Contents
Strategic Report .............................................................................................................................
Strategic Framework ........................................................................................................................... 2
Performance Highlights ....................................................................................................................... 3
Chairman’s Statement ........................................................................................................................ 4
Chief Executive Officer’s Review ......................................................................................................... 7
Chief Financial Officer’s Review ........................................................................................................ 12
Principal Risks and Uncertainties ...................................................................................................... 14
Governance ...................................................................................................................................
Board of Directors ............................................................................................................................. 18
Corporate Governance Report .......................................................................................................... 20
Section 172 Statement ...................................................................................................................... 23
Audit Committee Report ................................................................................................................... 24
Directors’ Remuneration Report ....................................................................................................... 26
Directors’ Report ............................................................................................................................... 29
Financial Statements ......................................................................................................................
Independent Auditor’s Report .......................................................................................................... 34
Consolidated Financial Statements ................................................................................................... 39
Notes to the Financial Statements .................................................................................................... 44
Company Information ....................................................................................................................... 64
Annual Report and Accounts 2021
1
Strategic Framework
Cornerstone is...
A payments focused fintech business that makes
managing currency simple for international SMEs
With a clear strategy to grow via...
Development of enhanced
products and services
- Continued technology and product innovation
- Multi-currency e-money accounts, accounting system
integrations and open banking services
Organic growth through
multi-channel sales
- Utilising advanced digital sales and marketing technologies
- Leveraging an experienced sales team
Buy-and-build acquisitions
- Roll-up and integrate independent FX brokers to drive scale
and profitability
Focusing on larger SME customers
- SMEs underserved by traditional banks
- Larger clients to drive greater revenues and profitability
…to create value for shareholders.
2
Strategic Delivery Since IPO
STRATEGIC REPORT
• Made acquisitions of other FX businesses
• Brought the majority of white label business in-house
• Significantly grown sales to clients that we serve directly
• Delivered substantial product enhancements
• Obtained authorisation as an Authorised Electronic Money Institution –
an important step towards being able to develop a full-connected
workflow platform for SME payments
• Expanded internationally with opening of an office in Dubai
• Strengthened our management team – bringing in highly experienced
individuals to drive the business forward
2021 Financial Summary
• Revenue increased 38% to £2.3m (2020: £1.7m)
• Gross margin improved to 51.6% (2020: 29.8%)
• Loss before tax of £4.2m (2020: £2.2m loss)
• Loss per share of 21.24p (2020: 14.99p loss)
• Cash and cash equivalents at 31 December 2021 of £384k (31 December
2020: £184k)
Annual Report and Accounts 2021
3
Chairman’s Statement
Introduction
The year to 31 December 2021 has been a period
of considerable development and successful
growth for the Group.
Cornerstone was admitted to trading on AIM on 6
April 2021 with an express strategy to build a
significant business in the provision of payment
services, foreign exchange and currency risk
management.
The Group has developed and built in-house its
own proprietary cloud-based software platform
known as FXPal. The platform is designed to cater
for the needs of SMEs engaged in international
trade. FXPal provides
international payment,
currency risk management and electronic account
services both directly to SMEs and via white label
partners on a SaaS basis. Cornerstone also serves
some high net worth individual clients (“HNWIs”).
During the year the Group expanded the scope of
its operation into the Middle East and Asia.
As announced on 14 January 2022, the Group is
reporting annual revenue growth of 38% to £2.3m
for
(2020: £1.7m). More
impressively, the Group increased gross profit to
£1.2m for the full year 2021 (2020: £0.5m).
full year 2021
As previously announced, this strong trading
momentum continued into 2022 and has been
maintained through the first half.
2021 Highlights
•
•
admitted to trading on AIM on 6 April 2021
on Admission, placing of shares raised
£2.2m gross of new equity and £450k via
convertible loan notes
appointed a new team to market the
Group's services in Asia in August 2021
opened new office in Dubai in September
2021
38% increase in revenues to £2.3m for 2021
(2020: £1.7m)
239% increase in gross profit to £1.2m for
2021 (2020: £0.5m)
underlying loss from operations of £1.4m
(2020: £1.0m)*
loss for the year after tax of £4.1m for 2021
(2020: £2.2m)
•
•
•
•
•
•
STRATEGIC REPORT
* excludes transaction costs and share-based
compensation
Progress in 2021
The Group appointed a new team, based in
London, in the second half of the year to market
the Group's services to businesses located in Asia,
with a primary focus on firms supporting HNWIs
acquiring real estate in the UK. The new team
joined the Group from Vorto Trading Ltd
("Vorto"), which provides international payment
services to individuals and organisations primarily
in European and Asian markets and is the Group's
largest white label partner.
On 27 September, Cornerstone announced that it
had expanded into the Middle East with the
opening of an office in Dubai to market its foreign
exchange
payment
management services to foreign investors in
investors
Dubai and particularly
acquiring real estate in the Emirate.
international
to Asian
and
volumes
increased
During the 12 months to 31 December 2021,
the
trading
contraction, particularly in the second half of
2020, due to the impact of COVID-19. As a result,
the Group delivered 38% growth in revenues to
£2.3m (2020: £1.7m).
following
The year ended 31 December 2021 saw a
significant increase in revenue generated by
clients the Group serves directly, with the
business transitioning to majority direct revenue
during the year. Direct revenue grew by 571%
over the prior year to £1.3m (2020: £0.2m) and
accounted for 56% of total revenue (2020: 12%).
Revenue generated
the Group's
introducer network (which is primarily white label
partners but also introducer brokers) was £1.0m
and accounted for 44% of total revenue (2020:
£1.4m and 88%).
through
Gross margin for the year ended 31 December
2021 was 51.6% (2020: 29.8%) with the significant
improvement due to the increased contribution
to revenue from direct customers.
The improvement in gross margin enabled the
Group to achieve a 239% growth in gross profit
compared with the prior year, with gross profit
for the period of £1.2m (2020: £0.5m). However,
Annual Report and Accounts 2021
4
this was offset by
increased administration
expenses associated with the Company's IPO and
other public company requirements and share-
administrative
based
expenses for 2021 were £5.4m compared with
£2.7m for the prior year.
compensation.
Total
The Group recognised a loss before tax of £4.2m
for the year ended 31 December 2021 compared
with £2.2m for 2020, which primarily reflects the
greater administrative expenses. Loss per
ordinary share on a basic and diluted basis was 21
pence (2020: 15 pence), due to the increased loss.
As at 31 December 2021, the Group had cash and
cash equivalents of £348k (31 December 2020:
£184k). This followed the raising of gross
proceeds of £2.2m via a placing of new ordinary
shares and £450k via convertible loan note
facilities as part of the IPO. The convertible loan
note facilities have not yet been drawn-down by
the Group.
In the 12 months to 31 December 2021 by client
type, corporate accounts generated £1.7m (2020:
£1.5m), accounting for 75% (2020: 92%) of total
revenue. HNWIs generated £585k for the year
(2020: £133k), accounting for 25% of total
revenue (2020: 8%). During the year, 416 new
clients were onboarded (2020: 328).
STRATEGIC REPORT
The Group’s product offering includes spot and
forward FX capabilities. In the twelve months to
31 December 2021, spot trades accounted for
96% of transactions (2020: 94%) and 89% of
revenue (2020: 87%), and forward currency
contracts accounted for 4% of transactions (2020:
6%) and 11% of revenue (2020: 13%). Commission
is charged at a higher rate on forward trades to
reflect the increased risks of the transactions.
Commission varies from client to client but in
general, the longer the maturity of the forward
trade, the higher the commission rates. The
difference between the volume of transactions
and proportion of revenue reflects the higher
forward
levels of commission charged on
transactions.
In total, payments worth £363m were transacted
through the Cornerstone platform in the year to
31 December 2021 (2020: £462m).
In the 12 months to 31 December 2021, the
Group has conducted transactions between 42
different currency pairs (2020: 59), with 91% of
transactions being between various combinations
of Sterling, Euros and US Dollars (2020: 88%). The
Group also provides same currency payment
services which are non-FX transactions.
Financial Summary
The summary income results for the Company for the year under review are as follows:
2021
£000
2,301
1,187
5,363
(4,174)
12 months ended 31 December
Sales
Gross profit
Total overheads
Adjusted loss before tax
2020
£000
1,664
496
2,652
(2,154)
Post Balance Sheet Developments
In January 2022 the Company announced a
placing and subscription of new shares at 26.5
pence per share raising total gross proceeds of
£870k following which a total of 3,283,034 new
ordinary shares of one penny each in the capital
of the Company were admitted to AIM.
In February 2022 the Company completed the
acquisition of Capital Currencies Limited, a well-
established foreign exchange broker specialising
in the provision of currency exchange and
international payments, authorised and regulated
by the Financial Conduct Authority (“FCA”) as an
authorised payment
institution permitted to
provide payment services. Capital Currencies
primarily serves UK corporates, with a particular
focus on larger SMEs. Over 90% of its revenue is
generated by clients that it services directly.
Also in February I was delighted to welcome Bill
Newton, Chief Information Officer, and Stephen
Flynn, Chief Technology Officer, to the Board as
Executive Directors of the Company.
In March 2022 we appointed Robert O'Brien,
General Manager APAC and Middle East, to the
newly created position of Interim Chief Operating
Annual Report and Accounts 2021
5
Officer of Cornerstone's principal operating
subsidiary, Cornerstone Payment Solutions
Limited, to strengthen operations as it continues
to grow and expand.
2021. As announced in our trading update on 14
January 2022, this change to majority direct
revenue has had a positive impact on the Group's
gross margin, a development which the Board
anticipates to continue in 2022.
STRATEGIC REPORT
Outlook and Prospects
As the Directors anticipated in March 2022, the
strong trading momentum achieved in 2021 has
continued into 2022. For the first quarter of 2022,
Cornerstone achieved underlying revenue growth
across the business and received the first
contribution to revenue from Capital Currencies
Limited (“Capital Currencies”). As a result, total
unaudited
2022 was
approximately £946k; the Group's highest ever
unaudited quarterly revenue. Excluding the
contribution from acquisitions, the Group's three-
month Q1 2022 unaudited
revenue of
approximately £888k surpassed the six-month
revenue reported by the Group for H1 2021 of
£837k.
for Q1
revenue
Revenue generated by clients that the Group
serves directly continued to increase significantly
during Q1 2022 to approximately 77% compared
with 28% for the first half of the previous year. A
key contributor to this was the Group's Asia team
that was brought on board in the second half of
As a fast-growing software development business,
further fundraisings will be required to enable the
business to grow and flourish. As detailed in the
Going Concern section of the Chief Financial
Officer’s review, further equity fundraising will be
necessary over the coming months in order to
implement
strategy.
Although the Group has had past success in
fundraising and continues to attract interest from
confident of
investors, making
fundraising success, there can be no guarantee that
such fundraising will be available.
Cornerstone’s
the Board
growth
Notwithstanding the funding requirements, the
Board remains confident in the Group's prospects
and looks forward to updating the market on
further progress.
Elliott Mannis
Chairman
29 June 2022
Annual Report and Accounts 2021
6
Chief Executive Officer’s Review
I am pleased to present Cornerstone’s annual
report for the year ended 31 December 2021. This
follows our first year as a public company after our
IPO in April 2021. The IPO was a key element in our
strategy to grow the business through acquisition
as well as continuing development of our highly
scalable, cloud-based software platform. I am
delighted to be able to report that we have made
excellent progress in delivering the objectives that
we outlined at the time of listing and that we
achieved significant growth during the year, with
that momentum having continued into 2022.
Significant Progress since IPO
We came to the market with the intention of
pursuing an aggressive expansion strategy – which
we began to deliver during the year.
is a
IPO was
first step
The
the
following our
appointment of a new team to market our services
to businesses located in Asia, with a primary focus
on firms supporting HNWIs acquiring real estate in
the UK. This
large and growing market
opportunity, which has been accelerated by the
pandemic. The new team, which is based in London,
joined from Vorto, which is our largest white label
partner. Since coming on board in the second half
of the year, the Asia team has performed incredibly
well – surpassing our expectations. By being part of
our business and under the Cornerstone brand,
they have been able to market a broader range of
products and services, to a broader range of
customers.
to
foreign
services
We further expanded our geographical reach with
the establishment of a new office in Dubai to
market our
investors,
particularly those investing in real estate in the
Emirate and businesses located there. We believe
this represents a significant and expanding market
opportunity. We were delighted to appoint Robert
O'Brien as General Manager APAC and Middle East
to lead the new office, who was also previously at
Vorto where he was the largest revenue generator.
We are seeing strong demand for our services in
Dubai, with
the office having commenced
generating revenue, and it is also providing us with
access to wider potential opportunities across the
region.
STRATEGIC REPORT
We achieved a significant milestone, post year end
in February, with the acquisition of Capital
Currencies, a well-established foreign exchange
broker that is authorised and regulated by the FCA
as an authorised payment institution permitted to
provide payment services. Capital Currencies is a
strong strategic fit for Cornerstone as its client base
is primarily UK corporates, with a particular focus
on larger SMEs, with over 90% of revenue being
generated by clients that it services directly. By
bringing
onto
Cornerstone’s technology platform, we can benefit
from economies of scale and from the cross-selling
of more services, and we expect it to be earnings
accretive from the current financial year.
Currencies’
Capital
clients
We are very pleased with the way the integration is
progressing and how the business has been
performing since the acquisition. We have met all
significant
including
integration milestones,
progress on migrating all Capital Currencies
customers onto the Cornerstone platform, and we
have begun to offer them additional, higher value
services such as forward contracts.
Performance
Cornerstone achieved significant growth in 2021,
with trading momentum increasing throughout the
year. Revenue for the 12 months ended 31
December 2021 was £2.3m, a year-on-year increase
of 38% (2020: £1.7m). This reflects a very strong
second half of the financial year, with revenue 75%
higher than in the first six months of 2021.
In
line with our stated strategy, this growth
primarily reflects a significant increase in revenue
generated by clients that we serve directly. The
proportion of total revenue that was accounted for
by direct clients increased to 56% compared with
12% for the previous year, being £1.3m (2020:
£0.2m). A key contributor to this growth was the
new Asia team that was brought on board in the
second half of the year.
through our
Revenue generated
introducer
network (which is primarily white label partners,
who use our technology, but also
introducer
brokers) accounted for 44% of total revenue (2020:
88%) and was £1.0m (2020: £1.4m). On a reported
basis this represents a reduction due to some
revenue that we previously generated through the
Annual Report and Accounts 2021
7
introducer network now being serviced directly.
However, on an underlying basis, there was an
increase
through our
introducer network in 2021 compared with 2020.
in revenue generated
By client type, there was an increase in revenue
generated by both corporate accounts and HNWIs.
This includes particularly strong growth in revenue
from HNWIs, which was primarily due to the
addition of the Asia team during the year. As a
result, the proportion of total revenue accounted
for by HNWIs increased to 25% (2020: 8%) with
corporate accounts contributing 75% (2020: 92%).
The total number of clients that traded with
Cornerstone during the year grew to 583 compared
with 541 for 2020. We onboarded 416 new clients
in 2021, an increase from 328 in the previous year.
This reflects the sustained expansion in the scale of
our business.
forward
Spot trades accounted for 96% of transactions
(2020: 94%) and 89% of revenue (2020: 87%).
contracts
Higher margin
accounted for 4% of transactions (2020: 6%) and
11% of revenue (2020: 13%). The difference
between the volume of transactions and proportion
of revenue reflects the higher levels of commission
charged on forward transactions.
currency
During 2021, transactions were conducted between
42 different currency pairs (2020: 59), with 91% of
transactions being between various combinations
of Sterling, Euros and US Dollars (2020: 88%).
Product Enhancement
During the year, and in line with our stated strategy,
we made a number of significant enhancements to
our offer. Firstly, we undertook a major rebuild of
the user interface of the platform to substantially
its appearance, streamline certain
modernise
pathways and make
functionality more
intuitive. This is part of our ongoing programme of
investment and development of our technology
platform as we look to continuously expand and
upgrade its features.
the
A key milestone was achieved with the receipt of
FCA approval – via our primary operating
subsidiary, Cornerstone Payment Solutions Ltd
(formerly FXPress Payment Services Ltd) (“CPS”) –
to become an Authorised Electronic Money
Institution (“AEMI”). This allows us to receive
payments and customer funds that can be held on
STRATEGIC REPORT
the system
account for an indefinite purpose and time –
enabling us to offer a more convenient service as
customers can leave money with Cornerstone
rather than needing to put it into, and taking it out
of,
foreign exchange
for each
transaction or international payment. Importantly,
being an AEMI will also enable us to develop further
technology-enabled products and services that take
advantage of the UK's Open Banking Initiative. This
forms a key part of our vision to develop a fully-
connected workflow platform for SMEs that will
provide a single access point to manage and
execute all of their payments – with or without an
FX element.
Post year end, we made another significant
enhancement through securing an additional
payment partner and liquidity provider, Banking
Circle, who sit alongside Currency Cloud and
Velocity. All trades placed with us by clients are
replicated in a back-to-back contract with a third-
party liquidity provider, which provides pricing,
execution and settlement services. By partnering
with Banking Circle, not only does this provide us
with more resilience by having multiple suppliers,
but it expands our business offering in several
respects. Firstly, it enables us to provide clients with
European IBANs (with some customers wanting a
European IBAN rather than a UK IBAN). It also
enables us to service a broader range of countries
and industries thanks to the range of services and
partnerships that Banking Circle has in place.
Delivering on Strategy
Accordingly, since our IPO last year, we have made
great progress in delivering against our stated
strategy. While we are still at the relative beginning
of our journey, I am proud of what we have
achieved to date. In particular, we have:
• Made acquisitions of other FX businesses
• Brought the majority of our white label
•
business in-house
Significantly grown sales to clients that we
serve directly
• Delivered product enhancements
• Obtained authorisation as an AEMI – an
important step towards being able to develop
a full-connected workflow platform for SME
payments
Expanded internationally
Strengthened our management
team –
bringing in highly experienced individuals to
drive the business forward
•
•
Annual Report and Accounts 2021
8
Outlook
revenue –
The strong trading momentum of 2021 has been
sustained into the current year and through the first
half. In the first quarter of 2022, we achieved our
highest ever quarterly
reflecting
underlying growth across the business as well as the
first contribution from Capital Currencies. The
investments made last year into enhancing our
product offering and strengthening our team are
continuing to drive an increase in trading volumes
and expansion of our customer base. As a result, the
Board continues to expect to achieve significant
revenue growth for full year 2022, in line with
market expectations.
We continue to pursue acquisition opportunities
and are actively progressing our organic growth
STRATEGIC REPORT
strategy – including plans to launch a new e-wallet
solution this year and secure further integrations
with accounting platforms. With our strong team
and highly scalable platform, we continue to believe
we are well-placed to take advantage of the
meaningful opportunities to build a significant
business offering technology-enabled international
payment services.
Accordingly, the Board remains confident
in
Cornerstone’s prospects and we look forward to
reporting on our progress.
Julian Wheatland
Chief Executive Officer
29 June 2022
Annual Report and Accounts 2021
9
Proprietary technology that
takes the hassle out of
international payments
We’re unlike many other foreign exchange and
payments companies who are reliant on third-party
software to trade foreign currencies and manage
their clients’ international transactions.
Our systems and accounts are powered by our own
proprietary software designed, developed and
managed by our team in house.
Other foreign exchange companies use our platform
as a white label product.
Businesses can be based in
70+ jurisdictions and can
transact in 25+ currencies.
10
Designed for SMEs
We know international payments can be
complex. Getting them 100% right, 100% of
the time is crucial to a business’ growth and
success.
Big corporates have access to a wealth of
premium technology that make this process
simpler and quicker.
Until now, this type of financial technology
or these services have been out of reach for
most small and medium size businesses.
At Cornerstone, we developed and manage
our own in-house platform that is designed
to specifically cater for the needs of SMEs –
giving us a strategic market position.
Both traditional and challenger banks are
largely focused on providing services to
large companies or consumers while FX and
international payments providers are mostly
focused on individuals and private clients.
A Cornerstone Online Account makes it
easier, quicker and cheaper to do business
across borders.
11
Chief Financial Officer’s Review
Revenue for the 12 months to 31 December 2021
increased by 38% to £2.3m compared with £1.7m
for the previous year. This reflects sustained
momentum throughout the year and underlying
growth across the business – driven, in particular,
by revenue generated by clients that we serve
directly.
Revenue by origin Revenue generated by clients
that we serve directly increased more than six-fold
to £1.3m (2020: £0.2m), accounting for 56% of total
revenue (2020: 12%). Revenue generated through
our introducer network (which is primarily white
label partners, who use our technology, but also
introducer brokers) was £1.0m (2020: £1.4m),
representing 46% of total revenue (2020: 88%).
While this represents a reduction
indirect
revenue, on an underlying basis there was an
increase due to some of the revenue that had
previously been generated through our introducer
network now being serviced directly.
in
Revenue by client
type Corporate accounts
remained the largest contributor to revenue by
in 2021 (2020:
client type, generating £1.7m
£1.5m), accounting for 75% (2020: 92%) of total
revenue. There was significant growth in revenue
from HNWIs, which increased to £0.6m (2020:
£0.1m) and accounted for 25% of total revenue
compared with 8% for the previous year.
Revenue by product Revenue continued to be
generated from the provision of foreign exchange
and payments services in the form of spot and
forward trades, accounting for 89% and 11% of
revenue respectively (2020: 87% and 13%).
Gross margin improved substantially to 51.6%
(2020: 29.8%) due to the increased contribution to
revenue from clients that we serve directly. The
improvement in gross margin combined with the
greater revenue generated a significant increase in
gross profit to £1.2m compared with £0.5m for the
previous year.
Total administrative expenses were £5.4m in 2021
compared with £2.7m for the previous year. This
primarily reflects an increase of:
•
£1.9m in share-based compensation to £2.3m
(2020: £0.4m), which includes £1.8m in share-
based incentivisation for the new Asia team
STRATEGIC REPORT
•
and the General Manager APAC and Middle
East; and
£1.1m in other administrative expenses to
(2020: £1.5m), which relates to
£2.6m
expenses associated with our IPO and other
public company requirements.
Loss before tax was £4.2m for 2021 (2020: £2.2m
loss), which primarily
the greater
administrative expenses. Loss per ordinary share on
a basic and diluted basis was 21.24 pence (2020:
14.99 pence loss).
reflects
As at 31 December 2021, the Group had cash and
cash equivalents of £348k (31 December 2020:
£184k). During the year, the Group raised gross
proceeds of £2.2m via a placing of new ordinary
shares. At year end, the Group also had access to
£450k in convertible loan note facilities. Post year
end, the Group raised gross proceeds of £870k
through the placing of, and subscription for, new
ordinary shares, which was partly used to fund the
initial cash consideration and integration costs of
our acquisition of Capital Currencies Limited.
Going Concern
The Group has bank balances of approximately
£0.28m at the date of approval of these financial
statements and is carefully managing its cash
resources, with the support of its professional
advisers and its key stakeholders, who are creditors
of the business.
It also has convertible loan note facilities of a
further £0.45m that are available to be called on 20-
days’ notice (£0.1m of which cannot be called until
13 January 2023).
The Directors have prepared cash flow forecasts
covering a period extending 18 months from the
date of approval of these financial statements, i.e.,
into account
to 31 December 2023, taking
projected
continued
in
increase
investment in the development of the software
platform and organic sales and marketing efforts.
revenues,
The cash flow forecasts assume that further equity
fundraising will be necessary over the coming
implement Cornerstone’s
months
in order to
Annual Report and Accounts 2021
12
growth strategy and for the Group to continue to
operate as a going concern.
Key Performance Indicators
STRATEGIC REPORT
Although the Group has had past success in
fundraising and continues to attract interest from
investors, making
confident of
fundraising success, there can be no guarantee that
such fundraising will be available.
the Board
These circumstances indicate the existence of a
material uncertainty, related to going concern. The
any
financial
adjustments that would result if the Company or
Group was unable to continue as a going concern.
statements do not
include
After careful consideration, the Directors consider
that they have reasonable grounds to believe that
the Group can be regarded as a going concern and
for this reason they continue to adopt the going
concern basis in preparing the Group's financial
statements.
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 2021: £2.3m (2020: £1.7m)
•
• 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 2021: £363m (2020: £462m)
•
• 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 2021: 416 (2020: 328)
•
• 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 2021: £5.4m (2020: £2.7m)
•
Judy Happe
Chief Financial Officer
29 June 2022
Annual Report and Accounts 2021
13
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
Risk change
Fundraising
Delivery on the Group’s strategy
is premised on raising additional
funds and market factors may
affect its ability to do so. There is
a risk that the Group will not have
enough cash resources to fund
the business.
The Group’s cash flow forecasts assume
that a further equity fundraising will be
necessary over the coming months.
Although the Group has had past success
in fundraising and continues to attract
interest from investors, making the Board
confident of fundraising success, there
can be no guarantee that such fundraising
will be available.
The Group seeks to engage with its
shareholders to maintain their support
and understanding of
the Group’s
strategy. The Group’s finance team also
has a strong focus on supporting the cash
position to try to minimise any impact of
being unable to raise funds.
Liquidity
Credit
the
regulatory
There is a risk that the Group will
not have sufficient capital to
meet
capital
requirement for an authorised
financial services business and
that it is unable to meet its
financial obligations when due.
Over the last 12 months, since the
licensing
regulatory
increased
gained by the Group’s operating
subsidiary, Cornerstone Payment
(formerly
Limited
Solutions
Services
Payment
FXPress
Limited) became an AEMI
in
August
the Group’s
regulatory capital requirement
increased to €350k from
has
approximately £90k.
2021,
The Group is exposed to credit
risk if a client fails to deliver
the
currency at maturity of
contract or fails to deposit margin
when a margin call is made.
that
provides
The Group has an experienced finance
effective
team
management of the Group’s operational
financial exposures, with a strong focus
on cash control. This includes ensuring
sufficient ring fencing of capital to meet
its regulatory obligations.
To manage the
increased regulatory
capital requirement, the Company made
an additional investment of £200k into
Cornerstone Payment Solutions in June
2021.
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
that
an experienced
finance
team
↑
↑
-
Annual Report and Accounts 2021
14
STRATEGIC REPORT
provides effective management of the
Group’s operational financial exposures,
with a strong focus on cash control.
↓
-
-
Velocity
The Group has a very good working
relationship with
Trade
International Ltd, its liquidity services
provider, and has been trading on agreed
terms for over ten years. The Group has
also recently appointed Banking Circle as
a further liquidity provider to which the
Group could transfer its business should
Velocity
the
to
agreement or should its systems fail.
terminate
choose
Significant barriers to entry exist in the
markets in which the Group operates,
such as the requirement for regulatory
authorisation and the technical skill,
expertise and experience required to
technology
proprietary
develop
platform.
a
in the
The Group’s management has extensive
foreign exchange
experience
payments 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 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
into its customers’ systems and increase
‘stickiness’.
The Board has established an employee
share incentive scheme and the majority
of its senior management are significant
shareholders or option holders, aligning
their interests with those of the Group.
The Group employs an experienced
Compliance and Money Laundering
Reporting Officer who is responsible for
monitoring
activities,
the Group’s
managing the Group’s regulatory and
reporting obligations and ensuring that all
FCA requirements are adhered to.
the services of
The Group retains
Compliancy
specialist
Services,
regulatory and compliance advisory
a
Counterparty
There is a risk that the Group’s
liquidity services provider could
terminate its agreement with the
Group or that its systems may fail
or are not operational for a period
of time, which could have a
materially adverse impact on the
Group’s business and operations.
Competition
Regulation
to
the
There is a risk that competitors
with greater financial resources
may develop software that
is
superior
Group’s
technology and they may also
adopt more aggressive pricing
models or undertake more
and
extensive
marketing
Such
competitors may also attract the
Group’s
employees or
prospective employees, which
could impact the level of service
that the Group can give to its
customers or
to
expand its service offering.
advertising
campaigns.
the ability
key
Group’s
subsidiary,
The
Cornerstone Payment Solutions
FXPress
Limited
(formerly
Payment Services Limited),
is
authorised and regulated by the
FCA as an AEMI and Avila House
is a Small Electronic
Limited
Money
In
is
addition, Capital Currencies
authorised and regulated by the
FCA as an Authorised Payment
Institution.
Annual Report and Accounts 2021
15
STRATEGIC REPORT
service, to support the Compliance and
Money Laundering Officer.
In addition, the Group is in the process of
porting over clients acquired by Capital
Currencies
transact only with
Cornerstone, with the migration largely
complete.
to
Institution. It is also supervised by
HMRC with respect to the Money
Laundering, Terrorist Financing
Funds
and
of
(Information on
the Payer)
Regulations 2017.
Transfer
The withdrawal of, or any
regulatory
amendment
to, a
the
approval
by
required
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.
Macro-
economic
Information
technology
A
slowdown
International trade is a key driver
of demand for foreign exchange
services.
in
international trade caused by
global macro-economic factors –
such as economic and political
conditions (such as the conflict in
natural
the Ukraine),
disasters
/
and
pandemics – could adversely
impact
the Group’s business
transaction turnover.
and
epidemics
prevent
or
access
There is a risk that the Group’s
technology platform may be
compromised or breached by
cyber-attacks and that it is unable
detect
to
unauthorised
to, or
disclosure of, clients’ confidential
personal
financial
and
information. Such an event could
result in breaches of obligations
under applicable laws or clients
agreements and have an adverse
impact on the Group’s reputation
and financial performance.
Acquisitions
A key risk to the Group delivering
its strategy is its ability to identify
acquisition opportunities and
execute successful acquisitions
seeks
The Group’s experienced management
to adverse
team
to adapt
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.
With regards to the current conflict in the
Ukraine, the Group does not have any
business in the Ukraine or Russia and
does not have any exposure to the
Rouble. Therefore management does not
consider the Group to be adversely
impacted by the sanctions.
The Group’s platform is entirely deployed
on Amazon Web Services, which
is
trusted by numerous major organisations
that require robust, scalable, secure and
cost-effective services. AWS has a
internationally recognised
number of
certifications
accreditations
and
demonstrating compliance with third-
party assurance frameworks.
Additionally, the Group uses two factor
authentication utilising OAuth2 protocol
for
periodically
commissions penetration testing of its
systems.
client
login
and
The Directors of the Group have a
demonstrable track record of business
growth
and
acquisitions, and integration. The Group’s
mergers
through
-
-
↑
Annual Report and Accounts 2021
16
STRATEGIC REPORT
those
(including migrating
businesses onto
the Group’s
platform), which is dependent on
a number of factors, including
sufficient funding. A key element
of
acquisition
strategy is its ability to use its
shares as acquisition currency
and the Group’s share price may
impact this.
the Group’s
a
increase
platform has been designed to be
scalable and it has the capability to
process
in
significant
transaction volume without the need for
any redesign of platform architecture.
The Group has communication strategies
in place to appropriately support its share
price (to the extent possible) and the
finance team maintains a strong focus on
supporting the cash position to try to
minimise any impact of being unable to
raise funds.
Annual Report and Accounts 2021
17
GOVERNANCE
Board of Directors
Elliott Michael Mannis, CPA, CA, Non-Executive Chairman
Committee Membership: Audit Committee (Interim Chairman), 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 Officer
Julian has served as Chief Executive of Cornerstone FS since October 2020. He 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.
William Newton, Chief Information Officer
William (“Bill”) has extensive operational experience within financial trading companies having worked in the
industry for over 30 years. He co-founded ODL Securities, a derivatives, equities and FX brokerage, where he
held a number of senior management roles including IT Director. There, he designed various real-time risk and
regulatory reporting systems and was responsible for all back-office development. He was subsequently
appointed CIO for London Capital Group and managed a reorganisation of its core systems and infrastructure.
Bill co-founded CPS, which was acquired by Cornerstone in September 2020.
Annual Report and Accounts 2021
18
GOVERNANCE
Stephen Flynn, Chief Technology Officer
Stephen’s background prior to entering the technology world was in equity derivatives trading and risk
management in London, Frankfurt and New York. He was employed by UBS as a senior structured product trader,
CSFB as a market maker trading equity and equity index products, and Smith Newcourt as an equity derivative
market maker. Stephen joined Cornerstone in October 2020 having previously worked as a consultant to CPS
and, along with Bill Newton, was responsible for designing and building the proprietary platform.
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. Dan co-founded real estate investment firm Song Capital in 2021. Amongst other acquisitions, Song
acquired a portfolio of 95 pubs from brewer SA Brains for c.£100m in May 2022.
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 Nightcap plc and a non-executive
director on the Boards of Cornerstone FS plc and Various Eateries plc, all of which are quoted on the London
Stock Exchange.
Philip Barry, Non-Executive Director
Committee Membership: Remuneration Committee
Philip (“Phil”) is a co-founder of Cornerstone Payment Solutions Ltd (“CPS”) (formerly FXPress Payment Services
Ltd). 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 CPS, to help manage the foreign exchange exposure of a
company portfolio. In 2010, Phil, together with Bill Newton and John Paul Thwaytes founded CPS.
Annual Report and Accounts 2021
19
Corporate Governance Report
The Board recognises the importance of sound
corporate governance and the Group has adopted
the Quoted Companies Alliance Corporate
Governance Code (QCA Code). The Board considers
that the Group complies with the QCA Code in all
respects, and details of its compliance can be found
on
of
Corporate Governance
Cornerstone’s website.
page
the
The Board
The Board is responsible for 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,
the Directors are
accountable. The Board will also address issues
internal control and the Group’s
relating to
approach to risk management, and it will monitor
and promote a healthy corporate culture. The
primary duty of the Board is to act in the best
interests of the Group at all times.
to whom
The Group holds (since its IPO) Board meetings
monthly and as required whenever issues arise that
require the urgent attention of the Board. Director
attendance at the Board meetings held during the
year can be found in the table on page 22.
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
including corporate
governance, strategy, major investments, financial
reporting and internal controls.
for the Board,
Board Directors
The Board comprises four Executive Directors, a
Non-Executive Chairman and three Non-Executive
Directors of which one (Daniel Mackinnon) is
deemed to be independent. The Board considers
that Daniel
in character and
judgement and that there are no business or other
relationships likely to affect, or which could appear
to affect, his judgement. The Board believes that it
independent
is
GOVERNANCE
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 18-19.
Board Committees
remuneration
The Group has established a
committee (the “Remuneration Committee”) and
an audit committee (the “Audit Committee”) with
formally delegated duties and responsibilities.
Director attendance at the committee meetings
held during the year can be found in the table on
page 22.
The Remuneration Committee comprises Gareth
Edwards as Chairman, Dan Mackinnon, Philip Barry
and Elliott Mannis. During the year under review
(and until his resignation on 3 May 2022), Glyn
Barker was also a member of the committee. The
committee, which meets not less than twice a year,
is responsible for the review and recommendation
of the scale and structure of remuneration for
senior management,
any bonus
arrangements or the award of share options with
due regard to the interests of the shareholders and
the performance of the Group.
including
replacement as Chairman of
The Audit Committee comprises Elliott Mannis as
Interim Chairman, Dan Mackinnon and Gareth
Edwards. During the year under review (and until
his resignation on 3 May 2022), Glyn Barker was
also a member, and was Chairman, of the
committee. The Board has commenced a search for
a
the Audit
Committee. The committee, which meets not less
is responsible for making
than twice a year,
recommendations
the
appointment of auditors and the audit fee and for
ensuring that the financial performance of the
Group is properly monitored and reported. In
addition, the Audit Committee will receive and
review reports from management and the auditors
the Board on
to
Annual Report and Accounts 2021
20
relating to the interim report, the annual report and
accounts and the internal control systems of the
Group.
Board Effectiveness
The Non-Executive Chairman is responsible for
ensuring an effective Board. The first internal
evaluation of the Board, the Committees and the
individual Directors, which will be led by the
Chairman, is due to be undertaken later this year
and thereafter such evaluations will be undertaken
on an annual basis to ensure that the Board is
performing effectively as a whole. The evaluations
will be undertaken with reference to how the
Director or officer has performed in fulfilling his/her
specific
functions, attendance at Board and
Committee meetings as appropriate, and effective
contribution to the Group as a whole.
The Board is aware that succession planning is a
vital task and the management of succession
planning represents a key responsibility of the
Board. The balance of skills required of the Board as
a whole is under regular review as the business
develops. As a result, the composition of the Board
will change over time. The Board is likely to appoint
additional directors in the event that outstanding
people with relevant skills are able to make the
necessary commitment to drive the business
forward. As noted, the Board is currently seeking to
appoint an independent Non-Executive Director
who will serve as Chairman of the Audit Committee
following the resignation of Glyn Barker in May
2022.
Shareholder Engagement
The Group seeks to engage with shareholders to
understand the needs and expectations of all
elements of the shareholder base.
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 base, and to ensure
that the Group’s strategy, financials and business
developments are communicated effectively. The
Board communicates with shareholders primarily
through the annual report and accounts; the
interim and
full-year results announcements;
trading updates (where required or appropriate);
annual general meetings; and the investor relations
section of the Cornerstone website. The CEO has
GOVERNANCE
also participated
webinar.
in
investor events held via
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 supported in managing its shareholder
relations by its financial public relations 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 works
directly and closely with customers, counterparties
and staff to enhance its products and software
platform to provide the best FX trading experience.
The Group takes its corporate social responsibilities
seriously and is focused on maintaining effective
working relationships across a wide range of
stakeholders, including employees, existing and
new direct
Introducers, other
intermediaries and professional advisers that it
collaborates with as part of its business strategy, in
order to achieve long-term success.
customers,
The Executive Directors maintain an ongoing
dialogue with stakeholders to inform strategy and
the day-to-day running of the business.
Sustainability
To be sustainable as a business that achieves long-
term success, the Board recognises the importance
of attracting, developing and retaining the right
people and of acting responsibly to minimise the
Group’s environmental impact.
People
including
establishing
Engagement The Group takes care to maintain and
encourage communication with, and amongst, its
employees,
internal
communications platforms as a tool for increasing
engagement and facilitating ad hoc, open dialogue
– both work-related and social-related. To further
the Group has
support
culture,
commenced holding monthly gatherings
to
exchange ideas and insight into areas of interest.
company
Development The Group
support
professional development and encourages career
development programmes. Currently, one member
seeks
to
Annual Report and Accounts 2021
21
of staff is enrolled on a sales apprenticeship course
whereby they are provided with formalised on-the-
job training and mentorship and a member of the
finance team is receiving paid leave to study for an
Association of Chartered Certified Accountants
qualification.
Wellbeing The Group supports employee wellbeing,
offering all staff flexible working options. Through
the services offered by the building from which the
Group operates, employees have access to, and
utilise, a wellness programme, gym discount and
other facilities to promote comfort such as a
mother’s room and relaxation rooms. The Group
has commenced providing employees (including
their families) with health insurance and intends to
offer this to all staff by the end of the calendar year.
Inclusion As a modern, forward-looking company,
Cornerstone is proud of its diversity and the insight
that it brings. The Group consists of multilingual
employees from several nationalities with a range
of different backgrounds and strives to create a
diverse and inclusive workplace that delivers for
both clients and employees. Regarding gender
balance, for both all employees and senior
management, 60% are male and 40% are female.
Environment
The Group’s operations have
low
emissions with its environmental impact being
inherently
Meeting Attendance
GOVERNANCE
largely limited to its offices. The Group believes in
further minimising its impact where possible, such
as encouraging all employees to be paper-free,
including providing them with the technology
required so that they can transport and share
information digitally. The Group seeks to encourage
energy-saving practices, such as by supporting its
employees to cycle to work with the provision of
indoor bike racks and showers.
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 takes
proper steps 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.
Annual General Meeting
The next Annual General Meeting of the Group will
be held at 11.00am on Monday 25 July 2022 at the
office of Luther Pendragon, 48 Gracechurch Street,
London EC3V 0EJ.
The table below details Director attendance at the Board and committee meetings held during the year in the
period following Admission.
Board
Director
9/9
Elliot Mannis, Chairman
9/9
Julian Wheatland, CEO
9/9
Judy Happe, CFO
7/9
Glyn Barker, Non-Executive Director
Gareth Edwards, Non-Executive Director
9/9
Daniel Mackinnon, Non-Executive Director 7/9
8/9
Philip Barry, Non-Executive Director
-
William Newton, CIO***
-
Stephen Flynn, CTO***
* Attended by invitation
** Philip joined the Remuneration Committee in July 2021
*** Joined the Board post year end in February 2022
Audit Committee
4/4
3*
3*
3/4
3/4
4/4
2**
-
-
Rem. Committee
3/3
1*
1*
2/3
3/3
1/3
2/3
-
-
In addition to the regular Board meetings noted in the table above, the Board met further a further six times for
specific purposes, including to approve publication of the report and accounts for 2020 and to approve the
publication of the report and accounts for period ended 30 June 2021. In addition to the Company’s formal
Board meetings, all of the Directors regularly discuss matters affecting the business and strategy of the Group.
Annual Report and Accounts 2021
22
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 business
relationships with suppliers, customers and other
impact of the Group’s
material stakeholders;
the
operations on
environment; desirability of the Group maintaining
a reputation for high standards of business conduct;
and need to act fairly between members of the
Group. In discharging its Section 172 duties, the
Board has considered the factors set out above and
the views of key stakeholders.
local communities and
the key stakeholder engagement
Details of
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 engage regularly with employees and
maintain an open dialogue. Due to the small size of
the Group’s current workforce, this is currently
conducted on an ad hoc basis, but the Directors
intend to implement a formal structure as the team
expands.
and
label
partners
Counterparties, white
introducers
The Group operates an extensive network of white
label and introducing broker relationships and
there is a regular and ongoing dialogue with these
business partners, proportional to their scale and
importance to the Group.
The Group’s principal counterparties, such as its
liquidity provider, Velocity, are some of its longest
standing
the
Directors aim to have regular interaction with these
partners.
relationships and
stakeholder
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 base. The Board
communicates 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.
Annual Report and Accounts 2021
23
Audit Committee Report
Dear shareholder,
I am pleased to present the Audit Committee report
for 2021. I trust that this report will provide you
with an insight into our work, the matters handled
and
the Audit Committee’s
deliberations during the year.
focus of
the
Membership and meetings
The members of the Audit Committee during the
year and up to the date of the signing of this report
(unless as otherwise indicated) are:
• Glyn Barker (Chairman of the committee until
his resignation as a director on 3 May 2022),
Independent Non-Executive Director
• Gareth Edwards, Non-Executive Director
•
Elliott Mannis, Non-Executive Chairman
(assumed the position of Interim Chairman of
the committee on 3 May 2022)
• Daniel Mackinnon, Independent Non-
Executive Director
The Audit Committee members 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 Glyn Barker had a 35-year career with PwC,
holding a number of senior posts
including
Managing Partner and Head of Assurance.
Following Glyn’s resignation on 3 May 2022, Elliott
stepped in as Interim Chairman of the Audit
Committee and shall remain in the role until a
replacement is appointed.
The Audit Committee meets at least twice a year at
appropriate intervals 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 are invited to
attend on a regular basis and other non-members
may be invited to attend as and when appropriate
and necessary. During
the Audit
Committee met on 4 occasions.
the year,
The Company Secretary is secretary to the Audit
Committee.
GOVERNANCE
Governance and effectiveness
Outside of the formal meeting programme, the
the Audit Committee and, as
Chairman of
appropriate,
the other committee members,
maintain a dialogue with key individuals involved in
the Group’s 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.
The committee undertakes its duties in accordance
with its terms of reference, which are reviewed at
least annually to ensure that they remain fit for
purpose and in line with best practice guidelines.
The committee intends to arrange for periodic
reviews of its own performance to ensure it is
operating at maximum effectiveness.
Responsibilities and activities
The Audit Committee’s responsibility is to ensure
that financial information published by the Group
properly presents its activities to stakeholders in a
way that is fair, balanced and understandable. The
Audit Committee oversees the effective delivery of
audit services, 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.
In its advisory capacity, the Audit Committee has
confirmed to the Board that, based on its review of
the Annual Report and financial statements and
internal controls that support 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 the Group’s position and performance, its
business model and strategy.
During the year, the Audit Committee’s activities
included:
•
Conducting a competitive tender process to
appoint a new auditor follow the Group’s
listing.
Annual Report and Accounts 2021
24
•
• Approving the appointment of Haysmacintyre
LLP as auditor and monitoring auditor
effectiveness and independence.
Examining the Annual Report and financial
statements for the year to 31 December 2020
and the half-year report or the six months to
30 June 2021 and discussing them with
management and the external auditor to
assess whether reports, taken as a whole,
were fair, balanced and understandable prior
to recommending these to the Board for
approval.
• Reviewing and challenging areas of significant
level of
risks and
judgement and the
disclosure. (Further detail below.)
• Reviewing the effectiveness of the Group’s
internal controls.
Significant judgements
The significant matters that the Audit Committee
considered, and made certain estimates and
judgements upon, are set out under note 1 of the
financial statements.
Risk management and internal controls
In supporting the Board in maintaining an effective
internal control environment, the Audit Committee
keeps under review the Group’s internal financial
controls systems and other internal control and risk
management systems; reviews the methodology
for reporting risk to the Board; sets triggers for
reporting and escalation of significant emerging
risks; reviews the adequacy and security of the
its employees and
Group’s arrangements for
contractors to raise concerns, in confidence, about
possible wrongdoing in financial reporting or other
matters; and reviews the Group’s procedures for
detecting fraud and preventing bribery and receive
reports on non-compliance.
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 technology and security policies. In
addition, the detailed operational and security
elements of the risk register are reviewed regularly
by the senior management team of the Group, also
in line with the ongoing risk and operational
resilience reporting requirements of the FCA.
GOVERNANCE
In providing foreign exchange services to its clients,
the Group is subject to 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
laundering compliance using specialist third party
compliance experts, with
recent
compliance audit concluding in March 2021. The
Group is also required to submit regular reports to
the FCA on a range of subject matters in this regard.
the most
Further details of the Group’s financial risk
management are set out under note 16 to the
financial statements.
Internal audit
At present, the Group does not have an internal
audit function. The Audit Committee believes that,
owing to the Group’s size, management is able to
the adequacy and
derive assurance as
to
risk
effectiveness of
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.
internal controls 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
auditor
effectiveness, independence and objectivity are
maintained.
relationship
ensure
that
to
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.
Elliott Mannis
Interim Audit Committee Chairman
29 June 2022
Annual Report and Accounts 2021
25
Directors’ Remuneration Report
The Remuneration Committee presents its report
on Directors’ remuneration for the year ended 31
December 2021. The disclosures comply with the
requirement of the Companies Act 2006, the
Corporate Governance Code of the Quoted
Companies Alliance and applicable AIM Rules.
Remuneration Committee
The members of the Remuneration Committee
during the year and up to the date of the signing of
this report (unless as otherwise indicated) are:
• Gareth Edwards (Chairman), Non-Executive
Director
•
Elliott Mannis, Non-Executive Chairman
• Glyn Barker, Independent Non-Executive
Director (resigned on 3 May 2022)
• Daniel Mackinnon, Independent Non-
Executive Director
committee
The Remuneration Committee met on three
occasions during 2021. The
is
responsible for the review and recommendation of
the scale and structure of remuneration for the
Chairman, the Executive Directors and 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 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.
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, Chief Information
Officer and Chief Technical Officer, and six months
for the Chief Financial Officer. Their service
agreements include standard summary termination
provisions and post
restrictive
covenants that apply for nine months for the Chief
Executive Officer and six months for the Chief
Financial Officer, Chief Information Officer and
Chief Technical Officer.
termination
GOVERNANCE
The Chief Executive Officer and Chief Financial
Officer are entitled to receive an annual salary of
£180,000 and £140,000 respectively, with an
to a pension contribution and
entitlement
discretionary bonus. The Chief Information Officer
and Chief Technical Officer are each entitled to
receive an annual salary of £110,000, with an
to a pension contribution and
entitlement
discretionary bonus.
In addition, the Group will make an annual grant of
options to the Chief Executive Officer and Chief
Financial Officer of 5% and 1.5% 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 Group. Non-
Executive Director 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 being made. Following the audited
consolidated turnover of the Group 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.
(excluding
the
The Non-Executive Directors
Chairman) will receive a fee of £35,000 per annum
and are 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. 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.
Annual Report and Accounts 2021
26
GOVERNANCE
Directors’ Remuneration
The following table details the Directors’ remuneration for the years ended 31 December 2021 and 2020:
Executive Directors
Julian Wheatland, CEO1
Judy Happe, CFO2
William Newton, CIO3
Stephen Flynn, CTO3
Non-Executive Directors
Elliott Mannis, Chairman5
Glyn Barker5
Gareth Edwards6
Daniel Mackinnon5
Philip Barry7
Salary/
Fees
£
180,000
140,000
110,000
110,000
36,987
25,891
25,891
25,891
25,891
Bonus
£
Pension
£
Benefits
£
Total 2021
£
Total 2020
£
43,200
33,600
0
0
-
-
-
-
-
9,000
6,417
-4
3,134
-
-
-
-
-
0
0
0
0
-
-
-
-
-
232,200
85,000
180,017
22,436
110,000
113,134
9,350
9,350
36,987
25,891
25,891
25,891
25,891
-
-
-
-
9,350
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. William Newton and Stephen Flynn were appointed to the Board of Directors, post period, on 22 February 2022. On
becoming Executive Directors, they continued in their existing operational roles and with no changes to their
remuneration packages. They were directors of FXPress prior to its acquisition by Cornerstone on 9 September 2020
and were paid £184,704 in fees during 2020, of which £66,688 covered the post-acquisition period.
4. William Newton chose to opt-out of the Company’s pension scheme.
5. Appointment effective 6 April 2021.
6. 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.
7. 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, 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.
Social security costs of £94,620 were incurred in respect of the Directors’ remuneration listed above (2020: £9,453).
Directors’ Interests
As at the date of signing 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
William Newton, CIO*
Stephen Flynn, CTO
43,461
19,516
2,530,787
2,435,442
0.2
0.1
10.7
10.3
Annual Report and Accounts 2021
27
GOVERNANCE
Non-Executive Directors
Elliott Mannis, Chairman
Gareth Edwards
Daniel Mackinnon
Philip Barry
218,720
471,688
0
3,205,749
0.9
2.0
0
13.5
* William Newton’s holding includes 81,967 ordinary shares held in the name of his wife.
During the year to 31 December 2021, the Group did not grant any options over ordinary shares to directors. As
at the signing of this Annual Report, the following options were held by directors:
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
8 March 2022
426,190
8 March 2025
36.15 pence
Judy Happe, CFO
2 December 2020
276,803
2 December 2021
50 pence
8 March 2022
127,857
8 March 2025
36.15 pence
The Company and William Newton entered into a convertible loan note instrument whereby the Company may
borrow up to £350,000 from William Newton at any time until 31 December 2023. In the event of a drawdown
and the Company issuing William Newton with unsecured convertible loan notes, the loan notes may be
converted at a subscription price of 26.5 pence per share. To date, the Company has not drawn down on this
facility.
In addition, in August 2021, the Company granted a loan of £10,000 to William Newton. The loan, which carried
no interest, was repaid in full on 16 June 2022.
Annual Report and Accounts 2021
28
Directors’ Report
The Directors present their annual report and
audited consolidated financial statements for the
year ended 31 December 2021.
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 to UK-based SMEs either
directly or via white label partners on a SaaS basis.
Cornerstone services some high net worth
individual clients. The business also provides same
currency payment services for its customers and
foreign
provides
exchange brokers.
liquidity services
to some
GOVERNANCE
•
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;
resigned on 3 May 2022)
• Gareth Edwards (appointed as a director of
July 2020;
Cornerstone Brands Ltd on 22
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)
(appointment effective 22
•
• William Newton
February 2022)
Stephen Flynn
February 2022)
•
(appointment effective 22
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-
17. The consolidated financial statements for the
year ended 31 December 2021 are set out on pages
39-63. The Group’s loss after taxation for the year
was £4.1 million.
Dividends
The Directors do not recommend the payment of a
dividend for 2021. 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):
•
Elliott Mannis (appointment effective 6 April
2021)
Biographies of the Directors, including their Board
committee memberships, are set out on pages 18-
19. 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 26-28.
Directors’ Indemnity
All Directors and officers of the Group have the
benefit of the indemnity provision contained in the
Group’s Articles of Association. The Group also has
Directors’ and Officers’ liability insurance in respect
of itself and its directors and officers.
Share Capital
Cornerstone FS plc is a public limited company
incorporated 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 23,683,616 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 2021
29
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
Name
Philip Barry
William Newton*
Stephen Flynn
Linista Group Inc.
John Paul Thwaytes
Robert Lee
David Ryan**
Vela Technologies plc
Terence Everson
Number of shares
% of issued share capital
3,205,749
2,530,787
2,435,442
1,509,434
1,470,567
1,426,635
1,100,000
1,045,902
773,660
13.5
10.7
10.3
6.4
6.2
6.0
4.6
4.4
3.3
* William Newton’s holding includes 81,967 ordinary shares registered in the name of his wife
** David Ryan’s holding includes 350,000 ordinary shares registered in the name of his wife
Subsequent Events
The material post balance sheet events can be
found in note 19 to the financial statements. In
particular, this includes the acquisition of Capital
Currencies Limited and the issuance of a total of
3,406,034 new ordinary shares of one penny each.
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
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
Monday 25 July 2022.
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 expected 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.
A review of the Group’s corporate governance is
provided in the Corporate Governance Report on
pages 20-22.
Going Concern
Stakeholder Engagement
Details of
the Group’s engagement with
stakeholders can be found in the Section 172
Statement on page 23 and in the Corporate
Governance Report on pages 20-22.
The Group has bank balances of approximately
£0.28m at the date of approval of these financial
statements and is carefully managing its cash
resources, with the support of its professional
advisers and its key stakeholders, who are creditors
of the business.
Annual Report and Accounts 2021
30
It also has convertible loan note facilities of a
further £0.45m that are available to be called on 20-
days’ notice (£0.1m of which cannot be called until
13 January 2023).
The Directors have prepared cash flow forecasts
covering a period extending 18 months from the
date of approval of these financial statements, i.e.,
into account
to 31 December 2023, taking
projected
continued
in
increase
investment in the development of the software
platform and organic sales and marketing efforts.
revenues,
The cash flow forecasts assume that further equity
fundraising will be necessary over the coming
implement Cornerstone’s
months
growth strategy and for the Group to continue to
operate as a going concern.
in order to
Although the Group has had past success in
fundraising and continues to attract interest from
investors, making
confident of
fundraising success, there can be no guarantee that
such fundraising will be available.
the Board
These circumstances indicate the existence of a
material uncertainty, related to going concern. The
any
financial
adjustments that would result if the company or
Group was unable to continue as a going concern.
statements do not
include
After careful consideration, the Directors consider
that they have reasonable grounds to believe that
the Group can be regarded as a going concern and
for this reason they continue to adopt the going
concern basis in preparing the Group's financial
statements.
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 with
International Financial Reporting Standards (“IFRS”)
as adopted by the United Kingdom (“UK”) and have
law to prepare the
elected under company
Company financial statements in accordance with
IFRS as adopted by the UK.
GOVERNANCE
The financial statements are required by law and
IFRS adopted by the UK to present fairly the
financial position and performance of the Group
and Company; the Companies Act 2006 provides in
relation
that
financial
references in the relevant part of that Act to
financial statements giving a true and fair view are
references to their achieving a fair presentation.
statements
such
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 Company
financial statements, the Directors are required to:
•
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 UK; and
prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Group and the Company will
continue in business.
and
the Group’s
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
the Company’s
explain
transactions and disclose with reasonable accuracy
at any time the financial position of the Group and
the Company and enable them to ensure that the
the
financial
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.
statements
comply
with
The Directors are responsible for the maintenance
integrity of the corporate and financial
and
information included on the Group’s website.
Legislation in the United Kingdom governing the
financial
preparation and dissemination of
statements may differ from legislation in other
jurisdictions.
On behalf of the Board
Julian Wheatland
Chief Executive Officer
29 June 2022
Annual Report and Accounts 2021
31
We’re making it easier to
do business across borders
Cost-effective
exchange rates
Cornerstone lets
businesses access
fair and transparent
exchange rates
Individual IBANs in
clients’ names
Currency risk
managed
Using just one login
clients can access
multiple accounts and
named IBANs
Account holders can use
forward contracts to lock
in exchange rates for
future dates
Receive overseas
payments directly
New integrations in
development
All funds are fully
safeguarded
Businesses can get
paid into their account
without bank conversion
& recipient fees
We’re always developing
the platform with new
integrations coming soon
We segregate funds and
keep them separate and
safeguarded
32
FINANCIAL STATEMENTS
For the year ended 31 December 2021
Annual Report and Accounts 2021
33
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 2021 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 United Kingdom.
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
2021 and of the group’s loss for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the United Kingdom; 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.
Material uncertainty related 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 evaluation of the directors’
assessment of the Group’s ability to continue to adopt the going concern basis of accounting included reviewing
and challenging cash flow forecasts prepared by management covering the period to 31 December 2023,
assessing management’s past forecasting accuracy and reviewing sensitivity analyses of these same cashflow
forecasts and considering the availability of funding.
We draw attention to the Going Concern Accounting policy on page 45 of the financial statements, which
indicates that the Group is not in a position where it is self-financing and will require further funding which has
not yet been secured. Therefore as disclosed in the Going Concern Accounting policy, a material uncertainty
exists that may cast significant doubt on the Group and parent company’s ability to continue as a going concern.
The financial statements do not include any adjustments that would result if the Group and parent company
were unable to continue as a going concern. Our opinion is not modified in respect of this matter.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Annual Report and Accounts 2021
34
FINANCIAL STATEMENTS
Key audit matters
In addition to the matter described above in the Material uncertainty related to going concern section, we have
determined the matters described below to be the key audit matters to be communicated in our report.
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
Carrying value of investments in the Parent Company’s
financial statements.
The Parent Company’s Statement of Financial Position as
at 31 December 2021 includes a total investment of
in 100% of the ordinary share capital of
£6.35m
Cornerstone Payment Solutions Limited and Avila House
Limited.
There is a risk that this investment might be impaired.
In April 2021 the Company listed on AIM and injected a
further £200k into its subsidiary companies to cover
regulatory capital requirements.
The Board concluded that there is no impairment
required to the carrying value of those investments,
based on their assessment of the forecasted future cash
flows of the business.
Our audit work considered, but was not restricted to,
the following:
•
•
•
•
the
review of
Impairment assessment
A
memorandum prepared by the Board in respect
of the carrying value of the investments in
accordance with its forecast performance in the
scenarios considered.
A review of the key estimates, assumptions and
judgements included in that assessment
Sensitivity analysis of the forecasts supporting the
Impairment assessment
A review of post year-end activity of the business.
Our work performed on the carrying value of
investments in the parent company highlighted no
material errors.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, in evaluating the effect of
misstatements and in forming an opinion. 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 needed,
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.
The materiality for the Group financial statements as a whole was set at £90,000. This was determined with
reference to 5% of the projected Group loss for the year, since the Group is driven by profit and loss performance
and this is a key performance indicator ("KPI").
Annual Report and Accounts 2021
35
FINANCIAL STATEMENTS
On the basis of our risk assessment and review of the Group’s control environment, performance materiality
was set at 75% of materiality, being £67,500.
The reporting threshold to the Audit and Risk Committee was set as 5% of materiality, being £4,500. If in our
opinion errors below this level warranted reporting on qualitative grounds, these would also be reported.
The materiality for the Parent Company financial statements was £67,000. This was based on 2% of gross assets
since the Parent Company is a holding company and its value is driven by the value of the investments it holds
in its subsidiary undertakings.
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 £50,250 and the reporting threshold was £3,350.
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
with limited activities in Dubai. 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.
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.
Annual Report and Accounts 2021
36
FINANCIAL STATEMENTS
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.
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 including the Financial Conduct Authority (“the FCA”) 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 the FCA and HMRC;
• 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 judgements made by management in their critical accounting estimate
Because of the inherent limitation of audit, there is a risk that we will not detect all irregularities, including those
leading to a material misstatement in the financial statements or non-compliance with regulation. This risk
increases the more that compliance with a law or regulation is removed from the events and transactions
reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.
Annual Report and Accounts 2021
37
FINANCIAL STATEMENTS
The risk is also greater regarding irregularities occurring due to fraud than error, as fraud involves intentional
concealment, forgery, collusion, omission or misrepresentation.
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)
10 Queen Street Place
For and on behalf of Haysmacintyre LLP
Statutory Auditors
EC4R 1AG
London
Date: 29 June 2022
Annual Report and Accounts 2021
38
Group Statement of Comprehensive Income
For the year ended 31 December 2021
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 income/(expense)
LOSS FOR THE YEAR
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
Loss per ordinary share – basic & diluted (pence)
FINANCIAL STATEMENTS
Notes
2021
£
2020
£
1
2,301,172
(1,113,995)
1,664,237
(1,167,929)
1,187,177
496,308
2
14
14
14
2
3
3
6
7
(2,338,495)
(402,515)
(2,621,962)
(358,443)
(793,577)
(1,499,589)
(5,362,972)
(2,651,609)
(1,434,785)
(1,003,281)
-
2,338,495
402,515
211,281
147,162
793,577
(4,175,795)
(2,155,301)
1,622
(360)
603
-
(4,174,533)
(2,154,698)
70,764
________
-
________
(4,103,769)
(2,154,698)
(4,103,769)
(2,154,698)
(21.24)
_______
(14.99)
_______
All amounts are derived from continuing operations.
The Notes to the Financial Statements form an integral part of these financial statements.
Annual Report and Accounts 2021
39
FINANCIAL STATEMENTS
Group and Company Statement of Financial Position
As at 31 December 2021
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
Group
Company
Company
31 December
2021
£
31 December
2020
£
31 December
2021
£
31 December
2020
£
Notes
8
9
10
12
14
13
577,447
21,542
-
_______
598,989
493,244
348,102
_______
841,346
_______
1,440,335
_______
320,972
8,464
-
_______
329,436
570,159
183,675
_______
753,834
_______
1,083,270
_______
484,927
-
6,349,758
_______
6,834,685
248,996
139,579
_______
388,575
_______
7,223,260
_______
226,278
-
6,147,773
_______
6,374,051
238,810
96,394
_______
335,204
_______
6,709,255
_______
202,776
3,074,355
2,392,710
5,557,645
(3,140,631)
(7,828,230)
_______
258,625
_______
165,887
951,422
54,215
5,557,645
(3,140,631)
(3,724,461)
_______
(135,923)
_______
202,776
3,074,355
2,392,710
5,557,645
-
(4,907,402)
_______
6,320,084
_______
165,887
951,422
54,215
5,557,645
-
(1,083,751)
_______
5,645,418
_______
1,181,710
_______
1,440,335
_______
1,219,193
_______
1,083,270
_______
903,176
_______
7,223,260
_______
1,063,837
_______
6,709,255
_______
A separate profit and loss account for the Parent company is omitted from the Group financial statements by virtue of section
408 of the Companies Act 2006. The Company loss for the year ended 31 December 2021 was £3,823,651 (five-month period
ended 31 December 2020: loss of £1,173,655).
The financial statements were approved by the Board of Directors and authorised for issue on 29 June 2022 and are signed
on its behalf by:
Julian Wheatland
Chief Executive Officer
Annual Report and Accounts 2021
40
FINANCIAL STATEMENTS
Group Statement of Changes in Equity
For the year ended 31 December 2021
Share capital
£
Share premium
£
Share-based
payment reserve
£
Merger relief
reserve
£
Reverse
acquisition reserve
£
Retained earnings
£
Total
£
Balance at 1 January 2020
91,559
1,543,988
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
Issue of shares
Costs of raising equity
Share-based payments (note 14)
Loss and total comprehensive income for the year
Balance at 31 December 2021
5,197
12,037
-
-
(103,596)
20,562
140,128
-
-
-
_______
165,887
36,889
-
-
-
_______
202,776
_______
-
565,426
-
(50,000)
(2,059,414)
1,007,557
-
(56,135)
-
-
_______
951,422
2,208,447
(85,514)
-
-
_______
3,074,355
_______
-
-
-
92,947
(92,947)
-
-
-
54,215
-
_______
54,215
-
-
2,338,495
-
_______
2,392,710
_______
-
-
-
-
-
-
5,557,645
-
-
-
_______
5,557,645
-
-
-
-
_______
5,557,645
_______
-
-
-
-
-
2,557,142
-
(5,697,773)
-
-
-
_______
(3,140,631)
-
-
-
-
_______
(3,140,631)
_______
(1,569,763)
65,784
-
-
-
-
-
-
-
-
-
(2,154,698)
_______
(3,724,461)
-
-
-
(4,103,769)
_______
(7,828,230)
_______
5,197
577,463
92,947
(50,000)
301,185
1,028,119
-
(56,135)
54,215
(2,154,698)
_______
(135,923)
2,245,336
(85,514)
2,338,495
(4,103,769)
_______
258,625
_______
Annual Report and Accounts 2021
41
FINANCIAL STATEMENTS
Company Statement of Changes in Equity
For the year ended 31 December 2021
Share
capital
£
Share
premium
£
Share-based
payment
reserve
£
Merger relief
reserve
£
Retained
earnings
£
Total
£
Balance at 1 August 2020
286
8,186,967
-
-
(8,092,153)
95,100
Bonus issues
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
4,911
-
140,128
20,562
-
-
(4,911)
(8,182,057)
-
1,007,558
(56,135)
-
-
-
-
-
-
54,215
-
-
5,557,645
-
-
-
-
8,182,057
-
-
-
-
-
5,697,773
1,028,120
(56,135)
54,215
-
-
-
-
(1,173,655)
(1,173,655)
Balance at 31 December 2020
165,887
951,422
54,215
5,557,645
(1,083,751)
5,645,418
Issue of shares
Costs of raising equity
Share-based payments
Loss and total comprehensive
income for the year
Balance at 31 December 2021
36,889
-
-
-
_______
202,776
_______
2,208,447
(85,514)
-
-
_______
3,074,355
_______
-
-
2,338,495
-
_______
2,392,710
_______
-
-
-
-
-
-
-
_______
5,557,645
_______
(3,823,651)
_______
(4,907,402)
_______
2,245,336
(85,514)
2,338,495
(3,823,651)
_______
6,320,084
_______
Annual Report and Accounts 2021
42
Group and Company Cash Flow Statement
For the year ended 31 December 2021
FINANCIAL STATEMENTS
Group
Group
Company
Year ended
31 December
2021
£
Year ended
31 December
2020
£
Year ended
31 December
2021
£
Company
5-month
period ended
31 December
2020
£
(4,174,533)
(2,154,698)
(3,890,085)
(1,173,655)
Notes
3
3
14
2
12
13
6
9
8
10
14
3
3
(1,622)
360
2,338,495
152,386
(54,577)
682,374
_______
(603)
-
358,443
22,270
-
-
2,338,495
145,920
(603)
-
54,215
16,638
(83,297)
1,000,240
_______
(141,678)
559,196
_________
(370,302)
1,069,655
_______
(1,057,117)
(857,645)
(988,152)
(404,052)
70,764
_______
(986,353)
-
_______
(857,645)
66,434
_________
(921,718)
-
_______
(404,052)
(17,371)
(404,568)
-
_______
(421,939)
1,571,457
-
1,622
(360)
_______
1,572,719
(9,144)
(335,436)
-
_______
(344,580)
1,212,032
95,000
603
-
_______
1,307,635
-
(404,569)
(201,985)
_________
(606,554)
1,571,457
-
-
-
__________
1,571,457
-
(242,916)
-
_______
(242,916)
647,759
95,000
603
-
_______
743,362
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 in accrued income, trade and other
receivables
Increase in trade and other payables
Cash used in operations
Income tax received
Cash used in operating activities
Investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Investment in group companies
Cash used in investment activities
Financing activities
Shares issued (net of costs)
Loans received
Interest and similar income
Interest and similar charges
Cash generated from financing activities
Increase in cash and cash equivalents
164,427
105,410
43,185
96,394
Opening cash and cash equivalents
Closing cash and cash equivalents
183,675
_______
348,102
=====================
78,265
_______
183,675
=====================
96,394
________
139,579
=====================
-
_______
96,394
=====================
Annual Report and Accounts 2021
43
FINANCIAL STATEMENTS
Notes to the Financial Statements
For the year ended 31 December 2021
BASIS OF PREPARATION
Cornerstone FS plc is a public limited company, incorporated and domiciled in England. 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 2-17.
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted
by the United Kingdom (“IFRS”) for the years ended 31 December 2020 and 31 December 2021, and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared in sterling,
which is the Group’s presentation currency and the functional currency of each Group entity. They have been prepared using
the historical cost convention except for the measurement of certain financial instruments.
The parent company accounts have also been prepared in accordance with IFRS (as adopted by the United Kingdom) and
using the historical cost convention. The accounting policies set out below have been applied consistently to the parent
company where applicable.
Monetary amounts in these financial statements are rounded to the nearest pound.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting year. These estimates and assumptions are based upon management’s knowledge and
experience of the amounts, events or actions. Actual results may differ from such estimates.
The critical accounting estimates are considered to relate to the following:
Intangible Assets: The Group recognises intangible assets in respect of software development costs. This recognition requires
the use of estimates, judgements and assumptions in determining whether the carrying value of such assets is impaired at
each year end.
Investments in subsidiary undertakings (Company financial statements only): The Company’s Statement of Financial Position
includes investments stated at cost in its subsidiary undertakings. The continuing recognition at cost requires judgements
and estimates including an assessment of whether the carrying value of such investments is impaired at each year end.
NEW STANDARDS AND INTERPRETATIONS
As of the date of approval of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet effective:
•
•
•
•
IFRS 17 Insurance Contracts (effective p/c on or after 1 January 2023).
Amendments to IAS 1, presentation of financial statements on classification of liabilities (effective p/c on
or after 1 January 2023).
Amendments to IFRS 3 – reference to the conceptual framework (effective p/c on or after 1 January
2023)
Amendments to IAS 16
Some of these standards and amendments have not yet been endorsed by the EU which may cause their effective dates to
change.
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material
impact on the financial statements of the Group. The Group does not intend to apply any of these pronouncements early.
IMPACT OF NEW INTERNATIONAL REPORTING STANDARDS, AMENDMENTS AND INTERPRETATIONS
The following Standards and Interpretations have been considered and applied in these financial statements:
•
•
IFRIC 23 Uncertainty over Income Tax Positions
Amendments to IFRS 9 Prepayment Features with Negative Compensation
Annual Report and Accounts 2021
44
FINANCIAL STATEMENTS
•
•
Amendments to IAS 28 Long-term interests in Associates and Joint Ventures
IFRS 16 Leases
There has been no material impact on the financial statements as a result of adopting these Standards and Interpretations.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings.
Entities are accounted for as subsidiary undertakings when the Group is exposed to or has rights to variable returns through
its involvement with the entity and it has the ability to affect those returns through its power over the entity.
Details of subsidiary undertakings and % shareholding:
Cornerstone Payment Solutions Ltd (formerly FXPress Payment Services Ltd)
Cornerstone - Middle East FZCO
Avila House Limited
CS Commercial Limited
Cornerstone EBT Trustee Limited
100% owned by Cornerstone Payment Solutions Ltd
100% owned by the Company
100% owned by the Company
-
-
-
-
-
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 were issued in the name of Cornerstone FS plc (“Cornerstone”), the legal
parent, the financial statements for the comparative year ended 31 December 2020, represent in substance the continuation
of the financial information of the primary legal subsidiary, Cornerstone Payment Solutions Ltd.
For the year ended 31 December 2020 the assets and liabilities of the primary legal subsidiary are recognised and measured
in the consolidated financial statements at the pre-combination carrying amounts and not re-stated at fair value. The
retained earnings and reserves balances reflect the retained earnings and other reserves of the primary legal subsidiary
immediately before the business combination and the results of the period from 1 January 2020 to the date of the business
combination are those of the primary legal subsidiary only.
As Cornerstone Payment Solutions Ltd reversed into Cornerstone when Cornerstone did not have an existing trade, the
transaction was not considered to be a business combination, as at the time of the reverse takeover, Cornerstone did not
meet the definition of a business, under IFRS 3 “Business Combinations”. As the transaction was capital in nature and
completed through the issue of shares, it fell within the scope of IFRS 2 ‘Share-based payments’. Any difference in the fair
value of shares deemed to be issued by the legal subsidiary (Cornerstone Payment Solutions Ltd) and the fair value of net
identifiable assets in the legal parent (Cornerstone FS plc) forms part of the deemed cost of acquisition.
GOING CONCERN
The Group has bank balances of approximately £0.28m at the date of approval of these financial statements and is carefully
managing its cash resources, with the support of its professional advisers and its key stakeholders, who are creditors of the
business.
It also has convertible loan note facilities of a further £0.45m that are available to be called on 20-days’ notice (£0.1m of
which cannot be called until 13 January 2023).
The Directors have prepared cash flow forecasts covering a period extending 18 months from the date of approval of these
financial statements, i.e., to 31 December 2023, taking into account projected increase in revenues, continued investment
in the development of the software platform and organic sales and marketing efforts.
The cash flow forecasts assume that further equity fundraising will be necessary over the coming months in order to
implement Cornerstone’s growth strategy and for the Group to continue to operate as a going concern.
Although the Group has had past success in fundraising and continues to attract interest from investors, making the Board
confident of fundraising success, there can be no guarantee that such fundraising will be available.
These circumstances indicate the existence of a material uncertainty, impacting the Company and the Group’s ability to
continue as a going concern. The financial statements do not include any adjustments that would result if the Company or
Group was unable to continue as a going concern.
After careful consideration, the Directors consider that they have reasonable grounds to believe that the Group can be
regarded as a going concern and for this reason they continue to adopt the going concern basis in preparing the Group's
financial statements.
Annual Report and Accounts 2021
45
FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE
The Group applies IFRS 15 Revenue from Contracts with Customers for the recognition of revenue. IFRS 15 established a
comprehensive framework for determining whether, how much and when revenue is recognised. It affects the timing and
recognition of revenue items, but not generally the overall amount recognised.
The performance obligations of the Group’s revenue streams are satisfied on the transaction date or by the provision of the
service for the period described in the contract. Revenue is not recognised where there is evidence to suggest that customers
do not have the ability or intention to pay. The Group does not have any contracts with customers where the performance
obligations have not been fully satisfied.
The Group derives revenue from the provision of foreign exchange and payment services. When a contract with a client is
entered into, it immediately enters into a separate matched contract with its institutional counterparty.
Spot and forward revenue is recognised when a binding contract is entered into by a client and the rate is fixed and
determined. Revenue represents the difference between the rate offered to clients and the rate received from its
institutional counterparties.
INVESTMENTS
Investments in subsidiary undertakings are accounted for at cost less impairment.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the Group Statement of Financial Position when the Group has
become a party to the contractual provisions of the instrument.
Derivative financial instruments
Derivative financial assets and liabilities are carried as assets when their fair value is positive and as liabilities when their fair
value is negative. Changes in the fair value of derivatives are included in the income statement. The Group’s derivative
financial assets and liabilities at fair value through profit or loss comprise solely of forward foreign exchange contracts.
Trade, loan and other receivables
Trade and loan receivables are initially measured at their transaction price. Trade and loan receivables are held to collect
the contractual cash flows which are solely payments of principal and interest. Therefore, these receivables are
subsequently measured at amortised cost using the effective interest rate method. The Directors have considered the
impact of discounting trade and loan receivables whose settlement may be deferred for lengthy periods and concluded that
the impact would not be material.
An impairment loss is recognised for the expected credit losses on trade and loan receivables when there is an increased
probability that the counterparty will be unable to settle an instrument’s contractual cash flows on the contractual due
dates, a reduction in the amounts expected to be recovered, or both.
Impairment losses and any subsequent reversals of impairment losses are adjusted against the carrying amount of the
receivable and are recognised in profit or loss.
Trade payables
Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into. An instrument
will be classified as a financial liability when there is a contractual obligation to deliver cash or another financial asset to
another enterprise.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term highly liquid
investments with original maturities of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of any outstanding bank overdraft which is integral to the Group’s cash management.
Annual Report and Accounts 2021
46
FINANCIAL STATEMENTS
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.
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.
Annual Report and Accounts 2021
47
FINANCIAL STATEMENTS
EMPLOYEE BENEFITS
The Group operates a defined contribution pension scheme. The pension costs charged in the financial statements represent
the contribution payable by the Group during the year.
The costs of short-term employee benefits are recognised as a liability and an expense in the period the related service is
rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
TAXATION
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at
the reporting date. Current income tax relating to items recognised directly in equity or other comprehensive income is
recognised in equity and not in the consolidated statement of comprehensive income.
Deferred income tax is provided on all temporary differences at the reporting date arising between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are offset when
the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities
relate to taxes levied by the same tax authority.
Deferred tax assets have not been recognised in respect of the Group’s tax losses carried forward.
Research and Development tax credits are not recognised as receivables until the claims have been submitted and agreed
by HMRC.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting judgements will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
IMPAIRMENT
At each accounting reference date, the Group reviews the carrying amounts of its intangibles, property, plant & equipment
and investments to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if
any).
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for
impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit)
in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried
in at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Annual Report and Accounts 2021
48
FINANCIAL STATEMENTS
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 2021
49
FINANCIAL STATEMENTS
1
REVENUE AND SEGMENTAL REPORTING
All of the Group’s revenue arises from its activities within the UK (although a proportion of revenue is derived from
customers incorporated or residing outside of the UK). Management considers there to be only one operating
segment within the business based on the way the business is organised and the way results are reported
internally.
Revenue is as follows:
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 2021
£
_______
2,301,172
_______
Group
Year ended 31
December
2020
£
_______
1,664,237
_______
Group
Year ended 31
December 2021
Group
Year ended 31
December
2020
£
£
-
2,338,495
402,515
97,556
4,293
148,094
86,434
_______
211,281
147,162
793,577
42,333
1,730
20,540
70,697
_______
Annual Report and Accounts 2021
50
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
Due diligence 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.
Total finance and other income
ii.
Total finance costs
4
EMPLOYEES
Year ended 31
December 2021
£
Year ended 31
December 2020
£
25,000
18,000
15,000
-
30,250
-------------------------
73,250
=========================
16,500
-------------------------
31,500
=========================
Group
Year ended 31
December 2021
£
Group
Year ended 31
December 2020
£
1,622
_______
(360)
_______
603
_______
-
_______
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 2021
Number
Year ended 31
December 2020
Number
8
14
_______
22
_______
-
9
_______
9
_______
Annual Report and Accounts 2021
51
EMPLOYMENT COSTS
Wages and salaries
Social security costs
Pension costs
Share-based compensation
FINANCIAL STATEMENTS
Year ended 31
December 2021
£
Year ended 31
December 2020
£
1,309,251
182,414
38,307
2,195,782
_______
3,725,754
_______
618,522
68,455
5,930
26,787
_______
719,694
_______
REMUNERATION OF KEY MANAGEMENT PERSONNEL
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in
aggregate. Further information about the remuneration of the individual directors is provided in the Directors’
Remuneration Report on pages 26-28.
Salaries and fees
Bonus
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
Bonus
Share-based compensation
Pension and other benefits
Year ended 31
December 2021
£
Year ended 31
December 2020
£
680,553
76,800
311,469
84,022
_______
1,152,844
_______
116,786
-
20,088
9,453
_______
146,327
_______
Number
Number
3
_______
-
_______
Year ended 31
December 2021
£
Year ended 31
December 2020
£
180,000
43,200
177,000
9,000
_______
409,200
_______
85,000
-
15,452
-
_______
100,452
_______
During the year no (2020: nil) Directors exercised any (2020: nil) share options.
Annual Report and Accounts 2021
52
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 £38,307 (2020:
£5,930). At 31 December 2021 contributions of £25,864 remained outstanding and are included within other
payables (2020: £2,490).
6
TAXATION
The tax on the loss on ordinary activities for the period was as follows:
CURRENT TAX:
Research & development tax credit
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% (2020: 19%)
EFFECTS OF:
Surrender of tax losses for research & development tax credit refund
Expenses not deductible for tax purposes
Share-based payments
Other deductions in period
Tax losses carried forward
Current tax
Group
Year ended 31
December 2021
£
_______
Group
Year ended 31
December 2020
£
_______
70,764
-
-
_______
70,764
_______
-
-
-
_______
-
_______
Group
Year ended 31
December 2021
£
(4,174,533)
_______
(793,161)
Group
Year ended 31
December 2020
£
(2,154,698)
_______
(409,393)
70,764
66,649
444,314
(702)
282,900
_______
70,764
_______
-
155,158
68,104
(1,446)
185,577
_______
-
_______
As at 31 December 2021, the Group had prepared but not yet submitted a Research and Development tax credits
reclaim, the estimated net benefit of which is approximately £158,000. During the year ended 31 December 2021
the Group received a Research and Development tax credit refund of £70,764 in respect of its reclaim for the year
ended 31 December 2020.
As at 31 December 2021, the Group had tax losses carried forward of £4,147,682 (31 December 2020: £2,847,347).
Deferred tax has not been recognised in respect of these tax losses. The standard rate of corporation tax applicable
to the Group for the year ended 31 December 2021 was 19%. The UK government has announced, with effect from
1 April 2023, an increase in the corporation tax main rate from 19% to 25% for companies with profits over
£250,000 and the introduction of a small profits rate of 19% applicable to companies with profits of not more than
£50,000, with marginal relief available for profits up to £250,000.
7
LOSS PER SHARE
The loss per share of 21.24p is based upon the loss of £4,103,769 (2020: loss of £2,154,698) and the weighted
average number of ordinary shares in issue for the year of 19,317,407 (2020: 14,370,030).
The loss incurred by the Group means that the effect of any outstanding warrants and options would be considered
anti-dilutive and is ignored for the purposes of the loss per share calculation.
Annual Report and Accounts 2021
53
8
GROUP INTANGIBLE ASSETS
COST
At 1 January 2021
Additions
At 31 December 2021
AMORTISATION
At 1 January 2021
Charge for the period
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
At 31 December 2020
FINANCIAL STATEMENTS
Internally
developed
software
£
242,916
404,569
_______
647,485
16,638
145,920
_______
162,558
Software costs
£
Other
£
15,611
-
_______
15,611
13,437
2,174
_______
15,611
92,520
-
_______
92,520
-
-
_______
-
Total
£
351,047
404,569
_______
755,616
30,075
148,094
_______
178,169
484,927
_______
-
_______
92,520
_______
577,447
_______
226,278
_______
2,174
_______
92,520
_______
320,972
_______
Other intangible assets comprise regulatory licenses held at cost and are not amortised.
COMPANY INTANGIBLE ASSETS
COST
At 1 January 2021
Additions
At 31 December 2021
AMORTISATION
At 1 January 2021
Charge for the period
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
At 31 December 2020
Internally
developed
software
£
242,916
404,569
_______
647,485
16,638
145,920
_______
162,558
Software costs
£
Other
£
-
-
_______
-
-
-
_______
-
-
-
_______
-
-
-
_______
-
Total
£
242,916
404,569
_______
647,485
16,638
145,920
_______
162,558
484,927
_______
226,278
_______
-
-
_______
_______
-
-
_______
_______
484,927
_______
226,278
_______
Annual Report and Accounts 2021
54
9
GROUP PROPERTY, PLANT AND EQUIPMENT
FINANCIAL STATEMENTS
COST
At 1 January 2021
Additions
At 31 December 2021
DEPRECIATION
At 1 January 2021
Charge for the period
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
At 31 December 2020
10
INVESTMENTS
Cost or Valuation
At 1 January 2021
Additions
At 31 December 2021
Net Book value
At 31 December 2021
At 31 December 2020
Computer Equipment
£
15,675
17,371
33,046
7,211
4,293
11,504
21,542
8,464
Investments in
Subsidiaries
£
6,147,773
201,985
6,349,758
6,349,758
6,147,773
The Company’s investment as at 31 December 2021 represents its investments in its direct subsidiaries of
£6,347,773 in Cornerstone Payment Solutions Ltd (formerly FXPress Payment Services Ltd) (2020: £6,147,773) and
£1,985 in Cornerstone – Middle East FZCO (2020: nil).
During the year ended 31 December 2021 the Company invested a further £200,000 in support of the increased
regulatory capital requirements for Cornerstone Payment Solutions Ltd in advance of it becoming an Authorised
Electronic Money Institution.
Annual Report and Accounts 2021
55
FINANCIAL STATEMENTS
Shares in subsidiary and associate undertakings are stated at cost. As at 31 December 2021, Cornerstone FS plc
owned the following principal subsidiaries which are included in the consolidated accounts:
Subsidiary
Cornerstone Payment Solutions Ltd (formerly
FXPress Payment Services Ltd)
Principal
Activity
Country of
Incorporation
Foreign
Exchange
and Payment
Services
Northern
Ireland
Cornerstone – Middle East FZCO
Consultancy
United Arab
Emirates
Avila House Limited
E-money and
Payment
Services
England and
Wales
CS Commercial Limited
(audit exempt)
Dormant
England and
Wales
Cornerstone EBT Trustee Limited
(audit exempt)
Dormant
England and
Wales
Percentage of
Ownership
100 per cent.
100 per cent.
100 per cent.
100 per cent.
100 per cent.
Registered Office
1 Elmfield
Avenue,
Warrenpoint,
Newry,
Co. Down, BT34
3HQ
Dubai Silicon
Oasis, DDP,
Building A2,
Dubai, United
Arab Emirates
The Old Rectory,
Addington,
Buckinghamshire,
MK18 2JR
The Old Rectory,
Addington,
Buckinghamshire,
MK18 2JR
The Old Rectory,
Addington,
Buckinghamshire,
MK18 2JR
12
CURRENT TRADE AND OTHER RECEIVABLES
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
Group
31
December
2021
£
Group
31
December
2020
£
Company
31
December
2021
£
Company
31
December
2020
£
-
90,360
322,710
42,525
-
37,649
_______
493,244
_______
8,405
24,623
299,035
140,378
-
97,718
_______
570,159
_______
-
31,118
-
10,000
170,229
37,649
_______
248,996
_______
-
9,600
-
131,492
-
97,718
_______
238,810
_______
For the year ended 31 December 2021 £nil was recorded as a bad debt expense (31 December 2020: £nil).
As at 31 December 2021, the Group had a contingent asset in respect of Research and Development tax credits for
which a reclaim had been prepared, but not yet submitted. The estimated net benefit of the claim is approximately
£158,000 (2020: £62,000) and has not been included in current receivables due to its contingent nature.
Annual Report and Accounts 2021
56
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
FINANCIAL STATEMENTS
Group
31
December
2021
£
346,255
290,292
60,349
484,814
-
_______
1,181,710
_______
Group
31
December
2020
£
525,064
216,061
47,273
430,795
-
_______
1,219,193
_______
Company
31
December
2021
£
212,561
-
10,923
244,033
435,659
_______
903,176
_______
Company
31
December
2020
£
238,654
-
17,411
290,773
516,999
_______
1,063,837
_______
14
SHARE CAPITAL AND RESERVES
Allotted, called up and fully paid
Ordinary shares of £0. 01 each as at 1 January 2021
Issue of new shares of £0.01
Ordinary shares of £0.01 each at 31 December 2021
Ordinary shares
No.
16,588,608
3,688,974
_______
20,277,582
_______
Share capital
£
165,886
36,890
_______
202,776
_______
At 31 December 2021 share subscriptions of £nil remained unpaid (31 December 2020: £131,492, comprising
£2,630 share capital and £128,862 share premium).
The following changes in the share capital of the Company have taken place in year ended 31 December 2021:
•
•
On 26 February 2021, 24,326 Ordinary Shares were issued at a price of £0.407 each on the exercise of
warrants.
On 6 April 2021, the Company placed 3,664,648 new ordinary shares at a price of £0.61 each on its
admission to AIM.
All Ordinary Shares are equally eligible to receive dividends and the repayment of capital and represent equal
votes at meetings of shareholders.
The following describes the nature and purpose of each reserve within owner’s equity:
Share capital: Amount subscribed for shares at nominal value.
Share premium: Amount subscribed for share capital in excess of nominal value, less costs of share issue.
Share-based payment reserve: The share-based payment reserve comprises the cumulative expense
representing the extent to which the vesting period of warrants and share options has passed and
management’s best estimate of the achievement or otherwise of non-market conditions and the number of
equity instruments that will ultimately vest.
Merger relief reserve: Effect on equity of the consideration shares issued over their nominal value.
Reverse acquisition reserve: Effect on equity of the reverse acquisition of FXPress Payment Services Ltd.
Retained losses: Cumulative realised profits less cumulative realised losses and distributions made, attributable
to the equity shareholders of the Company.
Options
The Company operates an Enterprise Management Inventive (“EMI”) Scheme equity-settled share-based
remuneration scheme for employees.
Annual Report and Accounts 2021
57
FINANCIAL STATEMENTS
Each of the option agreements under the EMI scheme provides that the relevant options vest, as to one third
of the shares comprised in them, on each of the first three anniversaries of the date of grant. Once vested, the
options are exercisable at any time. The options are also exercisable in the event of a change of control. If the
option holder’s employment within the Group is terminated, other than for gross misconduct, any options
vested may be exercised within 90 days of such termination (12 months in the case of the option holder’s death).
Otherwise the options lapse five years after the date of grant. The options also lapse, inter alia, if the option
holder is adjudged bankrupt or proposes a voluntary arrangement or other scheme in relation to his/her debts.
Outstanding as at 1 January 2020
Granted during the year
Outstanding as at 1 January 2021
Granted during the year
Outstanding as at 31 December 2021
Weighted
average exercise
price
£
Ordinary shares
No.
-
1,599,480
_______
1,599,480
-
_______
1,599,480
_______
-
0.50
_______
0.50
-
_______
0.50
_______
The weighted average contractual life of the options is five years (2020: zero).
No options were exercised during the current year (2020: nil).
Warrants
On 6 April 2021 the Company granted 63,114 warrants with an exercise price of £0.61 and a term of 2 years to
the Company’s broker Peterhouse Capital Limited, in connection with the Company’s IPO and representing 5%
of the number of shares issued to Peterhouse Capital Limited’s investors on IPO.
The warrants were estimated to have a grant date fair value of £0.27 per warrant using the Black-Scholes
valuation model. The principal inputs into the model were:
Share price at grant date
Risk-free rate
Expected Volatility
Contractual life
- 61 pence
- 0.8%
- 80.6%
- 2 years
The expected volatility reflects the assumption that historical volatility of comparable quoted companies is
indicative of future trends, which may not necessarily be the actual outcome.
On 26 February 2021, 24,326 warrants were exercised at a price of £0.407 each.
The Group share-based compensation charge for the year ended 31 December 2021 of £2,338,495 (2020:
£147,162) consists of £7,102 in relation to the accelerated share-based payment charges in respect of the
exercised warrants, £135,610 in relation to other warrants granted in Cornerstone (2020: £120,375), £306,833
in respect of the Cornerstone options (2020: £26,787), £81,370 in respect of equity settled share-based
payments related to the non-executive Board member’s service agreements (2020: £nil) and £1,807,580 of
other share-based compensation (2020: £nil).
Other share-based compensation
On 27 September 2021 the Company announced the appointment of Robert O’Brien as General Manager APAC
and Middle East. As part of his remuneration package over the first two years he and his team will be entitled
to receive share-based incentivisation based on a multiple of revenue generation and contribution to profit. This
will be measured at the end of both years. In the first year, any new ordinary shares earned under this
incentivisation plan would be issued at the lower of the IPO Placing Price (61 pence per share) or the average
closing price of Cornerstone shares for the 20 business days prior to issue. In the second year, any new ordinary
Annual Report and Accounts 2021
58
shares earned under this incentivisation plan would be issued at the average closing price of Cornerstone shares
for the 20 business days prior to issue. The charge recognised in respect of this share-based incentivisation
agreement is £1,807,580 for the year ended 31 December 2021 (2020: £nil) which is based on the forecasted
performance of Robert O’Brien and his team over the two-year period as of the reporting date, and based on
the share price at the grant date on 1 August 2021 of 29.5 pence per share.
FINANCIAL STATEMENTS
15
RELATED PARTY TRANSACTIONS
Details of key management compensation are included in note 4. Key management are considered to be the
Directors of the Group.
Transactions with subsidiaries
During the year, the Company and Cornerstone Payment Solutions Ltd entered into various transactions with each
other including software development charges, licenses fees and working capital support. The net balance of
transactions between the companies are held on an interest free inter-Group loan which has no terms for
repayment. At the year end, the Company owed £435,659 (2020: £516,999) to Cornerstone Payment Solutions
Ltd.
During the year, the Company also provided working capital support to Avila House Limited and Cornerstone –
Middle East FZCO. The net balance of transactions between the companies are held on an interest free inter-Group
loan which has no terms for repayment. At the year end, Avila House Limited owed the Company £150,041 (2020:
£nil) and Cornerstone – Middle East FZCO owed the Company £20,188 (2020: £nil).
Other related parties
All of the amounts below were in respect of the year ended 31 December 2021.
Terry Everson, a director of Cornerstone Payment Solutions Ltd and a significant shareholder in Cornerstone, was
paid consulting fees of £1,250 via Hazelwood Financial Ltd, a company of which he is a director and significant
shareholder (2020: £24,000). This fee prepaid a loan of made by the Group to Terry Everson leaving a net balance
of £8,750 unpaid as at 31 December 2021 (31 December 2020: £10,000).
The Company and William Newton, a director of the company, entered into a convertible loan note instrument
whereby the Company may borrow up to £350,000 from Willian Newton at any time until 31 December 2023. In
the event of a drawdown and the Company issuing William Newton with unsecured convertible loan notes, the
loan notes may be converted at a subscription price of 26.5 pence per share. To date, the Company has not drawn
down on this facility.
As at 31 December 2021, a loan of £10,000 made by the Group to William Newton, a director of the Company
remained unpaid (31 December 2020: £nil).
16
FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
Group
31
December
2021
£
Group
31
December
2020
£
Company
31
December
2021
£
Company
31
December
2020
£
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts with customers
Foreign currency forward contracts with institutional
counterparty
Cash and cash equivalents
Trade receivables
Other receivables
359,077
253,077
33
45,958
-
-
_______
359,110
348,102
-
132,885
_______
840,097
_______
_______
299,035
183,675
8,405
165,001
_______
656,116
_______
_______
-
139,579
-
211,347
_______
350,926
_______
Annual Report and Accounts 2021
-
-
_______
-
96,394
-
141,092
_______
237,486
_______
59
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
2021
£
Group
31
December
2020
£
Company
31
December
2021
£
Company
31
December
2020
£
290,292
55,869
-
160,192
-
-
-
-
_______
290,292
346,255
484,814
_______
1,121,361
_______
_______
216,061
525,064
430,795
_______
1,171,920
_______
_______
-
212,561
679,692
_______
892,253
_______
_______
-
238,654
807,772
_______
1,046,426
_______
All financial assets and liabilities have contractual maturity of less than one year.
Derivative financial assets and liabilities
Derivative financial assets not designated as hedging instruments
Foreign currency forward contracts with customers
Foreign currency forward contracts with institutional
counterparty
31 December 2021
31 December 2020
Fair Value
£
359,077
Notional
Principal
£
12,508,939
Fair Value
£
253,077
Notional
Principal
£
14,686,425
12,544
33
_______
_______
359,110 12,521,483
_______
_______
5,785,633
45,958
_______
299,035 20,472,058
_______
_______
_______
Derivative financial liabilities not designated as hedging instruments
Foreign currency forward contracts with customers
Foreign currency forward contracts with institutional
counterparty
31 December 2021
31 December 2020
Fair Value
£
290,292
Notional
Principal
£
9,874,438
-
_______
290,292
_______
-
_______
9,874,438
_______
Fair Value
£
55,869
160,192
_______
216,061
_______
Notional
Principal
£
4,392,467
12,390,456
_______
16,782,923
_______
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Foreign currency forward contracts are measured at fair
value on a recurring basis.
Annual Report and Accounts 2021
60
FINANCIAL STATEMENTS
There are three levels of fair value hierarchy:
•
•
•
Level 1 – the fair value of financial instruments traded in active markets is based on quoted market prices
at the end of the reporting period.
Level 2 – valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
Level 3 – valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
Foreign currency forward contracts with customers generally require immediate settlement on the maturity date
of the individual contract and fall into level 2 of the fair value hierarchy above. Level 2 comprises those financial
instruments which can be valued using inputs other than quoted prices that are observable for the asset or liability
either directly (i.e., prices) or indirectly (i.e., derived from prices). The fair value of forward foreign exchange
contracts is measured using observable forward exchange rates for contracts with a similar maturity at the
reporting date.
The net loss on financial assets at fair value through profit or loss for year ended 31 December 2021 was £29,661
(2020: net gain of £4,839).
Financial instruments – risk management
Financial assets primarily comprise trade and other receivables, cash and cash equivalents and derivative financial
assets. Financial liabilities comprise trade and other payables, shareholder loans and derivative financial liabilities.
The main risks arising from financial instruments are market risk (including foreign currency risk and interest rate
risk), liquidity risk, credit risk and counterparty risk.
Market risk
Market risk for the Group comprises foreign exchange risk and interest rate risk. The Group operates as a riskless
matched principal broker for deliverable non-speculative spot and forward foreign currency transactions, with each
trade with its clients matched with an identical trade with an institutional counterparty. Therefore, foreign
exchange risk is mitigated through the matching of foreign currency assets and liabilities between clients and
institutional counterparties which move in parity.
The Group’s cash balances are primarily held in Pound Sterling and the Group does not hold significant cash
balances in foreign currencies.
Interest rate risk affects the Group to the extent that it implicitly impacts the price of foreign currency forward
contracts. However, this risk is mitigated in the same way as foreign currency risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group
has extensive controls to ensure that it has sufficient cash or working capital to meet its cash requirements to
mitigate this risk.
As per the Going Concern note above, the Directors have prepared a cash flow forecast taking into account a
projected increase in revenues and continued investment in the development of the Group’s platform and organic
sales & marketing efforts and the inherent risks and uncertainties facing the Group’s business to assess the Group’s
working capital requirements. The Board reviews cash flow projections on a regular basis and have authority
controls in place so as not to commit to material expenditure without being satisfied that sufficient funding is
available to the Group.
The Group also has systems in place to monitor the margin requirements of its clients and its margin requirement
with the institutional counterparty for the back-to-back foreign currency forward contract on a real-time basis and
request any necessary top up payment from the clients. The Group also has the right to close any position if no
margin is given.
Annual Report and Accounts 2021
61
FINANCIAL STATEMENTS
Credit risk
Credit risk is the risk that clients do not meet their contractual obligations in respect of the currency spot and
forward contracts which leads to a financial loss. All customers are subject to credit verification checks.
Approximately 90% of the Group’s trades are spot currency contracts which are required to be settled within two
working days. For forward currency contracts, as noted above, clients are required to provide margin that mitigates
credit exposure. Trade limits are applied to all clients. The Group has systems to monitor trade limits and collateral
requirements on a real-time basis. The Group does not have any significant concentration of exposures within its
client base.
Counterparty risk
Each trade between a client and the Group is matched with an identified trade with Velocity Trade International
(“Velocity”), which is a global foreign exchange liquidity and trade provider that provides pricing, execution and
settlement services for the Group.
The Group also has brokerage accounts with alternative institutional counterparties and could transact with them
instead if Velocity is unable to provide liquidity.
Management of settled and open trades are conducted via Currency Cloud, the GV (formerly Google Ventures)
backed global payments and FX platform and Banking Circle. Client funds are safeguarded with Banking Circle in
line with the Group’s requirements under the Electronic Money Regulations 2011 for additional protection and to
reduce counterparty risk.
17
FINANCIAL COMMITMENTS
The Group is not considered to have any operating lease commitments. The offices utilised by the Group are
serviced offices, which have a short notice period and therefore it has not been considered necessary to disclose
these as an operating lease commitment.
18
CAPITAL MANAGEMENT
The capital structure of the business consists of cash and cash equivalents, debt and equity. Equity comprises share
capital, share premium and retained losses and is equal to the amount shown as ‘Equity’ in the balance sheet. The
Group’s current objectives when maintaining capital are to:
•
•
safeguard the Group’s ability to operate as a going concern so that it can continue to pursue its growth
plans;
provide a reasonable expectation of future returns to shareholders; and
• maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current
and long term.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and
adjusts it in the light of changes in economic conditions and the risk characteristics of underlying assets.
The Company is subject to the following externally imposed capital requirements:
•
as a public limited company, the Company is required to have a minimum issued share capital of £50,000.
Cornerstone Payment Solutions Ltd, a wholly-owned subsidiary of the Company, is subject to the following capital
requirement under the Electronic Money Regulations 2011:
•
2% of the average outstanding e-money issued by the Electronic Money Institution (based on a 6-month
rolling average), or the initial capital requirement of €350,000, whichever is the higher.
Prior to becoming an Authorised Electronic Money Institution in August 2021, Cornerstone Payment Solutions Ltd
was subject to the following capital requirement under the Payment Service Regulations 2017:
•
either 10% of fixed overheads for the preceding year or the initial capital requirement of €50,000,
whichever is the higher.
Cornerstone Payment Solutions Ltd complied with both of these above requirements for the relevant periods
during the year ended 31 December 2021.
Annual Report and Accounts 2021
62
19
EVENTS AFTER THE REPORTING DATE
FINANCIAL STATEMENTS
Acquisition of Capital Currencies Limited
On 1 February 2022, the Company completed the acquisition of Capital Currencies Limited, a well-established
foreign exchange broker specialising in the provision of currency exchange and international payments, authorised
and regulated by the FCA as an authorised payment institution permitted to provide payment services.
The consideration payable for the Acquisition consists of £0.586 million in cash on completion subject to customary
working capital adjustments with further earn-out consideration payable over two years after completion in two
tranches as follows:
•
•
on the first anniversary of completion, two times Capital Currencies' revenue for the 12-month period
leading up to 31 January 2023, less the amount already paid to the sellers in respect of the Acquisition.
One half of the earn-out will be satisfied in the issue of convertible loan notes to the sellers with a 6%
coupon interest and the remaining half shall be satisfied by the issue of consideration shares to the
sellers.
on the second anniversary of completion, three times Capital Currencies' revenue for the 12-month
period leading up to 31 January 2024, less the amounts already paid (or deemed paid) to the sellers in
respect of the Acquisition. The final earn-out payment shall be satisfied by the issue of consideration
shares to the sellers.
Total consideration is capped at £3 million.
Any convertible loan notes issued to the sellers under the earn-out payment is for a term of 2 years from the date
of issue and the sellers may elect to convert at any time prior to termination date. Any interest is payable quarterly
in arrears with the principal repayable at the end of the two-year term. The conversion price per share is at the
mid-market price of the Company's share in the 20 dealing days preceding the issue of the convertible loan notes.
Any consideration shares issued to the sellers under the earn-out payment is priced per share as the sum equal to
the average mid-market price of the Company's share in the 20 dealing days preceding the issue of the
consideration shares.
Any shares received by the sellers under the Acquisition (save for any shares issued under the convertible loan
notes) are subject to a 12-month lock-in from the date of issue (subject to certain limited exceptions) and, for a
further period of 12 months thereafter, the sellers will only dispose of any interests in the shares on an orderly
market basis through the Company's brokers. The sellers have also agreed that any shares issued under the
convertible loan notes will only be disposed, for a period of 12 months from the date of issue, through the
Company's brokers.
Other events after the reporting date
On 27 January 2022 the Company announced a placing and subscription raising total gross proceeds of £870,004
following which a total of 3,283,034 new ordinary shares of one penny each in the capital of the Company were
admitted to AIM.
On 8 March 2022, the Company granted options over ordinary shares of 1 penny each in the capital of the
Company. Julian Wheatland was granted 426,190 options at an exercise price of 36.15 pence per share. Judy Happe
was granted 127,857 options at an exercise price of 36.15 pence per share. In addition, the Company granted a
further 239,407 options to other staff members. All options are intended to qualify as Enterprise Management
Incentive options pursuant to the Income Tax (Earnings and Pensions) Act 2003.
On 8 April 2022, the Company allotted and issued 123,000 new ordinary shares of 1 penny each in the Company at
a price of £0.265. The new shares were issued and allotted to the recipient as consideration for investor relations
services.
Annual Report and Accounts 2021
63
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
Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Auditor
Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG
Solicitor
TH Jelf LLP
The Old Rectory
Addington
Buckinghamshire
MK18 2JR
Annual Report and Accounts 2021
64