Annual Report 2021
CONTENTS
..................................................................................................................................................................................
Highlights ............................................................................................................................................................ 1
Chairman’s statement ...................................................................................................................................... 2
CEO’s statement ................................................................................................................................................ 3
The Global Risk Platform ................................................................................................................................. 6
Our products ....................................................................................................................................................... 7
Principal risks and uncertainties ................................................................................................................... 12
Section 172 statement ................................................................................................................................... 15
Financial review................................................................................................................................................ 17
Board of Directors............................................................................................................................................ 22
Corporate Governance statement ................................................................................................................ 25
Audit Committee report .................................................................................................................................. 32
Remuneration Committee report .................................................................................................................. 34
Nomination Committee report ...................................................................................................................... 38
Directors’ report ............................................................................................................................................... 39
Financial statements ....................................................................................................................................... 44
Independent auditor’s report to the members of KRM22 Plc ................................................................. 45
Consolidated income statement and statement of comprehensive income for the group .............. 54
Consolidated statement of financial position for the group .................................................................... 55
Company statement of financial position ................................................................................................... 56
Consolidated statement of changes in equity for the group ................................................................... 57
Company statement of changes in equity .................................................................................................. 58
Consolidated statement of cash flows for the group ............................................................................... 59
Company statement of cash flows .............................................................................................................. 60
Notes to the consolidated financial statements ........................................................................................ 61
Company information ..................................................................................................................................... 93
1
KRM22 plc
ANNUAL REPORT 2021
HIGHLIGHTS
Financial
• Gross cash as at 31 December 2021 of £5.4m (2020: £2.0m)
• Annualised Recurring Revenue (ARR)1 as at 31 December 2021 of £3.8m (2020: £4.1m)
o New contracted ARR in the year ended 31 December 2021 of £0.7m
• Total revenue recognised of £4.1m (2020: £4.6m)
• Adjusted EBITDA loss2 of £0.7m (2020: £0.2m)
• An improved loss before tax of £3.4m (2020: loss of £5.7m)
• Further funding received in December 2021 of £4.7m (gross) through a direct strategic investment by
Trading Technologies International, Inc.
Operational
• Distribution agreement signed with Trading Technologies International, Inc. in December 2021
following its strategic investment which will help provide a platform for future growth
• Deployment of a major futures brokerage customer adopting multiple KRM22 risk management
products using a single data set
• 69% of customers now contacted under a Master Services Agreement on multi-year contracts with
increased ARR on an annual basis over the term of the contract with contract commitments of
between two and five years
• Soc 2 accreditation approved in March 2021 demonstrating KRM22 has internal controls in place to
safeguard customer data which will assist in new customer procurement processes
1 Annualised Recurring Revenue (ARR) is the value of contracted Software-as-a-Service (SaaS) revenue normalised to a one year
period and excludes one-time fees.
2 Adjusted EBITDA is the reported loss for the year, adjusted for recurring non-monetary costs including depreciation, amortisation
gain on extinguishment of debt, unrealised foreign exchange loss, deferred salary bonus accrual write back and share-based payment
charges and non-recurring costs including profit/(loss) on tangible/intangible assets, impairment charges, reorganisation costs and
acquisition and funding costs.
2
KRM22 plc
ANNUAL REPORT 2021
CHAIRMAN’S STATEMENT
2021 was a challenging year for KRM22 however we have entered 2022 well
positioned for the next phase of the Company’s growth. In the almost four
years since we floated on AIM, we have created a capital markets SaaS based
risk business with £3.8m of Annual Recurring Revenue and 28 institutional
customers with multi-year contracts.
We have endured two years of the COVID-19 pandemic which has placed
restrictions on the traditional sales methods and tackled the transitioning of
acquired deployed software to SaaS platform delivered services.
We exit 2021 with a strong shareholder base and balance sheet as well as an
extensive array of risk services on our Global Risk Platform as well as many new and renewed multi-year
contracts.
Trading Technologies International Inc. (“TT”) acquired a 25% strategic stake in KRM22 in December 2021
through a subscription for new shares and we have entered into a distribution agreement with TT to take
KRM22’s products progressively into the TT customer base with significant opportunities for growth and
cross selling.
In 2021 we secured £0.7m of new business however this organic growth was offset by an unprecedented
level of existing customer churn in the year. The churn was from legacy customers on old deployed software
that did not want to migrate to SaaS delivered services. This has been a common theme over the last two
years of the COVID-19 pandemic. Whilst some churn is expected and budgeted for in 2022, we now believe
to be at the end of that excessive churn process and expect to see positive growth in ARR going forward.
I am pleased that Stephen Casner is taking the Company forward as CEO. Stephen’s plans to strengthen
sales and marketing resource as well as continue investment in the Global Risk Platform and KRM22 risk
products, will help accelerate KRM22 for a sustained period of growth backed up by a strong balance sheet.
Keith Todd CBE
Executive Chairman
22 March 2022
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KRM22 plc
ANNUAL REPORT 2021
CEO’S STATEMENT
KRM22 is poised for a significant and rewarding year in 2022. We ended
2021 with a significant influx of capital from a new investor, a new
distribution channel with one of our industry’s premier technology
providers and a renewed commitment to redeploy our sales and
marketing resources, all of which is expected to provide accelerated
growth over the next two years.
2021 brought significant change to our target market. We saw
companies change the way they use, deploy and consolidate risk
technology. This change was predicted by KRM22 and underpinned the
rationale for the acquisition of legacy software products like Ancoa,
ProOpticus and Object+ which have subsequently been enhanced and
rebranded as Market Surveillance, Post-Trade, At-Trade and Pre-Trade products and the development of our
Global Risk Platform. Those acquisitions brought KRM22 key risk management talent and technology
solutions that could be modeled into services for our Global Risk Platform, as well as a portfolio of customers
who trusted these systems on a daily basis to manage risk on their assets.
We knew the products we acquired, and their competitors, were created in isolation of each other and
significant benefit would come from standardisation on to a seamless platform. Disruption would come to
these legacy platforms and our investments in creating a next generation, SaaS based Global Risk Platform
would prove to be a natural constituent for the market to progress into.
2021 saw KRM22 make good progress on delivering the Global Risk Platform. A new showcase customer
was deployed, creating the first instance of an “end to end” risk platform customer. This platform enabled
our customer to use one risk system, the KRM22 Global Risk Platform, with a common set of data elements
to manage market, compliance and enterprise risk. I am proud to announce that this key engagement
continues to be a success and new services are being deployed weekly to further grow and mature this next
generation system.
A key deliverable last year was our ability to completely rebuild one of the legacy systems we acquired into
fresh technology and successfully deploy it for a tier one bank as a new customer of KRM22. This Pre-Trade
Risk Limit Management application is now a key focal point of our Global Risk Platform and is being deployed
for the “showcase customer” right now. We believe by the end of 2022 that our “showcase” will be complete
and that the full power of the Global Risk Platform will be easy to identify and its value proposition obvious.
This will have a significant impact on our core market and will act as an accelerant to KRM22’s success in
becoming the capital markets premier provider of risk technologies.
In Blackrock’s CEO Larry Fink’s 2022 Letter to their CEO’s, he stated that the pandemic “has turbocharged an
evolution in the operating environment for virtually every company.”. This is true for KRM22 as well.
He went on to say “It’s changing how people work and how consumers buy. It’s creating new businesses and
destroying others. Most notably, it’s dramatically accelerating how technology is reshaping life and business.
Innovative companies looking to adapt to this environment have easier access to capital to realize their
visions than ever before. And the relationship between a company, its employees, and society is being
redefined.”.
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KRM22 plc
ANNUAL REPORT 2021
The pandemic’s “turbo-charging” had significant consequences for KRM22. Customer use of the legacy
applications we acquired diminished, as five major organisations “swapped” our legacy products for newer
products. While new customer acquisition was still strong, the sting of customer losses made it appear that
KRM22 was basically “treading water”, but nothing could be further from the truth.
Our products continued to grow into a formidable platform, our new customers are some of the most exciting
and dynamic firms in our industry and our staff of talented risk “knowledge merchants” found a successful
way to work remotely while building great new products and providing exceptional global support services.
One “turbo-charged” effect of the pandemic was the change in the “buying process” our target market uses
to evaluate and adopt new technology. The traditional industry events that could highlight and showcase
new products were either cancelled, reformulated into webinars or so lightly attended that they were no longer
effective marketing and selling events. Customers no longer tolerated the amount of “friction” in adopting
modern technology. They increasingly demand “on the go” applications that they can use without long
implementation planning and use of internal resources to manage large scale projects.
In response to that dynamic, KRM22 announced in September 2021 that it was looking for a strategic partner
to help battle back these headwinds, accelerate the adoption of our new products, stem the tide of customer
losses and provide capital to accelerate new features and products on the Global Risk Platform while we build
one of the best sales organisations in our industry.
To that end we took in a strategic investment and signed a major distribution agreement with Trading
Technologies International Inc. (“TT”), one of the futures industry’s most iconic technology firms. We now
begin 2022 with a strong balance sheet and one of the biggest growth opportunities for the Global Risk
Platform since we launched the platform in 2019.
We will use our balance sheet strength to continue adding to the Global Risk Platform, to invest in new sales
and marketing resources and efforts that recognise the “new post-pandemic normal”, whilst also adhering to
any financial covenants associated with the Kestrel loan facility. We are currently working hand in hand with
our new distribution partner and will deliver exciting and proven risk technology to their customers before
mid-year in a “frictionless” method, matching exactly how these customers want to buy. We will allow TT
users to adopt KRM22 technology without having to wait for long term implementations, risk will be available
to them at the “touch of a button”. This ability quickly validates the value proposition our technology brings
and creates a “stickiness” for our applications that will pave the way for these new customers to explore and
use more and more of our Global Risk Platform.
While we expect 2022 to be a year of transformation for KRM22, it is coming from a sound basis of great
technology, expert resources and enriching partnerships.
Stephen Casner
CEO
22 March 2022
Strategic Report
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KRM22 plc
ANNUAL REPORT 2021
THE GLOBAL RISK PLATFORM
All the risk applications of a customer in one place
The KRM22 Global Risk Platform brings all of a customer’s risk applications together to help them manage
their entire risk profile across the five domains in a single place.
Customers can log in to all applications with one click and with integration can share and avoid duplication of
data.
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KRM22 plc
ANNUAL REPORT 2021
OUR PRODUCTS
Enterprise Risk Cockpit
The Risk Cockpit improves your team’s process efficiency and
accuracy by capturing all risk management data in a single place for
automated analysis.
Your senior management and risk teams can:
• Eliminate the need for cumbersome spreadsheets
• Automate processes and workflows
• Define and embed accountabilities within the firm
•
Increase your ability to capture and analyse operational
losses
• Create a common risk management language and approach
• Deliver enterprise risk analysis and reporting
Regulatory Navigator
The Regulatory Navigator brings out-the-box regulatory functionality
covering Market Abuse, SM&CR and Financial Crime. Address your
overall regulatory risk and compliance position through real-time,
meaningful management information, sourced from the entire
regulatory application suite.
Your senior management and risk and compliance teams can:
• Eliminate the need for cumbersome spreadsheets
• Automate key regulatory processes and monitoring
workflows
• Embed regulatory industry best practice within the firm
•
Increase your ability to monitor and manage regulatory
breaches
• Benchmark versus continuously evolving industry best
practice
• Deliver a culture of individual accountability and transparency
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KRM22 plc
ANNUAL REPORT 2021
Market Surveillance
Market surveillance provides insightful analytics and contextual
market surveillance to help capital markets firms identify and
manage the potential risks of market abuse, fraud and operational
breaches.
Your risk and control team can:
•
Initiate their daily workflow through alerts
•
Identify the appropriate actions to manage alerts
• Configure and analyse alert scenarios in real-time
• Develop case management workflows
•
Investigate the risk profile of your firm
• Provide business intelligence by exploring the underlying data
Individual Accountability Regime
The Individual Accountability Regime allows financial institutions to
manage accountability throughout the firm, and comply with SMCR
and conduct rules, through governance tools and frameworks that
evolve as regulation and the business change.
Your compliance and HR teams can:
• Save time by automating IAR workflows
•
Increase visibility of responsibilities
• Understand certification position of individuals
• Trace workflows through time-stamped audit trails
• Drive culture and accountabilities
• Automate SMCR breach reporting
Client Onboarding
Digital client onboarding provides capital market firms with the tools
to make client onboarding as seamless as possible whilst allowing
them to fulfil their regulatory obligations.
Your credit and compliance teams can:
• Execute KYC and AML checks on new and existing clients
• Understand deep detail about clients through enhanced
checks
• Classify clients and investors to make risk-based decisions
• Check audit controls through supporting documentation
storage
• Ensure approval with declarations, terms and e-signatures
• Validate the data provided in real-time to make rapid choices
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KRM22 plc
ANNUAL REPORT 2021
Regulatory Reporting
Regulatory Reporting enables capital market firms to comply with its
regulatory reporting obligations across multiple jurisdictions
including EMIR, REMIT, FinfraG, MifIR, MiFIDII and SFTR.
Your operational teams can:
• Comply with complex reporting obligations including
reconciling data with trade repositories
• Validate data in seconds in order to take timely corrective
action
• Control remove the need to delegate providing you full
control
• Straight-through-processing with an end to end solution with
TR’s
• Monitor all reporting processes using intuitive dashboards
• Check audit controls and logs over every process
Enhanced Due Diligence
Enhanced Due Diligence enables firms to better understand online
reputational risks and evidence compliance, supporting the
mandatory due diligence requirements of a person’s honesty and
integrity as part of the Fit and Proper assessment.
Your compliance and HR teams can:
• Access data not visible to traditional web searches
• Eliminate false positives in due diligence
• Understand online reputational risks
• Confirm employee suitability
• Leverage AI techniques not bound by any single natural
language
• Remove bias from regulatory decisions
Regulatory Training
Regulatory training helps regulated firms address their mandatory
training requirements by ensuring individuals understand the
fundamentals of Market Abuse, Financial Crime and SM&CR.
Your regulated employees and managers can:
• Facilitate the prevention and detection of misconduct
through a framework for training
• Undertake simple interactive training delivered through on-
demand videos and handbooks
• Learn at their own pace with 24/7 access
• Understand key regulatory compliance obligations
• Access examination certificates to provide training evidence
• Track their completed and passed courses
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KRM22 plc
ANNUAL REPORT 2021
Post-Trade Risk - Stress
Post-Trade Stress scales the type and amount of risk calculations
performed against multiple sets of limits and risk slides, offering a
unique “max risk calculation” for risk managers.
Your firm can:
• React to extreme volatility through intraday P&L
• Analyse multiple market stress scenarios in real-time
• Understand your exposure with multi-level margin
requirements
• Define single and multi-dimensional limit alerts
• Drill down into underlying alert conditions
• Establish an audit trail by commenting on alerts and
notifications
Post-Trade Risk - VaR
Post-Trade VaR provides the unique view of multiple VaR
calculations across a single account, product or the whole portfolio
in a single place.
Your risk and credit managers can:
• Manage multiple asset classes and portfolios
• Understand the components of a VaR calculation
• Establish portfolio positions for the VaR calculation
•
• Assign probabilities to possible risk factor values
• Create pricing functions for positions
• View three VaR models - Historic, Parametric and Monte
Identify the risk factors affecting valuation of positions
Carlo
At-Trade Risk
At-Trade Risk provides P&L and Exchange Margin for clearing
houses, clearing members, traders, brokers and other financial
institutions that make decisions based on the management of risk.
Your risk and credit managers can:
• Understand your true exposure at all times
• React to extreme volatility across the book
• Receive automatic alerts of limit violations
• Access a centralised source of market and trade information
• Obtain real-time data directly from Exchanges
• Monitor your firms margin requirements and P&L
information
• Generate multiple and flexible stress scenarios
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KRM22 plc
ANNUAL REPORT 2021
Pre-Trade Risk
Pre-Trade Risk helps combat time consuming and error prone
processes by maintaining pre-trade limits in one centralised
application.
Your risk and credit managers can:
• Reduce errors and manual input of limits
• View alerts of unauthorised limit changes made in the
trading venues
• Support multiple trading venues with ease
• Access all ISVs and proprietary trading systems in one place
• Create integrated reports with centralised monitoring
• Audit all events from one central place
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KRM22 plc
ANNUAL REPORT 2021
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers the risks set out below to be the principal risks to KRM22. The Board continually reviews
the risks facing KRM22, including the use of the Risk Cockpit to help monitor and manage these risks, and
ensures appropriate steps are taken to mitigate them. If more than one event occurs, it is possible that the
overall effect of such events would compound the possible adverse effects on KRM22. The Board recognises
that the nature and scope of risks can change and there may be other risks to which KRM22 is exposed so the
list is not intended to be exhaustive.
Risk and uncertainty
Potential impact
Mitigating actions
The mitigating actions associated with COVID-19 related
risks and uncertainties are included in further detail
under each risk and uncertainty component listed below.
COVID-19
it will
related
The spread of coronavirus and resulting COVID-
19 global pandemic has had economic and
operational repercussions around the world.
risks and
the
Coronavirus and
uncertainties continue to evolve and there is no
way of predicting with certainty the extent to
which
impact stakeholders of the
business. In 2021 the pandemic impacted
customer retention, delays in new contract
signings, liquidity of customers and staff and
resource availability both within KRM22 and its
stakeholders.
impacts are
The potential
detailed further under the separate risk and
uncertainty components.
Customer retention
Given KRM22’s strategic focus on Annualised
Recurring Revenue,
retention of key
the
customers is critical to the maintenance of
revenue streams. The loss of key customers
could adversely impact business results.
New contract signings Delays in new customer contract signings will
impact business results and the cash position of
KRM22. Investors are expecting KRM22 to sign
new customer contracts and increase ARR and
any delays in this will impact shareholder
confidence.
Foreign exchange
KRM22 operates internationally and is therefore
exposed to fluctuations in foreign exchange
rates.
Every customer has an account manager who regularly
speaks with
the customer and who ensures
requirements are met.
KRM22 also has a centralised customer support team
with defined service levels to ensure quality product
service to the customer.
All sales opportunities are assigned a key internal
contact at KRM22 who updates the executive team on a
regular basis.
The CFO maintains detailed cash forecasts that include
sensitivity analysis applied to new sales opportunities
including delayed sales, reduced recurring and non-
recurring revenue values and no future sales growth.
These are reviewed and discussed on a regular basis
between the CFO and CEO so that they can manage the
cost base and cashflow accordingly. The forecasts are
also discussed at the monthly Board meetings.
KRM22 relies on a partial natural hedge of GBP, EUR and
USD costs and revenue being in the same currencies.
KRM22 also continuously monitors its foreign exchange
exposure
forward currency
transactions are necessary.
to assess whether
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KRM22 plc
ANNUAL REPORT 2021
Risk and uncertainty
Potential impact
Mitigating actions
Liquidity of customers KRM22 has a global customer base with these
customers being stakeholders in their own
supply chain. Customer’s liquidity will be
dependent on a number of factors including the
ability of their own customers to pay sales
invoices, their suppliers providing services that
support their own revenue and the availability of
staff to perform the work that drives their
revenue and liquidity of the business. The
actions of these stakeholders will impact the
customers liquidity and their ability to pay
KRM22 sales invoices.
Compliance with laws
and regulations
KRM22’s business is the sale of software that
will facilitate compliance with financial services
laws and regulations. A failure by KRM22 to
comply with laws and regulations in its own
business could lead to fines and revocation of
business
licences, as well as significant
reputational loss.
Staff recruitment and
retention
KRM22 is reliant on the skills and knowledge
of its people in a wide range of areas but
especially
in executive management and
software development.
in critical areas could
Failure to recruit, retain and motivate an
appropriate number of suitably qualified
lead to a
people
deterioration in the quality of our products and
services. This could lead to KRM22 failing to
meet its customers’ needs resulting in the loss
of business and a failure to deliver expected
financial returns.
Debt facility
including
compliance
The Convertible Loan with Kestrel Partners
requires KRM22 to adhere with various
obligations
compliance with
financial covenants and the provision of
forward-looking
information,
payment of interest by due dates and the
reporting of management information within
agreed timeframes. Failure to comply with a
financial covenant will result in an Event of
Default which may result in Kestrel Partners
withdrawing the Convertible Loan with all
amounts accrued becoming immediately due
and payable which would impact KRM22’s
cashflow.
KRM22 has a centralised finance function with accounts
receivable (“AR”) balances reviewed on a regular basis
with account managers and executives of the Company.
The use of automated centralised systems allows AR
balances to be updated daily and, should an AR balance
become overdue, appropriate action can be taken to
resolve payment of any outstanding amounts.
Sensitivity analysis is included on AR receipts when
preparing cash forecasts with any bad or doubtful AR
balances excluded from base case cash forecasts.
KRM22 employs fully qualified finance professionals
and external professional advisors, including legal and
tax, to ensure all relevant legal and regulatory codes are
fully complied with.
reviews KRM22’s
The Remuneration Committee
compensation policies to ensure KRM22 continues to
attract, motivate and retain qualified personnel. All
employees are offered share options in KRM22 so that
they have a vested interest in the long-term success of
KRM22.
KRM22 is committed to the retention of staff by adopting
a friendly and flexible working environment and offering a
broad range of staff benefits.
There is regular staff engagement and communication
including formal monthly internal company meetings
where the Executive team update all staff on business
wide issues and encourage team participation. In
addition, formal staff appraisals are completed two times
a year for employees and their managers to give direct
feedback and to understand staff morale, flight risks and
any gap in skills or qualifications. The output of each
appraisal is discussed by the Executive Directors with any
remedial action plans implemented accordingly.
The risk of failing to adhere with financial covenants is
mitigated by growth in ARR generated through new
customer
cash,
agreements, management
management of the cost base and ensuring that regular
forecasts are maintained that include sensitivity analysis
applied to new sales opportunities. Forecasts, with
specific reference to the financial covenants are also
reviewed and discussed at each Board meeting.
of
There are defined reporting obligations that KRM22 has to
Kestrel Partners and this includes a process to engage
together in advance of any forecasted issues and risks.
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KRM22 plc
ANNUAL REPORT 2021
Risk and uncertainty
Potential impact
Mitigating actions
Investor attitude and
confidence
Investors lose faith in KRM22 and the ability to
grow the business at a rate that provides them
with a suitable return on investment.
The CEO and CFO meet institutional shareholders, fund
managers and analysts at
least twice a year to
understand how the strategy and the Board’s decisions
impact on and are received by investors. In addition, the
CEO and CFO maintain regular contact with finnCap, as
Broker and Nominated Advisor, who keep in regular
contact with KRM22’s investor base.
Information security
To be a credible and competitive Software-as-
a-Service (SaaS) organisation who stores,
processes or transmits critical information,
well defined controls and procedures are
required to be defined and adhered to. Without
these controls and procedures, unauthorised
access and theft of customer and Company
data could materialise and be extremely
damaging to the Company, both financially
and reputationally.
In addition to the risk of customer and
Company data theft, KRM22 is susceptible to
more general fraud and security risks including
spam and phishing emails sent to KRM22
staff. If such emails, and any attachments are
opened by staff, the email and/or attachment
could instal fraud spyware and/or impact
services. If any phishing emails requesting a
payment to be made are received and
actioned, KRM22 could make fraudulent
payments resulting in financial loss.
and
policies
security
SOC 2 requires organisations to establish and follow strict
information
procedures,
encompassing
the security, availability, processing,
integrity and confidentiality of customer data. The
Company obtained SOC 2 accreditation in 2021 and a
SOC2 audit will continue to be undertaken on an annual
basis in future years. In addition to mitigating information
security risks, SOC 2 accreditation will also provide
KRM22 with an edge over competitors who cannot show
compliance.
In addition to SOC2, all staff are provided with regular
training on information security and fraud and are
expected to review and formally acknowledge the
Company’s Information Security Code of Practice on an
annual basis. KRM22 has anti-virus software installed on
all machines which is managed by central IT services and
audited on a regular basis. All bank payments require dual
approval to mitigate the risk of an unapproved payment
being made to a fraudulent third party.
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KRM22 plc
ANNUAL REPORT 2021
SECTION 172 STATEMENT
Under section 172(1) of the Companies Act 2006, the Directors of a company have a duty to promote the
success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other
matters) to:
a) The likely consequences of any decision in the long-term;
b) The interests of the company’s employees;
c) The need to foster the company’s business relationships with suppliers, customers and others;
d) The impact of the company’s operations on the community and environment;
e) The desirability of the company maintaining a reputation for high standards of business conduct; and
f) The need to act fairly as between members of the company.
During the year ended 31 December 2021, the principal decisions considered by the board were fundraising
and cash management, which continued to be set against the backdrop of the COVID-19 pandemic and the
impact on extended sales cycles.
The key stakeholders considered as part of the decision-making process were KRM22’s shareholders, Kestrel
Partners, as debt provider, customers and employees.
Fundraising
The Company holds investor roadshows when the full year and interim results are released to ensure investors
are kept updated and can ask questions of the Board. Following the release of the interim results in September
2021, the CEO and CFO engaged with KRM22’s existing shareholders and Kestrel Partners, as provider of the
Convertible Loan Facility, to share thoughts on strategic options that would help drive the business forward
and increase growth in ARR. These strategic options included a strategic partnership and potential trade
investment in KRM22. The existing shareholders were broadly supportive of the strategic options being
evaluated by the Board as they would promote the long-term interest of KRM22.
In November 2021, KRM22 announced a conditional subscription agreement with 7RIDGE for up to 25% of the
enlarged ordinary share capital of the Company to raise £4.7m. The subscription was conditional on a number
of items including the execution of a distribution agreement with Trading Technologies International Inc. (“TT”)
and the release of Keith Todd from his role as CEO of KRM22 to become CEO of TT whilst remaining Executive
Chairman of the Company.
The Board considered how the subscription, and specifically the release of Keith Todd as CEO of KRM22, would
impact existing shareholders and Kestrel, noting that a number of these stakeholders had invested in Keith’s
vision when KRM22 completed its IPO in 2018.
Having considered the impact on the affected stakeholders, the Board were of the opinion that this was
necessary to ensure the long-term success of KRM22. The release of Keith Todd as CEO allowed for the
subscription by TT of £4.7m to complete in December 2021 and therefore provided working capital to support
the business, provides job security and stability for KRM22 employees and ensures that KRM22 continues as
a going concern. The distribution agreement with TT will help provide a springboard for growth in future years
thus enabling investors to obtain the return on investment they anticipated when they invested in KRM22.
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KRM22 plc
ANNUAL REPORT 2021
Cost control and cash management
In response to extended sales cycles and the unanticipated level of churn, the Board considered a range of
short-term cost saving measures including employee salary sacrifices in exchange for the grant of share
options. The Board considered how the proposal would impact employees in terms of team motivation and
morale.
Given the fact that temporary salary sacrifices had been implemented in 2020, the Board were of the opinion
that any company wide temporary staff cost savings should not be implemented in 2021. Whilst shareholders
want a return from their investment and for KRM22 to be profitable, the Board deemed the impact on staff
morale and the risk of increased staff turnover, as a result implementing temporary staff costs savings,
outweighed the benefit from any short-term cost savings.
None of the key decisions considered by the Board in 2021 had an environmental impact and the Directors are
satisfied that decisions made by the Board promote the long-term interest of KRM22 for the benefit of its
members as a whole.
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KRM22 plc
ANNUAL REPORT 2021
FINANCIAL REVIEW
We continued to experience challenging conditions in the year with the COVID-19 pandemic continuing to have
an impact on extended sales cycles and customer churn which reduced total revenue recognised in the year
by 10% to £4.1m (2020: £4.6m). Adjusted EBITDA loss for the year increased to £0.7m (2020: loss of £0.2m)
however the loss for the year included staff salaries being paid at their full rate compared to the prior year when
all staff agreed to temporary salary waivers at the start of the pandemic to help KRM22’s cash flow.
Profit and Loss
Total revenue
Revenue recognised for the year to 31 December 2021 was £4.1m (2020: £4.6m), a reduction of 10% compared
with the prior year, with 96% (2020: 91%) of total revenue generated from recurring customer contracts. Non-
recurring revenue for the year ended 31 December 2021 totalled £0.2m (2020: £0.4m) and related principally
to customer implementations and proof of concept work.
Recurring revenue
A key revenue metric for KRM22 is ARR (“Annualised Recurring Revenue”) and as at 31 December 2021, ARR
was £3.8m (2020: £4.1m). KRM22 signed new contracted ARR in 2021 of £0.7m (2020: £0.8m) with £0.3m
generated from new customers and £0.4m generated from existing customers signing new contracts for
existing products and contractual price increases. The increase in ARR was offset by the level of customer
churn, largely from legacy customers, of £0.9m for the year (2020: £0.9m).
Gross profit
Gross profit for the year to 31 December 2021 was £3.5m (2020: £4.2m). The reduction in gross profit margin
to 84% compared to the prior year margin of 90% was due to an increase in the amount of recurring revenue
generated from partner products and services.
Capitalised research and development
A total of £0.7m (2020: £1.0m) of research and development was capitalised in the year to 31 December 2021.
Capitalised research and development is amortised over three years.
Adjusted EBITDA
Adjusted EBITDA is the key metric that the Company considers in order to understand the cash-profitability of
the business. This is due in particular to the non-cash items that impact the Income Statement under IFRS
accounting, such as non-cash share-based payment charges.
Adjusted EBITDA for the year to 31 December 2021 was a £0.7m loss (2020: loss of £0.2m). The increase in
adjusted EBITDA loss was driven by the reduction in total revenue recognised, the reduction in gross margin
from 90% to 84% and that staff salaries were paid at their full rate in the year following the temporary salary
waivers implemented of between 10% and 25% in April 2020 for the remainder of the prior year. Whilst the
adjusted EBITDA loss for the year increased compared to 2020, the loss for the year was still a significant
reduction compared to 2019 when adjusted EBITDA loss was £3.1m.
18
KRM22 plc
ANNUAL REPORT 2021
KRM22 benefited from a £0.2m (US$0.3m) Payback Protection Program (“PPP”) loan, a US government backed
loan, with the proceeds being used to cover specific US based payroll costs. Under the rules of the PPP
scheme, the total value of the loan was eligible for 100% forgiveness, with the loan being converted to a grant
and recognised as Other operating income.
A reconciliation of Adjusted EBITDA loss to the reported operating loss is provided as follows:
Adjusted EBITDA loss
Depreciation and amortisation
Unrealised FX losses
Impairment of intangible assets
Contingent consideration (charge)/write back
Acquisition, funding and debt expenses
Gain on extinguishment of debt (net)
Group restructuring costs
Deferred salary bonus accrual write back
Share-based payment expense
Operating loss
Operating loss
2021
£’m
(0.7)
(1.7)
(0.1)
–
(0.1)
–
–
–
–
(0.4)
(3.0)
2020
£’m
(0.2)
(1.7)
(0.2)
(3.0)
0.3
(0.4)
0.7
(0.4)
0.4
(0.9)
(5.4)
Reported operating loss for the year to 31 December 2021 was £3.0m (2020: loss of £5.4m).
Finance charges
Net finance expense in the year was £0.4m (2020: £0.3m) and includes:
• Loan interest of £0.3m (2020: £0.2m); and
•
IFRS16 lease liability interest of £0.1m (2020: £0.1m).
Taxation
The tax credit in the year was £0.1m (2020: credit of £0.2m) which includes £nil (2020: £0.1m) R&D tax credit
received.
Financial position
Assets
The cash balance as at 31 December 2021 was £5.4m (2020: £2.0m).
Current assets at 31 December 2021 include trade and other receivables of £0.7m (2020: £1.4m).
Non-current assets were £8.1m (2020: £9.2m) relating principally to: £6.1m for goodwill and assets acquired
(2020: £6.7m), £0.6m for right of use assets recognised under IFRS16 (2020: £1.0m) and £1.3m (2020: £1.3m)
for capitalised development costs.
19
Liabilities
KRM22 plc
ANNUAL REPORT 2021
As at 31 December 2021, our principal liabilities were:
• £3.0m Convertible Loan owed to Kestrel Partners LLP. The interest rate payable on the loan is 9.5%
payable in cash quarterly in arears. The loan can be converted into new Ordinary Shares in the
Company at a conversion price of 38p and the conversion can be requested by Kestrel Partners at any
time. The Company has the right to request conversion at any time after eighteen months following
the date of the agreement, subject to certain conditions regarding the Company's share price at that
time.
• £0.9m (US$1.1m) deferred consideration for earn out payments for the acquisition of Object+. The
liability had previously been accounted for as contingent consideration on a discounted basis as the
contingent consideration was payable subject to earnt-out performance milestones being achieved.
The Directors believe that the third and final performance milestone has been achieved and therefore
the consideration is now disclosed as a liability due within one year however the liability can be satisfied
in either cash or Company ordinary shares at the Company’s discretion.
• £0.8m for the right of use assets relating to all future payments of leased-office rentals under IFRS16
‘Leases’ whereby such lease payments are provided for at today’s value. In practice, these rental
payments will be spread over the next few years. As a result, £0.5m of the related liability is shown in
current liabilities as it relates to lease payments that will be paid in 2022, with the balance for periods
greater than one year.
• £1.7m of deferred revenue; contracted and paid services that will be released in a future period.
Investors
As an AIM quoted business, a large proportion of KRM22’s shareholders are professional investment funds. In
addition, the Directors together owned 3,764,958 shares at the year end.
Funding
On 30 December 2021, the Company raised £4.7m proceeds in equity funding through a subscription and
placement of 8,916,584 new shares at 53 pence per share.
The Company has a £3.0m convertible loan (the “Convertible Loan”) with Kestrel Partners LLP (“Kestrel”). The
interest rate payable on the Convertible Loan is 9.5% per annum and is paid quarterly in arrears. Kestrel can
convert the Convertible Loan into new ordinary shares in the Company at any time at a conversion price of 38p.
The Company has the right to request conversion at any time after the 18 months following the date of the
agreement, subject to certain conditions regarding the Company's share price at that time. Kestrel has the
right to prevent any conversion which would trigger a Rule 9 event under the Takeover Code.
The Convertible Loan is secured on certain KRM22 assets and includes covenants based on the Group’s
financial performance.
Use of cash in the year
Our net cash inflow in the year was £3.4m, which included the £4.7m receipt from the share subscription
completed in December 2021. Excluding the investment proceeds of £4.7m, the net cash outflow for the year
was £1.4m, of which £0.7m was used for capitalised research and development, £0.2m was used to pay
interest on the Convertible Loan and the balance was used to provide working capital for KRM22.
20
Going concern
KRM22 plc
ANNUAL REPORT 2021
Analysis of KRM22’s going concern position is detailed in the Directors report on pages 40 – 41.
Shareholdings and Earnings per share
As at 31 December 2021, KRM22 had 35,666,336 shares in issue. The undiluted weighted average number of
shares for the period to 31 December 2021 was 26,765,037. The difference in the two numbers results from
the timing of shares issued for the equity fundraise completed on 30 December 2021.
The resulting Earning per Share (“EPS”) is a 12.4p loss per share (2020: loss of 24.1p) on a weighted average
number of shares basis (equivalent to 26,765,037 on the shares in issue at year end). Due to the loss made,
diluted EPS is the same as EPS.
Dividend
We aim to deliver capital growth for shareholders to generate an attractive total return. However we do not
recommend a dividend for the year, but may choose to do so in future years.
Conclusion
Whilst 2021 has been challenging in terms of time taken to convert the sales pipeline and increased customer
churn, the TT investment of £4.7m has helped strengthen the financial position of KRM22 and this, together
with the sales pipeline opportunities, both direct and through the distribution agreement signed with TT, means
that KRM22 is well placed for growth in 2022.
Approved by the Board and signed on its behalf by:
Kim Suter
CFO
22 March 2022
Corporate Governance
22
KRM22 plc
ANNUAL REPORT 2021
BOARD OF DIRECTORS
Keith Todd CBE
Executive Chairman
Keith has over 40 years of global technology business experience from publicly listed and
large multi-nationals to start-up businesses.
Keith is Executive Chairman of KRM22, having previously held the joint roll of Executive Chairman and CEO of
KRM22 since its inception. As well as being Executive Chairman of KRM22, he is currently CEO of Trading
Technologies International, Inc. and Non-Executive Chairman of Blighter Surveillance, a private Radar business.
From 2002 to 2017 he served as Executive Chairman of AIM listed FFastFill plc, provider of SaaS to the global
derivatives community. Keith retained this position even after FFastFill was acquired by Ion Group in 2013.
He was Non-Executive chairman of AIM listed Aferian plc, a provider of digital TV entertainment and cloud
solutions to network operators from 2005 to 2019. He also served as Non-Executive Chairman of UK
Broadband Stakeholder Group (a UK Government advisory board), Easynet plc and Chief Executive of ICL plc.
Stephen Casner
CEO
Stephen became CEO of KRM22 in December 2021. A part of KRM22 since inception, he previously served as
President and previous to that, CEO of the North American business. Along with responsibility for the
Company’s North Americas operations, he has helped form and create KRM22’s market risk products as well
as lead the Company’s acquisition of Prime Analytics in Chicago and Object+ in Amsterdam.
Stephen has accumulated over 35 years of experience in the “Fin-Tech” industry. He served as CEO and Co-
Founder of HazelTree, the world’s leading treasury technology solution for hedge funds and global asset
managers, from 2010 until 2017. He led AIM-TO as CEO from 2004 to 2010 and Picasso Software as CEO
when Picasso was named one of the 50 fastest growing technology companies in 2002. He also ran Chicago
based Quantra group and drove their growth to a successful sale to SS&C Technologies in 1997.
23
KRM22 plc
ANNUAL REPORT 2021
Kim Suter
CFO
Kim has significant experience in building and leading finance functions to support business growth.
He started his career in practice, covering all aspects of audit, financial reporting and tax for a range of clients,
providing him with a broad knowledge of how finance functions operate across different business sizes and
industries. Kim has since applied this knowledge to support structured growth at a number of start-up
organisations prior to joining KRM22. Kim joined KRM22 in July 2018 as Head of Finance to set up the finance
function for the KRM22 group. He has served as CFO since July 2019 and joined the KRM22 Board in April
2020. Kim is a qualified Chartered Certified Accountant.
Sandy Broderick
Non-Executive Director
Sandy was previously Non-Executive Director of AIM listed regulatory reporting and collateral risk management
solutions company, Lombard Risk Management plc, which was acquired by Vermeg Group.
Prior to Lombard Risk Management he was CEO of DTCC DerivSERV, where he led the roll out of its Global
Trade Repository in Europe and Asia, as well as holding the CEO position of New York Portfolio Clearing, where
he oversaw its development and successful sale to ICE.
During Sandy’s 23 year derivative trading career at Société Générale and Bank of America, he was at the centre
of several industry initiatives in clearing and market infrastructure, including development of the LCH Clearnet
SwapClear system.
Sandy was Chairman of the OTC Derivnet Board from 2011 to 2012. Currently Sandy works with a number of
companies as an expert witness for Regulatory, Trading and Competition issues.
24
KRM22 plc
ANNUAL REPORT 2021
Garry Jones
Non-Executive Director
Garry Jones is currently CEO of NovaFori, a leading technology company operating in the marketplace and
auction technology space - overlaying platform technology with machine learning and artificial intelligence. As
well as being a Non-Executive Director of KRM22, he is a member of the Board of ICBCS, an emerging markets
investment bank.
He has many years’ experience in financial services, and has been CEO of three of the largest derivatives and
OTC exchanges in Europe: BrokerTec, LIFFE and the LME, as well as taking leadership roles in the parent
companies of NYSE Euronext and HKEX.
He has contributed to the business change, growth, and globalisation in the exchange world as technology has
fundamentally changed the way that we trade, driving the momentum behind electronic trading and increased
efficiency in the post trade environment.
Steve Sparke
Non-Executive Director
Steve has over 35 years’ experience in Financial Services, trading Interest Rate products for the first 15 years,
and subsequently in the Exchange Traded Derivatives (“ETD”) and Commodity industry with extensive board-
level experience for global ETD and Commodities organisations.
Prior to his role as Vice Chairman, leading the Conduct and Culture initiatives of Marex Spectron, Steve spent
10 years as Group COO, responsible for the firm’s operating environment, including IT, Operations, Risk,
Compliance and HR.
Before joining Marex Spectron, Steve spent 20 years with UBS where he was Managing Director and Global
Head of Exchange-Traded Derivatives.
Steve also holds NED positions on the UK Regulated Entities of TP ICAP and was Non-Executive Chairman of
FIA’s European Advisory Board until the end of 2019, where he continues as a Board Advisor. Steve was
previously a NED of NYSE Euronext LIFFE (now ICE Europe) for over 10 years and was a NED at PATS Systems,
an AIM-listed DMA system provider.
Steve has a Law degree from Nottingham University.
25
KRM22 plc
ANNUAL REPORT 2021
CORPORATE GOVERNANCE STATEMENT
In applying a recognised corporate governance code, the Directors have adopted the Quoted Companies
Alliance’s (QCA) Corporate Governance Code for small and mid-sized quoted companies (“QCA Code”). The
principal means of communicating our application of the Code are detailed in this Annual Report and on our
website (www.krm22.com/investor-relations/governance).
The Directors believe that, in addition to being responsible for setting the strategic direction and managing risk
across the business, they are responsible for good corporate governance, clear shareholder and stakeholder
communications and monitoring the effectiveness of the Executive Directors. The Directors believe that
effective corporate governance, appropriate to KRM22, considering its size and stage of development, will
assist in the delivery of corporate strategy, the generation of shareholder value and the safeguarding of
shareholders’ long-term interests.
This report follows the structure of the QCA Code guidelines and explains how the Board have applied the
guidance as well as the reasons for any departures from the guidance.
At the centre of KRM22’s philosophy are four groups of stakeholders:
• Customers: Customers should enjoy doing business with KRM22, receive value for money and
understand that KRM22 is aligned with their values.
Investors: Investors should receive superior returns from KRM22, governed along established lines.
•
• Team: The team should be highly motivated, well rewarded and believe in the Company vision.
• Community: The local and global community should see KRM22 as an asset.
In adopting QCA principles, the Directors have ensured alignment with the goals of the Company’s
stakeholders.
QCA PRINCIPLES
Principle 1: Establish a strategy and business model which promotes long-term value for shareholders
KRM22 listed on AIM, via an IPO, on 30 April 2018. As part of this process, the Board determined the long-term
vision of KRM22 and detailed the steps to achieve that strategy.
Since the IPO, the Board has refined the strategy, based on customer feedback, additional input from risk
management experts from the five KRM22 domains of risk: enterprise, market, compliance, operations and
technology, shareholder feedback, debt provider feedback and employee participation which has led to a
clearer definition of KRM22’s strategy.
Corporate status: KRM22 (KRM:L) is a closed-ended investment company (CEIC) listed on the AIM of the
London Stock Exchange. This means that the number of shares in the Company are known and the shares
are traded on AIM. KRM22 expects to convert to an operating company when its business develops to fit the
necessary criteria.
In adopting Principle 1, KRM22 is assisting investors to obtain superior returns.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Company’s CEO and CFO meet institutional shareholders, fund managers and analysts at least twice a
year to understand how the strategy and the Board’s decisions impact on and are received by investors.
26
KRM22 plc
ANNUAL REPORT 2021
The Annual General Meeting provides an opportunity for all shareholders to meet the Directors and raise any
questions.
finnCap act as the Company’s NOMAD and broker.
Nominated Advisor (NOMAD): NOMADs are approved by the London Stock Exchange and must meet
eligibility criteria set out in the AIM Rules for NOMADs. In their role, finnCap advises and guides the
KRM22 Board on its responsibilities as an AIM listed business and undertakes due diligence and works
as the primary advisor of the business.
Broker: finnCap is also the appointed broker of KRM22. In this role finnCap facilitate communications
with existing and potential new investors. The CEO and CFO regularly meet investors together with
representatives of the broker. finnCap also advise KRM22 on shareholder communications on its
website, all RNS releases (Regulatory News Service – AIM) and will guide communications within the
Annual Report.
Investor queries can be directed to KRM22 by email to InvestorRelations@krm22.com. All advisor details,
including those of KRM22’s NOMAD and Auditors can be found on the last page of this report.
In adopting Principle 2, KRM22 assures investors that the Company is aligned to their needs, expectations and
values.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-
term success
The Board believes that KRM22 should be seen as an asset to its stakeholders, aligned with their values. This
is why the Board plans to establish an Environment, Social and Governance (“ESG”) programme.
The ESG programme will be centred around meeting the United Nations 17 Sustainable Development Goals
(“SDGs”) (https://sdgs.un.org/goals). In order to work towards these SDGs, KRM22 will promote a culture of
transparency and discussion amongst all four stakeholder groups.
The first phase of the ESG programme, which KRM22 is in the process of undertaking, is an exercise to
benchmark the Company against the SDGs with the aim of establishing the areas of focus for the remainder
of the programme. During this benchmarking phase, each stakeholder group will be considered and if
necessary, consulted to establish alignment with their views and values.
In addition to the ESG programme, KRM22 continually gathers feedback from all stakeholder groups.
Methods of two-way communication include:
Investors: See Principle 10 below.
Customers: Regular meetings with existing and potential customers by the Business Development and
Customer Service teams.
Team: KRM22 communicates regularly with the cross-country, multi-national and diverse team in multiple
ways. Monthly internal company meetings are held where the Executive team update all staff on business-
wide issues and encourage team participation. In addition, KRM22 uses centralised internal systems including
team-wide easy-to-use communication tools, formal performance appraisals are completed two times a year,
with informal appraisals completed throughout the year, and “all-employee” announcements (for example, on
acquisitions/investments, new customer contract wins, customer projects and other business-wide news).
27
KRM22 plc
ANNUAL REPORT 2021
Principle 3 provides the main methodology of meeting KRM22’s ESG goals across all four stakeholder groups.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the
organisation
Good effective risk management is part of KRM22’s DNA and the Company has built the Enterprise Risk
Cockpit as a product to market and sell and also use internally to effectively manage risk throughout the
Company. Therefore, risk management is embedded in the culture of not only the KRM22 Board, but also the
whole team.
Director experience in risk management: All the Directors have experience of building growing multi-
national businesses and understand the risks and challenges that come with the journey. Their sector
and professional mix of skills is particularly relevant – see Principle 6.
Team experience in risk management: The subject matter expertise within the multi-national team is
very strong and includes market risk, compliance risk and enterprise risk experts. As a company
dedicated to risk management technology, the KRM22 team has a high understanding and experience
in managing risk.
Enterprise Risk Cockpit: The Enterprise Risk Cockpit is an application that KRM22 has developed to
allow CEOs and their teams to see real-time risk statuses and enable them to take action. KRM22 has
implemented the Enterprise Risk Cockpit internally to monitor and manage risks.
Controls and processes: The Directors are continually reviewing controls and processes in all key areas
on an ongoing basis. When an acquisition is completed, the acquired company’s control’s and
processes are reviewed and are aligned with group policy as quickly as possible, with a target of within
three months from the date of acquisition.
Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair
From KRM22’s inception and throughout 2021, Keith Todd was the Chairman and CEO of KRM22 and as such
had two roles in the business:
• Chairman: The principal role of the Chairman is to manage and to provide leadership to the Board of
Directors of the Company. The Chairman is accountable to the Board.
• CEO: The principal role as the CEO is to make major corporate decisions, manage the overall operations
and resources and act as the ultimate point of communication with stakeholders.
Whilst QCA guidelines encourage the role of Chairman and CEO to be held by two different people, Keith Todd’s
experience helped him perform these two roles with self-challenge. In addition, the Board comprises an equal
number of executive and non-executives which encourages healthy challenge and debate with the non-
executives providing additional independence.
On 30 December 2021 Keith Todd relinquished his role as CEO of KRM22 while remaining Executive Chairman
of the Company and Stephen Casner succeeded Keith Todd as CEO of the Company, thus adhering to the QCA
guidelines for the role of Chairman and CEO to be held by two different people.
The Board believes strongly that a mix of professional skills, risk management experience and capital market
understanding make a difference, as does diversity, and one of the responsibilities of the Nomination
Committee is to undertake an annual assessment of Board Effectiveness which includes a review of skills,
experience and composition.
The KRM22 leadership is described on pages 22 – 24.
28
KRM22 plc
ANNUAL REPORT 2021
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and
capabilities
The Directors consider that the mix of professional skills, risk management experience and capital market
understanding is key to the effectiveness of the Board and its Committees. As such, the Board is very satisfied
that the resulting mix of skills is suited to the sector, to the maturity and growth stage and for an AIM listed
business.
Skills: Of the six Directors, five have worked within capital markets, two are qualified accountants and one is a
qualified lawyer. All six Directors have experience of growing businesses and how risks need to be managed
within a fast-growth environment.
The Directors maintain their professional experience and skill set through Continued Professional Development
(legal and financial), and constant contact with customers, sector experts and industry influencers, and by
listening to feedback from all stakeholders.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The KRM22 Board has three Board Committees, each consisting of the three independent Non-Executive
Directors. See more details in Principle 9.
The responsibilities of the Nomination Committee include an annual assessment of Board Effectiveness. The
last assessment was completed in April 2021. The Non-Executive Directors assessed the Board on:
• Risk management (including Going Concern);
• Adequacy of management information to make decisions and manage risk;
• The effectiveness of decision processes and decision making;
• Board composition (mix of skills, experience, diversity, and adequate succession planning);
• The effectiveness of each Director on the Board, whether Executive or Non-Executive;
• Board communication and organisation; and
• Director induction and training.
The Nomination Committee regarded the Board’s performance, effectiveness and composition as appropriate
considering the size and stage of KRM22’s development however they continue to monitor the Board’s
construction and remit as KRM22 develops and grows.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
KRM22 has brought together different business and nationality cultures, through acquisitions and its own
organic growth, and therefore the Board is very people-focused, including all stakeholders whether internal or
external.
Team
The aim of the Directors is to build and maintain a culture of transparency and performance and the Directors
believe that empowerment of employees is key to delivering the strategy.
KRM22’s three key company values are:
• Focus wins;
• Business is a team game; and
• Clear accountabilities for all.
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KRM22 plc
ANNUAL REPORT 2021
All employees have access to an internal HR system which provides the full organisation chart across KRM22.
This helps each employee understand where they fit within the organisation and how their work contributes to
KRM22’s growth and performance.
KRM22 has adopted corporate policies, staff handbooks and accounting policies which are aligned with the
needs of the Group, each country and team. As each business is acquired, the team is included in internal
communications and is integrated/transitioned into the communication and systems of KRM22. Each
member of the team is expected to sign and adhere to certain policies, including the Business Code of Conduct
which outlines key responsibilities in terms of ethics.
In addition, for full transparency, the Board has adopted whistleblowing policies for employees and external
stakeholders, including the choice of reporting to and excluding the CFO.
As discussed in Principle 3, KRM22’s ESG programme is focused on meeting the United Nations 17 SDGs
which promotes a strong ethical culture within all areas of the Company.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good
decision-making by the Board
The Board of Directors is responsible for setting the strategic direction of the business, managing risks and
monitoring performance and progress. To help fulfil these responsibilities, the Directors have implemented
independent Board Committees which together with the Matters Reserved for the Board, provide structure and
formalisation of corporate governance.
The Board is provided with monthly financial and non-financial information for monitoring performance and to
make strategic decisions. The Board has a formal schedule of Matters Reserved for the Board including
acquisitions, share subscriptions and approval of the annual budget, together with standing items such as
health and safety, conflicts of intertest and concerns reported through whistleblowing procedures. The Board
meets for scheduled Board meetings ten times per year, plus ad hoc meetings as required.
Risk Management
The Company uses its own Enterprise Risk Cockpit software tool to assess and monitor risks. This has
gradually replaced any list of risks in Excel or Word (often the basis for a “Risk Register”) and deliver much
more visibility to the Directors of the performance KRM22 as a whole.
Independence
At 31 December 2021 the Board was comprised of three Executive Directors and three Non-Executive
Directors. Three of the Non-Executive Directors are considered independent as they have not previously
worked with the executive team.
Under their letters of appointment, the Non-Executive Directors have a time commitment of two days per
month and the executives are full-time (with time allowed for agreed external professional activities). All
Directors are able to allocate sufficient time to KRM22 to fulfil their responsibilities.
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KRM22 plc
ANNUAL REPORT 2021
Fourteen scheduled board meetings were held during the year.
20
Board meeting
attendance 2021
Executive Directors
Keith Todd
Stephen Casner
Kim Suter
Non-Executive Directors
Sandy Broderick
Garry Jones
Steve Sparke
Board committees
Maximum possible
meeting attendance
Number of meetings
attended
% of meetings
attended
14
14
14
14
14
14
13
13
13
13
13
12
93
93
93
93
93
86
The Directors have established an Audit Committee, a Nomination Committee and a Remuneration Committee
with formally delegated duties and responsibilities. None of the Executive Directors are members of these
Committees and, when invited to attend Committee meetings, it is to present information and not be part of
the decision making.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
All financial reports and publicly-available information is published in the investor information section of the
KRM22 website (www.krm22.com/investor-relations). This includes AIM rule 26, significant shareholder
information and details of the Directors’ roles and experience.
The CEO and CFO meet with institutional fund investors to communicate progress and plans at least twice a
year and have met them at other times where appropriate. In addition, the CEO and CFO meet with Kestrel
Partners LLP (the “Security Agent”) to report on financial covenants and forward-looking compliance
information as part of the reporting obligations of the Convertible Loan Agreement dated 15 September 2020
(the “Convertible Loan”).
The Directors believe that these meetings provide valuable two-way communication and allow investors and
Security Agent to provide feedback. Other investors are provided a channel for communication via the KRM22
investor information on the website and via email contact at InvestorRelations@krm22.com.
The report of Board Committees is included in our Annual Report and Accounts each year. When General
Meetings are held, the Directors publish the results of votes on the KRM22 website in the Investor Information
section.
Internally KRM22 uses multiple team-tools to communicate – see Principle 3.
Board Committees and Secretary
The Board delegates authority to three committees to assist in meeting its business objectives while ensuring
a sound system of internal control and risk management. The committees meet independently of Board
meetings.
31
Audit Committee
KRM22 plc
ANNUAL REPORT 2021
The Audit Committee was established by a resolution of the Board on the recommendation of the Nomination
Committee. The Audit Committee, which meets at least two times a year, consisted of Steve Sparke and Garry
Jones, both of whom were non-executive directors of the Company. Sandy Broderick, a non-executive director
became a member of the Audit Committee on 16 December 2021. During the year to 31 December 2021, and
to date, the Committee was chaired by Steve Sparke. The responsibilities of the Audit Committee are detailed
in the Audit Committee report on page 32.
Remuneration Committee
The Remuneration Committee, which meets at least once a year, consisted of Sandy Broderick and Garry
Jones, both of whom were non-executive directors of the Company. Steve Sparke, a non-executive director
became a member of the Audit Committee on 16 December 2021. The Committee was established by a
resolution of the Board on the recommendation of the Nomination Committee. During the year to 31 December
2021, and to date, the Committee was chaired by Sandy Broderick. The responsibilities of the Remuneration
Committee are detailed in the Remuneration Committee report on page 34.
Nomination Committee
The Nomination Committee, which meets at least once a year, consisted of Sandy Broderick and Garry Jones,
both of whom are non-executive directors of the Company. Steve Sparke, a non-executive director became a
member of the Audit Committee on 16 December 2021. The Committee was established by a resolution of
the Board. During the year to 31 December 2021, and to date, the Committee was chaired by Sandy Broderick.
The responsibilities of the Nomination Committee are detailed in the Nomination Committee report on page
38.
For and on behalf of the Board
Keith Todd CBE
Executive Chairman
22 March 2022
32
KRM22 plc
ANNUAL REPORT 2021
AUDIT COMMITTEE REPORT
The Audit Committee is responsible for challenging the quality of internal and external controls and for ensuring
that the financial performance of KRM22 is properly reviewed and reported.
The Committee reviews reports on the interim and annual accounts, financial announcements, the Company’s
accounting and financial control systems, changes to accounting policies, the extent of non-audit services
undertaken by the external auditor and the appointment of the external auditor.
During the year the Audit Committee reviewed the 2020 annual report, 2021 interim report and the associated
announcements. The Audit Committee considered the accounting policies and principles adopted in these
accounts as well as significant accounting issues and areas of judgement and complexity.
Composition
The terms of reference for the Audit Committee require the committee to consist of preferably three members
but not less than two members and that a majority of the members shall be independent non-executives with
at least one of whom shall have recent relevant financial experience.
Throughout 2021 the Audit Committee was composed of myself, Steve Sparke, as Chairman and Garry Jones
with Sandy Broderick joining the Committee on 16 December 2021. I have extensive board-level experience
and have previously been the Chairman of the Audit and Risk Committee at NYSE Euronext LIFFE (now ICE
Europe) and, whilst working at Marex Spectron, the Internal Audit group reported to me and I was a standing
attendee of the Audit and Compliance committee. The Board is of the view that we have recent and relevant
financial experience. Kim Suter (CFO), Carol Tarpey (Financial Controller) and other Executive Directors may
attend Committee meetings by invitation. The Committee formally met on two occasions during the year.
However, other informal discussions were held by Committee members during the year and since year end. I
report to the Board following an Audit Committee meeting and minutes are available to the Board.
Role of the Committee
The main duties of the Committee are set out in its terms of reference, which are available on KRM22’s website
and the main items of business considered by the Committee in the year included:
• Consideration of risk management and internal control systems;
• Review and approval of the 2020 audit plan presented by KRM22’s auditor, BDO LLP, which set out the
proposed scope of work, audit approach, materiality and identified key audit risk areas;
• Review of the 2020 audited annual report and financial statements;
• Consideration of key audit matters and how they are addressed;
• Review of the unaudited 2021 interim report;
• Review the suitability of the external auditor; and
• Meeting with the external auditor without management present.
Financial Reporting
The Committee reviews whether suitable accounting policies have been adopted and whether management
has made appropriate judgements and estimates. The Committee’s remit includes reviews of accounting
papers prepared by management providing details on the main financial reporting judgements as well as
assessments of the impact of potential new accounting standards.
33
KRM22 plc
ANNUAL REPORT 2021
There were no material changes in accounting policy for the Committee to consider during 2021. The
Committee have concluded that the annual report and financial statements are appropriately prepared and
provide the information necessary for shareholders to assess KRM22’s strategy and performance.
Risk management and interim controls
The risk and control management framework of KRM22 is designed to manage rather than eliminate the risk
of failure to meet KRM22’s objectives and the system can only provide reasonable and not absolute
assurances against material misstatement or loss. KRM22 faces a number of risks, the significant ones of
which are set out in the section on Principal risks and uncertainties on pages 12 – 14.
Through the control systems outlined in the Statement of Corporate Governance on pages 25 – 31, KRM22
operates an ongoing process of identifying, evaluating and managing significant risks faced by the business.
This process includes the following:
• Defined organisation structure and appropriate delegation of authority;
• Formal authorisation procedure for investments;
• Clear responsibility for management to maintain good financial control and the production and review
of detailed, accurate and timely financial information;
Identification of operational risks and mitigation plans developed by senior management; and
•
• Regular reports to the Board from Executive Directors.
During the year, internal control processes have been monitored and reviewed by the Committee and the Board
and, where necessary improvements, have been identified and implemented.
External Auditor
BDO was appointed auditor of KRM22 in 2018. The Committee considers that its relationship with the auditor
is working well and is satisfied with their effectiveness.
The Committee is responsible for implementing a suitable policy for ensuring that non-audit work undertaken
by the auditor is reviewed so that it will not impact their independence and objectivity. The breakdown of fees
between audit and non-audit services is provided in note 8 to KRM22’s financial statements. The non-audit
fees primarily relate to taxation advice and compliance.
As necessary, the Committee held private meetings with the auditor to review key items within its scope of
responsibility. Taking into account the auditor’s knowledge of KRM22 and experience, the Committee has
recommended to the Board that the auditor is reappointed for the year ending 31 December 2022.
For and on behalf of the Audit Committee
Steve Sparke
Audit Committee Chairman
22 March 2022
34
KRM22 plc
ANNUAL REPORT 2021
REMUNERATION COMMITTEE REPORT
The Board has prepared this report in relation to all Directors who have served during the year to 31 December
2021. As an AIM listed company KRM22 Plc is not required to provide the full disclosures required of fully
listed companies, however, the Board has chosen to provide the following details as a voluntary disclosure. As
a result, the Auditor is not required to and has not audited the information included in this report, unless
otherwise stated.
Composition
The terms of reference for the Remuneration Committee require the committee to consist of preferably three
members but not less than two members and that a majority of the members shall be independent non-
executives.
Throughout 2021 the Committee was composed of myself (Sandy Broderick) as Chairman and Garry Jones.
Steve Sparke was appointed a member of the Committee on 16 December 2021.
Role of the Committee
The purpose of the Committee is to ensure that the executive directors and other key employees of KRM22
(together, ‘Executive Directors’) are fairly rewarded for their individual contribution to the overall performance
of KRM22. The Committee’s main role and responsibilities are to:
• Have responsibility for setting the remuneration policy for Executive Directors and such other members
of the executive management as it is designated to consider;
• Recommend and monitor the level and structure of remuneration for senior management;
• Obtain reliable, up-to-date information about remuneration in other companies of comparable scale
and complexity in the light of reviewing the ongoing appropriateness of and relevance of remuneration
policy;
• Review the design of all share incentive plans for approval by the Board; and
• Approve the design of, and determine targets for, any performance-related pay schemes operated by
KRM22 and approve the annual payments made under such schemes.
Remuneration Policy
In setting the remuneration policy, the Committee recognises the need to be competitive in an international
market. The Committee’s policy is to set remuneration levels which ensure that the Executive Directors are
fairly rewarded in line with high levels of performance and not in excess of market rates for comparable
companies. Remuneration policy is designed to support business growth strategies and to create a strong
performance-oriented environment. The policy must also attract, retain, and motivate high calibre individuals.
The Remuneration Committee believes that a successful remuneration policy must ensure that a significant
proportion of the remuneration package is linked to the achievement of ambitious corporate performance
targets and a strong alignment with the interests of shareholders.
Consistent with the pay for performance policy, annual cash bonuses are linked to performance criteria. Share
option and warrant awards to Executive Directors are linked to performance as well as being time vested.
35
Annual salary
KRM22 plc
ANNUAL REPORT 2021
Salaries are set at a level appropriate for the role and the individual and are reviewed annually with effect from
1 January. Adjustments are made, if required, to reflect company and individual performance and competitive
pay levels. A salary increase was made for one Executive Director during the year whilst the remaining
executive salaries were only partially paid in the year. Following the changes to the executive roles in December
2021, all three executive salaries and employment contracts were reviewed and amended with effect from 1
January 2022.
Performance bonus
These are designed to reflect KRM22’s performance taking into account the performance of its peers, the
markets in which KRM22 operates and the Executive Directors’ contribution to that performance. No bonuses
were paid to the Directors in the year.
Share Options, Restricted Stock and Warrants
The following share options, restricted stock and warrants were held by Directors in the year.
Option holder
Name
Keith Todd
Kim Suter
Sandy Broderick
Garry Jones
Date of grant
18/09/2020
Exercise price
£0.380
Vesting period
18/09/2020 – 17/09/2023
28/09/2018
10/06/2019
10/06/2019
23/12/2019
22/07/2020
18/09/2020
01/10/2020
12/01/2021
10/06/2019
18/09/2020
01/10/2020
10/06/2019
01/10/2020
£1.000
£0.850
£0.850
£0.525
£0.300
£0.380
£0.380
£0.365
£0.850
£0.380
£0.380
£0.850
£0.380
28/09/2018 – 27/09/2021
10/06/2019 – 10/06/2022
10/06/2019 – 01/03/2020
23/12/2019 – 22/12/2022
22/07/2020 – 22/08/2020
18/09/2020 – 17/09/2023
01/10/2020 – 31/10/2020
12/01/2021 – 12/02/2021
10/06/2019 – 03/04/2022
18/09/2020 – 17/09/2023
01/10/2020 – 31/12/2020
10/06/2019 – 03/04/2022
01/10/2020 – 31/12/2020
Steve Sparke
01/10/2020
£0.380
01/10/2020 – 31/12/2020
Total
Restricted stock
holder name
Stephen Casner
Total
Warrant holder
name
Keith Todd
Stephen Casner
Total
award
Date of award
18/09/2020
Exercise price
£0.380
Vesting period
18/09/2020 – 17/09/2023
Date of grant
30/04/2018
24/04/2018
Exercise price
£1.00
£1.00
Vesting period
30/04/2018 – 29/04/2021
24/04/2018 – 23/04/2021
Number of ordinary
shares under option
287,831
287,831
50,000
50,000
30,000
60,000
21,875
124,342
17,270
17,979
371,466
10,000
59,210
59,211
128,421
176,471
49,342
225,813
59,211
59,211
1,072,742
Number of ordinary
shares under option
253,162
253,162
Warrants
held
3,300,000
1,200,000
4,500,000
36
KRM22 plc
ANNUAL REPORT 2021
During the year, a total of 617,719 share options were granted, of which 17,979 options were granted to Kim
Suter in lieu of him receiving a reduced level of remuneration in 2020.
Further information on warrants and share options issued is detailed in note 25 to the financial statements.
Service contracts
The Executive Directors have employment contracts which are subject to between 6- and 12-months’ notice
from either the executive or KRM22 at any given time.
Non-Executive Directors’ fees are determined by the Executive Directors having regard to the need to attract
high calibre individuals with the right experience, the anticipated time commitment to fulfil their duties and
comparative fees paid in the market to which KRM22 operates. They may be invited to participate in the
KRM22 share options scheme.
Directors’ Emoluments
The remuneration of the Executive and Non-Executive Directors (audited) for the year ended 31 December
2021 was as follows:
Salary
& Fees
£’000
28
111
119
30
25
30
–
343
Benefits
£’000
8
–
3
–
–
–
–
11
2021
Share
based
payments
£’000
105
68
17
2
9
–
–
201
Pension
£’000
–
–
6
–
–
–
–
6
Total
£’000
141
179
145
32
34
30
–
561
Salary
& Fees
£’000
12
45
56
5
6
8
13
145
Benefits
£’000
8
–
2
–
–
–
–
10
2020
Share
based
payments
£’000
372
143
13
5
12
4
25
574
Pension
£’000
–
–
3
–
–
–
–
3
Total
£’000
392
188
74
10
18
12
38
732
Keith Todd
Stephen Casner
Kim Suter
Sandy Broderick
Garry Jones
Steve Sparke
Karen Bach
Total
The benefits relate to private medical insurance, life insurance, critical illness cover and income protection
insurance for Directors and their immediate families.
37
KRM22 plc
ANNUAL REPORT 2021
Directors’ Interests
The Directors who held office at 31 December 2021 had the following interest in the ordinary share capital of
the Company as at that date:
Director
Keith Todd
Stephen Casner
Kim Suter
Sandy Broderick
Garry Jones
Steve Sparke
At 31 December 2021
No. of ordinary shares of 10p each
At 31 December 2020
No. of ordinary shares of 10p each
2,763,677
513,143
26,666
11,765
176,471
273,236
2,700,108
513,143
26,666
11,765
176,471
273,236
Sandy Broderick
Remuneration Committee Chairman
22 March 2022
38
KRM22 plc
ANNUAL REPORT 2021
NOMINATION COMMITTEE REPORT
During 2021 the Committee was composed of Sandy Broderick, as Chairman, and Garry Jones with Steve
Sparke appointed a member of the Committee on 16 December 2021.
The main duties of the Committee are set out in its terms of reference, which are available on KRM22’s website.
The Committee met on one occasion in 2021 to undertake an annual review of Board performance.
The annual review of Board performance considered the time spent by Non-Executive board members, the
structure, size and composition of the Board, the Board’s performance and the Nomination Committee’s
performance. The Committee concluded that the Board’s performance, effectiveness and composition was
appropriate considering the size and stage of KRM22’s development and would continue to monitor the
Board’s construction and remit as KRM22 grows. In considering the performance of the Nomination
Committee, the Committee deemed their performance as satisfactory, given the non-expansionary phase of
KRM22, and therefore lack of significant work for the Committee to consider.
Sandy Broderick
Nomination Committee Chairman
22 March 2022
39
KRM22 plc
ANNUAL REPORT 2021
DIRECTORS’ REPORT
The Directors present their report and the audited financial statements of KRM22 Plc (the “Company”) and its
subsidiary companies (together “KRM22”, the “Group”), for the year ended 31 December 2021. An indication
of likely future developments in the business is set out in the Strategic Report.
Principal activities
The principal activity of KRM22 is the development and sale of risk management software to the financial
services industry.
Directors
The Directors of the Company who served throughout the year and to the date of signing this report, except as
noted below were:
Keith Todd CBE
Executive Chairman (previously Chairman and CEO until 30 December 2021)
Stephen Casner
CEO (previously President until 30 December 2021)
Kim Suter
CFO
Sandy Broderick
Non-Executive Director
Garry Jones
Non-Executive Director
Steve Sparke
Non-Executive Director
Director indemnification and insurance
KRM22 maintains Directors’ and Officers’ liability insurance for each of its directors. The insurance covers any
liabilities that may arise to a third party, other than KRM22 or Company, for negligence, default or breach of
trust or duty.
Financial risk management objectives and policies
Further detailed commentary on financial risk management is included in note 27.
40
Liquidity risk
KRM22 plc
ANNUAL REPORT 2021
KRM22 seeks to manage financial risk by ensuring adequate liquidity is available to meet foreseeable needs
and to invest cash assets safely and profitably. Short-term flexibility is achieved by holding significant cash
balances in KRM22’s main operational currencies, notably UK Sterling, US Dollar, Euro and Czech Kroner.
Foreign exchange risk
KRM22 has significant operations in both the UK and overseas. Revenue and costs are exposed to variations
in exchange rates and therefore reported losses. There is some natural hedging of transactional foreign
exchange risk, however KRM22 remains subject to translation exchange risk.
COVID-19 risk
The global COVID-19 pandemic continues to create increased levels of risk to due to the difficulty in being able
to predict the timing and certainty of events affecting KRM22 and its stakeholders. Delays in the conversion
of sales pipeline opportunities impact cashflow and, whilst KRM22 cannot control external factors around the
timing and certainty of new contract sales, actions have been taken since the start of the pandemic to manage
cashflow including the arrangement of the Convertible Loan with Kestrel, the raising of additional capital
through the share subscription by Trading Technologies International, Inc. and continuing to manage the
underlying cost base of the business.
Overseas branches
KRM22 has one branch outside the UK located in Czech Republic.
Research and Development
KRM22 continues to dedicate resource to develop the Global Risk Platform and its suite of risk management
products including Enterprise (Risk Cockpit), Market (Pre-Trade, At-Trade and Post-Trade) and Compliance
(Market Surveillance).
In accordance with IAS38 ‘Intangible Assets’, expenses are capitalised when it is probable that future economic
benefits will be attributable to the asset and these costs can be measured reliably (see note 3). For the year
ended 31 December 2021, total expenditure that has been capitalised on these projects totalled £0.7m (2020:
£1.0m).
Going Concern
KRM22’s business activities, together with the factors likely to affect its future development, performance and
position are set out in the Strategic report on pages 5 – 20 and the financial position of KRM22, its cash flows,
liquidity position and borrowing facilities are described in the notes to the financial statements, in particular in
the consolidated cash flow statement on page 59 and in note 27 (financial instruments).
These financial statements have been prepared on the going concern basis. The Directors have reviewed
KRM22’s going concern position taking into account its current business activities, budgeted performance and
the factors likely to affect its future development, which are set out in this Annual Report, and include KRM22’s
objectives, policies and processes for managing its capital, its financial risk management objectives and its
exposure to credit and liquidity risks.
41
KRM22 plc
ANNUAL REPORT 2021
The Directors have undertaken a significant assessment of the cashflow forecasts covering a period of at least
twelve months from the date of approval of the financial statements. Cashflow forecasts have been prepared
based on a range of scenarios including, but not limited to, existing customer churn at different churn rates, no
new contracted sales revenue, delayed sales and a combination of these different scenarios.
Having assessed the sensitivity analysis on cashflows, the key risks to the KRM22 remaining a going concern
without implementing extensive cost reduction measures is existing customers paying on payment terms and
within 45 days of invoice, customer churn of up to 10%, conversion of some of the sales opportunities that are
currently at contract negotiation stage and maintaining control of the cost base.
If the forecast is achieved, KRM22 will be able to operate within its existing facilities. However, the time to
close new customers and the value of each customer, which are deemed individually as high value and low
volume in nature, is key. In addition, delayed sales and/or increased existing customer churn could result in
KRM22 failing to comply with financial covenants associated with the Convertible Loan and in this
circumstance KRM22 would be obliged to seek resolution with Kestrel on these financial covenants and may
need to seek additional funding through a placement of shares or other courses of funding which have not yet
been secured.
The Directors have concluded that the circumstances set forth above indicates the existence of material
uncertainty that may cast significant doubt on KRM22’s ability to continue as a going concern. However, given
KRM22’s forecast, visible sales pipeline and working capital needs, the Directors have considered it is
appropriate to prepare the financial statements on a going concern basis and the financial statements do not
include the adjustments that would be required if KRM22 were unable to continue as a going concern.
See note 3 on page 63 for further information on going concern.
Substantial Shareholders
As at 31 December 2021, the Shareholders listed below had a disclosable interest of 3% or more in the nominal
value of the ordinary share capital of the Company.
Trading Technologies International, Inc.
Kestrel Partners
KRM22 Concert Party
Canaccord Genuity Wealth Management
Cinnober Financial Technology AB
Herald Investment Management
Octopus Investments
Energy and carbon
Number of
ordinary shares
8,916,584
5,954,841
4,392,776
3,500,000
2,654,434
2,077,624
1,134,308
Percentage of
ordinary shares %
25.0
16.7
12.3
9.8
7.4
5.8
3.2
The 2018 Regulations introduced requirements under Part 15 of the Companies Act 2006 for an enhanced
group of companies, which are defined as large by the Companies Act 2006, to disclose their annual energy
use and greenhouse gas emissions, and related information. The Group is not currently defined as large.
However given the Group’s values and taking account of its energy consumption has chosen to apply the 2018
Regulations. KRM22 plc, itself consumes less than 40MWh and therefore as a low energy user, which negates
the need to make detailed disclosures of its energy and carbon information. Furthermore and taking account
of this, it has applied the option permitted by the 2018 Regulations to exclude any energy and carbon
42
KRM22 plc
ANNUAL REPORT 2021
information relating to its subsidiaries where the subsidiary would not itself be obliged to include if reporting
on its own account; this applies to all subsidiaries within the group.
Corporate governance
The Company adopts the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies (“QCA
guidelines”) as set out on pages 25 – 31.
Dividends
No interim dividends were paid and the Directors do not recommend payment of a final dividend.
Share options schemes
Details of employee share schemes are set out in note 25 to the financial statements.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law,
Directors have prepared the Group and Company financial statements in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006. 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 the affairs of KRM22 and the Company and for the profit or loss of KRM22 and the
Company for that period. The Directors are also required to prepare financial statements in accordance with
the rules of the London Stock Exchange for companies trading securities on the AIM.
In preparing these financial statements, the Directors are also required to:
• Select suitable accounting policies and apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• State whether they have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006; and
• Prepare the financial statements on the going concern basis, unless it is inappropriate to presume the
Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring that the annual report and the financial statements are made
available on the Company’s website. Financial statements are published on the Company’s website in
accordance with legislation in the United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the
43
KRM22 plc
ANNUAL REPORT 2021
Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the
ongoing integrity of the financial statements contained therein.
Disclosure of information to the auditor
Each of the Directors of the Company at the time when this report was approved confirms that:
• So far, as the Director is aware, there is no relevant audit information which the Company’s auditor is
unaware; and
• He has taken all the steps that he ought to have taken as a Director in order to make himself aware of
any relevant audit information and to establish that the Company’s auditor is aware of that information.
This confirmation is given in accordance with Section 418(2) of the Act.
Auditor
BDO LLP was appointed as auditor to the Company and in accordance with Section 485 of the Companies Act
2006, a resolution proposing that they be reappointed will be tabled at a General Meeting.
Approval
The Directors’ report was approved on behalf of the Board by:
Kim Suter
Company Secretary
22 March 2022
Financial Statements
45
KRM22 plc
ANNUAL REPORT 2021
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF KRM22 PLC
Opinion on the financial statements
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;
the Group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
the Parent Company financial statements have been properly prepared in accordance with UK
adopted international accounting standards as applied in accordance with the provisions of the
Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements of KRM22 Plc (the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 31 December 2021 which comprise the consolidated income statement and the
statement of comprehensive income for the Group, the consolidated statement of financial position for the
Group, the Company statement of financial position, the consolidated statement of changes in equity for
the Group, the Company statement of changes in equity, the consolidated statement of cash flows for the
Group and the Company statement of cash flows and notes to the consolidated financial statements,
including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK
adopted international accounting standards.
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 believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company 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.
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KRM22 plc
ANNUAL REPORT 2021
Material uncertainty related to going concern
We draw attention to note 3 in the financial statements which indicates that the Group may not be able to
comply with financial covenants agreed with its lender. These events or conditions, along with the other
matters as set out in note 3, indicate that a material uncertainty exists that may cast significant doubt about
the Group’s and the Parent Company ability to continue as a going concern. Our opinion is not modified in
respect of this matter.
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.
Because of the judgements made by management, and the significance of this area, we have determined
going concern to be a key audit matter. Our evaluation of the directors’ assessment of the Group and the
Parent Company’s ability to continue to adopt the going concern basis of accounting and in response to
the key audit matter included:
• Challenge of the internal forecasting process to confirm the projections are prepared by an
appropriate level of staff that are aware of the detailed figures included in the forecast but also have
an understanding of the entity’s market, strategy and changes in the customer base that might
impact on these projections;
• Challenge of management’s assessment of going concern through analysis of the Group’s cash
flow forecast through to 30 June 2023, including assessing and challenging management’s
assumptions underlying the forecasts and comparison against post year -end results to date;
• Checking and challenging the sensitivity analysis performed by management, including the reverse
stress test, to assess the impact on cash flow for changes in the level of estimated revenue and
costs and considered the likelihood that those fact patterns could occur;
• Reviewing the terms of the Group’s existing financing and covenants attached to it and plans for
future fund raising, including assessing the likelihood of a covenant breach within the going concern
assessment period;
• Reviewed post-balance sheet events, specifically the actual cash flow position against that
budgeted; and
• Considering the adequacy of the disclosures in the financial statements against the requirements
of the accounting standards.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in
the relevant sections of this report.
Overview
Coverage
Key audit matters
96% (2020: 86%) of Group loss before tax
87% (2020: 89%) of Group revenue
90% (2020: 90%) of Group total assets
Going Concern
Revenue Recognition
2021
2020
✓
✓
✓
✓
47
KRM22 plc
ANNUAL REPORT 2021
Impairment of intangible assets
(including Goodwill)
✓
Acquisition of the remaining
40% of subsidiary
✓
✓
Acquisition of the interest in subsidiary was no longer considered to be a
key audit matter because it was a specific transaction/event in the prior
year.
Materiality
Group financial statements as a whole
£193,000 (2020: £244,000) based 7% of loss before tax (2020: 5% of
average loss before tax for 3 years in 2020).
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the
Group’s system of internal control, and assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management override of internal controls, including assessing
whether there was evidence of bias by the Directors that may have represented a risk of material
misstatement.
In establishing the overall approach to the Group audit, we assessed the audit significance of each
component in the Group by reference to both its individual financial significance to the Group or other
specific nature or circumstances. We identified seven individually significant components, which makes
up 96% of Group loss before tax and also covers 90% of the total assets of the Group.
The significant components in all territories were audited by the Group audit team, as the Group’s finance
team and information for all territories are based within the UK and to this extent:
• The Group audit team performed full scope audits for KRM22 Plc and its subsidiaries KRM22
Central Limited, KRM22 Development Limited, and KRM22 Market Surveillance Ltd;
• The Group audit team performed specified audit procedures for KRM22 Americas Inc, KRM22
ProOpticus LLC, and Object+ Financial Services BV due to their significance to the Group, focussing
on Group risk areas; and
• The remaining components not subject to full scope audit or specific procedures have been
reviewed for Group reporting purposes, by the Group auditor, using analytic procedures to
corroborate the conclusions reached that there are no significant risks of material misstatement of
the aggregated financial information of these components.
The Group audit team performed the audit of 87% of the Group revenue using the materiality levels set out
above.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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) that we identified, including 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
48
KRM22 plc
ANNUAL REPORT 2021
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. In addition to the matters described in the Material uncertainty related to going concern
section of our report we considered the following matters to be key audit matters.
Key audit matter
Revenue
Recognition
The Group, as a software business,
generates revenue primarily from the sale of
recurring software as a service licenses, and
non-recurring
from software
implementation and set up services. Details
revenue streams and
of
accounting policies applied during the
period are given in note 3.
•
the Group’s
revenue
•
•
•
•
We considered there to be a significant audit
risk arising from inappropriate or incorrect
•
recognition of revenue.
to ensure each revenue stream had a
standalone value and that revenue is
/
recorded
not
recognised prematurely.
The key audit matters related to revenue
recognition are as follows:
inaccurately
to
• The risk of material misstatement in
relation
recognition
revenue
concerns the recognition around the
year end, particularly in relation to
license sales; and
• There is also a risk that not all revenue
streams have been recognised in line
with the revenue recognition policy, in
particular
the unbundling of any
contracts for installation and license
fees in line with their performance
obligations, to ensure that revenue is
not recorded inaccurately / recognised
prematurely.
How the scope of our audit addressed the
key audit matter
•
We performed the following specific testing:
licence
(‘SaaS’)
• Verified a sample of Software-as-a-
Service
fees
recognised in the year, reconciling to
and
underlying
appropriate
events
(performance obligations) for revenue
recognition;
agreements,
trigger
• Agreed a sample of the Group’s non-
recurring
(mainly
revenue
implementation fees) received through
to order and delivery confirmations,
ultimate cash receipt and confirmed
that
a
services
standalone value; and
provided
had
to
back
• Cut-off procedures including testing
invoices raised and contracts entered
in December 2021 and January 2022,
underlying
verifying
agreements, to check revenue has
been recognised within the correct
period and deferred appropriately.
• We selected a sample of revenue
transactions occurring either side of
the year-end reporting date across all
revenue streams and checked that the
revenues recognised for the year under
audit and accrued income and deferred
revenues recognised at the year end
reporting date had been recorded
appropriately with reference to the
sampled revenue contract.
• We assessed whether the revenue
recognition policies adopted by the
Group
accounting
standards.
comply with
Key observations:
Based on the work performed we consider
that
recognised
appropriately and in accordance with the
revenue has been
49
KRM22 plc
ANNUAL REPORT 2021
Impairment
of
intangible
assets
(including
Goodwill)
Taking account of the Group’s accounting
policy in note 3, and as disclosed in note 13,
the Directors have not determined any
impairment of intangible assets (including
goodwill) exists.
This has been determined based on a value
in use model, which includes consideration
of probability adjusted scenarios based on
cost growth
different
assumptions, to assess the recoverability of
the intangible assets (including goodwill).
revenue and
There are significant judgements involved in
the estimation of the recoverable amount of
the intangibles (including goodwill).
Group’s revenue recognition accounting
policy.
Our audit procedures included the following:
• We
challenged
management’s
impairment assessment, based on our
knowledge of the Group’s business and
performance to date.
• We
• We considered whether the discounted
cash flow model applied to value the
recoverable amount of the intangibles
appropriately supports the asset value.
the
reviewed and challenged
assumptions underpinning the forecasts
and the other inputs into the value in use
model such as the future revenue growth
rate, the budgeted cost base, working
capital and the WACC used. This
included a recalculation of the discount
rate applied.
• We checked that the forecast figures
included within the model had been
approved by the Board and the base
case scenario was consistent with
in other audit
information obtained
procedures.
• We have also reviewed the different
scenarios used by management and ran
evaluate
our own
management’s assessment of
the
recoverability of intangibles (including
goodwill).
sensitives
to
• We assessed the adequacy of the related
accounting policies and disclosures in
the financial statements.
Key observations
Based on the procedures performed, we
consider that management’s
judgement
that there is no impairment of intangible
assets required is reasonable.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect
of misstatements. We consider materiality to be the magnitude by which misstatements, including
50
KRM22 plc
ANNUAL REPORT 2021
omissions, could influence the economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality,
we use a lower materiality level, performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also
take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
and performance materiality as follows:
Group financial statements
Parent company financial statements
2021
2020
2021
2020
Materiality
£ 193,000
£ 244,000
£ 146,000
£ 126,000
Basis for
determining
materiality
7% of losses before
tax
5% of three year’s
average of losses
before tax
2% of total assets
2% of total assets
Rationale for the
benchmark
applied
Performance
materiality
Basis for
determining
performance
materiality
A primary KPI used by management to
assess the performance of the business.
As the parent primarily acts as a holding
company for the Group’s investments.
£ 135,000
£ 170,000
£ 102,000
£ 88,200
including
a number of factors
the
expected total value of known and likely
misstatements
past
factors) and
experience and other
management’s
towards
proposed adjustments
attitude
(based
on
including
a number of factors
the
expected total value of known and likely
misstatements
past
factors) and
experience and other
management’s
towards
proposed adjustments
attitude
(based
on
Component materiality
The individual component materiality values used for the individual overseas components were set at 50%-
75% of Group materiality, dependent on the size and our assessment of the risk of material misstatement
of that component, at £96,500 - £144,750 for overseas components. For UK components, this was set at
7% of loss before tax, which ranged between £20,000 to £146,000. In the audit of each component, we
further applied performance materiality levels of 70% of the component materiality to our testing to ensure
that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess
of £5,790 (2020: £12,200). We also agreed to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
51
Other information
KRM22 plc
ANNUAL REPORT 2021
The directors are responsible for the other information. The other information comprises the information
included in the annual report 2021 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.
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 course of 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 this gives rise to a material misstatement in
the financial statements themselves. 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.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we
are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as
described below.
Strategic report
and Directors’
report
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 Parent Company
and its environment obtained in the course of the audit, we have not identified material
misstatements in the Strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
the Parent Company financial statements are not in agreement with the
accounting records and returns; or
•
• certain disclosures of Directors’ remuneration specified by law are not made;
or
• we have not received all the information and explanations we require for our
audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities statement set out on page 42, the
Directors are responsible for the preparation of the financial statements and for being satisfied that they
52
KRM22 plc
ANNUAL REPORT 2021
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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
• We identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, and then design and perform audit procedures responsive to those risks, including
obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.
• We have identified and assessed the potential risks related to irregularities, including fraud, by
considering the following:
o Enquiries of management regarding: the compliance with laws and regulations; the
detection and response to the risk of fraud and any knowledge of actual, suspected or
alleged fraud; and the controls in place to mitigate risks related to fraud or non-compliance
with laws and regulations;
o Obtaining an understanding of the legal and regulatory framework in which the Group
operates. The key laws considered are accounting standards and the Companies Act 2006.
• We have responded to risks identified by performing procedures including the following:
o Enquiry of in-house management and external legal counsel concerning actual and potential
litigation and claims;
o Performing analytical procedures to identify any unusual or unexpected relationships which
may indicate risks of misstatement due to fraud; and
o Reading the minutes of meetings of those charged with governance.
o Review of financial statements disclosures and testing to supporting documentation.
• We have also considered the risk of fraud through management override of controls by:
o Testing on a sample basis the appropriateness of journal entries and other adjustments;
o Assessing whether the judgements made in making accounting estimates are indicative of
potential bias;
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the less likely we are to become aware of it.
53
KRM22 plc
ANNUAL REPORT 2021
A further description of our responsibilities is available 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 Parent 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
Parent 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 Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Nicole Martin (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
Date: 22 March 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
54
KRM22 plc
ANNUAL REPORT 2021
CONSOLIDATED INCOME STATEMENT AND
STATEMENT OF COMPREHENSIVE INCOME FOR THE
GROUP
For the year ended 31 December 2021
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Operating loss before interest, taxation, depreciation, amortisation, share
based payment and exceptional items (‘Adjusted EBITDA’)
Depreciation and amortisation
Impairment of intangible assets
Profit/(loss) on disposal of tangible/intangible assets
Contingent consideration (charge)/write back
Gain on extinguishment of debt (net)
Unrealised foreign exchange loss
Acquisition, funding and debt related expenses
Company reorganisation costs
Deferred salary bonus accrual write back
Share-based payment charge
Operating loss
Finance charge (net)
Loss before taxation
Taxation credit
Loss for the year
Loss for the year attributable to:
Equity shareholders of the parent
Non-controlling interest
Other comprehensive income
Item that may be reclassified subsequently to profit and loss:
Exchange loss on translation of foreign operations
Total comprehensive loss for the year
Total comprehensive loss for the year attributable to:
Equity shareholders of the parent
Non-controlling interest
Loss per ordinary share
Basic earnings per share
Diluted earnings per share
Note
5
6
7
10
11
12
12
All amounts relate to continuing activities.
The notes on pages 61 to 92 form part of these financial statements.
2021
£’000
4,128
(676)
3,452
259
(6,695)
(687)
(1,696)
–
6
(126)
–
(112)
(20)
–
–
(349)
(2,984)
(438)
(3,422)
92
(3,330)
(3,330)
–
(3,330)
(7)
(3,337)
(3,337)
–
(3,337)
(12.4p)
(12.4p)
2020
£’000
4,594
(440)
4,154
–
(9,570)
(167)
(1,688)
(3,022)
(63)
342
677
(160)
(401)
(430)
381
(885)
(5,416)
(324)
(5,740)
246
(5,494)
(5,879)
385
(5,494)
(117)
(5,611)
(5,996)
385
(5,611)
(24.1p)
(24.1p)
55
KRM22 plc
ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION FOR THE GROUP
As at 31 December 2021
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right of use assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Loans and borrowings
Derivative financial liability
Net current assets
Non-current liabilities
Trade and other payables
Lease liabilities
Loans and borrowings
Deferred tax liability
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Convertible debt reserve
Foreign exchange reserve
Share-based payment reserve
Retained earnings
Total equity
Note
13
13
14
20
16
18
19
20
21
21
19
20
21
22
24
25
2021
£’000
4,841
2,573
54
632
8,100
741
5,362
6,103
14,203
3,436
483
97
45
4,061
2,042
45
321
2,763
301
3,430
7,491
6,712
3,567
20,517
(190)
224
115
2,912
(20,433)
6,712
2020
£’000
4,937
3,065
136
1,041
9,179
1,434
1,974
3,408
12,587
2,539
456
97
45
3,137
271
882
549
2,664
405
4,500
7,637
4,950
2,672
16,676
(190)
224
108
2,563
(17,103)
4,950
The financial statements were approved by the Board and authorised for issue on 22 March 2022 and are
signed on its behalf by:
Kim Suter
Company Secretary
The notes on pages 61 to 92 form part of these financial statements.
56
KRM22 plc
ANNUAL REPORT 2021
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
Non-current assets
Investments
Intercompany loans
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Loans and borrowings
Net current assets/(liabilities)
Non-current liabilities
Loans and borrowings
Total liabilities
Net assets/(liabilities)
Equity
Share capital
Share premium
Convertible debt reserve
Share-based payment reserve
Retained earnings
Total equity
Note
15
16
16
18
19
21
21
24
25
2021
£’000
642
332
974
64
4,527
4,591
5,565
210
97
307
4,284
2,763
2,763
3,070
2,495
3,567
20,517
224
2,912
(24,725)
2,495
2020
£’000
489
737
1,226
76
157
233
1,459
150
97
247
(14)
2,664
2,664
2,911
(1,452)
2,672
16,676
224
2,563
(23,587)
(1,452)
As permitted by s408 Companies Act 2006, the Company has not prepared its own statement of
comprehensive Income and related notes. The Company’s loss for the year was £1,138,000 (2020: loss of
£5,984,000).
The financial statements were approved by the Board and authorised for issue 22 March 2022 and are
signed on its behalf by:
Kim Suter
Company Secretary
The notes on pages 61 to 92 form part of these financial statements.
57
KRM22 plc
ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY FOR THE GROUP
For the year ended 31 December 2021
For the year ended 31 December 2020
Ordinary
Shares
£’000
2,672
–
Share
premium
£’000
16,676
–
Merger
reserve
£’000
(190)
–
Convertible
debt reserve
£’000
224
–
Foreign
exchange
reserve
£’000
108
–
SBP
Reserve
£’000
2,563
–
Retained
losses
NCI
£’000 £’000
–
–
(17,103)
(3,330)
Total
equity
£’000
4,950
(3,330)
–
–
–
–
895
3,841
–
–
–
–
–
–
–
–
–
–
7
7
–
–
–
–
–
349
–
–
7
(3,330)
–
(3,323)
–
–
–
–
–
4,736
349
6,712
3,567
20,517
(190)
224
115
2,912
(20,433)
Ordinary
Shares
£’000
2,100
–
Share
premium
£’000
15,435
–
Merger
reserve
£’000
(190)
–
Convertible
debt reserve
£’000
–
–
Foreign
exchange
reserve
£’000
(9)
–
SBP
Reserve
£’000
1,678
–
Retained
losses
NCI
£’000 £’000
(738)
385
(10,871)
(5,879)
Total
equity
£’000
7,405
(5,494)
–
–
–
–
–
–
–
–
572
1,241
–
–
–
–
–
–
–
–
–
–
–
224
–
–
117
117
–
–
–
–
–
–
–
–
–
885
–
–
117
(5,879)
385
(5,377)
(353)
353
–
–
–
–
–
–
–
–
224
1,813
885
4,950
2,672
16,676
(190)
224
108
2,563
(17,103)
At 1 January 2021
Loss for the year
Other
comprehensive
loss
Total
comprehensive
loss
Allotment of share
capital
Share-based
payments
At 31 December
2021
At 1 January 2020
Loss for the year
Other
comprehensive
loss
Total
comprehensive
loss
Non-controlling
interest
Convertible debt
option
Allotment of share
capital
Share-based
payments
At 31 December
2020
The notes on pages 61 to 92 form part of these financial statements.
58
KRM22 plc
ANNUAL REPORT 2021
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
As at 1 January 2021
Loss for the period
Allotment of share capital
Share-based payments
As at 31 December 2021
Ordinary
shares
£’000
2,672
–
895
–
3,567
Share
premium
£’000
16,676
–
3,841
–
20,517
Convertible
debt reserve
£’000
224
–
–
–
224
SBP
Reserve
£’000
2,563
–
–
349
2,912
Retained
losses
£’000
(23,587)
(1,138)
–
–
(24,725)
For the year ended 31 December 2020
As at 1 January 2020
Loss for the period
Convertible debt option
Allotment of share capital
Share-based payments
As at 31 December 2020
Ordinary
shares
£’000
2,100
–
–
572
–
2,672
Share
premium
£’000
15,435
–
–
1,241
–
16,676
Convertible
debt reserve
£’000
–
–
224
–
–
224
SBP
Reserve
£’000
1,678
–
–
–
885
2,563
Retained
losses
£’000
(17,603)
(5,984)
–
–
–
(23,587)
Total
equity
£’000
(1,452)
(1,138)
4,736
349
2,495
Total
equity
£’000
1,610
(5,984)
224
1,813
885
(1,452)
The notes on pages 61 to 92 form part of these financial statements.
59
KRM22 plc
ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE GROUP
For the year ended 31 December 2021
Cash flows from operating activities
Loss for the year
Adjustments for:
Tax credit
Net finance expense
Amortisation of intangible assets
Depreciation of property, plant and equipment and right of use assets
Impairment of intangible assets
(Profit)/loss on disposal of intangible/tangible assets
Contingent consideration charge/(write back)
Gain on extinguishment of debt (net)
Unrealised foreign exchange loss
Deferred salary bonus accrual write back
Equity-settled share-based payment expense
Bad debt provision
Income taxes received
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
Net cash flows used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Costs of issue of shares
Lease payments principal
Lease payments interest
Receipts from borrowings
Interest paid
Repayments of borrowings
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
The notes on pages 61 to 92 form part of these financial statements.
2021
£’000
2020
£’000
(3,330)
(5,494)
(92)
438
1,201
495
–
(6)
126
–
112
–
349
127
–
(580)
566
(33)
533
(47)
(749)
(6)
(755)
4,735
–
(204)
(56)
–
(285)
–
4,190
3,388
1,974
–
5,362
3)
(246)
324
1,018
670
3,022
63
(342)
(677)
160
(381)
885
340
121
(537)
(76)
(329)
(405)
(942)
(959)
(2)
(961)
1,280
(25)
(458)
(84)
3,000
–
(874)
2,839
936
1,076
(38)
1,974
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KRM22 plc
ANNUAL REPORT 2021
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
Cash flows from operating activities
Loss for the year
Adjustments for:
Net finance income
Deferred salary bonus accrual write back
Increase in provisions against intra-group loans
Equity-settled share-based payment expense
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash outflows used in operating activities
Cash flows from investing activities
Advance of loans to subsidiaries
Net cash outflow used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Costs of the issue of shares
Receipts from borrowings
Repayments of borrowings
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at the end of the year
2021
£’000
2020
£’000
(1,138)
(5,984)
(1,415)
–
1,827
196
(530)
12
57
69
(461)
381
381
4,735
–
–
(285)
4,450
4,370
157
4,527
(1,381)
(107)
6,186
697
(589)
214
(187)
27
(562)
(3,620)
(3,620)
1,280
(25)
3,000
(4)
4,251
69
88
157
The notes on pages 61 to 92 form part of these financial statements.
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KRM22 plc
ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ended 31 December 2021
1. General information
KRM22 Plc, (the “Company”), is a public company, limited by shares and is listed on the Alternative
Investment Market (AIM). The Company is incorporated and domiciled in the UK. The registered office is
5 Ireland Yard, London, EC4V 5EH.
The principal activity of the Company, and together with its subsidiaries (“KRM22”, the “Group”), is to develop
and invest in leading risk tools to support enterprise, market, compliance, operational and technology risks.
2. Basis of Preparation and Consolidation
Basis of preparation
The financial reporting framework that has been applied in their preparation is applicable law and
international accounting standards in conformity with the requirements of the Companies Act 2006 and, as
regards the Parent Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
The financial information has been prepared on the historical cost basis except that financial instruments
are stated at the fair value.
The financial statements are prepared in Sterling, which is the functional currency of the Parent Company
too. Monetary amounts in these financial statements are rounded to the nearest £’000.
KRM22 applied all standards and interpretations issued by the IASB that were effective as of 1 January
2021. The accounting policies set out below have, unless otherwise stated, been applied consistently to all
years presented in this financial information.
The preparation of the financial statements, in conformity with IFRS, requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying
KRM22’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated financial statements, are disclosed in
note 4.
Adoption of new and revised standards
There are no new standards impacting the Group that have been adopted in the annual financial statements
for the year ended 31 December 2021, which have given rise to material changes in the Group's accounting
policies.
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Standards, amendments and interpretations to published standards not yet effective
There are a number of new standards and amendments to and interpretations of existing standards, which
have been published and are not yet mandatory and which the Group has decided not to adopt early, as
below:
Effective date for
annual periods
beginning
on/after
Issue
date
Expected
impact
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
(not EU endorsed)
23-Jan-20
01-Jan-23
None
Basis of consolidation
The financial information represents the consolidated financial information of the Company and its
subsidiaries (“KRM22”, the “Group”) as if they are formed as a single entity. Intercompany transactions and
balances between KRM22 companies are therefore eliminated in full. The results of subsidiary
undertakings are included in the consolidated statement of comprehensive income from the date that
control commences until the date that control ceases. The Company controls a subsidiary if all three of
the following elements are present:
• power over the investee;
• exposure to variable returns from the investee; and
•
the ability of the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of
these elements of control. In assessing control, KRM22 takes into consideration potential voting rights that
are currently exercisable.
On 19 April 2018, KRM22 Plc, a company under common control of the KRM22 Central Limited
shareholders, acquired KRM22 Central Limited from its shareholders in return for an issue of shares. As a
combination of entities under common control, the transaction falls outside the scope of the standard IFRS
3 ‘Business Combinations’.
Paragraph 10 of IAS8 Accounting Policies, Changes in Accounting Estimates and Errors requires
management to use its judgement in developing and applying a policy that is relevant, reliable, represents
faithfully the transaction, reflects the economic substance of the transaction, is neutral, is prudent and is
complete in all material respects when selecting appropriate methodology for consolidation accounting.
In the absence of IFRS guidance, KRM22 has applied merger accounting in accordance with ‘FRS102:
Section 19 Business Combinations and Goodwill’, as the business combination meets the requirements set
out in paragraph 27, namely:
•
•
the use of the merger accounting method is not prohibited by company law or other relevant
legislation;
the ultimate equity holders remain the same, and the rights of each equity shareholder, relative to
others before and after the acquisition are unchanged; and
• no non-controlling interest in the net assets of KRM22 is altered by the transfer.
In accordance with merger accounting, consolidated accounts have been prepared for the restructured
Group as if it has always been in existence. The carrying value of assets and liabilities have not been
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ANNUAL REPORT 2021
adjusted to fair value. The difference between the nominal value of the shares issued and the nominal value
of the shares received has been recorded in the merger reserve.
3. Accounting policies
Going concern
These financial statements have been prepared on the going concern basis. The Directors have reviewed
the Group and Company’s going concern position taking into account of its current business activities,
budgeted performance and the factors likely to affect its future development, which are set out in this
Annual Report, and include the Group’s objectives, policies and processes for managing its capital, its
financial risk management objectives and its exposure to credit and liquidity risks.
The Group and Company meets their day-to-day working capital requirements through cash generated from
the capital it has raised on AIM, and a Convertible Loan facility (the “Convertible Loan”) with Kestrel Partners
LLP (“Kestrel”). Further, the Group has infused a capital of £4.7m during the year. At 31 December 2021
the Group had £5.4m of cash at bank and debt due to Kestrel of £3.0m (gross).
The Directors have undertaken a significant assessment of the cashflow forecasts covering a period of at
least twelve months from the date of approval of the financial statements. Cashflow forecasts have been
prepared based on a range of scenarios including, but not limited to, existing customer churn at different
churn rates, no new contracted sales revenue, delayed sales and a combination of these different scenarios.
Having assessed the sensitivity analysis on cashflows, the key risks to the Group remaining a going concern
without implementing extensive cost reduction measures is existing customers paying on payment terms
and within 45 days of invoice, customer churn of up to 10%, conversion of the sales opportunities that are
currently at contract negotiation stage and maintaining control of the cost base.
If the forecast is achieved, the Group will be able to operate within its existing facilities. However, the time
to close new customers and the value of each customer, which are deemed individually as high value and
low volume in nature, is key. In addition, delayed sales and/or increased existing customer churn could
result in the Company failing to comply with financial covenants associated with the Convertible Loan and
in this circumstance the Group would be obliged to seek resolution with Kestrel Partners on these financial
covenants and may need to seek additional funding through a placement of shares or other courses of
funding which have not yet been secured. This event indicates the existence of a material uncertainty that
may cast significant doubt on the Group and Company’s ability to continue as a going concern. However,
given the Group’s forecast, visible sales pipeline and working capital needs, the Directors have considered
it is appropriate to prepare financial statements on a going concern basis and have not included the
adjustments that would result if the Group or Company were unable to continue as a going concern.
Revenue recognition
Revenue comprises recurring revenue, non-recurring revenue and other revenue and is stated exclusive of
VAT and sales tax.
All revenue is only recognised to the extent when services have been delivered and the revenue can be
reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value
of the consideration received or receivable.
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ANNUAL REPORT 2021
The following specific recognition criteria are applied to each revenue stream:
Recurring revenue
Recurring revenue comprises Software-as-a-Service (“SaaS”) license fees which give the licensee a
right to access the software for a fixed period of time together with ongoing post-contract customer
support services comprising customer support (including designated contacts, telephone and
onsite support), hosting and maintenance services, enhancements and minor and major upgrades.
All of the post-contract customer support services are bundled into one service and are not readily
distinguishable in terms of apportioning the license fee between its constituent parts.
In applying the principles of IFRS15 ‘Revenue from Contracts with Customers’ the Directors consider
that SaaS licenses provide the customer with a right to access the software over a period of time
and that revenue generated from sales of software licenses is recognised over the term of the
license.
Where license fees are invoiced in advance, the income is deferred and released over the term of
the license with the balance recorded within accruals and deferred income in the statement of
financial position.
Non-recurring revenue
Non-recurring revenue comprises one-off pieces of work including implementation fees related to
initial set-up services and ad-hoc development services which are outside the scope of post-contract
customer services covered by the license fee.
Where implementation fees have only been partially completed at the statement of financial position
date, revenue represents the value of service provided to date based on completed implementations
as defined in the contract. Where payments have been received from customers in advance of
services provided, the amounts are recorded within accruals and deferred income in the statement
of financial position. The implementation fee is a distinct obligation and therefore recognised at a
point in time.
Other revenue
Other revenue comprises miscellaneous revenue that is not part of providing SaaS services, either
as recurring revenue or non-recurring implementation fees, and is not part of KRM22’s core
business. Turnover represents the value of service provided and where payments have been
received from customers in advance of services provided, the amounts are recorded within accruals
and deferred income in the statement of financial position.
Deferred revenue
At 31 December 2021, the balance of deferred revenue was £1.7m (2020: £1.5m) and this will be
released to the income statement in full within one year of the statement of financial position date.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s
chief operating decision maker (CODM). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Chief Executive Officer.
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KRM22 plc
ANNUAL REPORT 2021
Business combinations and goodwill
KRM22 applies the acquisition method to account for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities assumed by the
former owners of the acquiree and the equity interests issued by KRM22. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets and liabilities acquired, and liabilities assumed are measured initially at their fair values
at the acquisition date. Goodwill is measured as the excess of the sum of the consideration transferred, the
amount of any non-controlling interests in the acquired entity measured on the proportionate net asset basis,
over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. If,
after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities
assumed exceeds the sum of the consideration transferred, the excess is recognised immediately in the
income statement as a bargain purchase gain.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the
purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to the KRM22’s cash-generating unit that is expected to benefit from the combination, irrespective
of whether other assets of liabilities of the acquiree are assigned to that unit.
Intangible assets
Research expenditure is expensed to the income statement in the year in which it is incurred. Expenditure
on internal projects is capitalised if it can be demonstrated that:
it is technically and commercially feasible to develop the asset for future economic benefit;
•
• adequate resources are available to maintain and complete the development;
• KRM22 is able to use the asset;
• use of the asset will generate future economic benefit;
• expenditure on the development of the asset can be measured reliably; and
•
it is KRM22’s intention to complete the development and use or sell it.
Other development expenditure is recognised in the income statement as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated amortisation and less
accumulated impairment losses.
Amortisation is charged to the income statement on a straight line basis over the estimated useful lives of
intangible assets. Intangibles assets are amortised from the date they are available for use. The estimated
useful lives are as follows:
Acquired software
Capitalised development costs
Customer contracts and relationships
Brand (including trademarks)
-
-
-
-
straight line over 5 - 10 years
straight line over 3 years
straight line over 10 years
straight line over 3 - 10 years
The basis for choosing these useful lives is with reference to the years over which they can continue to
generate value for KRM22.
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ANNUAL REPORT 2021
Amortisation charges are included within administrative expenses in the consolidated statement of income
statement. KRM22 reviews the amortisation year and methodology when events and circumstances
indicate that the useful life may have changed since the last reporting date.
Property, plant and equipment
Property, plant and equipment are initially measured at historical cost and subsequently measured at
historical cost, net of depreciation and any impairment losses.
Depreciation on other assets is calculated on a straight-line method to allocate their cost or revalued
amounts to their residual values over their estimated useful lives, as follows:
Fixtures and fittings
Office and computer equipment
-
-
straight line over 4 years
straight line over 4 years
The gain or loss arising on the disposal of an asset is determined as the difference between the sale
proceeds and the carrying value of the asset and is recognised in the income statement.
Right of use assets
KRM22 recognises right of use assets for all applicable leases at the lease liability commencement date.
The right of use asset is initially measured at cost, and consists of the amount of:
the initial measurement of lease liability, plus
•
• any lease payments made to the lessor at or before the commencement date, less
• any lease incentives received;
•
the initial estimation of restoration costs; and
• any initial direct costs incurred by the lessee.
Depreciation on right of use assets is calculated on a straight line method over the lease term.
Non-current assets
The Company’s interests in subsidiaries are initially measured at cost and subsequently measured at cost
less accumulated impairment losses.
Impairment of tangible and intangibles assets
All tangible and intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount might not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely
independent cash inflows or Cash Generating Units (CGUs).
Financial assets
Financial assets are recognised in KRM22 and the Company’s statement of financial position when KRM22
and the Company becomes party to the contractual provisions of the instrument. Under IFRS 9 the
classification of financial assets is based both on the business model and cash flow type under which the
assets are held. There are three principal classification categories for financial assets: amortised cost; fair
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KRM22 plc
ANNUAL REPORT 2021
value through other comprehensive income; and fair value through profit or loss. KRM22 has not classified
any of its financial assets as fair value through other comprehensive income.
Amortised cost
These assets are non-derivative financial assets held under the ‘held to collect’ business model and
attracting cash flows that are solely payments of principal and interest. They comprise trade and other
receivables and cash and cash equivalents. They are initially measured at fair value plus transaction costs
and are subsequently carried at amortised cost using the effective interest rate method, less provision for
impairment.
Impairment provisions for trade and other receivables are calculated using an expected credit loss model.
Under this model, impairment provisions are recognised to reflect expected credit losses based on a
combination of historic and forward-looking information, the amount of such a provision being the
difference between the net carrying amount and the present value of the future expected cash flows
associated with the impaired receivable. For trade receivables, which are reported net; such provisions are
recorded in a separate allowance account. On confirmation that the trade receivable will not be collectable,
the gross carrying value of the asset is written off against the associated provision.
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term highly
liquid investments with maturities of three months or less.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other
financial liabilities.
(a) Financial liabilities at fair value through profit or loss
Financial liabilities are stated at fair value with differences taken to the consolidated income statement.
Interest on financial liabilities up to maturity are included as a finance expense in the consolidated income
statement.
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is a derivative
(except for effective hedge) or are designated upon initial recognition as FVTPL.
Gains or Losses, including any interest expense on liabilities held for trading or a derivative, are recognised
in the consolidated income statement.
(b) Trade and other payables
Trade payables and other payables are not interest bearing and are stated at their full value on initial
recognition. For disclosure purposes, the fair values of trade and other payables are estimated at the
present value of future cash flows, discounted at the market rate of interest at the reporting date. As trade
payables and other payables are short term in nature at the reporting date, the carrying value is considered
to be a reasonable approximation of fair value.
(c) Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs. They are subsequently
measured at amortised cost using the effective interest method, with interest recognised on an effective
rate basis.
68
Fair value measurement
KRM22 plc
ANNUAL REPORT 2021
Fair value is measured using the following fair value hierarchy that reflects the significance of the inputs
used in making the measurements. The different levels can be defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2: inputs other than quoted prices included within level that are observable for the asset or
liability, either directly (i.e. prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are based on observable market data (unobservable
inputs).
Taxation
The tax expense represents the sum of tax currently payable and deferred tax.
(a) Current tax
Any current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the income statement because it excludes certain items of income or expense that are either
taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
Company’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the reporting end date.
Companies within the Group may be entitled to claim special tax allowances in relation to qualifying
research and development expenditure, e.g. R&D tax credits. The Group accounts for such allowances as
tax credits which means they are recognised when it is probable that the benefit will flow to the Group and
that the benefit can be reliably measured. R&D tax credits reduce current tax expense and, to the extent the
amounts are due in respect of them and not settled by the statement of financial position date, reduce
current tax payable.
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or
the initial recognition (other than in a business combination) of assets and other liabilities in a transaction
that affects neither the tax profit or loss nor the accounting profit or loss.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset
to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the
liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement,
except when it relates to items charged or credited directly to ‘other comprehensive income’, in which
case the deferred tax is dealt with in ‘other comprehensive income’. Deferred tax assets and liabilities are
offset when the Company 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.
69
Provisions
KRM22 plc
ANNUAL REPORT 2021
Provisions are recognised when KRM22 has a legal or constructive present obligation as a result of a past
event, it is probable that KRM22 will be required to settle that obligation and a reliable estimate can be made
of the amount of KRM22’s obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from
a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be
received and the amount of the receivable can be measured reliably.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and as an expense, unless those
costs are required to be recognised as part of the cost of inventories or non-current assets. The cost of
any unused holiday entitlement is recognised in the year in which the employee’s services are received.
Retirement benefits
KRM22 operates a defined contribution plan, under which KRM22 pays contributions to independently
administered pension plans on a mandatory, contractual or voluntary basis. KRM22 has no further payment
obligations once the contributions have been paid. The contributions are recognised as an employee benefit
expense in the income statement when they are due.
Share-based payments
The Company issues equity-settled share-based payments to certain employees and these payments are
measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of the grant
using appropriate pricing models. The fair value determined at the grant date of the equity-settled share-
based payments is expensed on a straight-line basis over the vesting period, based on the Company’s
estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting
conditions.
At the date of each statement of financial position, the Company revises its estimate of the number of
equity instruments that are expected to become exercisable. It recognises the impact of the revision of
original estimates, if any, in the income statement, and a corresponding adjustment is made to equity over
the remaining vesting period. The fair value of the awards and ultimate expense are not adjusted on a
change in market vesting conditions during the vesting period.
The value of share-based payment is taken directly to reserves and the charge for the period is recorded in
the income statement.
KRM22’s scheme, which awards shares in the parent entity, includes recipients who are employees in all
subsidiaries. In the consolidated financial statements, the transaction is treated as an equity-settled share-
based payment, as KRM22 has received services in consideration for KRM22’s equity instruments. An
expense is recognised in the Group income statement for the fair value of share-based payment over the
vesting year, with a credit recognised in equity.
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ANNUAL REPORT 2021
In the subsidiaries’ financial statements, the awards, in proportion to the recipients who are employees in
said subsidiary, are treated as an equity-settled share-based payment, as the subsidiaries do not have an
obligation to settle the award. An expense for the grant date fair value of the award is recognised over the
vesting period, with a credit recognised in equity. The credit is treated as a capital contribution, as the
parent is compensating the subsidiaries’ employees with no cost to the subsidiaries as there is no
expectation to recharge the cost. In the parent company’s financial statements, there is no share-based
payment charge where the recipients are employed by a subsidiary, with the parent company recognising
an increase in the investment in the subsidiaries as a capital contribution from the parent and a credit to
equity.
Earnings per share
Earnings per share are calculated by dividing profit or loss after tax attributable to equity shareholders of
the parent company by the weighted average number of ordinary shares in issue during the period.
Diluted earnings per share requires that the weighted average number of ordinary shares in issue is adjusted
to assume conversion of all dilutive potential ordinary shares. These arise from awards made under share-
based incentive schemes. Instruments that could potentially dilute basic earnings per share in the future
have been considered but were not included in the calculation of diluted earnings per share because they
are anti-dilutive for the periods presented. This is due to the KRM22 incurring losses on continuing
operations for the year.
Leases
Under IFRS16 ‘Leases’, KRM22 recognises a lease liability at the commencement date of the lease at an
amount equal to the present value of the lease payments during the lease term that are not yet paid. The
present value of the lease payments is based on applying a discount rate which is either the interest rate
implicit in the lease or the incremental borrowing rate. The interest rate is treated as an interest expense
and charged to the income statement.
KRM22 also recognises a right of use asset at the lease liability commencement date and is measured at
cost as detailed in the Right of use assets accounting policy. The right of use asset is depreciated over the
term of the lease.
Where a lease has less than twelve months until the lease expiry date from the date of commencement,
KRM22 continues to classify these as operating leases and are charged as an expense to the income
statement on a straight line basis.
Where KRM22 sublets office space for periods of less than twelve months from the date of commencement
of the sublease or where the terms of the sublease differ significantly to the terms of the headlease, these
subleases are classified as operating leases. Operating lease income, net of agency management charges,
is accounted for as other operating income and credited to the income statement on a straight line basis
over the term of the sublease.
Foreign currency
Foreign currency transactions are translated at the exchange rates prevailing at the date of transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange at the
statement of financial position date. Any gain or loss arising from a change in the exchange rates of
exchange subsequent to the date of the transaction is included as a gain or loss in the income statement.
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ANNUAL REPORT 2021
The statement of financial position of the foreign subsidiaries are translated into Sterling at the exchange
rate at the year end. The results of foreign subsidiaries are translated into Sterling at the average rate of
exchange during the financial year. Exchange differences which arise from the translation of opening net
assets of the foreign subsidiary undertakings are included in the consolidated statement of comprehensive
income and transferred to the KRM22’s translation reserve.
Descriptions of nature of each component of equity
The components of KRM22’s equity can be described as follows:
• Share capital – The amount for the nominal value of shares issued.
• Share premium – The amount subscribed for share capital in excess of nominal value after
deducting certain costs of issue.
• Merger reserve – See note 2.
• Convertible debt reserve – This relates to the residual amount of any liability component from the
fair value of debt instruments as a whole where the debt instrument includes a liability and
embedded equity feature.
• Foreign exchange reserve – This reserve relates to exchange differences arising on the translation
of the statement of financial position of the KRM22’s foreign operations at the closing rate and the
translation of the income statement of those operations at the average rate.
• Share-based payment (SBP) reserve – This relates to the fair value of share options and warrants
determined at the grant date of the equity- settled share-based payments.
• Retained deficit – The net gains and losses recognised in the consolidated statement of
comprehensive income.
Government grants
Government grants received by KRM22 are initially recognised as deferred income on the statement of
financial position and credited to the income statement when there is reasonable assurance that the
Company will comply with the conditions attached to the grant and that the grant will be received.
Government grants are recognised in the income statement as ‘Other operating income’ on a systematic
basis over the periods in which KRM22 recognises the related costs for which the grants are intended to
compensate.
4. Critical accounting judgements and key sources of estimation uncertainty
IAS 1 requires disclosure of the judgements, apart from those involving estimations, that management has
made in the process of applying the entity’s accounting policies that have the most significant effect on the
amounts recognised in the financial statements.
In the application of KRM22 and Company’s accounting policies, the Directors are required to make certain
judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates. The Directors believe that there are five areas within the financial statements which constitute
critical accounting judgements as follows:
I.
Contingent consideration
When KRM22 acquires subsidiary undertakings, the total consideration to be paid can include a
combination of initial cash consideration, Company ordinary shares and contingent consideration
72
KRM22 plc
ANNUAL REPORT 2021
that can be settled in either in the form of cash or Company ordinary shares at the Company’s
discretion.
The contingent consideration is dependent on the acquired subsidiary undertaking achieving certain
performance conditions at a future date and as specified in the relevant share purchase agreement.
As the performance conditions are based on a future date, management are required to apply a
significant amount of judgement in determining the likelihood of whether the performance criteria
will be achieved.
II.
Revenue
The allocation and timing of the recognition of revenue requires management judgement. Contracts
can include both the sale of licences and the provision of services including integration and
development.
The point at which the significant risks and rewards of ownership transfer is dependent on the
contractual terms and on this basis an analysis is made of each separable component of revenue.
In respect of a licence, this would usually be across the license term as the license is deemed to
provide a ‘right of access’ to the customer. In respect of provision of services and integration and
development this would usually be the period of time in which the integration and development
services were completed.
III.
Capitalisation of development costs
Development costs are capitalised based on an assessment on whether they meet the criteria
specified in IAS 38 for capitalisation. During each reporting period, an assessment is performed by
management to determine time spent developing the intangible assets as a proportion of total time
spent in the year. This represents an area of judgement and impacts the value of intangible costs
capitalised.
IV.
Leases
The recognition of leases in line with IFRS 16 requires significant judgement around the interest rate
used to calculate the discount rate of the present value of future cash flows.
V.
Business combinations
The valuation of contingent consideration based on the future performance of acquired businesses
relies upon significant judgments made by management.
In addition, IAS 1 requires disclosure of information about the assumptions the entity makes about
the future, and other major sources of estimation uncertainty at the end of the reporting period, that
have a significant risk of resulting in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year. In respect of those assets and liabilities, the notes to the
financial statements include details of their nature and carrying amount at the end of the reporting
period.
In addition, judgments are made around the fair value of certain acquired assets to disclose their
fair value, based on areas such as expected credit risk of assumptions around performance.
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KRM22 plc
ANNUAL REPORT 2021
VI.
Impairment of goodwill and other intangible assets
The Group has carried out an impairment review of its cash generating unit (“CGU”). The recoverable
amount of the CGU is based on estimates of future cash flows discounted using an appropriate
discount rate. Estimates of future cash flows are inherently uncertain and, to take account of this
uncertainty, management have used the “expected cash flow approach” which involves probability
weighting several alternate scenarios.
It is possible that changes in economic conditions or deviations in actual performance from forecast
could result in a material adjustment to the carrying value of the CGU within the next financial year.
The key estimates made by management are set out in note 13. The information in note 13 given
on each scenario also provides an indication of the amount of any further impairment for other
reasonably possible outcomes.
5. Segmental reporting
The Board of Directors, as the chief operating decision maker in accordance with IFRS 8 Operating
Segments, has determined that KRM22 have identified five risk domains as operating segments, however
for reporting purposes into a single global business unit and operates as a single operating segment, as the
nature of services delivered are common.
The internal management accounting information has been prepared in accordance with IFRS but has a
non-GAAP ‘Adjusted EBITDA’ as a profit measure for the overall group. This amount is reported on the face
of the income statement.
KRM22’s revenue from external customers and information about its non-current assets, excluding
deferred tax, by geography is detailed below:
UK
Europe
USA
Rest of world
Total
2021
Revenue
£’000
1,234
895
1,697
302
4,128
2021
Non-current
assets
£’000
3,224
1,918
2,958
–
8,100
2020
Revenue
£’000
990
763
2,383
458
4,594
2020
Non-current
assets
£’000
3,973
1,911
3,294
1
9,179
The Directors consider that the business has five risk domains: Enterprise, Market, Compliance, Operations
and Technology as is described in the Strategic Report. Within these five risk domains, there are two
revenue streams with different characteristics, which are generated from the same assets and cost base.
For the years ended 31 December 2021 and 2020, no customer generated more than 10% of total revenue.
Non-current assets include goodwill and intangible assets recognised on consolidation and are classified
by reference to the geographical location of the KRM22 group company which initially acquired the
acquiree.
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ANNUAL REPORT 2021
Recurring revenue is recognised over the period of time and non-recurring revenue is recognised at a point
in time. Other revenue comprises miscellaneous revenue that is not part of KRM22’s core business.
Recurring revenue
Non-recurring revenue
Total revenue
Enterprise
Market
Compliance
Other
Total
6. Other operating income
Grant income relate to COVID 19 (refer to note below)
Operating lease income (net)
Total revenue
I. Grant income related to COVID 19
2021
£’000
3,955
173
4,128
2021
£’000
435
1,881
1,812
–
4,128
2021
£’000
188
71
259
2020
£’000
4,193
401
4,594
2020
£’000
420
2,476
1,673
25
4,594
2020
£’000
–
–
–
During the year ended 31 December 2021, KRM22 received a £0.2m (US$0.3m) Payback Protection
Program (“PPP”) loan, a US government backed loan, under the US Department of Treasury CARES
Act. The proceeds of the loan were used to cover specific US based payroll costs as specified under
the rules of the scheme. As KRM22 was able to demonstrate that the PPP loan proceeds had been
used for eligible expenses, the total value of the loan was forgiven by the Small Business
Administration and at that point, the value of the loan was released to the income statement as an
income-related grant.
II. Operating lease income (net)
In April 2021, KRM22 entered into an agreement to sublet some of its office space on a two-year
lease with an eighteen-month break clause. The terms of the sublease differ to the terms of the
headlease, which KRM22 recognises as a finance lease, and therefore the sublease is treated as an
operational lease with net income generated in the year of £0.1m (2020: £nil).
75
7. Operating loss
KRM22 plc
ANNUAL REPORT 2021
Operating loss for the year has been arrived at after charging the following:
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets
Impairment of intangible assets
Acquisition, funding and debt expenses (refer to note below)
Company reorganisation costs (refer to note below)
Contingent consideration charge/(write back) (refer to note below)
Gain on extinguishment of debt (net) (refer to note below)
Deferred salary bonus accrual write back
Operating lease costs
Foreign currency exchange losses
2021
£’000
86
409
1,201
–
20
–
126
–
–
23
110
2020
£’000
93
577
1,018
3,022
401
430
(342)
(677)
(381)
23
260
I.
II.
III.
Acquisition, funding, and debt related costs
Total acquisition, funding, and debt related costs of £0.0m were incurred in the year ended 31
December 2021 in connection with the share subscription by Trading Technologies International
Inc. Costs recognised in the year ended 31 December 2020 related to the acquisition of the
remaining 40% shareholding in KRM22 Market Surveillance and the replacement of the Harbert Debt
Facility with the Kestrel Convertible Loan facility.
Company reorganisation costs
Reorganisation costs in the year ended 31 December 2020 related to staff redundancy costs as a
result of KRM22 scaling back certain business operations. There were no reorganisation costs
incurred in the year ended 31 December 2021.
Contingent consideration charge/(write back)
A contingent consideration charge of £0.1m (2020: a write back of £0.3m) was recognised in
connection with deferred consideration associated with the acquisition of Object+. The Directors
believe that the third and final performance milestone was achieved and that the related deferred
contingent consideration of £0.9m (US$1.1m) is now payable. Accordingly, the fair value of the third
tranche of consideration has been adjusted to reflect the amount payable (see note 28).
IV. Gain on extinguishment of debt (net)
On 15 April 2020, £1.3m of debt due from KRM22 Market Surveillance Limited, a KRM22 group
undertaking, to Cinnober Financial Technology AB (“Cinnober”) was settled through the issue of a
£0.6m convertible loan note (“CLN) provided by KRM22 to Cinnober which resulted in the recognition
of a gain on extinguishment of debt in the year ended 31 December 2020 of £0.7m. There was no
similar transaction to report in the year ended 31 December 2021.
V.
Deferred salary bonus accrual write back
Total accrued salary bonuses of £0.4m were written back during the year ended 31 December 2020
and resulted from employees waiving any entitlement to bonuses accrued in the year ended 31
December 2019 in exchange for the grant of share options (see note 25). There was no similar
transaction to report in the year ended 31 December 2021.
76
8. Auditor’s remuneration
KRM22 plc
ANNUAL REPORT 2021
For audit services
Audit of the financial statements of the Company
Audit of the financial statements of the Company’s subsidiaries
For other services
Tax services of the Company
Tax services for the Company’s subsidiaries
Tax services around acquisitions
9. Employee information
I.
Employee numbers
2021
£’000
85
8
93
12
4
–
16
2020
£’000
95
8
103
12
14
2
28
The average monthly number of people, including Executive Directors, employed by KRM22 during
the year was as follows:
UK
Europe
USA
Rest of world
Total
II.
Employee benefits
The aggregate payroll cost of these persons were as follows:
Wages and salaries
Social security costs
Pension costs to defined contribution schemes
Share-based payments
Total
III.
Directors’ remuneration
2021
No.
25
11
11
2
49
2021
£’000
2,855
188
126
349
3,518
2020
No.
22
17
11
2
52
2020
£’000
2,520
85
101
886
3,592
The remuneration of the Directors, who also represent the key management personnel of KRM22,
during the year was as follows:
Remuneration for qualifying services
Pension contributions to defined contribution schemes
Share-based payments
Total
2021
£’000
354
6
201
561
2020
£’000
155
3
574
732
77
KRM22 plc
ANNUAL REPORT 2021
Full details of Directors’ remuneration is presented in the Remuneration Committee report on page 36.
Remuneration disclosed above includes the following amounts paid to the highest paid director:
Remuneration for qualifying services
Total
2021
£’000
128
128
2020
£’000
61
61
The number of Directors for whom retirement benefits are accruing under defined contribution schemes
amounted to 1 (2020: 1).
10. Finance expense
Interest income
Interest expense on financial liabilities
Interest expense on lease liabilities
Net finance expense
11. Taxation
Current tax
UK Corporation tax at 19% on loss for the year (2020:19%)
Prior year adjustment to deferred tax
Research and Development tax credits
Total current tax
Deferred tax
Origination and reversal of temporary differences
Intangible assets recognised on acquisition
Total deferred tax (note 22)
Total tax credit
2021
£’000
(2)
384
56
438
2021
£’000
–
–
–
–
(9)
(83)
(92)
(92)
2020
£’000
(5)
243
86
324
2020
£’000
–
11
(121)
(110)
(14)
(122)
(136)
(246)
The tax expense differs from the standard rate of corporate tax in the UK for the year of 19% for the following
reasons:
Losses before tax
Loss before tax based on corporation tax 19% (2020: 19%)
Accelerated capital allowances
Expenses not deductible for tax purposes
Intangible assets recognised on acquisition
Adjustments to brought forward values
Losses carried forward
Total tax credit
For information on the Group’s total available tax losses, see note 22.
2021
£’000
(3,422)
(650)
(9)
27
(83)
–
623
(92)
2020
£’000
(5,740)
(1,091)
(14)
78
(122)
11
892
(246)
78
12. Loss per share
KRM22 plc
ANNUAL REPORT 2021
Basic earnings per share is calculated by dividing the loss attributable to the equity holders of KRM22 by
the weighted average number of shares in issue during the year.
KRM22 has dilutive ordinary shares, this being warrants, restricted stock awards and share options granted
to employees. As KRM22 has incurred a loss in the year, the diluted loss per share is the same as the basic
earnings per share as the loss has an anti-dilutive effect.
Loss for the year attributable to equity holders of the parent
Basic weighted average number of shares in issue
Diluted weighted average number of shares in issue
13. Intangible assets
Cost
At 1 January 2021
Additions
Foreign exchange movements
At 31 December 2021
Accumulated amortisation
At 1 January 2021
Amortisation for the year
Foreign exchange movements
At 31 December 2021
At 31 December 2020
At 31 December 2021
2021
£’000
(3,330)
26,765,037
37,502,896
(12.4p)
2020
£’000
(5,879)
24,414,093
33,256,848
(24.1p)
Goodwill on
Consolidation
£’000
Acquired
software and
related assets
£’000
Capitalised
development
costs
£’000
7,656
–
(119)
7,537
2,719
–
(23)
2,696
4,937
2,852
–
(26)
2,826
1,085
446
(6)
1,525
1,767
4,277
749
(24)
5,002
2,979
755
(4)
3,730
1,298
Total
£’000
14,785
749
(169)
15,365
6,783
1,201
(33)
7,951
8,002
4,841
1,301
1,272
7,414
Goodwill that arose in prior periods is not amortised. Impairment testing is carried out at Cash Generating
Units (CGU) level on an annual basis.
KRM22 are now projecting higher revenue growth than that used in the prior year impairment assessment,
due to management’s commitment to invest in sales and marketing resource following the £4.7m
investment by Trading Technologies Inc. (“TT”) and the distribution agreement signed with TT in December
2021. Accordingly, the Company has reassessed the recoverability of goodwill and intangible assets and
this resulted in significant valuation headroom above the carrying value.
The Company has estimated the recoverable amount at £8.1m using a value-in-use model by projecting
cashflows for the next five years together with a terminal value using a growth rate. The five-year
projections used in the model are based on the FY22 budget approved by the Directors. Given the
uncertainty involved in predicting long-term projections, management developed expectations of future
performance under a range of scenarios with different levels of future revenue growth. The value in use
was estimated by probability weighting the value in use under each scenario as summarised below.
79
KRM22 plc
ANNUAL REPORT 2021
Scenario
Upside
Base case
Downside
Severe downside
Probability weighted average
Annual
Revenue growth
FY22 to FY26
%
40%
25%
20%
5%
Annual
cost growth
FY22 to FY26
%
5%
3%
2%
1%
Value in use
£’000
31,797
8,497
2,834
(12,878)
30,250
Headroom/
(Impairment)
£’000
24,383
1,083
(4,580)
(20,292)
594
Probability
%
10%
55%
30%
5%
100%
The single most likely scenario assumed revenue growth of 25% per annum over the period (2020: 18%).
The other key assumptions used were:
• The discount rate (WACC) of 13% (2020: 12%). An increase of 1% in WACC rate would result in a
£4.4m decrease in the headroom.
• Long-term growth rate of 1.5% (2020: 1.5%). An increase of 1%, in the long-term growth rate would
result in a £4.0m increase in the headroom.
14. Property, plant and equipment
Cost
At 1 January 2021
Additions
Disposals
Foreign exchange movements
At 31 December 2021
Accumulated depreciations
At 1 January 2021
Depreciation charge for the year
Disposals
Foreign exchange movements
At 31 December 2021
Net book value at 31 December 2020
Net book value at 31 December 2021
15. Investment in subsidiaries
Cost
At 1 January 2021
Additions
At 31 December 2021
Carrying amount
At 1 January 2021
At 31 December 2021
Fixtures and
Fittings
£’000
Office
equipment
£’000
Total
£’000
256
–
(18)
1
239
163
62
(15)
–
210
93
29
119
6
–
(1)
124
76
24
–
(1)
99
43
25
£’000
2021
£’000
489
153
642
489
642
375
6
(18)
–
363
239
86
(15)
(1)
309
136
54
2020
£’000
)
£’000
301
188
489
301
489
The additions in 2021 represents share capital contributions made to the Company’s subsidiaries in respect
of the share option expense recognised on share options issued by the Company to employees of the
appropriate subsidiaries. The capital contribution transaction is a non-cash transaction.
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KRM22 plc
ANNUAL REPORT 2021
Details of the Company’s subsidiaries at 31 December 2021 are as follows:
Name of undertaking
Registered office
KRM22 Central Limited *
KRM22 Development Limited
KRM22 Development Spain SL**
KRM22 Singapore Pte Limited
KRM22 Americas Inc.
KRM22 ProOpticus LLC
5 Ireland Yard
London, EC4V 5EH
England
5 Ireland Yard
London, EC4V 5EH
England
Travessera de Gràcia, 11
5th floor
08021, Barcelona
Spain
10 Anson Road, #23-02
International Plaza
079903
Singapore
444 Madison Ave
Suite 2801, New York
NY, 10022
USA
318 W Adams, 10th Floor
Chicago
IL, 60606
USA
KRM22 Netherlands B.V.
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
KRM22 Market Surveillance
Limited
5 Ireland Yard
London, EC4V 5EH
England
Object+ Holding B.V.
Object+ B.V.
Object+ Financial Services B.V.
Object+ Financial Products B.V.
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
Ownership interest and
voting rights
Nature of business
100%
Administrative and sales
company
100%
Development services
100%
Development services
100%
Sales company
100%
100%
100%
100%
100%
100%
Administrative and sales
company
Administrative and sales
company
Non-trading intermediate
holding company
Administrative and sales
company
Non-trading intermediate
holding company
Non-trading intermediate
holding company
100%
Administrative company
100%
Sales company
81
KRM22 plc
ANNUAL REPORT 2021
Ownership interest and
voting rights
Nature of business
100%
Sales company
Name of undertaking
Registered office
Object+ Americas LLC
318 W Adams, 10th Floor
Chicago
IL, 60606
USA
* Shares held directly by KRM22 Plc
** In liquidation
16. Trade and other receivables
Trade receivables disclosed below are classified as loans and receivables and are therefore measured at
amortised cost.
Amounts falling due within one year:
Trade receivables
Other receivables
Prepayments and accrued income
Total trade and other receivables due within one year
Amounts falling due after more than one year:
Amounts due from group undertakings
Total trade and other receivables due in more than one year
2021
Group
£’000
2021
Company
£’000
2020
Group
£’000
2020
Company
£’000
328
217
196
741
–
–
–
6
58
64
332
332
980
232
222
1,434
–
–
–
29
47
76
737
737
The carrying value of trade and other receivables approximates fair value.
At 31 December 2021, the Group had trade receivables falling due within one year of £0.4m including
provisions of £0.1m (2020: £0.3m), other receivables falling due within one year of £0.2m including
provisions of £nil (2020: £0.03m). At 31 December 2021, the Company had amounts due from group
undertakings falling due after more than one year of £0.3m including provisions of £1.8m (2020: £0.7m
with provisions of £6.2m).
KRM22 has elected to apply the simplified approach available under IFRS 9:5.5.15 for its trade receivables.
KRM22’s trade receivables result from transactions in the scope of IFRS 15 ‘Revenue from Contracts with
Customers’. Under this simplified approach, a lifetime expected loss allowance is always recognised (both
at initial recognition and throughout the life of the trade receivable).
KRM22’s trade receivables have a short duration of less than twelve months, and do not have a contractual
interest rate. Therefore an EIR of zero has been applied to cash flows. KRM22 has used a provision matrix
to determine the lifetime ECL of the portfolio. It is based on KRM22’s historical, observed default rates, and
is adjusted by a forward looking estimate of future economic conditions.
KRM22 group revenue was derived from organic customer growth and acquired customer growth through
the previous acquisitions: KRM22 Market Surveillance, KRM22 ProOpticus and the Object+ Group. Based
on historical observed default rates of the acquired companies, the estimated impairment loss is
immaterial. Furthermore, since acquisition the Group has managed customer credit risk in line with Group
policy and outstanding receivables are actively monitored and discussed by management. There are no
doubts as to the future recoverability of these balances. Therefore, any impairment would be immaterial.
Amounts due from group undertakings have been classified as falling due after more than one year based
on the agreed terms of repayment by subsidiaries in future periods. The Company provides regular funding
82
KRM22 plc
ANNUAL REPORT 2021
to KRM22 Central Limited at an appropriate interest rate of 8.14%. The Directors consider the terms of the
transaction to be at arm’s length.
There are significant doubts as to the future recoverability of these intercompany balances, and as such, a
provision for bad and doubtful debts of £1.8m (2020: £6.2m) has been raised against the amounts due
from group undertakings in the Company statement of financial position and recorded as a charge in the
Company income statement.
17. Trade receivables – credit risk
Aging of due and past due but not impaired receivables
0 – 30 days
31 – 60 days
61 – 90 days
91 – 120 days
120 + days
Total trade and other receivables due in less than one year
18. Cash and cash equivalents
Cash at banks and on hand
19. Trade and other payables
Amounts falling due within one year:
Trade payables
Accruals and deferred income
Social security and other taxation
Other payables
Total due within one year
Amounts falling due after more than one year:
Contingent consideration
Provision for dilapidations
Total due in more than one year
2021
£’000
306
3
19
–
–
328
2020
£’000
897
9
–
–
74
980
2021
Group
£’000
5,362
5,362
2021
Company
£’000
4,527
4,527
2020
Group
£’000
1,974
1,974
2020
Company
£’000
157
157
2021
Group
£’000
2021
Company
£’000
2020
Group
£’000
2020
Company
£’000
479
1,959
121
877
3,436
–
45
45
67
143
–
–
210
–
–
–
373
1,821
253
92
2,539
828
54
882
28
89
–
33
150
–
–
–
The fair value of trade and other payables are the same as the carrying values.
Provisions for dilapidation for expected future expenditure in accordance with lease obligations are based
on the Group’s best estimate of the likely committed cash outflow. These costs are expected to be incurred
at the end of the lease and therefore have been classified as non-current.
Other payables at 31 December 2021 of £0.9m relate to contingent consideration associated with the
acquisition of Object+. The contingent consideration is payable subject to earnout conditions and
performance milestones. As detailed in note 28, the Directors believe that the third and final performance
milestone was achieved and have therefore reclassed the contingent consideration as other payables due
within one year however the liability can be satisfied in either cash or Company ordinary shares at the
Company’s discretion.
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KRM22 plc
ANNUAL REPORT 2021
20. Leases – right of use assets and lease liabilities
Right of use assets
Cost
At 1 January 2021
Disposals
Foreign exchange movements
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Depreciation charge for year
Disposals
Foreign exchange movements
At 31 December 2021
Net book value at 31 December 2020
Net book value at 31 December 2021
Lease liabilities
Cost
At 1 January 2021
Interest expense
Lease payments
Foreign exchange movements
At 31 December 2021
The maturity of the lease liabilities is as follows:
Amounts payable under leases
Within one year
In two to five years
2021
£’000
483
321
804
KRM22’s leases relate to various office leases held by subsidiary undertakings.
Total
£’000
1,782
(73)
(1)
1,708
741
409
(73)
(1)
1,076
1,041
632
Total
£’000
1,005
56
(260)
3
804
2020
£’000
456
549
1,005
84
21. Loans and borrowings
Current
Secured loans
Non-Current
Secured loans
KRM22 plc
ANNUAL REPORT 2021
2021
£’000
97
97
2,763
2,763
2,860
2020
£’000
97
97
2,664
2,664
2,761
The fair value of loans and borrowings are the same as the carrying values.
On 15 September 2020, the Company entered into an agreement for a new three year £3.0m convertible
loan facility (the “Convertible Loan”) with Kestrel Partners LLP (“Kestrel”). The interest rate payable on the
Convertible Loan is 9.5% per annum and is paid quarterly in arrears. Kestrel can convert the Convertible
Loan into new ordinary shares in the Company at any time at a conversion price of 38p. The Company has
the right to request conversion at any time after eighteen months following the date of the agreement,
subject to certain conditions regarding the Company's share price at that time. Kestrel has the right to
prevent any conversion which would trigger a Rule 9 event under the Takeover Code.
The Convertible Loan contains a host liability and embedded (fixed-for-fixed) equity conversion feature on
the basis that there is a contractual cash obligation to pay quarterly interest and a requirement to repay the
principal amount at the end of three-year Convertible Loan term, subject to the conversion option not being
exercised by either Kestrel or KRM22. The Convertible Loan is classified as being a compound financial
instrument and on this basis IAS 32 requires that the Convertible Loan is split into equity and liability
components. The fair value of the liability component, included in current and non-current borrowings, at
initial recognition was calculated using a market interest rate that would apply to a stand-alone loan without
a conversion feature (12.65%). The equity component is assigned as the residual amount of £0.2m (see
SOCE on page 57), by deducting the amount calculated for the liability component from the fair value of the
instrument as a whole. As the Convertible Loan is not quoted on an active market, the transaction price of
£3.0m for the instrument is its fair value. The carrying amount of the liability component of the Convertible
Loan is adjusted for total transaction costs incurred of £0.1m.
22. Deferred tax
Deferred tax liability at 1 January 2020
On acquisition
Income statement credit
Deferred tax liability at 31 December 2020
Income statement (credit)
Foreign exchange movements
Deferred tax liability at 31 December 2021
Intangible assets recognised
on acquisition
£’000
513
(122)
5
396
(83)
(12)
301
Accelerated capital
allowances
£’000
23
(14)
–
9
(9)
–
–
Total
£’000
536
(136)
5
405
(92)
(12)
301
KRM22 has tax losses of £16.4m (2020: £14.7m) that are available for offset against future taxable profits
of those subsidiary companies in which the tax losses arose. Deferred tax assets have not been recognised
in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and they
have arisen in subsidiaries whose future taxable profits are uncertain. The estimated value of the deferred
tax asset not recognised is £3.9m (2020: £2.9m).
85
KRM22 plc
ANNUAL REPORT 2021
In addition to the above operating tax losses, a potential deferred tax asset, could relate to pre-acquisition
tax losses of KRM22 ProOpticus. The availability and future utilisation of these losses remains under
consideration, taking account of both its legacy ownership structure and Section 382 of the US Internal
Revenue Code, whereby the ability to utilise net operating losses arising prior to a change of ownership is
limited to a percentage of the entity value of the entity at the date of change of ownership. These potential
operating tax losses (and related potential deferred tax asset) have not been included in the available
operating tax losses (and related deferred tax asset) owing to current uncertainties on their actual usability.
A deferred tax liability of £0.3m (2020: £0.4m) has been recognised in relation to intangible assets of £2.9m
(2020: £2.9m) that arose on the acquisition of KRM22 Market Surveillance, KRM22 ProOpticus and the
Object+ group in prior periods.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in that jurisdiction
in the year when the asset is realised or the liability settled, based on tax rates that have been enacted or
substantively enacted at the statement of financial position date and therefore these have been measured
at 23% UK and an effective rate of 23% on our overseas jurisdictions.
23. Operating leases
KRM22 operates from various leased properties around the world and the terms of property leases vary by
location. Any property leases that have less than twelve months at the date of inception until termination
date are deemed to be short–term leases and recognised as operating leases.
KRM22 has total minimum future lease commitments under non–cancellable operating leases as set out
below:
Due within one year
24. Share capital
Issued and fully paid 10p Ordinary shares
At 1 January
Issued for cash during the year*
Issued for other consideration
At 31 December
2021
£’000
2
2
2021
No.
26,719,127
8,947,209
–
35,666,336
2021
£’000
2,672
895
–
3,567
2020
No.
20,998,029
4,266,664
1,454,434
26,719,127
2020
£’000
2
2
2020
£’000
2,100
427
145
2,672
The following movements in the ordinary share capital of the Company occurred during the year:
• On 19 April 2021, the Company issued 30,625 new ordinary shares of 10 pence each at a price of
30 pence per share as part of an exercise of share options under the Company’s Employee Share
Options Plan.
• On 30 December 2021, the Company issued 8,916,584 new ordinary shares of 10 pence each at a
price of 53 pence per share as part of a share subscription, giving rise to a share premium of £3.8m.
The share premium account represents the premium arising on the issue of equity shares, comprising 10
pence ordinary shares, net of share issue expenses.
86
KRM22 plc
ANNUAL REPORT 2021
25. Share–based payments
Warrants
On 24 April 2018, the Company passed a resolution for a total of 6,000,000 warrants to be granted to certain
directors and members of staff conditional on the Company’s admission to the AIM. The warrants are
exercisable in full in three equal tranches, in the event that the Company’s share price equals or exceeds
three separate hurdles at the relevant testing or vesting date. The earliest testing date for tranche one was
two years following admission to the AIM, i.e. 30 April 2020, with the earliest testing date for tranche two
and three being one year later, i.e. 30 April 2021.
If these conditions are met the warrants are exercisable at a 100 pence per share. The vesting period is
three years and the warrants can be exercised if, at a testing date, the specific performance conditions are
met, or the Directors, in their absolute discretion, determine that an option may be exercised at any other
time and in any other circumstances. If the options remain unexercised after a period of ten years from the
date of the grant the options expire.
Employee share option plan
The KRM22 Employee Share Option Plan (“ESOP”), a UK tax authority approved Enterprise Management
Incentive (“EMI”), was set up on 24 April 2018. During the year the Company granted a total of 617,719
options to employees of KRM22 and this included 437,000 options (the “LTIP Options”) granted to
employees as part of long-term incentive plans and 180,719 options (the “Salary Sacrifice Options”) granted
to employees who waived a proportion of their salary in 2020 to help the Company’s cashflow.
The LTIP Options vest over a three-year period and are exercisable on the third anniversary of the grant date
provided that the share price has increased by 5% compounded during the period and provided the
employee remains employed by KRM22.
The Salary Sacrifice Options granted to Executive Directors and employees vest over a one-month period
from the date of grant and the Salary Sacrifice Options granted to Non-Executive Directors vest over a three-
month period from the date of grant. All Salary Sacrifice Options lapse on termination of employment with
the Company and are not subject to any share price performance conditions.
The Salary Deferral Bonus Options granted in 2020 vest over a three-year period in thirty-six equal monthly
instalments, are not subject to any share price performance conditions and do not lapse if an employee
ceases to be employed by KRM22.
The Salary Deferral Options granted in 2019 vested over a one-year period, are not subject to any share
price performance conditions and lapse on termination of employment with the Company.
All options unexercised after a period of ten years from the date of grant expire. KRM22 has no legal or
constructive obligation to repurchase or settle the options for cash.
Options are exercisable at a range of between 30.0 pence per share and 109.5 pence per share. The
weighted average remaining contractual life of the share options outstanding at 31 December 2021 is 1
year and 2 months (2020: 1 year and 7 months).
87
KRM22 plc
ANNUAL REPORT 2021
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Weighted
average
2021
exercise price
Number
£
9,703,716
0.72
617,719
0.46
(144,363)
0.64
0.30
(30,625)
0.80 10,146,447
Weighted
average
exercise price
£
0.81
0.36
0.76
–
0.72
2020
Number
7,839,471
2,058,242
(193,997)
–
9,703,716
The fair value of options subject to non–market based vesting conditions are measured using a Black
Scholes model and those options with market based conditions are measured using a Monte Carlo pricing
model.
The fair value of the outstanding options without performance conditions was measured using the Black
Scholes options valuation model. The inputs to that model in respect of the share options outstanding
under each issue were as follows:
Grant month
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Grant month
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Sep
2018
£1.0950
£1.000
3 years
30%
–
0.86%
Jul
2020
£0.280
£0.300
3 years
30%
–
0.86%
Jun
2019
£0.770
£0.850
3 years
30%
–
0.86%
Sep
2020
£0.380
£0.380
3 years
30%
–
0.86%
Jun
2019
£0.770
£0.850
1 year
30%
–
0.86%
Oct
2020
£0.380
£0.380
3 years
30%
–
0.86%
Nov
2019
£0.535
£0.850
3 years
30%
–
0.86%
Jan
2021
£0.365
£0.365
3 years
30%
–
0.86%
Dec
2019
£0.525
£0.525
3 years
30%
–
0.86%
May
2021
£0.500
£0.500
3 years
30%
–
0.86%
The fair value of the outstanding warrants with performance conditions was measured using the Monte
Carlo simulation model and the inputs to that model in respect of the share options outstanding under each
issue were as follows:
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
2018
£1.3198
£1.00
3 years
30%
–
0.8287%
The total expense recognised for the year ending 31 December 2021 arising from equity-settled share-
based payment transactions amounted to £0.3m (2020: £0.9m) and the share-based payment reserve as
at 31 December 2021 amounted to £2.9m (2020: £2.6m).
88
26. Capital commitments
KRM22 plc
ANNUAL REPORT 2021
At 31 December 2021 KRM22 had no material capital commitments (2020: £nil).
27. Financial instruments and financial risk management
KRM22’s principal financial liabilities comprise trade and other payables and borrowings. The primary
purpose of these financial liabilities is to finance the operations. KRM22 has trade and other receivables
and cash that derive directly from its operations.
The Company has limited financial liabilities as its primary purpose is to hold investments in other group
companies. The Company’s receivables largely relate to its funding of the operations of KRM22. All items
below are stated at amortised cost unless explicitly stated. The Company measures fair values using the
following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
The table below analyses financial instruments carried at fair value by hierarchy level.
Financial assets
Cash at banks and on hand – unrestricted
Trade receivables group companies
Trade and other receivables
Financial liabilities
Trade and other payables
Accruals
Contingent consideration at FVTPL (Level 3)
Borrowings
Derivative financial liability at FVTPL (Level 1)
Finance lease obligations
2021
Group
£’000
2021
Company
£’000
2020
Group
£’000
2020
Company
£’000
5,362
–
545
5,907
1,401
268
–
2,860
45
804
5,378
4,527
332
–
4,859
67
143
–
–
–
–
210
1,974
–
1,212
3,186
519
355
828
2,761
45
1,005
5,513
157
737
–
894
61
89
–
–
–
–
150
The Directors consider that the carrying amount for all financial assets and liabilities which are not held at
fair value through profit or loss approximates to their fair value.
In conjunction with a debt facility (the “Debt Facility”) arranged with Harbert European Growth Capital Fund
II (“Harbert”) in 2019, the Company constituted warrants over 495,049 Ordinary shares. Whilst the balance
of the Debt Facility was settled during the year ended 31 December 2020, the warrants remain in place and
are exercisable by Harbert until 29 April 2029. The warrants are treated as a derivative financial instrument
and recorded at fair value as a current liability with any adjustment in fair value at the statement of financial
position dated recognised within finance charge on financial liabilities in the income statement.
89
KRM22 plc
ANNUAL REPORT 2021
The fair value of the warrant instrument was measured using the binomial option valuation model. The
inputs to the model are as follows:
Share price at grant date
Exercise price
Contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Financial risk management
2019
£0.82
£1.01
10years
30%
–
0.84%
KRM22 is exposed to market risk, which includes interest rate risk and currency risk, credit risk and liquidity
risk. The senior management oversees the management of these risks and ensures that the financial risk
taken is governed by appropriate policies and procedures and that financial risks are identified, measured
and managed in accordance with KRM22’s policies and risk appetite.
The Board of Directors review and agree polices for managing each of these risks, which are summarised
below:
a) Market risk
KRM22’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates and interest rates.
Financial currency risk management
KRM22 is exposed to transactional exchange risk. Transactional foreign exchange risk arises from
sales or purchases by a group company in a currency other than that Company’s functional
currency. Further the Group and the Company have inter-company loans made in currencies other
than their functional currency.
Year ended 31 December 2020
Average rate
Year-end spot rate
Year ended 31 December 2021
Average rate
Year-end spot rate
Foreign currency sensitivity analysis
USD
EUR
CZK
SGD
1.29
1.36
1.38
1.35
1.12
1.11
1.17
1.19
29.73
28.95
29.87
29.67
1.77
1.80
1.85
1.82
The following table details KRM22’s sensitivity analysis to a 5% decrease in Sterling against the
relevant foreign currencies which the Directors believe could have the most significant impact on
the performance of KRM22. For a 5% strengthening of Sterling against the relevant currency there
would be a comparable impact on financial performance.
90
KRM22 plc
ANNUAL REPORT 2021
US Dollar
Euros
Czech Kroner
Singapore Dollar
Interest rate risk
Loss
2021
£’000
(33)
(7)
(75)
–
(115)
Other equity
2021
£’000
(96)
5
(176)
1
(266)
Loss
2020
£’000
(43)
(7)
(48)
(3)
(101)
Other equity
2020
£’000
(68)
(7)
(103)
–
(178)
Interest rate risk is the risk that the fair value of future cash flows or a financial instrument will
fluctuate because of changes in market interest rates. The Directors do not believe the interest rate
risk to be material and therefore no sensitivity analysis has been prepared.
b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or
customer contract, leading to a financial loss. KRM22 is exposed to credit risk from its operations,
primarily from trade receivables, and from loans provided to related parties.
Trade receivables
Customer credit risk is managed subject to KRM22’s established policy, procedures and control
relating to customer credit risk management. Outstanding receivables are regularly monitored and
discussed at executive management and Board level of group companies.
Financial instruments and cash deposits
Credit risk from cash balances with banks and financial institutions is managed in accordance with
KRM22 policy. Credit risk with respect to cash is managed by carefully selecting the institutions
with which cash is deposited.
Impairment
The financial assets of the Group comprise cash at banks, trade receivables and other receivables.
Having reviewed the recoverability of KRM22’s financial assets since the reporting date, as well as
the likelihood of future losses over the next twelve months and the lifetime of the assets, the
Directors have recognised credit losses in respect of other receivables, as detailed in note 16.
c) Liquidity risk
KRM22 is not currently cash generative, however funds were raised as part of the IPO, subsequent
share placements and the Kestrel Convertible Loan facility. The Board carefully monitors the levels
of cash and is comfortable that it has sufficient cash for normal operating requirements. KRM22
has no committed lines of credit.
The following table details KRM22’s remaining contractual maturity for its financial liabilities based
on contractual payments:
91
KRM22 plc
ANNUAL REPORT 2021
At 31 December 2020
Trade and other payables
Contingent consideration
Secured loans (gross)
Finance lease obligations
At 31 December 2021
Trade and other payables
Secured loans (gross)
Finance lease obligations
Capital risk management
Within 1 year
£’000
1 to 2 years
£’000
2 to 5 years
£’000
2,539
–
356
459
3,436
285
483
–
828
285
283
–
3,210
250
–
–
3,214
375
–
–
71
Total
£’000
2,539
828
3,855
1,117
3,436
3,495
804
KRM22 manages its capital to ensure that it will be able to continue as a going concern while also
maximising the operational potential of the business. The capital structure of KRM22 consists of
cash and cash equivalents and equity attributable to equity holders of the Company, comprising
issued capital and reserves as disclosed in the consolidated statement of changes in equity. KRM22
is not exposed to externally imposed capital requirements.
28. Business combinations
Object+ Holding B.V.
On 30 May 2019 KRM22 Netherlands B.V., a wholly owned subsidiary of KRM22 Central Limited, acquired
Object+ Holding B.V. and its subsidiaries Object+ B.V., Object+ Financial Services B.V., Object+ Financial
Products B.V. and Object+ Americas LLC (collectively “Object+”), a risk management and post-trade services
technology business focused on capital markets.
The acquisition was for an initial consideration of US$1.2m (£0.9m) with US$0.5m (£0.4m) payable in cash
and US$0.7m (£0.5m) through the issue of 606,909 ordinary shares in the Company together with
contingent consideration of US$2.7m (£2.3m). The contingent consideration is payable in three tranches
subject to earn-out conditions.
The first and second tranche of contingent consideration totalling US$1.2m (£0.8m) was payable in the
event that the ARR of Object+ native products exceeded US$1.5m (£1.1m) on the second anniversary of
acquisition. The third and final tranche of contingent consideration of US$1.6m (£1.2m) was payable in the
event that US$0.3m (£0.2m) of ARR can be generated by sales of Object+ native products to new customers
by the third anniversary of acquisition.
The contingent consideration can be paid at any point after the first anniversary date of acquisition and can
be satisfied in either cash or Company ordinary shares at the Company’s discretion. If the contingent
consideration is satisfied by the issue of ordinary shares, the number of shares issued will be determined
by the market share price at the issue date. The contingent consideration of £2.3m was originally
discounted to a present value of £1.3m based on a WACC of 13.8%.
The Directors believe that the first and second performance milestones were not achieved and excluded
this element of consideration form the fair value of the total consideration that could have been paid under
the terms of the share price agreement.
92
KRM22 plc
ANNUAL REPORT 2021
The Directors believe that the third and final performance milestone was achieved however the third and final
tranche of contingent consideration of US$1.6m was reduced by US$0.5m on 4 March 2021 in consideration
for a cash payment of US$0.1m (£0.1m) and KRM22 waiving a US$0.1m (£0.1m) promissory loan note due
from the seller of Object+. The contingent consideration of £0.9m (US$1.1m) is included as other payables
due within one year.
29. Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel, including Directors, is set out in aggregate for each of the
categories specified in IAS 24 Related Party Disclosures as follows:
Short-term employee benefits
Retirement benefits
Share-based payment benefits
Total
Related party transactions
2021
£’000
354
6
201
561
2020
£’000
155
3
574
732
During the year, KRM22 Market Surveillance Limited charged services to Cinnober Financial Technology AB
(“Cinnober”) of £0.2m (2020: £0.2m) under normal commercial terms. At 31 December 2021, the balance
due to KRM22 Market Surveillance Limited from Cinnober was £nil (2020: £0.1m). Cinnober is a 7.4%
shareholder of the Company.
On 15 September 2020, KRM22 entered into an agreement for a new three year £3.0m convertible loan
facility (the “Convertible Loan”) with Kestrel Partners LLP (“Kestrel”). The interest rate payable on the
Convertible Loan is 9.5% per annum payable quarterly in arrears and the total interest charged in the year
ended 31 December 2021 was £0.3m (2020: £0.1m). Kestrel can convert the Convertible Loan into new
ordinary shares in the Company at any time at a conversion price of 38p. The Company has the right to
request conversion at any time after eighteen months following the date of the agreement, subject to certain
conditions regarding the Company's share price at that time. Kestrel has the right to prevent any conversion
which would trigger a Rule 9 event under the Takeover Code. The Convertible Loan is secured on certain
KRM22 assets and includes covenants based on the Group’s financial performance, based on ARR and
solvency. Kestrel, inclusive of beneficial interests, is a 16.7% shareholder of the Company.
93
KRM22 plc
ANNUAL REPORT 2021
COMPANY INFORMATION
The board of directors
Keith Todd CBE
Executive Chairman (previously Chairman and
CEO until 30 December 2021)
Stephen Casner
CEO (previously President until 30 December
2021)
Kim Suter
CFO
Sandy Broderick
Non-Executive Director
Garry Jones
Non-Executive Director
Steve Sparke
Non-Executive Director
Registered office
5 Ireland Yard, London, EC4V 5EH
Company number
11231735
Company Secretary
Kim Suter
Nominated Adviser and Broker
finnCap, 1 Bartholomew Close, London, EC1A 7BL
Solicitors
Fieldfisher LLP, Riverbank House, 2 Swan Lane,
London, EC4R 3TT
Auditor
BDO LLP, 55 Baker Street, London, W1U 7EU
Registrars
Equiniti, Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6D
ANNUAL REPORT 2021 |
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