Company registration number 08172199 (England and Wales)
SOFTIRON LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
SOFTIRON LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3
Directors' responsibilities statement
4
Independent auditor's report
5 - 8
Group statement of comprehensive income
9
Group balance sheet
10
Company balance sheet
11
Group statement of changes in equity
12
Company statement of changes in equity
13
Group statement of cash flows
14
Company statement of cash flows
Notes to the financial statements
15 - 32
SOFTIRON LIMITED
COMPANY INFORMATION
Directors
Dr N Fraser
Mr P Straw
Mr J Van Der Schyff
Secretary
Mr J Van Der Schyff
Company number
08172199
Registered office
Level 1 Devonshire House
One Mayfair Place
London
W1J 8AJ
Auditor
Moore (N.I.) LLP
4th Floor Donegall House
7 Donegall Square North
Belfast
BT1 5GB
Business address
Level 1 Devonshire House
One Mayfair Place
London
W1J 8AJ
Bankers
HSBC Innovation Banking
Alphabeta
14-18 Finsbury Square
London
EC2A 1BR
JP Morgan Chase Bank
25 Bank Street
London
E14 5JP
Solicitors
Mills & Reeve LLP
7th & 8th Floors
24 King William Street
London
EC4R 9AT
SOFTIRON LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -

The directors present the strategic report for the year ended 31 December 2022.

Review of the business

SoftIron performed positively in the year to 31 December 2022, with strong revenue growth, significant technical developments and a major product launch.

 

In terms of financial KPIs, the business globally doubled its revenue compared to the previous financial year. Corresponding increases to operating expenses were limited to less than 50%. No new shares were issued in 2022, so funding primarily came into the business via the Convertible Loan Note, with more than £13 million invested during the course of the year.

 

The corporate footprint continued to expand, incorporating a new subsidiary in Singapore in March 2022.  SoftIron had a presence by year end in the UK, the USA, Germany, the Czech Republic, Australia, New Zealand and Singapore.  Headcount grew from 72 FTE to 80 FTE globally, with new capability added in the Engineering and Operations areas.   Our manufacturing facility in Sydney was considerably developed during the year, with the aid of a government grant from the Australian Department of Defence.  The first successful system level QA testing was completed in early November and the facility had its inauguration ceremony later that month.  This is the first sovereign ICT manufacturing facility in Australia.

 

During the summer of 2022, the business completed a significant intellectual property acquisition providing SoftIron with the source code and perpetual patent licenses to software previously developed by our CTO, Kenny Van Alstyne during his tenure at Peraton. As the basis for a number of high-security private cloud environments this software was brought together with SoftIron’s own purpose-built hardware and supporting software assets to form the basis of our new flagship product, HyperCloud. SoftIron continued its R&D activities whilst rolling out HyperCloud, with four patents granted by the US Patent and Trademark Office (USPTO) during 2022. Patent numbers: 11,301,009; 11,321,203; D969,796; and 11,537,539.

 

HyperCloud reduces the deployment time to build true private clouds from weeks and months to hours and days, with a fraction of the human resources and a dramatically reduced required skill set, using hardware that requires far less power, no climate controls and is highly scalable. HyperCloud was launched officially to the market in September 2022 and embraced with great enthusiasm.  Gartner featured SoftIron alongside global leaders such as Cisco, HPE, Nutanix and Dell in their Market Guide for Integrated Systems report.  HyperCloud environments were beginning to be installed towards the end of 2022. 

SOFTIRON LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Principal risks and uncertainties

Execution Risk: With ambitious growth plans for the business, the Directors are focused on mitigating execution risk. The sales pipeline is being carefully managed, with increasing visibility over short and longer term opportunities coming to fruition.  Work is also underway to re-shape the cost base to be leaner and more suited to the go-forward business model, acknowledging HyperCloud as the new flagship product.

 

FX Risk: Despite having a diverse global footprint, SoftIron’s foreign exchange / currency risk is somewhat mitigated by the fact that the majority of our cost base, revenue sources, and investment are dollar-denominated.  Given that the Company does not hold significant cash reserves, there is limited scope or need for hedging in the short term.

 

Credit Risk (customers): As HyperCloud takes over from our previous HyperDrive product suite, the accompanying transition to focus on fewer, bigger customers should be beneficial in terms of credit risk.  However, the Company is likely to experience at least episodic higher concentration risk.  There are no concerns over the creditworthiness of our "cornerstone" customers.

 

Inflation Risk: The majority of the business’s cost base is People-related overheads and the Company does expect some pressure on salaries as CPI has been high in all our core locations during 2022 but salaries have remained static.  Price inflation is a concern for COGS, especially with more niche vendors where alternative suppliers are limited.

 

Market headwinds:  The Company's view is that the general market for its products should be buoyant, as enterprises look to repatriate their data, address data security needs, and control capital costs while facing pressures to invest (most notably) in AI.  Capital investment in infrastructure is more likely in the coming 12-24 months as the Company's core geographies are generally less concerned with looming recession risk, and seeing the cost of capital stabilise and slowly decrease.  Continued high energy prices, especially in Europe, play in the Company's favour, as we can offer a lower energy consumption option.

 

Future Outlook

SoftIron raised its Series B investment in 2020 to help complete the main pillars of the product development programme and to prove our products in the market. Since then the Company has successfully sold to a wide array of medium and large enterprises and government customers around the globe. The sales process and adoption cycles for our products tend to unfold slowly, as SoftIron builds its referenceability as a small and contrarian player in a small field of long-established global competitors.  However, the Company is already seeing signs of success with HyperCloud, where small scale trial orders lead to larger follow-on orders from significant government entities and Fortune 2000 businesses.

 

Having launched HyperCloud in September 2022, and quickly acquired several reference  installations with enthusiastically supportive customers, the Company planned to press ahead with a Series C fundraising in Q1 2023. However, the effects of high inflation and high-interest rates on the dynamics of the technology business sector, together with changes in the capital markets, combined with the challenging macro market conditions, have had a profound impact on fundraising - by early 2023, the Company was seeing a marked shift in the availability of capital for cash-hungry businesses, as investors grew more cautious about deploying their funds without a much more concrete path to short-term profitability.  The Directors therefore currently plan to continue with financing that will bridge the Company until it is positioned for Series C financing in late 2024 or early 2025, when the Company aims to be tracking toward profitability.

 

On behalf of the board

Dr N Fraser
Director
7 March 2024
SOFTIRON LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -

The directors present their annual report and financial statements for the year ended 31 December 2022.

Principal activities

The principal activity of the Company and group continued to be that of the development of innovative hardware and software solutions.

Results and dividends

The results for the year are set out on page 9.

No ordinary dividends were paid. The directors do not recommend payment of a further dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Dr N Fraser
Mr P Straw
Mr J Van Der Schyff
Energy and carbon report

As the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the Company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the Company is aware of that information.

On behalf of the board
Dr N Fraser
Director
7 March 2024
SOFTIRON LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -

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 the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and Company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

SOFTIRON LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF SOFTIRON LIMITED
- 5 -

Qualified Opinion

We have audited the financial statements of Softiron Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group statement of comprehensive income, the group balance sheet, the Company balance sheet, the group statement of changes in equity, the Company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion, except for the effects of the matter described in the basis for qualified opinion paragraph, the financial statements:

Basis for qualified opinion

We were appointed as auditors of the Group and Parent Company on 1 October 2023 and were unable to satisfy ourselves by alternative means concerning the existence and condition of stock quantities at 31 December 2022, which are included in the balance sheet at £6,651,031, by using other audit procedures. Consequently, we were unable to determine whether any adjustment to this amount was necessary. Furthermore,we were unable to determine whether adjustments might have been necessary in respect of the loss for the period reported in the statement of comprehensive income and the net cash flows from operating activities reported in the statement of cash flows.

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and 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, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

SOFTIRON LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SOFTIRON LIMITED
- 6 -

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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.

As described in the basis for qualified opinion section of our report, we were unable to satisfy ourselves concerning the stock quantities of £6,651,031 held at 31 December 2022 and the consequential effect on cost of sales for the year ended 30 December 2022. We have concluded that where the other information refers to the stock balance, cost of sales or related balances and disclosures, it may be materially misstated for the same reason.

 

Opinions on other matters prescribed by the Companies Act 2006

Except for the possible effects of the matter described in the basis for qualified opinion section of our report, in our opinion, based on the work undertaken in the course of our audit:

Matters on which we are required to report by exception

Arising solely of the limitation on our work relating to stock held at 31 December 2022 and the consequential effect on cost of sales for the year ended 31 December 2022, described above:

 

Except for the matter described in the basis for qualified opinion paragraph, in the light of the knowledge and understanding of the group and the parent company and their 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:

 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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 parent company or to cease operations, or have no realistic alternative but to do so.

SOFTIRON LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SOFTIRON LIMITED
- 7 -
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.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the Group and Parent Company.

Based on our understanding of the Group and the Parent Company’s operating environment, we determined that the most significant frameworks which have a direct impact on the preparation of the financial statements are those related to the reporting framework (FRS 102 and the Companies Act 2006) and the relevant tax compliance regulations.

We assessed the susceptibility of the Group and Parent Company's financial statements to material misstatement, including how fraud might occur, including evaluating management's incentives and opportunities to manage earnings or influence the reported results. From the results of our assessment, we determined that the principal risk of fraud related to posting inappropriate journal entries. In common with all audits under ISAs (UK), we are required to perform specific procedures to respond to the risk of management override.

 

SOFTIRON LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF SOFTIRON LIMITED
- 8 -

Audit response to risks identified

As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. Audit procedures performed by the engagement team included:

We communicated relevant laws and regulations and potential fraud risks to all engagement team members, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

There are inherent limitations in the audit procedures described above 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 would become aware of it. Also, 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 through collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

The purpose of our audit work and to whom we owe our responsibilities

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.

Dr R I Peters Gallagher OBE FCA (Senior Statutory Auditor)
For and on behalf of Moore (N.I.) LLP
8 March 2024
Chartered Accountants
Statutory Auditor
4th Floor Donegall House
7 Donegall Square North
Belfast
BT1 5GB
SOFTIRON LIMITED
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
2022
2021
Notes
£
£
Turnover
3
4,824,620
2,457,414
Cost of sales
(4,282,122)
(3,559,088)
Gross profit/(loss)
542,498
(1,101,674)
Administrative expenses
(16,723,396)
(11,157,175)
Other operating expenses
(1,519)
(2,203)
Operating loss
4
(16,182,417)
(12,261,052)
Interest receivable and similar income
8
38,019
294,097
Interest payable and similar expenses
9
(2,500,130)
(520,319)
Loss before taxation
(18,644,528)
(12,487,274)
Tax on loss
10
1,755,950
1,877,223
Loss for the financial year
28
(16,888,578)
(10,610,051)
Other comprehensive income
Currency translation loss arising in the year
(296,047)
(28,327)
Total comprehensive income for the year
(17,184,625)
(10,638,378)
Loss for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.
SOFTIRON LIMITED
GROUP BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 10 -
2022
2021
Notes
£
£
£
£
Fixed assets
Intangible assets
11
4,124,227
2,199,750
Tangible assets
12
2,101,722
1,368,190
6,225,949
3,567,940
Current assets
Stocks
16
6,406,693
5,268,696
Debtors
17
5,755,903
3,463,026
Cash at bank and in hand
313,552
6,472,087
12,476,148
15,203,809
Creditors: amounts falling due within one year
19
(30,526,717)
(14,363,518)
Net current (liabilities)/assets
(18,050,569)
840,291
Total assets less current liabilities
(11,824,620)
4,408,231
Creditors: amounts falling due after more than one year
20
(951,774)
-
Net (liabilities)/assets
(12,776,394)
4,408,231
Capital and reserves
Called up share capital
24
315
315
Share premium account
25
38,337,459
38,337,459
Other reserves
2,619,047
2,915,094
Profit and loss reserves
28
(53,733,215)
(36,844,637)
Total equity
(12,776,394)
4,408,231
The financial statements were approved by the board of directors and authorised for issue on 7 March 2024 and are signed on its behalf by:
07 March 2024
Dr N Fraser
Director
Company registration number 08172199 (England and Wales)
SOFTIRON LIMITED
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2022
31 December 2022
- 11 -
2022
2021
Notes
£
£
£
£
Fixed assets
Intangible assets
11
4,124,227
2,199,750
Tangible assets
12
188,129
261,277
Investments
13
24,700
24,700
4,337,056
2,485,727
Current assets
Debtors falling due after more than one year
17
27,283,230
20,019,025
Debtors falling due within one year
17
4,345,099
1,990,222
Cash at bank and in hand
26,625
5,712,318
31,654,954
27,721,565
Creditors: amounts falling due within one year
19
(26,513,294)
(12,774,741)
Net current assets
5,141,660
14,946,824
Net assets
9,478,716
17,432,551
Capital and reserves
Called up share capital
24
315
315
Share premium account
25
38,337,459
38,337,459
Other reserves
2,943,421
2,943,421
Profit and loss reserves
28
(31,802,479)
(23,848,644)
Total equity
9,478,716
17,432,551

As permitted by s408 Companies Act 2006, the Company has not presented its own profit and loss account and related notes. The Company’s loss for the year was £7,953,835 (2021 - £5,682,269 loss).

The financial statements were approved by the board of directors and authorised for issue on 7 March 2024 and are signed on its behalf by:
07 March 2024
Dr N Fraser
Director
Company registration number 08172199 (England and Wales)
SOFTIRON LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
Share capital
Share premium account
Warrants
Currency translation reserve
Profit and loss reserves
Total
£
£
£
£
£
£
Balance at 1 January 2021
315
38,337,459
2,943,421
-
0
(26,234,586)
15,046,609
Year ended 31 December 2021:
Loss for the year
-
-
-
-
(10,610,051)
(10,610,051)
Other comprehensive income:
Currency translation differences
-
-
-
(28,327)
-
0
(28,327)
Total comprehensive income
-
-
-
(28,327)
(10,610,051)
(10,638,378)
Balance at 31 December 2021
315
38,337,459
2,943,421
(28,327)
(36,844,637)
4,408,231
Year ended 31 December 2022:
Loss for the year
-
-
-
-
(16,888,578)
(16,888,578)
Other comprehensive income:
Currency translation differences
-
-
-
(296,047)
-
0
(296,047)
Total comprehensive income
-
-
-
(296,047)
(16,888,578)
(17,184,625)
Balance at 31 December 2022
315
38,337,459
2,943,421
(324,374)
(53,733,215)
(12,776,394)
SOFTIRON LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
Share capital
Share premium account
Warrants
Profit and loss reserves
Total
£
£
£
£
£
Balance at 1 January 2021
315
38,337,459
2,943,421
(18,166,375)
23,114,820
Year ended 31 December 2021:
Loss and total comprehensive income for the year
-
-
-
(5,682,269)
(5,682,269)
Balance at 31 December 2021
315
38,337,459
2,943,421
(23,848,644)
17,432,551
Year ended 31 December 2022:
Profit and total comprehensive income
-
-
-
(7,953,835)
(7,953,835)
Balance at 31 December 2022
315
38,337,459
2,943,421
(31,802,479)
9,478,716
SOFTIRON LIMITED
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 14 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash absorbed by operations
30
(13,153,246)
(13,172,532)
Interest paid
(2,500,130)
(520,319)
Income taxes refunded
-
0
1,157,316
Net cash outflow from operating activities
(15,653,376)
(12,535,535)
Investing activities
Purchase of intangible assets
(2,484,188)
-
Purchase of tangible fixed assets
(1,093,339)
(960,886)
Exchange adjustment for opening fixed assets
(102,308)
(1,477)
Interest received
38,019
294,097
Net cash used in investing activities
(3,641,816)
(668,266)
Financing activities
Issue of convertible loans
13,196,917
12,394,998
Net cash generated from financing activities
13,196,917
12,394,998
Net decrease in cash and cash equivalents
(6,098,275)
(808,803)
Cash and cash equivalents at beginning of year
6,404,680
7,213,483
Cash and cash equivalents at end of year
306,405
6,404,680
Relating to:
Cash at bank and in hand
313,552
6,472,087
Bank overdrafts included in creditors payable within one year
(7,147)
(67,407)
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 15 -
1
Accounting policies
Company information

Softiron Ltd (“the Company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is .

 

The group consists of Softiron Ltd and all of its subsidiaries.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, [modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value]. The principal accounting policies adopted are set out below.

1.2
Business combinations

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

 

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

1.3
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company Softiron Ltd together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.

 

All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

 

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -

Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.

Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.

 

If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.

 

Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.

1.4
Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.5
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

 

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

1.6
Research and development expenditure

Research expenditure is expensed against profits in the year in which it is incurred. Identifiable development expenditures are capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

1.7
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Patents & licences
10 years straight line (or the term of the licence if shorter)
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
1.8
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Leasehold improvements
10 years straight line
Plant and equipment
5 years straight line
Fixtures and fittings
3-10 years straight line
Computer equipment
3-10 years straight line

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 profit and loss account.

1.9
Fixed asset investments

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

 

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the Company holds a long-term interest and where the Company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

 

Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.

 

Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the Company has incurred legal or constructive obligations or has made payments on behalf of the associate.

 

In the parent company financial statements, investments in associates are accounted for at cost less impairment.

Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 18 -
1.10
Impairment of fixed assets

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

1.11
Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is comprised of direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

 

Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

1.12
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 19 -
1.13
Financial instruments

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled compltetely, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 20 -
Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

 

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

1.14
Compound instruments

The component parts of compound instruments issued by the group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity net of income tax effects and is not subsequently remeasured.

1.15
Equity instruments

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

1.16
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 21 -
Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end 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 period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is 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.

1.17
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.18
Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

 

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Amounts due from lessees under finance leases are recognised as receivables at the amount of the group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the group’s net investment outstanding in respect of leases.

1.19
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
2
Judgements and key sources of estimation uncertainty

In the application of the group’s accounting policies, the directors are required to make 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 estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

3
Turnover and other revenue
2022
2021
£
£
Turnover analysed by class of business
Turnover
4,824,620
2,457,414
2022
2021
£
£
Other revenue
Interest income
38,019
294,097
4
Operating loss
2022
2021
£
£
Operating loss for the year is stated after charging:
Exchange losses
306,629
39,445
Research and development costs
61,307
97,576
Depreciation of owned tangible fixed assets
462,115
295,621
Amortisation of intangible assets
559,711
311,292
5
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the group and company
25,000
-
For other services
All other non-audit services
18,617
35,719
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
6
Employees

The average monthly number of persons (including directors) employed by the group and company during the year was:

Group
Company
2022
2021
2022
2021
Number
Number
Number
Number
80
72
19
15

Their aggregate remuneration comprised:

Group
Company
2022
2021
2022
2021
£
£
£
£
Wages and salaries
9,208,440
6,606,757
1,887,421
1,507,293
7
Directors' remuneration
2022
2021
£
£
Remuneration for qualifying services
480,180
435,540
Remuneration disclosed above includes the following amounts paid to the highest paid director:
2022
2021
£
£
Remuneration for qualifying services
240,090
217,770
8
Interest receivable and similar income
2022
2021
£
£
Interest income
Other interest income
38,019
294,097
9
Interest payable and similar expenses
2022
2021
£
£
Other finance costs:
Other interest
2,500,130
520,319
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 24 -
10
Taxation
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
(1,755,950)
(1,877,223)

The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

2022
2021
£
£
Loss before taxation
(18,644,528)
(12,487,274)
Expected tax charge based on the standard rate of corporation tax in the UK of 0% (2021: 0%)
-
-
Research and development tax credit
(1,755,950)
(1,877,223)
Taxation credit
(1,755,950)
(1,877,223)
11
Intangible fixed assets
Group
Patents & licences
£
Cost
At 1 January 2022
3,112,924
Additions
2,484,188
At 31 December 2022
5,597,112
Amortisation and impairment
At 1 January 2022
913,174
Amortisation charged for the year
559,711
At 31 December 2022
1,472,885
Carrying amount
At 31 December 2022
4,124,227
At 31 December 2021
2,199,750
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
11
Intangible fixed assets
(Continued)
- 25 -
Company
Patents & licences
£
Cost
At 1 January 2022
3,112,924
Additions
2,484,188
At 31 December 2022
5,597,112
Amortisation and impairment
At 1 January 2022
913,174
Amortisation charged for the year
559,711
At 31 December 2022
1,472,885
Carrying amount
At 31 December 2022
4,124,227
At 31 December 2021
2,199,750
12
Tangible fixed assets
Group
Leasehold improvements
Plant and equipment
Fixtures and fittings
Computer equipment
Total
£
£
£
£
£
Cost
At 1 January 2022
241,697
969,970
641,156
239,696
2,092,519
Additions
226,708
712,314
76,006
78,311
1,093,339
Exchange adjustments
25,243
51,143
10,663
24,318
111,367
At 31 December 2022
493,648
1,733,427
727,825
342,325
3,297,225
Depreciation and impairment
At 1 January 2022
31,565
290,810
307,307
94,647
724,329
Depreciation charged in the year
46,806
227,999
125,250
62,060
462,115
Exchange adjustments
3,732
(4,268)
1,585
8,010
9,059
At 31 December 2022
82,103
514,541
434,142
164,717
1,195,503
Carrying amount
At 31 December 2022
411,545
1,218,886
293,683
177,608
2,101,722
At 31 December 2021
210,132
679,160
333,849
145,049
1,368,190
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
12
Tangible fixed assets
(Continued)
- 26 -
Company
Fixtures and fittings
Computer equipment
Total
£
£
£
Cost
At 1 January 2022
551,118
29,767
580,885
Additions
35,052
5,169
40,221
At 31 December 2022
586,170
34,936
621,106
Depreciation and impairment
At 1 January 2022
293,924
25,684
319,608
Depreciation charged in the year
110,224
3,145
113,369
At 31 December 2022
404,148
28,829
432,977
Carrying amount
At 31 December 2022
182,022
6,107
188,129
At 31 December 2021
257,194
4,083
261,277
13
Fixed asset investments
Group
Company
2022
2021
2022
2021
Notes
£
£
£
£
Investments in subsidiaries
14
-
0
-
0
24,700
24,700
Movements in fixed asset investments
Company
Shares in subsidiaries
£
Cost or valuation
At 1 January 2022 and 31 December 2022
24,700
Carrying amount
At 31 December 2022
24,700
At 31 December 2021
24,700
14
Subsidiaries

Details of the company's subsidiaries at 31 December 2022 are as follows:

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
14
Subsidiaries
(Continued)
- 27 -
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Indirect
SoftIron, Inc.
USA
Ordinary
100.00
-
SoftIron Czech s.r.o
Czech Republic
Ordinary
100.00
-
SoftIron Germany GmbH
Germany
Ordinary
100.00
-
SoftIron New Zealand Ltd
New Zealand
Ordinary
100.00
-
SoftIron Australia Pty Ltd
Australia
Ordinary
100.00
-
SoftIron Singapore Pte Ltd
Singapore
Ordinary
100.00
-
SoftIron Financing Australia Pty Ltd
Australia
Ordinary
-
100.00
15
Financial instruments
Group
Company
2022
2021
2022
2021
£
£
£
£
Carrying amount of financial assets
Debt instruments measured at amortised cost
1,982,293
1,327,694
27,763,757
20,066,765
Carrying amount of financial liabilities
Measured at amortised cost
30,070,231
14,297,312
26,431,546
12,733,729
16
Stocks
Group
Company
2022
2021
2022
2021
£
£
£
£
Raw materials and consumables
5,939,580
5,268,696
-
-
Work in progress
254,840
-
-
-
Finished goods and goods for resale
212,273
-
0
-
0
-
0
6,406,693
5,268,696
-
-
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 28 -
17
Debtors
Group
Company
2022
2021
2022
2021
Amounts falling due within one year:
£
£
£
£
Trade debtors
1,689,529
1,167,473
480,527
-
0
Corporation tax recoverable
3,633,173
1,877,223
3,633,173
1,877,223
Finance leases receivable
32,402
-
-
-
Other debtors
10,812
78,120
-
0
77,565
Prepayments and accrued income
276,582
340,210
231,399
35,434
5,642,498
3,463,026
4,345,099
1,990,222
Amounts falling due after more than one year:
Amounts owed by group undertakings
-
-
27,283,230
20,019,025
Finance leases receivable
113,405
-
0
-
0
-
0
113,405
-
27,283,230
20,019,025
Total debtors
5,755,903
3,463,026
31,628,329
22,009,247
18
Finance lease receivables
Group
Company
2022
2021
2022
2021
£
£
£
£
Gross amounts receivable under finance leases:
Within one year
32,402
-
-
-
In two to five years
113,405
-
-
-
145,807
-
-
-
Unearned finance income
-
-
-
-
Present value of minimum lease payments receivable
145,807
-
-
-
The present value is receivable as follows:
Within one year
32,402
-
-
-
Analysis of finance leases

Finance lease receivables are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

Group
Company
2022
2021
2022
2021
£
£
£
£
Current assets
32,402
-
0
-
0
-
0
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
18
Finance lease receivables
(Continued)
- 29 -

The group enters into financial leasing arrangements for Equipment. The average term of finance leases entered into is 5 years.

19
Creditors: amounts falling due within one year
Group
Company
2022
2021
2022
2021
Notes
£
£
£
£
Convertible loans
22
25,805,460
12,608,543
25,805,460
12,608,543
Bank loans and overdrafts
21
7,147
67,407
7,147
78
Trade creditors
2,958,908
1,021,229
215,539
110,507
Other taxation and social security
184,551
66,206
81,748
41,012
Deferred income
23
271,935
-
0
-
0
-
0
Other creditors
40,119
4,656
-
0
-
0
Accruals and deferred income
1,258,597
595,477
403,400
14,601
30,526,717
14,363,518
26,513,294
12,774,741
20
Creditors: amounts falling due after more than one year
Group
Company
2022
2021
2022
2021
Notes
£
£
£
£
Deferred income
23
951,774
-
0
-
0
-
0
21
Loans and overdrafts
Group
Company
2022
2021
2022
2021
£
£
£
£
Bank overdrafts
7,147
67,407
7,147
78
Payable within one year
7,147
67,407
7,147
-
22
Convertible loan notes
Group
Company
2022
2021
2022
2021
£
£
£
£
Liability component of convertible loan notes
25,805,460
12,608,543
25,805,460
12,608,543

Convertible loan notes with a principal value totalling £22,687,746 have been issued since May 2019. They are due to be converted to equity in FY 2024.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
22
Convertible loan notes
(Continued)
- 30 -

The liability component is measured at amortised cost, and the difference between the carrying amount of the liability at the date of issue and the amount reported in the Balance Sheet represents the effective interest rate less interest paid to that date.

The effective rate of interest is 15%.

The equity component of the convertible loan notes has been credited to the equity reserve.

23
Deferred income
Group
Company
2022
2021
2022
2021
£
£
£
£
Other deferred income
1,223,709
-
-
-

Deferred income is included in the financial statements as follows:

Current liabilities
271,935
-
0
-
0
-
0
Non-current liabilities
951,774
-
0
-
0
-
0
1,223,709
-
-
-
24
Share capital
Group and company
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
18,556,664 Ordinary shares of 0.0001p each
18,556,664
18,556,664
185
185
2,428,855 Ordinary A shares of 0.0001p each
2,428,855
2,428,855
24
24
10,573,949 Ordinary B shares of 0.00001p each
10,573,949
10,573,949
106
106
31,559,468
31,559,468
315
315

 

25
Share premium account
Group
Company
2022
2021
2022
2021
£
£
£
£
At the beginning and end of the year
38,337,459
38,337,459
38,337,459
38,337,459
SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 31 -
26
Currency translation reserve
2022
2021
Group
£
£
At the beginning of the year
28,327
-
0
Translation loss arising in the year
296,047
28,327
At the end of the year
324,374
28,327
2022
2021
Company
£
£
At the beginning and end of the year
-
-
27
Warrants
2022
2021
Group and company
£
£
At the beginning and end of the year
2,943,421
2,943,421
28
Profit and loss reserves
Group
Company
2022
2021
2022
2021
£
£
£
£
At the beginning of the year
(36,844,637)
(26,234,586)
(23,848,644)
(18,166,375)
Loss for the year
(16,888,578)
(10,610,051)
(7,953,835)
(5,682,269)
At the end of the year
(53,733,215)
(36,844,637)
(31,802,479)
(23,848,644)
29
Related party transactions

The Company has taken advantage of the exemption in FRS 102.33.1A from disclosing transactions with related parties that have been eliminated on consolidation.

SOFTIRON LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 32 -
30
Cash absorbed by group operations
2022
2021
£
£
Loss for the year after tax
(17,184,625)
(10,638,378)
Adjustments for:
Taxation credited
(1,755,950)
(1,877,223)
Finance costs
2,500,130
520,319
Investment income
(38,019)
(294,097)
Amortisation and impairment of intangible assets
559,711
311,292
Depreciation and impairment of tangible fixed assets
462,115
295,621
Movements in working capital:
Increase in stocks
(1,137,997)
(1,517,950)
Increase in debtors
(536,927)
(836,235)
Increase in creditors
2,754,607
864,119
Increase in deferred income
1,223,709
-
Cash absorbed by operations
(13,153,246)
(13,172,532)
31
Analysis of changes in net debt - group
1 January 2022
Cash flows
31 December 2022
£
£
£
Cash at bank and in hand
6,472,087
(6,158,535)
313,552
Bank overdrafts
(67,407)
60,260
(7,147)
6,404,680
(6,098,275)
306,405
Convertible loan notes
(12,608,543)
(13,196,917)
(25,805,460)
(6,203,863)
(19,295,192)
(25,499,055)
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