VIRTUSLAB LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Company Registration No. 09793578 (England and Wales)
VIRTUSLAB LTD
COMPANY INFORMATION
Directors
Mr D P Flueckiger
Mr R P Pokrywka
Secretary
Michelmores Secretaries Limited
Company number
09793578
Registered office
Level 18
40 Bank Street (Hq3)
Canary Wharf
London
England
E14 5NR
Auditor
Champion Accountants LLP
7-9 Station Road
Hesketh Bank
Preston
Lancashire
PR4 6SN
VIRTUSLAB LTD
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4 - 5
Directors' responsibilities statement
6
Independent auditor's report
7 - 10
Group statement of comprehensive income
11
Group balance sheet
12
Company balance sheet
13
Group statement of changes in equity
14
Company statement of changes in equity
15
Group statement of cash flows
16
Notes to the financial statements
17 - 37
VIRTUSLAB LTD
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Principal activities

The principal activity of the company and group continued to be that of providing expert software engineering and consultancy services to help its customers adopt technology transformations and boost the value they create for the modern industry. We have extensive knowledge about Scala, FinTech, Dev tooling and Data. We strongly support the IT community, launch conferences, meetups and contribute to open source initiatives.

Review of the business

On the 27 December 2021 the Group was reorganized in a way that Virtuslab Ltd. became a shareholder of Virtuslab Sp. z o.o. (Ltd.), Poland, Sensinum Sp. z o.o. (Ltd.), Poland and Virtuslab GmbH (Ltd.), Germany. Before reorganization Virtuslab Sp. z o.o. was formally a superior company to other companies. From an operating perspective Virtuslab Sp. z o.o. remains a central company which provides services to other Companies from the Group and Customers. At the end of first quarter of 2023 the Group acquired a new company, SoftwareMill Group (Poland) which became a subsidiary of Virtuslab Sp. z o.o. This was a strategic acquisition to increase the Group's position on the market especially in the area of Scala development language.

 

In 2023, there was a noticeable slowdown in the IT services market but despite this situation the Group generated revenue of £25.6m (2022: £18.4m) and the gross profit margin remained at a stable level of 43% (2022: 42%). Operating profit for the year was £0.6m (2022: £0.2m) and was higher than in the previous period due to acquisition of Softwaremill, increase in activated development costs and positive impact of F/X differences. Operating profit before amortization and depreciation (EBITDA) for the year was £1.7m (2022: £0.4m) - in 2023 the Group started amortisation of Softwaremill goodwill of £0.8m (2022: £nil).

 

The Group made a profit before tax of £0.04m (2022: £0.1m) and the net asset position of the Group was £6.9m (2022: £2.4m) as at the balance sheet date.

VIRTUSLAB LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Principal risks and uncertainties

In the course of normal business, the directors assess the significant risks faced and take action to mitigate their potential impact. The following risks, whilst not intended to be a comprehensive analysis, constitute (in the opinion of directors) the principal risks and uncertainties currently facing the Group.

 

Access to skilled staff risk

Key factor to success is access to skilled and experienced employees who can provide high-quality services for customers. Lack of adequate employees may cause problems with delivery of services for existing customers but also limits Group’s development.

 

Risk is mitigated by an established People and Talent Acquisition Team which actively and permanently analyzes the market and searches potential candidates. Additionally the Group has expanded its locations and strengthened its position in a number of local IT Communities.

 

Margin erosion risk

The Group operates in a highly competitive environment on a global market (IT services can be provided remotely from almost any country). Current advantage of access to the highly skilled employees and consultants in Poland at comparatively lower costs compared to western Europe is still decreasing as salaries in the IT industry in Europe are still leveling what can finally lead to the lower margins.

 

The Group is mitigating this risk by permanent increasing of skills of its staff and quality of provided services and takes action to negotiate adequate rates with its customers.

 

Cyber security risk

Data loss and compliance with security requirements. Data loss or non-compliance may potentially result in high financial or reputation damages.

 

The Group has implemented ISO27001 standard and continues to invest in robust cybersecurity measures to protect against potential breaches and ensure the integrity of systems and improvement of security procedures. Regular internal and external audits are conducted.

 

Economic risks

(e.g. War in Ukraine, Inflation, Brexit)

A broader economic downturn, whether regional or global, can impact customers spendings and investments and thus also demand for IT services.

 

The Group maintains flexibility in its business strategies to adapt to the changing environments. The Directors also monitor the ongoing war in Ukraine and its impact on the situation on the markets.

 

Financial risks

(e.g. Foreign Currency Risk, Interest Rate Risk, Concentration)

Operating in international markets exposes the Group to currency exchange fluctuations. The Group, where it is possible, employs hedging mechanisms to mitigate the impact of adverse exchange rate movements to ensure the stability of financial results. Changes in interest rates can affect borrowing costs and investment returns. A rise in interest rates may increase the debt-servicing expenses. The Group actively manages interest rate risk through prudent financial planning and hedging strategies. The Group is still exposed to significantly high concentration of revenue from its biggest customer but its share continues to decrease due to development of the Group.

VIRTUSLAB LTD
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Key performance indicators

 

2023

2022

Turnover

£25.6m

£18.4m

Gross profit margin

43%

42%

Operating (loss)/profit

£0.6m

£0.4m

EBITDA

£1.7m

£0.5m

Cash at bank

£1.1m

£0.8m

 

Analysis of KPIs is discussed in the business review section of the strategic report.

 

Earnings before interest, taxes, depreciation and amortisation (EBITDA) is effectively the group operating profit plus depreciation charged and amortisation charged.

Other information and explanations

The group meets its day-to-day working capital requirements through current cash flows and its bank facilities. The current economic conditions continue to create uncertainty over (a) the level of demand for the group’s products and services, and (b) the availability of bank finance for the foreseeable future. The group’s forecasts and projections, taking account of a severe but plausible change in trading performance, show that the group should be able to operate within the level of its current facilities. Additionally Group may adjust it's level of R&D and sales investments without significant impact on short term revenue. Adjustment of investment spending is mitigation factor in case of negative changes.

 

Due to the dampened economic environment in 2023 and significant investments Virtuslab failed to meet its covenant obligations under the loan agreement. In April 2024, Virtuslab received an official waiver letter from ING in which the bank agreed not to enforce the rights it has under the Finance Documents. Additionally, an annex to the loan facility was signed, to which certain provisions in the original agreement were amended including covenants for the year 2024 and the following years. Based on the current forecast the Group expects to meet revised covenants in following periods.

 

After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going concern basis in preparing its financial statements.

On behalf of the board

Mr R P Pokrywka
Director
7 August 2024
VIRTUSLAB LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Results and dividends

The results for the year are set out on page 11.

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:

Mr D P Flueckiger
Mr V La Ruffa
(Appointed 13 July 2023 and resigned 14 May 2024)
Mr R P Pokrywka
Ms A L Greenberg
(Resigned 13 July 2023)
Directors' insurance

The group maintains insurance policies on behalf of all the directors against liability arising from negligence, breach of duty and breach of trust in relation to the group.

Research and development

The Group invests constantly in new technologies and software products. In 2022 the Group acquired new product Tetrisly (UX utility software) and continued its development and sales. Additionally new versions and functionalities within own products (Nexelem, Vived, Scala OSS) were developed and further investments in sales activities have been made. Further work on development of existing software and other software initiatives are planned in the coming years. In 2023 the Group completed 2 projects which were co-financed by received grant and those development works will be amortised over period of 5 years.

Post reporting date events

Due to the dampened economic environment in 2023 and significant investments Virtuslab failed to meet its covenant obligations under the loan agreement. In April 2024, Virtuslab received an official waiver letter from ING in which the bank agreed not to enforce the rights it has under the Finance Documents. Additionally, an annex to the loan facility was signed, to which certain provisions in the original agreement were amended including covenants for the year 2024 and the following years. Based on the current forecast the Group expects to meet revised covenants in following periods.

Future developments

The company will continue to work on expanding its market offer using innovative technologies, development of its own products and geographical expansion. At the same time, the Group plans further expansion through acquisitions of additional companies in order to increase the scale and scope of its operations. By diversifying its operations, expanding its customer portfolio and continuously expanding the products and services offered, the Group tries to minimize different risks. Potential development will depend mainly on the economic situation on the European and US markets. 

Strategic report

The truegroup has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the group's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of financial risk management objectives and policies, and indication of exposure to price risk, credit risk, liquidity risk and cash flow risk.

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.

VIRTUSLAB LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
Medium-sized companies exemption

This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.

On behalf of the board
Mr R P Pokrywka
Director
7 August 2024
VIRTUSLAB LTD
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -

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.

VIRTUSLAB LTD
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF VIRTUSLAB LTD
- 7 -
Opinion

We have audited the financial statements of VIRTUSLAB LTD (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023, which comprise the consolidated statement of comprehensive income, the consolidated and company balance sheets, the consolidated and company statements of changes in equity, the consolidated statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and 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:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of the group 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, 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

We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group's and the parent company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.

In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group's and the parent company's business model including effects arising from macro-economic uncertainties such as cost of living crisis and global wars, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the group's and the parent company's financial resources or ability to continue operations over the going concern period.

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 the 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.

VIRTUSLAB LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF VIRTUSLAB LTD
- 8 -

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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements 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.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

Matter on which we are required to report under the Companies Act 2006

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.

Matters on which we are required to report by exception

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 statement of directors' responsibilities set out on page 9 to 33, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

VIRTUSLAB LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF VIRTUSLAB LTD
- 9 -
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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:

VIRTUSLAB LTD
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF VIRTUSLAB LTD
- 10 -

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.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Peter Buck FCA, DChA (Senior Statutory Auditor)
For and on behalf of Champion Accountants LLP
7 August 2024
Chartered Accountants
Statutory Auditor
7-9 Station Road
Hesketh Bank
Preston
Lancashire
PR4 6SN
VIRTUSLAB LTD
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
2023
2022
Notes
£
£
Turnover
3
25,577,155
18,412,210
Cost of sales
(14,482,386)
(10,641,968)
Gross profit
11,094,769
7,770,242
Administrative expenses
(10,981,586)
(7,884,488)
Other operating income
496,862
330,725
Operating profit
4
610,045
216,479
Interest receivable and similar income
7
3,678
9,090
Interest payable and similar expenses
8
(568,487)
(95,796)
Profit before taxation
45,236
129,773
Tax on profit
9
(204,854)
(42,757)
(Loss)/profit for the financial year
25
(159,618)
87,016
Other comprehensive income
Currency translation gain taken to retained earnings
513,440
64,461
Total comprehensive income for the year
353,822
151,477
(Loss)/profit 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.
VIRTUSLAB LTD
GROUP BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 12 -
2023
2022
Notes
£
£
£
£
Fixed assets
Goodwill
10
10,733,010
-
0
Other intangible assets
10
1,590,296
315,274
Total intangible assets
12,323,306
315,274
Tangible assets
11
432,686
414,157
12,755,992
729,431
Current assets
Debtors
14
5,588,280
4,580,354
Cash at bank and in hand
1,075,597
835,592
6,663,877
5,415,946
Creditors: amounts falling due within one year
15
(6,177,626)
(3,292,081)
Net current assets
486,251
2,123,865
Total assets less current liabilities
13,242,243
2,853,296
Creditors: amounts falling due after more than one year
16
(6,197,683)
(339,822)
Provisions for liabilities
Deferred tax liability
19
146,108
73,668
(146,108)
(73,668)
Net assets
6,898,452
2,439,806
Capital and reserves
Called up share capital
21
3,060
3,030
Share premium account
22
6,234,434
2,129,640
Merger reserve
23
25,058,727
25,058,727
Merger difference reserve
24
(27,160,563)
(27,160,563)
Profit and loss reserves
25
2,762,794
2,408,972
Total equity
6,898,452
2,439,806

These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.

The financial statements were approved by the board of directors and authorised for issue on 7 August 2024 and are signed on its behalf by:
07 August 2024
Mr R P Pokrywka
Director
Company registration number 09793578 (England and Wales)
VIRTUSLAB LTD
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023
31 December 2023
- 13 -
2023
2022
Notes
£
£
£
£
Fixed assets
Investments
12
31,293,221
27,188,397
Current assets
Debtors
14
510,662
368,249
Cash at bank and in hand
91,649
288,455
602,311
656,704
Creditors: amounts falling due within one year
15
(442,448)
(542,982)
Net current assets
159,863
113,722
Net assets
31,453,084
27,302,119
Capital and reserves
Called up share capital
21
3,060
3,030
Share premium account
22
6,234,434
2,129,640
Other reserves
25,058,727
25,058,727
Profit and loss reserves
25
156,863
110,722
Total equity
31,453,084
27,302,119

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £46,141 (2022 - £73,556 loss).

These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.

The financial statements were approved by the board of directors and authorised for issue on 7 August 2024 and are signed on its behalf by:
07 August 2024
Mr R P Pokrywka
Director
Company registration number 09793578 (England and Wales)
VIRTUSLAB LTD
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
Share capital
Share premium account
Merger reserve
Merger difference reserve
Profit and loss reserves
Total
Notes
£
£
£
£
£
£
Balance at 1 January 2022
3,030
2,129,640
25,058,727
(27,160,563)
2,257,495
2,288,329
Year ended 31 December 2022:
Profit for the year
-
-
-
-
87,016
87,016
Other comprehensive income:
Currency translation differences
-
-
-
-
64,461
64,461
Total comprehensive income
-
-
-
-
151,477
151,477
Balance at 31 December 2022
3,030
2,129,640
25,058,727
(27,160,563)
2,408,972
2,439,806
Year ended 31 December 2023:
Loss for the year
-
-
-
-
(159,618)
(159,618)
Other comprehensive income:
Currency translation differences
-
-
-
-
513,440
513,440
Total comprehensive income
-
-
-
-
353,822
353,822
Issue of share capital
21
30
4,104,794
-
-
-
4,104,824
Balance at 31 December 2023
3,060
6,234,434
25,058,727
(27,160,563)
2,762,794
6,898,452
VIRTUSLAB LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
Share capital
Share premium account
Merger reserve
Profit and loss reserves
Total
Notes
£
£
£
£
£
Balance at 1 January 2022
3,030
2,129,640
25,058,727
184,278
27,375,675
Year ended 31 December 2022:
Loss and total comprehensive income for the year
-
-
-
(73,556)
(73,556)
Balance at 31 December 2022
3,030
2,129,640
25,058,727
110,722
27,302,119
Year ended 31 December 2023:
Profit and total comprehensive income
-
-
-
46,141
46,141
Issue of share capital
21
30
4,104,794
-
-
4,104,824
Balance at 31 December 2023
3,060
6,234,434
25,058,727
156,863
31,453,084
VIRTUSLAB LTD
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 16 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
29
2,160,038
193,674
Interest paid
(568,487)
(95,796)
Income taxes paid
(240,098)
(80,787)
Net cash inflow from operating activities
1,351,453
17,091
Investing activities
Purchase of intangible assets
(1,296,738)
(150,038)
Purchase of tangible fixed assets
(79,262)
(47,461)
Purchase of subsidiaries, net of cash acquired
(12,937,917)
-
Loans made to other entities
(51,543)
-
Repayment of loans
-
501,709
Interest received
3,678
9,090
Net cash (used in)/generated from investing activities
(14,361,782)
313,300
Financing activities
Proceeds from issue of shares
4,104,824
-
Repayment of bank loans
7,091,488
(88,050)
Payment of finance leases obligations
(156,497)
(150,397)
Net cash generated from/(used in) financing activities
11,039,815
(238,447)
Net (decrease)/increase in cash and cash equivalents
(1,970,514)
91,944
Cash and cash equivalents at beginning of year
575,960
442,126
Effect of foreign exchange rates
414,479
41,890
Cash and cash equivalents at end of year
(980,075)
575,960
Relating to:
Cash at bank and in hand
1,075,597
835,592
Bank overdrafts included in creditors payable within one year
(2,055,672)
(259,632)
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
1
Accounting policies
Company information

Virtuslab Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Level 18, 40 Bank Street (Hq3), Canary Wharf, London, England, E14 5NR.

 

The group consists of Virtuslab Ltd and all of its subsidiaries. The principal activity of the group is disclosed in the strategic report.

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, The principal accounting policies adopted are set out below.

The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:

 

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.

 

At the end of 2021 the whole of the share capital of Virtuslab Sp. z o.o. (Ltd.), Poland, Sensinum Sp. z o.o. (Ltd.), Poland and Virtuslab GmbH (Ltd.), Germany. was acquired by the Company via a share for share exchange agreement. The Group has adopted the principles of merger accounting from FRS 102.

 

In accounting for the above the Company took group reconstruction relief and recognised a minimum share premium on the difference between the nominal value of the shares issued via the share for share exchange agreement and the net assets of the above named entities as at 31 December 2021. In addition to the minimum share premium, a merger reserve was created and this was calculated as the difference between the consideration received for the shares issued and the amount recognised as the minimum share premium.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
1.3
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company Virtuslab Ltd together with all entities controlled by the parent company (its subsidiaries).

 

As part of the consolidation and due to the application of merger accounting, a merger difference reserve is created. This is calculated as the difference between the value of the investments in the parent company financial statements and the nominal value of the share capital within the financial statements of the subsidiaries.

 

All financial statements are made up to 31 December 2023. 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.

1.4
Going concern

The group meets its day-to-day working capital requirements through current cash flows and its bank facilities. The current economic conditions continue to create uncertainty over (a) the level of demand for the group’s products and services, and (b) the availability of bank finance for the foreseeable future. The group’s forecasts and projections, taking account of a severe but plausible change in trading performance, show that the group should be able to operate within the level of its current facilities. Additionally Group may adjust it's level of R&D and sales investments without significant impact on short term revenue. Adjustment of investment spending is mitigation factor in case of negative changes.

 

Due to the dampened economic environment in 2023 and significant investments Virtuslab failed to meet its covenant obligations under the loan agreement. In April 2024, Virtuslab received an official waiver letter from ING in which the bank agreed not to enforce the rights it has under the Finance Documents. Additionally, an annex to the loan facility was signed, to which certain provisions in the original agreement were amended including covenants for the year 2024 and the following years. Based on the current forecast the Group expects to meet revised covenants in following periods.

 

After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going concern basis in preparing its 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.

Revenue from software development is recognised in months when services were actually performed 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.

 

1.6
Research and development expenditure

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised as part of development costs in intangible assets to the extent that the technical, commercial and financial feasibility can be demonstrated.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 19 -
1.7
Intangible fixed assets - goodwill

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.

 

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

1.8
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.

Costs associated with maintaining computer software are recognised as an expense as incurred.

 

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognised as intangible assets when the following criteria are met:

 

• It is technically feasible to complete the software so that it will be available for use.

• Management intends to complete the software and use or sell it.

• There is an ability to use or sell the software.

• It can be demonstrated how the software will generate probable future economic benefits.

• Adequate technical, financial and other resources to complete the development and to use or sell the

software are available.

• The expenditure attributable to the software during its development can be reliably measured.

 

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

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:

Trademarks & licences
5 years straight line
Development costs of existing products
5 years straight line
1.9
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:

IT equipment
3-5 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.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 20 -
1.10
Fixed asset investments

In the parent company financial statements, investments in subsidiaries 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.

1.11
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 is tested for impairment. 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.

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.

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.

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.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 21 -
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.

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, 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.

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.

Derecognition of financial liabilities

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

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 22 -
1.14
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.

1.15
Taxation

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

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.

1.16
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.

1.17
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

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.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 23 -
1.19
Government grants

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

 

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

1.20
Foreign exchange

The Group’s financial statements are presented in Sterling (£). The individual financial statements of each Group entity are prepared in the currency of the primary economic environment in which the entity operates (its functional currency). These financial statements are then translated into the Group’s presentation currency for consolidation purposes as described below.

 

The Company's functional and presentational currency is Sterling.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

 

Exchange differences are recognised in profit and loss in the period in which they arise. However, in the consolidated financial statements exchange differences arising on monetary items that form part of the the net investment in a foreign operation are recognised in other comprehensive income and are not reclassified to profit or loss.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign operations are translated from their functional currency to Sterling using the closing exchange rate. Income and expenses are translated using the average rate for the period. Exchange rate differences arising on the translation of group companies are recognised in other comprehensive income.

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.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Judgements and key sources of estimation uncertainty
(Continued)
- 24 -
Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Intangible assets

Annually, the group considers whether intangible assets, including goodwill, as well as investments into subsidiaries, are impaired. Where an indication of impairment is identified the estimation of recoverable value requires estimation of the recoverable value of the cash– generating units (CGUs). This requires estimation of the future cash flows from the CGUs or fair value less costs to sell.

 

As at 31 December 2023 management have not identified any indicators of impairment.

Going concern

The group’s forecasts and projections, taking account of a severe but plausible change in trading performance and also eventual changes of economic conditions. An uncertainty over the level of demand for the group’s products and services remains a key source of uncertainty. In analyzed forecasts and scenarios the Group always estimates to meet all contractual requirements and bank covenants. In case of potential problems or failure of meeting them Group plans to mitigate them by adjusting of short them strategy e.g. reducing R&D and sales investments or renegotiating of contracts.

3
Turnover and other revenue
2023
2022
£
£
Turnover analysed by class of business
IT consulting and software development
25,577,155
18,412,210
2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
2,151,494
1,733,506
Europe
19,770,593
15,727,004
USA
2,665,640
605,712
Rest of the world
989,428
345,988
25,577,155
18,412,210
2023
2022
£
£
Other revenue
Interest income
3,678
9,090
Grants received
149,315
324,445
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
4
Operating profit
2023
2022
£
£
Operating profit for the year is stated after charging/(crediting):
Exchange gains
(11,244)
(1,059)
Government grants
(149,315)
(324,445)
Fees payable to the group's auditor for the audit of the group's financial statements
50,000
91,500
Depreciation of owned tangible fixed assets
49,699
42,539
Depreciation of tangible fixed assets held under finance leases
147,568
100,577
Amortisation of goodwill
816,371
-
Amortisation of other intangible assets
95,836
45,910
5
Employees

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

Group
Company
2023
2022
2023
2022
Number
Number
Number
Number
IT consultants and engineers
98
105
-
-
Administrative staff
36
36
1
1
Management staff
17
11
1
3
Total
151
152
2
4

Their aggregate remuneration comprised:

Group
Company
2023
2022
2023
2022
£
£
£
£
Wages and salaries
4,175,006
4,503,065
168,835
129,325
Social security costs
456,934
577,552
14,769
7,957
Pension costs
2,189
1,761
2,189
1,761
4,634,129
5,082,378
185,793
139,043
6
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
136,096
148,880

Some of the directors are not remunerated for their position as a director by this group or any other group to which this group belongs.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 26 -
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Other interest income
3,678
9,090
8
Interest payable and similar expenses
2023
2022
£
£
Interest on bank overdrafts and loans
454,077
25,222
Interest on finance leases and hire purchase contracts
21,046
32,121
Other interest
93,364
38,453
Total finance costs
568,487
95,796
9
Taxation
2023
2022
£
£
Current tax
Foreign current tax on profits for the current period
136,286
29,612
Deferred tax
Origination and reversal of timing differences
109,159
13,145
Changes in tax rates
(10,075)
-
0
Adjustment in respect of prior periods
(31,904)
-
0
Tax losses carried forward
1,388
-
0
Total deferred tax
68,568
13,145
Total tax charge
204,854
42,757

In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase to 25% (rather than remaining at 19%, as previously enacted). This new law was substantively enacted on 24 May 2021. In the Autumn Statement in November 2022, the government confirmed the increase in corporation tax rate to 25% from April 2023.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
9
Taxation
(Continued)
- 27 -

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

2023
2022
£
£
Profit before taxation
45,236
129,773
Expected tax charge based on the standard rate of corporation tax in the UK of 25.00% (2022: 19.00%)
11,309
24,657
Tax effect of expenses that are not deductible in determining taxable profit
204,093
842
Tax effect of income not taxable in determining taxable profit
-
0
(4,457)
Tax effect of utilisation of tax losses not previously recognised
(1,388)
-
0
Unutilised tax losses carried forward
(40,591)
-
0
Change in unrecognised deferred tax assets
-
0
13,134
Foreign exchange differences
295
(804)
Foreign tax differences
31,136
9,385
Taxation charge
204,854
42,757
10
Intangible fixed assets
Group
Goodwill
Trademarks & licences
Development costs of existing products
Total
£
£
£
£
Cost
At 1 January 2023
-
0
210,849
155,904
366,753
Additions
11,549,381
-
0
1,296,738
12,846,119
Disposals
-
0
(3,812)
-
0
(3,812)
Exchange adjustments
-
0
11,890
69,473
81,363
At 31 December 2023
11,549,381
218,927
1,522,115
13,290,423
Amortisation and impairment
At 1 January 2023
-
0
45,189
6,290
51,479
Amortisation charged for the year
816,371
41,832
54,004
912,207
Disposals
-
0
(3,812)
-
0
(3,812)
Exchange adjustments
-
0
4,362
2,881
7,243
At 31 December 2023
816,371
87,571
63,175
967,117
Carrying amount
At 31 December 2023
10,733,010
131,356
1,458,940
12,323,306
At 31 December 2022
-
0
165,660
149,614
315,274
The company had no intangible fixed assets at 31 December 2023 or 31 December 2022.
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 28 -
11
Tangible fixed assets
Group
IT equipment
£
Cost
At 1 January 2023
764,286
Additions
79,262
Business combinations
111,692
Exchange adjustments
63,832
At 31 December 2023
1,019,072
Depreciation and impairment
At 1 January 2023
350,129
Depreciation charged in the year
197,267
Exchange adjustments
38,990
At 31 December 2023
586,386
Carrying amount
At 31 December 2023
432,686
At 31 December 2022
414,157
The company had no tangible fixed assets at 31 December 2023 or 31 December 2022.

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Group
Company
2023
2022
2023
2022
£
£
£
£
IT equipment
211,619
359,187
-
0
-
0
12
Fixed asset investments
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Investments in subsidiaries
13
-
0
-
0
31,293,221
27,188,397
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
12
Fixed asset investments
(Continued)
- 29 -
Movements in fixed asset investments
Company
Shares in subsidiaries
£
Cost or valuation
At 1 January 2023
27,188,397
Additions
4,104,824
At 31 December 2023
31,293,221
Carrying amount
At 31 December 2023
31,293,221
At 31 December 2022
27,188,397
13
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Indirect
Virtuslab Sp. z o.o
Zofii Natkowskiej 23, 35-211 Rzeszow, Poland
Ordinary
100.00
-
Virtuslab Gmbh
Potsdamer Platz 10, 10785 Berlin, Germany
Ordinary
100.00
-
Sensinum Sp. z o.o
Szlak 49, 31-153 Krakow, Poland
Ordinary
100.00
-
SoftwareMill Sp. z o.o
Na Uboczu 8/87, 02-791 Warszawa, Poland
Ordinary
-
100.00
Reasonfield Lab Sp. z o.o.
Na Uboczu 8/87, 02-791 Warszawa, Poland
Ordinary
-
100.00
14
Debtors
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£
£
£
£
Trade debtors
4,049,888
4,156,129
303,185
234,238
Corporation tax recoverable
194,569
88,914
32,777
32,777
Amounts owed by group undertakings
1,644
-
108,940
99,485
Other debtors
1,116,999
156,806
21,464
1,749
Prepayments and accrued income
89,673
45,027
3,705
-
0
5,452,773
4,446,876
470,071
368,249
Deferred tax asset (note 19)
135,507
133,478
40,591
-
0
5,588,280
4,580,354
510,662
368,249

Included within other debtors is £973,747 (2022: £109,025) relating to VAT recoverable, and £49,899 (2022: £nil) relating to related party loans.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 30 -
15
Creditors: amounts falling due within one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Bank loans and overdrafts
17
3,557,436
353,982
-
0
-
0
Obligations under finance leases
18
23,975
37,383
-
0
-
0
Trade creditors
1,280,623
1,386,795
10,695
14,402
Amounts owed to group undertakings
-
0
-
0
293,801
444,717
Other taxation and social security
832,972
562,887
72,452
67,057
Other creditors
143,488
820,633
-
0
11,806
Accruals
339,132
130,401
65,500
5,000
6,177,626
3,292,081
442,448
542,982

Included within other creditors is £nil (2022: £693,963) relating to factoring.

16
Creditors: amounts falling due after more than one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Bank loans and overdrafts
17
5,707,662
23,587
-
0
-
0
Obligations under finance leases
18
89,297
232,386
-
0
-
0
Accruals and deferred income
400,724
83,849
-
0
-
0
6,197,683
339,822
-
-
17
Loans and overdrafts
Group
Company
2023
2022
2023
2022
£
£
£
£
Bank loans
7,209,426
117,937
-
0
-
0
Bank overdrafts
2,055,672
259,632
-
0
-
0
9,265,098
377,569
-
-
Payable within one year
3,557,436
353,982
-
0
-
0
Payable after one year
5,707,662
23,587
-
0
-
0
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
17
Loans and overdrafts
(Continued)
- 31 -

List of security measures granted by Virtuslab Sp. z o.o. or a partner of Virtuslab Sp. z o. o., i.e. Virtuslab Limited based on the loan agreement of 27 March 2023 between ING Bank Śląski S.A. as the lender and Virtuslab Sp. z o. o., as the borrower:

 

Interest on the loans are charged at 2% above the WIBOR 3M interest rate in Poland. Overdraft interest is charged at 1.8% above the WIBOR 3M interest rate plus a 0.2% quarterly fee and a 0.5% fee for any unused amount.

18
Finance lease obligations
Group
Company
2023
2022
2023
2022
£
£
£
£
Future minimum lease payments due under finance leases:
Within one year
97,579
183,394
-
0
-
0
In two to five years
26,227
117,104
-
0
-
0
123,806
300,498
-
-
Less: future finance charges
(10,534)
(30,729)
-
0
-
0
113,272
269,769
-
0
-
0

Finance lease payments represent rentals payable by the company or group for certain items of IT equipment. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3-5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 32 -
19
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Group
£
£
£
£
Exchange rate differences from valuation
94,012
179
9,339
6,070
Tax losses
-
-
40,591
-
Employer's social security contributions on remuneration paid after year end
-
-
1,796
14,543
Orders and management not paid
-
-
16,505
26,253
Other reserves
-
-
20,865
11,574
Pension and leave reserve
-
-
24,889
23,783
Interest on loans granted, unpaid
330
-
-
-
Leasing liabilities / assets
51,766
73,489
21,522
51,255
146,108
73,668
135,507
133,478
Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Company
£
£
£
£
Tax losses
-
-
40,591
-
Group
Company
2023
2023
Movements in the year:
£
£
Asset at 1 January 2023
(59,810)
-
Charge/(credit) to profit or loss
78,643
(30,516)
Charge to other comprehensive income
1,843
-
Effect of change in tax rate - profit or loss
(10,075)
(10,075)
Liability/(Asset) at 31 December 2023
10,601
(40,591)

The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period.

20
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
2,189
1,761
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
20
Retirement benefit schemes
(Continued)
- 33 -

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

21
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary of £30 each
102
101
3,060
3,030

The shares have attached to them full voting, dividend and capital distribution rights.

On 31st March 2023 the company issued 1 new ordinary share which was obtained by the existing shareholder AQ Sphere Midco Limited (issue price of £4.1m, paid by contribution of 64,540 SoftwareMill shares).

22
Share premium account
Group
Company
2023
2022
2023
2022
£
£
£
£
At the beginning of the year
2,129,640
2,129,640
2,129,640
2,129,640
Issue of new shares
4,104,794
-
4,104,794
-
At the end of the year
6,234,434
2,129,640
6,234,434
2,129,640

The share premium account includes the minimum share premium relating to group reconstruction relief, this amounted to £2,129,640. This was calculated as the difference between the nominal value of the shares issued as part of the share for share exchange agreement 27 December 2021, and the net assets of the subsidiary companies as at 31 December 2021.

 

The remaining share premium relates to a share for share agreement dated 31 March 2023. This is the difference in the nominal value of the share issued and the consideration received for the share.

23
Merger reserve
2023
2022
Group and company
£
£
At the beginning and end of the year
25,058,727
25,058,727

At the end of 2021 the Group was reorganized in a way that Virtuslab Ltd. became a shareholder of Virtuslab Sp. z o.o. (Ltd.), Poland, Sensinum Sp. z o.o. (Ltd.), Poland and Virtuslab GmbH (Ltd.), Germany. Before reorganization Virtuslab Ltd was a subsidiary established and owned by Virtuslab Sp. z o.o. (Ltd.).

 

As a result of group reconstruction relief being applied on the inclusion of Virtuaslab Sp. Z o.o, Sensinum Sp. Z o.o and Virtuslab Gmbh in the consolidated financial statement a merger reserve was created. This reserve represents the difference between the consideration received as part of the share for share agreement and the minimum share premium recognised in the accounts of the parent company.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 34 -
24
Merger difference reserve
2023
2022
Group
£
£
At the beginning and end of the year
(27,160,563)
(27,160,563)
2023
2022
Company
£
£
At the beginning and end of the year
-
-

As a result of group reconstruction relief, on consolidation a merger difference reserve is created. This reserve represents the difference between the value of the investment by the parent company in the subsidiaries and the nominal value of the subsidiaries share capital.

25
Profit and loss reserves
Group
Company
2023
2022
2023
2022
£
£
£
£
At the beginning of the year
2,408,972
2,257,495
110,722
184,278
Profit/(loss) for the year
(159,618)
87,016
46,141
(73,556)
Currency translation differences
513,440
64,461
-
0
-
0
At the end of the year
2,762,794
2,408,972
156,863
110,722

Retained earnings relate to the cumulative profit and loss net of distributions to owners.

26
Acquisition of a business

On 31 March 2023 the group acquired 100% of the issued capital of the Software Mill Group. The group includes SoftwareMill Sp. z o.o and its subsidiary Reasonfield Lab Sp. z o.o, both are incorporated in Poland.

Book Value
Adjustments
Fair Value
Net assets acquired
£
£
£
Property, plant and equipment
111,692
-
111,692
Investments
45,728
-
45,728
Trade and other receivables
1,315,567
-
1,315,567
Cash and cash equivalents
90,608
-
90,608
Trade and other payables
(82,117)
-
(82,117)
Tax liabilities
(2,334)
-
(2,334)
Total identifiable net assets
1,479,144
-
1,479,144
Goodwill
11,549,381
Total consideration
13,028,525
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
26
Acquisition of a business
(Continued)
- 35 -
The consideration was satisfied by:
£
Cash
13,028,525
Contribution by the acquired business for the reporting period included in the group statement of comprehensive income since acquisition:
£
Turnover
4,656,883
Profit after tax
60,473

The goodwill arising on the acquisition of the businesses is attributable to the anticipated profitability of the distribution of the businesses products in new markets and future operating synergies from the combination.

27
Related party transactions
Remuneration of key management personnel

The remuneration of key management personnel is as follows.

2023
2022
£
£
Aggregate compensation
449,695
522,659
Transactions with related parties

During the year the group entered into the following transactions with related parties:

Sales
Sales
2023
2022
£
£
Group
Other related parties
1,464,668
1,214,556

The following amounts were outstanding at the reporting end date:

Amounts due to related parties
2023
2022
£
£
Group
Other related parties
835
59,560

The related party balances are repayable on demand, unsecured and free of interest. Trading balances fall due within the usual terms given to other customers.

VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
27
Related party transactions
(Continued)
- 36 -

The following amounts were outstanding at the reporting end date:

Amounts due from related parties
2023
2022
Balance
Balance
£
£
Group
Entities with control, joint control or significant influence over the group
85,148
-
Other related parties
83,688
25,304

The related party balances are repayable on demand, unsecured and free of interest. Trading balances fall due within the usual terms given to other customers.

Other information

Transactions between group companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

28
Controlling party

The immediate parent undertaking is AQ Sphere Midco Limited (registered office address: Eagle House, 108-110 Jermyn Street, London, SW1Y 6HB).

The ultimate parent undertaking is AQ Sphere Holdings Limited (registered office: Eagle House, 108-100 Jermyn Street, London, SW1Y 6HB).

29
Cash generated from group operations
2023
2022
£
£
(Loss)/profit for the year after tax
(159,618)
87,016
Adjustments for:
Taxation charged
204,854
42,757
Finance costs
568,487
95,796
Investment income
(3,678)
(9,090)
Amortisation and impairment of intangible assets
912,207
45,910
Depreciation and impairment of tangible fixed assets
197,267
143,116
Movements in working capital:
Decrease/(increase) in debtors
542,507
(949,687)
(Decrease)/increase in creditors
(101,988)
737,856
Cash generated from operations
2,160,038
193,674
VIRTUSLAB LTD
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 37 -
30
Analysis of changes in net funds/(debt) - group
1 January 2023
Cash flows
Exchange rate movements
31 December 2023
£
£
£
£
Cash at bank and in hand
835,592
(174,474)
414,479
1,075,597
Bank overdrafts
(259,632)
(1,796,040)
-
(2,055,672)
575,960
(1,970,514)
414,479
(980,075)
Borrowings excluding overdrafts
(117,937)
(7,091,489)
-
(7,209,426)
Obligations under finance leases
(269,769)
156,497
-
(113,272)
188,254
(8,905,506)
414,479
(8,302,773)
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