Company registration number 07937973 (England and Wales)
DISGUISE TECHNOLOGIES LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
DISGUISE TECHNOLOGIES LIMITED
COMPANY INFORMATION
Directors
F M Kufer
R Sklar
Company number
07937973
Registered office
Hermes House
88-89 Blackfriars Rd
South Bank
London
United Kingdom
SE1 8HA
Auditor
BDO LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
DISGUISE TECHNOLOGIES LIMITED
CONTENTS
Page
Strategic report
1 - 6
Directors' report
7 - 9
Directors' responsibilities statement
10
Independent auditor's report
11 - 14
Statement of comprehensive income
15
Balance sheet
16
Statement of changes in equity
17
Notes to the financial statements
18 - 35
DISGUISE TECHNOLOGIES LIMITED
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 company is part of the Butterfly Topco Limited group of companies (Butterfly Group) whose principal activity is as a leading global provider of on premises or virtual event visualisation solutions, specialising in the provision of the software, hardware and support services that allow creative productive teams to pre-visualise, stimulate and deliver their 3D shows in real time. The company's immediate parent undertaking is New Leaf Bidco Limited.

 

The company's principal activity is to support the wider group by performing research and development activities. Costs are recharged to other group companies for the provision of these services. The company also performs the role of a holding company.

Review of the business

In 2023 the Butterfly Group saw strong revenue growth through continued vertical, geographic and product expansion alongside building out the Meptik LLC and Polygon Labs LLC revenue streams. The Group also underwent an extensive cost rationalisation exercise across our staff and administrative expenses, and finalised the project to onshore the supply chain which will deliver future gross margin improvements. This was particularly relevant for the Company as it reduced staff levels and reliance on consultants/freelancers.

 

The above cost saving measures were taken to ensure the business is rightsized and in a good position to maximise profit and cash generation in future periods and already the Company has seen a strong improvement year-on year in profitability.

 

The Group also had an injection of £4m from Shareholders in the form of a Convertible Loan Note to ensure the Group’s balance sheet is strengthened and can meet future obligations under appropriate stress testing.

 

The company has also invested in the development of the next generation of hardware models in both our pro range series of machines, with significant margin improvements anticipated in future periods for the Group and a wider portfolio of products to cater towards the lowered priced segments of our verticals.

DISGUISE TECHNOLOGIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Principal risks and uncertainties

The principal risks and uncertainties of the Company relate to the ongoing activities of the company in which it holds investment and its ability to bring to market innovative products. The Company’s function as undertaking research and development activities for the Butterfly Group of companies means it is dependent for its revenues upon its own performance and the performance of its affiliates in the live and virtual events visualisation services industry. The risks that the Company are exposed to are managed at a Group level and the nature of the risk and the risk management principles and strategies to mitigate these risks are disclosed in the consolidated financial statements of the Butterfly Topco Limited. These are summarised below together with the relevant mitigation:

 

 

Identified risk

Potential impact

Mitigation

A significant change in the global economy.

The Company & Group is unable to meet its strategic growth target, which may result in financial difficulties.

The business constantly monitors the external business environment using both financial and non-financial measures to enable it to react quickly to changes to the global environment.

Interruption to the supply of critical

components.

Inability to meet customer demand,

reducing revenues.

The    product    development    and

operations teams work closely with

the Company and Group's suppliers

to ensure contingency plans are in

place    to minimise business

interruption and react quickly to

route    supply    through    difference

geographies within our network. The

Company also places orders in

advance to secure supply and owns all IP and drawings to move the supply chain if required.

Management of the Company's investment in research & development.

The Company makes significant investment in research and development to future proof its products and revenues. Failure to manage this investment may result in the failure to generate future revenues

and increased costs charged through the income statement.

The business constantly reviews the costs invested in research & development, analysing the costs by project. Projects are reviewed both in terms of cost and commercial viability. Should a project be deemed unviable it

is abandoned at the earliest opportunity.

There may be increasing demand to

reduce the impact of electronic materials on the environment.

The cost of production may increase as

the Group tries to meet the new stringent environmental laws by having to invest in R&D to identify alternative materials or incur additional costs in reducing the impact on the environment.

The Company & Group has registered

with the WEEE directive to ensure products are disposed of in a suitable manner. The directors also recognise there is further improvements to be made and are looking at schemes to offset the business activities carbon footprint and have set a three-year timeframe to embed this in our overall strategy.

 

 

 

DISGUISE TECHNOLOGIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Financial risk management objectives and policies

The Company’s activities expose it to a variety of financial risks. These risks are managed at a Group level and of the ultimate parent undertaking Butterfly Topco Limited. The principal financial risks are summarised below:

 

Credit Risk:

The Company’s main financial assets are its cash balances and intercompany debtors. For banks and financial institutions, only independent rated parties with a strong credit rating are accepted. Intercompany debtors are regularly reviewed for recoverability and settled for trading positions.

 

Liquidity Risk:

Liquidity risk arises from timing differences between cash inflows and outflows. At the reporting date, the Company had net cash balances but was in a net current liabilities position.

 

The Company is reliant on Butterfly Bidco Limited not calling in the intercompany debt, and as part of this the ultimate parent company, Butterfly Topco Limited, has confirmed in a letter to the company that it will continue to provide financial support for the foreseeable future and ensure the Group operates in a responsible manner in managing the intercompany credit risk between the Group entities.

Key performance indicators

EBITDA (earnings before interest, tax, depreciation and amortisation) is calculated as the operating profit of the Company with depreciation, amortisation, share-based payments, and unrealised foreign exchange/translation impact all added back.

 

Adjusted EBITDA is calculated as EBITDA (as defined) with one off expenses, investor costs and capitalised R&D expenditure (if applicable) added back.

2023
2022
£
£
Turnover
16,111,398
15,891,212
Turnover growth %
1.39%
44.00%
Operating loss
(972,110)
(731,668)
Development costs
(1,975,166)
(3,515,293)
Depreciation and amortisation
2,459,633
1,487,647
Share-based payment charge
422,449
278,679
EBITDA
65,194
2,480,635
One-off expenses
378,750
183,452
Development costs
1,975,166
3,515,293
Adjusted EBITDA
2,288,722
1,218,110
DISGUISE TECHNOLOGIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
Key performance indicators (continued)

The Company spent £2.0m (2022 - £2.7m) on staff development expenditure which was capitalised across intangible assets. The development expenditure included a number of major release updates totalling £0.2m to its main software during the year.

 

It also included expenditure related to the new hardware technologies totalling £0.2m (2022 - £0.8m) capitalised in intangible assets with our next generation media servers and our patented video format conversion cards.

 

Turnover, relating to management services and recharges, slightly increased by 1.4% to £16.1 million (2022 - £15.9 million) as activity levels remained consistent through the Group despite reduced spend on research and development, as we embed and evolve product iterations ahead of a wider ramp up expected with the next generation of hardware. This helped increase Adjusted EBITDA by 88% to £2.3m (2022 - £1.2m).

 

In the year the company also incurred £0.4m (2021 - £0.1m) of one-off fees as adjustments that have been added back when calculating the Adjusted EBITDA for reporting purposes to key stakeholders. These one-off fees relate to severance costs undertaken as part of the Group overhead rationalisation.

 

As such, net assets were £6.1m (2022 - £6.5m) representing a 6% decrease driven by a modest reduction in other debtors in the Group. The net book value of Intangible assets decreased 8% to £5.2m (2022 - £5.6m) as products cycles hit the market and amortisation charges increase year-on year.

 

Analysis based on Non-Financial Key Performance Indicators

The Group also reviews a number of other non-financial KPIs which apply to the subsidiaries of the Company:

 

Future developments

It is the intention of the directors that the Company will continue for the foreseeable future, oversee and managing the research and development aspects of the Group. The Group plans to expand its product portfolio and further expand into new verticals alongside building out capabilities in our existing markets and verticals served.

 

The Company is committed to be at the forefront of the R&D initiatives through the Group and further expand the hardware, software capabilities and investment into the Group’s intellectual property.

 

 

 

 

DISGUISE TECHNOLOGIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -

Directors' statement of compliance with duty to promote the success of the Company

The Directors of the Group acknowledge that they must act in a way which is considered in good faith and would be most likely to promote the success of the company and its wider Group for the benefit of all interested parties as defined in Section 172 (1) of the Companies Act 2006. In doing so, the Directors of the Group have considered the following aspects and how they have regarded each of the matters set out below.

 

Have regarded the likely consequence of any decision in the long-term:
Our mission is to build leading edge technology solutions for creatives around the world to deliver unparalleled performances for audiences in person and in the cloud. We recognise that our decisions must take into account the long-term consequences for our company and its stakeholders. For example, when considering investment in new products or services, we take into account the potential impact of our financial position, our ability to complete in the market, and the interests of our shareholders.

The interests of the Group's employees:
We monitor the development, performance and impacts of our activity on social plus employee matters. We are committed to providing a positive working environment that is free from all forms of illegal and improper discrimination and harassment. Our employees are key to the success of our company, and we are key to the success of our company. We are committed to promoting our employees interests. We provide a wider range of benefits as well as opportunities for training and development including remote working. We also have policies in place to promote diversity and inclusion. We seek to foster a positive working environment that promotes innovation and collaboration.

 

The need to foster the Group's business relationships with suppliers, customers and others:
We recognise that our success is closely tied to our relationships with our customers and suppliers. We aim to provide high-quality products and services that meet the needs of our customers. We work closely with our suppliers to ensure that we have reliable and cost-effective supply chains. In 2023, several new products were in development providing new advances in power and output to match our customers creative needs. We continue to work with all our supply chain to ensure compliance with all relevant legislation and minimising impact on our business operations.

 

The impact of the Group's operations on the community and environment:
We understand that our operations have an impact on the wider community and the environment. We are committed to minimising our environmental footprint through the use of renewable energy sources and the reduction of waste and emissions. We also support industry initiatives working with charities through donations and volunteer work within the Group.

 

The desirability of the Group maintaining a reputation for high standards of business conduct:
Respecting human rights is a core value and one that we expect our business partners to share. We have documented policies and procedures internally as well as robust supplier T&C's which reference what we expect from our suppliers. This will ensure we limit the risk to the business and uphold our core values. Employees have access to all Group policies and procedures, with training provided as part of the employee onboarding process with regards to the Corporate Criminal Offences Act, Modern Slavery Act, Anti-Bribery and Corruption.

 

We have a zero-tolerance stance for all human rights abuse. We are committed to ensuring we maintain robust programs and procedures. This is to protect our people and prevent such abuse through our supply chain. Our supplier code of conduct expressly prohibits the use of forced, imprisoned, bonded, indentured or involuntary labour including child labour. Other requirements including safe and clean working conditions, fair wages and no discrimination.

 

The need to act fairly between all interested parties within the Group
The Board considers all interested parties when making business decisions to ensure fair representation irrespective of their interest holding within the Group. The Group has robust policies in place to ensure that fair representation is maintained both at board level and within wider business through, management meetings and Non-Executive representation at the Board.

DISGUISE TECHNOLOGIES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -

On behalf of the board

R Sklar
Director
9 September 2024
DISGUISE TECHNOLOGIES LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -

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

Results and dividends

The loss for the year, after taxation, is £1,258,277 (2022 £363,492).

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

Directors

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

F M Kufer
R Sklar
Qualifying third party indemnity provisions

The Company has taken out qualifying third party indemnity insurance for the benefit of one or more of the directors of the Company. Such third-party indemnity provisions were in place at the date of the signing of the Directors' Report.

Energy and carbon report

The Company has taken the exemption available to subsidiary companies to not disclose information in respect of greenhouse gas emissions, energy consumption, and energy efficiency action given that this is disclosed in the consolidated financial statements of the ultimate parent company, Butterfly Topco Limited.

Matters covered in the Strategic Report

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company'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 a review of the business, future developments, and an indication of exposure to financial risks, as the Directors consider them to be of strategic importance to the Company.

DISGUISE TECHNOLOGIES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
Going concern

As at 31 December 2023, the Company had net assets and net current assets of £6.1m (2022 - £6.5m).

 

The directors have received confirmation from the Group that it will provide ongoing financial support for a period of not less than 12 months in order of the Company to meet its liabilities as they fall due. As a result, the below disclosures which are in respect of the wider Butterfly Topco Limited group, are considered relevant to the Company.

 

As at the year-end date the Group had generated EBITDA of £7.6m (2022 - £0.8m) and generated cash flows from operating activities of £9.8m (2022 - £1.3m). Closing cash balances were £10.7m (2022 - £2.5m), taking into account the injection from its shareholders of £4.0m by way of convertible shareholder loan notes issued on 10 July 2023 after discussion with its Senior Lender.

 

The Group had £12.8m of term loans drawn from its facilities agreement with its Senior Lender to finance the acquisitions of Polygon Labs LLC and Meptik LLC both acquired in 2022. £10m is drawn from one term loan and £2.8m from an additional term loan facility of £7.0m, both of which are not due for repayment until December 2027. At the year-end date the net debt position of the Group excluding shareholder loans was £2.1m (2022 - £9.3m). The Group has access to additional facilities via a £3.0m revolving credit facility which is undrawn and £4.2m of the additional term loan facility which is undrawn to finance further commitments under the acquisitions.

 

The Group’s term loan arrangements with its Senior Lender are based on two covenants. The first is Adjusted Leverage (the ratio of an Adjusted EBITDA-based metric to Total Net Debt) measured on a quarterly basis on a rolling 12-month period with the target ratio reducing over time. The second covenant is an Interest Cover (the ratio of Cashflow to Net Finance Charges) again measured on a quarterly basis on a rolling 12-month period. The Senior Facilities are provided by Santander UK PLC and details can be found in Note 20 to the financial statements.

 

The Group has net current assets of £14.7m (2022 - £10.5m) at 31 December 2023 and has remained stable through 2024 to the date of signing of the financial statements. The directors are satisfied with the cash, additional facilities line and current balance of term loans within the business such that it can meet any future ongoing obligations.

 

The long term debt of the Group is made up of shareholder loan notes of £151.2m (2022 – £132.9m) which mature on the earlier of the Group entering into an agreement with a new acquirer or the maturity of those loan notes in March 2031. The shareholders have not requested any interest repayments until that point.

 

The directors monitor cashflow through short and long term forecasting and its going concern assessment is on a future looking period of a minimum of twelve months from the date of signing the audited financial statements. These forecasts are stress tested on revenue following a deep review of pipeline known projects and historical seasonality, alongside modelling of debtor days lengthening.

 

Our margin forecasts are based on our new supply chain product pricing and working capital is driven predominantly by our sales demand and appropriately run through our financial model taken into account any historical trends. The forecasts have also been heavily sensitised in producing a financing case to ensure that with minimal revenue growth and cost efficiencies actioned we are still able to maintain cash liquidity and meet our covenant requirements.

 

The directors have considered the financial forecasts of the overall Group inclusive of this entity, taking into consideration the current macroeconomic climate, the projections are for the Group to remain profitable and generate positive cashflows in both a short term and long term assessment giving the Group the ability to continue to operate into the future and meet the respective financial covenants.

 

The directors conclude that there are no material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern and have therefore adopted the going concern basis in preparing the financial statements.

Auditor
The auditor, BDO LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
DISGUISE TECHNOLOGIES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 9 -
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 company's auditor 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 company's auditor is aware of that information.
On behalf of the board
R Sklar
Director
9 September 2024
DISGUISE TECHNOLOGIES LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -

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 company and of the profit or loss of the company 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 company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

DISGUISE TECHNOLOGIES LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF DISGUISE TECHNOLOGIES LIMITED
- 11 -
Opinion

In our opinion the financial statements:

 

We have audited the financial statements of Disguise Technologies Limited (“the Company”) for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and 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).

Basis for opinion

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

Independence

We are independent of the 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.

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 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.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

DISGUISE TECHNOLOGIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DISGUISE TECHNOLOGIES LIMITED
- 12 -

Other Companies Act 2006 reporting

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

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

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 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 company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Non-compliance with laws and regulations

 

Based on:

 

We considered the significant laws and regulations to be the applicable accounting framework, the Companies Act 2006, UK Corporation tax legislation and UK VAT registration.

 

The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the health and safety legislation, UK employment law and the Data Protection Act.

DISGUISE TECHNOLOGIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DISGUISE TECHNOLOGIES LIMITED
- 13 -

Our procedures in respect of the above included:

Fraud

 

We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:

Based on our risk assessment, we considered the areas most susceptible to fraud to be:

 

Our procedures in respect of the above included:

 

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

 

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

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.

DISGUISE TECHNOLOGIES LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DISGUISE TECHNOLOGIES LIMITED
- 14 -

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.

Neil Ebdon (Senior Statutory Auditor)
Senior Statutory Auditor
For and on behalf of`BDO LLP, Statutory Auditor
Leeds, UK
9 September 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
DISGUISE TECHNOLOGIES LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
2023
2022
Notes
£
£
Turnover
3
16,111,398
15,891,212
Cost of sales
(18,719)
-
0
Gross profit
16,092,679
15,891,212
Administrative expenses
(17,042,340)
(16,344,201)
Other operating income
400,000
-
0
Share-based payment charge
(422,449)
(278,679)
Operating loss
5
(972,110)
(731,668)
Interest payable and similar expenses
8
(53,605)
(15,362)
Loss before taxation
(1,025,715)
(747,030)
Tax on loss
9
226,523
383,538
Loss for the financial year
(799,192)
(363,492)

The profit and loss account has been prepared on the basis that all operations are continuing operations.

DISGUISE TECHNOLOGIES LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 16 -
2023
2022
Notes
£
£
£
£
Fixed assets
Intangible assets
11
5,190,695
5,612,896
Tangible assets
12
186,128
262,408
Investments
13
1,755,546
1,755,546
7,132,369
7,630,850
Current assets
Debtors falling due after more than one year
15
855,789
646,920
Debtors falling due within one year
15
29,930,928
27,971,983
Cash at bank and in hand
26,218
101,491
30,812,935
28,720,394
Creditors: amounts falling due within one year
16
(31,845,510)
(29,881,725)
Net current liabilities
(1,032,575)
(1,161,331)
Net assets
6,099,794
6,469,519
Capital and reserves
Called up share capital
19
1,935
1,935
Capital contribution reserve
3,505,737
3,076,270
Profit and loss reserves
2,592,122
3,391,314
Total equity
6,099,794
6,469,519

The notes on pages 18 to 35 form part of these financial statements.

The financial statements were approved by the board of directors and authorised for issue on 9 September 2024 and are signed on its behalf by:
R Sklar
Director
Company registration number 07937973 (England and Wales)
DISGUISE TECHNOLOGIES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
Share capital
Capital contribution reserve
Profit and loss reserves
Total
£
£
£
£
Balance at 1 January 2022
1,935
1,043,695
3,754,806
4,800,436
Year ended 31 December 2022:
Loss and total comprehensive loss
-
-
(363,492)
(363,492)
Capital contribution for loan
-
1,753,896
-
0
1,753,896
Capital contribution for share-based payments
-
278,679
-
278,679
Balance at 31 December 2022
1,935
3,076,270
3,391,314
6,469,519
Year ended 31 December 2023:
Loss and total comprehensive loss
-
-
(799,192)
(799,192)
Capital contribution for share-based payments
-
429,467
-
0
429,467
Balance at 31 December 2023
1,935
3,505,737
2,592,122
6,099,794
DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
1
Accounting policies
Company information

Disguise Technologies Limited is a private company limited by shares incorporated in England and Wales. The registered office is Hermes House, 88-89 Blackfriars Rd, South Bank, London, United Kingdom, SE1 8HA.

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 certain financial instruments at fair value. The principal accounting policies adopted are set out below.

This 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:

 

 

The financial statements of the company are consolidated in the financial statements of Butterfly Topco Limited. These consolidated financial statements are available from its registered office, Hermes House 88-89 Blackfriars Road, South Bank, London, SE1 8HA.

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

 

Disguise Technologies Limited is a wholly owned subsidiary of Butterfly Topco Limited and the results of Disguise Technologies Limited are included in the consolidated financial statements of Butterfly Topco Limited which are available from Hermes House 88-89 Blackfriars Road, South Bank, London, SE1 8HA.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 19 -
1.2
Going concern

As at 31 December 2023, the Company had net assets and net current assets of £6.1m (2022 - £6.5m).true

 

The directors have received confirmation from the Group that it will provide ongoing financial support for a period of not less than 12 months in order of the Company to meet its liabilities as they fall due. As a result, the below disclosures which are in respect of the wider Butterfly Topco Limited group, are considered relevant to the Company.

 

As at the year-end date the Group had generated EBITDA of £7.6m (2022 - £0.8m) and generated cash flows from operating activities of £9.8m (2022 - £1.3m). Closing cash balances were £10.7m (2022 - £2.5m), taking into account the injection from its shareholders of £4.0m by way of convertible shareholder loan notes issued on 10 July 2023 after discussion with its Senior Lender.

 

The Group had £12.8m of term loans drawn from its facilities agreement with its Senior Lender to finance the acquisitions of Polygon Labs LLC and Meptik LLC both acquired in 2022. £10m is drawn from one term loan and £2.8m from an additional term loan facility of £7.0m, both of which are not due for repayment until December 2027. At the year-end date the net debt position of the Group excluding shareholder loans was £2.1m (2022 - £9.3m). The Group has access to additional facilities via a £3.0m revolving credit facility which is undrawn and £4.2m of the additional term loan facility which is undrawn to finance further commitments under the acquisitions.

 

The Group’s term loan arrangements with its Senior Lender are based on two covenants. The first is Adjusted Leverage (the ratio of an Adjusted EBITDA-based metric to Total Net Debt) measured on a quarterly basis on a rolling 12-month period with the target ratio reducing over time. The second covenant is an Interest Cover (the ratio of Cashflow to Net Finance Charges) again measured on a quarterly basis on a rolling 12-month period. The Senior Facilities are provided by Santander UK PLC and details can be found in Note 20 to the financial statements.

 

The Group has net current assets of £14.7m (2022 - £10.5m) at 31 December 2023 and has remained stable through 2024 to the date of signing of the financial statements. The directors are satisfied with the cash, additional facilities line and current balance of term loans within the business such that it can meet any future ongoing obligations.

 

The long term debt of the Group is made up of shareholder loan notes of £151.2m (2022 – £132.9m) which mature on the earlier of the Group entering into an agreement with a new acquirer or the maturity of those loan notes in March 2031. The shareholders have not requested any interest repayments until that point.

 

The directors monitor cashflow through short and long term forecasting and its going concern assessment is on a future looking period of a minimum of twelve months from the date of signing the audited financial statements. These forecasts are stress tested on revenue following a deep review of pipeline known projects and historical seasonality, alongside modelling of debtor days lengthening.

 

Our margin forecasts are based on our new supply chain product pricing and working capital is driven predominantly by our sales demand and appropriately run through our financial model taken into account any historical trends. The forecasts have also been heavily sensitised in producing a financing case to ensure that with minimal revenue growth and cost efficiencies actioned we are still able to maintain cash liquidity and meet our covenant requirements.

 

The directors have considered the financial forecasts of the overall Group inclusive of this entity, taking into consideration the current macroeconomic climate, the projections are for the Group to remain profitable and generate positive cashflows in both a short term and long term assessment giving the Group the ability to continue to operate into the future and meet the respective financial covenants.

 

The directors conclude that there are no material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern and have therefore adopted the going concern basis in preparing the financial statements.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 20 -
1.3
Turnover

Revenue related to management fees charged to group undertakings. Revenue is recognised over the period to which the management fees relate.

 

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and revenue can be measured reliably. Revenue is measured at the fair value of consideration receivable, after discounts, but excluding VAT.

1.4
Research and development expenditure

In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure on research is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised as an intangible asset if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight line basis over their useful economic lives of 3 years.

 

If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.

1.5
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.

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:

Development Expenditure
3 years straight line
1.6
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:

Fixtures and fittings
20% straight line
Computers
33% 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 credited or charged to profit or loss.

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.

1.7
Fixed asset investments

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

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

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 21 -
1.8
Impairment of fixed assets

At each reporting period end date, the company 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.

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.

1.9
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.

1.10
Financial instruments

The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with 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.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 22 -
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 company 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 company 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.

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.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 23 -
Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.11
Equity instruments

Equity instruments issued by the company 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 company.

1.12
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 company’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 when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.13
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.

1.14
Retirement benefits

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

1.15
Share-based payments

For cash-settled share-based payments, a liability is recognised for the goods and services acquired, measured initially at the fair value of the liability. At the balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 24 -

Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the most appropriate model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.

 

Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

For cash-settled share-based payments, a liability is recognised for the goods and services acquired, measured initially at the fair value of the liability. At the balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.

 

The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Company keeping the scheme open or the employee maintaining contributions required by the scheme)

 

Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.

 

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.

 

Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

1.16
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Rentals paid under operating leases are charged to the Statement of Comprehensive Income on a straight-line basis over the lease term.

 

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 25 -
1.17
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.

2
Judgements and key sources of estimation uncertainty

In the application of the company’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.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Intangible assets

Determine the point from which it is appropriate to recognised an intangible asset for development costs incurred in respect of new products. In doing so, the Directors have considered whether the various recognition criteria required by FRS 102 have been met, in particular the reliable measurement of costs directly attributable to the development, the technical feasibility of the project, the availability of the necessary resources to complete the product development, and the existence of a suitable market to buy the finished product.

Share based payment charge

The company is party to an arrangement whereby the Parent has issued shares and share-matching arrangements as part of its long-term incentive plan for employees. For shares, these are classified as equity-settled share-based payments and are therefore fair valued at the grant date, and the resultant share-based payment charge spread over the expected vesting period of the instruments.

 

There are a number of existing schemes from prior years. For the shares issued in May 2023, these were valued using a Monte-Carlo simulation option pricing model based on the Black-Scholes model. This requires a number of assumptions to be made including the share price at the grant date, the volatility of the share price, expected dividend yield and expected period to exercise.

 

The shares were issued with an average exercise price of £1 per share for E shares and £0.50 per share for F shares. The weighted average fair value net of exercise price is £33.08 for E shares and £0.62 for F shares, which was determined with input from an expert.

 

The directors are satisfied that the share price is reasonable taking into consideration the EBITDA performance and the resultant expected enterprise value of the company, based on benchmarking of the earnings ratio to comparable companies in the sector.

 

The total anticipated share-based payment charge is spread over the vesting period of the instruments. For those instruments that do not vest before the year-end, management make an assessment of the the expected timing of the vesting date.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Judgements and key sources of estimation uncertainty
(Continued)
- 26 -
Cash settled

The company has granted cash-settled share-based payments in the year. These are fair-valued at each period end, and the resultant expected share based payment charge spread over the expected vesting period of the instruments.

Vesting period

The vesting period is the point at which there is an exit event (ie: a sale of listing of the Company). The directors have assessed the relevant vesting period, based on information available at the balance sheet date. Their assumption was that of an exit event at June 2025.

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.

Internal development time

Identification of staff time spent in developing and improving products requires a key estimate in order to capitalise eligible costs.

Testing of impairment

The company considers on an annual basis whether indications of impairment relating to non-monetary assets exist and if so perform an impairment test. The recoverable amount is determined based on the higher of value in use calculations or fair value less costs to sell. The use of value in use method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows, which are key estimates. Further details are provided in note 10.

Recoverability of development costs

The company determines the recoverability of development costs from future cash flows based on the development project and any changes in the potential market for the product. The capitalisation of development costs is based on discounted future cash flows based on the business forecasts of revenues generated from development of new products and are therefore inherently judgemental. Future events could cause the values of this intangible asset to be impaired.

3
Turnover

The whole of the turnover is attributable to the principal activity of the Company. All turnover arose within the United Kingdom in the current and prior year.

 

2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
16,111,398
15,891,212

All turnover arises in the United Kingdom from the one principal activity.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 27 -
4
Alternative performance measure

The Directors have used an Alternative Performance Measure ("APM") in the preparation of these financial statements. The Consolidated Income Statement has presented Adjusted EBITDA, where Adjusted EBITDA represents Earnings before Interest, Tax, Depreciation and Amortisation.

 

The Directors have presented this APM because they feel it most suitably represents and explains the underlying performance of the business, and allows comparability between the current and comparative period in light of the rapid changes in the business, most notably its growth to new sites and the financing costs incurred as part of this. The Directors also believe that this will allow an ongoing trend analysis of this performance based on current plans for the business.

5
Operating loss
2023
2022
Operating loss for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(1,793)
11,670
Research and development costs
478,309
927,461
Government grants
(400,000)
-
Depreciation of owned tangible fixed assets
123,236
206,062
Amortisation of intangible assets
2,336,397
1,283,647
Impairment of intangible assets
49,522
-
0
Operating lease charges
28,381
5,018
6
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
42,000
40,000
For other services
All other non-audit services
94,227
72,896
7
Employees

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

2023
2022
Number
Number
Admin
67
80
IT
4
4
Sales
3
18
Technology
60
71
Total
134
173
DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
7
Employees
(Continued)
- 28 -

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
10,035,099
9,687,528
Social security costs
1,118,492
1,097,331
Pension costs
233,195
198,897
11,386,786
10,983,756

The above costs exclude £1,777,150 (2022 - £2,680,202) which has been capitalised as development costs in the year, as shown in note 11.

8
Interest payable and similar expenses
2023
2022
£
£
Interest on bank overdrafts and loans
18,751
15,362
Interest on overdue taxation
34,854
-
0
53,605
15,362
9
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
100,000
(42,214)
Adjustments in respect of prior periods
(117,654)
-
0
Total current tax
(17,654)
(42,214)
Deferred tax
Origination and reversal of timing differences
(317,471)
(135,284)
Changes in tax rates
(19,969)
-
Adjustment in respect of prior periods
128,571
(206,040)
Total deferred tax
(208,869)
(341,324)
Total tax credit
(226,523)
(383,538)
DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
9
Taxation
(Continued)
- 29 -

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:

2023
2022
£
£
Loss before taxation
(1,025,715)
(747,030)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%)
(241,248)
(141,936)
Tax effect of expenses that are not deductible in determining taxable profit
112,007
93,897
Change in unrecognised deferred tax assets
(111,745)
-
0
Adjustments in respect of prior years
-
0
(42,214)
Permanent capital allowances in excess of depreciation
(60)
-
0
Research and development tax credit
(94,082)
-
0
Other permanent differences
3
-
0
Remeasurement of deferred tax for change in tax rate
(19,969)
(32,468)
Deferred tax adjustments in respect of prior years
128,571
(206,040)
Super deduction
-
0
(54,777)
Taxation credit for the year
(226,523)
(383,538)

Factors that may affect future tax charges

The main corporation tax rate increased from 19% to 25% on 1 April 2023. The deferred tax balances at 31 December 2023 have been measured using the rates expected to apply in the reporting periods when the timing differences reverse, being 25% (2022 - 25%).

10
Impairments

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

2023
2022
Notes
£
£
In respect of:
Intangible assets
11
49,522
-
0
Recognised in:
Administrative expenses
49,522
-
DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 30 -
11
Intangible fixed assets
Development Expenditure
£
Cost
At 1 January 2023
8,227,623
Additions - internally developed
1,975,166
Disposals
(11,448)
At 31 December 2023
10,191,341
Amortisation and impairment
At 1 January 2023
2,614,727
Amortisation charged for the year
2,336,397
Impairment losses
49,522
At 31 December 2023
5,000,646
Carrying amount
At 31 December 2023
5,190,695
At 31 December 2022
5,612,896

Impairment testing

The Company considers annually whether there are any indicators of impairment of its intangible assets and other non-monetary assets in the cash-generating unit ("CGU"). Consideration is made by reference to a value-in-use calculation, which covers a 5 year detailed cashflow followed by terminal values. The present value of the expected cash flows is determined by applying a suitable discount rate reflecting the current market assessments of the time value of money and risks specific to the CGU. The pre-tax discount rate applied to the group's cashflows is 20.00%.

 

As of the reporting date management performed impairment assessments for intangible assets and concluded that there were no indications of impairment.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 31 -
12
Tangible fixed assets
Fixtures and fittings
Computers
Total
£
£
£
Cost
At 1 January 2023
19,268
907,395
926,663
Additions
-
0
46,956
46,956
Disposals
-
0
(10,305)
(10,305)
At 31 December 2023
19,268
944,046
963,314
Depreciation and impairment
At 1 January 2023
14,121
650,134
664,255
Depreciation charged in the year
2,585
120,651
123,236
Eliminated in respect of disposals
-
0
(10,305)
(10,305)
At 31 December 2023
16,706
760,480
777,186
Carrying amount
At 31 December 2023
2,562
183,566
186,128
At 31 December 2022
5,147
257,261
262,408
13
Fixed asset investments
2023
2022
Notes
£
£
Investments in subsidiaries
14
1,755,546
1,755,546
DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 32 -
14
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
Disguise Systems Limited
Hermes House, 88-89 Blackfriars Rd, South Bank, London, SE1 8HA
Ordinary
100.00
-
Disguise Systems (APAC) Limited
Workshop D2, 26th Floor, TML Tower, No. 3 Hoi Shing Road. Tsuen Wan, New Territories, Hong Kong
Ordinary
-
100.00
Disguise Systems Inc
421 Colyton Street, #1R, Los Angeles, CA 90013
Ordinary
-
100.00
Disguise Systems (China) Limited
Room 103, 6/F WeWork, The Konnect, 118 South Yunnan road, Huangpu District, Shanghai, China
Ordinary
-
100.00
Disguise EMEA Limited
Hermes House, 88-89 Blackfriars Rd, South Bank, London, SE1 8HA
Ordinary
-
100.00
Disguise Spain Sociedad Limitada
Paseo Recoletos 37 Planta 128004 Madrid, Spain
Ordinary
-
100.00
Disguise Systems Canada Inc (formerly Mapping Matters Inc)
630, boul. Rene-Levesque Ouest, Bureau 2780, Montreal, Quebec H3B 1S6, Canada
Ordinary
-
100.00
Disguise New Zealand Limited
Level 4 BDO Centre, 4 Graham Street, Auckland 1010, New Zealand
Ordinary
-
100.00
Disguise Korea Limited
G129-3 No 219, Tera3 No 219, Tera-tower 2, 201, tower 2, 201, Songpadaero, Songpagu, Seoulgu, Korea
Ordinary
-
100.00
Disguise Japan GK
371 We Work Ocean Gate Minato Mirai, Japan
Ordinary
-
100.00
Previz LLC
1115 W Sunset Blvd, Suite 608, Los Angeles, CA 90012, USA
Ordinary
-
100.00
Disguise Systems Singapore Pte  Limited
600 North Bridge Road, #23-01 Parkview Square, Singapore (18878)
Ordinary
-
100.00
Polygon Labs LLC
228 Bushwick Ave 3G, Brooklyn, New York 11026, USA
Ordinary
-
100.00
Meptik LLC
215 Chester Ave SE Suite A-111, Alanta, Georgia 30316, USA
Ordinary
-
100.00
15
Debtors
2023
2022
Amounts falling due within one year:
£
£
Corporation tax recoverable
787,097
607,280
Amounts owed by group undertakings
28,629,209
26,823,494
Other debtors
384,316
406,038
Prepayments and accrued income
130,306
135,171
29,930,928
27,971,983
2023
2022
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 17)
855,789
646,920
Total debtors
30,786,717
28,618,903
DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 33 -
16
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
233,014
317,803
Amounts owed to group undertakings
30,770,376
28,056,645
Taxation and social security
261,243
1,114,173
Other creditors
392,139
65,822
Accruals and deferred income
188,738
327,282
31,845,510
29,881,725

Amounts owed to group undertakings are interest free, unsecured and repayable on demand,

17
Deferred taxation

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

Assets
Assets
2023
2022
Balances:
£
£
Accelerated capital allowances
(1,295,106)
(1,132,699)
Losses and other deductions
2,136,896
1,763,164
Short term timing differences
13,999
16,455
855,789
646,920
2023
Movements in the year:
£
Asset at 1 January 2023
(646,920)
Credit to profit or loss
(208,869)
Asset at 31 December 2023
(855,789)

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

18
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
233,195
198,897

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
18
Retirement benefit schemes
(Continued)
- 34 -

Contributions totalling £51,329 (2022 - £65,822) were payable to the fund at the reporting date and are included to other creditors.

19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
180,000 (2022 - 180,000) Ordinary shares of £0.01 each of 1p each
180,000
180,000
1,800
1,800
9,677 (2022 - 9,677) A Ordinary shares of £0.01 each of 1p each
9,677
9,677
97
97
3,870 (2022 - 3,870) B Ordinary shares of £0.01 each of 1p each
3,870
3,870
38
38
193,547
193,547
1,935
1,935

All shares confer voting rights, enable the holder to participate in dividends, and enable the holder to participate in a capital distribution. All shares are non-redeemable.

20
Operating lease commitments
Lessee

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2023
2022
£
£
Within one year
15,000
15,628
Between two and five years
46,250
60,000
In over five years
-
0
3,750
61,250
79,378
21
Related party transactions
Transactions with related parties

The company engaged Dept Design & Technology Ltd who is a sister portfolio company within the Carlyle fund on an arms length basis in relation to website design with £nil (2022: £131,763) charged through the accounts.

Other information

The Company is a wholly owned subsidiary of Butterfly Topco Limited and has taken advantage of the available exemption conferred by section 33.1A of FRS 102 not to disclose transactions with wholly owned group members. Details of balances outstanding at the year end are given in notes 15 and 16.

DISGUISE TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 35 -
22
Ultimate controlling party

At the reporting period date, the Company's immediate parent undertaking was New Leaf Bidco Limited, a company incorporated in England, whose registered office is Hermes House 88-89 Blackfriars Rd, South Bank, London, SE1 8HA.

 

On 14 August 2024, following a restructuring of the companies in the group, the immediate parent undertaking became Butterfly Bidco Limited, a company incorporated in England, whose registered office is Hermes House 88-89 Blackfriars Rd, South Bank, London, SE1 8HA.

 

The Company's ultimate parent company at the reporting period date and at the date of signing is unchanged, and is Butterfly Topco Limited, a company incorporated in England, whose registered office is Hermes House 88-89 Blackfriars Rd, South Bank, London, SE1 8HA.

 

The largest and smallest group in which the results of the Company are consolidated was that headed by Butterfly Topco Limited. The consolidated financial statements of Butterfly Topco Limited are publicly available and may be obtained from its registered office at Hermes House 88-89 Blackfriars Rd, South Bank, London, SE1 8HA.

 

CETP IV Investment S.a.r.l, is the ultimate controlling party at the reporting date.

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