Registered number: SC349230
CLOUDSOFT CORPORATION LIMITED
FINANCIAL STATEMENTS
INFORMATION FOR FILING WITH THE REGISTRAR
FOR THE YEAR ENDED 31 DECEMBER 2023
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CLOUDSOFT CORPORATION LIMITED
REGISTERED NUMBER: SC349230
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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CLOUDSOFT CORPORATION LIMITED
REGISTERED NUMBER: SC349230
STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2023
The Company's financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of comprehensive income in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 4 to 17 form part of these financial statements.
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CLOUDSOFT CORPORATION LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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Comprehensive income for the year
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Other comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Shares issued during the year
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Total transactions with owners
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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Comprehensive income for the year
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Other comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Share based payment expense
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Total transactions with owners
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The notes on pages 4 to 17 form part of these financial statements.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Cloudsoft Corporation Limited (company number: SC349230) is a private company limited by shares and is incorporated in Scotland. The address of its registered office is Suite 2, Ground Floor, Orchard Brae House, 30 Queensferry Road, Edinburgh EH4 2HS.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
In order to correctly allocate costs within the statement of comprehensive income, a number of expenses have been reallocated from administrative expenses to cost of sales and turnover. The directors consider this provides a more appropriate guide to performance and aligns the statutory financial statements and with internal management accounts and internal performance indicators. This has resulted in a reallocation of £2,634,224 from administrative expenses to cost of sales and turnover. There has been no impact upon prior year operating loss or loss for the year.
The following principal accounting policies have been applied:
We live in uncertain times which of course leads to uncertainty in any business. The tech industry has faced significant challenges over the past few years, leading major firms to tighten their spending, which has impacted company results.
The company incurred a net loss of £1,186,032 (2022 - £372,495) for the year ended 31 December 2023, with net liabilities of £905,953 (2022 - £259,931), and net current assets of £180,367 (2022 - £319,813) at the statement of financial position date. The business has been loss making in recent years, mainly due to revenue levels being lower than forecast, and this has been reflected in a reduction in cash levels over the period together with net current assets.
As a result of these matters there is a material uncertainty that may cast significant doubt upon the company’s ability to continue as a going concern and therefore whether the company will realise its assets and settle its liabilities in the ordinary course of business at the amounts recorded in the financial statements.
We have therefore taken several steps to address this issue.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Going concern (continued)
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Post the 2023 financial year end the company has undertaken a strategic reorganisation in order to better align the cost base with the future operational structure of the company, generate profitability, enhance cash inflows and improve the balance sheet position. In 2024 this will result in a reduction of business unit overheads of 31% as well as a fall in group overheads of 33% and amount to a saving of £786k in annual running costs. Although going into 2024 the company aims to expand and broaden the customer base; in line with similar companies in the software industry, it continues to face a material uncertainty over the timing of revenue generation and cash inflows. In the past, the company has seen its main focus within the AMP product line, however we have changed our sales strategy in this area to focus on selling via OEMs. Our primary focus is now selling and delivery of services and to that end, the sales team has been restructured and a new Services Commercial Director hired with the aim of further increasing the breadth and depth of customer penetration. We are now seeing the benefits from this and have recently closed a $1.5m services deal.
The directors believe that the Company has a range of sales opportunities in the pipeline and these along with the already confirmed projects and services, will generate additional sales, leading to increased cash inflows for the business. This along with the above noted restructuring means the company is now optimally positioned to right size in line with sales performance and manage liquidity.
During 2023 and 2024 further loan financing was input by the main investors and they continue to believe that Cloudsoft will become a profitable, cash generative and successful company which will deliver a positive return to all stakeholders over time.
The Board also continues to proactively seek additional funding opportunities to facilitate potential growth and product development in order to accelerate company growth.
The directors continue to regularly review the cash flow and trading forecasts in order to ensure that the company has sufficient resources to meet ongoing liabilities on a rolling 12 month basis. Having reviewed any material uncertainty in respect of sales forecasts and taking into account the ability of the company to manage its cost base in line with any potential sales downturn, the Directors believe that Cloudsoft’s current financial position will sustain the company’s operational existence for at least the next twelve months from the date of the accounts.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of revenue can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract;
∙the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙the costs incurred and the costs to complete the contract can be measured reliably.
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight line basis over the lease term.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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 shall be recognised as an expense when it is incurred. Intangible assets are recognised from the development phase of a project 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, being 5 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.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of financial position. The assets of the plan are held separately from the Company in independently administered funds.
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
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 any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than employees, profit or loss is charged with fair value of goods and services received.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of financial position date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses. The lives are based on historical experience with similar assets, and historically there have been no changes to the useful lives of the assets held that have resulted in a material change to the company’s depreciation charge.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Tangible fixed assets (continued)
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Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
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.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Investments in joint ventures are measured at cost less accumulated impairment.
Short term debtors are measured at transaction price, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or in case of an out-right short-term loan that is not at market rate, the financial asset or liability is measured, initially at the present value of future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost, unless it qualifies as a loan from a director in the case of a small company, or a public benefit entity concessionary loan.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Judgements in applying accounting policies and key sources of estimation uncertainty
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The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and
the amounts reported for revenues and expenses during the year. However, the nature of estimation
means that actual outcomes could differ from those estimates. The following judgements and estimates
have had the most significant effects on amounts recognised in the financial statements:
Intangible Assets - Development expenditure
Development expenditure is capitalised in accordance with the Company's accounting policy. Initial
capitalisation of costs is based on management’s judgement that technical and economic feasibility is
confirmed, usually when a product development project has reached a defined milestone according to an
established project management model. In determining the amounts to be capitalised management
makes assumptions regarding the expected future cash generation of the assets and the expected period
of benefits.
The estimates and assumptions made to determine the amortisation charge require judgements to be
made as regards to useful lives. The useful lives of the Company's intangible assets are determined by
management and are reviewed annually for appropriateness. The lives are based on historical experience
with similar assets.
Share based payment transactions
In line with FRS102 share based payment transactions are accounted for at fair value. The financial
statements include share options fair valued at the date of grant. Managements judgement is required to
determine an appropriate fair value in line with accounting standards. In determining the fair value
management consider the earnings valuation model and relevant market conditions.
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The average monthly number of employees, including the directors, during the year was as follows:
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Charge for the year on owned assets
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Charge for the year on owned assets
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Investment in joint ventures
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Prepayments and accrued income
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Creditors: Amounts falling due within one year
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Other taxation and social security
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Accruals and deferred income
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Creditors: Amounts falling due after more than one year
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Other loans of £752,000 are 3-year term loans raised from existing investors. The loan accrues interest at a rate of 8% per annum. During the year the investors agreed in writing to extend the repayment date to 30 April 2025. Post year end the investors signed a loan variation agreement to extend the repayment date to 30 September 2026 with an option to extend further to 30 September 2027.
Other loans of £425,000 have been raised from existing investors during the year. The loan accrues interest at a rate of 8% per annum and are repayable in April 2026.
The loans are secured by a bond and floating charge over the assets and undertaking of the company.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Allotted, called up and fully paid
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119,088,000 (2022 - 65,088,000) Ordinary shares of £0.01 each
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510,442 (2022 - 510,400) Non voting shares of £0.01 each
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100 (2022 - 100) Preference shares of £0.01 each
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The non-voting and preference shares do not hold any rights to voting. The preference shares are not entitled to any distributions of available profits.
On a winding up of the company or on exit the preferred shareholders have a right to receive, in priority to any other classes of shares, a sum equal to the original price of the shares plus the share premium.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Share options and warrant grants
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The company has the following share options and warrant grants in issue at 31 December 2023 in respect of Non-voting ordinary shares:
Cloudsoft have two types of EMI share options: (i) Employee and (ii) Incentive. If these options remain unexercised at the end of the options period, they expire. Options are forfeited if the employee leaves the company.
The company has taken advantage of the exemption provided by FRS 102 not to fair value share options granted prior to 1 January 2016.
During the year, the company recognised a share based payment charge of £Nil (2022 - £112,259).
Employee
The option period of the employee EMI share options issued ends 10 years after the date of the option agreement and their vesting period is between 1 and 36 months. At the year end, 14,217,764 EMI share options were vested. These options can be exercised at any point during the option period subject to vesting conditions. The options are settled in equity once exercised.
During 2023, 300,102 (2022 - 624,354) employee EMI share options were issued and 994,617 EMI share options were cancelled (2022 - 102,020).
Incentive
The option period of the incentive EMI share options issued ends 10 years after the date of the option agreement and there is no vesting period. These options can be exercised upon the company being sold at any point during the option period subject to vesting conditions based on the value of the sale. The options are settled in equity once exercised.
During 2023, no incentive EMI share options were issued (2022 - 1,436,400). The incentive options are unapproved and unvested at the year end. 2,484,200 incentive EMI share options were exchanged for warrant grant options. 2,146,200 incentive EMI share options were cancelled during the year.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Warrant Grants
The vesting period of the Warrant grants is 1 to 36 months. At the year end, 9,769,747 Warrant grants were vested. These Warrant grants can be exercised at any time during the warrant period. During 2023 808,500 warrant grants were issued in exchange for EMI incentive options. During 2023 4,636,576 warrant grants were issued (2022 - Nil). The Warrant grants are settled in equity once exercised.
If these Warrant grants remain unexercised at the end of the 10 year warrant period they expire. 55,000 (2022 - Nil) warrant grants expired during 2023.
In addition to the above, Scottish Loan Fund hold warrant grants totalling 4,796,427 which are settled in equity on a specified exercise event.
The Company operates a defined contributions pension scheme. The assets of the scheme are held
separately from those of the company in an independently administered fund. Contributions totalling
£15,266 (2022 - £840) were payable to the fund at the reporting date and are included in other creditors.
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CLOUDSOFT CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Commitments under operating leases
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At 31 December 2023 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Post balance sheet events
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Post year end the existing investors and provided further loan funding and extended the repayment terms for some of the existing loans to 30 September 2026 with an option to extend further to 30 September 2027.
In the opinion of the directors there is no controlling party.
The auditor's report on the financial statements for the year ended 31 December 2023 was unqualified.
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In their report, the auditor emphasised the following matter without qualifying their report:
Material uncertainty related to going concern
We draw attention to note 2.2 in the financial statements, which indicates that the company has been loss
making in recent years, mainly due to revenue levels being lower than forecast, and this has been reflected in a reduction in cash levels over the period, and net current assets. As stated in note 2.2, these events or conditions, along with the other matters as set forth in note 2.2, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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The audit report was signed on 12 September 2024 by Nicola MacLennan (Senior statutory auditor) on behalf of French Duncan LLP.
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