IBIDEM_CAPITAL_LIMITED - Accounts

The directors present the strategic report for the year ended 31 December 2021.

The results for the year and the financial position at the year-end were considered satisfactory by the directors who expect continued revenue growth in the foreseeable future.

The group continues to invest in the business - attracting new customers, enhancing technology and transitioning to in-house capabilities, with less reliance on third parties. These investments are paying off with above-industry revenue growth and gross profit enhancement supporting the group's plans to profitability.

The group measures its performance against several key performance indicators (KPIs):

Revenue for the year increased by 28% to £15.8m reflecting high customer retention and the roll out of new payrolls from customers acquired in prior years. The group expects this growth to continue having had a very successful 2021 with respect to winning new customers and expanding its footprint with existing customers.

A key strategic aim of the group is to increase its gross profit and 2021 was a successful year with gross profit margin rising by 3.0% as more pay slips are processed in-house rather than relying on local in-country partners. The growth in revenue and improved margins supports the group contributing to lower operating losses in 2021.

The total loss before tax for the year was £4.6m (2020: £4.7m). These were planned losses with significant growth expenditure being expensed.

Description of principal risks and uncertainties

The group's business is subject to a number of risks and uncertainties. The directors consider the following to be the key risks and uncertainties:

COVID-19 global pandemic

The business has operated entirely remotely since the outbreak of the Covid-19 global pandemic and continues to do so whilst maintaining its high level of customer service. The business has a customer base that is not weighted towards travel and retail sectors, which were heavily affected by the pandemic. The uncertainty of the pandemic is now behind us and there remains encouraging signs that our customers are now re-hiring and expanding into additional countries.

Funding and liquidity risk

The business manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the business has sufficient liquid resources to meet the operating needs of the business.

Interest rate cash flow risk

The business is exposed to potential upward movements in EUR Libor rate above 0.00%, currently 0.65%. With inflation rising throughout Europe there may be the case for central banks to raise interest rates but given the general economic climate, the business does not expect to see any material growth in interest expense over the coming year.

Competition

The business operates in a highly competitive environment. To date, the business has been very successful in growing and retaining its customer base. The directors expect competitive pressures to increase with advancements in technology and efficiencies.

Credit risk

All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts, where necessary.

Foreign currency risk

The business’s principal foreign currency exposures arise from trading with overseas entities. The risk is minimised through partial hedging, with traded currencies (receipts and payments) limited as far as possible to GBP, USD and EUR.

Data protection risk

The business is responsible to its customers for ensuring that customer data is adequately protected. The business has developed robust infrastructure and follows industry accepted policies and procedures as required under the certification of ISO 27001 and SOC 1. Our certification audits in 2021 highlighted no material deviations. The business has outsourced its data centre operations to third parties who operate at industry recognised standards. A material data breach would have an adverse financial impact.

Technology risk

The business has built its own robust, proprietary technology that has been in operation for a number of years with frequent upgrades and new functionality. Business continuity plans have been developed to ensure that the business will continue to operate under various scenarios.

The directors consider the following factors to be key in analysing the development and performance of the business.

- Revenue growth;

- Gross profit improvement;

- Lower operating losses; and

- Value of new contracts won.

Part of the business's activities are directed towards R&D. In its widest sense, R&D encompasses the use of scientific or technological knowledge in order to produce new or substantially improved materials, devices, products or services to install new processes and systems prior to the commencement of commercial production or application, or to improve substantially materials, devices, products or services already produced or installed.

The directors consider that the development of new software applications and other advancements being developed fall within this definition.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2021.

The principal activity of the company and group continued to be that of the provision of international payroll services.

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

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

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

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

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

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the ;

•     prepare the on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

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

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

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the group 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.

We have audited the financial statements of Ibidem Capital Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the group's and the parent company's affairs as at 31 December 2021 and of the group's loss for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

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

Conclusions relating to going concern

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

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

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

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

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

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

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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.

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.

Extent to which the audit was considered 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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the group, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the group is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the group that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Review of minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the group through enquiry and inspection with a specific focus on compliance with GDPR and other legislation relevant to data protection given the nature of the group's activities and the volume of potentially sensitive personal data held; 

• Review of financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations; and

• Performance of audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias. 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £24,995 (2020 - £2,876 loss).

Ibidem Capital Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Festival House, Jessop Avenue, Cheltenham, Gloucestershire, United Kingdom, GL50 3SP.

The group consists of Ibidem Capital Limited and all of its subsidiaries.

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

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

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

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

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: The disclosure requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c), 12.26, 12.27, 12.29(a), 12.29(b), and 12.29A;

• Section 26 ‘Share based Payment’: Share based payment arrangements required under FRS 102 paragraphs 26.18(b), 26.19 to 26.21 and 26.23; and

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

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

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

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

All financial statements are made up to 31 December 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

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

The group made losses in both 2020 and 2021. However, these were planned losses with significant growth investment expensed through the group's loss for each year. The losses in the current and prior year have been funded by the group's parent company, TeakiiPay Holdings LLC, and through a debt financing facility provided by a European-based, specialist lending company.

The group had net liabilities as at the balance sheet date. However, looking towards 2022 and beyond, the directors are confident that the group has sufficient cash resources and facilities available to meet its liabilities as they fall due by utilising existing debt financing facilities available to it and with the continued support of its parent company. The group has also prepared several scenarios with different forecasts and funding alternatives. The directors are confident that, based on their previous experience of successfully raising finance, they would be able to secure additional funding to that included in the group’s forecasts, should it be required.

At the time of approving the financial statements, the directors therefore have a reasonable expectation that the group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of the financial statements.

Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover is measured at the fair value of consideration received or receivable and represents amounts for services provided to third parties in the normal course of business during the period net of value added tax and any discounts, and results from the principal activity of the group.

Each element of turnover (described below) is recognised only when:

• Provision of services has occurred;

• The consideration received is fixed or determinable;

• There are no significant vendor obligations remaining; and

• Collection of the amount due from the customer is reasonably assured.

Income from payroll processing and any related support, maintenance and unit based licencing arrangements is recognised rateably over the initial term of the related customer contract.

Any income arising from pure consultancy work is recognised in profit or loss on a time and materials basis.

Services that have been provided at the end of a financial period, but which have not been invoiced at the time, are recognised as turnover in profit or loss and shown within prepayments and accrued income on the balance sheet.

Implementation and set-up fees in connection with the provision of payroll processing services are deferred until such initial work is considered complete and is then recognised rateably over the remaining term of the related customer contract.

Advance payments from customers or advance invoicing at the end of the financial period are included within accruals and deferred income on the balance sheet. Such amounts are recognised in profit or loss when the services are provided to the customer in accordance with the points set out above.

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

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

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

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

Intangible assets comprise both licence and development costs for computer software, and development costs on internally generated intangibles related to creating new and improved interfaces, dashboards and security features to enhance the customer experience. Such assets are defined as having finite useful lives and the costs are amortised on a straight line basis over their estimated useful lives of 3 years. Intangible assets are stated at cost less amortisation and are reviewed for impairment whenever there is an indication

that the carrying value may be impaired.

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:

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:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

In the parent company financial statements, interests in subsidiaries 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 or .

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

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

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

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

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

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

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.

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

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

Basic financial assets, 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, 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.

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.

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

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

Basic financial liabilities, 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.

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.

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

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

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

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

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

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

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.

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

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 an option pricing model considered appropriate by the directors. The fair value determined at the grant date is expensed over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.

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 leased asset are consumed.

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.

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

Deferred costs

Costs in respect of implementation and set-up fees are deferred until such initial work is considered complete and are then recognised rateably over the remaining term of the related customer contract. Deferred costs are included within prepayments and accrued income on the balance sheet.

Related parties

The company has taken advantage of exemption under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' not to disclose related party transactions with wholly owned subsidiaries within the group.

Provisions

Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event, it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

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.

Income generated from implementation and set-up fees for work performed on new customer contracts is deferred and released rateably over the remaining term of the customer contract when work is considered complete. The related costs are also deferred and released rateably over the same period. The value of costs deferred are a combination of an estimated allocation of internal staff costs and associated overhead costs, and actual third-party costs incurred.

Referred to note 20 for further details in relation to Government grants receivable in the year.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2020 - 1).

The number of directors who are entitled to receive shares under long term incentive schemes during the year was 4 (2020 - 4).

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

Investment income includes the following:

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:

Taxable losses have been incurred and are available for use against future taxable profits. A deferred tax asset has not been recognised as the group does not anticipate these losses to be fully utilised in the immediate future. The approximate value of the total unrecognised deferred tax asset measured at a standard rate of 25% (2020: 19%) is £5,320,000 (2020: £3,750,000).

Factors that may affect future tax charges

An increase in the main rate of Corporation Tax to 25% due to take effect from 1 April 2023 had been substantively enacted at the balance sheet date.

Included within Computer software is an individual asset with a carrying amount of £1,046,605 and a remaining useful life of 68 months.

Included within Development costs is an individual asset with a carrying amount of £208,281 and a remaining useful life of 36 months.

Intangible assets held are pledged as security for the borrowings of the group under fixed and floating charges.

The amortisation charge is included in Administrative expenses in the Group Statement of Comprehensive Income.

Tangible assets held are pledged as security for the borrowings of the group under fixed and floating charges.

The depreciation charge is included in Administrative expenses in the Group Statement of Comprehensive Income.

Fixed asset investments held are pledged as security for the borrowings of the group under fixed and floating charges.

Details of the company's subsidiaries at 31 December 2021 are as follows:

Registered office addresses (all UK unless otherwise indicated):

Debtors held are pledged as security for the borrowings of the group under a fixed and floating charge.

Amounts owed by group undertakings are unsecured, interest free, have no fixed repayment date and are repayable on demand.

Amounts owed to group undertakings are unsecured, interest free, have no fixed repayment date and are repayable on demand.

Other loans of £8,556,628 are secured by fixed and floating charges over all the property and undertakings of the group. The parent company, TeakiiPay Holdings LLC, has provided guarantees over this loan facility to the lender.

Other loans of £8,556,628 are repayable by monthly capital and interest payments with maturity dates ranging from 30 April 2023 to 30 June 2024. Interest is charged on other loans of £8,556,628 at 10%, and any advance subsequent to 1 January 2022 will incur interest at the higher of 10%, or 10% plus the one year Euro LIBOR rate, at the drawdown date for each advance.

Other loans of £15,386 relate to the unforgiven balance of the PPP loan as referred to in notes 3 and 20. This balance is repayable by monthly capital and interest payments with a maturity date of April 2022. Interest is charged at 1%.

On 27 March 2020, the U.S. Federal Government enacted the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") which includes provision for a Paycheck Protection Programme ("PPP") administered by the U.S. Small Business Administration ("SBA"). The PPP allows qualifying businesses to borrow up to $10million calculated based on qualifying payroll costs. PPP loans bear a fixed interest rate of 1% over a two-year term, are guaranteed by the Federal Government and do not require collateral. The loans may be forgiven, in part or whole, if the proceeds are used to retain and pay employees and for other qualifying expenditure.

The group applied for a PPP loan in the amount of £256,933, which was approved by the SBA on 30 April 2020 and received during the year ended 31 December 2020. The group used the majority of the proceeds of the PPP loan in accordance with the provisions of the CARES Act and during the year, the group applied for over 90% of the PPP loan to be forgiven. As a result, £242,681 was recognised as government grant income by the group in relation to the amount forgiven, with the balance repayable.

The group has a Management Incentive Plan (the "Incentive Plan") to award Management Incentive Units ("MIUs") to key employees and independent contractors of the group. The Incentive Plan is administered by the Board of the parent company, TeakiiPay Holdings LLC, and is subject to termination, at any time, as determined by the Board. As of 31 December 2021, 18,357 (2020: 17,033) Class C MIUs have been issued. These MIUs vest, conditional upon a contingent event, and in accordance with the terms of the Incentive Plan.

Class C MIUs are authorised under the parent company's Company Agreement, do not have an exercise price and do not expire until the parent company is dissolved. The Class C MIUs represent non-voting interest. Members holding Class C MIUs are subject in all respects to the parent company's Operating Agreement, including provisions relating to the distributions of such profits, information rights with respect to the parent company, competition and confidentiality.

No expense was recognised by the group in the year ended 31 December 2021 or 31 December 2020 in relation to these MIUs.

There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the repayment of capital.

During the year, the company allotted 1,196,849 Ordinary £0.10 shares with an aggregate nominal value of £119,685. The shares were issued at at a premium for total consideration of £3,985,507 and this resulted in an increase in the Share premium account of £3,865,822.

The share premium reserve contains the premium arising on issue of equity shares, net of issue expenses.

Retained earnings includes all current and prior period retained profits and losses.

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

Of the future minimum lease payments under non-cancellable operating leases noted above, £510,604 (2020: £233,561) relate to premises.

The remuneration of key management personnel is as follows.

As at 31 December 2021, £73,878 (2020: £73,190) was owed by a director to the group and company. The loan is denominated in US dollars, has no set repayment terms, no interest has been charged and movements in the loan balance in the current year relate solely to foreign exchange gains and losses arising on retranslation of the loan at the balance sheet date.

The controlling party is the parent company, TeakiiPay Holdings LLC, a company registered in the United States of America.

Neither the company nor group had any capital commitments at the balance sheet date (2020: £Nil).

As at the balance sheet date, the company had given a guarantee in respect of borrowings in a subsidiary undertaking of £8,556,628 (2020: £4,908,855). This guarantee is secured by fixed and floating charges over all the assets, property and undertakings of the company.

The group had no contingent liabilities at the balance sheet date (2020: £Nil).

In the current year, it was identified that certain costs previously treated as administrative costs (or overhead costs) were more appropriately cost of sales (or direct costs), and vice versa.

As a result of this change in accounting policy, the overall impact in the current year is an increase in cost of sales of £188,840 and a reduction in administrative costs of the same amount.

As a change in accounting policy, the impact has been adjusted retrospectively and resulted in an increase in cost of sales of £231,672 and a reduction in administrative costs of the same amount in the comparative amounts for the year ended 31 December 2020 as presented in these financial statements.

There has been no impact on the overall loss for either the current or prior year, on the brought forward or carried forward losses, or on the equity as previously reported as a result of the retrospective application of this change in accounting policy.