Company Registration No. SC468392 (Scotland)
EDINBURGH ALTERNATIVE FINANCE LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
PAGES FOR FILING WITH REGISTRAR
EDINBURGH ALTERNATIVE FINANCE LIMITED
CONTENTS
Page
Statement of financial position
1
Notes to the financial statements
2 - 9
EDINBURGH ALTERNATIVE FINANCE LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
31 DECEMBER 2021
31 December 2021
- 1 -
2021
2020
Notes
£
£
£
£
Fixed assets
Tangible assets
5
14,062
16,028
Current assets
Debtors
6
131,975
281,454
Cash at bank and in hand
808,956
1,118,278
940,931
1,399,732
Creditors: amounts falling due within one year
7
(289,845)
(405,640)
Net current assets
651,086
994,092
Total assets less current liabilities
665,148
1,010,120
Creditors: amounts falling due after more than one year
8
(527,169)
(240,000)
Net assets
137,979
770,120
Capital and reserves
Called up share capital
10
1,819,702
1,651,493
Share premium account
7,043,681
6,351,851
Profit and loss reserves
(8,725,404)
(7,233,224)
Total equity
137,979
770,120
The directors of the company have elected not to include a copy of the income statement within the financial statements.
true
These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements were approved by the board of directors and authorised for issue on 27 April 2022 and are signed on its behalf by:
S Lunn
Director
Company Registration No. SC468392
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
- 2 -
1
Accounting policies
Company information
Edinburgh Alternative Finance Limited is a private company limited by shares incorporated in Scotland. The registered office is 23 Manor Place, Edinburgh, EH3 7DX.
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 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
The financial statements are prepared in
sterling
, which is the functional currency of the company.
Monetary a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historic cost convention, modified to include certain items at fair value. The principle accounting policies adopted are set out below.
1.2
Going concern
Whilst the company made a loss for the year, this was anticipated and tightly controlled. The loss was due in part to reduced activity as a result of the Covid pandemic. The company had bank balances of £0.8m at the year end.
true
On 3 February 2022, a new facility agreement was established to provide £100m of institutional funding for SME loans through the company's platform to support SMEs as they recover from the coronavirus pandemic and return to growth.
The company has prepared various scenario forecast models. Under the base case scenario it is concluded that no additional equity funding is required, however it is acknowledged that under other forecast scenarios additional funding and/or cost savings would be required.
The directors are satisfied that should this additional funding be required, then it would be available from the shareholder base and that should they be required, the necessary cost savings would be achievable.
The key assumptions in management’s forecasts are the size and phasing of borrower demand and availability of additional equity funding and/or cost savings should they be required. Whilst unconfirmed at this time, none of these uncertainties are assessed to be significant, as there is confidence in their deliverability, therefore the directors are satisfied that it remains appropriate to prepare the accounts on a going concern basis.
1.3
Turnover
Turnover represents commission charged to borrowers and lenders for the use of the LendingCrowd platform. Commission charged to lenders is recognised over the term of the loan and recognised when repayments are made, whilst commission charged to borrowers is recognised on acceptance of the loan.
1.4
Research and development expenditure
Research
and development
expenditure is written off against profits in the year in which it is incurred.
1.5
Tangible fixed assets
Tangible fixed assets
are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 3 -
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Plant and equipment
33% per annum
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
.
1.6
Cash at bank and in hand
Cash at bank and in hand
are basic financial assets
and
include cash in hand
and
deposits held at call with banks
.
1.7
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 statement of financial position 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
current assets and are therefore measured at transaction price.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
Basic financial liabilities
Basic financial liabilities, including
creditors
,
are current liabilities and are therefore measured at transaction price.
Other Financial Liabilities
Compound financial instruments issued by the company comprise convertible loans that can be converted to share capital at the option of the lender. The liability component of a compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 4 -
1.8
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.
1.9
Taxation
The tax
credit through the tax line of the statement of comprehensive income represents research and development tax credits paid to the company.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement
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.
R&D tax credits
R&D tax credits are recognised at the fair value of the asset received or receivable when there is reasonable assurance that claims will be successful. R&D tax credits are recognised as part of the taxation charge or credit in the year the recognition criteria are met. R&D tax credits relating to earlier periods are included within the current tax charge or credit as adjustments in respect of prior periods.
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.
Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or right to pay less tax, at a future date, at rates expected to apply when they crystallised based on current tax rates and law. Timing differences arise from inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not they will be recovered. Deferred tax assets and liabilities are not discounted.
1.10
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense
.
1.11
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.12
Leases
Rentals payable under operating leases
are
expensed over the life of the
relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 5 -
1.13
Equity-settled share-based payments for employees are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the service period to vesting, based on the company's estimate of equity instruments that will eventually vest. A corresponding adjustment is made to the profit and loss reserves.
At each balance sheet date, the company revises its estimate of the number of equity instruments expected to vest, as a result of the effect of non market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to profit and loss reserves.
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.
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.
Valuation of share options
The determination of the valuation of share options involves significant judgement around the inputs and assumptions used in the options valuation model. The assumptions are reviewed at each grant date by management. See note 10.
3
Employees
The average monthly number of persons (including directors) employed by the company during the year was 30 (2020 - 33
).
4
Deferred taxation
The company has a potential deferred tax asset of £1,927,870 (2020: £1,224,500), for unused tax losses that may be offset against future profits, reducing future corporation tax liabilities. The recoverability of deferred tax assets is dependent on the business' ability to generate sufficient future taxable profits to utilise tax losses. Consistent with accounting standards, due to the inherent uncertainty in forecasting the amount and timing of future taxable profits, this has not been recognised in the year to 31 December 2021.
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 6 -
5
Tangible fixed assets
Plant and machinery etc
£
Cost
At 1 January 2021
59,246
Additions
11,225
At 31 December 2021
70,471
Depreciation and impairment
At 1 January 2021
43,218
Depreciation charged in the year
13,191
At 31 December 2021
56,409
Carrying amount
At 31 December 2021
14,062
At 31 December 2020
16,028
6
Debtors
2021
2020
Amounts falling due within one year:
£
£
Trade debtors
1,674
1,396
Amounts owed by connected companies
2,870
1,200
Prepayments and accrued income
45,342
158,522
Other debtors
82,089
120,336
131,975
281,454
7
Creditors: amounts falling due within one year
2021
2020
£
£
Trade creditors
19,250
42,291
Amounts owed to connected companies
115,087
255,140
Taxation and social security
51,573
36,913
Other creditors
103,935
71,296
289,845
405,640
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 7 -
8
Creditors: amounts falling due after more than one year
2021
2020
£
£
Other creditors
527,169
240,000
On 10 September 2020, a £240,000 convertible loan was issued to the company. This loan, repayable three years after the date of issue, can be converted to share capital at the option of the lender, on pre-agreed terms, up to and including the redemption date. The loan is interest free for the first year and thereafter interest is charged at 8% per annum.
On 30 September 2021, a £500,000 convertible loan note was issued by the company. This loan, repayable ten years after the date of issue, can be converted to share capital at the option of the lender, on pre-agreed terms, up to and including the redemption date. This loan is interest free for the first three years and thereafter interest is charged at 7.72% per annum.
£218,000 of the September 2021 loan note was converted into equity prior to the year-end at a conversion rate of £0.65 per share. This amounted to a total of 335,384 "A" ordinary shares being issued. The balance of the loan note remaining at 31 December 2021 was £282,000. The loan note liability that has been recognised is the loan note principal as the difference between the loan note principal and fair value is not assessed to be significant. Similarly, no value has been attributed to the equity element of this loan note on the grounds of materiality.
9
Share-based payment transactions
Number of share options
Weighted average exercise price
2021
2020
2021
2020
Number
Number
£
£
Outstanding at 1 January 2021
231,730
257,384
0.75
0.70
Granted
1,799,229
0.19
Forfeited
(199,979)
(25,654)
0.84
0.20
Exercised
(488,921)
0.19
Outstanding at 31 December 2021
1,342,059
231,730
0.19
0.75
Exercisable at 31 December 2021
51,308
231,730
0.20
0.75
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
9
Share-based payment transactions
(Continued)
- 8 -
Options outstanding at 1 January 2021 were fully vested and were in respect of 2017
and 2018
share options scheme for certain employees.
During the year the company issued equity-settled share options under both an Approved Share Option Scheme and an Unapproved Share Option Scheme.
The options outstanding at 31 December 2021 had an exercise price ranging from £0.19 to £0.20 per share, and a remaining contractual life which runs 10 years from the date of grant.
The options granted have vesting periods ranging from immediately to 3 years. Vesting is contingent on holders remaining in the company's employment throughout the vesting period.
The share options granted during the year were valued using a Black-Scholes model.
The share based payment charge for the year was £350,263 (2020: £nil), and is included within cost of sales in the statement of comprehensive income.
10
Called up share capital
2021
2020
£
£
Ordinary share capital
Issued and fully paid
15,816,184 (2020: 14,469,477) Ordinary shares of £0.10 each
1,581,619
1,446,948
2,380,831 (2020: 2,045,447) A Ordinary shares of £0.10 each
238,083
204,545
1,819,702
1,651,493
There were 5 allotments of shares in respect of subscriptions and one share conversion made during the year. On 27 July 2021, 384,615 ordinary shares, with a nominal value of £0.10 per share were allotted for consideration of £0.65 per share.
On 7 September 2021, 143,077 ordinary shares, with a nominal value of £0.10 per share were allotted for consideration of £0.65 per share.
On 30 September 2021, 322,401 ordinary shares, with a nominal value of £0.10 per share were allotted for consideration of £0.65 per share.
On 30 November 2021, 488,921 ordinary shares, with a nominal value of £0.10 per share were allotted for consideration of £0.19 per share
on the exercise of share options per note
10 and 7,693 ordinary shares, with a nominal value of £0.10 per share were allotted for consideration of £0.65 per share.
On 1 December 2021, 335,384 A ordinary shares with a nominal value of £0.10 were converted from debt to equity as discussed in Note 9 for a consideration of £0.65 per share.
EDINBURGH ALTERNATIVE FINANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 9 -
11
Audit report information
As the income statement has been omitted from the filing copy of the financial statements
,
the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006
:
The auditors report was unqualified.
The senior statutory auditor was David Holmes.
The auditor was Johnston Carmichael LLP.
12
Events after the reporting date
On 3 February 2022, a new facility agreement was established to provide £100m of institutional funding for SME loans through the company's platform to support SMEs as they recover from the coronavirus pandemic and return to growth. This will be delivered through both the company's standard loan product and through the UK Government's Recovery Loan Scheme. The company has started to deploy this funding to SMEs across Britain.
2021-12-31
2021-01-01
false
27 April 2022
CCH Software
CCH Accounts Production 2022.200
No description of principal activity
This audit opinion is unqualified
S Lunn
W Dobbie
Sir A M Crombie
A Weir
G Reid
2022-04-27
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