CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2016

BUSINESS REVIEW

I am delighted to report great progress in the first half of 2016, as we rapidly develop Crossword Cybersecurity PLC’s technology commercialisation business focused exclusively on cyber security.

Cyber security continued to be a headline issue through the first half of 2016. HM Government’s Cyber Security Breaches Survey 2016, launched in May, revealed that 65% of large businesses experienced a cyber breach or attack in the past year. The Government has committed a record £1.9 billion investment in cyber security over the next five years to protect the UK. In June, it was reported that the UK rail network had been hit by multiple cyber attacks over the last 12 months. Ransomware attacks on hospitals in the USA and Germany reduced several to using paper based systems. Over $80m was stolen from a Central Bank via the SWIFT system. All recent and high profile examples of such attacks.

The pace of innovation by hackers means that industry and government need to draw upon the best cyber research available to counter these threats. Crossword works with universities to commercialise technology based on their extensive cyber research.

Crossword established a relationship with the University of Surrey to explore commercialising their patented research into information hiding, a form of enabling secure transmission of critical information. This brings the total to five, the number of relationships with leading cyber security research universities; alongside Bristol, Warwick, Coventry and City, University of London.

In April, Crossword announced the creation of CyberOwl Limited, a spin out from Coventry University with Mercia Fund Management providing the seed funding. CyberOwl is commercialising Coventry’s patent pending research into early warning of cyber attacks in extremely large scale environments such as the Internet of Things and Smart Cities. In May, Crossword and the University of Warwick won a Ministry of Defence contract for a proof of concept for blockchain enabled smart documents.

As the UK leader in working with cyber research universities, the UK Government’s Department for Culture Media & Sports (DCMS) commissioned Crossword to lead a delegation, in May, of leading UK cyber security Professors to meet counterparts in the USA, at Harvard, MIT, Stanford and UC Berkeley. Crossword will publish a report on this major cyber commercialisation mission later in this year.

With Crossword’s cyber risk product, Rizikon, based on City University of London research, our focus has been on signing up a network of distribution partners. We are making very good progress on this front, with several professional firms signed up as partners and initial revenue starting to come through, and a strong pipeline of new partners that we are in conversation with.

Crossword launched its second product, Nixer, at InfoSec2016, in June 2016. Nixer is a next generation Denial of Service (DDoS) platform using advanced machine learning techniques emerging from university research. We are currently in conversation with design partners to help us take Nixer to market. We also launched Crossword Consulting, staffed by ex-national security, military and cyber industry professionals in partnership with cyber security university experts to meet commercial client needs.

On the corporate front, we were delighted to announce former Government Chief Scientific Adviser for National Security, Professor Nick Jennings CB FREng, as a senior adviser. We also appointed Hybridan LLP as our Corporate Broker.

Following the end of the period, Crossword appointed, on 1st September, Sir Richard Dearlove as non-executive Chairman. He succeeds Tom Ilube, who continues in his role as CEO. Sir Richard was Chief of the Secret Intelligence Service (MI6). He retired from the Service in 2004. He is currently Chair of Trustees of the University of London and was previously Master of Pembroke College, Cambridge. Sir Richard is Chairman of Ascot Underwriting at Lloyd’s of London and a Director of New York Stock Exchange listed Kosmos Energy.

PRINCIPAL RISKS AND UNCERTAINTIES

The key risks to the group are as follows:

  • failure to develop an appropriate commercial application for its developing products; 
  • failure to obtain sufficient financial support to enable such products to be adequately delivered;
  • failure to establish commercialisation partnerships with leading research universities
  • competition from existing IP transfer businesses seeking to engage in cyber security commercialisation activity

At present the directors are pleased with progress in both of these areas and consider these risks are sufficiently mitigated.

FINANCIAL AND NON FINANCIAL KEY PERFORMANCE INDICATORS

The directors consider the key financial performance indicator to be cash ‘burn rate’. At present they consider that this is within reasonable parameters and will continue to monitor this is the future.

At this stage in its development, the directors do not consider that there are any relevant non-financial key performance indicators.

T Ilube

Director

Read the full consolidated 2016 Interim result statement