Annual Report 2018
The fastest path to discovery
DIRECTORS, OFFICERS AND ADVISORS
Non-Executive Chairman
Chief Executive
Finance Director
Founding Scientific Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Directors
James Ede-Golightly
Mark Warne
Michael Bretherton
Lee Cronin
David Cleevely
Laurence Ede
Bettina Goerner
Secretary
Michael Bretherton
Registered Office
The Walbrook Building
25 Walbrook
London EC4N 8AF
Broker and Nominated Advisor
Stockdale Securities Limited
100 Wood Street
London EC2V 7AN
Auditor
Nexia Smith & Williamson
Portwall Place
Portwall Lane
Bristol BS1 6NA
Registrar and Transfer Agent
Neville Registrars
Neville House
Steelpark Road
Halesowen B62 8HD
Company Number
05845469 (England and Wales)
CONTENTS
DIRECTORS, OFFICERS AND ADVISERS
CHAIRMAN’S STATEMENT
STRATEGIC REPORT
DIRECTORS’ REPORT
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CASH FLOWS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTICE OF THE ANNUAL GENERAL MEETING
IFC
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DeepMatter Group Plc Annual Report 2018
1
CHAIRMAN’S STATEMENT
Introduction
On behalf of the Board, I am pleased to be able to report
on such a transformative year for DeepMatter Group Plc
(”DeepMatter Group” or “the Group”), with the Group
making significant strides in progressing its strategy to
digitize chemistry.
During the year, we rebranded and strengthened the
management team with the appointment of a new CEO,
Mark Warne, to take the Group forward through its next
phase of growth. Under Mark’s leadership, the Group has
successfully executed on the first stage of its strategy, with
its technology now deployed on a trial basis with several of
the world’s premier scientific organisations. Post-period
end, the Group completed the key strategic acquisition of
Infochem and the Group’s largest fundraising.
We are very pleased to be reporting on this rapid pace of
progress, which is in line with the Group’s expected
timeline for this stage of the growth strategy. The
achievements made over the year have strengthened the
Group technically, operationally and financially as we
focus on building the credibility, awareness and
understanding of the DigitalGlassware™ platform before
rolling it out in full to the broader scientific community.
Vision and Strategy Update
DeepMatter Group’s aim is for the use of its software
platform to become truly integral to research and process
chemistry, providing those involved with a cost-effective,
easy-to-use solution that will save them significant time,
effort and money. The research industry is ripe for
modernisation, becoming more open to adopting new
disruptive solutions, having reached a point where the
use of digitisation and big data at scale is viable. The
Group is confident its technology, positioning and
capability mean that it is able to capitalise on this
opportunity.
In the near term, the Group is delivering an integrated
software, hardware and machine learning enabled
platform, DigitalGlassware™, to scientists across
research and process development sectors. This process
has now begun with the Pioneer Partner trials, described
in more detail below.
The DigitalGlassware™ platform allows experiments to
be accurately and systematically recorded, coded and
entered into a shared data cloud. The platform is
designed to enable scientists to collaborate effectively;
sharing the details of their experiments from anywhere
and in real-time. This ensures that work is not needlessly
duplicated, time and money wasted, and ultimately new
discoveries can be made faster.
Building upon its experiences with the DigitalGlassware™
Pioneer Programme, the Group is now focused on
deploying its technology to an increasingly large user
base; incorporating robust cheminformatic capabilities
enabled by the recent InfoChem acquisition; and
progressing to the direct monetisation of the platform.
Alongside this, the Group has begun to identify unique
chemistry insights, which it will both use to create
intellectual property and also begin to share with the
wider scientific community in due course, as further proof
of the validity of the platform.
The Group’s vision is to progress its platform to the point
where it enables the use of artificial intelligence in
chemistry, ultimately to the stage where chemicals can
be synthesised autonomously through robotics operating
on the DeepMatter platform.
DigitalGlassware™ platform deployment
During 2018, the Group partnered with, and continues to
work with, a total of seven organisations across three
continents for its DigitalGlassware™ Pioneer Programme
(the “Pioneers”). The seven Pioneers include
multinational life science companies, research institutions
and leading academic institutions. We are pleased with
the level of engagement seen with the technology from
trial users so far.
To date, the DigitalGlassware™ platform has been used
to collect data from over 900 days (2.5 years) of
chemistry research across over 1,100 individual
experimental runs. Data has been collected and
structured, comprising nearly 9 billion sensor readings
over 221 million samples. Of the most frequently used
synthetic reaction types in medicinal chemistry*, more
than 50 per cent. are now represented in the
DigitalGlassware™ platform.
This data will be subjected to machine learning
methodologies that will form the basis of intellectual
property to be protected by the Group.
InfoChem Acquisition, Placing and
associated Board Appointment
In December 2018, the Group announced that it had
agreed to acquire the entire issued share capital of
InfoChem GmbH, a specialist in cheminformatics, from
global publisher Springer-Verlag GmbH (“Springer
Nature”). The total consideration was a maximum of
£2.031 million satisfied as to £0.321 million
(€0.374 million) in cash and up to 68,400,000 new
ordinary shares in the capital of the Group. The Group
also announced its intention to raise new capital by way
of a proposed placing of new Ordinary Shares to further
finance ongoing DigitalGlassware™ technology
development, including integration of cheminformatics
capabilities, user and partner support, marketing, data
science, manufacture and for working capital
requirements of the enlarged Group. The placing was
ultimately oversubscribed, with the Group raising £4.0
million and the acquisition completed in March 2019.
* as reported in the frequently cited publication by Brown and Boström of pharmaceutical company AstraZeneca in the Journal of Medicinal Chemistry
59, 4443 (2016)
2
DeepMatter Group Plc Annual Report 2018
CHAIRMAN’S STATEMENT (CONTINUED)
InfoChem, based in Munich, Germany, has extensive
scientific expertise and a long tradition in developing
successful software solutions for handling and retrieval of
structures and reactions. With an established base of users,
which are in the same industries as those being targeted by
the Group, the acquisition will accelerate the Group’s
strategy by providing cost effective access to established
data sources and chemical information software tools,
assisting in the accelerated development of the
DigitalGlassware™ platform, as well as providing specialist
staff, recurring revenues and an additional sales channel.
Bettina Goerner, Managing Director, Databases, at
Springer Nature, was appointed to the DeepMatter Board
as a Non-Executive Director, on completion of the
acquisition.
SICM Divestment
In January 2019, DeepMatter Group announced that
Group company OpenIOLabs Limited (“OpenIOLabs”)
had disposed of Scanning Ion Conductance Microscope
(“SICM”), by way of an asset purchase agreement.
The Group acquired OpenIOLabs in 2017 to secure
access to some of its key technology assets, specifically
those used to integrate equipment in a laboratory, a
capability the Group had always intended to include in its
DigitalGlassware™ platform. With this objective
complete, the remainder of the OpenIOLabs business,
being non-core to the Group’s continuing operations, was
sold for cash to Scientific Digital Imaging Plc.
Scientific Publications
Scientific credibility of the Group’s approach, ultimately
an important factor in the Group’s industry
engagements, has been underpinned by relevant high-
profile publications, Nature, Science and PNAS, by the
Group’s Founding Scientific Non-Executive Director,
Professor Lee Cronin FRSE FRSC, and the granting of
patents assigned to the Group under its agreement
with the University of Glasgow.
Change of Group Name and
Re-branding
In May 2018, to better represent its vision and strategy,
the Group rebranded as DeepMatter Group Plc. The
change has been received well by the Group’s
stakeholders, commercial partners and the wider industry.
Board Changes
The Group announced in June 2018 that Mark Warne
would join the Group full time as Chief Executive Officer.
Having been a Non-Executive Director of the Group, I
assumed the role of Non-Executive Chairman on an
interim basis whilst the search for a new Non-Executive
Chairman was undertaken. This search remains in
process. We are confident that we now have in place the
strength and depth of management required.
We have today announced further changes to the Board,
as we seek to optimise our structure for streamlined
strategic and operational execution, while retaining the
wealth of industry knowledge and insight of our
Directors. The changes are:
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Lauren Lees, currently Financial Controller, will be
appointed to the Board as Financial Director, taking
effect as of 28 June 2019.
Michael Bretherton, current Financial Director, will
step down from the Board as of 28 June 2019,
allowing for an orderly handover.
David Cleevely, Non-Executive Director, will step
down from the Board and become Chairman of the
Advisory Committee, with immediate effect.
Professor Lee Cronin, Founding Scientific
Non-Executive Director, will also step down from
the Board and join the Advisory Committee, with
immediate effect.
The function of DeepMatter’s Advisory Committee is to
develop the Group’s strategy and proposition in an
innovative, interdisciplinary context while the Board
increasingly focuses on operational and strategic delivery.
Financial Review and Corporate
Governance
The Group incurred an operating loss for the year ended
31 December 2018 of £2.0 million (2017: loss from
operations of £1.58 million) which after tax and
discontinued operations of SICM, resulted in an overall
after-tax loss of £1.92 million (2017: loss of £1.46 million).
The Group held cash balances at 31 December 2018 of
£1.09 million (2017: £3.27 million). The £2.18 million
decrease during the year is mainly attributable to the
research and development and overhead expenditure
costs associated with the continuing operations of the
Group. Cash was also spent in funding SICM’s losses
ahead of the planned sale of the business. Subsequent to
the year end, the successful placing in March 2019
contributed an additional £4.0 million to the Group’s cash
balances.
As required by AIM Rule 26, the Group adopted the
Quoted Companies Alliance (QCA) Code as of
28 September 2018. The Group’s corporate governance
statement in relation to the QCA Code can be viewed on
the Group’s investor webpage at
http://www.deepmattergroup.com/content/investor/
governance.asp
Prior to the formal adoption of the QCA Code, the Group
adhered to good corporate governance which it deemed
appropriate for the size and nature of the Group.
DeepMatter Group Plc Annual Report 2018
3
CHAIRMAN’S STATEMENT (CONTINUED)
Outlook
Our DigitalGlassware™ platform brings code, structure
and order into the chemistry lab environment and enables
recordable, shareable, reproduceable chemistry whilst
also championing speed, simplicity and unhindered
discovery.
The Group is progressing well with its DigitalGlassware™
Pioneer Programme and is focused in 2019 on driving
deployment with key opinion leaders; delivering the first
complete site rollouts to early adopters. The platform is
expected to progress during the year as the
cheminformatics capabilities are integrated and the
expanding dataset demonstrates its value.
James Ede-Golightly
Non-Executive Chairman
11 April 2019
Company Number: 05845469
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DeepMatter Group Plc Annual Report 2018
STRATEGIC REPORT
The Directors present their Strategic Report with the
audited consolidated financial statements and their
assessment of risks faced by DeepMatter Group Plc
(“DeepMatter” or the “Company”) and its subsidiaries
(the “DeepMatter Group” or “the Group”) for the year
to 31 December 2018.
The Company name changed from “Cronin Group Plc”
to “DeepMatter Group Plc” on 18 May 2018.
The company has three wholly owned subsidiaries,
two of which are active trading entities, DeepMatter
Limited (2017: Cronin 3D Limited) and OpenIOLabs
Limited (“OpenIOLabs”). DeepMatter Tech Limited is
a dormant subsidiary.
OpenIOLabs was acquired in November 2017 to
complement the strategic digitization of chemistry
operations of the Group by securing its one point of
control technology platform developed to bridge the
language and compatibility gap between various
hardware and software systems. The Group has
successfully integrated this acquired technology with
its own DigitalGlassware™ platform. The remaining
Scanning Ion Conductance Microscope trade of
OpenIOlabs was never part of the continuing
operations of the DeepMatter Group and was
subsequently sold to Scientific Digital Imaging Plc on
15 January 2019 by way of an asset purchase
agreement.
Principal Activity and Business Model
The Group’s ongoing business activity, undertaken by a
subsidiary entity, is that of the digitization of chemical
space coupled with innovative chemical discovery.
The Group continues to make exciting progress towards
deploying its DigitalGlassware™ technology platform,
comprising an easy-to-use software interface and a
unique, low footprint sensor array, which will allow an
individual to access reproducible chemistry via internet
protocols. The platform will increase access to, and the
quality of, data associated with making a chemical.
During the financial year ended 31 December 2018, our
DigitalGlassware™ technology platform was successfully
deployed to several academic institutions and commercial
companies under the Group’s pioneer programme.
Valuable insights were obtained through pioneer
deployments and have been encompassed into the
Group’s on-going development roadmap for 2019.
Business Review
A review of the Group’s performance and future
prospects is included in the Chairman’s Statement on
pages 2 to 4.
Share Capital & Funding
The Group held cash balances of £1.09 million at
31 December 2018 which were subsequently
strengthened by way of a placing of shares completed
on the 13 March 2019 at 2.5 pence per share and
which raised £4.05 million in gross cash funding.
Management believes that this provides sufficient
funding for the Group to continue to execute its
development strategy in the foreseeable future. There
were 550,748,266 ordinary shares in issue at
31 December 2018. As at 11 April 2019, there were
736,533,946 ordinary shares in issue following the
post year end fundraise of £4.0 million and acquisition
of InfoChem GmbH.
Financial Review
The Consolidated Financial Statements have been
prepared for the year to 31 December 2018.
Key performance indicators
Key Group performance indicators are set out below:
31 December 31 December
2018 2017
Net assets (£ million) 6.20 8.11
Net asset value per share (pence) 1.13 1.47
Total loss after tax (£ million) (1.92) (1.46)
Basic loss per share from
continuing operations (pence) (0.33) (0.27)
Cash and short term deposits
with banks (£ million) 1.09 3.27
Consolidated statement of comprehensive income
The Group incurred a total loss after tax for the year
ended 31 December 2018 of £1.92 million compared to a
loss of £1.46 million in the previous year.
Consolidated statement of financial position
The Group continues to benefit from a solid balance
sheet with net assets at 31 December 2018 of
£6.20 million compared to £8.11 million at
31 December 2017. The reduction in net assets
reflects the £1.92 million loss for the year.
Consolidated statement of cash flows
The Group’s overall cash position decreased by
£2.18 million during the year. The decrease mainly
reflects £2.17 million of cash used in operating activities
and cash of £0.01 million invested in property plant and
equipment during the year.
Directors & Employees
As at 31 December 2018, the Group had 21 employees,
consisting of 6 directors and 15 mainly technical and
scientific staff. The profile of the directors and their
remuneration is detailed in the Directors’ Report on
pages 8 to 10.
During the year the Group employed an average of 15 of
its own technical and scientific staff, together with an
office manager and financial controller. The Group
continues to recruit a number of additional employees to
staff both its management team and development
programmes.
DeepMatter Group Plc Annual Report 2018
5
STRATEGIC REPORT (CONTINUED)
The Company continues to provide a money purchase
defined contribution pension scheme during the year for
all employees and under which the Company pays a fixed
4% of basic salary as pension contributions.
market’s acceptance of its products or services and
there can be no guarantee that this will be forthcoming
or that alternative competitor technologies are adopted
by the market instead.
The Group is committed to the health and safety of its
employees in the workplace and has processes and
procedures, combined with appropriate training and risk
assessment, to ensure the same. The Group supports
employment of disabled people wherever possible
through recruitment, by retention of those who become
disabled and generally through training, career
development and promotion. The Group is committed to
keeping employees as fully informed as possible with
regard to the Group’s performance and prospects and
seeks their views, wherever possible, on matters which
affect them as employees.
Risk Review
The analysis of key performance indicators ("KPls") is
included in the Financial Review section of the
Strategic report. The Directors believe that
performance should also be measured by achievement
against technical and business development
milestones.
The Group’s risk management objectives and exposure
to various risks are detailed in note 22 to the Group
financial statements. The key operating risks of the
Group and the measures taken to manage these are
summarised below.
Early stage operations
The Group is at an early stage of development. It is
difficult to predict if and when material revenues will
arise and the Group faces risks frequently encountered
by developing companies. The Group’s success will
depend on its ability to develop products and services
which address specific market needs and develop
suitable licensing, royalty and contract manufacture
models and capture value from business opportunities.
Technology & Development Risk
There is a risk that technology development is delayed
or specific programme targets cannot be met. The
Group manages the development of its technology
through separate development programmes. Each
programme has a specific set of milestones (either
internal or external), together with measurable goals
and a timeline. Performance against each of these is
monitored regularly, depending on the programme
requirements. This enables the Group to identify
issues at an early stage and take appropriate mitigating
actions.
Commercial success and market acceptance
There can be no assurance that any current or future
technology programmes will be successfully
developed into commercially viable products or
services. The Group’s success will depend on the
6
DeepMatter Group Plc Annual Report 2018
Attraction and retention of key employees
The Group depends on its Directors and other key
employees and whilst it has entered into contractual
arrangements with these individuals with the aim of
securing the services of each of them, retention of
these services cannot be guaranteed. The Group has
attempted to reduce this risk by offering competitive
remuneration packages and investment in training,
development and succession planning.
Intellectual Property
A part of the Group’s future development and growth
depends on its intellectual property. If intellectual
property is inadequately protected, the Group’s future
success could become adversely affected. The Group
may not be able to protect and preserve its intellectual
property or to exclude competitors with competing
technology products. The Group continues to invest in
the protection and expansion of its intellectual property
portfolio. In addition the Group utilises internal
procedures and controls to identify and capture new
intellectual property and to prevent unauthorised
disclosure to third parties.
Financial Risks
The Group’s activities expose it to a number of
financial risks including credit risk, interest rate risk and
liquidity risk. The Group is not currently exposed to
significant exchange rate risks. At present the Group
does not use financial derivatives in the normal course
of business. The Group’s and the Company’s financial
instruments comprise cash and cash equivalents, trade
and other receivables, equity investments and trade
and other payables. The main purpose of these
financial instruments is the funding of the Group’s
activities.
Credit Risk
The Group’s principal financial assets are cash and
cash equivalents and trade and other receivables. The
Group’s credit risk is primarily attributable to its cash
and cash equivalents. The Group seeks to reduce the
credit risk associated with cash by only holding cash
with institutions that have good credit ratings.
Interest Rate Risk
The Group has no external financing facility, therefore its
interest rate risk is limited to the level of interest received
on its cash surpluses. Interest rate risk on cash, cash
equivalents and short term deposits is partially mitigated
by using an element of fixed-rate accounts and short term
deposits.
STRATEGIC REPORT (CONTINUED)
Liquidity Risk
The Group seeks to manage liquidity by ensuring
sufficient funds are available to meet foreseeable needs
and to invest cash assets safely and profitably. The Group
had cash, cash equivalents and short-term deposit
balances of £1.09 million as at 31 December 2018
(2017: £3.27 million).
In order to minimise risk to the Company’s capital, funds
are invested across a number of financial institutions with
sound credit ratings. Cash forecasts are updated regularly
to ensure that there is sufficient cash available for
foreseeable requirements. The Directors are satisfied that
the current cash balances, together with the £4.0 million
of gross cash proceeds raised from a share placing in
March 2019 and the present running cost base of the
Group, ensures that the going concern assumption
remains valid.
Future Developments
The Board remains committed to delivering additional
value for our shareholders and aims to pursue its
corporate strategies as outlined in the Chairman’s
Statement.
On behalf of the Board
Mark Warne
Chief Executive
11 April 2019
Company Number: 05845469
DeepMatter Group Plc Annual Report 2018
7
DIRECTORS’ REPORT
The Directors present their report and the audited
consolidated financial statements for DeepMatter
Group Plc (“DeepMatter” or “the Company”) and its
subsidiaries (the “DeepMatter Group” or “the Group”)
for the year to 31 December 2018.
Directors and their interests
The Directors who have held office during the year and
in the subsequent period to the signing of these
financial statements were as follows:
Principal Activities
A review of the Group’s activities is included in the
Chairman’s Statement on pages 2 to 4 and in the
Strategic Report on page 5.
Business Review
A review of Group performance and future prospects
is given in the Chairman’s Statement on pages 2 to 4
and in the Strategic Report on page 5.
Share Capital
The share capital of the Company increased marginally
by the issue of 8,333 ordinary shares during the year
on the exercise of options by departing employees.
Results and Dividends
The audited consolidated financial statements have
been prepared for the year to 31 December 2018. The
loss before tax from continuing operations for the year
was £1.99 million (2017: £1.56 million). The Directors
do not recommend a dividend in respect of the year to
31 December 2018 and no dividends were paid during
the year under review or the prior year.
Substantial Shareholdings
No single person directly or indirectly, individually or
collectively, exercises control over the Company. The
Directors are aware of the following persons, who had an
interest in 3% or more of the issued ordinary share
capital of the Company as at 11 April 2019:
No. of
ordinary
Name shares % holding
IP Group and controlled undertakings 266,959,497 36.25%
Richard Griffiths and controlled
undertakings 165,032,111 22.41%
Prof Lee Cronin 55,973,019 7.60%
Robert Quested 42,285,279 5.74%
GU Holdings 39,373,994 5.35%
Springer Nature 25,600,000 3.48%
At this date no other person had notified any interest in
the ordinary shares of the Company required to be
disclosed to the Company in accordance with Chapter 5
of the Disclosure and Transparency Rules of the Financial
Services Authority in respect of holdings exceeding the
3% notification threshold.
Mark Warne
Michael Bretherton
David Cleevely
Lee Cronin
Laurence Ede
James Ede-Golightly
Bettina Goerner (appointed 15 March 2019)
The remuneration of the Directors for the year under
review is shown below:
Directors’ Remuneration
Salaries Pension Total Total
and Contribu- December December
fees tions 2018 2017
Name of Director £’000 £’000 £’000 £’000
Mark Warne 85 4 89 20
Michael Bretherton 12 – 12 12
David Cleevely 14 – 14 2
Lee Cronin 12 – 12 12
Laurence Ede 24 – 24 16
James Ede-Golightly 14 – 14 12
161 4 165 74
All Directors have service contracts with one month’s
notice with the exception of the Chief Executive whose
service contract is for six month’s notice. The Directors
are all required to put themselves up for re-election
periodically in accordance with the Articles of Association
and all service contracts and letters of appointment are
subject to early termination provisions.
Remuneration for Executive Directors is recommended
by the Remuneration Committee and agreed by the
Board as a whole. During the year, one executive
director benefitted from a pension payment
contribution of £3,750 (2017: £nil). At the present time,
none of the Executive Directors receive any other
benefits and nor do they participate in bonus schemes.
Remuneration for Non-executive Directors is set by
the Board as a whole. Non-executives do not receive
any pension payments or other benefits and nor do
they participate in bonus or share option schemes.
Director dealings in Shares of the
Company
The Group has adopted a model code for Directors’
dealings in securities of the Company which is
appropriate for a company quoted on AIM. The
Directors comply with Rule 21 of the AIM Rules
relating to Directors’ dealings and also take all
reasonable steps to ensure compliance by the Group’s
“applicable employees” as defined in the AIM Rules.
8
DeepMatter Group Plc Annual Report 2018
DIRECTORS’ REPORT (CONTINUED)
Directors’ Interests in Shares of the
Company
The beneficial interests of the Directors in the issued
share capital of the Company at 31 December 2018
are given below:
Ordinary shares of £0.0001 each
31 December 2018 31 December 2017
Number Percent Number Percent
Mark Warne 541,475 0.10% 541,475 0.10%
Michael
Bretherton 4,033,824 0.73% 4,033,824 0.73%
David Cleevely 15,692,993 2.85% 15,692,993 2.85%
Lee Cronin 55,173,019 10.02% 54,618,853 9.92%
Laurence Ede 801,586 0.15% 444,444 0.08%
James
Ede-Golightly 2,080,249 0.38% 2,080,249 0.38%
On 12 March 2019, the Board granted an initial award
of options to Mark Warne over 25,000,000 ordinary
shares at an exercise price of 2.5 pence, reflecting the
2.5 pence issue price of the placing of shares issued
between 12 and 13 March 2019 to raise gross cash
proceeds of £4 million. Provided Mark remains an
employee, his options vest over 36 months starting
from the commencement of his employment but
subject to specific share price triggers being reached
as set out in the table below. All unexercised options
lapse after 10 years from the date of grant. No other
directors have been granted share option awards.
Number of plan
Share Price shares in respect of
Trigger which the Options
(£) may be exercised
None 3,750,000
0.04 3,750,000
0.06 3,750,000
0.08 3,750,000
0.10 3,750,000
0.12 1,250,000
0.14 1,250,000
0.16 1,250,000
0.18 1,250,000
0.20 1,250,000
Profiles of the Directors
Mark Warne
Chief Executive
Mark Warne was appointed as Chief Executive Officer of
DeepMatter Group Plc on the 2 July 2018. Mark, who joined
DeepMatter as a Non-Executive Director in September 2015
also served as its Executive Chairman between April 2017 and
July 2018. Mark is widely recognised in the UK and
International life sciences sector, having spent almost 10 years
at IP Group Plc, a leading intellectual property
commercialisation company, where he led the Healthcare
team. He managed a portfolio of £330m of net assets in
2016/2017 and represented IP Group on the boards of both
listed and private companies. In 2018, concurrent with the
integration of Touchstone Innovations into IP Group, Mark
became a Partner in the Life Sciences division. He joined IP
Group from pre-clinical drug discovery CRO, Exelgen, where he
was Managing Director. Mark spent eight years at Exelgen
(formerly Tripos Discovery Research) where he also held
positions in licensing and strategic affairs, project management
and research. He has a PhD in Computational Chemistry, an
MSc in Colloid Science and a BSc in Chemistry, all from the
University of Bristol. Mark is a Chartered Chemist and member
of the Royal Society of Chemistry. He serves as a non-
executive director on the boards of hVIVO plc and Ixico Plc.
Prof. Lee Cronin
Founding Scientific Non-Executive Director
Professor Cronin is the Regius Chair of Chemistry in the
Department of Chemistry at the University of Glasgow.
He was elected to the Fellowship of the Royal Society of
Edinburgh, the Royal Society of Chemistry, and appointed to
the Gardiner Chair in April 2009. He was awarded a
Philip Leverhulme Prize by the Leverhulme Trust in 2007.
He was awarded the Corday-Morgan medal of the Royal
Society of Chemistry in 2012. Professor Cronin has a large
active group at the University of Glasgow performing
cutting-edge research into how complex chemical systems,
created from non-biological building blocks, can have
real-world applications with wide impact. Professor Cronin has
published in excess of 300 peer-reviewed articles in a number
of journals and has given over 280 invited presentations at
conferences and universities worldwide.
Michael Bretherton
Finance Director
Michael joined the Board in June 2015. He is Chairman
of Adams Plc and is also a director of Sarossa Plc and
ORA Limited. In addition, Michael has been a
non-executive director of six other AIM quoted
companies during the last six years, including Nanoco
Group Plc, Tissue Regenix Group Plc and Ceres Power
Holdings Plc. He has a degree in Economics from
Leeds University and is a member of the Institute of
Chartered Accountants in England and Wales. His early
career included working as an accountant and manager
with PriceWaterhouse for 7 years in London and the
Middle East, followed by finance roles at the Plessey
Company plc, Bridgend Group plc, Mapeley Limited
and Lionhead Studios Limited.
James Ede-Golightly
Non-Executive Chairman
James joined the Board in July 2014. He is chairman of
East Balkan Properties Plc and Quoram Plc and has
extensive experience as a non-executive on the boards of
AIM-quoted companies with international business
interests. James was a founder of ORA Capital Partners in
2006, having previously worked as an analyst at Merrill
Lynch Investment Managers and Commerzbank. He is a
CFA Charterholder and holds an MA in economics from
Cambridge University. In 2012 he was awarded New
Chartered Director of the Year by the Institute of Directors.
DeepMatter Group Plc Annual Report 2018
9
DIRECTORS’ REPORT (CONTINUED)
David Cleevely
Non-Executive Director
David Cleevely is a serial entrepreneur having founded or
co-founded several companies and organisations, notably
including Abcam Plc, Analysys Limited, 3 WayNetworks
Limited, Cambridge Wireless Limited, Cambridge Angels
and Controllis Limited. David is Chairman of the
Raspberry Pi Foundation and is a member of the IET
Communications Policy Panel. He was awarded a CBE for
services to innovation and technology in 2013.
Laurence Ede
Non-Executive Director
Laurence Ede was the Managing Director and co-owner of
Tocris Bioscience, a company producing chemical
compounds for pharmaceutical research, when it was sold
to Techne Corporation for £75M in 2011. Mr. Ede had
previously led the Management Buyout of Tocris for £14M
five years earlier and grew its value by focusing on
developing the business to be an increasingly significant
provider of products within the life science arena. Mr. Ede is
currently a non-executive director of Ubiquigent Ltd, a drug
discovery services company using research tools and
chemistry to pursue ubiquitin system-focused drug
discovery programmes. He has a BSc in Chemistry from
Reading University and an MBA from the University of Bath.
Bettina Goerner
Non-Executive Director
Bettina Goerner is Managing Director, Databases, at
Springer Nature, based in Heidelberg, Germany. She
oversees product development, portfolio management
and commercialization for the databases and corporate
product lines. This spans a portfolio of products relevant
to academic institutions and corporations with R&D
activity in areas like drug discovery and material sciences.
Springer Nature was created as a result of the merger of
Nature Publishing Group, Palgrave Macmillan, Macmillan
Education and Springer Nature Science+Business Media
in May 2015. Bettina graduated in Molecular Biology
(MSc) from the International Max Planck Research School
after a research stay at the Harvard Institute of Medicine.
She first ventured into the corporate world with
assignments at McKinsey & Company and INSEAD
Business School, before joining Springer Nature in 2008.
She was responsible for Springer Nature’s open access
activities from 2009 to 2013 before moving to her current
position.
Corporate governance
Compliant with AIM Rules, the Company has adopted the
Quoted Companies Alliance (QCA) corporate governance
code with effect from 28 September 2018. Prior to the
formal adoption of the QCA code in September 2018, the
Group adhered to good corporate governance practice
appropriate for the size and nature of the Group.
The Board
The Board currently comprises a Non-Executive
Chairman, a Chief Executive, a Founding Scientific
Non-Executive Director, a Finance Director and three
Non-executive Directors.
Audit committee
The Audit Committee’s primary responsibilities are to
monitor the integrity of the financial affairs and statements
of the Company, to ensure that the financial performance
of the Company and any subsidiary of the Company is
properly measured and reported on, to review reports
from the Company’s auditors relating to the accounting
and internal controls and to make recommendations
relating to the appointment of the external auditors.
The Audit Committee comprises David Cleevely, who
acts as chairman, and Laurence Ede.
Remuneration committee
The Remuneration Committee’s primary responsibilities are
to review the performance of the executive directors of the
Company and to determine the broad policy and framework
for their remuneration and the terms and conditions of their
service and that of senior management (including the
remuneration of and grant of options to such persons under
any share scheme adopted by the Company). The
remuneration committee comprises Laurence Ede, who
acts as chairman, Lee Cronin and James Ede-Golightly.
The remuneration of Non-executive Directors is set by
the Board as a whole.
Internal Control
The Board is responsible for maintaining a sound system
of internal control. The Board’s measures are designed to
manage, but not eliminate, risk and such a system
provides reasonable but not absolute assurance against
material misstatement or loss.
Some key features of the internal control system are:
(i) Management accounts information, budgets,
forecasts and business risk issues are regularly
reviewed by the Board which meets at least four
times per year;
The Company has operational, accounting and
employment policies in place;
The Board actively evaluates the risks inherent in
the business and ensures that appropriate controls
and procedures are in place to manage these risks;
and
There is a clearly defined organisational structure
and well-established operational and financial
reporting and control systems.
(ii)
(iii)
(iv)
Going Concern
At 31 December 2018, the Group had £1.09m (2017:
£3.27m) of cash available to it. In addition, £4.0m of gross
cash funding was subsequently raised from a placing of
10
DeepMatter Group Plc Annual Report 2018
DIRECTORS’ REPORT (CONTINUED)
shares completed on 13 March 2019 at 2.5 pence
per share. The Directors have considered their obligation in
relation to the assessment of the going concern of the
Group and each statutory entity within it and have
reviewed the current budget cash forecasts and
assumptions as well as the main risk factors facing the
Group.
After due enquiry, the Directors consider that the Group
has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing
the consolidated financial statements.
Risk management
The Group’s risk management objectives and exposure
are detailed in the Strategic Report on pages 6 to 7 and in
note 22 of the financial statements.
Employment policy
When applicable, the Directors are committed to continuing
involvement and communication with employees on
matters affecting both the employees and the Company.
The Group supports employment of disabled people
wherever possible through recruitment, by retention of
those who become disabled and generally through training,
career development and promotion.
Creditor payment policy
The Group seeks to abide by the payment terms agreed
with suppliers whenever it is satisfied that the supplier
has provided the goods or services in accordance with
the agreed terms and conditions. The Group does not
have a standard code of conduct that deals specifically
with the payment of suppliers.
At the end of the year outstanding invoices for the Group
and Company represented 24 days purchases
(2017: 60 days).
Annual General Meeting
The next Annual General Meeting will take place on
22 May 2019 at the Offices of IP Group Plc, Floor 9,
The Walbrook Building, 25 Walbrook, London EC4N 8AH
on 22 May 2019 at 11.00 a.m.
Voting rights
On a show of hands at a general meeting of the Company
every holder of shares present in person and entitled to
vote, and every proxy duly appointed by a member
entitled to vote, has one vote and on a poll every member
present in person or by proxy and entitled to vote has one
vote for every share held. Further details regarding voting
at the Annual General Meeting can be found in the Notice
of Annual General Meeting at the back of this document.
None of the shares carry any special rights with regard to
control of the Company. Electronic and paper proxy
appointments and voting instructions must be received by
the Company’s transfer agent not later than 48 hours (not
counting non-working days) before the meeting.
Statement of Directors’ Responsibilities
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 prepared the Group and parent company
financial statements in accordance with applicable law
and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the
parent company financial statements, as applied in
accordance with the provisions of the Companies Act
2006.
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 the affairs of the
Company and of the Group and of the profit or loss of the
Group for that period.
In preparing these financial statements, the Directors are
required to:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Select suitable accounting policies and then apply
them consistently;
Make judgements and accounting estimates that
are reasonable and prudent;
State whether applicable IFRSs as adopted by the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements; and
Prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the
Company and enable the Directors to ensure that any
financial statements comply with the requirements of the
Companies Act 2006. They are also responsible, as a
matter of general law, for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the company’s website
(www.deepmattergroup.com), and legislation in the UK
governing the preparation and dissemination of financial
statements, may differ from legislation in other
jurisdictions.
Independent Auditors
A resolution to reappoint the auditors, Nexia Smith &
Williamson, will be proposed at the Annual General
Meeting.
DeepMatter Group Plc Annual Report 2018
11
DIRECTORS’ REPORT (CONTINUED)
Disclosure of information to auditors
So far as each Director is aware, there is no relevant audit
information of which the Company’s auditors are
unaware. Each Director has taken all the steps that he
ought to have taken in his duty as a Director in order to
make himself aware of any relevant audit information and
to establish that the Company’s auditors are aware of that
information.
Approved by order of the Board
Michael Bretherton
11 April 2019
12
DeepMatter Group Plc Annual Report 2018
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF DEEPMATTER GROUP PLC
Opinion
We have audited the financial statements of DeepMatter
Group Plc (the ‘parent company’) and its subsidiaries (the
‘Group’) for the year ended 31 December 2018 which
comprise the Consolidated Statement of Comprehensive
Income, the Consolidated and Parent Company
Statements of Financial Position, the Consolidated and
Parent Company Statements of Cash Flows, the
Consolidated and Parent Company Statements of
Changes in Equity and the notes to the financial
statements, including a summary of significant accounting
policies. The financial reporting framework that has been
applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent
company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the financial statements give a true and fair view of
the state of the group’s and of the parent
company’s affairs as at 31 December 2018 and of
the group’s loss for the year then ended;
the group financial statements have been properly
prepared in accordance with IFRSs as adopted by
the European Union;
the parent company financial statements have been
properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in
accordance with the provisions of the Companies
Act 2006; and
the financial statements 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 group 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 as applied to SME listed entities, 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
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
(cid:129)
(cid:129)
the directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the group’s or the
parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the
financial statements are authorised for issue.
Emphasis of matter – valuation of
goodwill, intangible asset platform and
parent company’s investments in
subsidiaries
We draw attention to the disclosures made in note 14 to
the group financial statements concerning the valuation of
goodwill, the disclosures made in note 15 to the group
financial statements concerning the valuation of the
intangible technology asset platform and the disclosures
made in note C2 to the parent company financial
statements concerning the valuation of investments in
subsidiaries. The valuation of £4.1 million goodwill,
£0.7 million intangible asset platform and £5.6 million
investments is dependent on future sales within the
group, which are dependent on the timing of products,
obtaining regulatory approval and being taken to market,
including their successful commercialisation.
The ultimate outcome of these matters cannot presently
be determined, and the financial statements do not
reflect any provision that may be required if the
£4.1 million goodwill, £0.7 million intangible asset
platform and £5.6 million investments cannot be
recovered in full. Our opinion is not modified in respect of
these matters.
Key audit matters
We have identified the following key audit matters
described below. Key audit matters include the most
significant assessed risks of material misstatement,
including those risks that had the greatest effect on our
overall audit strategy, the allocation of resources in the
audit and the direction of the efforts of the audit team.
In addressing these matters, we have performed the
procedures below which were designed to address the
matters in the context of the financial statements as a
whole and in forming our opinion thereon. Consequently,
we do not provide a separate opinion on these individual
matters.
DeepMatter Group Plc Annual Report 2018
13
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF DEEPMATTER GROUP PLC (CONTINUED)
Goodwill and intangible asset platform
impairment – group only
Key audit matter description
As explained further in notes 14 and 15, the group
recognised goodwill upon the acquisition of DeepMatter
Limited and an intangible asset platform upon the
acquisition of OpenIOLabs Limited, which management
tests for impairment on an annual basis, in line with
accounting standards. This presents an area of audit risk,
given the uncertainty and value of future sales, and the
projected future life of the intangible asset and
amortisation period assigned. For this reason, we have
considered this area of key audit focus.
Response to key audit matter
We discussed the cash flow forecasts and budgets
prepared by management in their impairment calculation.
The main procedures performed on the calculation, the
intangible assets workings and areas where we
challenged management were as follows:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
testing the quality of management forecasting by
comparing cash flow forecasts for prior periods to
actual outcomes;
verifying the consistency of forecasts used in the
going concern assessment with those used for
impairment calculations;
testing the appropriateness of the assumptions that
had the most material impact; the main focus was
on forecast costs and the discount factor used as
the assumptions made by management regarding
revenue were deemed highly uncertain, as referred
to above in the Emphasis of Matter paragraph; in
challenging these assumptions actual results,
external market conditions and progression of the
business against milestones set were taken into
account; reference to market conditions was
considered by comparing the market capitalisation
to the assets of the business;
reviewing the amortisation charged during the year
for the intangible asset platform, to ensure it has
been calculated in accordance with the group’s
amortisation policy, and consideration of whether
the amortisation period is appropriate in light of
future plans considered by the group;
assessing the value of the intangible asset platform
against the impairment indicators of IAS 36 and
determining whether there is any indication that the
asset might be impaired;
considering the appropriateness of the disclosures
made in the financial statements in respect of
these assets.
Parent company investment in subsidiaries –
parent company only
Key audit matter description
As explained further in note C2 to the parent company
financial statements, the valuation of the investment
balance related to the subsidiaries of the parent company
is linked to the assessment of goodwill and the intangible
asset platform on consolidation. As with the key audit
matter described above, this also presented an area of
audit risk, given the uncertainty and value of future sales
used to determine the cash flow projections upon which
conclusion was reached that the values are deemed
recoverable. For this reason, we have considered this
area of key audit focus.
Response to key audit matter
We discussed the cash flow forecasts and budgets
prepared by management in their impairment calculation.
The main procedures performed on the calculation, the
intangible assets workings and areas where we
challenged management were as follows:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
testing the quality of management forecasting by
comparing cash flow forecasts for prior periods to
actual outcomes;
verifying the consistency of forecasts used in the
going concern assessment with those used for
impairment calculations;
testing the appropriateness of the assumptions that
had the most material impact; the main focus was
on forecast costs and the discount factor used as
the assumptions made by management regarding
revenue were deemed highly uncertain, as referred
to above in the Emphasis of Matter paragraph; in
challenging these assumptions actual results,
external market conditions and progression of the
business against milestones set were taken into
account; reference to market conditions was
considered by comparing the market capitalisation
to the assets of the business;
assessing the value of the investments against the
impairment indicators of IAS 36 and determining
whether there is any indication that the investments
might be impaired;
considering the appropriateness of the disclosures
made in the financial statements in respect of these
investments.
Materiality
The materiality for the Group financial statements as a
whole was set at £315,000. This has been determined
with reference to the benchmark of the Group’s net
assets, which we consider to be an appropriate measure
for a Group of companies with significant value in
investments and research and development activities
which are fundamental to the future trading of the Group.
Materiality represents 5% of net assets as presented on
the face of the Consolidated Statement of Financial
Position.
14
DeepMatter Group Plc Annual Report 2018
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF DEEPMATTER GROUP PLC (CONTINUED)
We report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £15,750
(0.8% of Group loss before taxation), in addition to other
identified misstatements that warrant reporting on
qualitative grounds.
The materiality for the parent company financial
statements as a whole was set at £252,000. This has
been determined with reference to the benchmark of the
parent company’s net assets, which we consider to be an
appropriate measure for a holding entity. Materiality
represents 3% of net assets as presented on the face of
the Company Statement of Financial Position.
An overview of the scope of our audit
We subjected all of the Group’s reporting components to
audits for Group reporting purposes.
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. 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.
In connection with our audit of the financial statements,
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 audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we
are required to determine whether there is a material
misstatement in the financial statements or a material
misstatement of the other information. 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.
Opinion on other matters prescribed by
the Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
(cid:129)
(cid:129)
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.
Matters on which we are required to
report by exception
In the light of the knowledge and understanding of the
Group and the parent company and their environment
obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 11, 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 Group’s and 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 Group or the
parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free
from material misstatement, whether due to fraud or
error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of these financial statements.
DeepMatter Group Plc Annual Report 2018
15
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF DEEPMATTER GROUP PLC (CONTINUED)
A further description of our responsibilities for the audit of
the financial statements is located on the Financial
Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the parent 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 parent
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 parent company and the parent company’s members
as a body, for our audit work, for this report, or for the
opinions we have formed.
Carl Deane
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
Portwall Place
Portwall Lane
Bristol
BS1 6NA
Date: 11 April 2019
16
DeepMatter Group Plc Annual Report 2018
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December 2018
Continuing operations
Revenue
Research and development costs
Share based payments
Administrative costs
Operating loss
Finance income
Loss before tax
Income tax credit
Loss from continuing operations
Discontinued operations
Loss from discontinued operations
Loss and total comprehensive loss for the year
Loss and total comprehensive loss for the year attributable to:
The Company’s equity shareholders
Loss per share attributable to the equity holders of the Company:
Basic and diluted loss per share (pence) on continuing operations
Basic and diluted loss per share (pence) on total operations
Year to
Year to
31 December
31 December
2018
£’000
–
(1,399)
(6)
(600)
(2,005)
12
(1,993)
180
(1,813)
(104)
(1,917)
2017
£’000
–
(1,224)
(1)
(356)
(1,581)
22
(1,559)
137
(1,422)
(42)
(1,464)
Notes
11
9
10
15
(1,917)
(1,464)
20
20
(0.33)
(0.35)
(0.27)
(0.28)
The notes on pages 21 to 34 form an integral part of these consolidated financial statements.
DeepMatter Group Plc Annual Report 2018
17
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 31 December 2018
Assets
Non-current assets
Intangible assets and goodwill
Investments
Plant and equipment
Current assets
Inventories
Trade and other receivables
Income tax asset
Cash and cash equivalents
Liabilities
Current liabilities
Trade and other payables
Net current assets
Net assets
Equity and liabilities
Shareholder’s equity
Called up share capital
Share premium
Merger reserve
Shares to be issued reserve
Share based payments reserve
Retained (deficit) / earnings
Total equity attributable to shareholders of the Company
At
At
31 December
31 December
2018
£’000
4,914
3
29
4,946
74
152
289
1,086
1,601
(345)
1,256
6,202
55
3,287
5,334
204
7
(2,685)
6,202
2017
£’000
4,958
3
31
4,992
10
127
–
3,265
3,402
(281)
3,121
8,113
55
3,287
5,334
204
1
(768)
8,113
Notes
14,15
13
16
10
17
18
19
21
21
21
23
The financial statements were approved by the Board of Directors on 11 April 2019 and were signed on its behalf by:
Michael Bretherton
Finance Director
Company Number: 05845469
18
DeepMatter Group Plc Annual Report 2018
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
For the year ended 31 December 2018
Share
based Shares to
Share Share Merger Retained payment be issued
Total
equity premium reserve earnings reserve reserve
equity
£’000 £’000 £’000 £’000 £’000 £’000
Balance at 31 December 2016 53 3,287 4,880 696 – –
£’000
8,916
Total comprehensive loss for the year
to 31 December 2017 – – – (1,464) – –
(1,464)
Transactions with owners:
Shares issued and issuable on acquisition of subsidiary 2 – 454 – – 204
Share based payment charge – – – – 1 –
Balance at 31 December 2017 55 3,287 5,334 (768) 1 204
660
1
8,113
Total comprehensive loss for the year
to 31 December 2018 – – – (1,917) – –
(1,917)
Transactions with owners:
Share options exercised – – – – – –
Share based payment charge – – – – 6 –
–
6
Balance at 31 December 2018 55 3,287 5,334 (2,685) 7 204
6,202
DeepMatter Group Plc Annual Report 2018
19
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
Cash flows from operating activities
Operating loss from continuing operations
Operating loss from discontinued operations
Depreciation and amortisation charges
Share based payments charge
Operating cash outflows before movement in working capital
(Increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables
Cash used in operations
Interest received
Taxation received
Net cash used in operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Cash and bank in subsidiary at acquisition
Net cash used in investing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
15
13
Year to
Year to
31 December
31 December
2018
£’000
(2,005)
(213)
59
6
2017
£’000
(1,581)
(42)
14
1
(2,153)
(1,608)
(64)
(25)
64
(1)
(80)
27
(2,178)
(1,662)
12
–
22
137
(2,166)
(1,503)
(13)
–
(13)
(2,179)
3,265
1,086
(24)
3
(21)
(1,524)
4,789
3,265
20
DeepMatter Group Plc Annual Report 2018
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2018
1. Corporate information
DeepMatter Group Plc (“the Company”) is a public limited company incorporated, registered and domiciled in England
and Wales and its shares are publicly traded on AIM, a market operated by the London Stock Exchange. The Group
financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group” and
individually as “Group entities”) for the year ended 31 December 2018.
The address of the registered office is given on the inside front cover of this report. The nature of the Group’s activities
are set out in the Strategic Report and Directors’ Report.
2. Basis of preparation
These consolidated and Company financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006
applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the
historical cost convention and all values have been rounded to the nearest thousand, except where otherwise
indicated. The functional currency of the Group is Sterling.
The preparation of financial statements in conformity with IFRS as adopted by the European Union requires the use of
certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying
the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the Group financial statements are disclosed in note 6.
The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial
statements for the year ended 31 December 2017, except for the adoption of new standards and interpretations, none
of which resulted in any impact on the accounting policies, financial position or performance of the Group.
3. Basis of consolidation
The Consolidated Financial Statements incorporate the results of the Company and its subsidiaries. Control is achieved
where the Company is exposed or has rights to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of
Comprehensive Income from the effective date of acquisition and up to the effective date of disposal, as appropriate.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into
line with those used by the Company.
4. Going concern
Information on the business environment and the factors underpinning the Group’s future prospects and product
portfolio are included in the Chairman’s Statement, Strategic Report and the Directors’ Report. The Directors confirm
that they are satisfied that the Group has adequate resources to continue in business for the foreseeable future, based
on the current cash resources available. For this reason, they continue to adopt the going concern basis in preparing
the financial statements.
5. Summary of significant accounting policies
Revenue recognition
No revenue has been recognized in respect of continuing operations for the year ended 31 December 2018. A revenue
recognition policy for future expected revenue streams is currently being formed under IFRS 15.
Taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates
taxable income.
DeepMatter Group Plc Annual Report 2018
21
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
Sales tax
Revenues, expenses and assets and liabilities are recognised net of the amount of sales tax, except:
(cid:129)
(cid:129)
Where the sales tax incurred on a purchase of assets or goods or services is not recoverable from the taxation
authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the
expense item as applicable;
Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the statement of financial position.
Research and development
Research costs are charged against income as they are incurred. Certain development costs are capitalised as
intangible assets, when it is probable that future economic benefits will flow to the Group. Such intangible assets are
amortised on a straight‑line basis from the point at which the assets are ready for use over the period of the expected
benefit, and are reviewed for impairment at each balance sheet date. Other development costs are charged against
income as incurred since the criteria for their recognition as an asset are not met.
The criteria for recognising development expenditure as an asset are:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Completion of the intangible asset is technically feasible so that it will be available for use or sale;
The Group intends to complete the intangible asset and use or sell it;
The Group has the ability to use or sell the intangible asset;
The intangible asset will generate probable future economic benefits. Among many other things, this requires
that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such benefits;
That the Group has available to it adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
That the Group can reliably measure the expenditure attributable to the intangible asset during its development.
No development costs have been capitalised as intangible assets to date.
Patents and licenses
Patent costs and licensing rights are amortised over their estimated useful economic life of 20 years. Amortisation is
included within administrative expenses.
Plant and equipment
Plant and equipment are stated at cost, net of depreciation and any provision for any impairment. Depreciation is
calculated to write off the cost of all plant and equipment to estimated residual value on a straight‑line basis over their
expected useful lives as follows:
(cid:129)
(cid:129)
(cid:129)
Plant and machinery 4 years
Fixtures and fittings 4 years
Computer and IT equipment 3 years
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such
indication exists, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or cash‑generating unit’s fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets
or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. 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. An impairment loss is recognised as an expense immediately.
An assessment is made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used
to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset
22
DeepMatter Group Plc Annual Report 2018
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
in prior years. Such reversal is recognised in the consolidated statement of other comprehensive income. After such a
reversal the depreciation charge is adjusted in future years to allocate the asset’s revised carrying amount, less any
residual value, on a systematic basis over its remaining useful life.
Goodwill
Goodwill arising on consolidation of subsidiaries represents the excess of fair value of the cost of acquisition over the
Group’s interest in the fair value of the identifiable assets and liabilities at the date of acquisition. Goodwill is tested for
impairment annually and whenever there is an indication that the asset may be impaired. Any impairment is charged to
the consolidated statement of comprehensive income.
Investments
Investments in subsidiaries are stated at cost less any impairment in value. Any impairment is charged to the Company
income statement.
Other Investment assets are accounted for as fair value through other comprehensive income. Gains or losses arising
from changes in fair value are recognised directly in equity until the investment is disposed of or determined to be
impaired, at which time the cumulative gain or loss previously recognised directly in equity, is included in the profit or
loss for the period.
Financial assets and liabilities
(cid:129)
Trade and other receivables. Trade and other receivables are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method less any provision for impairment.
(cid:129)
(cid:129)
Trade and other payables. Trade and other payables are recognised initially at their fair value and subsequently
measured at amortised cost using the effective interest method.
Cash and cash equivalents. Cash and cash equivalents comprise cash at hand, bank balances and short‑term
deposits of less than three months. The Group’s funds are held for the purpose of funding the future growth of
the business. Deposits are placed with banks and financial institutions with a sound credit rating, and such
investments are regularly reviewed by the Board.
Leases
Leases in which a significant portion of the risks and rewards of the ownership are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the consolidated statement of comprehensive income on a straight‑line basis over the period of the lease.
Share-based payments
Employees (including senior executives) of the Group receive remuneration in the form of share‑based payment share
option transactions, whereby employees rendered services as consideration for equity instruments (equity‑settled
transactions).
All goods and services received in exchange for the grant of any share‑based payment are measured at their fair
values. Where employees are rewarded using share‑based payments, the fair values of employees’ services are
determined indirectly by reference to the fair value of the instrument granted to the employee.
Share options are valued at the date of grant using the Black‑Scholes Merton model and are charged to operating profit
over the overall vesting period of the award with a corresponding credit to the share‑based payment reserve.
Where an equity‑settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not
yet recognised for the award is recognised immediately.
Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital,
and where appropriate, share premium.
New Standards and interpretations
(a) New and amended Standards and Interpretations adopted by the Group
There were a number of Amendments to Standards adopted in the current year, but none of these had a material
impact on the Group in the current period.
IFRS 9 “Financial instruments” has been effective for the current year ended, the main impact of which being the
impairment assessment methodology used to value trade receivables. The adoption of this standard has not had a
material impact on the consolidated financial statements.
DeepMatter Group Plc Annual Report 2018
23
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
IFRS 15 “Revenue from contracts with customers” has been effective for the year ended 31 December 2018. The
adoption of this standard has had no impact on the consolidated financial statements, seeing as the Group does not
currently recognize any revenue.
(b) There were a number of Amendments to Standards not yet effective in the current year, but none
of these are expected to have a material impact on the Group in the following period.
New and amended Standards and Interpretations issued but not effective for the financial year beginning 1 January 2018.
At the date of authorisation of these financial statements, the following standards and interpretations which have not
been applied in these financial statements were in issue but not yet effective:
IFRS 16 “Leases” will be effective for the year ending December 2019 onwards and the impact on the financial
statements is not expected to be significant.
6. Critical Accounting Estimates and Judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the actual results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Critical accounting estimates
Impairment of tangible and intangible assets
The Group tests tangible and intangible assets with definite lives for impairment if and when indicators of impairment
arise. Where such an indication exists, the Group estimates the value in use of the assets based on the net present
value of future cash flows.
The directors have considered whether there are any indicators of impairment to the goodwill figure of £4,123,000
which arose on the acquisition of DeepMatter Ltd in 2015 and concluded that no impairment charge is required.
The directors have also considered whether there are any indicators of impairment to the carrying amount of £686,000
(2017: £722,000) related to the intangible technology asset platform developed by OpenIOLabs and which arose on the
acquisition of that company in 2017. That one point of control technology asset platform is being used by DeepMatter
Ltd to advance its digitalization of chemistry strategy by capturing information during chemical reactions from sensors
not developed by DeepMatter Ltd. The directors have concluded that no impairment charge is required.
The directors acknowledge, however, that whilst DeepMatter Ltd is still at an early stage of development, there is
considerable uncertainty regarding the valuation of the above goodwill of £4,123,000 and the further £686,000 (2017:
£722,000) attributed to the intangible technology asset platform being used by DeepMatter Ltd, based on any estimate
of the net present value of DeepMatter Ltd’s future cash flows.
Valuation of consideration and resultant goodwill arising on business combination
The Company completed the acquisition of 100% of the issued share capital of OpenIOLabs in November 2017 for a
consideration which included 22 million ordinary shares that may be conditionally issued within 4 years of completion (the
"Deferred Share Contingent Consideration") if (a) at any time before the fourth anniversary of Completion, (i) the middle
market quotation for the Company's ordinary shares on AIM is at a price equal to or above 5 pence for a continuous period
of 60 business days; or (ii) the whole of the ordinary share capital of the Company is acquired on arm's length terms by a
third party purchaser (who is not a connected party to the Group or any of its shareholders) at a price equal to or above 5
pence per share; and (b) provided that David Cleevely has not voluntarily resigned from or has not otherwise decided to
leave the board of the DeepMatter Group within 24 months of the 8 November 2017 acquisition date.
The fair value of the Deferred Share Contingent Consideration has been determined as £204,000 and is based on the
acquisition date fair value of the shares of 1.825 pence and incorporates the probability, estimated as 50.76 % using a
Cox-Ross-Rubeinstein binomial option pricing model, that DeepMatter’s share price will have exceeded 5 pence within
4 years. The principal input assumptions used in the model are(i) underlying share price of 1.825 pence and strike price
of nil pence (ii) share price volatility rate of 68%; (iii) risk free interest rate of 2%; (iv) dividend yield nil; and (v) duration
period 4 years. It has been assumed that David Cleevely does not voluntarily leave the board with 2 years.
The directors acknowledge, however, that the input assumptions necessary for the above valuation model may be
different to the actual outcomes.
24
DeepMatter Group Plc Annual Report 2018
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
Judgements
Development costs to date have not been capitalised as intangible assets as the Directors consider DeepMatter to still
be at an early stage of development on our planned progression to the digitisation of chemistry. Development costs are
charged against income as incurred since the criteria for their recognition as an asset are not met.
7. Segmental Reporting
The Board has determined that there is only one reportable operating segment, being that of the digitization of
chemical space and of innovative chemical discovery, and as such management information is reviewed at a group
level on that basis.
Within the core digitization of chemistry segment, individual projects do not meet the definition of segments, and as
such the revenues and costs of individual projects are not formally separated. In addition, due to the research and
development nature of the business, many projects are transitory, depending on success, and thus no meaningful data
can be provided through such analysis.
All non-current assets are held in the UK.
8. Employee Benefit Expense
Salaries and fees
Social security costs
Pension costs
Share based payments (note 23)
The average monthly number of employees of the Group was:
Directors
Technical, scientific and administrative staff
Directors’ emoluments
The following disclosures are in respect of the emoluments paid to the Directors of the Company
Salaries and fees
Pension Contributions
Social security costs
Key management personnel remuneration
9. Finance Income
Bank interest receivable
2018
£’000
1,081
106
47
6
1,240
2018
No.
6
17
23
2018
£’000
161
4
13
178
2018
£’000
12
2017
£’000
611
60
9
1
681
2017
No.
5
12
17
2017
£’000
74
–
2
76
2017
£’000
22
DeepMatter Group Plc Annual Report 2018
25
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
10. Income Tax Credit
a) Tax credited in the consolidated statement of comprehensive income
UK corporation tax credit on continuing operations
UK tax credit on discontinued operations (note 15)
Total UK corporation tax credit
2018
£’000
180
109
289
2017
£’000
137
–
137
b) Current tax
The current tax credit in the consolidated statement of comprehensive income for the year is detailed below. Current
tax credit is lower than the standard rate of corporation tax in the UK of 19% (2017: 19.25%). The differences are
reconciled below:
Loss before tax on continuing operations
Loss before tax on discontinued operations
Loss before tax on total operations
Loss on ordinary activities multiplied by the average standard rate of corporation
tax in the UK of 19% (2017: 19.25%)
Effects of:
Expenses not deductible for tax
R&D tax credits received in respect of prior periods*
Deferred tax not recognised on losses carried forward
Tax credit on continuing operations
Tax credit on discontinued operations
Total tax credit
2018
£’000
(1,813)
(213)
(2,026)
(385)
24
(289)
361
(180)
(109)
(289)
2017
£’000
(1,559)
(42)
(1,601)
(308)
14
(137)
294
(137)
–
(137)
* The tax credit accounted for in 2018 was received in February 2019 and is shown as an income tax asset at the 31 December 2018 year end.
The losses available for carry forward at 31 December 2018 comprise those of the Company and its two subsidiaries,
DeepMatter Ltd and OpenIOLabs and amount to £8,919,000 at 31 December 2018, (2017: £7,726,000). No deferred
tax asset has been recognised in respect of the losses as recoverability is uncertain.
c) Deferred Tax
Tax losses carried forward
Deferred tax assets (unrecognised)
2018
£’000
1,516
1,516
2017
£’000
1,313
1,313
d) Change in Corporation Tax rate
The Finance Act 2016, which received Royal Assent on 15 September 2016, includes legislation to reduce the main
rate of corporation tax to 17% from 1 April 2020. Accordingly, unrecognised deferred tax assets and liabilities have
been calculated at the tax rate of 17% (2017: 17%).
11. Operating Costs
Operations
Employee benefit expense (see note 8)
Depreciation of property, plant and equipment
Amortisation of intangible assets – patents and licences
Operating lease costs
26
DeepMatter Group Plc Annual Report 2018
2018
£’000
1,240
15
44
71
2017
£’000
681
9
5
39
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
12. Auditors’ Remuneration
During the year the Company obtained the following services from the Company’s auditors.
Continuing operations
Fees payable to the Company’s auditors:
– The audit of the Company and consolidated accounts
– The audit of the Company’s subsidiaries
– The provision of non-audit services
2018
£’000
15
10
2
13. Plant and Equipment
Plant &
machinery
Fixtures &
Computer
fittings
equipment
Notes £’000
£’000
£’000
Cost
At 31 December 2016 8
Additions 2
Acquisition of subsidiary 15 –
At 31 December 2017 10
Additions –
At 31 December 2018 10
Depreciation
At 31 December 2016 –
Charge for year 3
At 31 December 2017 3
Charge for year 2
At 31 December 2018 5
Net Book Value
At 31 December 2017 7
At 31 December 2018 5
2
–
–
2
–
2
–
–
–
–
–
2
2
6
22
1
29
13
42
1
6
7
13
20
22
22
14. Intangible Assets – Goodwill and Patents & Licences
Patents &
Notes
Cost
At 31 December 2016
Acquisition of subsidiary 15
At 31 December 2017
At 31 December 2018
Amortisation and Impairment
At 31 December 2016
Amortisation for year
At 31 December 2017
Amortisation for year
At 31 December 2018
Net Book Value
At 31 December 2017
At 31 December 2018
Licences
Goodwill
£’000
£’000
4,123
–
4,123
4,123
–
–
–
–
–
98
747
845
845
5
5
10
44
54
835
791
2017
£’000
20
10
–
Total
£’000
16
24
1
41
13
54
1
9
10
15
25
31
29
Total
£’000
4,221
747
4,968
4,968
5
5
10
44
54
4,123
4,123
4,958
4,914
DeepMatter Group Plc Annual Report 2018
27
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
The only licence assets held at 31 December 2018 are that of a technology licence agreement with the University of
Glasgow, which is being amortised over a 20 year useful economic life, together with licences relating to a one-point-
of-control technology asset platform developed by OpenIOLabs, which are also being amortised over a 20 year useful
economic life.
The Group tests goodwill and intangible technology assets allocated to cash generating units annually by comparing the
recoverable amount of the unit with the carrying amount of the unit. The recoverable amount is determined based on
estimated value in use calculated using a discounted cash flow model which is dependent on the timing and amount of
forecast sales and when relevant regulatory approvals are achieved. Where practical, forecasts are prepared over the
expected life cycle of the Group’s proposed products and which are longer than five years due to the long term nature
of the development cycle. Forecasts are prepared based on management’s current project plans for the next five years
and expectations for the subsequent five years thereafter and owing to the early stage development of the project, the
forecasts are not based on past experience. The recoverable amount is most sensitive to the discount rate used in the
discounted cash flow model (a discount rate of 12% has been used) as well as the expected future cash flows and the
multiple of year ten cash flows used in determining the estimated terminal value at that date (a multiple of 10 has been
used). The Group have considered sensitivities in regard to the assumptions used and have reviewed both the discount
factor and multiple of earnings. A variation in the discount rate of +31% would be required to indicate an impairment
on the carrying value of goodwill.
The directors acknowledge that whilst both DeepMatter Ltd and OpenIOLabs are still at an early stage of development,
there is material uncertainty regarding the valuation of this goodwill based on any estimate of the net present value of
the subsidiary entities’ future cash flows. This material uncertainty arises because of the unpredictability of the timing
and amount of any revenue cash flow receipts or the full cost base cash outflows required to generate such revenues.
The directors will continue to review the progress of the subsidiary entities in following the Group roadmap to the
digitization of chemistry and the pursuit of opportunities to commercialise its platform technology. In the event that any
impairment to this goodwill is in fact required in the future, this would result in a non cash impairment charge through
the consolidated statement of comprehensive income and with a corresponding reduction to intangible assets and
goodwill in the statement of financial position.
15. Acquisition of OpenIOLabs/Discontinued Operations
On the 8 November 2017, the Company completed the acquisition of 100% of the issued share capital of OpenIOLabs
for a maximum consideration of 47 million of the Company’s ordinary shares, of which 25 million ordinary shares were
issued on completion at 1.825 pence share for a value of £456,000. The balance of 22 million ordinary shares may be
conditionally issued within 4 years of completion (the "Deferred Share Contingent Consideration"). if (a) at any time
before the fourth anniversary of Completion, (i) the middle market quotation for the Company's ordinary shares on AIM
is at a price equal to or above 5 pence for a continuous period of 60 business days; or (ii) the whole of the ordinary
share capital of the Company is acquired on arm's length terms by a third party purchaser (who is not a connected
party to DeepMatter Group or any of its shareholders) at a price equal to or above 5 pence per share; and (b) provided
that David Cleevely has not voluntarily resigned from or has not otherwise decided to leave the board of DeepMatter
Group within 24 months of the 8 November 2017 acquisition date.
The acquisition of OpenIOLabs was made to complement the strategic digitization of chemistry operations of the
Group by securing its technology platform developed to bridge the language and compatibility gap between various
hardware and software systems. The remaining Scanning Ion Conductance Microscope (“SICM”) trade of OpenIOlabs
was never part of the continuing operations of the DeepMatter Group and the post acquisition losses attributable to
this business have, therefore, been treated as a discontinued operation. This SICM was subsequently sold to Scientific
Digital Imaging Plc on 15 January 2019 by way of an asset purchase agreement.
The results of the discontinued SICM operations, which have been separately disclosed after tax in the Group’s
consolidated statement of comprehensive income, were as follows:
Revenue
Expenses
Loss before tax
Attributable tax credit
Net loss attributable to discontinued operations
28
DeepMatter Group Plc Annual Report 2018
2018
£’000
170
(383)
(213)
109
(104)
2017
£’000
63
(105)
(42)
–
(42)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
16. Trade and other Receivables
Current:
Other receivables
Prepayments
2018
£’000
122
30
152
2017
£’000
68
59
127
The Directors consider that the carrying amount of trade and other receivables approximates to their fair values. There was
no provision for impairment at 31 December 2018 or 31 December 2017 and all trade receivables are not past due.
17. Cash and Cash Equivalents
Cash at bank and in hand
18. Trade and other Payables
Current:
Trade payables
Social security and other taxes
Accrued expenses and other creditors
2018
£’000
1,086
2018
£’000
81
36
228
345
The Directors consider that the carrying amounts of trade and other payables approximates to their fair values.
19. Called-up Share Capital
Allotted, issued and fully paid ordinary shares of £0.0001:
At 31 December 2014
Subdivision of shares and capital reduction
Issue of consideration shares on acquisition of DeepMatter Ltd
Issue of placing shares
At 31 December 2015 and 31 December 2016
Issue of consideration shares on acquisition of OpenIOLabs
At 31 December 2017
Issue of shares on exercise of options
At 31 December 2018
No. of Shares
197,740,641
–
195,999,292
132,000,000
525,739,933
25,000,000
550,739,933
8,333
550,748,266
2017
£’000
3,265
2017
£’000
163
21
97
281
£’000
1,977
(1,957)
20
13
53
2
55
–
55
8,333 shares were issued during the year ending 31 December 2018 on the exercise of options by employees who left
the Group.
DeepMatter Group Plc Annual Report 2018
29
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
20. Loss per share
Basic loss per share is based on the loss after tax for the year and the weighted average number of ordinary shares of
£0.0001 each in issue during the year. Diluted loss per share is calculated by adjusting the average number of ordinary
shares in issue during the period to assume conversion of all dilutive potential ordinary shares. The Company had a
total of 23,816,667, potentially issuable dilutive ordinary shares in existence at the 31 December 2018 period end,
(2017: 23,936,557), comprised of 1,816,667 (2017: 1,936,667) share options (see note 23) and 22,000,000
(2017: 22,000,000) deferred consideration shares issued in relation to the acquisition of OpenIOLabs (see note 15). The
23,816,667, potentially issuable dilutive shares have not been included in the calculations below due to their potential
issuance having an effect to reduce loss per share attributable to equity holders.
Continuing operations
Loss attributable to equity holders of the Group (£’000)
Weighted average number of shares in issue
Basic and diluted loss per share (pence)
Total operations
Loss attributable to equity holders of the Group (£’000)
Weighted average number of dilutive shares in issue
Basic and diluted loss per share (pence)
21. Reserves
2018
2017
(1,813)
(1,422)
550,743,326
529,370,079
(0.33)
(0.27)
(1,917)
(1,464)
550,743,326
529,370,079
(0.35)
(0.28)
Details of the movements in reserves are given in the Statement of Changes in Equity. A description of each reserve is
set out below.
Share premium
The share premium account is used to record the aggregate amount or value of premiums paid when the Company’s
shares are issued at a premium.
Merger Reserve
The merger reserve arose on the acquisition of DeepMatter Limited (previously, Cronin 3D Limited) under section
612 of the Companies Act 2006 as shares with a nominal value of £0.02m were issued for a total of £4.9m as
consideration. The reserve was further increased in November 2017 upon the acquisition of OpenIOLabs as
shares with a nominal value of £0.02m were issued for a total of £0.46m as consideration.
Share based payment reserve
The share based payment reserve relates to the Group Share Option Scheme. Additional details are disclosed in
note 23 to the financial statements.
Shares to be issued reserve
The shares to be issued reserve arose on the acquisition of OpenIOLabs and has been used to record the fair value
at the acquisition date of the 22 million potentially issuable deferred consideration shares in connection with that
acquisition, see note 15 for more details.
22. Financial Risk Management
Objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies, as
laid out in the Strategic Report. The following information lays out the exposure the Group has to financial instruments.
Capital risk management
The Group’s capital is comprised of issued ordinary shares of £0.0001 per share and reserves. The Group manages its
capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to
shareholders. This is achieved through careful investment of surplus cash balances and tight budgetary control.
30
DeepMatter Group Plc Annual Report 2018
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
Significant accounting policies
Details of significant accounting policies and methods adopted, including criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset
and financial liability are disclosed in note 5 to the financial statements.
Categories of financial instrument
At 31 December 2017
Investments
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net Total
At 31 December 2018
Investments
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net Total
Financial
Financial
asset at
liabilities at
amortised
amortised
cost
£’000
–
68
3,265
–
3,333
–
152
1,086
1,238
cost
£’000
–
–
–
(281)
(281)
–
–
–
(345)
(345)
Financial
assets at
fair value
through
OCI
£’000
3
–
–
–
3
3
–
–
–
3
Total
£’000
3
68
3,265
(281)
3,055
3
152
1,086
(345)
896
All financial liabilities for both the Group and the Company are payable on demand. The amounts reflected above
represent the Group’s maximum exposure to credit risk for such loans and receivables. There were no out of term
financial assets or liabilities. Currently the Group does not undertake any material transactions denominated in foreign
currencies.
Liquidity risk
The Group does not consider that it carries any significant liquidity risk at the present time.
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, deposits with banks and
financial institutions, as well as credit exposures to customers. For banks and financial institutions only independently
rated parties with sound credit ratings are used. For credit exposures to customers the Group assesses the likelihood
of payment from various factors including external credit ratings, financial records and other relevant factors.
Interest Rate Sensitivity
The interest rate sensitivity of the consolidated loss for the year and equity to a reasonably possible change in interest
rates of 1% with effect from the beginning of the year is illustrated below. These changes are considered to be
reasonably possible based on observation of current market conditions. The calculations are based on the Group’s cash
and cash equivalents held at the balance sheet date. All other variables are held constant. Note that the impact of a fall
in rates for 2018 is limited to the amount of interest earnt during the year.
Year to 31 December 2018
Year to 31 December 2017
+1%
Interest Rate Sensitivity £’000
Loss for year 22
Equity 22
-1%
£’000
(12)
(12)
+1%
£’000
40
40
-1%
£’000
(22)
(22)
DeepMatter Group Plc Annual Report 2018
31
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
23. Share-based payments
The company operates a share option scheme for the benefit of employees and share options are granted to all eligible
employees. The exercise price of the options is equal to the market price of the shares on the date of grant. All options
are equity settled and vest over a period of up to 3 years. If the options remain unexercised after a period of 10 years
from the date of grant, the options expire. The options are accounted for as equity settled share based payment
transactions.
No share options were granted during the year ending 2018. On 1 December 2017, the Board granted an initial award
of options to employees over 1,936,667 ordinary shares at an exercise price of 2.13 pence (being the closing price on
30 November 2017, the business day preceding the date of grant).
Of those 1,936,667 share options granted, 677,871 vested on the date of grant. The balance vest in one monthly
instalments until either three years from the date of grant or in the case of certain longer serving employees, from the
earlier date of three years from the end of each of the employees’ respective historic probation periods.
At 31 December 2018, there were 1,816,667 (2017: 1,936,667) share options in issue at a weighted average exercise
price (“WAEP”) of 2.13 pence as illustrated in the following table of movements in share options during the year:
Number
Outstanding at 1 January 1,936,667
Granted during the year –
Exercised during the year (8,333)
Forfeited (71,667)
Lapsed (40,000)
Outstanding at 31 December 1,816,667
2018
2017
WAEP
pence
2.13
–
2.13
2.13
2.13
2.13
Number
–
1,936,667
–
–
–
WAEP
pence
–
2.13
–
–
–
1,936,667
2.13
Of the 1,816,667 share options outstanding, 1,257,870 were exercisable as at 31 December 2018 (2017: 677,870).
The fair value of equity-settled share options granted is estimated as at the date of grant using the Black-Scholes-
Merton model, taking into account the terms and conditions upon which the options were granted and expected
payment of the dividends by the Company.
The following table lists the inputs to the model used for the year ending 31 December:
Expected share price volatility
Risk free interest rate
Dividend yield
Weighted average exercise price (pence)
Weighted average share price at date of grant (pence)
2018
68%
2.0%
0.0%
2.13
2.13
2017
68.0%
2.0%
0.0%
2.13
2.13
The expected life of the options up to the point of exercise allows for options that vest to be exercised annually on
each subsequent 12 month anniversary from the date of grant. The expected life of the options is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical
volatility is indicative of future trends, which may also not necessarily be the actual outcome.
The fair value of equity-settled share options granted are recognised as an expense in the statement of comprehensive
income over the assumed period to exercise of the award, with a corresponding credit to the share based payment
reserve. The expense so recognised in the year ended 31 December 2018 amounted to £6,000 (2017: £1,000) and the
total credit on the share based payment reserve amounted to £7,000 at that date.
32
DeepMatter Group Plc Annual Report 2018
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
24. Events Subsequent to the year ended 31 December 2018
Acquisition – InfoChem GmbH
On 15 March 2019, the Company completed the acquisition of 100% of the issued share capital of InfoChem GmbH
from Springer-Verlag GmbH (“Springer Nature”) for a maximum consideration of £2.031 million, satisfied by payment of
a cash component of £321,000 (€374,000), together with the issue of up to 64.8 million of the Company’s ordinary
shares, of which 25.6 million ordinary shares were issued on completion at 2.5 pence per share for a value of
£640,000. The balance of 42.8 million ordinary shares (the “Deferred Shares”) are issuable no earlier than 18 months
after the acquisition date (once the period for warranty claims has expired) and provided that no warranty claims have
been made. In the event of a warranty claim, the Company is able to cancel Springer Nature’s right to the number of
Deferred Shares as are necessary to satisfy the claim in full. The fair value of the Deferred Shares contingent
consideration has been determined as £1,070,000 and is based on the acquisition date fair value of the shares of 2.5
pence per share and assumes that there will be no warranty claims during the warranty period.
The fair market price of the Company’s shares on completion of the InfoChem acquisition has been determined at 2.5
pence per share. This 2.5 pence share price is considered to be the best estimate of fair value for a transaction of the
size of the InfoChem acquisition and reflects the 2.5 pence share price that was paid by investors under the £4 million
fund raise that was completed by the Company on 13 March 2019. This price has, therefore been used in the valuation
of the InfoChem share consideration, rather than use of the higher AIM quoted mid-market price of 3.45 pence per
share at the close of the AIM market on 14 March 2019 prior to completion of the acquisition, and which reflected a
small volume of AIM market share trades around that time.
InfoChem is a company registered in Germany based in Munich which has extensive scientific expertise and a long
tradition in developing successful software solutions for handling retrieval, structures and reactions. Its established
base of users is in the same industries as those being targeting by the Company. The Directors anticipate that the
integration of InfoChem will assist in the accelerated development of the DigitalGlassware™ platform and the shared
customer base will provide an additional sales channel.
The Group estimates it has incurred £70,000 of third party acquisition related costs in respect of this acquisition. These
expenses have been included in accrued professional fees within administrative expenses in the Group’s consolidated
statement of comprehensive income for the period ended 31 December 2018.
The acquisition of InfoChem will be accounted for by the purchase method of accounting. As the acquisition completed
on the 15 March 2019, the detailed purchase price allocation exercise is currently on-going and therefore the following
table summarises the InfoChem acquisition consideration and the incomplete amounts of identified assets acquired
and liabilities assumed at the acquisition date:
Recognised amounts of net assets acquired and liabilities assumed
(incomplete estimate):
Cash
Debtors
Intangible Asset
Fixed Assets
Other liabilities
Net assets acquired
Goodwill arising on acquisition
Fair value of consideration transferred
Satisfied by:
Cash paid on completion
Ordinary shares issued on completion
Deferred shares contingent consideration
Total consideration
£’000
586
78
323
79
(512)
554
1,477
2,031
321
640
1,070
2,031
DeepMatter Group Plc Annual Report 2018
33
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2018
The recognised amounts of all the net assets acquired and liabilities assumed are incomplete estimates.
The goodwill arising on the acquisition of InfoChem is largely attributable to the premium payable for a pre-existing,
well positioned business that has revenues, together with the benefits of anticipated future synergies from the
DeepMatter enlarged group combination. The directors have determined that the fair value of Intangible technology
assets, representing software developed by InfoChem, amounts to an estimated £323,000 (€379,000) and the
directors are at the present time, giving further consideration to whether there are any other Identifiable Intangible
Assets that can be recognized separately from goodwill. An update of the recognised amounts of net assets acquired
and liabilities assumed on the acquisition of InfoChem will be reported in the Group’s Annual Report to 31 December
2019.
Given that InfoChem was acquired post 31 December 2018, no revenues or profits relating to that company have been
included in the DeepMatter Group’s consolidated results for 2018. As accounting for the acquisition is incomplete, the
Group has not disclosed the total comprehensive income result of InfoChem GmbH for the financial year ending 31
December 2018.
Divestment of Scanning Ion Conductance Microscope (“SICM”) trade
On 15 January 2019, the SICM trade of OpenIOlabs was sold to Scientific Digital Imaging Plc by way of an asset
purchase agreement for a cash consideration of £49, 220 and which after allowing for the net assets sold and the costs
of disposal, is expected to generate a profit of approximately £18,000 on disposal. OpenIOLabs was acquired in
November 2017 to complement the strategic digitization of chemistry operations of the Group by securing its one point
of control technology platform developed to bridge the language and compatibility gap between various hardware and
software systems. The SICM trade has never been part of the continuing operations of the DeepMatter Group.
25. Related Parties and Directors’ Transactions
Group
DeepMatter Group has paid companies that are part of IP Group, a significant shareholder, £14,395 in respect of the
provision of administrative services and the recharge of business expensed incurred by Mark Warne as a Non-Executive
Director of the Group prior to his appointment as Chief Executive in July 2018 (2017: £14,543). There were no amounts
outstanding at the end of the year (2017: £nil).
DeepMatter Group also paid £14,500 (2017: £nil) to Cleevely & Partners Ltd, a company owned by David Cleevely, a
Non-Executive Director. There were no amounts outstanding at the end of the year (2017: £nil).
Key employees
At the year end the Board did not consider any employees to be key management to the Group other than the Directors.
The remuneration of the directors is disclosed in the Directors’ Report on page 8.
26. Ultimate Controlling Party
In the opinion of the Directors, there is no ultimate controlling party.
34
DeepMatter Group Plc Annual Report 2018
COMPANY STATEMENT OF FINANCIAL
POSITION
As at 31 December 2018
Assets
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Liabilities
Current liabilities
Trade and other payables
Net current assets
Net assets
Equity and liabilities
Shareholder's equity
Called up share capital
Share premium
Merger reserve
Shares to be issued reserve
Share based payments reserve
Retained earnings
Total equity attributable to shareholders of the Company
At
At
31 December
31 December
2018
£’000
5,569
5,569
3,289
1,027
4,316
(132)
4,184
9,753
55
3,287
5,334
204
7
866
9,753
2017
£’000
5,563
5,563
1,501
3,135
4,636
(60)
4,576
10,139
55
3,287
5,334
204
1
1,258
10,139
Notes
C2
C4
C5
19
21
21
21
23
The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own statement
of comprehensive income in these financial statements. The parent Company’s loss for the year to 31 December 2018
was £392,000 (2017: £187,000).
The financial statements were approved by the Board of Directors on 11 April 2019 and were signed on its behalf
by:
Michael Bretherton
Director
Company Number: 05845469
DeepMatter Group Plc Annual Report 2018
35
COMPANY STATEMENT OF CHANGES
IN EQUITY
For the year ended 31 December 2018
Share
Shares to based
Share Share Merger Retained be issued payment
Total
equity premium reserve earnings reserve reserve
equity
£’000 £’000 £’000 £’000 £’000 £’000
Balance at 31 December 2015 53 3,287 4,880 1,540 – –
Total comprehensive loss for the year to
31 December 2016 – – – (95) – –
Balance at 31 December 2016 53 3,287 4,880 1,445 – –
£’000
9,760
(95)
9,665
Total comprehensive loss for the year to
31 December 2017 – – – (187) – –
(187)
Transactions with owners:
Share based payment charge – – – – – 1
Shares issued and issuable on acquisition of subsidiary 2 – 454 – 204 –
1
660
Balance at 31 December 2017 55 3,287 5,334 1,258 204 1
10,139
Total comprehensive loss for the year to
31 December 2018 – – – (392) – –
(392)
Transactions with owners:
Share based payment charge – – – – – 6
6
Balance at 31 December 2018 55 3,287 5,334 866 204 7
9,753
36
DeepMatter Group Plc Annual Report 2018
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
Loss before tax
Share based payment charge
Finance Income
Operating cash outflows before movements in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operations
Interest received
Net cash used in operating activities
Investment in subsidiary undertaking
Cash used in investing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
2018
£’000
(392)
6
(12)
(398)
(1,787)
71
(2,114)
12
(2,102)
(6)
(6)
(2,108)
3,135
1,027
2017
£’000
(187)
1
(22)
(208)
(1,377)
13
(1,572)
22
(1,550)
–
–
(1,550)
4,685
3,135
DeepMatter Group Plc Annual Report 2018
37
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
For the year ended 31 December 2018
C1. Basis of preparation
The Company separate financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006
applicable to companies reporting under IFRS. The financial statements have been prepared under the historical
cost convention and all values have been rounded to the nearest thousand, except where otherwise indicated.
The Company’s functional currency is Sterling.
The principal accounting policies adopted are the same as for those set out in the Group financial statements.
Investments in subsidiaries
Investments in subsidiaries are stated in the Company statement of financial position at cost less provision for
any impairment. Any impairment is charged to the Company income statement.
C2. Investments
Shares in
subsidiary
Other
undertakings
Investments
Notes
£’000
£’000
Cost
At 31 December 2016
Additions
At 31 December 2017
Additions 15
At 31 December 2018
Impairment
At 31 December 2016
Impairment
At 31 December 2017
Impairment
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018
4,900
660
5,560
6
5,566
–
–
–
–
–
5,560
5,566
3
–
3
–
3
–
–
–
–
–
3
3
Total
£’000
4,903
660
5,563
6
5,569
–
–
–
–
–
5,563
5,569
The directors have considered whether there are any indicators of impairment to the Shares in Subsidiary Undertakings
investment figure of £5,566,000 and concluded that no impairment charge is required.
The directors acknowledge, however, that whilst the operations of the subsidiary entities are still at an early stage of
development, there is considerable uncertainty regarding the valuation of this investment balance based on any
estimate of the net present value of the subsidiaries future cash flows. See note 14 to the Group financial statements
for further details.
38
DeepMatter Group Plc Annual Report 2018
NOTES TO THE COMPANY FINANCIAL
STATEMENTS (CONTINUED)
for the year ended 31 December 2018
As at 31 December 2018, details of the Company’s subsidiaries are as follows:
Name of Company Holding % of shares held
Nature of business
Registered
Office
Address
DeepMatter Limited (incorporated in Scotland) Ordinary
100
Digitization of chemical
38 Queen Street,
space and chemical discovery
Glasgow, Scotland,
G1 3DX
OpenIOLabs Limited Ordinary
100
Open source one point
St Brandon’s House,
(incorporated in England & Wales)
of control systems
29 Great
George Street, Bristol,
BS1 5QT
DeepMatter Tech Limited Ordinary
100
Dormant subsidiary The Walbrook Building,
(incorporated in England & Wales)
25 Walbrook,
London, EC4N 8AF
C3. Information regarding parent company employees
The 6 (2017: 6) Directors are the only employees of the parent company. Details of the Directors’ emoluments is
included at note 8 within the Group accounts.
C4. Trade and Other Receivables
Current:
Intercompany receivables
Other receivables
Prepayments
C5. Trade and Other Payables
Current:
Trade payables
Social security and other taxes
Accrued expenses
2018
£’000
3,274
6
9
3,289
2018
£’000
3
10
119
132
2017
£’000
1,464
16
21
1,501
2017
£’000
18
1
41
60
The Directors consider that the carrying amounts of trade and other payables approximates to their fair values.
C6. Share Capital
The movement in share capital for the Company is detailed in note 19 to the Group financial statements.
C7. Other Reserves
The movement on all other company reserves is detailed in the statement of changes in equity.
DeepMatter Group Plc Annual Report 2018
39
NOTES TO THE COMPANY FINANCIAL
STATEMENTS (CONTINUED)
for the year ended 31 December 2018
C8. Related Party Transactions
For the period ending 31 December 2018, the intercompany receivable increased by £1.8m to £3.3m (2017: £1.5m) . This
increase is reflective of the investment made in progressing the Digital Glassware™ platform.
Further details of the related party transactions and balances are included in note 25 to the Group financial statements.
C9. Financial Risk and Capital Management
Financial risk and capital management is managed at a Group level, which is considered appropriate given the similar nature
of both the Group and Company statements of financial position. Please refer to note 22 to the Group financial statements.
Categories of financial instrument
Financial assets
liabilities at
Financial
Financial
assets at
at amortised
amortised
fair value
cost
cost
through OCI
£’000
£’000
£’000
At 31 December 2017
Investments –
Trade and other receivables 1,480
Cash and cash equivalents 3,135
Trade and other payables –
Net Total 4,615
At 31 December 2018
Investments –
Trade and other receivables 3,289
Cash and cash equivalents 1,027
Trade and other payables –
Net Total 4,316
–
–
–
(60)
(60)
–
–
–
(132)
(132)
3
–
–
–
3
3
–
–
–
3
Total
£’000
3
1,480
3,135
(60)
4,558
3
3,289
1,027
(132)
4,187
All financial liabilities for the Company are payable on demand. The amounts reflected above represent the Company’s
maximum exposure to credit risk for such loans and receivables. There were no out of term financial assets or
liabilities. Currently the Company does not undertake any material transactions denominated in foreign currencies.
40
DeepMatter Group Plc Annual Report 2018
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting (“Meeting”) of DeepMatter Group Plc (the “Company”)
will be held at the Offices of IP Group Plc, Floor 9, The Walbrook Building, 25 Walbrook, London EC4N 8AH on
22 May 2019 at 11.00 a.m.
ORDINARY BUSINESS
1. Report and accounts
To receive and consider the Directors’ Report, the audited consolidated Financial Statements and Independent Auditors’
Report for the year ended 31 December 2018.
2. Re-appointment of a director
To consider and, if thought fit, to approve the re-appointment of Mark Warne as a director of the Company, who retires
pursuant to the Article 129 of the Articles of Association of the Company (the “Articles”) and who is recommended by
the board of directors of the Company (the ”Board”) for re-appointment.
3. Re-appointment of a director
To consider and, if thought fit, to approve the re-appointment of James Ede-Golightly as a director of the Company,
who retires pursuant to the Article 129 of the Articles and who is recommended by the Board of directors of the
Company for re-appointment.
4. Re-appointment of a director
To consider and, if thought fit, to approve the re-appointment of Bettina Goerner as a director of the Company, who
retires pursuant to the Article 134 of the Articles and who is recommended by the Board of directors of the Company
for re-appointment.
5. Re-appointment of auditors
To consider and, if thought fit, to approve the re-appointment of Nexia Smith & Williamson as independent auditors of
the Company and to authorise the Board to determine their remuneration.
SPECIAL BUSINESS
As special business to consider and, if thought fit, pass the following resolutions, of which resolution 6 will be
proposed as an ordinary resolution and resolution 7 will be proposed as special resolution:
6.
Directors’ authority to allot shares
6.1 That the Directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act
2006 (the “2006 Act”) to exercise all the powers of the Company to allot and make offers to allot Relevant
Securities (as defined below):
6.1.1 comprising equity securities (as defined by section 560 of the 2006 Act) up to an aggregate nominal
amount of £49,102.26 (such amount to be reduced by the nominal amount of any Relevant Securities
allotted under paragraph 6.1.2 below) in connection with an offer by way of a rights issue:
(i)
(ii)
to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective
holdings; and
to holders of other equity securities as required by the rights of those securities or as the
Directors otherwise consider necessary, but subject to such exclusions or other arrangements
as the Board may deem necessary or expedient in relation to treasury shares, fractional
entitlements, record dates, legal or practical problems in or under the laws of any territory or the
requirements of any regulatory body or stock exchange; and
6.1.2 in any other case, up to an aggregate nominal amount of £19,584.73 such amount to be reduced by
the nominal amount of any equity securities allotted under paragraph 6.1.1 above in excess of
£29,517.53, provided that (unless previously revoked, varied or renewed) this authority shall expire
15 months from the date of passing this resolution, or, if earlier, the conclusion of the next Annual
General Meeting of the Company held after the passing of this resolution save that the Company may
before such expiry make an offer or enter into an agreement which would or might require Relevant
Securities to be allotted after such expiry and the Directors may allot Relevant Securities in pursuance
of such offer or agreement as if the authority conferred hereby had not expired.
6.2 This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot
Relevant Securities but without prejudice to any allotment of shares or grant of rights already made, offered
or agreed to be made pursuant to such authorities.
DeepMatter Group Plc Annual Report 2018
41
NOTICE OF ANNUAL GENERAL MEETING
(CONTINUED)
6.3 For the purposes of this resolution, a “Relevant Security” is:
6.3.1 a share in the Company other than a share allotted pursuant to:
(i)
(ii)
(iii)
an employee share scheme (as defined by section 1166 of the 2006 Act);
a right to subscribe for a share or shares in the Company where the grant of the right itself
constituted a Relevant Security under paragraph 6.3.2 below; or
a right to convert securities into a share or shares in the Company where the grant of the right
itself constituted a Relevant Security under paragraph 6.3.2 below.
6.3.2 any right to subscribe for or to convert any security into a share or shares in the Company other than a
right to subscribe for or convert any security into a share or shares allotted pursuant to an employee
share scheme (as defined by section 1166 of the 2006 Act).
6.4 References to the allotment of “Relevant Securities” in this resolution shall be construed accordingly.
7.
Disapplication of statutory pre-emption rights
7.1 That subject to the passing of resolution 6 above, the Directors of the Company be authorised and
empowered pursuant to section 570 of the 2006 Act to allot equity securities (as defined by section 560 of
the 2006 Act) for cash, either pursuant to the authority conferred by resolution 6 or by way of a sale of
treasury shares, as if section 561(1) of the 2006 Act did not apply to any such allotment, provided that such
power is limited to:
7.1.1 the allotment of equity securities in connection with an offer by way of a rights issue:
(i)
(ii)
to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective
holdings; and
to holders of other equity securities as required by the rights of those securities or as the
Directors otherwise consider necessary, but subject to such exclusions or other arrangements
as the Board may deem necessary or expedient in relation to treasury shares, fractional
entitlements, record dates, legal or practical problems in or under the laws of any territory or the
requirements of any regulatory body or stock exchange; and
7.1.2 the allotment of equity securities (otherwise than pursuant to paragraph 7.1.1 above) up to a maximum
aggregate nominal amount of £11,048.01
7.2 This authority shall expire 15 months from the date of passing this resolution, or, if earlier, the conclusion of
the next Annual General Meeting of the Company held after the passing of this resolution, provided that the
Company may, before the expiry of this power, make an offer or agreement which would or might require
equity securities to be allotted after the expiry of this power and the Directors may allot equity securities in
pursuance of such an offer or agreement as if the power had not expired.
7.3 This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot
equity securities but without prejudice to any allotment of equity securities already made, offered or agreed
to be made pursuant to such authorities.
On behalf of the Board
Michael Bretherton
Company secretary
11 April 2019
DeepMatter Group Plc
The Walbrook Building
25 Walbrook
London EC4N 8AF
42
DeepMatter Group Plc Annual Report 2018
EXPLANATORY NOTES
Entitlement to attend and vote
1.
The Company specifies that only those members registered on the Company's register of members at:
(cid:129)
(cid:129)
11.00 a.m. on 20 May 2019; or,
if this Meeting is adjourned, at 11.00 a.m. on the day two working days prior to the adjourned meeting (not
counting non-working days),
shall be entitled to attend and vote at the Annual General Meeting (the “Meeting”).
Appointment of proxies
2.
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint one or more
proxies to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have
received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in
these notes and the notes to the proxy form.
3.
4.
A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of
how to appoint the chairman of the Meeting (the “Chairman”) or another person as your proxy using the proxy
form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Meeting
you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.
A vote withheld will not be counted in the calculation of votes for or against the resolution. If no voting indication
is given, your proxy may vote or abstain from voting at his or her discretion. Your proxy may vote (or abstain from
voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
Appointment of proxy using hard copy proxy form
5.
The notes to the proxy form explain how to direct your proxy to vote on each resolution or withhold their vote.
To appoint a proxy using the proxy form, the form must be:
(cid:129)
(cid:129)
completed (although no voting indication need be given if you wish your proxy to exercise their discretion)
and signed;
sent or delivered to Neville Registrars, Neville House, Steelpark Road, Halesowen, B62 8HD; and received
by Neville Registrars no later than 11.00 a.m. on 20 May 2019.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed
on its behalf by a duly authorised officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the proxy form is signed (or a copy of such power or
authority certified notarially or in some other way approved by the board of directors of the Company) must be
included with the proxy form.
Appointment of proxy by joint members
6.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which
the names of the joint holders appear in the Company's register of members in respect of the joint holding (the
first-named being the most senior).
Changing proxy instructions
7.
To change your proxy instructions simply submit a new proxy appointment using the methods set out above.
Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended
instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions
using another hard-copy proxy form, but have not retained a copy of the blank proxy form, please contact Neville
Registrars, Neville House, Steelpark Road, Halesowen, B62 8HD.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the
receipt of proxies will take precedence.
DeepMatter Group Plc Annual Report 2018
43
EXPLANATORY NOTES
(CONTINUED)
Termination of proxy appointments
8.
In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice
clearly stating your intention to revoke your proxy appointment as above. In the case of a member which is a
company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of
the company or an attorney for the company. Any power of attorney or any other authority under which the
revocation notice is signed (or a copy of such power or authority certified notarially or in some other way
approved by the board of directors of the Company) must be included with the revocation notice.
The revocation notice must be received by Neville Registrars no later than 11.00 a.m. on 20 May 2019. If you
attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to
the paragraph directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have
appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.
Issued shares and total voting rights
9.
As at 6 p.m. on 10 April 2019, the Company's issued ordinary share capital comprised 736,533,946 ordinary
shares of £0.0001 each. Each ordinary share carries the right to one vote at a general meeting of the Company.
Quorum
10.
The quorum for the Meeting is not less than two shareholders present either in person or by proxy. The majority
required for the passing of each of the ordinary resolutions is a simple majority of the total number of votes cast
on each such ordinary resolution. The majority required for the passing of each of the special resolutions is three-
quarters of the total number of votes cast on each such special resolution.
11. At the Meeting the votes may be taken on the resolutions by a show of hands or on a poll. On a show of hands
every shareholder whether present in person or by proxy has one vote. On a poll every shareholder who is
present, in person or by proxy, shall have one vote for every ordinary share held. A shareholder entitled to more
than one vote need not use all of their votes or cast all of their votes in the same way.
12.
To allow effective constitution of the meeting, if it is apparent to the Chairman that no shareholders will be
present in person or by proxy, other than by proxy in the Chairman’s favour, then the Chairman may appoint a
substitute to act as proxy in his stead for any shareholder, provided that such substitute proxy shall vote on the
same basis as the Chairman.
Documents on display
13.
The following documents will be available for inspection at the registered office of the Company during normal
business hours on any weekday (weekends excepted) from the date of this notice until and for 15 minutes prior
to and during the Meeting:
a.
b.
copies of the service contracts of executive directors of the Company; and
copies of letters of appointment of the non-executive directors of the Company.
Perivan Financial Print 254085
44
DeepMatter Group Plc Annual Report 2018
Registered office
The Walbrook Building
25 Walbrook
London EC4N 8AF
Company Number
05845469 (England and Wales)