Annual Report 2019
The fastest path to discovery
DIRECTORS, OFFICERS AND ADVISORS
Non-Executive Chairman
Chief Executive
Finance Director (resigned 28 June 2019)
Finance Director (appointed 28 June 2019)
Scientific Founder & Non-Executive Director (resigned 12 April 2019)
Non-Executive Director (resigned 12 April 2019)
Non-Executive Director
Non-Executive Director (appointed 15 March 2019)
(appointed 28 June 2019)
(resigned 28 June 2019)
Directors
James Ede-Golightly
Mark Warne
Michael Bretherton
Lauren Lees
Lee Cronin
David Cleevely
Laurence Ede
Bettina Goerner
Secretary
Lauren Lees
Michael Bretherton
Registered Office
St Brandon’s House
29 Great George Street
Bristol BS1 5QT
Broker and Nominated Advisor
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
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
2
3
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17
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DeepMatter Group Plc Annual Report 2019
1
CHAIRMAN’S STATEMENT
I am pleased to report on a year of solid progress for
DeepMatter, with the Group taking tangible steps towards
its vision to digitise chemistry. All the targets set by the
management team for 2019 were achieved, both financially
and strategically, laying down a platform for growth in the
years ahead. The DigitalGlassware™ Pioneer Programme
has been brought to a successful conclusion and the first
Pioneer converted to a revenue generating contract, the
management team has been strengthened and the sales
pipeline for DigitalGlassware™ has expanded considerably.
The acquisition of InfoChem GmbH (“InfoChem”) has
further increased the income of the Group, bringing high
margin recurring software revenues, while adding
technological capabilities and customers. COVID-19 has
impacted the way in which the business operates,
however the pipeline of revenue remains strong and the
impact of the virus on customer working practices has
increased interest in our products.
Group revenues increased from £nil to £1.2 million in the
year. Approximately 75% of these revenues are recurring
in nature, derived from long standing customers and
represent a stable base of revenues for the year ahead.
Gross profit was £0.5 million at a margin of 44%, and the
operating loss was £3.4 million (2018: £2.0 million), before
exceptional costs relating to the acquisition. The Group
recorded a loss after tax of £3.0 million (2018: £1.8 million)
and an EPS loss of 0.42 pence (2018: loss of 0.35 pence)
per share, in line with management’s expectations. The
Group raised approximately £4.0 million through a placing
of shares in March 2019. The funds greatly strengthened
the business, further financing ongoing DigitalGlassware™
technology development, user and partner support,
marketing, data science initiatives and the manufacture of
hardware. We would like to thank all the new and existing
investors who took part for their support.
The Board carefully manages investment to support the
Group’s growth opportunity and has adopted a capital efficient
strategy. A consolidation of personnel resources following
the integration of the InfoChem business has resulted in a
reduction in the cost base of the Group, the benefit of
which will manifest itself in 2020. The Group closed the
year with a net cash position of £2.6 million (2018:
£1.1 million).
The Group continues to execute on the organic growth
strategy of the business, seeking to grow both
revenues, while
DigitalGlassware™ and
remaining alert to the potential of acquisitions to enhance
product development or add further customers to the
Group.
ICSynth™
Board Changes
As DeepMatter transitions out of the R&D stage into
commercialisation, so the composition of the Board has
evolved. The Founding Scientific Director, Lee Cronin, and
fellow Non-Executive Director, David Cleevely, both retired
from the Board during the year, while continuing to provide
support as part of an Advisory Committee. The commercial
expertise on the Board was strengthened in the year with
the appointment of Bettina Goerner as Non-Executive
Director following the acquisition of InfoChem. Lauren
Lees was appointed as Financial Director, having previously
been Group Financial Controller. concurrent with Michael
Bretherton retiring as Financial Director.
We would like to wholeheartedly thank Michael, David and
Lee for their contributions to the Group, and warmly
welcome the new Board members. As part of the
continuing evolution of the Board I will be retiring as a
Director of the Company at the 2020 AGM, having served
as a Director since 2014. The Board is in discussion with
candidates and expects to announce the appointment of a
Non-Executive Chairperson later in the year.
COVID-19
Our priority at this time has been to ensure the well-being
of our teams, and we have moved to remote working
across our sites. To mitigate the impact of COVID-19 on the
short-term conversion of the sales pipeline, cost-cutting
measures have been implemented to preserve the Group’s
resources. The Board is confident sufficient measures have
been put in place to ensure the progression of the Group
through this time and maintains a vigilant focus on costs
and the end market.
Summary and Outlook
DeepMatter is a well-managed business with a robust
growth strategy and growing market opportunity. While the
uncertainty caused by COVID-19 situation will likely have
an impact on the length of contract discussions in the
short-term, it is evident the opportunity for the Group’s
technology is significant and long-term. The change to
working practices within laboratories caused by social
distancing is highlighting the need to share scientific data
both remotely and within the lab, accelerating the
digitisation of the laboratory and underlining the value
proposition of the DigitalGlassware™ platform.
The Board is therefore confident in the prospects for
DeepMatter, its ability to weather the current market
conditions and deliver on the increasing interest and
relevance of its offering.
James Ede-Golightly
Non-Executive Chairman
28 May 2020
2
DeepMatter Group Plc Annual Report 2019
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 Group”) for the year to 31 December 2019.
Our goal is for our DigitalGlassware™ technology platform,
along with other cheminformatics products, to be used
across the pharmaceutical and wider chemical research
industry to produce new chemical products, better, faster
and cheaper. We will achieve this through:
The Company has four wholly owned subsidiaries, three of
which are active trading entities, InfoChem GmbH
(“InfoChem”), DeepMatter Limited (“DML”) and OpenIOLabs
Limited (“OpenIOLabs”). DeepMatter Tech Limited (“DTL”)
is a dormant subsidiary.
Principal Activity and Business Model
The Group’s ongoing business activity, undertaken by DML
and InfoChem, is that of the digitisation of the chemical
space coupled with innovative chemical discovery.
The Group continues to make exciting progress in
deploying its DigitalGlassware™ technology platform,
comprising an easy-to-use software interface and a unique,
low footprint sensor array, which allows an individual to
access reproducible chemistry via internet protocols.
As outlined in our Annual Report for 2018, our strategic
priorities for 2019 were to:
–
–
–
Ensure engagement with Key Opinion Leaders
Progress industrial site roll-outs to early adopters
Initiate
DigitalGlassware™
Cheminformatics
integration
into
We are pleased to report having realised all these priorities
in 2019.
Market & Strategy
The Company’s strategy is focused on the development of
DigitalGlassware™, a data rich platform, which we believe
has the potential to transform chemistry lab processes,
bringing the benefits of digital technology, cloud computing
and AI to the lab, improving R&D productivity.
Chemical companies are making their plants and processes
increasingly digital, data-driven and interconnected. Human
interaction to produce chemical products introduces many
opportunities for error and the ‘Reproducibility crisis’ in
chemistry, where chemical experiments cannot be
accurately reproduced and therefore duplication work is
required, is estimated to cost the industry over $28 billion*
annually in the US alone.
Our
is a
innovative platform, DigitalGlassware™,
cloud-based software, proprietary hardware and
machine-learning enabled platform which eradicates
reproducibility issues. Experiments are accurately and
systematically recorded, coded and entered into a shared
data cloud, allowing scientists to collaborate effectively,
sharing details of their experiments from anywhere and in
real-time.
–
–
–
Organic growth of the User Base, Data Repository
and Revenues
Strategic Partnerships with influencers, sector
adjacent hardware and data providers
Commercial validation of the aggregate data
proposition
Operational Review
The Pioneer Programme
The Pioneer Programme, for the initial testing and industry
validation of the DigitalGlassware™ platform has now been
brought to a successful conclusion, with one of the Pioneers
converting to a revenue generating contract in the year.
Growing market validation and awareness
2019 saw growing market validation for the Company’s
DigitalGlassware™ technology. This started with the
Company receiving its first purchase order for the platform
in August 2019, from o2h discovery
(“o2h”), an
Anglo-Indian medicinal chemistry service provider that has
end-to-end capability to take drug discovery programmes
to the IND filing stage. o2h participated in the Company’s
the
Pioneer Programme during 2018,
DigitalGlassware™ platform in both its research and
process chemistry operations. Having participated in the
Pioneer Programme, and being sufficiently impressed by
the DigitalGlassware™ technology, o2h elected to pay for
the provision of a greater number of user licences. This roll
out will enable o2h to use DigitalGlassware™ as part of its
drug-discovery collaboration with a strategic customer.
trialling
multinational
In December 2019, we announced a collaboration with
and
leading
biopharmaceutical firm AstraZeneca, with the aim of
improving the productivity and reproducibility of compound
synthesis.
pharmaceutical
Later that month, we welcomed three leading sector
figures as industry advisors on our commercial roll-out of
DigitalGlassware™. The advisors bring in-depth knowledge
in research & medicinal chemistry, process chemistry and
industrially focused closed-loop robotics and automation,
all target industries for DigitalGlassware™.
Following the year end, our traction with institutions has
continued. In February 2020, we were delighted to
announce two collaborations with leading UK Universities:
The Institute of Process Research and Development (iPRD)
at the University of Leeds and the University of
Nottingham’s School of Chemistry. In April 2020 we also
announced a trial of DigitalGlassware™ within the Drug
Discovery Unit of the Cancer Research UK Beatson
Institute.
* published by Freedman et al at the Global Biological Standards Institute, Washington, D.C., USA in the peer reviewed journal PLOS Biology 13 (2015).
DeepMatter Group Plc Annual Report 2019
3
STRATEGIC REPORT (CONTINUED)
To support awareness of the DigitalGlassware™ platform,
we initiated marketing activity during the year, targeting
both the corporates who will purchase the licences for
DigitalGlassware™ and the chemists who will use it,
through increased attendance at industry events, social
media marketing and direct marketing activities.
Acquisition and integration of InfoChem GmbH
In March 2019, we completed the acquisition of InfoChem,
a specialist in cheminformatics, from global publisher
Springer-Verlag GmbH (“Springer Nature”). The total
consideration payable was £2.031 million satisfied as to
£0.321 million (€0.374 million) in cash and the issue of
68,400,000 new ordinary shares in the capital of the Group
comprising of 25,600,000 initial consideration shares and
42,800,000 deferred consideration shares.
The acquisition and integration of InfoChem provided a solid
financial platform for the business, bringing customers and
recurring revenues while adding key software functionality
to increase the capabilities of the DigitalGlassware™
platform. The acquisition provides the Group with cost
to extensive scientific expertise,
effective access
established data sources and chemical
information
software tools. Integration of the operations are now
complete, with selected
InfoChem cheminformatics
capabilities now embedded in DigitalGlassware™. A rolling
programme of integration continues.
ICSynth™,
The pipeline of sales opportunities for
InfoChem’s core product offering, has increased following
acquisition and the Company is increasingly building
awareness of InfoChem’s value proposition within this
growing market, supporting market share growth.
Strengthening of our team
During the year, the leadership team of the Group has been
strengthened through the appointments of a new Financial
Director, Chief Operating Officer and Marketing Lead.
Evolution of the suite of software
offerings
DigitalGlassware™
We have continued to develop the DigitalGlassware™
platform through the year, building core capability and
adding integrations with further software and hardware
platforms, to increase the richness and quality of data
captured and the platform’s commercial attraction. Being a
cloud-based platform, upgrades to the capabilities of the
platform can be completed frequently, and these have
included
(“ELN”)
Electronic Laboratory Notebook
interfacing, third party analytical hardware integration,
streamlining of the interface, bespoke export options,
automatically embedded Health & Safety codes, real-time
sensor alerts, new virtual sensors, and the launch of a
publicly accessible version of chemistry content on the
DigitalGlassware™ platform.
As expected, the Group has also begun to identify unique
chemistry insights, which it will use to create intellectual
property and share with the wider scientific community in
due course, as further proof of the validity of the platform.
For example, correlating reaction yields and purities to
multiple features recorded in data to determine which
features are significant in changing synthesis outcomes.
Through
the
DigitalGlassware™ technology is gaining recognition in the
scientific community.
potential
efforts,
these
the
of
To date, the DigitalGlassware™ platform has been used to
collect data from over 2,400 days of chemistry research
across over 1,000 individual experimental runs. Data has
been collected and structured, comprising nearly 17 billion
sensor readings over 400 million samples. Of the most
frequently used synthetic reaction types in medicinal
chemistry*,
the
DigitalGlassware™ platform.
the majority are
represented
in
The first patents relating to unique chemistry insights from
the platform have been filed and we have a rapidly growing
minable data repository.
ICSynth™: innovative retro-synthesis tool
InfoChem’s lead software product, ICSynth™, is a key
asset for the Group. This desktop machine learning based
synthesis design tool reduces costs and identifies unique
choices for chemical reactions. The Synthesis Planning
market is growing rapidly, and we see a strong opportunity
to take market share with this product which, unlike peers,
allows retrosynthesis prediction for novel molecules, in-
house installation using our customers’ knowledge model
and the use of any reaction database as a knowledge
model. An update to the software application has been
under development, rich in new features and release of an
advanced user interface is planned for later in 2020.
COVID-19 and Current Trading
As with many businesses, the impact of the COVID-19
pandemic has been felt both by us and our customers. We
have seen a protraction of contract negotiations with our
target
large pharmaceutical
organisations, whose immediate focus has been on the
reorganisation of their workforces and the prioritisation of
COVID-19 related activities.
customer base of
Our priority has been to ensure the well-being of our
teams, and the Group has moved to remote working
across our sites, with all existing customers being fully
supported remotely. In order to protect the business
through this period, we have reduced the cost base of the
Group through the deferment of Board and management
and employee salaries, the reduction of expenditure and
the use of Government support schemes where
appropriate in both the UK and Germany.
The need to either close laboratories or reduce the
workforce occupancy within laboratories, implement
* as reported in the frequently cited publication by Brown and Boström of pharmaceutical company AstraZeneca in the Journal of Medicinal Chemistry
59, 4443 (2016)
4
DeepMatter Group Plc Annual Report 2019
STRATEGIC REPORT (CONTINUED)
remote working and share data across offsite and onsite
teams has highlighted the benefit of the cloud-based
sharing of scientific data and underlined the value-
proposition of the DigitalGlassware™ platform. While
negotiations can be protracted, we are engaged in
promising discussions with several multi-national
organisations, our relationship with AstraZeneca continues
and we have a growing pipeline of further opportunities.
Outlook
Currently our focus is on safeguarding the business
through the challenging period ahead, retaining a tight
control of costs and preserving our resources, while
ensuring we have the ability to capitalise on our growing
sales pipeline.
Our ongoing objectives in 2020 will be based around
further development of DigitalGlasswareTM through:
•
•
•
•
•
Organic growth or the User Base, Data Repository
and Revenues
Strategic Partnerships with influencers, sector
adjacent hardware and data providers
Commercial validation of the aggregate data
proposition
Signing more revenue-generating contracts with
large pharma
Enhancing the Platform’s capabilities in Research and
Process Chemistry and Teaching
With a blue-chip customer base, proven technology,
recurring revenues and growing market awareness we
believe we have the right structure to succeed and look to
the long-term future with confidence.
Share Capital & Funding
The Group held cash balances of £2.6 million at
31 December 2019 reflective of an increase of £1.5m on
the balance of £1.1 million at the end of December 2018.
The increase was a result of the placing of shares
completed on the 13 March 2019 at 2.5 pence per share
and which raised £4.0 million in gross cash funding. As at
31 December 2019, there were 736,533,946 ordinary
shares in issue.
Financial Review
The Consolidated Financial Statements have been
prepared for the year to 31 December 2019.
Key Group performance indicators are set out below:
31 December 31 December
Name 2019 2018
Net assets (£ million) 9.10 6.20
Net asset value per share (pence) 1.23 1.13
Total loss after tax (£ million) (2.98) (1.92)
Basic loss per share from continuing
operations (pence) (0.43) (0.33)
Cash and short-term deposits with
banks (£ million) 2.61 1.09
Segment EBITDA is reviewed by the Chief Operating
Decision Maker and disclosed within note 7 to the
accounts.
Consolidated statement of comprehensive income
The Group incurred a total loss after tax for the year ended
31 December 2019 of £2.98 million compared to a loss of
£1.92 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 2019 of £9.10 million
compared to £6.20 million at 31 December 2018. The
increase in net assets reflects the acquisition of InfoChem
and the increased cash balance following the placing in
March 2019.
Consolidated statement of cash flows
The Group’s overall cash position increased by £1.52 million
during the year. The increase mainly reflects £2.72 million of
cash used in operating activities offset by the net proceeds
of the placing of £3.87 million during the year.
Directors & Employees
As at 31 December 2019, the Group had 42 employees,
consisting of 5 Directors and 37 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 26 of its
own technical and scientific staff, together with an average
of 7 management and administrative staff and 5 Directors.
Our staff give us the knowledge that feeds into our
digitisation of chemistry expertise and our core
technological capabilities, with that knowledge flowing
directly through our business model to create value for our
shareholders. Accordingly, the long-term success of the
Group relies upon the knowledge and dedication of our
staff. The Board therefore understands the importance of
employee engagement, not only by offering a beneficial
remuneration package but also keeping employees as fully
informed as possible with regard to the Group’s
performance and prospects , seeking 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.
DeepMatter Group Plc Annual Report 2019
5
STRATEGIC REPORT (CONTINUED)
Foreign Exchange Risk
The Group’s exchange risk is limited to cash balances held
within InfoChem and transactions with foreign customers.
The Group seeks to reduce exposure to foreign exchange
risk by maintaining the principal cash balances of the Group
in Sterling. Exposure to foreign exchange is monitored and
kept under review.
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 and timely receipts from customers. The Group
performs credit checks on potential new customers to
mitigate this risk and 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.
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
£2.61 million as at 31 December 2019 (2018: £1.09 million).
In order to minimise risk to the Group’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.
Based on the current cash balance at the 31 December
2019, the Directors expect that the Group will need to raise
additional funds through either equity-based investor
funding or debt finance within 12 months. The Group is
also pro-actively responding to the current COVID-19
situation, utilising appropriate Government support
schemes in both the UK and Germany to control the cost
base being incurred whilst navigating through this period of
increased uncertainty. Subject to raising funds as
described above or reducing certain day-to-day working
capital requirements, the Directors have a reasonable
expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future
as a going concern.
its
Technology & Development Risk
There is a risk that the technology development of
DigitalGlassware™ is delayed or specific programme
targets cannot be met. The Group manages the
development of
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.
technology
Commercial success and market acceptance of
technological development
There can be no assurance that any current or future
technology programmes of DML and InfoChem will be
successfully developed into commercially viable products
or services. The Group’s success will depend on the
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.
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 uses 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 foreign exchange risk, credit risk, interest
rate risk and liquidity risk. 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, lease liabilities, equity investments and trade
and other payables. The main purpose of these financial
instruments is the funding of the Group’s activities.
6
DeepMatter Group Plc Annual Report 2019
STRATEGIC REPORT (CONTINUED)
Section 172(1) statement
From the perspective of the Board, and as a result of the
governance structure for the Group, the matters that it is
responsible for considering under Section 172 of the
Companies Act 2006 (“s172”) have been considered to an
appropriate extent by the senior management in relation to
the Company.
Such consideration is included in the statements set out
below, noting the directors’ duty under s172 to act in good
faith to promote the success of the Group for the benefit
of its shareholders but having regard amongst other
matters to the following:
•
•
•
•
•
•
the likely consequences of any decision in the long
term;
the interests of the Group’s employees;
the need to foster the Group’s business relationships
with customers and others;
the impact of the Group’s operations on the
community and the environment;
the desirability of the Group maintaining a reputation
for high standards of business conduct; and
the need to act fairly as between members of the
Group.
The key stakeholders have been identified as customers,
employees, shareholders, and our communities.
(i)
Customers
Throughout 2018 and 2019, DML partnered with a
total of seven organisations across three continents
as part of its DigitalGlasswareTM Pioneer Programme
(the “Pioneers”). The seven Pioneers
include
multinational
life science companies, research
institutions and leading academic institutions. The
purpose of the Pioneer Programme was to solicit
feedback to guide the testing and enhancement of
our technology for use in commercial and academic
settings. This Pioneer Programme has provided us
with valuable insights, expert feedback and given us
confidence that the product is fit for deployment on a
wider scale. During 2019 one of the Pioneers
converted to a revenue generating contract in the
year, strongly advocating the value of the feedback.
On an ongoing basis, DML and Infochem, through
their Product Management functions, continue to
solicit feedback from all their customers and the
wider scientific community, with features and
capabilities identified by its customers contributing to
the Group’s technical and commercial roadmap as
deemed appropriate based on resourcing capabilities.
(ii)
Employees
Good two-way communication with staff is a key
requirement for high levels of engagement, fostering
a culture of innovation and helping deliver the Group’s
operations. We engage with staff by ensuring regular
flat
staff meetings
management structure and clear reporting lines, with
attendance of key staff at certain Board meetings.
We also conduct periodic engagement surveys.
take place, we have a
(iii)
Shareholders
The Group wishes to engage with investors and
potential investors to keep them informed of the
Group’s
results and progress and ensure a
congruence of objectives between the shareholders
and the Board. The company ensures sufficient
maintenance of the Group’s website is completed
and responds to any shareholder enquiries. Periodic
investor
releases are
circulated, and the publishing and posting of the
Annual and half-year reports are on time. The Board
works to ensure there
is engagement with
shareholders at the AGM.
information and news
(iv) Communities
The Group seeks to minimise the impact of our operations
on the environment through the pursuit of good business
practices and is committed to:
•
•
•
continually making improvements by designing and
implementing environment management systems in
its offices to reduce, reuse and recycle general
waste.
prioritise sourcing sustainable office space, including
the use of renewable energy, appropriate choices in
our fit outs, and re-using office furniture where
possible;
working collaboratively with contractors and local
suppliers to reduce emissions and sourcing locally
across our offices and address any issues, such as
use of plastic packaging and where possible
implement the best sustainable solution.
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
28 May 2020
Company Number: 05845469
DeepMatter Group Plc Annual Report 2019
7
DIRECTORS’ REPORT
The Directors present their report and the audited
consolidated financial statements for DeepMatter Group
Plc (“the Company”) and its subsidiaries (the “Group”) for
the year to 31 December 2019.
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
Strategic Report on page 3.
Business Review
A review of Group performance and future prospects is
given in the Chairman’s Statement on page 2 and in the
Strategic Report on pages 3-7.
Share Capital
The share capital of the Company increased in the year
through the issue of 160,185,680 ordinary shares to raise
funds and the issue of 25,600,000 ordinary shares to
acquire the entire share capital of InfoChem.
Results and Dividends
The audited consolidated financial statements have been
prepared for the year to 31 December 2019. The loss
before tax from continuing operations for the year was
£3.36 million (2018: £1.99 million). The Directors do not
recommend a dividend in respect of the year to
31 December 2019 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 28 May 2020:
No. of
ordinary
Name shares % holding
IP Group and controlled undertakings 266,959,497 36.25%
Richard Griffiths and controlled
undertakings 123,182,111 16.72%
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 (resigned 28 June 2019)
David Cleevely (resigned 12 April 2019)
Lee Cronin (resigned 12 April 2019)
Laurence Ede
James Ede-Golightly
Bettina Goerner (appointed 15 March 2019)
Lauren Lees (appointed 28 June 2019)
The remuneration of the Directors from all Group
companies for the year under review is shown below:
Directors’ Remuneration
Salaries Pension Total Total
and Contribu- December December
fees tions 2019 2018
Name of Director £’000 £’000 £’000 £’000
Mark Warne 150 8 158 89
Michael Bretherton 6 – 6 12
David Cleevely 4 – 4 14
Lee Cronin 4 – 4 12
Laurence Ede 24 – 24 24
James Ede-Golightly 20 – 20 14
Bettina Goerner – – – –
Lauren Lees 43 1 44 –
251 9 260 165
All Directors have service contracts with one month’s
notice with the exception of the Chief Executive and
Finance Director whose service contracts are for six
months’ 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, two Executive Directors
benefitted from pension payment contributions of £9,200
(2018: £3,750). At the present time, none of the Executive
Directors receive any other benefits and nor do they
receive a bonus from the discretionary bonus scheme.
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.
8
DeepMatter Group Plc Annual Report 2019
DIRECTORS’ REPORT (CONTINUED)
Director’s Share Options
On 11 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
The share option charge recognised in respect of the
options granted to Mark Warne was £274,000 (2018: £nil)
for the year ending 31 December 2019.
Directors’ interests and indemnity
arrangements
Directors’ interests in the shares of the Company, including
family interests, are disclosed in the section below. No
Director had, during or at the end of the year, a material
interest in any contract which was significant in relation to
the Group’s business except in respect of service
agreements and share options and as disclosed above and
on pages 8 and 9.
As permitted by the Articles of Association, in accordance
with the provisions of the Companies Act 2006 the
Company has maintained insurance throughout the year
for its Directors and officers against the consequences of
actions brought against them in relation to their duties for
the Company. The Company has granted no indemnities to
any of its Directors against liability in respect of
proceedings brought by third parties.
Director dealings in Shares of the
Company
The Company 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.
Directors’ Interests in Shares of the
Company
The beneficial interests of the Directors in the issued share
capital of the Company at 31 December 2019 are given
below:
Ordinary shares of £0.0001 each
31 December 2019 31 December 2018
Number Percent Number Percent
Mark Warne 1,541,475 0.21% 541,475 0.10%
Michael
Bretherton 4,433,824 0.60% 4,033,824 0.73%
David Cleevely 15,692,993 2.13% 15,692,993 2.85%
Lee Cronin 55,973,019 7.60% 55,173,019 10.02%
Laurence Ede 1,201,586 0.16% 801,586 0.15%
James
Ede-Golightly 2,680,249 0.36% 2,080,249 0.38%
Profiles of the Directors
Mark Warne
Chief Executive
Mark Warne was appointed as Chief Executive Officer of
the Company 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 Open Orphan Plc and Ixico Plc.
DeepMatter Group Plc Annual Report 2019
9
DIRECTORS’ REPORT (CONTINUED)
Lauren Lees
Finance Director
Bettina Goerner
Non-Executive Director
Lauren Lees was appointed Finance Director of the
Company in June 2019. She had previously served as
Group Financial Controller during which time she has
played a significant role in the strategic and operational
development of the Group. Previously she was Group
Financial Controller at BioOutsource, a high growth start-
up life science company acquired by Sartorius AG serving
on both the local management team and strategy team.
Lauren Lees is an ICAS Chartered Accountant who trained
at Grant Thornton UK LLP.
James Ede-Golightly
Non-Executive Chairman
James joined the board in 2014. He is chairman of Oxford
Advanced Surfaces and East Balkan Properties and has
extensive experience as a Non-Executive including Silence
Therapeutics and Oxehealth. 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.
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 and Rosa Biotech Ltd, a
biosensor development business. He has a BSc in
Chemistry from Reading University and an MBA from the
University of Bath.
Bettina Goerner is Managing Director, Databases, at
Springer Nature, based in Heidelberg, Germany. She
oversees product development, portfolio management and
commercialisation 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 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
in 2008. She was
responsible for Springer Nature’s open access activities
from 2009 to 2013 before moving to her current position.
joining Springer Nature
Corporate governance
The Board of the Company is responsible for the Group’s
corporate governance policies and recognises the
importance of this in creating a sustainable, growing and
profitable business. The Board believe strongly in the value
and importance of good corporate governance and in their
accountability to all of the Company’s stakeholders,
its shareholders, employees, customers,
including
suppliers, advisers and regulators. Robust corporate
governance improves performance and mitigates risk and
therefore is an important factor in achieving the medium to
long term success of the Group. In the statement which
follows, the Board explains its approach to corporate
governance and how the Board and its committees
operate.
Compliant with AIM Rules, the Company has adopted the
Quoted Companies Alliance (QCA) corporate governance
code with effect from 28 September 2018. This can be
found on the company’s website using the following link:
https://www.deepmattergroup.com/content/investor/
governance.
10
DeepMatter Group Plc Annual Report 2019
DIRECTORS’ REPORT (CONTINUED)
A summary of the key points for disclosure are listed below;
Governance Principles Compliant Explanation
Establish a strategy and business
model which promote long-term value
for shareholders
Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
has
successfully
The Group’s business model is the digitisation of chemistry. As part of this
process, DML
operates
DigitalGlassware™, a big data analysis platform focused on enabling
reproducibility in chemistry. DigitalGlassware™ comprises an easy-to-use
software interface and sensor array to collect, store and process data
generated from chemical experiments. InfoChem complements and
strengthens
the DigitalGlassware™ platform, bringing strong
cheminformatic capabilities to the Group.
developed
and
The key challenges and risks faced by the Group are set out on in the
strategic report and include technology and development, commercial
success and market acceptance, intellectual property and the attraction
and retention of key employees.
The Board believes that it has the right team and strategy in place,
appropriate to the current size and complexity of the Group, in order to
deliver the strategic aims of the Group over the medium to long term.
Risk management at the Company is an integral part of decision making
and is embedded in normal business operations. It exists to help protect
and safeguard employees, clients, Group assets and reputation and to
help achieve business objectives. The Company’s Board of Directors is
responsible for ensuring that the Group maintains an appropriate system
of internal control. The system of control is designed to manage rather
than eliminate the risk of failure to achieve business objectives.
The Board has prepared a risk register for the Group that identifies key
risks
in the areas of operational strategy, financial, regulatory,
environmental, research and development and the wider macro-economic
considerations. All Directors are provided with a copy of this register,
which is reviewed periodically and updated as and when necessary. The
Board considers the risk register when assessing the current status of the
Group and its operations as well as the intended strategic aims and
progress of the Group. Given the stage of development the Group is
currently at, an internal audit function is not deemed required. This will be
monitored as the company evolves.
Maintain
the Board as a well-
functioning, balanced team led by the
Chair
The members of the Board have a collective responsibility and legal
obligation to promote the interests of the Group and are collectively
responsible for defining corporate governance arrangements. Ultimate
responsibility for the quality of, and approach to, corporate governance lies
with the Chair of the Board.
DeepMatter Group Plc Annual Report 2019
DeepMatter Group Plc Annual Report 2019
11
11
DIRECTORS’ REPORT (CONTINUED)
Governance Principles Compliant Explanation
that between
Ensure
the
Directors have the necessary up-to-date
experience, skills and capabilities
them
All members of the Board bring significant and varied sector experience,
and many have board and public markets experience. The Board’s
members have chemical, technological, financial, regulatory, and venture
stage operational experience and one member, Lauren Lees, is a chartered
accountant. The Board believes that its blend of relevant experience, skills
and personal qualities and capabilities is sufficient to enable it to
successfully execute its current strategy. Directors attend seminars and
other regulatory and trade events as considered appropriate to ensure that
their knowledge remains current.
All Directors have access to the advice and services of the Company
Secretary and in the course of their duties, if necessary, are able to take
independent professional advice at the Company’s expense. Committees
have access to such resources as are required to fulfil their duties.
The Non-Executive Directors contribute independent thinking and
judgement through the application of their external experience and
knowledge, scrutinise the performance of management, provide
constructive challenge to the Non-Executive Chairman and ensure that the
Company is operating within the governance and risk framework approved
by the Board.
Evaluate Board performance based on
clear and relevant objectives, seeking
continuous improvement
Whilst the Company does not currently have an externally facilitated
appraisal process for Directors, the Chairman engages with all Directors to
ensure that their individual contribution is relevant and effective and that
they are committed members of the Board.
Promote a corporate culture that is
based on ethical values and behaviours
Our long-term growth is underpinned by our core values, which are
considered to be:
1. We place our customer users first and ensure that we understand
the current and future needs of those who use our products and
services, and always strive to exceed their expectations.
2. We are committed to innovation in what we do and how we do it, by
being creative, pragmatic and different.
3. We focus on creating an environment where people want to work
and give their best and feel empowered to make a difference.
4. We expect all our directors and employees to respect each other, to
act honourably, to follow the law and to conduct business with the
highest professional and ethical standards.
The Company encourages two-way communication with both its
institutional and private investors and respond quickly to all queries
received. The Chairman and Chief Executive talk regularly with the
Company’s major shareholders and ensure their views are communicated
fully to the Board.
Communicate how the company is
is performing by
governed and
maintaining
with
shareholders
relevant
stakeholders
a
and other
dialogue
12
DeepMatter Group Plc Annual Report 2019
DIRECTORS’ REPORT (CONTINUED)
The Board
The Board currently comprises a Non-Executive Chairman, a Chief Executive, a Finance Director and two Non-Executive
Directors.
At the 31 December 2019, the Board consisted of five directors of whom two are Executive and three are Non-Executive.
One Non-Executive Director, Laurence Ede, is considered to be an independent Director.
All Directors are required to attend Board and relevant Board Committee meetings and, where possible, the AGM each
year and to be available at other times as required for face-to-face and telephone meetings with the executive team and
investors as reasonable. Each Director is required to keep their skill set up to date by attendance at webinars, CPD training
and attending relevant corporate update sessions where appropriate.
Meetings held in the 12 months to 31 December 2019 and the attendance of the Directors at these meetings is
summarised below:
Remun-
Board Audit eration
Position Independence (7) (2) (2) Total Attendance
Executive Directors
Mark Warne No 7/7 – – 7/7
Lauren Lees (appointed 28 June 2019) No 3/3 – – 3/3
Michael Bretherton (resigned 28 June 2019) No 4/4 – – 4/4
Independent Non-Executive Directors/Committee Members
James Ede-Golightly No 7/7 – – 7/7
Laurence Ede Yes 7/7 2/2 2/2 11/11
Bettina Goerner (appointed 15 March 2019) No 5/5 1/1 1/1 7/7
Lee Cronin (resigned 12 April 2019) No 2/2 – – 2/2
David Cleevely (resigned 12 April 2019) Yes 2/2 1/1 1/1 4/4
100%
100%
100%
100%
100%
100%
100%
100%
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 Laurence Ede, who acts as Chairperson, and Bettina Goerner. The Chair of the Audit
Committee is provided with a comprehensive guide for review of the company’s Financial Reporting Cycle by the Finance
Director, which includes advice on nurturing a culture of improvement, timing, planning, reporting on skillset and
experience and the use of auditors and follows guidance suitable for Audit committees of AIM quoted companies issued
by the FRC and ICAEW(2019).
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 Bettina Goerner, who acts as
Chairperson, and Laurence Ede.
The remuneration of Non-Executive Directors is set by the Board as a whole.
DeepMatter Group Plc Annual Report 2019
13
DIRECTORS’ REPORT (CONTINUED)
Remuneration Policy
It is the Company’s policy that Executive Directors should
have contracts with an indefinite term providing for a
maximum of six months’ notice. The main elements of the
remuneration package for Executive Directors and senior
management are:
Base annual salary
The base salary is reviewed annually by the Remuneration
Committee and any change in salary is applied from the
beginning of each calendar year. In determining the base
annual salary, the Remuneration Committee considers
several factors, including the current position and
development of the Group, individual contribution, and
market salaries for comparable organisations.
Pension and other benefits
As with all employees, the Executive Directors may
participate in the Group defined contribution pension
scheme. In the 2019 fiscal year, the maximum employer
pension contribution was 5% of base salary.
Share incentive schemes
The Company operates share option plans, under which
certain Directors have been granted options to subscribe
for ordinary shares. All options are equity settled. The
options have an exercise price of 2.5 pence and vesting
occurs in tranches over a three year period subject to share
price performance targets.
If the options remain
unexercised after a period of ten years from the date of
grant, the options expire. The Company has no legal or
constructive obligation to repurchase or settle the options
in cash.
Discretionary annual bonus
arrangements
All Executive Directors and senior managers are eligible for
a discretionary annual bonus which is paid in accordance
with a bonus scheme developed by the Remuneration
Committee. This takes into account performance against
defined personal objectives and the financial performance
of the Company.
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;
(ii)
(iii)
(iv)
The Group 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.
Going concern
As in previous years the Group has continued to utilise its
cash resources to fund losses whilst the Digital Glassware
™ platform is commercialised and the sales pipeline is
being established.
The Group continues to actively seek new business
opportunities and progress discussions with our existing
partners. At the year end, the timing and value of new
revenue contracts remains uncertain and the current
COVID-19 situation increases this uncertainty. However,
discussions are progressing and are expected to result in
additional new revenues for the Group.
The Group has acted proactively in efficiently restructuring
the business to align itself with the evolving operational
cost base and sales projections. In response to COVID-19,
the Group has utilised appropriate schemes offered by both
the UK and German Governments to efficiently manage
the cost base whilst navigating this period of increased
uncertainty in global markets.
The cash balance at the 31 December 2019 was
£2.6 million. Based on its current expenditure the Group
expects that it will need to raise additional funds through
either equity-based investor funding or debt finance within
12 months. Subject to this, or reducing certain day-to-day
working capital, the Directors have a reasonable
expectation that the Group has adequate resources to
continue in operational existence for the foreseeable
future.
After making appropriate enquires and considering the
assumptions and uncertainties described above, the
Directors consider that it is appropriate to adopt the going
concern basis in preparing the consolidated financial
statements. Accordingly, the financial statements do not
include any adjustments which would be required if the
going concern basis of preparation was deemed to be
inappropriate. However, if the Group is unable to deliver
upon its proposed revenue projections, or alternatively
proposed cost reductions, there is limited headroom in the
current forecasts and as such there is considered a
material uncertainty which may cast significant doubt
about the Group’s ability to continue as a going concern.
14
DeepMatter Group Plc Annual Report 2019
DIRECTORS’ REPORT (CONTINUED)
Post Balance Sheet Event
The current COVID-19 situation has been identified by the
Directors as a non-adjusting post balance sheet event.
Whilst the financial impact of COVID-19 on the current year
for the Group is unknown, the Group expects that sales
transactions may take longer to conclude as large
pharmaceutical companies
reduce operations and
restructure their budgets in response to COVID-19. The
potential impact of COVID-19 on the Group’s ability to
continue as a going concern is discussed above in detail.
Risk management
The Group’s risk management objectives and exposure are
detailed in the Strategic Report on pages 5 to 6 and in note
22 of the financial statements.
Employment policy
When applicable, the Directors are committed to
involvement and communication with
continuing
employees on matters affecting both the employees and
the Group.
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 (2018:
24 days).
Annual General Meeting
The next Annual General Meeting will take place at
11.00am on Thursday 25th June 2020, at St Brandon’s
House, 29 Great George Street, Bristol, BS1 5QT.
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 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. Due
to the COVID-19 crisis, shareholders are required to follow
the latest ‘stay-at-home’ measures and Government
guidance in respect of public gatherings and therefore are
instructed that they should not attend the AGM in person
but instead submit their votes by proxy, with all votes to be
routinely dealt with by way of a poll. 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:
•
•
•
•
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.
DeepMatter Group Plc Annual Report 2019
15
DIRECTORS’ REPORT (CONTINUED)
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 also responsible for ensuring that they
meet their responsibilities under the AIM rules.
of
the
The Directors are responsible for the maintenance and
integrity
website
(www.deepmattergroup.com), and legislation in the UK
governing the preparation and dissemination of financial
statements, may differ
in other
jurisdictions.
company’s
legislation
from
Independent Auditors
The independent auditors, Nexia Smith & Williamson, have
indicated their willingness to continue in office and a
resolution that they be reappointed will be proposed at
the AGM.
Disclosure of information to auditors
So far as each Director is aware, there is no relevant audit
information of which the Company and the Group’s auditor
was unaware. Each Director has taken all the steps that the
director ought to have taken as a Director in order to make
himself or herself aware of any relevant audit information
and to establish that the Company and the Group’s auditor
was aware of that information.
This information is given and should be interpreted in
accordance with the provisions of S418 of the Companies
Act 2006.
Approved by order of the Board
Lauren Lees
28 May 2020
16
DeepMatter Group Plc Annual Report 2019
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 2019 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 addition, on 11 March 2020, Covid-19 was declared a
pandemic by the World Health Organisation. The impact of
the Covid-19 pandemic on the business remains
unquantifiable at this stage, particularly in relation to the
impact on a future fund raise, revenue growth and the
duration of government support measures.
These conditions, as further explained in note 4 to the
financial statements, indicate the existence of a material
uncertainty which may cast significant doubt upon the
company and Group’s ability to continue as a going
concern. Our opinion is not modified in respect of this
matter.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
In our opinion:
•
•
•
•
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 2019 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 and parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard 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.
Material uncertainty related to going
concern
We draw attention to note 4 to the financial statements
concerning the Group and parent company’s ability to
continue as a going concern.
The Group reported a loss of £3.0 million for the year and
will potentially require a further round of fund raising or
alternative funding arrangements to allow it to continue to
meet its liabilities as they fall due for the next 12 months if
the forecast cost reductions are unable to be fully executed.
Emphasis of matter – valuation of
goodwill, intangible assets and parent
company’s investments in subsidiaries
and intercompany receivables
We draw attention to the disclosures made in note 15 to
the Group financial statements concerning the valuation of
goodwill and intangible assets and the disclosures made in
notes C2 and C4 to the parent company financial
statements concerning the valuation of investments in
subsidiaries and of
receivables
respectively.
intercompany
the
In the Group financial statements, the valuation of
£4.8 million of goodwill and £1.8 million of intangible assets
are dependent upon the future cash flows generated by
themselves
the subsidiary companies, which are
dependent on the value and timing of product sales,
obtaining regulatory approval and products being taken to
market, including their successful commercialisation.
Similarly, the carrying value of investments in subsidiary
companies of £7.6 million and intercompany receivables of
£5.0 million are also dependent on these future cash flows.
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 cash flows
generated by the subsidiary companies is not as forecast.
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 2019
17
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF DEEPMATTER GROUP PLC (CONTINUED)
Goodwill and intangible asset
impairment – Group only
Key audit matter description
As explained further in notes 15 and 24, the Group
recognises goodwill and other intangible assets in respect
of its current and prior year acquisitions. Management are
required to undertake impairment reviews on an annual
basis, in line with accounting standards.
This presents an area of audit risk, given the uncertainty
over the value and timing of future cash flows and the
amortisation period assigned. For this reason, we have
considered this an area of key audit focus.
fair value of consideration paid and also the fair value of the
net assets acquired, which requires further judgement.
This presents an area of audit risk, given the judgements
required over the determination of separable, identifiable
intangible assets and the fair value of the consideration
paid and the net assets acquired.
Response to key audit matter
We discussed the purchase price allocation calculations
prepared by management and their determination of the
fair value of the consideration and net assets. The main
procedures performed in our review and where we
challenged management were as follows:
•
•
•
•
reviewing the underlying agreements relating to the
acquisition;
testing the appropriateness of the valuation used for
consideration and the fair value of the assets and
liabilities acquired;
testing the appropriateness of the assumptions used
in the calculation of the technology and customer
relationship assets that has the most material
impact; the main focus was on technology asset
costs and the discount factor used as the
assumptions made by management regarding
revenue and commercialisation of the technology
were deemed more uncertain, as referred to in the
Emphasis of Matter paragraph above; and
considering the appropriateness of the disclosures
made in the financial statements in respect of the
acquisition.
In addition to the procedures noted above, we engaged our
valuation specialists who performed the following
procedures:
•
•
evaluated the approach to valuation of the technology
and customer relationship assets; and
critically reviewed the assumptions incorporated in
the valuations.
Parent company investment in
subsidiaries and intercompany
receivables – parent company only
Key audit matter description
As explained further in note C2 and C4 to the parent
company financial statements, the valuation of the
investment balance related to subsidiary companies and
intercompany receivables are linked to the assessment of
goodwill and the intangible assets on consolidation. This
presents 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 prepared by
management in their impairment calculation for each CGU.
The main procedures performed on the calculations, the
intangible assets workings and areas where we challenged
management were as follows:
•
•
•
•
•
testing the quality of management forecasting by
comparing cash flow forecasts for prior periods to
actual outcomes;
the
assessed
appropriateness of
in conjunction with our internal valuation specialists,
we
the
assumptions that had the most material impact; the
main focus was on forecast costs and the discount
the assumptions made by
factor used as
management regarding revenue were deemed more
uncertain, as referred to above in the Emphasis of
Matter paragraph; market conditions were also
considered by comparing the market capitalisation to
the assets of the business;
reviewing the amortisation charged during the year
for intangible assets, 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 of the Group;
reviewing the value of the intangible assets against
the impairment reviews undertaken by management
and determining whether there is any indication that
the assets might be impaired; and
considering the appropriateness of the disclosures
made in the financial statements in respect of these
assets and the impairment reviews undertaken.
Business combination of Infochem GmbH
– Group only
Key audit matter description
As explained further in note 24, the company acquired
100% of Infochem GmbH in the year. Fair value calculations
are inherently judgmental and IFRS 3 requires that
consideration is given to the existence and measurement of
separable, identifiable intangible assets that have been
acquired. Management are also required to determine the
18
DeepMatter Group Plc Annual Report 2019
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF DEEPMATTER GROUP PLC (CONTINUED)
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 and
areas where we challenged management were as follows:
•
•
•
•
•
testing the quality of management forecasting by
comparing cash flow forecasts for prior periods to
actual outcomes;
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 more 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;
reviewing the expected credit loss assessment made
of the inter-company receivables under IFRS 9; and
considering the appropriateness of the disclosures
made in the financial statements in respect of these
investments and intercompany receivable balances.
Going concern – Group and parent
company
This has been covered within the Material Uncertainty
related to Going Concern paragraph above.
Revenue recognition – Group only
Key audit matter description
The Group is reporting revenues for the first time and is
required to adopt IFRS 15. Due to the nature of revenue
recognition of the Group in respect of the various
performance obligations within contracts, and the
estimates and judgement involved in determining the
amount of revenue to recognise each year, we have
considered this area of key audit focus.
Response to key audit matter
The main procedures performed on the revenue
recognised and areas where we challenged management
were as follows:
•
A sample of contracts with customers were obtained
and reviewed against the steps referenced by
IFRS 15. Assessment of management’s accounting
treatment were performed on each contract sampled
in respect of:
–
–
contracts identified;
performance obligations identified;
–
–
determination and allocation of transaction
price for each of those; and
determination of revenue recognition method
for satisfying those performance obligations.
Management were challenged on judgements made.
The revenue recognised in the year was assessed against
the criteria specified in the standard that demonstrates
control has passed to the customer;
•
•
Performing tests of detail on revenue covering both
completeness and existence as well performing cut-
off procedures on revenue recognised; and
considering the appropriateness and completeness
of the disclosures made in the financial statements in
relation to this matter.
Materiality
The materiality for the Group financial statements as a
whole was set at £454,000. 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.
for
the parent company
financial
The materiality
statements as a whole was set at £302,900. 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 2% of net assets as presented on the face of
the Company Statement of Financial Position.
An overview of the scope of our audit
Of the Group’s 4 reporting components, we subjected 2 to
audits for Group reporting purposes and 2 to specific audit
procedures where the extent of our audit work was based
on our assessment of the risk of material misstatement
and of the materiality of that component.
The components within the scope of our work covered:
100% of Group revenue, 100% of Group profit before tax
and 100% of Group net assets.
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
DeepMatter Group Plc Annual Report 2019
19
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF DEEPMATTER GROUP PLC (CONTINUED)
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:
•
•
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:
•
•
•
•
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 pages 15 and 16, 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
financial
necessary
statements that are free from material misstatement,
whether due to fraud or error.
the preparation of
to enable
20
DeepMatter Group Plc Annual Report 2019
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.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial
Reporting
at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Council’s
website
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
Kelly Jones
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
Portwall Place
Portwall Lane
Bristol
BS1 6NA
Date: 28 May 2020
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December 2019
Continuing operations
Revenue from contracts with customers
Cost of providing services
Gross profit
Research and development costs
Share based payments
Administrative costs
Operating loss
Finance income – net
Loss before tax
Taxation
Loss from continuing operations
Discontinued operations
Profit/(loss) from discontinued operations
Profit on disposal of discontinued operations
Net result from discontinued operations
Loss for the year
Other comprehensive income
Amounts which may be reclassified to profit or loss
Currency translation differences on foreign operation
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
2019
£’000
1,196
(667)
529
(1,787)
(278)
(1,850)
(3,386)
23
(3,363)
346
(3,017)
22
14
36
2018
£’000
–
–
–
(1,399)
(6)
(600)
(2,005)
12
(1,993)
180
(1,813)
(104)
–
–
Notes
7
11
23
9
10
25
25
(2,981)
(1,917)
7
–
(2,974)
(1,917)
20
20
(0.43)
(0.42)
(0.33)
(0.35)
The notes on pages 25 to 48 form an integral part of these consolidated financial statements.
DeepMatter Group Plc Annual Report 2019
21
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 31 December 2019
Assets
Non-current assets
Intangible assets and goodwill
Investments
Plant and equipment
Right-of-use assets
Current assets
Inventories
Trade and other receivables
Income tax asset
Cash and cash equivalents
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Net current assets
Non-current liabilities
Lease liabilities
Deferred tax
Total non-current liabilities
Total net assets
Shareholder’s equity
Called up share capital
Share premium
Merger reserve
Shares to be issued reserve
Foreign currency translation reserve
Retained deficit
Total equity attributable to shareholders of the Company
At
At
31 December
31 December
Notes
2019
£’000
2018
£’000
15
13
14
16
10
17
18
14
14
10
19
21
21
21
21
21
6,633
4,914
3
41
182
6,859
–
432
172
2,607
3,211
(464)
(123)
(587)
2,624
(61)
(341)
(402)
9,081
74
7,136
5,971
1,274
7
(5,381)
9,081
3
29
–
4,946
74
152
289
1,086
1,601
(345)
–
(345)
1,256
–
–
–
6,202
55
3,287
5,334
204
–
(2,678)
6,202
The financial statements were approved by the Board of Directors on 28 May 2020 and were signed on its behalf by:
Lauren Lees
Finance Director
Company Number: 05845469
22
DeepMatter Group Plc Annual Report 2019
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
For the year ended 31 December 2019
Foreign
Shares to currency
Share Share Merger Retained be issued translation
Total
equity premium reserve earnings reserve reserve
equity
£’000 £’000 £’000 £’000 £’000 £’000
Balance at 31 December 2017 55 3,287 5,334 (767) 204 –
£’000
8,113
Total comprehensive loss for the year
to 31 December 2018 – – – (1,917) – –
(1,917)
Transactions with owners:
Share based payment charge – – – 6 – –
Balance at 31 December 2018 55 3,287 5,334 (2,678) 204 –
Loss for the year to 31 December 2019 – – – (2,981) – –
Currency translation differences – – – – – 7
6
6,202
(2,981)
7
Total comprehensive loss for the year
to 31 December 2019 – – – (2,981) – 7
(2,974)
Transactions with owners:
Issue of shares for cash 16 3,849 – – – –
3,865
Shares to be issued and issuable on
acquisition of subsidiary 3 – 637 – 1,070 –
Share based payment charge – – – 278 – –
Balance at 31 December 2019 74 7,136 5,971 (5,381) 1,274 7
1,710
278
9,081
DeepMatter Group Plc Annual Report 2019
23
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
Cash flows from operating activities
Operating loss from continuing operations
Operating profit/(loss)from discontinued operations
Depreciation and amortisation charges
Share based payments charge
Operating cash outflows before movement in working capital
Decrease/(increase) in inventories
(Increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash used in operations
Interest 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 of cash payment
Net cash generated by/(used in) investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Transaction costs arising from issue of share capital
Payment of lease liabilities
Taxation received
Net cash generated by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
25
11
23
9
13
14
10
Year to
Year to
31 December
31 December
2019
£’000
(3,386)
29
558
278
2018
£’000
(2,005)
(213)
59
6
(2,521)
(2,153)
74
(51)
(247)
(2,745)
28
(2,717)
(12)
265
253
4,005
(140)
(107)
289
4,047
1,583
1,086
(62)
2,607
(64)
(25)
64
(2,178)
12
(2,166)
(13)
–
(13)
–
–
–
–
(2,179)
3,265
–
1,086
24
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2019
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 2019. The Company has four wholly owned subsidiaries, three of which
are active trading entities, InfoChem GmbH (“InfoChem”), DeepMatter Limited (“DML”) and OpenIOLabs Limited
(“OpenIOLabs”). DeepMatter Tech Limited (“DTL”) is a dormant subsidiary.
The address of the registered office is given on the inside front cover of this report. The nature of the Group’s activities is
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 2018, except for the adoption of new standards and interpretations noted
below.
New and amended standards adopted by the Group
The Group adopted IFRS 16 “Leases” (IFRS 16) for the first time in their annual reporting period commencing the 1 January
2019.
Adoption of existing standards by the Group
The Group has applied the following standards and amendments for the first time for the annual reporting period
commencing 1 January 2019:
•
•
•
IFRS 15 “Revenue from Contracts with Customers” (IFRS 15)
IAS 21 “Foreign currency transactions” (IAS 21)
IFRS 8 “Operating Segments” (IFRS 8)
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019
reporting periods and have not been early adopted by the group. These standards are not expected to have a material
impact on the entity in the current or future reporting periods and on foreseeable future transactions.
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. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group.
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. All inter-group transactions and balances arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
DeepMatter Group Plc Annual Report 2019
25
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
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 cash balance at the 31 December
2019 was £2.6m and the Group expects that it will need to raise additional funds through either equity-based investor
funding or debt finance within 12 months to meet its priorities for both 2020 and future years.
The current COVID-19 situation increases the uncertainty of both the timing of a fundraise and the timing and value of
future sales. However, the Group, in response to COVID-19, have prepared prudent cash forecasts, assuming reduced
operations, for the next 12 months which demonstrate that the Group can meet its liabilities as they fall due without further
funding.
After making appropriate enquiries and considering the assumptions and uncertainties described above, the Directors
consider that it is appropriate to adopt the going concern basis in preparing the consolidated financial statements.
Accordingly, the financial statements do not include any adjustments which would be required if the going concern basis
of preparation was deemed to be inappropriate. However, if the Group is unable to deliver upon its proposed revenue
projections, or alternatively proposed cost reductions, there is limited headroom in the current forecasts and as such there
is considered a material uncertainty which may cast significant doubt about the Group’s ability to continue as a
going concern.
5. Summary of significant accounting policies
Revenue from Contracts with Customers
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled to exchange for those
goods or services.
Revenue is recognised at the fair value of the consideration received or receivable for the sale of services in the ordinary
course of business and is shown net of Value Added Tax. The Group primarily earns revenues from the sales of software
licenses and software consulting services.
In the current financial year, the Group carried out a review to adopt ‘IFRS 15 Revenue from Contracts with Customers’
and align the revenue recognition policies of InfoChem with those of the Group.
A proportion of the contracts consist of multiple performance obligations and are bundled contracts. The performance
obligations in bundled contracts were identified and an estimate was made of the fair value of the transaction price. Details
of the estimates made, and obligations identified is included within critical estimates and judgements in note 6.
The following revenue recognition policies were adopted for InfoChem;
•
•
•
•
Software licenses are recognised immediately where the performance obligation is satisfied upon the delivery of the
license to the customer.
Hosted software licenses are recognised in line with the satisfaction of the performance obligation over the license
term under the output method and revenue not yet earned is accounted for within deferred income.
Post contract support and maintenance contracts are deferred over the contractual term. Revenue is recognised using
the output method based on the passage of the contractual term.
Consulting projects are recognised on completion of the relevant performance obligations. Applying the output
method, revenue is recognised as the performance obligation is met and the customer is invoiced.
The adoption of IFRS 15 has resulted in a restatement of revenues in the current year as the accounting policies of InfoChem
were aligned with the Group upon acquisition. The InfoChem revenues were the first revenues for the Group and therefore
no restatement of prior year revenues has been made.
In the year, DML made the first commercial sale of DigitalGlassware™. DigitalGlassware™ consists of a bundled monthly
software license and hardware fee. Revenue is invoiced and recognised monthly using the output method over the
contractual term.
Amounts included in deferred income are expected to be recognised within one year and are included within current
liabilities.
26
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker.
Foreign currency translation
As required by IAS 21, the results and financial position of all Group entities that have a functional currency different from
the presentation currency are translated in the presentation currency as follows;
•
•
•
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date
of the statement of financial position;
Income and expenses for each income statement are translated at average exchange rates; and
All resulting exchange differences are recognised as a separate component of equity in the foreign currency translation
reserve.
Leases
In the year to 31 December 2019 the Group adopted ‘IFRS 16’ Leases which has resulted in the Group recognising a right-
of-use asset and lease liability for all contacts that are or contain a lease where the Group is a lessee. The Group has applied
the modified retrospective adoption method, with no restatement of prior year comparatives.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’ under the principals of IAS 17 Leases. These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The lessee’s
incremental borrowing rate applied to the lease liabilities was 3.5%.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
•
•
•
•
applying a single discount rate to a portfolio of leases with reasonably similar characteristic;
accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-
term leases;
excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
At the 1 January 2019, the Group had one operating lease which had a termination date of September 2019. The Group
calculated the operating lease commitment on the basis that it would not renew the lease in September 2019 and this
short-term lease was not recognised as a liability. The value recognised as short term lease was £31,000. A new lease was
negotiated commencing 1 October 2019 over a two-year term which was recognised under IFRS 16.
Additional leases were acquired upon acquisition of InfoChem in March 2019 and were recognised under IFRS 16.
The impact of the adoption of IFRS 16 in the period is the recognition of a total lease liability at 31 December 2019 of
£184,000 of which £123,000 is current and £61,000 is non-current. A right-of-use asset of £182,000 was recognised.
Depreciation of £107,000 was charged in respect of these assets and interest of £5,000 was recognised. Under previous
accounting standards, an operating lease expense of £143,000 would have been recognised in the year to 31 December
2019 with no corresponding balance sheet entries.
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.
Deferred Tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of
the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
DeepMatter Group Plc Annual Report 2019
27
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
Deferred Tax (continued)
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and
liabilities and where the deferred tax balances relate to the same taxation authority.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
Sales tax
Revenues, expenses and assets and liabilities are recognised net of the amount of sales tax, except:
• 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:
•
•
•
•
•
•
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.
Intangible assets
Intangible assets which arise on consolidation are stated at their fair value, net of amortisation and any provision for
impairment. Amortisation is calculated to write off the value of all intangible assets to estimated residual value on a straight-
line basis over their expected useful lives as follows:
•
•
•
•
Patent costs and licensing rights 20 years
Customer relationships 10 years
Technology platform 1-2 years
Technology database 5 years
Amortisation is included within administrative expenses.
28
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
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:
•
•
•
•
Plant and machinery 4 years
Fixtures and fittings 4-5 years
Computer and IT equipment 3 years
Right-of-use assets Over the term of the lease
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the Consolidated Statement of Comprehensive Income
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 in prior years. Such reversal
is recognised in the consolidated statement of 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.
Business Combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
•
•
•
•
•
fair values of the assets transferred;
liabilities incurred to the former owners of the acquired business;
equity interests issued by the Group;
fair value of any asset or liability resulting from a contingent consideration arrangement; and
fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity and acquisition-
date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired
is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired,
the difference is recognised directly in profit or loss as a bargain purchase.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.
DeepMatter Group Plc Annual Report 2019
29
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
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
IFRS 9 states the requirements for the classification and measurement of financial assets and financial liabilities, the
impairment of financial assets, and general hedge accounting.
Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group
becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual
rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred.
Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.
Subsequent to initial recognition, assets are measured at either amortised cost, fair value through other comprehensive
income or fair value through profit or loss.
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.
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 or by applying Binomial probability
modelling and are charged to operating profit over the overall vesting period of the award with a corresponding credit to
retained earnings.
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.
30
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
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 whether goodwill has suffered any impairment on an annual basis. For the 2019 and 2018 reporting periods,
the recoverable amount of the cash-generating units (CGUs) was determined based on value-in-use calculations which
require the use of assumptions.
As a result of the acquisition of InfoChem, goodwill is monitored by the Directors at the level of the two operating segments
of DeepMatter and InfoChem.
DeepMatter
It is Management’s assessment that the CGU of DeepMatter includes both the Group’s investment in DML and in
OpenIOLabs as the technology platform acquired upon acquisition of OpenIOLabs in 2017 is used within the DeepMatter
CGU.
The value-in-use calculations in respect of DeepMatter use cash flow projections based on financial budgets approved by
the Directors covering a five-year period. Cash flows beyond the five year periods are extrapolated using a multiplier of 10.
The pre-tax discount rate applied was 13.5%.
Based on the CGU calculation for DeepMatter, 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 DML in 2015 and the carrying amount of the intangible
of £650,000 (2018: £686,000) related to the intangible technology asset platform developed by OpenIOLabs and which
arose on the acquisition of that company in 2017. The Directors concluded that no impairment charge is required at 31
December 2019.
The directors acknowledge, however, that whilst the CGU of DeepMatter 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 £650,000
(2018: £686,000) attributed to the intangible technology asset platform being used by DeepMatter, based on any estimate
of the net present value of DeepMatter’s future cash flows.
InfoChem
The CGU of InfoChem encompasses the trade of InfoChem which was acquired on the 15 March 2019.
The value-in-use calculations in respect of InfoChem use cash flow projections based on financial budgets approved by the
Directors covering a five-year period. Cash flows beyond the five-year period are extrapolated using a multiplier of 10. The
pre-tax discount rate applied was 22%.
Based on the CGU calculation for InfoChem, the directors have considered whether there are any indicators of impairment
to the goodwill figure of £720,000 which arose on the acquisition of InfoChem and the carrying amount of the intangibles
of £1,046,000 related to the intangible technology assets and customer relationship asset which arose upon acquisition.
The Directors concluded that no impairment charge is required at 31 December 2019.
The directors acknowledge, however, that there is considerable uncertainty regarding the valuation of the above goodwill
of £720,000 and the further £1,046,000 attributed to the intangible assets, based on any estimate of the net present value
of InfoChem’s future cash flows.
DeepMatter Group Plc Annual Report 2019
31
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
Valuation of consideration and resultant goodwill arising on business combination
InfoChem
The Company completed the acquisition of 100% of the issued share capital of InfoChem in March 2019 from Springer
Nature for a consideration which included 42.8 million ordinary shares which may be issued 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.
Revenues
A proportion of the contracts with customers include bundled performance obligations. In allocating the transaction price
to the relevant performance obligations, the following estimates were made:
•
•
Post Contract Support (PCS) includes bug fixing and minor compatibility updates. The transaction price allocated to
PCS was estimated to be 15% of the contract value. This is consistent with the transaction price in contracts where
PCS is sold as a single performance obligation.
Service warranty obligations reflect service level agreements (SLAs) agreed with customers. The transaction price
allocated to service warranty obligations was estimated to be 15% of the contact value. This is consistent with the
transaction price in contracts where a service warranty obligation is sold as a single performance obligation.
Inter-company balances
To support working capital requirements, loans are provided to Group subsidiary companies. The Directors consider these
inter-company balances to be recovered through the on-going trade of the subsidiaries which is based on the forecast
underlying cashflows of these companies for which uncertainty remains over whether these will be achieved.
Inter-company loans are considered repayable on demand and no interest is payable on these loans.
Judgements
Going Concern
Based on the year end cash balance of £2.6m, the Directors expect that the Group will need to raise additional funds through
either equity-based investor funding or debt finance within the next 12 months. The Group continues to actively pursue this
however the timing of such an event remains uncertain and the current COVID-19 situation increases the uncertainty. In
response to COVID-19, the Group have acted pro-actively, utilising appropriate Government support schemes to efficiently
manage operational costs during this period of increased uncertainty. Based on raising funds or making further reductions
to the day-to-day working capital of the Group, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. However, if the Group is unable to deliver upon its
proposed revenue projections, or alternatively proposed cost reductions, there is limited headroom in the current forecasts
and as such there is considered a material uncertainty which may cast significant doubt about the Group’s ability to continue
as a going concern.
Revenues
In adopting IFRS 15 ‘Contracts with Customers’, judgements were made by the Directors as to the timing of the satisfaction
of performance obligations and the amounts allocated to performance obligations.
The following judgements were made in respect of the timing of the satisfaction of performance obligations:
•
•
•
•
Software licenses which are delivered by a license key are determined to satisfy the performance obligation at the
point of delivery and revenue is recognised immediately;
Hosted Software licenses are determined to satisfy the performance obligation over the contractual license term;
Post contract support and maintenance is delivered throughout the license term and is determined to satisfy the
performance obligation over the contractual license term; and
Consulting work is recognised on completion of the relevant performance obligation as agreed with the customer.
32
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
Short term evaluation trials of software products by customers are recognised as one performance obligation as it is
determined that the customer is required to experience all aspects of the evaluation to fully assess the software.
The Directors have determined that minor warranty obligations are not a separate performance obligation and are a quality
guarantee. The term of the guarantee is one year and is effective throughout the license term which is 12 months. As a
result, no warranty provision under IAS 37 has been calculated as the license term end dates are concurrent with the
31 December 2019.
There are no customer contracts in the Group which are determined to contain a significant financing component.
Development costs
Development costs to date in respect of DML have not been capitalised as intangible assets as the Directors consider
DML 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.
Estimate of useful life of acquired intangible assets
Upon acquisition of InfoChem on the 15 March 2019, intangible assets were identified and restated to their fair values. The
Directors made a judgement in respect of the expected useful lives of the intangible assets acquired and an appropriate
amortisation charge is made. The useful economic life of the intangibles was estimated as follows:
•
•
•
Customer relationships 10 years
Technology platform 1-2 years
Technology database 5 years
The Directors acknowledge, however, the actual useful life may be shorter or longer than the estimates made, depending
on technical innovations and competitor actions.
Leasing
In determining the lease term under IFRS 16, the Directors consider all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after
termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
The lessee’s incremental borrowing rate applied to the lease liabilities was 3.5%.
7. Segmental Reporting
The Chief Operating Decision Maker has been identified as the Chief Executive Officer (“CEO”) of the company. The Group
has two operating segments and the CEO reviews the Group’s internal reporting which recognises these two segments
in order to assess performance and allocate resources. The Group has determined its reportable segments which are also
its operating segments based on these reports. The Group currently has two operating and reportable segments being
DeepMatter and InfoChem;
•
•
DeepMatter – this segment owns, develops and is in the early stage of commercially exploiting intellectual property,
software, hardware and data analysis capabilities (including machine learning) combined as a visionary, disruptive
platform called DigitalGlassware™, enabling step changes in productivity and discovery for scientists in the pharma
and life science sectors.
InfoChem – this segment develops and commercialises cheminformatics software to handle, store and retrieve
chemical structures and reactions for application in pharma, life sciences and scientific publications. The segment
has industry established market leading tools for the production of synthesis planning and reaction prediction solutions
and the automatic extraction of scientific information from text and images.
Information regarding the operation of the reportable segments is included below. The CEO assesses the performance of
the operating segments based on revenue and a measure of earnings before interest, tax, depreciation and amortisation
(EBITDA) before any allocation of Group overheads, charges for share based payment and costs associated with
acquisitions. This segment EBITDA is used to measure performance as the CEO believes such information is most relevant
in evaluating the results of the segment.
The Group’s EBITDA for the year has been calculated after deducting the Group overheads from the EBITDA of the two
segments as reported internally. Group overheads include the cost of the Board, listing costs, all the costs of running the
premises in Glasgow and Munich, Group marketing, finance and legal and professional fees.
The segment information is prepared using accounting policies consistent with those of the Group as a whole.
DeepMatter Group Plc Annual Report 2019
33
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
The non-current assets are reviewed by the chief operating decision-maker in reviewing the carrying value of goodwill and
intangibles for indicators of impairment. Segment non-current assets are measured in the same way as in the financial
statements and the assets are allocated based on the operations of the segment and the physical location of the asset.
The current assets and non-current and current liabilities of the Group are not reviewed by the chief operating decision-
maker on a segment basis and therefore none of the Group’s current assets and current and non-current liabilities are
segmental assets and liabilities and are all unlocated for segmental disclosure purposes. For that reason, the Group has
not disclosed details of these segmental assets and liabilities.
The discontinued operations of SICM which was disposed of on the 15 January is not reviewed by the chief operating
decision maker and has therefore not been disclosed within operating segments.
In the year to 31 December 2019, the Group had 3 customers that exceeded 10% of total revenue, being 21% and two
each at 17% (2018: nil).
All segments are continuing operations.
Revenue from contracts with customers by geographic location
Year ended 31 December 2019 Year ended 31 December 2018
External Internal Total
£’000 £’000 £’000
External
£’000
Internal
£’000
Total
£’000
Germany 576 – 576
Switzerland 347 – 347
United Kingdom 157 – 157
North America 103 – 103
Rest of the world 13 – 13
Revenue for the period 1,196 – 1,196
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The revenues reported above are both by destination and origin.
Revenue from contracts with customers by operating segment
Year ended 31 December 2019 Year ended 31 December 2018
External Internal Total
£’000 £’000 £’000
External
£’000
Internal
£’000
DeepMatter 40 – 40
InfoChem 1,156 – 1,156
Revenue from contracts with customers 1,196 – 1,196
–
–
–
–
–
–
Total
£’000
–
–
–
Loss by operating segment
Year ended 31 December 2019 Year ended 31 December 2018
Depreciation,
amortisation,
Depreciation,
amortisation,
EBITDA acquisition
EBITDA
acquisition
share based costs &
share based
costs &
payments and share based Operating
payments and
share based
Operating
acquisition payments Profit/(loss)
acquisition
payments
Profit/(loss)
£’000 £’000 £’000
DeepMatter (1,295) (78) (1,373)
InfoChem (108) (481) (589)
Group overheads (1,104) – (1,104)
Acquisition costs – (42) (42)
Share based payments – (278) (278)
£’000
(1,463)
–
(477)
Loss before tax and interest (2,507) (879) (3,386)
(1,940)
£’000
(59)
–
–
–
(6)
(65)
Group interest and tax 369
Discontinued operations after tax 22
Profit on disposal of discontinued operation 14
Loss for the period (2,981)
£’000
(1,522)
–
(477)
–
(6)
(2,005)
192
(104)
–
(1,917)
34
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
Non-current assets by segment
DeepMatter
UK
Germany
InfoChem
UK
Germany
Total non-current segment assets
Unallocated:
Financial assets at fair value through other comprehensive income
Total non-current assets as per the statement of financial position
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
Directors remuneration
9. Finance Income and expense
Finance income
Bank interest receivable
Finance expense
Interest charge for lease liabilities
Net finance income
Year ended
Year ended
31 December
31 December
2019
£’000
2018
£’000
4,965
4,943
–
–
1,891
6,856
3
6,859
2019
£’000
2,069
303
48
278
–
–
–
4,943
3
4,946
2018
£’000
1,081
106
47
6
2,698
1,240
2019
No.
5
33
38
2019
£’000
251
9
29
289
2019
£’000
28
(5)
23
2018
No.
6
17
23
2018
£’000
161
4
13
178
2018
£’000
12
–
12
DeepMatter Group Plc Annual Report 2019
35
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
10. Taxation
Current Tax
UK Corporation tax credit on continuing operations
UK tax credit on discontinued operations (note 25)
Total UK corporation tax credit
Deferred income tax
Deferred tax credit
Total deferred tax credit
Total tax credit
2019
£’000
172
(7)
165
174
174
339
2018
£’000
180
109
289
–
–
289
The 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% (2018: 19%). The differences are reconciled below:
Loss before tax on continuing operations
Profit/(Loss) before tax on discontinued operations
Loss before tax on total operations
Loss multiplied by the average standard rate of corporation tax in the UK of 19% (2018: 19%)
Effects of:
Expenses not deductible for tax
R&D tax credits received in respect of prior periods *
Utilisation of tax losses
Prior year adjustment
Difference in overseas tax rates
Deferred tax not recognised on losses carried forward
Total tax credit
Tax credit on continuing operations
Tax charge/(credit) on discontinued operations
Total tax credit
2019
£’000
(3,363)
43
(3,320)
(631)
67
(172)
(7)
7
(76)
473
(339)
(346)
7
(339)
2018
£’000
(1,813)
(213)
(2,026)
(385)
24
(289)
361
(289)
(180)
(109)
(289)
*The tax credit accounted for in 2019 was received in February 2020 and is shown as an income tax asset at the 31 December 2019 year end.
Deferred Tax
Deferred Tax Assets
The balance comprises temporary timing difference attributable to:
Fair value adjustment to revenues
Deferred tax assets
Deferred Tax Liabilities
The balance comprises temporary timing difference attributable to:
Intangible assets
Deferred tax liabilities
Net deferred tax liabilities
36
DeepMatter Group Plc Annual Report 2019
2019
£’000
4
4
2019
£’000
(345)
(345)
(341)
2018
£’000
–
–
2018
£’000
–
–
–
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
Deferred Tax Losses
The losses available for carry forward at 31 December 2019 comprise those of the Company and its four subsidiaries, DTL,
InfoChem, DML and OpenIOLabs and amount to £11,377,000 at 31 December 2019, (2018: £8,919,000). No deferred tax
asset has been recognised in respect of the losses as recoverability is uncertain.
Tax losses carried forward
Share based payment charge
Deferred tax assets (unrecognised)
2019
£’000
2,120
53
2,173
2018
£’000
1,516
–
1,516
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% (2018: 17%).
11. Operating Costs
Operations
Employee benefit expense (see note 8)
Depreciation of property, plant and equipment (See note 13)
Depreciation of right-of-use assets (see note 14)
Amortisation of intangible assets (See note 15)
Operating lease costs
Loss on disposal of property, plant and equipment (See note 13)
Research and development costs
Foreign exchange gains and losses
12. Auditors’ Remuneration
During the year the Company obtained the following services from the Company’s auditor.
Continuing operations
Fees payable to the Company’s auditor:
– The audit of the Company and consolidated accounts
– The audit of the Company’s subsidiaries
– The provision of non-audit services
2019
£’000
2,698
26
107
419
31
6
1,787
1
2019
£’000
25
25
2
2018
£’000
1,240
15
–
44
71
–
1,399
–
2018
£’000
15
10
2
DeepMatter Group Plc Annual Report 2019
37
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
13. Plant and Equipment
Plant &
Fixtures &
Computer
machinery
fittings
equipment
Cost £’000
£’000
£’000
At 31 December 2017 10
Additions –
At 31 December 2018 10
On acquisition 194
Additions –
Disposal (78)
Foreign Currency Translation 1
At 31 December 2019 127
Depreciation
At 31 December 2017 3
Charge for year 2
At 31 December 2018 5
On acquisition 180
Charge for the year 7
Disposal (73)
Foreign Currency Translation 1
At 31 December 2019 120
Net Book Value
At 31 December 2018 5
At 31 December 2019 7
14. Leases
This note provides information where the Group is a lessee.
2
–
2
49
–
(3)
–
48
–
–
–
32
5
(3)
–
34
2
14
29
13
42
68
12
(57)
1
66
7
13
20
67
14
(56)
1
46
22
20
14(a) Amounts recognised in the consolidated statement of financial position
The consolidated statement of financial position shows the following amounts relating to leases:
Right-of-use assets
Buildings
Hardware
Vehicles
Total
Lease liabilities
Current
Non-Current
Total
2019
£’000
126
41
15
182
123
61
184
Total
£’000
41
13
54
311
12
(138)
2
241
10
15
25
279
26
(132)
2
200
29
41
2018
£’000
–
–
–
–
–
–
–
38
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
14(b) Amounts recognised in the consolidated statement of comprehensive income
The Consolidated Statement of Comprehensive Income shows the following amounts relating to leases:
Depreciation charge for right-of-use assets
Buildings
Hardware
Vehicles
Total
Interest expenses (included in finance cost)
The total cash outflow for leases in 2019 was £107,000.
2019
£’000
81
19
7
107
5
2018
£’000
–
–
–
–
–
14(c) The Group’s leasing activities and how these are accounted for
The Group leases the following assets;
•
•
•
•
UK office – The Group leases an office in the UK for the operations of DML. The lease commenced on the 1 October
2019 and has a fixed term of 24 months.
German office – An office is leaded in Munich for the operations of InfoChem. The lease commenced on the 15 March
2019 and has a fixed term of 16 months.
Servers – Hardware servers are leased to support operational activity. The lease term commenced on the 1 November
2017 and was for a period of 36 months. The Group acquired this lease on acquisition of InfoChem on the 15 March
2019. The term auto renews for a period of 12 months if notice of termination is not served. It has been assessed
that the lease will run for an additional 12 months from the end of the original contract term.
Vehicles – Vehicles are leased over 3-year contractual terms. Vehicles leases were acquired on the acquisition of
InfoChem.
The lease agreements above do not impose any covenants and leased assets may not be used as security for borrowing
purposes.
Prior to 2019, the Group only had operating lease contracts with terms of less than or equal to 12 months. IFRS 16 was
adopted in the year and leases are recognised as a right-of-use asset and a corresponding liability at the date at which the
leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
•
•
Fixed payments, less any lease incentive receivable; and
Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the Group’s weighted average incremental borrowing rate of 3.5% is
used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to
the right-of-use asset in a similar economic environment with similar terms, security and conditions.
The Group is exposed to potential future increases in variable lease payments in respect of the offices based on rent
reviews which are not included in the lease liability until they take effect. When adjustments to lease payments take effect,
the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liability.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-
line basis.
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-
line basis as an expense in the Consolidated Statement of Comprehensive Income. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise IT equipment and small items of hardware equipment.
DeepMatter Group Plc Annual Report 2019
39
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
15. Intangible Assets
Patents & Customer
Technology
Licences Relationships
Notes £’000 £’000
Assets
£’000
Goodwill
£’000
Cost
At 31 December 2017 845 –
At 31 December 2018 845 –
Acquisition of subsidiary 24 – 378
Foreign currency translation – (1)
At 31 December 2019 845 377
Amortisation
At 31 December 2017 10 –
Amortisation for year 44 –
At 31 December 2018 54
Amortisation for year 44 31
Foreign currency translation – (1)
At 31 December 2019 98 30
Net Book Value
At 31 December 2018 791 –
At 31 December 2019 747 347
–
–
1,029
(4)
1,025
–
–
344
(18)
326
–
699
Total
£’000
4,968
4,968
2,127
(8)
7,087
10
44
54
419
(19)
454
4,123
4,123
720
(3)
4,840
–
–
–
–
–
–
4,123
4,840
4,914
6,633
During the year, InfoChem was acquired for a consideration of £2.031m and intangible assets were recognised upon
determining the fair value of the net assets. Technology assets totalling £1,029,000 were recognised at the date of
acquisition reflecting core cheminformatics technologies and customer relationships were valued at £378,000. The details
of the intangible assets acquired, and their estimated useful economic lives are as follows:
•
•
•
•
£261,000 reflecting technology which extracts chemical meta-data from papers and patents with multi-lingual support.
The technology asset is being amortised over a 2-year economic useful life.
£175,000 assigned in respect of the ICSynth technology platform which is being amortised over a 1-year economic
useful life.
£593,000 assigned to license rights for a chemical reaction database which is being amortised over a 5-year economic
useful life.
£378,000 has been assigned to customer relationships due to recurring software license sales is being amortised
over a 10-year economic useful life.
The only other licence assets held at 31 December 2019 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.
Cash Generating Units (CGUs)
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.
For the year ending 31 December 2019, the Group has identified two cash generating units within the Group. The CGU of
Deepmatter encompasses the trade of DML and the remaining technology assets of OpenIOLabs. The CGU of InfoChem
encompasses the trade of InfoChem.
40
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
DeepMatter CGU
Where practical, forecasts are prepared over the expected life cycle of the Group’s proposed products based on
management’s current project plans for the next five years. The forecasts are not based on past experience owing to the
early stage development of the project. The recoverable amount is most sensitive to the discount rate used in the
discounted cash flow model (a pre-tax discount rate of 13.5% has been used) as well as the expected future cash flows
and the multiple of year five 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 38.5% would be required to indicate an impairment on
the carrying value of goodwill and intangible asset of £4,870,000.
The Directors acknowledge that whilst both DML 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.
InfoChem CGU
Forecasts are prepared covering the next five years and are prepared based on management’s current project plans for the
next five years. As InfoChem was acquired in March 2019, the forecasts are not based on experience and are based on
market and product knowledge. The recoverable amount is most sensitive to the discount rate used in the discounted cash
flow model (a pre-tax discount rate of 22% has been used) as well as the expected future cash flows and the multiple of
year five 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 25% or a drop of 7 in the terminal exit multiplier would be required
to indicate an impairment on the carrying value of goodwill and intangible asset of £1,766,000
The Directors acknowledge that whilst InfoChem is an established company with recurring revenue streams, there is
material uncertainty regarding the valuation of this goodwill based on any estimate of the net present value of the subsidiary
entity’s future cashflows. This material uncertainty arises due to the unpredictability of the timing of revenues and
uncertainty regarding the commercialisation of the technologies acquired.
The Directors will continue to review the progress of the subsidiary entities in following the Group roadmap to the
digitisation of chemistry and the pursuit of opportunities to commercialise its platform technology. In the event that any
impairment to 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.
16. Trade and other Receivables
Current:
Trade receivables
Other receivables
Prepayments
2019
£’000
289
111
32
432
Ageing of trade receivables
More than
More than
More than
30 days
31 December 2019 Current past due
Gross carrying amount of trade receivables 259 34
Impairment provision – (4)
Net carrying value of trade receivables 259 30
60 days
past due
120 days
past due
–
–
–
–
–
–
2018
£’000
–
122
30
152
Total
293
(4)
289
The Directors consider that the carrying amount of trade and other receivables approximates to their fair values. There was
a provision of £4,000 (2018: £nil) for impairment in respect of trade receivables at the 31 December 2019. The credit quality
of those trade receivables not past due and not impaired is considered good.
DeepMatter Group Plc Annual Report 2019
41
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
17. Cash and Cash Equivalents
Cash at bank and in hand
Denominated in UK Sterling
Denominated in Euros
Cash at bank and in hand
18. Trade and other Payables
Current:
Trade payables
Social security and other taxes
Accrued expenses and other creditors
Deferred Income
2019
£’000
2,607
2,415
192
2,607
2019
£’000
24
57
288
95
464
2018
£’000
1,086
1,086
–
1,086
2018
£’000
81
36
228
–
345
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non-
interest bearing and are normally settled on 30-45 day terms.
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:
No. of Shares
£’000
At 31 December 2018
Issue of consideration shares on acquisition of Infochem
Issue of placing shares
At 31 December 2019
550,748,266
25,600,000
160,185,680
736,533,946
55
3
16
74
No share options were exercised in the year ending 31 December 2019. 8,333 shares were issued during the year ending
31 December 2018 on the exercise of options by employees who left the Group.
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
74,015,278 potentially issuable dilutive ordinary shares in existence at the 31 December 2019 period end, (2018: 23,816,667),
comprised of 9,215,278 share options, 22,000,000 deferred consideration shares issued in relation to the acquisition of
OpenIOLabs and 42,800,000 deferred consideration shares issued in relation to the acquisition of InfoChem (see note 24).
The 74,015,278, 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)
42
DeepMatter Group Plc Annual Report 2019
2019
2018
(3,017)
(1,813)
699,838,689
550,743,326
(0.43)
(0.33)
(2,981)
(1,917)
699,838,689
550,743,326
(0.42)
(0.35)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
21. Reserves
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.
During the year, the reserve increased by £3.85m following a placing of shares with a nominal value of £0.02m. The increase
to the share premium account was offset by £0.15m of costs incurred in raising the proceeds of £4.0m.
Merger Reserve
The merger reserve arose on the acquisition of DML under section 612 of the Companies Act 2006 as shares with a
nominal value of £0.002m 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 £0.002m were issued for a total of £0.46m as consideration.
In the current year, the reserve increased further upon the acquisition of InfoChem as shares with a nominal value of
£0.003m were issued for a total consideration of £0.64m.
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.
The reserve increased further to record the fair value of the 42.8 million potentially issuable deferred consideration shares
in connection with the acquisition of InfoChem, see note 24 for more details.
Foreign Currency Translation Reserve
The foreign currency translation reserve arose on the acquisition of InfoChem. The results and financial position of InfoChem
are translated into the Group’s presentation currency as follows;
•
•
Assets and liabilities are translated at the closing rate at the date of the statement of financial position; and
Income and expenses are translated at average exchange rates.
All resulting exchange differences are recognised in the foreign currency translation reserve.
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.
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.
DeepMatter Group Plc Annual Report 2019
43
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
Categories of financial instrument
At 31 December 2018
Investments
Trade and other receivable
Cash and cash equivalents
Trade and other payables
Current lease liabilities
Non-current lease liabilities
Net Total
At 31 December 2019
Investments
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current lease liabilities
Non-current lease liabilities
Net Total
Financial
Financial
asset at
liabilities at
amortised
amortised
cost
£’000
–
152
1,086
–
–
–
cost
£’000
–
–
–
(345)
–
–
1,238
(345)
–
432
2,607
–
–
–
3,039
–
–
–
(464)
(123)
(61)
(648)
Financial
assets at
fair value
through
OCI
£’000
3
–
–
–
–
–
3
3
–
–
–
–
–
3
Total
£’000
3
152
1,086
(345)
–
–
896
3
432
2,607
(464)
(123)
(61)
2,394
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.
Liquidity risk
The Directors acknowledge that there is a need to raise funding through an equity placing or debt financing in the next
12 months. The Group has a cash balance of £2.61m at 31 December 2019 and the Directors are confident that subject to
raising funds or making day-to-day reductions to the working capital base that the risk to the liquidity of the Group is
managed.
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 is
limited to the amount of interest earnt during the year.
Year to 31 December 2019
Year to 31 December 2018
+1%
Interest Rate Sensitivity £’000
Loss for year 18
Equity 18
-1%
£’000
(18)
(18)
+1%
£’000
22
22
-1%
£’000
(12)
(12)
44
DeepMatter Group Plc Annual Report 2019
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
23. Share-based payments
The company operates a share option scheme for the benefit of employees and share options are granted to certain 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 usually 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.
Options are forfeited if the employee leaves the Group before the options vest.
On 11 March 2019, options were granted 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 the 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.
Share Price Trigger (£)
which the options may be exercised
of options granted (pence)
Number of plan shares in respect of
Fair Value
None
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0.20
3,750,000
3,750,000
3,750,000
3,750,000
3,750,000
1,250,000
1,250,000
1,250,000
1,250,000
1,250,000
2.54
1.39
1.34
1.23
1.46
1.46
1.46
1.66
1.66
1.66
All unexercised options lapse after 10 years from the date of grant. No other directors have been granted share option
awards.
At 31 December 2019, there were 26,736,667 (2018: 1,816,667) share options in issue at a weighted average exercise
price (“WAEP”) of 2.02 pence as illustrated in the following table of movements in share options during the year:
Number
Outstanding at 1 January 1,816,667
Granted during the year 25,000,000
Exercised during the year –
Forfeited (80,000)
Lapsed –
Outstanding at 31 December 26,736,667
2019
2018
WAEP
pence
2.13
2.50
–
2.13
–
2.02
Number
1,936,667
–
(8,333)
(71,667)
(40,000)
1,816,667
WAEP
pence
2.13
–
2.13
2.13
2.13
2.13
Of the 26,736,667 share options outstanding, 9,215,278 were exercisable as at 31 December 2019 (2018: 1,257,870).
The assessed fair value at grant date of options granted during the year ended 31 December 2019 is shown above for each
tranche of share options which would be granted on the share price performance trigger being reached. The fair value at
grant date has been determined using a binomial tree approach that takes into account the exercise price, the term of the
option, the share price at grant date, the expected price volatility of the underlying share and the risk-free interest rate for
the term of the option. The model inputs for options granted during the year ended 31 December are as follows;
Expected share price volatility
Risk free interest rate
Dividend yield
Weighted average exercise price (pence)
Weighted average share price at date of grant (pence)
Granted on
Granted on
11 March
1 December
2019
62%
1.4%
0.0%
2.5
3.7
2017
68%
2.0%
0.0%
2.13
2.13
DeepMatter Group Plc Annual Report 2019
45
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
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 retained earnings. The expense
so recognised in the year ended 31 December 2019 amounted to £278,000 (2018: £6,000).
24. Acquisition of InfoChem
On 15 March 2019, the Company completed the acquisition of 100% of the issued share capital of InfoChem 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 68.4 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 targeted 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 acquisition of InfoChem was accounted for using the acquisition method of accounting. Details of the purchase
consideration, the net assets acquired and the goodwill are as follows:
Cash
Trade receivables
Intangible asset
Fixed assets
Right-of-use assets
Other current assets
Other liabilities
Current lease liabilities
Deferred tax liability
Non-current lease liabilities
Net assets acquired
Goodwill
Fair value of consideration transferred
Satisfied by:
Cash paid on completion
Ordinary shares issued on completion
Deferred shares contingent consideration
Total consideration
46
DeepMatter Group Plc Annual Report 2019
£000
586
74
1,407
33
183
155
(430)
(112)
(512)
(73)
1,311
720
(2,031)
321
640
1,070
2,031
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
The above values of net assets and liabilities on acquisition of the subsidiary have been reviewed and aligned with Group
adopted accounting policies to present the fair value amount.
The goodwill of £720,000 arising on the acquisition of InfoChem is largely attributable to the synergy of a cheminformatics
business rich in chemical knowledge and technology with the DigitalGlassware™ platform. The activities of InfoChem are
aligned with those of the Group and the existing technology and specialist skills within InfoChem bolster the strength of
the Group.
The directors have determined that the fair value of intangible assets at the point of acquisition as follows;
•
•
•
•
£261,000 reflecting technology which extracts chemical meta-data from papers and patents with multi-lingual support.
The technology asset is being amortised over a 2-year economic useful life.
£175,000 assigned in respect of the ICSynth technology platform which is being amortised over a 1-year economic
useful life.
£594,000 assigned to license rights for a chemical reaction database which is being amortised over a 5-year economic
useful life.
£378,000 has been assigned to customer relationships due to recurring software license sales which is being
amortised over a 10-year economic useful life.
The fair value of acquired trade receivables is £74,000. The gross contractual amount for trade receivable due is £75,000
with a loss allowance of £1,000 recognised on acquisition.
InfoChem contributed revenues of £1,156,000 and net loss of £618,000 to the group for the period from 15 March to
31 December 2019. If the acquisition had occurred on 1 January 2019, consolidated pro-forma revenue and loss for the
year ended 31 December 2019 would have been £1,523,000 and £464,000 respectively. These amounts have been
calculated using the subsidiary’s results and adjusting them for differences in the accounting policies between the Group
and the subsidiary, and the additional depreciation and amortisation that would have been charged assuming the fair value
adjustments to property, plant and equipment and intangible assets had applied from 1 January 2019.
The Group incurred £94,000 of third-party acquisition related costs in respect of this acquisition. These expenses have
been included in professional fees within administrative expenses in the Group’s consolidated statement of comprehensive
income for the period ended 31 December 2019 with £67,000 having been accrued at 31 December 2018.
25. 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,
generated a profit of approximately £14,000 on disposal. OpenIOLabs was acquired in November 2017 to complement the
strategic digitisation 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 Group.
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
Other income
Profit/(Loss) before tax
Attributable tax (charge)/credit
Net loss attributable to discontinued operations
2019
£’000
–
(7)
36
29
(7)
(22)
2018
£’000
170
(383)
–
(213)
109
(104)
DeepMatter Group Plc Annual Report 2019
47
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
for the year ended 31 December 2019
26. Related Parties and Directors’ Transactions
Group
Bettina Goerner joined the Board of the Company as a Non-Executive Director on the acquisition of InfoChem from Springer
Nature in March 2019. Bettina Goerner continues to serve as a Managing Director of Springer Nature and no amounts were
paid to Springer Nature in respect of Bettina Goerner’s services in the year ending 31 December 2019.
The Group has paid companies that are part of IP Group, a significant shareholder, £20,620 in respect of the provision of
administrative services (2018: £14,395). There were no amounts outstanding at the end of the year (2018: £nil).
The Group paid £12,800 (2018: £14,500) to Cleevely & Partners Ltd, a company owned by David Cleevely, a former non-
executive Director who stepped down from the Board on the 12 April 2019. There were no amounts outstanding at the
end of the year (2018: £nil).
The Group recognised sales of £246,000 (2018: £nil) in respect of the ‘Services Agreement’ between InfoChem and
Springer Group companies. There was £17,000 outstanding at the end of the year (2018: £nil.)
The Group paid £108,000 (2018: £nil) in respect of the receipt of administrative services as agreed in the ‘Transition Services
Agreement’ between InfoChem and Springer Nature AG & Co KGaA and Springer-Verlag GmbH. There were no amounts
outstanding at the end of the year (2018: £nil).
Key employees
At the year-end, the Directors did not consider any employees to be key management to the Group other than the Chairman,
Executive Directors and Non-Executive Directors who served during the period. Details of the remuneration paid to each
Director is presented in the Directors’ Report on page 8.
27. Post Balance Sheet Event
Subsequent to the 31 December 2019, the current COVID-19 situation developed in the first quarter of 2020 and continues
to prevail. As a response to COVID-19, the Governments in both the UK and Germany introduced lock-down measures
which the Group complied with in the interests of the well-being of staff and wider stakeholders.
The estimate of the financial effect of COVID-19 on the current financial year cannot be made. However, the Group has
utilised appropriate Government support schemes in both the UK and Germany to efficiently manage the cost base. In this
period of uncertainty, it is likely that the potential to grow the Group’s sales in the immediate future may be more challenging
as pharmaceutical companies reduce R&D spend as they revaluate budgets in response to the COVID-19 pandemic.
Credit risk from customers has not increased from that experienced throughout 2019. 100% of the outstanding trade
receivables balance of £289,000 on 31 December 2019 has been recovered subsequent to the year end.
The liquidity impact of COVID-19 to the Group is monitored and the Directors are cognisant of the need to raise additional
funds within the next 12 months, through equity-based investor funding or debt financing, based on the predicted cash
outflows of the Group. The uncertainty over the timing of a fundraise is increased during COVID-19. To mitigate this
uncertainty, the Directors have a reasonable expectation that changes can be made to reduce the day-to-day working capital
costs of the Group to ensure the Group has adequate resources to continue in operational existence for the foreseeable
future.
28. Ultimate Controlling Party
In the opinion of the Directors, there is no ultimate controlling party.
48
DeepMatter Group Plc Annual Report 2019
COMPANY STATEMENT OF FINANCIAL
POSITION
As at 31 December 2019
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
Shareholder’s equity
Called up share capital
Share premium
Merger reserve
Shares to be issued reserve
Retained earnings
Total equity attributable to shareholders of the Company
At
At
31 December
31 December
2019
£’000
7,605
7,605
4,975
2,318
7,293
(89)
7,204
14,809
74
7,136
5,971
1,274
354
14,809
2018
£’000
5,569
5,569
3,289
1,027
4,316
(132)
4,184
9,753
55
3,287
5,334
204
873
9,753
Notes
C2
C4
C5
19
21
21
21
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 2019
was £797,000 (2018: £392,000).
The financial statements were approved by the Board of Directors on 28 May 2020 and were signed on its behalf by:
Lauren Lees
Director
Company Number: 05845469
DeepMatter Group Plc Annual Report 2019
49
COMPANY STATEMENT OF CHANGES
IN EQUITY
For the year ended 31 December 2019
Shares to
Share Share Merger Retained be issued
equity premium reserve earnings reserve
£’000 £’000 £’000 £’000 £’000
Balance at 31 December 2017 55 3,287 5,334 1,259 204
Total comprehensive loss for the year to
31 December 2018 – – – (392) –
Total
equity
£’000
10,139
(392)
Transactions with owners:
Share based payment charge – – – 6 –
6
Balance at 31 December 2018 55 3,287 5,334 873 204
9,753
Total comprehensive loss for the year to
31 December 2019 – – – (797) –
Transactions with owners:
Share based payment charge – – – 278 –
Issue of shares for cash 16 3,849 – – –
Shares issued and issuable on acquisition of subsidiary 3 – 637 – 1,070
(797)
278
3,865
1,710
Balance at 31 December 2019 74 7,136 5,971 354 1,274
14,809
50
DeepMatter Group Plc Annual Report 2019
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
Loss before tax
Share based payment charge
Finance Income
Net impairment losses on financial assets
Operating cash outflows before movements in working capital
Increase in trade and other receivables
(Decrease)/Increase in trade and other payables
Cash used in operations
Interest received
Net cash used in operating activities
Payment for acquisition of subsidiary
Investment in subsidiary undertaking
Cash used in investing activities
Proceeds from the issue of share capital
Transaction costs arising from issue of share capital
Cash from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2019
£’000
(797)
278
(22)
197
(344)
(1,884)
(43)
(2,271)
22
(2,249)
(321)
(4)
(325)
4,005
(140)
3,865
1,291
1,027
2,318
2018
£’000
(392)
6
(12)
–
(398)
(1,787)
71
(2,114)
12
(2,102)
–
(6)
(6)
–
–
–
(2,108)
3,135
1,027
DeepMatter Group Plc Annual Report 2019
51
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
For the year ended 31 December 2019
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 2017
Additions
At 31 December 2018
Additions
Acquisition of subsidiary 24
At 31 December 2019
Impairment
At 31 December 2017
Impairment
At 31 December 2018
Impairment
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
5,560
6
5,566
5
2,031
7,602
–
–
–
–
–
5,566
7,602
3
–
3
–
–
3
–
–
–
–
–
3
3
Total
£’000
5,563
6
5,569
5
2,031
7,605
–
–
–
–
–
5,569
7,605
The directors have considered whether there are any indicators of impairment to the Shares in Subsidiary Undertakings
investment figure of £7,602,000 and concluded that no impairment charge is required.
The directors acknowledge, however, that there is considerable uncertainty regarding the valuation of this investment
balance based on any estimate of the net present value of the future cash flows of the two Cash Generating Units of
DeepMatter and InfoChem. See note 15 to the Group financial statements for further details.
52
DeepMatter Group Plc Annual Report 2019
NOTES TO THE COMPANY FINANCIAL
STATEMENTS (CONTINUED)
for the year ended 31 December 2019
As at 31 December 2019, details of the Company’s subsidiaries are as follows:
Name of Company Holding % of shares held
Nature of business
Registered
Office
Address
DeepMatter Limited Ordinary 100
Digitisation of chemical
38 Queen Street,
(incorporated in Scotland)
space and chemical
Glasgow,
OpenIOLabs Limited Ordinary 100
Open source one point
St Brandon’s House,
(incorporated in England & Wales)
of control systems
29 Great George
discovery
Scotland, G1 3DX
InfoChem GmbH Ordinary 100
Digitisation of chemical
Aschauer Str. 30,
(incorporated in Munich, Germany)
space and chemical
Munich, Germany)
discovery
81549 München,
Germany
Deepmatter Tech Limited Ordinary 100
Dormant subsidiary
St Brandon’s House,
Street, Bristol,
BS1 5QT
(incorporated in England & Wales)
29 Great George
Street, Bristol,
BS1 5QT
C3. Information regarding parent company employees
The only employees of the parent company are 6 (2018: 6) of the 8 Directors who served during the year. Details of the
Directors’ emoluments paid to those Directors is as follows:
Salaries and fees
Pension contributions
Social security costs
Directors remuneration
C4. Trade and Other Receivables
Current:
Intercompany receivables
Other receivables
Prepayments
2019
£’000
208
8
23
239
2019
£’000
2018
£’000
161
4
13
178
2018
£’000
4,969
3,274
–
6
6
9
4,975
3,289
The Directors acknowledge that there is uncertainty over recoverability of the intercompany receivables balance, as it relies
upon the underlying future trading performance of the subsidiaries, which can not be forecast with a high degree of accuracy.
C5. Trade and Other Payables
Current:
Trade payables
Social security and other taxes
Accrued expenses
Other payables
2019
£’000
15
7
54
13
89
2018
£’000
3
10
119
–
132
The Directors consider that the carrying amounts of trade and other payables approximates to their fair values.
DeepMatter Group Plc Annual Report 2019
53
NOTES TO THE COMPANY FINANCIAL
STATEMENTS (CONTINUED)
for the year ended 31 December 2019
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.
C8. Related Party Transactions
For the period ending 31 December 2019, the intercompany receivable increased by £1.7m to £5.0m (2018: £3.3m). This
increase is reflective of the investment made in progressing the DigitalGlassware™ platform.
£219,000 (2018: £60,000) was recognised by the Company in respect recharges to Group entities. £53,000 was outstanding
from Group entities at the end of the year (2018: £30,000).
A credit loss provision of £197,000 (2018: £nil) was recognised under IFRS 9 in the year to 31 December 2019 in respect
of the intercompany receivable due from OpenIOLabs.
Further details of the related party transactions and balances are included in note 26 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.
Financial assets
liabilities at
at amortised
amortised
Financial
Financial
assets at
fair value
cost
cost
through OCI
£’000
£’000
£’000
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
At 31 December 2019
Investments –
Trade and other receivables 4,975
Cash and cash equivalents 2,318
Trade and other payables –
Net Total 7,293
All financial liabilities for the Company are payable on demand.
–
–
–
(132)
(132)
–
–
–
(89)
(89)
3
–
–
–
3
3
–
–
–
3
Total
£’000
3
3,289
1,027
(132)
4,187
3
4,975
2,318
(89)
7,207
Impairment of financial assets
The Company applies IFRS 9 to measuring expected credit losses relating to intercompany loans advanced to Group
Companies.
The loss allowance recognised in the year was £197,000 (2018: £nil).
Impairment losses on receivables are presented as net impairment losses within operating profit. Subsequent recoveries
of amounts previously written off are credited against the same line item.
54
DeepMatter Group Plc Annual Report 2019
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 St Brandon’s House, 29 Great George Street, Bristol, BS1 5QT at 11.00 a.m. on Thursday 25 June.
Currently, a quorum of two shareholders is required to attend in person, to be satisfied by the Chairman of the Meeting
(the “Chairman”) and another Director or the Company Secretary, although should the Government relax this requirement,
or other measures be necessary, alternative arrangements will be considered.
The health of the Company's shareholders and its employees is of paramount importance. Due to the COVID-19 crisis,
shareholders are required to follow the latest ‘stay-at-home’ measures and Government guidance in respect of public
gatherings and therefore are instructed that they should not attend the AGM in person but instead submit their votes by
proxy, with all votes to be routinely dealt with by way of a poll. Shareholders may ask questions in advance of the meeting
investor website at
by emailing AGM@deepmatter.io, with responses to be set out on the Company’s
www.deepmattergroup.com following the publication of the results of the AGM. Questions must be received no later than
11.00 a.m. on Tuesday 23 June 2020.
Non-Executive Director and Chairman of the Board James Ede-Golightly has today announced his intention to resign from
the Board to focus on his other business interests. His resignation will come into effect following the Company’s AGM.
The Board would like to thank James for his contributions to the Company.
ORDINARY BUSINESS
Report and accounts
1.
To receive and consider the Directors’ Report, the audited consolidated Financial Statements and Independent Auditors’
Report for the year ended 31 December 2019.
Re-appointment of a director
2.
To consider and, if thought fit, to approve the re-appointment of Laurence Ede as a director of the Company, who retires
pursuant to the Article 134 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.
Re-appointment of a director
3.
To consider and, if thought fit, to approve the re-appointment of Lauren Lees 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.
Re-appointment of auditors
4.
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 resolutions 5 and 6 will be
proposed as an ordinary resolution and resolution 7 will be proposed as special resolution:
Approval of Employee Share Plan
5.
To consider and, if thought fit, to approve:
5.1
the rules of the Share Option Plan 2017 (the “Plan”) which was recommended by resolution of the Board on 1
December 2017, the principal terms of which remain unchanged and are summarised in the Annex to the Notes, and
under which 26,745,000 options which remain live have been granted to date. The rules of the Plan are produced to
the meeting and signed by the Chairman of the meeting for the purposes of identification; and
5.2
the restatement of the share option pool to up to 12% of the issued share capital of the Company as at 6 p.m. on
28 May 2020.
DeepMatter Group Plc Annual Report 2019
55
NOTICE OF ANNUAL GENERAL MEETING
(CONTINUED)
Directors’ authority to allot shares
6.
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) to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings;
and
(ii) 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 £23,759.35 such amount to be reduced by the
nominal amount of any equity securities allotted under paragraph 6.1.1 above in excess of £25,342.91,
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.
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) an employee share scheme (as defined by section 1166 of the 2006 Act);
(ii) 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
(iii) 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.
7.1
Disapplication of statutory pre-emption rights
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) to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings;
and
(ii) 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 6.1.1 above) up to a maximum
aggregate nominal amount of £14,730.68.
56
DeepMatter Group Plc Annual Report 2019
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
Lauren Lees
Company secretary
28 May 2020
DeepMatter Group Plc
St Brandon’s House
29 Great George Street
Bristol
BS1 5QT
DeepMatter Group Plc Annual Report 2019
57
EXPLANATORY NOTES
Entitlement to attend and vote
1.
The Company specifies that only those members registered on the Company's register of members at:
•
•
11.00 a.m. on 23 June 2020; 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 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 must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting (the
"Chairman") or another member of the Company who will be in attendance at the Meeting 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 another member of the Company that will be in attendance at the Meeting (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:
•
•
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 23 June 2020 .
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).
Appointment of proxy through CREST
7.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service
may do so for the meeting and any adjournment(s) of the meeting by using the procedures described in the CREST
Manual. CREST personal members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited's
(“Euroclear”) specifications and must contain the information required for such instructions, as described in the
CREST Manual. The message must, in order to be valid, be transmitted so as to be received by Neville Registrars (ID
7RA11) no later than 48 hours before the time fixed for the AGM (not counting non-working days). For this purpose,
the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the
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DeepMatter Group Plc Annual Report 2019
EXPLANATORY NOTES
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CREST Applications Host) from which Neville Registrars Is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should
be communicated to the appointee through other means.
Changing proxy instructions
8.
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.
Termination of proxy appointments
9.
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 23 June 2020. 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.
Issued shares and total voting rights
10. As at 6 p.m. on 28 May 2020, 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
11.
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.
12. 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.
13. 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
14. 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.
c.
copies of the service contracts of executive directors of the Company;
copies of letters of appointment of the non-executive directors of the Company; and
copy of the Share Option Plan 2017.
DeepMatter Group Plc Annual Report 2019
59
EXPLANATORY NOTES
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Annex
Principal terms of the Share Option Plan 2017 (the Plan)
•
•
•
•
•
•
•
•
•
The Plan provides for the grant of qualifying EMI options to employees and for the grant of unapproved options to
the extent that options above the EMI limit are granted to that employee.
The Board of directors has absolute discretion as to who should receive options under the Plan.
The exercise price for any option granted under the Plan is established by the Board of directors but shall not be less
than the nominal value of the ordinary shares of 0.01p in the Company.
An option must be exercised before the 10th anniversary of its date of grant.
The Board of directors has the discretion to determine vesting criteria which may be based on the passage of time,
performance of the Company, and/or performance of the option holder. The Board of directors may at any time waive
any performance related condition.
If an option holder ceases employment for any reason (other than death), any vested options will lapse unless within
90 days of cessation the Board of directors exercises its discretion to allow any vested options to be exercised during
such period as the Board of directors may allow. If an option holder dies, any vested options or any subsisting options
which the Board in its discretion decides to treat as vested, may be exercised by their personal representatives within
12 months of death.
Options may be exercised for a 6 month period in the event of a change of control or in the event of a court sanctioned
reconstruction of the Company. If there is a winding up of the Company or the option holder becomes bankrupt then
any options shall lapse immediately.
The Plan is administered by the Board of directors which also has the power to amend its rules.
The Plan will terminate on 1 December 2027.
Perivan 258881
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DeepMatter Group Plc Annual Report 2019
Registered office
St Brandon’s House
29 Great George Street
Bristol BS1 5QT
Company Number
05845469 (England and Wales)