DEEPVERGE PLC
Annual Report
2020
DeepVerge Plc
Contents
Company Information
Chairman’s Statement
Chief Executive’s Statement
The Board
Strategic Report
Report of the Directors
Corporate Governance Statement
Report of the Remuneration Committee
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated and Company’s Statement of Financial Position
Consolidated and Company’s Statement of Cash Flows
Consolidated and Company’s Statement of Changes in Shareholders’ Equity
Notes to the Financial Statements
1
2
4
8
9
12
16
19
21
28
29
30
31
32
1
DeepVerge Plc
Company Information
Directors:
Ross Andrews (Non-Executive Chairman)
Gerard Brandon (Chief Executive Officer)
Camillus Glover (Chief Financial Officer)
Fionan Murray (Chief Operations Officer)
Dr Nigel Burton (Non-Executive Director)
Company Secretary:
Fiona Joyce
Registered office:
Corporate office:
York Biotech Campus,
Sand Hutton, York
North Yorkshire, YO41 1LZ
12 James’s Terrace, Malahide,
Dublin K36 N996, Ireland
Place of incorporation:
England and Wales (Company number – 10205396)
Auditors:
Nominated Adviser:
Brokers:
Solicitors to the Company:
Registrars:
Bankers:
Public relations:
Jeffreys Henry LLP
Finsgate
5 – 7 Cranwood Street
London, EC1V 9EE
Spark Advisory Partners Limited
5 St. John’s Lane
London, EC1M 4BH
Turner Pope Investments (TPI) Limited
6th Floor, Becket House
36 Old Jewry, London EC2R 8DD
BPE Solicitors LLP
St James’ House
St James’ Square
Cheltenham, GL50 3PR
Neville Registrars Limited
Neville House, 18 Laurel Lane
Halesowen, B63 3DA
Ulster Bank
Victoria Square
11 – 16 Donegal Square East
Belfast, BT1 5UB
Mo PR Advisory
Mill Hill, Grange Road
Tiptree CO5 0UL
Website:
www.DeepVerge.com
1
DeepVerge Plc
Chairman’s Statement
For the year ended 31 December 2020
Dear Fellow Shareholder,
In my second year as Chairman, I have pleasure presenting the Company’s report and results for the year ended 31 December 2020.
Our Business
DeepVerge Plc (“DeepVerge”, “Group” or “the Company”) was incorporated and registered in England and Wales on 28 May
2016 and was admitted to trading on the AIM market of London Stock Exchange plc on 5 April 2017. Following on from the
strategic acquisition of artificial intelligence software company, Rinocloud Limited, in 2019, DeepVerge has applied artificial
intelligence to life science and environmental test services for bacteria, viruses and toxins across the Group generating revenue
growth, culminating in the first quarterly positive EBITDA in Q4, 2020 (excluding exceptional costs associated with the acquisition
of Modern Water plc).
Labskin has its cloud-based eco-system that validates skincare products and ingredients, remotely for clients, and has delivered
strength to the core business growth in 2020, building on the already growing list of multi-year, framework agreements with many
global Top 20 skincare and healthcare companies. In just over two years, the Labskin division’s laboratory space has increased
from 924 sq. ft in 2018 to 9,378 sq. ft in 2020.
The Company recently launched the Skin Trust Club Artificial Intelligence Skincare App and Home Test Kit that provide simple, at-
home skin microbiome testing for personalised skincare and skin health tracking. These were in development throughout 2020.
The self-administered skin swab is a remote trial and allows the consumer to conduct each stage of the trial without interaction.
Skin Trust Club’s DNA Test generates a report that consumers can use to manage their custom skincare regime. Analysis of skin
attributes provides information to create hundreds of different product combinations to suit a person’s unique skin microbiome.
The Company’s acquisition of Modern Water plc (“Modern Water”) completed in November 2020 and expanded DeepVerge’s
offering to include environmental data management, monitoring and analysis of water contamination using AI. The Group has
over 3,000 units installed in over 60 countries serving clients in water utilities, public health authorities and industrial
manufacturers. The Group is introducing new equipment to meet demand across its Microtox and MicroTrace ranges with a new
range of real-time surveillance services in water quality monitoring.
Results
Yet again, this year has been transformational for DeepVerge, attributable to enhancing an already successful business model, better
than expected with our first EBITDA profitable quarter in Q4, 2020, before costs of Modern Water acquisition. Revenues for the year
exceeded the Company guided number by 10% and growth in sales is reflected in higher revenues per client, increased demand
requiring additional employees across all subsidiaries during lockdown, no COVID-19 furlough and expansion of laboratory space
throughout 2020 and into 2021.
Highlights:
• Total 2020 revenue £6.650m including pre-acquisition Modern Water revenue, increase of 553% from 2019 £1.017m
revenue;
• Consolidated group revenue £4.483m (2019: £0.823m);
• EBITDA losses before exceptional items reduced by 19% to £0.859m (2019: £1.055m);
• H2, 2020 revenue growth of 3.47 times H1 revenue;
• Strong sales in Q4 2020 delivered the Company's first EBITDA profitable quarter (excluding exceptional costs associated with
the acquisition of Modern Water);
• Administration costs increased to £4.561m (2019: £2.973m) with Modern Water acquisition and Labskin expansion;
• Operating loss of £2.718m (2019: £2.371m) after providing for:
o Depreciation of £0.172m (2019: £0.101m);
o Amortisation of £0.941m (2019: £0.442m);
o
o
Impairment of intangible assets £nil (2019: £0.241m);
Impairment of investments £0.354m (2019: £nil);
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DeepVerge Plc
Chairman’s Statement (continued)
For the year ended 31 December 2020
•
Exceptional costs of £0.391m (2019: £0.532m) were one-off transaction costs relating to acquisition activities; £13.315m
all-share Acquisition of Modern Water.
Post Year-End Highlights
• £10m Placing and Subscription to fund scale, meet increased demand and expand revenues across the Group
o At 30 pence per 0.1p ordinary share;
o 100% increase in share issue price since previous December 2019 placing at 15 pence equivalent per 0.1p ordinary
share (1.5p per 0.01p ordinary share before 10:1 consolidation).
Further information on our products, technologies and advances Post-Year-End can be found in the Chief Executive’s Report.
Corporate governance
I believe that good corporate governance is important to support our future growth and the Board, which has extensive experience
in publicly listed companies and running companies in the personal healthcare sector, is committed to the highest standards.
Outlook
COVID-19 presented challenges for the global economy but multiple opportunities for the Group. The move from selling equipment
to providing services and consumables gave the Group scope to expand substantially into 2021 with our real-time water
contamination detection and environment sector solutions, contributing to increased demand with additional staff recruited over
the lock-down period and announcement of up to a further 60 staff required in the next few months. The outcome has resulted in an
increase of new and core business from Labskin, Modern Water and the new Skin Trust Club consumer division.
SARS-CoV-2 and COVID-19 Testing has been underway between DeepVerge and Modern Water since our joint collaboration and
development announcement in June 2020. The most recent RNS has confirmed the successful SARS-CoV-2 detection in wastewater
treatment plants with equipment installed and data continuing to transmit alerts on the identification of the virus, in real-time.
These are exciting developments, and the Company will update the market on an extended roll out across multiple jurisdictions,
expected in H2 this year.
The Board provided guidance for 2021 revenue of £10m in January 2021 and remains and remains well on track and expects the
business will continue to grow across all divisions in the Group.
Ross Andrews
Chairman
30 June 2021
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DeepVerge Plc
Chief Executive’s Statement
For the year ended 31 December 2020
Dear Fellow Shareholder,
We have grown from 5 full time employees in August 2018 to nearly 60 today and recently announced of an additional 60 to join over
the next few weeks and months. The Chief Executive’s Statement reflects a year in the life of the Company, but the growth and
success comes from the people who breathe the life and soul into the Group, making a difference every day. So, I present the
Company’s results for the year ended 31 December 2020 below on behalf of the DeepVerge Team.
DeepVerge
DeepVerge is an environmental and life science group of companies that develops and applies AI and IoT technology for the
analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent data analytics to scientifically prove the impact
of skincare product claims on skin microbiome for most of the top 20 global cosmetic company clients and remotely detect and
identify in real-time, dangerous pathogens, such as SARS-CoV-2 in wastewater treatment plants, drinking water, rivers, lakes and
reservoirs.
Our core services:
• Regulated environmental toxicology services;
• Human skin equivalent platform to validate and verify the safety and impact on client products for regulatory authority
approval;
• AI and microbiome platform to facilitate clinical trials for skincare companies and remote test-kits for consumer skin;
• Monitoring and data analytics platform for real-time detection and identification of pathogens in water and wastewater.
Highlights:
• Total 2020 revenue £6.650m including pre-acquisition Modern Water revenue, increase of 553% from 2019 £1.017m
revenue;
• Consolidated group revenue increased by 445% to £4.483m (2019 restated: £0.823m);
• H2 2020 revenue £3.479m an increase of 247% from H12020 £1.004m revenue;
• Strong sales in Q4 2020 delivered the Company's first EBITDA profitable quarter (excluding exceptional costs associated with
the acquisition of Modern Water);
• Group staff number increased by 27 (268%) to 43 employees (2019: 16) and Share Option program implemented
• EBITDA losses fell by 37% to £0.668m (2019: £1.053m),
o excluding exceptional items and share option scheme of £191,000 (2019: £2,000) ;
• EBITDA losses fell by 19% to £0.859m (2019: £1.055m),
o excluding exceptional items)
• Administration costs increased to £4.561m (2019: £2.973m) with Modern Water acquisition and Labskin expansion;
• Operating loss of £2.718m (2019: £2.371m) after providing for:
o Depreciation of £0.172m (2019: £0.101m);
o Amortisation of £0.941m (2019: £0.442m);
o
o
o Exceptional costs of £0.391m (2019: £0.532m) were one-off transaction costs relating to acquisition activities;
Impairment of intangible assets £nil (2019 : £0.241m);
Impairment of investments £0.354m (2019: £nil);
• £13.315m all-share acquisition of Modern Water.
Post-year-end highlights
• £10m Placing and Subscription to fund scale, meet increased demand and expand revenues across the Group
o At 30 pence per 0.1p ordinary share;
o 100% increase in share price since previous December 2019 placing at 15 pence equivalent per 0.1p ordinary share
(1.5p per 0.01p ordinary share before 10:1 consolidation).
•
FY 2021 revenue guidance remains at £10m with £3.6m already received in Modern Water orders in Q1.
• Group staff numbers continues to grow to meet demand and as at 30 June 2021 stands at 57 up from 43 at year end
•
The Labskin Division has sealed its reputation as a leading diagnostics partner with global partners and new service
offerings
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DeepVerge Plc
Chief Executive’s Statement (continued)
For the year ended 31 December 2020
o We work with 18 of the top 20 global pharma companies;
o Virtual clinical trials with remote collection of human volunteer's skin microbiome;
• New solution for the collection of volunteer microbiomes to allow for lab controlled clinical trials of advanced skin models
(pigmented, acne, atopic dermatitis, psoriasis) and human microbiomes;
• As the data bank of remote volunteers grow the higher the accuracy and increased reliability of virtual product testing
can be provided to clients eliminating early human trial and error testing and faster time to market;
• Building of a data repository to allow AI modelling of skin conditions and ingredient effects;
o Launch of Skin Trust Club Artificial Intelligent (A.I.) Skincare App and Home Test Kit
▪ 2,000 members in the Alpha test with more than 5,000 before we stopped accepting for the Beta of
▪
which we will throttle back to complete.
Self-administered skin swab from home-test-kit allows the clinical trial or Skin Trust Club participant to
conduct a simple test without interaction;
▪ DNA test that generates a report consumers can use to manage their custom skincare regimen. Analysis
of skin attributes provides information to create hundreds of different product combinations to suit a
person’s unique skin microbiome;
• Environmental Health division also continues to grow apace with new equipment, solutions, labs and services creating a
strong $5.0m (£3.6m) sales pipe for Microtox and MicroTrace in Q1 alone
o New equipment rolling off production lines on three continents to meet demand across the Microtox and
MicroTrace range with new range of real-time surveillance services in Water Quality Monitoring
o New solutions to detect contaminants of concern and forever chemicals through Microsaic systems, mass
spectroscopy-based identification systems and our work with the Aptamer Group
o Two New Containment Level 3 (Virus) level labs at our York UK facility
o New services to detect dangerous pathogens, including contagious infections as well as community detection of
opioids.
•
Initial data from ongoing Phase III COVID-19 detection studies demonstrates ability to identify and detect the virus
o Public Health England access to the SARS-CoV-2 virus at Category 3 lab with University of Aberdeen, Genoa, Italy
and Liverpool University
Identified the virus S-Protein in quantities at 40 femtogram per millilitre ("Fg/mL")
▪
▪ Close to 100% sensitivity and specificity on DeepVerge's Microtox BT nano-optofluidic chip
o 40 subject breath test clinical trial concluded at Royal College of Surgeons, Ireland
▪ 16 independently confirmed as COVID-19 positive with PCR tests
▪ Breath samples were tested on the Microtox® BT nano-optofluidic chip surface with Affimer® reagents
("Avacta Group") and Optimers ("Aptamer Group")
▪ Detection of the live virus confirmed indicating 9 times increase in digital spectrum signal on the
Microtox® BT compared to control
▪ Microtox® BT delivered results in under 60 seconds from breath samples
o Subject to completion of additional human trials, the Microtox BT would be expected to meet the criteria for
UK, MHRA's Target Product Profile Rapid Breath Test which would enable us to roll out the COVID-19 and other
pathogen breath tests later this year
• On 26 April, Skin Trust Club iOS App went live after successful completion of 2,000 Alpha skin tests
• On 28 April the Company announced it had entered into a Memorandum of Understanding for a Joint Venture with China
Resources Environmental Protection Development Limited to cover the manufacture, assembly and sale of
environmental monitoring equipment.
• On the 6 May the Company announced the establishment of a new AI centre of excellence in Cork, Ireland to play key
role in real-time detection of SARS-CoV-2 in Ireland and across Europe. In addition, the Irish headcount, based on growing
demand, is expected to triple in 2021 adding up to 60 new hires for roles in data science, physics and epidemiology.
5
DeepVerge Plc
Chief Executive’s Statement (continued)
For the year ended 31 December 2020
• On 24 June the Company announced the successful completion of Phase 3 field trials in which Microtox PD achieved real-
time detection and transmission of data, specific to SARS-CoV-2, in wastewater treatment plants at multiple sites . As a
result, Modern Water entered into a master service agreement with EPS Group to install, calibrate, service and maintain
Microtox PD units which, subject to negotiation with undisclosed parties, have the potential to be installed in multiple
European countries.
The Company has transformed its business model to apply artificial intelligence to life science and environmental test services
for bacteria, viruses and toxins. Key activities of the business are as follows:
Labskin
Labskin is a 3D human skin equivalent test platform that scientifically proves the impact of skincare product claims in healthcare,
life sciences, skin microbiome clinical trials, pharmaceutical and cosmetics industries. The Labskin division’s laboratory space has
increased from 924 sq. ft in 2018 to 9,378 sq. ft in 2021 and the team works with leading skincare companies such as Stryker,
L’Oréal and Kimberly-Clark. Labskin’s virtual clinical trials with remote collection of human volunteers’ skin microbiome provides
a solution for the collection of volunteer microbiomes to allow for lab-controlled trials of advanced skin models and human
microbiomes. As the data bank of remote volunteers grow, the higher the accuracy and increased reliability of virtual product
testing that can be provided to clients, eliminating early human trial and error testing and resulting in a faster time to market.
Skin Trust Club
The Company recently launched the Skin Trust Club Artificial Intelligence Skincare App and Home Test Kit that provide simple,
at-home skin microbiome testing for personalised skincare and skin health tracking. The self-administered skin swab is a remote
trial and allows the participant to conduct each stage of the trial without interaction. Skin Trust Club’s DNA Test generates a
report that consumers can use to manage their custom skincare regime. Analysis of skin attributes provides information to create
hundreds of different product combinations to suit a person’s unique skin microbiome.
Modern Water Plc
On 13 October 2020 the Company made an offer to acquire Modern Water Plc. The offer consisted of one Company share for ten
Modern Water Plc shares. The Company issued 55,669,222 ordinary shares at an average 23.92p per share, valuing the acquisition
at £13,315,114. On 9 November 2020 the Company acquired majority control of Modern Water Plc and on 15 January 2021 the
acquisition was completed. Modern Water plc was de-listed from AIM on 9 December 2020. Modern Water is expert in the
development of analytical instruments and technology for monitoring toxicity in water, soil, food and industry. The Company
believes that valuable emerging synergies exist between Rinocloud AI and Modern Water technology.
Drinking and Wastewater Analysis
The Company gained control of Modern Water in November 2020 expanding DeepVerge’s offering to include environmental
data management, monitoring and analysis of water contamination using AI. The Group has over 3,000 units installed in over 60
countries serving clients in water utilities, public health authorities and industrial manufacturers. The Group is introducing new
equipment to meet demand across its Microtox and MicroTrace ranges with a new range of real-time surveillance services in
water quality monitoring. It is also developing, in partnership with Microsaic Systems and the Aptamer Group, a range of binders
to detect contaminants of concern and forever chemicals. The Company has two new containment level 3 (virus) labs at its York
facility and is also introducing new services targeting dangerous pathogens including contagious infections as well as community
detection of opioids.
SARS-CoV-2 and COVID-19 Testing
With access to the SARS CoV-2 virus at a category 3 laboratory with the University of Aberdeen and Liverpool University, the
Company’s Microtox® unit is able to identify the virus S-Protein in quantities at 40 femtogram per millimetre (“Fg/mL”). The
results were close to 100% sensitivity and specificity on DeepVerge’s Microtox® nano-optofluidic chip and Microtox®, using AI
was able to detect super-spreaders (with a high viral load), average spreaders and the lower limit sufficient to pick up the low
emitters (asymptomatic). The effectiveness of Microtox® was demonstrated in a 40 subject clinical trial conducted with the
cooperation of the Royal college of Surgeons, Ireland, where 16 subjects were independently confirmed as COVID-19 positive
with PCR tests. Breath samples were tested on the Microtox® BT nano-optofluidic chip surface with Affimer reagents and
Optimers.
6
DeepVerge Plc
Chief Executive’s Statement (continued)
For the year ended 31 December 2020
Detection of the live virus was confirmed indicating 9 times increase in digital spectrum signal on the Microtox compared to
control. Microtox delivered results in under 60 seconds from breath samples. Subject to completion of additional human trails,
the Microtox BT would be expected to meet the criteria for UK, MHRA’s Target Production Profile Rapid Breath Test.
Disruptive Business Model
DeepVerge has advanced its core business model with Labskin AI platform to create a fundamental change in topical skin related
clinical and medical device trial costs. Changes go far beyond incremental savings resulting in:
Physical presence of human volunteers can be eliminated using remote clinical trials testing;
Swab of test subject’s skin is taken and applied to Labskin;
Instantly creates twin test subject;
•
•
•
• Recruitment time is shorter as location is irrelevant, or at least within posting distance;
•
Project management and supervision time and personnel are reduced substantially;
• AI integration delivers comparative analytical data plus human test response data;
• Reduces error – highlighting test subjects who are not sticking to test regime;
•
•
• Our commercial focus is on distribution using sales, marketing and distribution channels of collaboration partners as well as
Increases accuracy;
Clients win, Clinical Research Organisation wins and Labskin wins extra revenues;
adding to the combined knowledge with our team that understand bacteria, fungi and viruses;
• We have a full team of IT and web services professionals that understand ‘online’ and SEO, bringing our partner businesses
fully online, through ecowaterOS and RinoDrive, which is so necessary in a COVID-19 world;
Sales and Marketing includes an inside sales team, brand and marketing specialists that complement our partners traditional
sales models;
Flexible enough to facilitate scientific procedures that need to be updated.
•
•
3-Step Strategic Plan Across All Divisions
1. Grow Profits Across Related Markets
We will continue to leverage existing blue-chip clients and collaboration partner relationships to secure additional high value product
test service contracts with additional sales resources.
Product & Service Investment
2.
Roll-out of physical and digital cloud-based reporting services to keep our Life Science and Environmental Health offering competitive
and relevant to our clients is key to delivering more value to our clients and increasing revenue per client in return. We maintain this
approach by extending our technical resources to enhance product and service development. The addition and continued
development of AI data analytics capabilities from our Rinocloud division, and the continued growth in revenue because of that,
shows we are on the right track.
Collaboration & Acquisition
3.
We actively pursue a broader portfolio of services through revenue shared collaboration and acquisition options. These areas have
been previously mentioned in RNS announcements and include, but are not limited to, data analytics, software and biophysics
integration services. All of these lead to extending the scope and reach of all divisions. As mentioned above the key criteria in our
collaboration and partner targets are to increase revenue per client and earnings from repurposed assets to enhance shareholder
value.
As noted from the recent RNS on the positive results of wastewater treatment plant installations of Microtox PD, the Company has
signed master service and commercial agreements with Avacta Group plc and Aptamer Group Limited for binding agents, installation,
maintenance, a service agreement with EPS Group for Europe and will update the market on an extended roll out across multiple
jurisdictions for detection of SARS-CoV-2 in real-time, expected in H2 this year. We look forward to updating you on the progress
of this strategy as we go forward.
Gerard Brandon
Chief Executive Officer
30 June 2021
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DeepVerge Plc
The Board
Ross Andrews, Non-Executive Chairman
Ross was appointed Chairman on 21 May 2019, having been a non-executive director since April 2017. He is a corporate financier
with over 30 years’ experience, has a strong understanding of corporate governance regimes and is chairman and non-executive
director of several UK listed companies. In 2018, he established Guild Financial Advisory, a corporate finance boutique focused on
ambitious and fast-growing companies.
Gerard Brandon (Chief Executive Officer)
Gerard was appointed Director and CEO of DeepVerge in August 2018. Previously, he joined Cellulac Limited (Ireland) as its Chief
Executive Officer in May 2012 and assumed the same role for Cellulac plc in October 2013. In 1996 he became founder and CEO of
Alltracel Pharmaceuticals PLC, where he built a team that oversaw numerous patents granted on refined cellulose. Alltracel was
admitted to trading on AIM in 2001. In 2004, he was appointed as a Managing Partner for Farmabrand Private Equity. In 2009, he was
appointed as an Executive Consultant to Eplixo Limited. He is a Fellow of the Ryan Academy of Entrepreneurs in Dublin.
Camillus Glover (Chief Financial Officer)
Camillus was appointed Director and COO of DeepVerge on 8 August 2018. On 29 August 2018 he took over as Chief Financial Officer.
Previously, he joined Cellulac Limited (Ireland) as Chief Financial Officer in May 2012 and assumed the same role for Cellulac plc in
October 2013. He is a member of the Institute of Chartered Accountants Ireland. In 2003, he joined Alltracel Pharmaceuticals plc as
Commercial Director and was appointed Chief Operations Officer in 2005 until it was acquired in 2008 by Hemcon Medical
Technologies (“Hemcon”). Between 2009 and 2012, he was VP of Global Business Development for Hemcon prior to joining Cellulac
plc.
Fionan (Fin) Murray, (Chief Operations Officer)
Fin is the founder of Rinocloud Limited. He was appointed Sales Director of DeepVerge on 2 May 2019 following the acquisition
of Rinocloud Ltd. On 26 February 2020 he was appointed COO of DeepVerge. He is a seasoned sales executive with more than 30
years’ experience in worldwide distribution deals, selling complex software solutions into the multi-national corporate sectors in
financial services, biotech, utilities and government departments. He is former CEO of LeT Systems Ltd and a senior executive at
KBC Bank and Kindle Banking systems. He was appointed Chief Operations Officer on 26 February 2020.
Dr Nigel Burton (Non-Executive Director)
Nigel was appointed non-executive director of the Company on 10 November 2020 following the acquisition of Modern Water
where Nigel was a non-executive director. Nigel worked for over 14 years as an investment banker at leading London City
institutions including UBS Warburg and Deutsche Bank, including serving as a Managing Director responsible for the energy and
utilities industries. Following these roles Nigel spent 15 years as Chief Financial Officer or Chief Executive Officer of a number of
private and public companies and is a Non-Executive Director of a number of other listed companies including BlackRock
Throgmorton Trust, eEnergy Group, Microsaic Systems and Location Sciences.
8
DeepVerge Plc
Strategic Report
For the year ended 31 December 2020
Review of the business
A comprehensive review of the year is given in the Chairman’s and Chief Executive’s Statements on pages 2 to 8.
Principal risks and uncertainties
The Directors continually identify, monitor and manage the risks and uncertainties of the Group. Risk is inherent in all businesses. Set
out below are certain risk factors which could have an impact on the Group’s long-term performance and mitigating factors adopted
to alleviate these risks. This list does not purport to be an exhaustive summary of the risks affecting the Group.
Management and employees
The Group’s future success will be dependent on key employees and their on-going relationships with customers. The Group
encourages customer contacts to be maintained by more than one individual. Key employees are incentivised through a mixture of
competitive remuneration and sales commission. Main Board Directors are incentivised as detailed in the Directors’ Remuneration
Report.
Early stage of operations
DeepVerge is an early commercial stage company. The acquisition of both Rinocloud Limited and Modern Water has generated
substantial growth in revenue and increased product and service offerings which allows visibility on long term sales pipeline activity.
This integration of all divisions has had a relatively short-term track record of product sales and new service offerings, but recent
funding has secured the resources to balance growth of product and service supply with demand for these offerings from our clients.
Delay in product launches
The Group has identified product and service development projects to take to market, some of which required specific funding to
proceed. The recent funding is no guarantee that these projects will be completed within anticipated timescales, and while they have
resulted in viable products and services, they remain at early stage to understand the size of the opportunities across the Group. The
Group’s strategy involves, inter alia, running clinical studies on its products to create verifiable data which can be used in marketing
campaigns to differentiate the Group’s products from competitors. The Skin Trust Club, a consumer skincare home test kit for skin
microbiome was launched recently. If the clinical studies and roll out of services to consumers take longer than expected, or fail to
establish the anticipated numbers signing up, this could be damaging to the Group’s prospects.
Potential funding requirement for further development
Any future collaboration, partnership, joint venture expansion, activity, acquisitions and/or business development may require
additional capital and the Group may seek to raise additional funds through equity or debt financings or from other sources. There
can be no guarantee that the necessary funds will be available on a timely basis, on favourable terms, or at all, or that such funds if
raised, would be sufficient.
Competition risk
The Group’s current and future potential competitors include, amongst others, major multinational healthcare and environmental
health companies with substantially greater resources than those of the Group. There can be no assurance that competitors will not
succeed in developing systems, products and services that are more effective or economic than any of those developed by the Group,
which would render the Group’s products obsolete or otherwise non-competitive. The Group seeks to reduce this risk by ensuring
that a professional and high standard product and service is provided to its customers, maintaining confidentiality agreements and
selecting leading businesses in their respective fields as collaboration and joint development partners capable of addressing
significant competition, should it arise.
Currency exchange risk
The Company’s financial statements are denominated in pounds sterling, its functional currency. The Company plans to increase its
sales and activities in the USA and the EU which may be impacted by exchange rate fluctuations in future. Following the acquisition
of Modern Water additional dollar costs will arise which will be hedged against dollar sales.
COVID-19 risk
Management is constantly reviewing the impact of COVID-19 with clients and partners to assess manufacturing and supply of services
stress. These include, but are not limited to, restrictions on the supply of materials that enable the Group to supply goods and services
to clients. This review process is designed to provide advance warning to be able to manage impacts on the business and to assist
clients meet their needs where reliance on the delivery of our goods and services from the Group is critical.
9
DeepVerge Plc
Strategic Report (Continued)
For the year ended 31 December 2020
Financial risk management
The Group has instigated certain financial risk management policies and procedures which are set out in note 3 to the financial
statements.
Companies Act S.172 Statement
The Directors are fully appraised of their responsibilities under section 172(1) of the Companies Act 2006 and
are so advised and updated on a regular basis by the Company Secretary of DeepVerge plc.
Business
The Group’s strategic plan was designed to have a long-term beneficial impact on the Group and our customers by delivering the
range of products and services as the go-to brand for animal testing alternatives for human skin, within Labskin, the go-to brand for
environmental health testing in water and wastewater in Modern Water. The Directors will continue to operate the business within
tight budgetary control and in line with regulatory requirements.
Employees
The Group has increased employees because of increased demand as well as ahead of expected future demand for products and
services. Management of HR is critical to the delivery of the Group’s strategic plan. The Directors ensure that the Group complies
with all employment laws in the respective jurisdictions of each subsidiary and have implemented appropriate standards and systems
to monitor and to ensure the welfare of all employees. For more detail on how the Directors support the employees, see Corporate
And Social Responsibility report in this Annual Report.
Stakeholder engagement
The Group has built and maintained relationships with shareholders, advisers and suppliers. The Directors have taken steps to develop
and strengthen them through dialogue and engagement. These relationships are regularly monitored at Board level. The Chairman
ensures that he is available to discuss issues with key shareholders outside of the shareholder meetings which are held. The Company
complies with its disclosure obligations as set out in the AIM Rules for Companies, published by London Stock Exchange to ensure
that shareholders are updated on key developments on a timely basis.
Governance
The Board recognises that good standards of corporate governance help the Group to achieve its strategic goals and is vital for the
success of the Company. For more detail on the corporate governance of the Group, see Corporate Governance Report in this annual
report.
Disclosure of information to the Auditors
The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant
audit information of which the Company’s auditors are unaware, and each Director has taken all the steps that he ought to have
taken as a Director in order to make him aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.
Outlook
Key Performance Indicators (KPIs)
The key performance indicators currently used by the Group are revenue, adjusted EBITDA and cash resources. The Group intends to
establish other key performance indicators in due course once the Group has matured sufficiently. The Group does not use and does
not at present intend to use non-financial key performance indicators.
Review of strategy and business model
Since 2019, DeepVerge Plc has completed a number of strategic acquisitions and the most recent being Modern Water, under the
Company’s control since 9 November 2020. With 30+ years of institutional knowledge of virus, bacteria, toxins and parasites in
water and wastewater, Modern Water complements the knowledge within Labskin of virus, bacteria and toxins on human skin.
The addition of a digital platform which was originally created for Labskin can now be extended to facilitate data accumulated
from equipment already installed in more than 60 countries and using AI to identify in real-time dangerous pathogens across the
group.
10
DeepVerge Plc
Strategic Report (Continued)
For the year ended 31 December 2020
This physical laboratory-grown 3D human skin equivalent, developed specifically to host bacteria, virus and fungi on human skin
in our test laboratories, incorporates a digital artificial intelligence to enhance clinical research, medical device and life science
testing in physical real-world and virtual digital simulated form. Labskin allows our clients in skincare, healthcare, pharmaceutical
manufacturers and the cosmetic industry to test and validate their product claims on human-like skin in a real-world environment
with full access to multiple state-of-the-art partner technologies.
Because of the changes to the business model the Company is seeing an improved pipeline of activity. The Rinocloud acquisition and
its development team has integrated well, as much of the work in collaboration had commenced prior to completion of the
transaction. Moving to a higher value service offering and now including detection and predictive services across the Group is both
exciting and challenging. With an increased order pipeline, the Company requires additional infrastructure and expertise. The
announcements throughout 2020 of increased laboratory space and personnel growth has secured immediate organic growth from
all divisions. The data analytics and use of artificial intelligence to enhance the capabilities of existing equipment and services of both
the life science and environmental health divisions, opens opportunities to explore options of collaboration, partnership and
acquisitive growth to achieve Company goals of meeting increased demands from our clients, regulatory compliance and enhance
shareholder value.
Environment
The Directors consider that the nature of the Group’s activities is not inherently detrimental to the environment.
Employees
The Group places value on the involvement of its employees and they are regularly briefed on the Group’s activities. The Group
closely monitors staff attrition rates which it seeks to maintain at current low levels and aims to structure staff compensation levels
at competitive rates in order to attract and retain high calibre personnel.
Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the specific aptitudes of the applicant
involved. It is the policy of the Group that the training, career development and promotion of disabled persons, as far as possible, be
identical with that of other employees.
Social, community, and human rights
The Board recognises that the Group has a duty to be a good corporate citizen and to respect the laws, and where appropriate
the customs and culture of the territories in which it operates. It contributes as far as is practicable to the local communities in
which it operates and takes a responsible and positive approach to employment practices.
The Strategic Report was approved by the Board on 30 June 2021 and signed on its behalf by:
Gerard Brandon
Chief Executive Officer
11
DeepVerge Plc
Report of the Directors
For the year ended 31 December 2020
The Directors have pleasure in submitting this report together with the audited financial statements of DeepVerge Plc for the year
ended 31 December 2020.
Corporate details
DeepVerge Plc is incorporated in England and Wales with registration number 10205396. The registered office is York Biotech Campus,
Sand Hutton, York, North Yorkshire, YO41 1LZ.
Directors
The Directors who held office during the year and as at the date of signing the financial statements were as follows:
Gerard Brandon
Camillus Glover
Ross Andrews
Fin Murray
Nigel Burton
(Appointed on 10 November 2020)
Principal activities
The Group is an environmental and life science group of companies that develops and applies AI and IoT technology to analytical
instruments for the analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent data analytics to
scientifically prove the impact of skincare product claims on skin microbiome for most of the top 20 global cosmetic company
clients and remotely detect and identify in real-time, dangerous pathogens, such as SARS-CoV-2 in wastewater treatment plants,
drinking water, rivers, lakes and reservoirs.
Our core services:
• Regulated environmental toxicology services;
• Human skin equivalent platform to validate and verify the safety and impact on client products for regulatory authority
approval;
• AI and microbiome platform to facilitate clinical trials for skincare companies and remote test-kits for consumer skin;
• Monitoring and data analytics platform for real-time detection and identification of pathogens in water and wastewater.
Dividends
There were no dividends paid or proposed by the Company during the period (2019: none).
Going concern
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements.
The Directors have prepared cash flow projections to determine funding requirements of the Group.
During June 2021 the Company raised £10m by issuing new shares to fund accelerated sales opportunities and for general working
capital purposes.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual
report and consolidated financial statements.
12
DeepVerge Plc
Report of the Directors (continued)
For the year ended 31 December 2020
Directors’ interests
The interests of the Directors who served during the year and previous year in the share capital of the Company (all held beneficially)
as at 31 December 2020 were as follows:
Ordinary Shares of 0.1p each
8,414,4831
Gerard Brandon
Camillus Glover 4,250,670
Ross Andrews 323,846
Fin Murray 8,786,758
Nigel Burton 1,883,167
1 Includes 194,942 shares held by family member
Substantial shareholdings
At the date of signing of these financial statements, the following interests in 3% or more of the issued Ordinary Share capital had
been notified to the Company:
Number
of shares
Percentage of issued
share capital
9,571,943
8,786,758
8,219,901
4.45%
4.08%
3.82%
Shareholder
Helium Rising Stars Fund
Fionan Murray
Gerard Brandon
Post balance sheet events
The following events have taken place since the year end:
Ordinary Shares Issued
In the period from 1 January 2021 to date of the signing of these financial statements subscribers have exercised warrants over
3,824,485 Ordinary Shares of 0.1p each at an exercise price of 20p raising a total of £764,897.
In the period from 1 January 2021 to date of the signing of these financial statements staff employees have exercised options over
43,962 Ordinary Shares of 0.1p each at an exercise price of 0.1p raising a total of £44.
In the period from 1 January 2021 to date of the signing of these financial statements Turner Pope International exercised warrants
over 8,422,284 Ordinary Shares of 0.1p at exercise prices ranging from 5p to 15p, at an average of 6.53p per Ordinary Share of 0.1p
raising a total of £500,200.
On 7 June 2021 the Company raised £10 million by way of a firm and conditional placing of 33,333,334 Ordinary Shares of 0.1p at a
placing price of 30 pence per share. The first firm placing on 11 June 2021 of 21,086,888 Ordinary Shares raised £6.32 million. The
second conditional placing on 24 June 2021 of 12,246,446 Ordinary Shares raised £3.68 million.
At the date of signing these financial statements, the Company had an issued share capital of 215,138,276 Ordinary Shares of 0.1p
each and 223,685,232 deferred Ordinary Shares of 0.99p each.
Director Purchase of Ordinary Shares
On 12 April 2021 Ross Andrews, Director, purchased 1,000,000 Ordinary Shares of 0.1p each on the open market at an average price
of 33.72p per share.
13
DeepVerge Plc
Report of the Directors (continued)
For the year ended 31 December 2020
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 International Financial Reporting Standards (IFRSs) as adopted
by the European Union. Under Company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group and the
Parent Company 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 Company will
continue in business.
•
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the
Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Parent
Company and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Parent Company’s website (www.deepvergeplc.com). Legislation
in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Directors consider that the annual report and the accounts, taken as a whole are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Group and the Parent Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Report of the Directors confirm that, to the best of their knowledge:
•
•
•
the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company;
the Parent Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European
Union, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company; and
the Chairman’s Statement and Chief Executive’s Statement include a fair review of the development of the business and the
position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that it
faces.
Directors’ liability insurance
The Company maintains Directors and Officers liability insurance, which is reviewed annually and is considered to be adequate by the
Company and its insurance advisers.
Independent auditors
Jeffreys Henry LLP were appointed during the year and have expressed their willingness to continue in office as auditors and a
resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.
14
DeepVerge Plc
Report of the Directors (continued)
For the year ended 31 December 2020
Companies Act S.172 Statement
The Directors are fully appraised of their responsibilities under section 172(1) of the Companies Act 2006 and
are so advised and updated on a regular basis by the Company Secretary of DeepVerge plc.
Business
The Group’s strategic plan was designed to have a long-term beneficial impact on the Group and our customers by delivering the
range of products and services as the go-to brand for animal testing alternatives for human skin, within Labskin, the go-to brand for
environmental health testing in water and wastewater in Modern Water. The Directors will continue to operate the business within
tight budgetary control and in line with regulatory requirements.
Employees
The Group has increased employees because of increased demand as well as ahead of expected future demand for products and
services. Management of HR is critical to the delivery of the Group’s strategic plan. The Directors ensure that the Group complies
with all employment laws in the respective jurisdictions of each subsidiary and have implemented appropriate standards and
systems to monitor and to ensure the welfare of all employees. For more detail on how the Directors support the employees, see
Corporate And Social Responsibility report in this Annual Report.
Stakeholder engagement
The Group has built and maintained relationships with shareholders, advisers and suppliers. The Directors have taken steps to
develop and strengthen them through dialogue and engagement. These relationships are regularly monitored at Board level. The
Chairman ensures that he is available to discuss issues with key shareholders outside of the shareholder meetings which are held.
The Company complies with its disclosure obligations as set out in the AIM Rules for Companies, published by London Stock
Exchange to ensure that shareholders are updated on key developments on a timely basis.
Governance
The Board recognises that good standards of corporate governance help the Group to achieve its strategic goals and is vital for the
success of the Company. For more detail on the corporate governance of the Group, see Corporate Governance Report in this
annual report.
Disclosure of information to the Auditors
The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant
audit information of which the Company’s auditors are unaware, and each Director has taken all the steps that he ought to have
taken as a Director in order to make him aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.
Annual General Meeting
A copy of the notice convening the Annual General Meeting will be sent out shortly under separate cover.
The Directors’ report was approved by the Board on 30 June 2021 and signed on its behalf by:
Gerard Brandon
Chief Executive Officer
15
DeepVerge Plc
Corporate Governance Statement
For the year ended 31 December 2020
Compliance
The Directors recognise the value of the principles of the Corporate Governance Code for Small and Mid-Size Quoted Companies
issued by the Quoted Companies Alliance (QCA).
The following statement describes how the Group seeks to address the principles underlying the Code where practicable and
appropriate for a company of this size.
Board composition and responsibility
The Board currently comprises five Directors. The Non-executive Chairman, three executive Directors and two non-executive
Director. The Board has determined that the Non-executive Directors are independent in character and judgement and that there
are no relationships or circumstances which could materially affect or interfere with the exercise of their independent judgement.
The Board is satisfied with the balance between executive and non-executive Directors which allows it to exercise objectivity in
decision making and proper control of the Group’s business. The Board considers this composition is appropriate in view of the size
and requirements of the Group’s business and the need to maintain a practical balance between executives and non-executives.
All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and are subject to
re-election at least every three years. The Board does not automatically re-nominate non-executive Directors for election by
shareholders. The terms of appointment of the non-executive Directors can be obtained by request to the Company Secretary.
The Board’s primary objective is to focus on adding value to the assets of the Group by identifying and assessing business
opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved for Board decisions include
strategic long-term objectives and capital structure of major transactions. There is a division of responsibilities between the Non-
Executive Chairman, who is responsible for the overall strategy of the Group, and the CEO, who is responsible for implementing the
strategy and day to day running of the Group. He is assisted by the CFO and the COO.
Board meetings
26 Board meetings were held during the period. The Director’s attendance record during the period is as follows:
Gerard Brandon
Camillus Glover
Ross Andrews
Fin Murray
Nigel Burton
(Appointed 10 November 2020)
25
26
13
13
3
Audit and Risk Committee membership and activities
The Chair of the Audit Committee is Non-executive Director Ross Andrews. The Committee welcomed Dr Nigel Burton to the Board as
a second Non-executive Director during the year and the third member of the Committee is Executive Director Fin Murray. All three
Directors possess the necessary depth of financial and commercial expertise to fulfil their role. Although not members of the Audit
Committee, the CEO and CFO are also invited to attend meetings, unless they have a conflict of interest. Other senior members of the
business are invited to attend meetings as appropriate. The Audit Committee met twice for scheduled meetings during the year.
Key activities during the year
• Reviewed the Annual Report and Accounts, including whether they were fair, balanced and understandable, the material
judgements and estimates, going concern and viability statements.
Considered the external auditor’s report on the full- and half-year audits.
•
• Reviewed the full- and half-year results announcements.
• Appraised the effectiveness and performance of our external auditors, assessed their independence and objectivity, and
recommended their reappointment.
Considered the external audit fees and terms of engagement.
•
16
DeepVerge Plc
Corporate Governance Statement (continued)
For the year ended 31 December 2020
Financial reporting
The Committee’s primary responsibility in relation to the Group’s financial reporting is to review, with management and the external
auditor, the quality and appropriateness of the annual and half-yearly financial statements. The Committee focuses on the quality of
accounting policies and practices, the appropriateness of underlying assumptions, judgements and estimates made by management,
key audit matters identified by the external auditor, the clarity of the disclosures and compliance with financial reporting standards, an
assessment of whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and performance, business model and strategy, and advising the Board on
the form and basis underlying the three step strategic plan.
Nomination Committee membership and activities
The Chair of the Nomination Committee is Non-executive Director Ross Andrews. The Board welcomed Dr Nigel Burton to the Board
as Non-executive Director during the year and Dr Burton joined the Nomination Committee as its second Non-executive Director. The
third member of the Committee is executive Director Fin Murray. All three Directors possess the necessary depth of management and
commercial expertise to fulfil their role. Although not members of Nomination Committee, the CEO and CFO are also invited to attend
meetings, unless they have a conflict of interest. Other senior members of the business are invited to attend meetings as appropriate.
The Nomination Committee met twice for scheduled meetings during the year.
By appointing Dr Nigel Burton to the Board we are ensuring that we have the world- class experience, skills and expertise necessary to
drive the Group forward through its three step strategic plan.
.
In the coming year, the Committee will turn its focus to ensuring the continued growth of the executive and senior management team.
Remuneration Committee membership and activities
The Chair of the Remuneration Committee is Non-executive Director Ross Andrews Dr Nigel Burton joined the Committee as the second
as Non-executive Director. The third member of the Committee is executive Director Fin Murray. Appropriate members of the
management team, as well as the Committee’s advisers, are invited to attend meetings as appropriate, unless there’s a potential
conflict of interest. The remuneration of Non-executive Directors, is determined by the Executive Directors. The Remuneration
Committee met twice for scheduled meetings during the year.
During the year the Committee:
– Determined and recommended to the Board the Group’s overall remuneration policy.
– Determined and recommended to the Board the remuneration of Executive Directors.
– Monitored, reviewed and approved the levels and structure of remuneration for other senior managers.
Internal control
The Directors are responsible for ensuring that the Group maintains a system of internal control to provide them with reasonable
assurance regarding the reliability of financial information used within the business and for publication and that the assets are
safeguarded. There are inherent limitations in any system of internal control and accordingly even the most effective system can
provide only reasonable, but not absolute, assurance with respect to the preparation of financial reporting and the safeguarding of
assets.
The Group, in administering its business has put in place strict authorisation, approval and control levels within which senior
management operates. These controls reflect the Group’s organisational structure and business objectives. The control system
includes clear lines of accountability and covers all areas of the organisation. The Board operates procedures which include an
appropriate control environment through the definition of the above organisation structure and authority levels and the identification
of the major business risks.
Internal financial reporting
The Directors are responsible for establishing and maintaining the Group’s system of internal reporting and as such have put in place
a framework of controls to ensure that the on-going financial performance is measured in a timely and correct manner and that risks
17
DeepVerge Plc
Corporate Governance Statement (continued)
For the year ended 31 December 2020
are identified as early as is practicably possible. There is a comprehensive budgeting system and monthly management accounts are
prepared which compare actual results against both the budget and the previous year. They are reviewed and approved by the Board,
and revised forecasts are prepared on a regular basis.
Relations with shareholders
The Company reports to shareholders twice a year. The Company dispatches the notice of its Annual General Meeting, together with
a description of the items of special business, at least 21 days before the meeting. Each substantially separate issue is the subject of a
separate resolution and all shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The
Chairman of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which
may be relevant to their work. The Chairman advises the meeting of the details of proxy votes cast on each of the individual resolutions
after they have been voted on in the meeting.
The Chairman and the non-executive Directors intend to maintain a good and continuing understanding of the objectives and views
of the shareholders.
Corporate social responsibility
The Board recognises that it has a duty to be a good corporate citizen and is conscious that its business processes minimise harm to
the environment, contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive
approach to employment practices.
18
DeepVerge Plc
Report of the Remuneration Committee
For the year ended 31 December 2020
Statement of compliance
This report does not constitute a Directors Remuneration Report in accordance with the Directors Remuneration Regulations 2007
which do not apply to the Company as it is not fully listed. This report sets out the Group policy on Directors’ remuneration, including
emoluments, benefits and other share-based awards made to each Director.
Policy on Executive Directors’ remuneration
Remuneration packages are designed to motivate and retain executive Directors to ensure the continued development of the
Company and to reward them for enhancing value to shareholders. The main elements of the remuneration package for executive
Directors are basic salary or fees, performance related bonuses, benefits and share option incentives.
Directors’ remuneration
The remuneration of the Directors of the Company for the year ended 31 December 2020 and 2019 is shown below:
Non-Executive Directors
Ross Andrews
Nigel Burton (appointed 10 November 2020)
Tony Richardson (resigned on 21 May 2019)
Executive Directors
Gerard Brandon 1
Camillus Glover 1
Fin Murray (appointed 2 May 2019)
Helmut Schlieper (resigned on 6 August 2018)
Total fees and emoluments
2020
£’000
2019
£’000
49
8
-
57
173
141
129
-
443
500
41
-
5
46
131
110
79
1
321
367
1 The salary of Gerard Brandon and Camillus Glover from the period 6 August 2018 to 30 June 2019 is for non-cash consideration and these Directors
may elect to have accrued salary settled by the allotment of new ordinary shares subject to certain conditions. The element of non-cash consideration
in 2019 was for Gerard Brandon £56,000 (2018: £48,000) and for Camillus Glover £51,000 (2018: £42,000).
Directors’ share options
2017 Share Option Scheme
In April 2017, the Company awarded options to five officers of the Company over 6,720,000 ordinary shares of 1p each. These options
were exercisable after two years provided that the holder of the options is still an employee of the Company.
Four of the officers have since left the Company, resulting in 6,081,600 of the options lapsing.
There have been a number of share reorganisations in the interim period and the remaining options under the scheme as at 31
December 2020 were as follows:
Director
Date granted
No. of ordinary shares
under option
Exercise
price
Exercise period
Ross Andrews
5 April 2017
63,840
50p-60p1
From 5 April 2017 to 5 April 2027
1 50% of the shares will vest at an exercise price of 50p and 50% at an exercise price of 60p 0.1p ordinary shares.
19
DeepVerge Plc
Report of the Remuneration Committee (Continued)
For the year ended 31 December 2020
2020 Employee Share Option Scheme
On 18 September 2020 the Company implemented a group wide share option scheme for staff. The scheme incorporated an EMI Share
Option Scheme for UK employees, a Share Option Scheme for Irish employees and Non-Approved Scheme to recognise the work and
to reward, retain and recognise their contribution to date and their importance to the Company going forward. The share option
program will reward the innovation that has been delivered by all team associates, across the DeepVerge Group, and put in place,
motivation for our most valuable assets to continue to deliver shareholder value over the next 3 years. The EMI share options will lapse
on 18 September 2030 and the Irish Share Options will lapse on 17 September 2027. No share options have been granted to PDMRs.
On 19 November 2020 share options were awarded to the directors of Company:
Exercise
Price
Exercise Date
1 Jan 2021
Exercise Date
1 Jan 2022
Exercise Date
1 Jan 2023
Gerard Brandon
Fionan Murray
Camillus Glover
Ross Andrews
Nigel Burton
30p
30p
30p
30p
30p
240,000
225,000
225,000
60,000
50,000
280,000
262,500
262,500
70,000
58,333
280,000
262,500
262,500
70,000
58,334
Exercise
Period
10 years
7 years
7 years
10 years
10 years
Share Option Scheme
EMI Share Option Scheme
Ireland Share Option Scheme
Ireland Share Option scheme
Non-Approved Scheme
Non-Approved Scheme
The fair value calculation of the share options has been calculated using the Black Scholes Model. The charge to the income
statement in 2020 for the director share options is as follows:
Director
Gerard Brandon
Camillus Glover
Fionan Murray
Ros Andrews
Nigel Burton
Total
Full details of the Share Option Scheme appear in Note 32.
2020
£’000
9
8
8
2
2
29
2019
£’000
-
-
-
-
-
-
20
DeepVerge Plc
Independent Auditor’s Report to the Members of DeepVerge Plc
For the year ended 31 December 2020
Opinion
We have audited the financial statements of DeepVerge Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2020 which comprise the consolidated income statement, the consolidated statement of comprehensive
income, the consolidated and company statements of financial position, the consolidated and company statements of cash flows,
the consolidated and company statements of changes in equity and notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
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 2020 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 company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to
continue to adopt the going concern basis of accounting included reviews of expected cash flows for a period of 12 months, to
determine expected cash burn, which was compared to the liquid assets held in the entity.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group's ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is
not a complete list of all risks identified by our audit.
21
DeepVerge Plc
Independent Auditor’s Report to the Members of DeepVerge Plc
For the year ended 31 December 2020
Key audit matter
Impairment of intangible assets
How our audit addressed the key audit matter
During the year, as part of the Modern Water acquisition, the
intangible assets with a fair value of
group acquired
£14,882,000 and with a useful economic life of 10 years.
Consequently, the group carried
intangible assets of
£18,241,000 (2019: £3,654,000) at the yearend relating to
intellectual property and development costs.
The risk is that the useful economic life of the intangible assets
may be different to the management assumptions or
technological advancements may render its market value
below its carrying value.
EBITDA, which is considered by management to be a key
metric and is included as a KPI in the strategic report, is directly
impacted by the amount of costs capitalised.
Intangibles are only assessed for impairment when indicators
of impairment exist. We have considered the life cycle, public
perception through the share price of the Company and the
fair value of intangibles held by the Company.
We have performed the following audit procedures:
• Obtained management’s forecast for future value in
use of the intangible assets;
• Assessed the reliability of forecasts by agreeing to
historical inputs;
• Reviewed management and challenged management
on their judgements of the forecasted sales and
estimates useful life of the intangible assets;
•
assessed the appropriateness and applicability of
discount rate applied to the current business
performance;
• Assessed the ongoing projects viability and ensured
they met the criteria defined in the accounting
standards for intangibles; and
•
•
•
Tested the clerical accuracy of management’s
forecast.
confirmed cost and useful life by reviewing the
underlying contracts for purchase of the intangible
assets, including those acquired on acquisition of
subsidiary during the year;
reviewed the latest management accounts to assess
post year end cashflows due to the technology and
patents held; and
• As all the capitalised intangibles relate to enhancing
its product, no impairment is required.
Based on the audit work performed we are satisfied, that
although there are inherent uncertainties associated with the
forecast and estimation of useful economic life of intangible
assets, the directors have made reasonable assumptions
about the valuation and useful economic life of intangible
assets, based on past experience and expected future
revenues. We are also satisfied that all necessary disclosures
have been made in the consolidated financial statements.
22
DeepVerge Plc
Independent Auditor’s Report to the Members of DeepVerge Plc
For the year ended 31 December 2020
Valuation of investments in and recoverability of amounts
due from subsidiaries
The parent company carried Investments in subsidiaries of
£15,603,000 (2019: £3,488,000).
We have performed the following audit procedures:
The parent company also had amounts owed by subsidiary
undertakings of £2,934,000 (2019: £3,609,000) at the year
end.
Management’s assessment of the recoverable amounts from
investments in and loans to subsidiaries requires estimation
and judgement around assumptions used, including the cash
flows to be generated from continuing operations. Changes to
assumptions could lead to material changes in the estimated
recoverable amount, impacting the value of investment in the
subsidiary, amounts recoverable from the subsidiaries and
resulting impairment charges.
The directors have assessed
recoverability of
intercompany balances and have concluded that they are
recoverable apart from the balance due from Innovenn UK
Limited of £3.185m that has been impaired.
the
There is a risk that the subsidiaries may not be able to trade as
expected in the future and therefore the investment and the
amounts recoverable may be impaired.
•
•
•
•
•
•
•
•
reviewed management’s assessment of
operating cashflows and indicators of impairment;
future
assessed the methodology used by management to
estimate the future profitability of companies in the
group and recoverable value of the investment, in
conjunction with any intra-group balances, to ensure
that the method used is appropriate;
assessed the reasonableness of the key assumptions
used in management’s estimates of recoverable
industry
line with the economic and
value,
statistics relevant to the business;
in
that any adverse changes
confirmed
in key
assumptions will not would not materially increase
the impairment loss;
challenged cash inflows from revenue generating
activities and the key assumptions applied in arriving
at the expected revenues for the foreseeable future;
assessed the appropriateness and applicability of
discount rate applied to the current business
performance;
assessed the reasonability of cash outflows, including
contracted costs, research expenditure and expected
capital expenditure;
reviewed the latest management accounts for all
entities in the group to confirm reasonability of
assumption used in the cashflow forecast.
Based on the audit work performed we are satisfied that the
management have made reasonable assumptions in arriving
at the value of the companies in the group based on net
present value of future cashflow and the amounts are
disclosed in accordance with the reporting framework, and no
further impairment loss should be recognised in the parent
company financial statements.
23
DeepVerge Plc
Independent Auditor’s Report to the Members of DeepVerge Plc
For the year ended 31 December 2020
Business combination – valuation of intangible assets
Management acquired 93.46% interest in a subsidiary for
consideration of £12,115,000 during the year.
We have performed the following audit procedures:
We identified a risk that the fair value of intangible assets may
not have been accurately derived when accounting for the
business combination.
•
•
•
•
the consolidation workings,
critically reviewed
consolidation journals and assessed how the entity
was accounted for at the point of acquisition to
ensure principals of IFRS 3 have been adhered;
reviewed the share purchase agreement to ensure
considerations was included at fair value and the fair
values of the assets and the liabilities agreed to the
consolidation workings provided by management;
reviewed the share purchase agreement for any
clauses which could have future impact on the
valuation of assets acquired;
discussed the future operation of the newly acquired
subsidiary and synergies expected
the
acquisition;
from
• Obtained management’s forecasts for the intangibles
of the business acquired ;
• Assessed the reliability of forecasts by agreeing
amounts to actual results to date and plans ; and
• Reviewed management and challenged management
on their judgements of the forecasted sales;
•
•
assessed the appropriateness and applicability of
discount rate applied to the current business
performance;
reviewed the consolidated financial statements to
ensure all the necessary disclosures were made;
Based on the audit work performed we are satisfied that the
acquired entity has been accurately consolidated and all
in the financial
necessary disclosures have been made
statement of the group.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
24
DeepVerge Plc
Independent Auditor’s Report to the Members of DeepVerge Plc
For the year ended 31 December 2020
Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for
benchmark applied
Group financial statements
£243,000 (2019: £93,000).
Based on 1% of Gross Assets (2019: 1% of
Gross Assets).
We believe that Gross Assets are a primary
measure used by shareholders in assessing
the financial position of the group, and is a
generally accepted auditing benchmark.
Company financial statements
£196,000 (2019: £93,000).
Based on 1% of Gross Assets (2019: 1% of
Gross Assets).
We believe that Gross Assets are a primary
measure used by shareholders in assessing
the financial position of the group, and is a
generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was between £5,000 and £60,000.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above
£11,050 (Group audit) (2019: £4,650) and £8,900 (Company audit) (2019: £4,650) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgments, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of
our audits we also addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls,
and the industry in which they operate.
The Group financial statements are a consolidation of eight reporting units, comprising the Group’s operating businesses and
holding companies.
We performed audits of the complete financial information for DeepVerge Plc, Innovenn UK Limited, Integumen Ireland Limited,
Stoer Ireland Limited, Rinocloud Limited and Modern Water Plc, reporting units, which were individually financially significant and
accounted for over 100% of the Group’s revenue and over 99% of the Group’s absolute loss before tax (i.e. the sum of the
numerical values without regard to whether they were profits or losses for the relevant reporting units).
The Group engagement team performed all audit procedures, with the exception of the audits of Lifesciencehub UK Limited and
Lifesciencehub Ireland Limited, which were performed by a component auditor in The Republic of Ireland where the audited
financial statements were reviewed.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
25
DeepVerge Plc
Independent Auditor’s Report to the Members of DeepVerge Plc
For the year ended 31 December 2020
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.
Opinions 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 parent company and its 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 in relation to which 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 page 14, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and 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.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout
the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
26
DeepVerge Plc
Independent Auditor’s Report to the Members of DeepVerge Plc
For the year ended 31 December 2020
•
•
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal
control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
•
• Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the
Group to express an opinion on the financial statements. We are responsible for the direction, supervision and
performance of the audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at:
www.frc.org.uk/auditorsresponsibilities This description forms part of our auditor’s report.
Use of this report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.
Sanjay Parmar (Senior Statutory Auditor)
For and on behalf of Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London EC1V 9EE
30 June 2021
27
DeepVerge Plc
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Continuing operations
Revenues*
Costs of sales
Gross profit
Administrative Costs
Operating loss
Depreciation
Amortisation
Impairment of intangible assets
Impairment of Investment
Exceptional items
EBITDA before exceptional items
Finance costs
Loss before income tax
Taxation
(Loss) for the year from continuing operations
Profit for the year from discontinued operations
Loss for the year
Other comprehensive income
Currency translation differences
Total comprehensive loss for the year
Notes
5
6
6,16
6,14,15
6,15
17
6,7
11
12
34
2020
£’000
4,483
(2,639)
1,844
(4,561)
(2,717)
172
941
-
354
391
(859)
(183)
(2,900)
182
(2,718)
-
(2,718)
33
(2,685)
2019
£’000
823
(221)
602
(2,973)
(2,371)
101
442
241
-
532
(1,055)
(26)
(2,397)
126
(2,271)
6
(2,265)
(8)
(2,273)
Loss per share from continuing and discontinued operations
attributable to owners of the parent during the year
Basic and diluted loss per 0.1p ordinary share**
From continuing operations
From discontinued operations
From loss for the year
Pence
Pence
13
13
13
2.1p
0.0p
2.1p
2.8p
0.0p
2.8p
*2020 Revenue excludes £2,167,000 Modern Water 2020 pre-acquisition revenue.
** On 16 September 2020 share consolidation of 0.01p ordinary share in 10: 1 conversion to 0.1p new ordinary share.
The notes on pages 32 to 70 are an integral part of these consolidated financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company
income statement account.
The loss for the parent Company for the year was £1,590,000 (2019: £1,384,000).
28
DeepVerge Plc
Consolidated and Company’s Statement of Financial Position
As at 31 December 2020
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right of use assets
Investments in subsidiaries
Loans to subsidiary undertakings
Other investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity attributable to owners
Share capital
Share premium account
Retained loss
Foreign currency reserve
Reverse acquisition reserve
Capital redemption reserve
Share based equity reserve
Sub total
Non-controlling interests
Total equity
Non-current liabilities
Deferred tax liabilities
Deferred revenue
Lease liability
Borrowings
Total non-current liabilities
Current liabilities
Trade and other payables
Deferred tax liabilities
Lease Liability
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
15
16
14
17
29
17
19
20
21
25
27
26
27
27
27
27
33
23
16
14
24
22
23
14
24
Group
2020
£’000
18,241
874
569
-
-
354
20,038
1,347
1,448
1,441
4,236
24,274
2,380
25,069
(18,964)
(226)
(2,843)
9,519
197
15,132
789
15,921
2,780
24
358
583
3,745
2,667
328
264
1,349
4,608
8,353
24,274
Group
2019
£’000
Company
2020
£’000
Company
2019
£’000
3,654
471
503
-
-
708
5,336
85
549
1,193
1,827
7,163
2,322
11,743
(15,400)
(259)
(2,843)
9,519
6
5,088
-
5,088
500
-
402
135
1,037
693
61
102
182
1,038
2,075
7,163
38
-
-
15,603
2,867
354
18,862
-
246
451
697
19,559
2,380
25,069
(19,851)
-
-
9,519
197
17,314
-
17,314
-
-
-
583
583
745
-
-
917
1,662
2,245
19,559
53
-
-
3,488
3,259
708
7,508
-
407
1,115
1,522
9,030
2,322
11,743
(15,076)
-
-
9,519
6
8,514
-
8,514
-
-
-
-
-
516
-
-
-
516
516
9,030
The notes on pages 32 to 70 are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board on 30 June 2021.
Camillus Glover
Chief Financial Officer
DeepVerge Plc
Registered no: 10205396
29
DeepVerge Plc
Consolidated and Company’s Statement of Cash Flows
For the year ended 31 December 2020
Notes
28
12
11
33
15
16
Cash Flow from operating activities
Cash used in operations
Taxation
Net Interest (paid)/received
Net cash used in operating activities
Cash flow from investing activities
Acquisition of subsidiary net of cash balance
Payments to acquire intangibles
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issuance of ordinary shares
Proceeds from new loans
Capital element of finance lease
Repayments on borrowings
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
21
Group
2020
£’000
(2,098)
77
(183)
(2,205)
739
(488)
(296)
(45)
1,328
1,500
(125)
(205)
2,498
248
1,193
-
1,441
Group
2019
£’000
(2,281)
32
(26)
(2,275)
22
(213)
(138)
(329)
3,961
-
(19)
(171)
3,771
1,167
26
-
1,193
Company
2020
£’000
Company
2019
£’000
(4,141)
-
(90)
(4,231)
739
-
-
739
1,328
1,500
-
-
2,828
(664)
1,115
-
451
(2,887)
-
(2)
(2,889)
22
-
-
22
3,961
-
-
-
3,961
1,094
21
-
1,115
30
DeepVerge Plc
Consolidated Statement of Changes in Shareholders’ Equity
Share
capital
£’000
2,260
Share
premium
£’000
3,662
Retained
earnings
£’000
(13,221)
Foreign
currency
reserve
£’000
(251)
Reverse
acquisition
reserve
£’000
(2,843)
Capital
redempt
-ion
reserve
£’000
9,519
Share
based
equity
reserve
£’000
90
Non-
controlling
interests
Group
At 1 January 2019
Changes in equity for the year
ended 31 December 2019
Loss for the year
Currency translation differences
Total comprehensive loss
for the year
Transactions with the owners
Shares issued during the year
Costs of Share issue
Share option-based charge
Transferred from Share based equity reserve
Total contributions by and
distributions to owners
At 31 December 2019
Changes in equity for the year
ended 31 December 2020
Loss for the year
Non-controlling interests (note 33)
Currency translation
differences
Total comprehensive loss
for the year
Transactions with the owners
Shares issued during the year
Costs of Share issue
Share option-based charge
Transfer from Share based equity reserve
Total contributions by and
distributions to owners
At 31 December 2020
Company
At 1 January 2019
Changes in equity for the year
ended 31 December 2019
Loss for the year
Total comprehensive loss
for the year
Transactions with the owners
Shares issued during the year
Costs of Share issue
Share option-based charge
Transferred from Share based equity reserve
Total contributions by and
distributions to owners
At 31 December 2019
Changes in equity for the year
ended 31 December 2020
Loss for the year
Total comprehensive loss
for the year
Shares issued during the year
Costs of Share issue
Share option-based charge
Subsidiary loan forgiveness (note 17)
Total contributions by and
distributions to owners
At 31 December 2020
-
-
-
62
-
-
-
-
-
-
(2,265)
-
(2,265)
8,419
(338)
-
-
-
-
-
86
-
(8)
(8)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62
2,322
8,081
11,743
86
(15,400)
-
(259)
-
(2,843)
-
9,519
-
-
.
-
58
-
-
-
2,380
-
-
-
-
13,326
-
-
-
-
25,069
(2,718)
(846)
-
(3,564)
-
-
-
-
-
-
33
33
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(18,964)
-
(226)
-
(2,843)
-
9,519
Share capital
£’000
2,260
Share
premium
£’000
3,662
Retained
earnings
£’000
(13,778)
Capital
redemption
reserve
£’000
9,519
-
191
Share based
equity
reserve
£’000
90
-
-
62
-
-
-
62
2,322
-
-
58
-
-
-
2,380
-
-
-
-
-
-
-
-
(1,384)
(1,384)
-
-
-
86
8,419
(338)
-
-
8,081
11,743
86
(15,076)
-
9,519
-
(1,590)
-
13,326
-
-
-
-
25,069
(1,590)
-
-
-
(3,185)
-
(19,851)
-
-
-
-
-
-
-
9,519
Total
£’000
(784)
(2,265)
(8)
(2,273)
8,481
(338)
2
-
8,145
5,088
-
-
-
-
-
-
-
-
-
-
789
-
(2,718)
(57)
33
789
(2,742)
-
-
-
-
13,384
-
191
-
-
789
-
15,921
Total
£’000
1,753
(1,384)
(1,384)
8,481
(338)
2
-
8,145
8,514
(1,590)
(1,590)
13,384
-
191
(3,185)
-
17,314
31
-
-
-
-
-
2
(86)
(84)
6
-
-
-
-
-
-
191
-
-
-
-
-
2
(86)
(84)
6
-
-
-
-
191
-
-
197
DeepVerge Plc
Notes to the Financial Statements
For the year ended 31 December 2020
1. General information
DeepVerge Plc is a company incorporated in England and Wales. The registered number of the Company is 10205396. At General
Meeting of shareholders on 15 September 2020 the company changed its name from Integumen Plc to DeepVerge Plc.
The Company is a public limited company admitted to trading on the AIM market of the London Stock Exchange since 5 April 2017.
The address of the registered office is York Biotech Campus, Sand Hutton, York, YO41 1LZ.
The Company is an environmental and life science group whose principal activities is the development and application of AI and
IoT technology to analytical instruments for the analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent
data analytics to scientifically prove the impact of skincare product claims on skin microbiome and the remote detection and
identification in real-time, dangerous pathogens, such as SARS-CoV-2 in wastewater treatment plants, drinking water, rivers, lakes
and reservoirs.
The financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group’s
trading companies operate. The Group comprises DeepVerge Plc and its subsidiary companies as set out in note 17.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The policies
have been consistently applied throughout the year, unless otherwise stated.
Basis of preparation
The consolidated financial statements of DeepVerge Plc have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs), IFRIC interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS. Practice is continuing to evolve on the application and interpretations of IFRS.
The consolidated financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS 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 consolidated financial
statements are disclosed in note 4.
Under Section 479A of the Companies Act 2006, exemptions from an audit of the accounts for the financial year ended 31 December
2019 have been taken all subsidiary companies of the Company as listed in Note 17 Investments. As required, the Company
guarantees all outstanding liabilities to which the subsidiary companies listed are subject at the end of the financial year, until they
are satisfied in full and the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary companies
listed above is liable in respect of those liabilities.
Changes in accounting policies and disclosures
(a) New and amended standards adopted by the Group
There are no IFRS or IFRIC interpretations that are effective for the first time in this financial period that would be
expected to have a material impact on the Group.
(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been
early adopted by the Company in the 31 December 2020 financial statements.
Amendment to IFRS 16, ‘Leases’ Covid-19 Related Rent Concessions: 1 April 2021
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2: 1 January 2021
Amendments to IAS 1, Presentation of financial statements’ on classification of liabilities: 1 January 2022
A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 17, and some annual improvements
on IFRS 1, IFRS 9, IAS 41 and IFRS 16: 1 January 2022
The Directors anticipate that the adoption of these standard and the interpretations in future period will have no
material impact on the financial statements of the company.
32
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Going concern
The financial statements have been prepared on the assumption that the company is a going concern. When assessing the
foreseeable future, the Directors have looked at the forecast for the next 12 months from the date of this report, expected growth
in revenues, some of which is contracted, the cash at bank available, loan facilities and existing liabilities as at the date of approval of
this report and are satisfied that the Group should be able to cover its working capital requirements.
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. Since
January 2021 the Company has raised £11.3m, before expenses, for shares issued. See note 36 for full details.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual
report and consolidated financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary and associated
undertakings. Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies
generally accompanying a shareholding of more than fifty per cent of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the
date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition
movements in other comprehensive income is recognised in the comprehensive income with a corresponding adjustment in the
carrying amount of the investment.
(a) Acquisition accounting
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the
Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition
basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair
value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase,
the difference is recognised directly in the income statement.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from
contingent consideration amendments.
(b) Reverse acquisition accounting
The acquisition of Innovenn UK Limited and its subsidiary by DeepVerge Plc on 17 November 2016 has been accounted using the
principles of reverse acquisition accounting. Although the Group financial statements have been prepared in the name of the legal
parent, DeepVerge Plc, they are in substance a continuation of the consolidated financial statements of the legal subsidiary,
Innovenn UK Limited. The following accounting treatment has been applied in respect of the reverse accounting:
33
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
The assets and liabilities of the legal subsidiary, Innovenn UK Limited are recognised and measured in the Group financial
statements at the pre-combination carrying amounts, without restatement of fair value. The retained earnings and other equity
balances recognised in the Group financial statements reflect the retained earnings and other equity balances of Innovenn UK
Limited immediately before the business combination and the results of the period from 1 January 2014 to the date of the business
combination are those of Innovenn UK Limited. However, the equity structure appearing in the Group financial statements reflects
the equity structure of the legal parent, DeepVerge Plc, including the equity instruments issued in order to effect the business
combination.
Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in sterling,
which is the functional and presentational currency of the main operating entities.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement within ‘administrative expenses’, except when deferred in other comprehensive income as qualifying cash
flow hedges and qualifying net investment hedges.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have
a functional currency different from the presentation currency are translated into the presentational currency as follows:
•
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates; and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other
comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity
are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors who make strategic decisions.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical
cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition
for its intended use.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only where it is
probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured
reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred. Any borrowing costs associated with qualifying property plant and
equipment are capitalised and depreciated at the rate applicable to that asset category.
34
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Depreciation on assets is calculated using the straight-line method or reducing balances method to allocate their cost to its residual
values over their estimated useful lives, as follows:
Fixtures and fittings
Plant and machinery
20% - 33%
16% - 20%
The assets’ residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting
period.
An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognised
in administration expenses in the income statement.
Intangible assets
Intellectual property rights
Intellectual property rights relate to patents, and licences acquired by the Group. Amortisation is calculated using the straight-line
method over the expected life of 5 - 10 years and is charged to administrative expenses in the income statement.
Development costs
Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the group
are recognised as intangible assets when the following criteria are met:
• it is technically feasible to complete the product so that it will be available for use;
• management intends to complete the product and use or sell it;
• there is an ability to use or sell the project;
• it can be demonstrated how the products will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the product are available; and
• the expenditure attributable to the product during its development can be reliably measured. Directly attributable costs that
are capitalised as part of the product include employee costs and an appropriate portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use
using the straight-line method over the expected life of 5 - 10 years and is charged to administrative expenses in the income
statement.
Know how acquired as part of business combinations is capitalised at fair value at the date of acquisition. Following the
initial recognition, the carrying amount of the know how is its cost less accumulated amortisation and any accumulated
impairment losses. Amortisation is charged on the basis of the estimated useful life on a straight-line basis and the
expense is taken to the Statement of Comprehensive Income which management estimate to be ten years.
Impairment of non-financial assets
Assets that have an indefinite life such as goodwill are not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its
recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of the money and the risks specific to the asset which the estimates of future cash flows have not been adjusted.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.
35
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset (cash-generating unit) in the prior period. A reversal of an
impairment loss is recognised in the income statement immediately. If goodwill is impaired however, no reversal of the impairment
is recognised in the financial statements.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out method and includes
expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is
based on estimated selling price in the ordinary course of business, less further costs expected to be incurred to completion and
disposal. Provision is made for obsolete, slow-moving or defective items where appropriate.
Financial instruments
Recognition and initial measurement
Financial assets and financial liabilities are initially classified as measured at amortised cost, fair value through other comprehensive
income, or fair value through profit and loss when the group becomes a party to the contractual provisions of the instrument.
Financial assets at amortised cost
The group’s financial assets at amortised cost comprise trade and other receivables. These represent debt instruments with fixed or
determinable payments that represent principal or interest and where the intention is to hold to collect these contractual cash flows.
They are initially recognised at fair value, included in current and non-current assets, depending on the nature of the transaction, and
are subsequently measured at amortised cost using the effective interest method less any provision for impairment.
Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise trade and other payables, and borrowings. They are classified as current and non-
current liabilities depending on the nature of the transaction, are subsequently measured at amortised cost using the effective
interest method.
Financial assets at fair value through other comprehensive income (FVOCI)
Financial assets at fair value through other comprehensive income are comprised of the investment in Cellulac plc. The election has
been made to designate this asset as FVOCI. FVOCI assets are recognised and measured at fair value with gains and losses recognised
in OCI.
The fair value measurement of the group’s financial and non- financial assets and liabilities utilises market observable inputs and data
as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable
the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’).
Level 1 – Quoted prices in active markets
Level 2 – Observable direct or indirect inputs other than Level 1 inputs
Level 3 – Inputs that are not based on observable market data
The group measures financial instruments relating to other investments at fair value using Level 3, as the investment is not listed, and
has no readily available market price.
Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and
rewards of ownership and it does not retain control of the financial asset.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
36
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Impairment
In accordance with IFRS 9 an expected loss provisioning model is used to calculate an impairment provision. We have implemented
the IFRS 9 simplified approach to measuring expected credit losses (‘ECL’) arising from trade and other receivables, being a lifetime
expected credit loss. In the previous year the incurred loss model is used to calculate the impairment provision.
Research and development
Research expenditure is written off to the statement of comprehensive income in the year in which it is incurred. Development
expenditure is written off in the same way unless the Directors are satisfied as to the technical, commercial and financial viability of
individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected
to benefit.
Trade and other receivables
Trade receivables are initially recognised at fair value, being the original invoice amount, and subsequently measured at amortised
cost less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not
be able to collect all amounts due according to the original terms of the receivable. Trade receivables that are less than three months
past due date are not considered impaired unless there are specific financial or commercial reasons that lead management to
conclude that the customer will default. Older debts are considered to be impaired unless there is sufficient evidence to the contrary
that they will be settled. The amount of the provision is the difference between the asset’s carrying value and the present value of
the estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the
amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible it
is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against
administrative expenses in the income statement.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original
maturity of less than three months, reduced by overdrafts to the extent that there is a right of offset against other cash balances.
For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as
defined above net of outstanding bank overdrafts.
Share capital
Ordinary Shares and Deferred shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated
to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary
Shares or options are deducted from the share premium account.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
Borrowings
Borrowings are recognised initially at the fair value of proceeds received, ne of transaction costs incurred. Borrowings are
subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the balance sheet date.
Borrowing costs are expensed in the consolidated Group income statement under the heading ‘finance costs’. Arrangement and
facility fees together with bank charges are charged to the income statement under the heading ‘administrative costs’.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates
to items recognised in other comprehensive income where the associated tax is also recognised in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date
37
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
in the countries where the Company and its subsidiaries operate and generate taxable income. Management evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised, using the liability method, on all temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised in respect
of all temporary differences except where the deferred tax liability arises from the initial recognition of goodwill in business
combinations.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and tax losses, to the
extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will
be sufficient taxable profits against which the future reversal of the underlying temporary differences can be deducted.
The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance sheet date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on
either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Exceptional items
These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one-off items
relating to business combinations, such as acquisition expenses.
Leases
Right of use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the
Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use
assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets
are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the
Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities
is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a
change in the assessment to purchase the underlying asset.
38
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Short-term leases and leases of low-value assets.
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below
£5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over
the lease term.
Employee benefits
Pension obligations
Group companies operate a pension scheme with defined contribution plans. A defined contribution plan is a pension plan under
which the Group pays fixed contributions into a separate entity with the pension cost charged to the income statement as incurred.
The Group has no further obligations once the contributions have been paid.
Revenue recognition
(a) Revenue from sale of goods
Revenue represents the fair value of consideration received or receivable for goods delivered to customers in the normal course of
business, net of trade discounts and VAT.
(b) Revenue from services to customers
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be
reliably measured. Revenue represents the fees and commissions, net of discounts, derived from services provided to and invoiced
to customers. Revenue is recognised in the period in which the service is performed, in accordance with contractual arrangements.
Income billed in advance of the performance of service is deferred and income in respect of work carried out but not billed at the
period end is accrued. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the costs
recognised that are recoverable.
(c) Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s
net carrying amount.
(d) Royalty and licence income
Royalty and licence income is recognised on an accruals basis in accordance with the substance of the relevant agreements.
Dividend distribution
Dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in
which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when paid.
3. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (foreign exchange risk and cash flow interest rate risk), credit
risk, liquidity risk, capital risk and fair value risk. The Group’s overall risk management programme focuses on the unpredictability of
the financial markets and seeks to minimise the potential adverse effects on the Group’s financial performance. The Group does not
use derivative financial instruments to hedge risk exposures.
Risk management is carried out by the head office finance team. It evaluates and mitigates financial risks in close co-operation with
the Group’s operating units. The Board provides principles for overall risk management whilst the head office finance team provides
specific policy guidance for the operating units in terms of managing foreign exchange risk, credit risk and cash and liquidity
management.
39
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
(a) Market risk
Foreign exchange – cash flow risk
The Group’s presentational currency is sterling although it operates internationally and is exposed to foreign exchange risk arising
from various currency exposures, primarily between GBP and both Dollars and Euro such that the Group’s cash flows are affected by
fluctuations in the rate of exchange between sterling and the aforementioned foreign currencies.
Management do not use derivative financial instruments to mitigate the impact of any residual foreign currency exposure not
mitigated by the natural hedge within the business model. The Group does not speculate in foreign currencies and no operating
Company is permitted to take unmatched positions in any foreign currency.
Foreign exchange – Fair value risk
Translation exposures that arise on converting the results of overseas subsidiaries are not hedged. Net assets held in foreign
currencies are hedged wherever practical by matching borrowings in the same currency. The principal exchange rates used by the
Group in translating overseas profits and net assets into Euro are set out in the table below.
Compared to Sterling
Euro
US Dollar
Average rate
2020
Year end rate
2020
Average rate
2019
0.89
0.78
0.90
0.73
0.88
0.78
Year end rate
2019
0.85
0.76
A 5% strengthening of the foreign exchange rates as at 31 December 2020, and for the year then ended, would have increased the
net liabilities by £ 59,000 (2019: £43,000). A 5% weakening would have had an equal and opposite effect.
Cash flow and fair value interest rate risk
The Group has assets in the form of cash and cash equivalents and limited interest-bearing liabilities which relate to long-term
borrowing. Interest rates on cash and cash equivalents are currently zero whilst interest rates on bank borrowings are 4.25% over the
banks Cost of Funds Rate and therefore expose the Group to fair value interest rate risk. The Group does not speculate on future
changes in interest rates.
It is the Group’s policy not to trade in derivative financial instruments. The Group does not use interest rate swaps.
(b) Credit risk
Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary and
operating business unit is responsible for managing and analysing the credit risk for each of their new customers before standard
payment and delivery terms and conditions are offered. Credit risk is managed at the operating business unit level and monitored at
the Group level to ensure adherence to Group policies. If there is no independent rating, local management assesses the credit quality
of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on
internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers.
(c) Liquidity risk
Cash flow forecasting is performed in the individual operating entities of the Group and is aggregated by Group finance. Group finance
monitors cash and cash flow forecasts and it is the Group’s liquidity risk management policy to maintain sufficient cash and available
40
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
funding through an adequate amount of cash and cash equivalents and committed credit facilities from its bankers. Due to the
dynamic nature of the underlying businesses, the head office finance team aims to maintain flexibility in funding by keeping sufficient
cash and cash equivalents available to fund the requirements of the Group.
The Group’s policy in relation to the finance of its overseas operations requires that sufficient liquid funds be maintained in each of
its subsidiaries to support short and medium-term operational plans. Where necessary, short-term funding is provided by the parent
Company. Typically, excess funds are placed as short-term deposits, to provide a balance between interest earnings and flexibility.
The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows.
At 31 December 2020:
Borrowings
Trade and other payables
At 31 December 2019:
Borrowings
Trade and other payables
Notes
24
22
24
22
Less than
Between
one year 1 and 2 years 2 and 5 years
£’000
Between More than
5 years
£’000
£’000
£’000
1,349
2,667
182
693
583
-
135
-
-
-
-
-
-
-
-
-
Total
£’000
1,932
2,667
317
693
(d) Capital risk management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings (including “current and non-current borrowings” as shown in the consolidated balance sheet) less cash
and cash equivalents. Total capital is the sum of net debt plus equity.
Government grant
A government grant is recognised only when there is reasonable assurance that (a) the entity will comply with any conditions attached
to the grant and (b) the grant will be received. The grant is recognised as income over the period necessary to match them with the
related costs, for which they are intended to compensate, on a systematic basis
4. Critical accounting estimates and judgements
In the process of applying the Group’s accounting policies, management has made accounting judgements in the determination of
the carrying value of certain assets and liabilities. Due to the inherent uncertainty involved in making assumptions and estimates,
actual outcomes will differ from those assumptions and estimates. The following judgements have the most significant effect on the
amounts recognised in the financial statements.
(a) Business combinations
The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets
acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to
the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill.
The acquisition of Modern Water in November 2020 includes an assessment and valuation of the intangible assets acquired
(b) Impairment of cost of investments
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of estimates as set out in note 15. In addition, the Group has also considered the impairment of the investments in
the subsidiary undertakings.
41
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
(c) Intangible assets (including capitalised development costs and know how)
The assessment of the future economic benefits generated by these separately identifiable intangible assets and the determination
of its amortisation profile involve a significant degree of judgement based on management estimation of future potential revenue
and profit and the useful life of the assets. Reviews are performed regularly to ensure the recoverability of these intangible assets.
Should the intangible asset be deemed irrecoverable it will be impaired in the period.
5. Segmental analysis
(a) Reportable segments
Management has determined the Group’s operating segments based on the monthly management reports presented to the Chief
Operating Decision Marker (‘CODM’). The CODM is the Executive Directors and the monthly management reports are used by the
Group to make strategic decisions and allocate resources. With the Company gaining control of Modern Water on 9 November 2020
for management reporting purposes the group is organised into three operating segments of (i) Life Science, (ii) Data AI and (iii)
Monitoring.
Administrative expenses which are directly attributable to the three main operating Divisions (comprised of business development,
sales, operations and technical expenditure) are reported as expenditure in the respective Division. However, a significant proportion
of the Group’s expenditure (legal, marketing, finance, facilities and directors’ expenditure) is managed and reported centrally. A
proportion of these charges have been recharged to subsidiary companies. As the commercial activities of the Group continue to
develop, this financial information is expected to evolve further.
Currently the key operating performance measures used by the CODM are revenue, EBITDA and cash resources.
Life
Science
£000
Data AI
£000
2020
Monitor
-ing
£000
2,443
919
1,121
Central
£000
Total
£000
Life
Science
£000
Data AI
£000
2019
Monitor
-ing
£000
4,483
565
Revenue
Cost of Sales
Gross Profit
Admin expenses *
EBITDA
Depreciation**
Amortization
Impairment
Exceptional items
Operational
(Loss)/Profit
Finance Costs
(Loss)/Profit before
tax
Taxation
(Loss)/Profit for the
Year
-
-
-
(729)
(729)
(2)
(622)
(354)
(391)
(2,639)
1,844
(2,703)
(859)
(172)
(941)
(354)
(391)
13
(3)
(2,159)
(146)
(2,717)
(183)
(2,304)
105
(2,900)
182
(1,483)
960
(1,213)
(253)
(146)
(114)
-
-
(513)
(34)
(564)
77
(421)
498
(477)
21
(1)
(141)
-
-
(121)
-
(169)
-
(487)
(169)
(735)
386
(283)
103
(23)
(64)
-
-
3
-
3
258
-
258
(298)
(39)
-
(87)
-
(31)
(158)
-
(158)
-
(221)
344
(756)
(412)
(100)
(16)
-
-
(529)
(23)
(552)
32
(2,199)
(2,718)
(520)
(158)
*Admin expenses excludes Depreciation, Amortisation, Impairment and Exceptional Costs
**Depreciation includes Capital Grant amortisation of £1k
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Central
£000
Total
£000
-
-
-
(603)
(603)
-
(339)
(241)
(501)
823
(221)
602
(1,657)
(1,055)
(101)
(442)
(241)
(532)
(1,684)
(3)
(2,371)
(26)
(1,687)
94
(2,397)
126
(1,593)
(2,271)
42
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
(b) Geographical information
Disclosure of group revenue by geographical location is follows:
United Kingdom
Europe
United States of America
Rest of World
Total revenue
2020
£’000
612
264
2,680
927
4,483
2019
£’000
222
270
112
219
823
Revenues of £2,639,000 (2019: £534,000) are derived from 3 (2019: 4) customers each representing more than 10% of the group
revenue.
6. Expenses – analysis by nature
Employee benefit expense (note 9)
Depreciation (note 16)
Capital Grants amortization (note 16)
Amortisation right of use asset (note 14)
Amortisation (note 15)
Impairment of intangible assets (note 15)
Impairment of investment (note 17b)
Exceptional items (note 7)
Auditors’ remuneration – audit of the parent company and consolidation
Auditors’ remuneration – other services
Foreign exchange differences
Share option-based charge
Other expenses
Total administrative costs
7. Exceptional items
Included within administrative expenses are exceptional items as shown below:
Exceptional items include:
– Transaction costs relate to business acquisitions
Total exceptional items
2020
2019
£’000
1,415
173
(1)
144
797
-
354
391
20
30
50
191
997
4,561
£’000
824
101
-
21
421
241
-
532
16
30
25
2
760
2,973
2020
£’000
2019
£’000
391
391
532
532
43
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
8. Directors’ remuneration
The remuneration of the Directors in DeepVerge Plc who held office during the year ended 31 December 2020 was as follows:
Aggregate emoluments
Share option-based charge (note 32)
Total Directors’ remuneration
A breakdown of Directors’ remuneration has been provided on page 18.
9. Employee benefit expense
Wages and salaries
Social security costs
Pension Costs
Other Benefits
Capitalised salaries during the Year to Intangible Assets
Total employee benefit expense
Share option based charge (note 32)
10. Average number of people employed
Average number of people (including Executive Directors) employed was:
Administration
Operations and research
Sales and marketing
Total average number of people employed
The total number of employees at 31 December 2020 was 43 (2019: 16)
11. Finance costs
Interest expense:
– Bank borrowings
– Other finance costs
– Interest on right of use asset leases
– Other interest
Finance costs
2020
£’000
471
29
500
2019
£’000
365
2
367
2020
£’000
1,387
113
25
9
(119)
1,415
2019
£’000
744
67
13
-
-
824
162
-
2020
No
13
18
6
37
2020
£’000
93
25
25
40
183
2019
No
5
8
3
16
2019
£’000
18
-
5
3
26
44
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
12. Income tax expense
Group
Current tax:
Current tax for the year
Research and development tax credit
Total current tax (credit)/charge
Deferred tax (note 23):
Origination and reversal of temporary differences
Total deferred tax
Income tax (credit)/charge
2020
£’000
2019
£’000
(77)
(77)
(105)
(105)
(182)
-
(32)
(32)
(94)
(94)
(126)
The tax on the Group’s results before tax differs from the theoretical amount that would arise using the standard tax rate applicable
to the profits of the consolidated entities as follows:
Loss before tax
2020
£’000
2019
£’000
(2,900)
(2,397)
Tax calculated at domestic tax rates applicable to UK standard rate of tax of 19% (2019 - 19%)
(551)
(455)
Tax effects of:
– Impact of actual tax rates
– Expenses not deductible for tax purposes
– Research and development tax credit
– Losses carried forward
Tax (credit)
11
140
(77)
295
18
27
(32)
316
(182)
(126)
There are no tax effects on the items in the statement of comprehensive income. The effect of losses is discussed in note 23.
45
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
13. Loss per share
At a General Meeting of the Company on 15 September 2020 a share consolidation was approved. With effect from 16 September
2020 all ordinary shares of 0.01 pence each were consolidated into new ordinary shares of 0.1 pence each, on a 10 for 1 basis.
The following table illustrates the basic loss for both 2020 and 2019 when converting a 10:1 consolidation for all 0.01 pence ordinary
shares in issue pre-15 September 2020 to 0.1 pence new ordinary shares.
(a) Basic
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year.
Loss from continuing operations
(Profit) from discontinued operations
Loss attributable to owners of the parent
2020
£2,718,000
2019
£2,271,000
-
(£6,000)
£2,718,000
£2,265,000
Weighted average number of 0.1p Ordinary Shares in issue
128,715,344
80,739,573
Basic loss per ordinary share
From continuing operations
From discontinued operations
From loss for the year
2.1p
0.0p
2.1p
2.8p
0.0p
2.8p
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The options and warrants are anti-dilutive in view of the losses in the year. Details
of warrants outstanding are given in note 25.
14. Right of use of assets and lease liabilities
Right of use assets
Leasehold Property
As at 1 January
On acquisition of subsidiary (note 33)
Additions
Amortisation
Foreign Exchange Movements
As at 31 December
Lease Liabilities
As at 1 January
On acquisition of subsidiary (note 33)
Additions
Interest expense
Lease Payments
Foreign Exchange Movements
As at 31 December
Current
Non-current
2020
£’000
503
159
48
(144)
3
569
2020
£’000
504
191
44
25
(150)
8
622
264
358
2019
£’000
-
-
525
(21)
(1)
503
2019
£’000
-
-
522
5
(24)
1
504
102
402
46
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
15. Intangible fixed assets
Group
Cost
At 1 January 2019
On acquisition of subsidiary (note 33)
Additions
Exchange differences
At 31 December 2019
Amortisation
At 1 January 2019
Charge for the year – continuing operations
Impairment – continuing operations
Exchange differences
At 31 December 2019
Net book value
At 31 December 2019
Cost
At 1 January 2020
On acquisition of subsidiary (note 33)
Additions
Exchange differences
At 31 December 2020
Amortisation
At 1 January 2020
On acquisition of subsidiary
Charge for the year – continuing operations
Exchange differences
At 31 December 2020
Net book value
At 31 December 2020
Development Costs and
Intellectual Property Rights
£’000
1,968
3,377
201
(1)
5,545
1,250
421
241
(21)
1,891
Total
£’000
1,968
3,377
201
(1)
5,545
1,250
421
241
(21)
1,891
3,654
3,654
5,545
14,882
488
60
20,975
1,891
-
797
46
2,734
5,545
14,882
488
60
20,975
1,891
-
797
46
2,734
18,241
18,241
47
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Company
Cost
At 1 January 2019
Additions
At 31 December 2019
Amortisation
At 1 January 2019
Charge for the year
At 31 December 2019
Net book value
At 31 December 2019
Cost
At 1 January 2020
Additions
At 31 December 2020
Amortisation
At 1 January 2020
Charge for the year
At 31 December 2020
Net book value
At 31 December 2020
Development Costs and
Intellectual Property Rights
£’000
Total
£’000
75
-
75
-
22
22
53
75
-
75
22
15
37
38
75
-
75
-
22
22
53
75
-
75
22
15
37
38
At 31 December 2020, the Group had intangible assets arising from intellectual property recognised on acquisitions, development
costs on certain research and development and licence agreements.
Management performed an impairment analysis to determine the fair value of the intangible assets. In assessing fair value, the
estimated future cash flows of each underlying business unit were discounted to their present value that reflects management’s
current market assessments of the time value of the money and were adjusted for risks specific to each business segment
For the purpose of impairment testing, other intangible assets are allocated to the operating segments to which they relate as set
out below and is compared to their recoverable value.
The recoverable amounts were determined using the higher of the CGU fair value less costs of disposal (FV) and value in use (VIU)
calculations. The fair value less costs of disposal method calculates the fair value of each CGU based on the Company’s share price
and the selling prices of comparable businesses. The VIU method requires the estimation of future cash flows before tax and the
selection of a suitable discount rate in order to calculate the net present value (NPV) of these cash flows. The discount rates
applied to each CGU for the value in use projections were between 8% and 12% and all assumptions were reviewed at the end of
the year and revised where necessary.
48
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
The key assumptions for the Labskin, Data AI and Monitoring divisions fair value in use calculations are sales (volume, new product
and services delivery, geographic growth) and gross margin. Management’s forecasts are based on the current five-year business
plan and assume the Division delivers, on average, double digit revenue growth and maintains stable profit margins, based on past
experience in this market. A discount rate of 10% and a terminal growth rate of 2% were used to calculate the NPV.
The estimate of recoverable amount is particularly sensitive to the revenue growth rate and the assumption of a terminal value.
This was stress tested by reducing revenue growth by 10% and removing the terminal value entirely which show that no
impairment would be recognised.
Management is not currently aware of any other reasonably possible changes to key assumptions that would cause a unit’s
carrying amount to exceed its recoverable amount.
The remaining intangible asset value is predominantly our actively managed patent portfolio, which is continually reviewed for
impairment in the normal course of business and the individual patents are also amortised on an annual basis over their lives.
As a result of the impairment analysis, the Directors have decided that the current value represents fair value so no impairment
of intangible asset for the year (2019: £241,000).
49
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
16. Property, plant and equipment
a) Fixed Assets
Group
Cost
At 1 January 2019
Additions
On acquisition of subsidiary (note 33)
Exchange differences
At 31 December 2019
Depreciation
At 1 January 2019
On acquisition of subsidiary (note 33)
Charge for the year – continuing operations
Exchange differences
At 31 December 2019
Net book value
At 31 December 2019
Cost
At 1 January 2020
Additions
On acquisition of subsidiary (note 33)
Exchange differences
At 31 December 2020
Depreciation
At 1 January 2020
On acquisition of subsidiary (note 33)
Charge for the year
Exchange differences
At 31 December 2020
Net book value
At 31 December 2020
Fixtures and fittings
£’000
Total
£’000
149
540
10
(2)
697
117
10
101
(2)
226
149
540
10
(2)
697
117
10
101
(2)
226
471
471
697
320
273
3
1,293
226
-
173
20
419
697
320
273
3
1,293
226
-
187
6
419
874
874
Ulster Bank borrowings as detailed in note 24 are secured with a floating charge against the assets of Innovenn UK Limited, which
include the above fixtures and fittings.
Barclays Bank borrowings as detailed in note 24 are secured by a fixed and floating charge against the assets of Modern Water plc and
all of its subsidiary companies through a cross guarantee.
The Company had no property, plant and equipment.
50
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
b) Capital Grants
Group
Cost
At 1 January
Additions
At 31 December
Amortisation
At 1 January
Charge for the year
At 31 December
Net book value
At 31 December
17. Investments
(a) Investments in subsidiaries
Company
At 1 January 2019
Acquisition during the year (note 33b)
Impairment provision
Loans advanced
At 31 December 2019
At 1 January 2020
Acquisition during the year (note 33a)
Impairment provision
Loans repaid
At 31 December 2020
Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid, less impairments.
On 2 May 2019 the Company acquired the entire share capital of Rinocloud Limited for a consideration of £3.0m.
At 23 November 2020 the Company had acquired 93.47% of the share capital of Modern Water plc at a value of £12.1m.
2020
£’000
2019
£’000
-
25
25
-
(1)
(1)
24
-
-
-
-
-
-
-
Investments
£’000
Loan to
Subsidiaries
£’000
729
3,000
(241)
-
3,488
3,488
12,115
-
-
15,603
-
-
-
3,259
3,259
3,259
-
-
(325)
2,934
51
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
On 9 November 2020 the company acquired control of Modern Water, with 80.85% of acceptances on that date of the share
holders at that date. As at 31 December 2020 acceptances were at 93.47% and the compulsory acquisition of the remaining shares
was completed on 15 January 2021. The completed share transaction for a consideration of £13.3m.
Amounts owing from subsidiary companies greater than one year have been classified as non-current assets in the financial
statements. The total amount owing at 31 December 2020 is £6,195,000 (2019: £3,259,000) before Director review below.
Management performed an impairment analysis to determine the fair value of the investments in, and loans to, subsidiaries. In
assessing fair value, the estimated future cash flows of each investment were discounted to their present value that reflects
management’s current market assessments of the time value of the money and were adjusted for risks specific to each investment.
The result of the impairment analysis supported a fair value of £15,602,000 (2019: £3,488,000) for the Company’s investments
which resulted in an impairment of £nil (2019: £241,000). With regard to the fair value of the loans of subsidiaries the Directors
considered it reasonable for the Company to forgive loans to the value of £3.185m (2019: £nil) with regard to monies due from
Innovenn UK, reflecting historic expenditure made by Innovenn UK for which the whole of the Group is now benefiting from. This
results in a fair value of £3,010,000 (2019: £3,259,000) in loans to subsidiaries, at 31 December 2020. Discount rate used to arrive
at fair value was 10%.
The subsidiaries of DeepVerge Plc are as follows:
Name of Company
Proportion Held Class of Shareholding
Country of Incorporation
Innovenn UK Limited
Integumen Ireland Limited
Lifesciencehub UK Limited
Lifesciencehub Ireland Limited
Rinocloud Limited
STOER Ireland Limited
Integumen Limited
Modern Water plc*
Modern Water Holdings Limited ^
Modern Water Technology (Shanghai) Co Limited^
Aguacure Limited^
Surrey Aquatechnology Limited^
MW Monitoring Limited^
Cymtox Limited^
Modern Water INC^
MW Monitoring IP Limited^
MW Monitoring Limited^
Modern Water Nominees Limited^
Modern Water Technologies LCC^
Poseidon Water Limited^
Encylco Water Technology (Zheijang) Co. Ltd^
* Modern Water plc was acquired by the Company in an all share offer for the entire issued capital of Modern Water plc
^ A Modern Water plc subsidiary.
100% (direct)
100% (indirect)
100% (direct)
100% (indirect)
100% (direct)
100% (direct)
100% (direct)
100% (direct)
100% (direct)
100% (indirect)
100% (indirect)
100% (indirect)
100% (indirect)
100% (indirect)
100% (indirect)
100% (indirect)
100% (indirect)
100% (indirect)
70% (indirect) Ordinary
51% (indirect) Ordinary
Ordinary
49% (indirect)
United Kingdom
Ireland
United Kingdom
Ireland
Ireland
Ireland
United Kingdom
United Kingdom
United Kingdom
China
United Kingdom
United Kingdom
United Kingdom
United Kingdom
USA
United Kingdom
United Kingdom
United Kingdom
Oman
United Kingdom
China
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
On 9 November 2020, 80.85% of Modern Water plc shareholders agreed to the Company share offer. On 17 November 2020, the
close of the formal acceptance period, 93.47% of Modern Water plc shareholders agreed to the Company share offer.
As more than 90% of Modern Water Plc shareholders agreed to the Company share offer, under sections 974-991 of the Companies
Act 2006, the Company was entitled to acquire the minority shareholders. On 15 January 2021 the Company allotted a further
3,636,915 0.1p ordinary shares to complete the acquisition of Modern Water plc.
52
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
b) Other investments
Company
Carrying amount:
At 1 January
Impairment during the year
End of the year
2020
£’000
708
(354)
354
2019
£’000
708
-
708
In August 2018, the Company acquired 9.35% of the ordinary shares of Cellulac plc for a consideration of £708,000 through the issue
of 82,844,388 ordinary shares of 0.01p each.
COVID-19 travel restrictions has impacted in the short term on large scale applications of the Cellulac energy reduction and water
processing projects. Although the long-term value of the technology has not changed the Directors have taken the view that a
reduction of £354,000 (2019: £nil) in the carrying value of the asset is prudent given the uncertainty in relation to COVID-19
restrictions continuing into the future.
18. Financial instruments by category
(a) Assets
31 December
Assets as per balance sheet
Trade and other receivables excluding prepayments and
corporation tax
Cash and cash equivalents
Total
(b) Liabilities
31 December
Liabilities as per balance sheet
Borrowings
Lease Liabilities
Trade and other payables
Total
Group
2020
£’000
Group Company
Company
2019
£’000
2020
£’000
2019
£’000
1,288
1,441
2,729
Group
2020
£’000
1,932
622
2,669
5,223
466
1,193
1,659
237
451
620
388
1,115
1,503
Group
2019
£’000
317
504
693
1,514
Company
2020
Company
2019
£’000
£’000
1,500
-
745
2,245
-
-
516
516
Liabilities in the analysis above are all categorised as ‘other financial liabilities at amortised cost’ for the Group and Company.
53
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
(c) Credit quality of financial assets
The Group is exposed to credit risk from its operating activities (primarily for trade receivables and other receivables) and from its
financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial
instruments.
Trade receivables
The credit quality of trade receivables that are neither past due date nor impaired have been assessed based on historical information
about the counterparty default rate. The Group does not hold any other receivable balances with customers, whose past default has
resulted in the non-recovery of the receivables balances.
Cash at bank
The credit quality of cash has been assessed by reference to external credit ratings, based on reputable credit agencies’ long-term
issuer ratings:
Rating
A – AAA
Total
19. Inventories
Raw materials and finished goods
Inventory
2020
£’000
1,441
1,441
Group
2020
£’000
1,347
1,347
2019
£’000
1,193
1,193
Group
2019
£’000
85
85
There are no inventories in the Company. The Directors consider that the carrying amount of inventory approximates to their fair
value.
20. Trade and other receivables
Group
Group
Company
Company
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments and accrued income
2020
£’000
1,061
(53)
1,008
160
Amounts owed by subsidiary undertakings
-
Taxation
Other receivables
177
103
1,448
2019
£’000
402
(32)
370
83
-
81
15
549
-
-
-
10
67
68
101
246
2020
£’000
2019
£’000
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
-
-
-
19
350
32
6
407
54
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
The carrying amounts of the Group’s trade and other receivables denominated in foreign currencies were as follows:
Sterling
US Dollars
Euro
21. Cash and cash equivalents
Cash at bank and on hand
Cash and cash equivalents
Group
2020
£’000
697
537
163
1,397
Group
2020
£’000
1,441
1,441
Group
2019
£’000
375
-
174
549
Company
Company
2020
£’000
-
-
-
-
2019
£’000
407
-
-
407
Group
Company
Company
2019
£’000
1,193
1,193
2020
£’000
451
451
2019
£’000
1,115
1,115
The Group’s cash and cash equivalents are held in non-interest-bearing accounts. The Directors consider that the carrying amount of
cash and cash equivalents approximates to their fair value.
22. Trade and other payables
Trade payables
Amounts due to group companies (note 29)
Amounts due to connected parties (note 29)
Social security and other taxes
Accrued expenses and deferred income
Other creditors
Group
2020
£’000
1,714
-
-
181
652
120
2,667
Group
2019
£’000
159
-
-
30
480
24
693
Company
Company
2020
£’000
271
-
-
2
352
120
745
2019
£’000
83
-
-
-
433
-
516
55
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
23. Deferred income tax
Deferred tax liabilities
Deferred tax balances were as follows:
Deferred tax liability to be recovered after more than one year
Deferred tax liability to be recovered within one year
Deferred tax liabilities were made up as follows:
Accelerated tax depreciation
The movement on the deferred tax income tax account is as follows:
At 1 January
On acquisition of subsidiary
Income statement movement – continuing operations (note 12)
At 31 December
There were no deferred tax liabilities in the Company.
Group
2020
£’000
2,951
345
3,296
3,296
3,296
Group
2020
£’000
561
2,840
(105)
3,296
Group
2019
£’000
500
61
561
561
561
Group
2019
£’000
90
565
(94)
561
Deferred tax assets
Deferred income tax assets are recognised to the extent that the realisation of the related tax benefit through future taxable profits
is probable. The Group did not recognise deferred income tax assets of approximately £ 1,566,000 (2019: £1,204,000) mainly in
respect of tax losses amounting to approximately £8,684,000 (2019: £6,697,000) that can be carried forward against future taxable
income. An average tax rate of 18% (2019: 18%) has been used.
There was no deferred tax asset recognised for the Company.
56
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
24. Borrowings
Non-current
Bank borrowings
Other borrowings
Current
Bank borrowings
Other borrowings
The maturity profile of bank borrowings was as follows:
Amounts falling due
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Total borrowings
Group
2020
£’000
583
-
583
1,187
162
1,349
Group
2020
£’000
1,349
583
-
1,932
Group
2019
£’000
Company
Company
2020
£’000
2019
£’000
135
-
135
182
-
182
Group
2019
£’000
182
135
-
317
583
-
583
917
-
917
-
-
-
-
-
-
Company
Company
2020
£’000
917
583
-
1,500
2019
£’000
-
-
-
-
Security on bank borrowings
As at 31 December 2020 loan balance of £139,000 (2019: £318,000) was owing to Ulster Bank Ireland . The 5-year term loan bearing
a fixed coupon of 4.33% annually over the bank’s cost of funds matures in August 2021. The loan is secured with a floating charge
against the assets of Innovenn UK Limited.
On 29 July 2020 the Company signed a £3,000,000 loan facility with Riverfort Global Opportunities PCC Limited and YA II PN, Ltd with
a 3-year term. On the date of signing the Company drew down £1,500,000, 50% of the facility, as a 24-month loan with the first six
months interest only. The interest applicable to outstanding drawdown amounts is 1.05% per month with a repayment fee of 8%
payable on the date the principal sums are repaid. The amount of the loan outstanding at 31 December 2020 was £1,500,000 (2019:
£nil). The loan is secured by a cross-company guarantee.
As at 31 December 2020 loan balance of £131,000 (2019: £440,000) was owing to Barclays Bank by Modern Water plc. The loan
attracts an interest rate of 8% above the Barclays base rate. The loan is secured by a fixed and floating charge over the assets of
Modern Water plc and all subsidiary companies through a cross guarantee. The loan was fully repaid in March 2021 and a statement
of satisfaction releasing the security was registered with Companies House on 7 May 2021.
The Company has been compliant with its banking covenants throughout the year. The bank borrowings are repayable by monthly
instalments. The Company is not exposed to interest rate changes or contractual re-pricing dates at the end of the reporting period,
as the borrowings are fixed in nature.
The fair value of both current and non-current borrowings equals their carrying amount, as the impact of discounting is not significant.
The Group’s bank borrowings are denominated in Sterling, Dollars and Euro.
57
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
25. Share capital
165,877,296 0.1p Ordinary shares (2019: 1,072,416,903 0.01p
ordinary shares)
o ordinary) Ordinary shares of 0.01p)
223,685,232 (2019: 223,685,232) Deferred shares of 0.99p
Total
During the year, the following ordinary shares were issued:
Group
2020
£’000
166
2,214
2,380
Group
2019
£’000
Company
2020
£’000
Company
2019
£’000
108
2,214
2,322
166
2,214
2,380
108
2,214
2,322
Placing subscribers warrants exercise of 0.01p ordinary shares during 2020:
Date granted
Number of shares
Exercise price
Consideration
30 May
5 January
7 August
14 August
14 August
24 August
26 August
28 August
8 September
10 September
Sub Total
3,000,000
3,333,332
1,715,714
26,071,429
3,333,333
1,249,999
1,928,573
13,464,286
500,000
4,417,857
59,014,523
1.5p
1.5p
2p
2p
1.5p
2p
2p
2p
2p
2p
£ 45,000
£ 50,000
£ 34,314
£ 521,429
£ 50,000
£ 25,000
£ 38,571
£ 269,286
£ 10,000
£ 88,357
£ 1,131,957
On 15 September 2020 a share consolidation was approved at General Meeting such that existing warrants for ordinary shares
of 0.01 pence each were consolidated into warrants for one new ordinary share of 0.1 pence in nominal value on a 10 for 1 basis
with effective date of 16 September 2020.
Placing subscribers warrants exercise of 0.1p ordinary shares during 2020:
Date granted
Number of shares
Exercise price
Consideration
16 September
25 September
25 September
2 October
9 November
10 November
Sub Total
42,500
82,142
266,666
10,000
178,571
40,000
619,879
20p
20p
15p
20p
20p
20p
£ 8,500
£ 16,428
£ 40,000
£ 2,000
£ 35,714
£ 8,000
£ 110,643
Shares in lieu of invoice issue at 0.1p ordinary shares during 2020:
Date granted
Number of shares
Exercise price
Consideration
9 November
81,967
30p
£ 25,000
58
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Shares issued for Modern Water plc shares offer agreement in 2020:
Date granted
Number of shares
Exercise price
Consideration
3 November
9 November
17 November
Sub Total
40,677,491
1,741,870
9,612,946
52,032,307
23p
22.5p
24.7p
£ 9,355,823
£ 391,921
£ 2,369,591
£ 12,117,335
Share Capital Movement
As 1 January
Issued to 15 September
Total 0.01p
16 September Share consolidation
Issued to 31 December
Shares in Issue at 31 December
Ordinary Share Ordinary Share
0.01p
0.1p
1,072,416,903
59,014,523
1,131,431,426
-
-
-
-
-
-
113,143,143
52,743,153
165,877,296
As at 31 December 2020, the Company had an issued share capital of 165,877,296 ordinary shares of 0.1p each and 223,685,232
deferred shares of 0.99p each.
Share Warrants
As at 1 January 2020 the Company had granted the following warrants:
Warrant holder
Date granted
Turner Pope Investments (TPI) Ltd
Placing subscribers
Hybridan LLP
Turner Pope Investments (TPI) Ltd
Placing subscribers
Turner Pope Investments (TPI) Ltd
Turner Pope Investments (TPI) Ltd
5 April 2017
5 January 2018
5 January 2018
5 January 2018
2 May 2019
2 May 2019
16 December 2019
Number of Ordinary
shares of 0.01p each
1,800,000
14,066,666
1,000,000
300,000
95,624,999
8,142,857
5,279,999
126,214,521
Exercise price
Expiry date
6.25p
1.5p
1.5p
1.5p
2.0p
1.4p
1.5p
5 April 2022
5 January 2023
5 January 2023
5 January 2023
2 May 2021
2 May 2022
16 December 2022
59
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Share warrants granted during the year
On 15 September 2020 warrants of 18,905,021 ordinary shares of 0.01p to the value of £375,000 were granted to Riverfort
Global Opportunities PCC Ltd and YA II PN Ltd as a condition of the Loan Agreement entered into on 29 July 2020. The exercise
price of the warrants is 2.57868 pence for each ordinary share with an exercise period of 48 months ending on 15 September
2024. Following the share consolidation both Riverfort and YA II PN Ltd hold warrants to subscribe for 945,251, at exercise
price of 25.7868 pence, per new ordinary shares of 0.1 pence.
On 9 November 2020 the Company gained control of Modern Water in the share for share acquisition of Modern Water. The
consideration was for the issue of 1 DeepVerge ordinary 0.1p share for every 10 Modern Water 0.25p ordinary shares. As at this
date warrants to subscribe for 70,500,000 Modern Water ordinary shares with an exercise price of 0.5p per share were held by
JIM Nominees, acting as nominees for Turner Pope International, broker to Modern Water. JIM Nominees elected to exchange
outstanding warrants over 70,500,000 Modern Water ordinary shares for warrants over 7,050,000 DeepVerge ordinary 0.1p
shares with same exercises times.
Share warrants exercised during the year
For the period 1 January 2020 to 15 September 2020
-
-
A total of 9,666,665 ordinary shares of 0.01p each were issued to various placing subscribers for the exercised warrants
granted on 5 January 2018 at 1.5p per ordinary share of 0.01p.
A total of 49,347,858 ordinary shares of 0.01p each were issued to various placing subscribers for the exercised warrants
granted on 2 May 2019 at 2p per ordinary share of 0.01p.
On 15 September 2020 a share consolidation was approved at General Meeting such that existing warrants for ordinary shares
of 0.01 pence each were consolidated into warrants for one new ordinary share of 0.1 pence in nominal value on a 10 for 1
basis with effective date of 16 September 2020.
For the period 16 September 2020 to 31 December 2020
-
-
A total of 266,666 ordinary shares of 0.1p each were issued to various placing subscribers for the exercised warrants
granted on 5 January 2018 at 15p per ordinary share of 0.1p.
A total of 4,274,501 ordinary shares of 0.1p each were issued to various placing subscribers for the exercised warrants
granted on 2 May 2019 at 20p per ordinary share of 0.1p.
Share warrants at end of year
As of 31 December 2020, valid share warrants in issue were:
Warrant holder
Turner Pope Investments (TPI) Ltd
Placing subscribers
Hybridan LLP
Turner Pope Investments (TPI) Ltd
Placing subscribers
Turner Pope Investments (TPI) Ltd
Turner Pope Investments (TPI) Ltd
Riverfort Global Opportunities PCC
YA II PN, Ltd
Turner Pope Investments (TPI) Ltd
Date
granted
5 Apr 2017
5 Jan 2018
5 Jan 2018
5 Jan 2018
2 May 2019
2 May 2019
16 Dec 2019
15 Sep 2020
15 Sep 2020
9 Nov 2020
Ordinary
shares of
0.1p each
Exercise
Price
Expiry Date
62.5p
15p
15p
15p
20p
14p
15p
180,000
173,334
100,000
30,000
4,274,501
814,285
527,999
945,251 25.7868p
945,251 25.7868p
7,050,000
15,040,621
5p
5 Apr 2022
5 Jan 2023
5 Jan 2023
5 Jan 2023
2 May 2021
2 May 2022
16 Dec 2022
15 Sep 2024
15 Sep 2024
16 Feb 2023
Outstanding
at 30 June
2021
180,000
173,334
100,000
-
-
-
-
945,251
945,251
-
2,343,836
60
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
26. Retained earnings
At 1 January 2019
Loss for the year
Transfer from Share Option reserve
At 31 December 2019
At 1 January 2020
Loss for the year
Subsidiary loan forgiveness
Premium on acquisition of NCI
At 31 December 2020
27. Other reserves
Group
At 1 January 2019
Issue of ordinary shares (note 25)
Costs of Share issue
Currency translation differences
Transfer to retained earnings (note 32)
Share option-based charge (note 32)
At 31 December 2019
At 1 January 2020
Issue of ordinary shares (note 25)
Currency translation differences
Share option-based charge (note 32)
At 31 December 2020
Group
£’000
(13,221)
(2,265)
86
Company
£’000
(13,778)
(1,384)
86
(15,400)
(15,076)
(15,400)
(2,718)
-
(846)
(18,964)
(15,076)
(1,590)
(3,185)
-
(19,851)
Share
premium
£’000
3,662
8,419
(338)
-
-
-
11,743
11,743
13,326
-
-
25,069
Foreign
currency
reserve
£’000
(251)
-
-
(8)
-
-
(259)
(259)
-
33
-
(226)
Reverse
acquisition
reserve
£’000
(2,843)
-
-
-
-
-
(2,843)
(2,843)
-
-
-
(2,843)
Capital
Redemption
reserve
£’000
9,519
-
-
-
-
-
9,519
9,519
-
-
-
9,519
Share
based
equity
reserve
£’000
90
-
-
-
(86)
2
6
6
-
-
191
197
The reverse acquisition reserve arose as result of the reverse acquisition of Innovenn UK Limited and its subsidiary by DeepVerge Plc.
Currency translation differences arose from the translation of the net investment in foreign subsidiaries.
61
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Company
At 1 January 2019
Issue of ordinary shares (note 25)
Costs of Share issue
Transfer to retained earnings (note 32)
Share option-based charge (note 32)
At 31 December 2019
At 1 January 2020
Issue of ordinary shares (note 25)
Costs of Share issue
Transfer to retained earnings (note 32)
Share option-based charge (note 32)
At 31 December 2020
28. Cash used in operations
Loss for the year from continuing activities
Adjustments for:
– Depreciation and amortisation
– Impairment of intangible assets
– Impairment of investments
– Foreign currency translation of net assets
– Exceptional Items
– Net finance costs
– Taxation
– Share option-based charge
Changes in working capital
– Inventories
– Trade and other receivables
– Trade and other payables
Net cash used in discontinued operations (note 34)
Net cash generated (used) in operations
Share premium
£’000
3,662
8,419
(338)
-
-
11,743
11,743
13,326
-
-
-
25,069
Capital
Redemption
reserve
£’000
9,519
-
-
-
-
9,519
Share based equity
reserve
£’000
90
-
-
(86)
2
6
9,519
-
-
-
-
9,519
6
-
-
-
191
197
Group
2020
£’000
(2,718)
1,113
-
354
36
-
303
(182)
191
344
(513)
(1,026)
-
2,098
Group
2019
£’000
(2,271)
543
241
-
(7)
-
26
(126)
2
50
(120)
(62)
(557)
(2,281)
Company
Company
2020
£’000
(1,590)
15
15
354
59
-
210
-
191
-
(3,151)
(229)
-
(4,141)
2019
£’000
(1,384)
22
-
-
4
(1,332)
2
(31)
2
-
14
(184)
-
(2,887)
62
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
29. Related Party Disclosures
Amounts due from connected parties
Drive4Growth Company Limited
Group
Group Company Company
2020
£’000
36
36
2019
£’000
89
89
2020
£’000
2019
£’000
-
-
-
-
The Company owns 9.35% of Cellulac plc (note 17). Gerard Brandon and Camillus Glover are directors of Cellulac Ltd and Cellulac plc.
On 12 June 2020 Cellulac Ltd entered into a loan agreement with the Company whereby Cellulac Limited agreed to lend the Company
up to £400,000 at an interest rate of 5% to be drawn down no later than 30 September 2020. The Company did avail of the facility
and the loan agreement lapsed 1 October 2020.
Fin Murray is a director of Drive4Growth Company Limited which held a sales agency agreement with Rinocloud Ltd until 31 October
2019.
During the year, the Company paid £27,000 (2019: £17,550) to Dagmara Brandon, close family member of the director Gerard
Brandon, for professional services provided to the Company.
The Company
Amounts due from group companies
Innovenn UK Limited
Lifesciencehub UK Limited
Rinocloud Limited
Integumen Ireland Limited
STOER Ireland Limited
Modern Water Plc
Non Current Assets
Current Assets
Company
2020
Company
2019
£’000
1,188
217
1,095
316
51
67
2,934
2,867
67
£’000
2,604
208
350
370
77
-
3,609
-
-
As part of the review of the recoverability of subsidiary indebtedness to the Company the Directors considered the position of
Innovenn UK in the group since listing in April 2017 and in particular the contribution the subsidiary has made to the overall group.
It was considered reasonable that £3,185,000 of monies owing by Innovenn UK to the Company be forgiven and that the ultimate
cost of this would be borne by the Company, resulting in the amount owing from Innovenn UK falling to £1,188,000.
During the year, the Company charged management charges of £105,000 (2019: £88,000) to Innovenn UK Limited, £84,000 to
Rinocloud Limited (2019: £71,000), £ 25,000 to Stoer Ireland Ltd (2019: £21,000) and £8,000 (2019: £7,000) to Lifesciencehub UK
Limited.
Rinocloud Limited charged sales and management charges to Innovenn UK Limited of £ 215,000 (2019: £105,000).
During the year, the Company was recharged costs by Integumen Ireland Limited of £ 280,000 (2019: £169,000).
63
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
30. Capital commitments
The Group had no capital commitments at 31 December 2020.
31. Financial commitments
The Group had no financial leases.
32. Share options
The Company has achieved multiple positive milestones since 2018 and shareholder value has improved substantially in that time.
Team members across the Group have been entirely responsibly for achieving the returns by as much as 500% from the lows of 2018.
Therefore, it is only right and fitting that future growth is incentivised for all Team members who contribute to increased returns for
shareholders. That is why management have implemented only recently a Share Options Scheme to deliver on this objective.
Management and Staff options
The Company introduced an EMI approved share option scheme for employees in the UK, a Share Options Scheme for employees and
in Ireland and an unapproved share options scheme as a means to act as motivation to staff to deliver overall shareholder.
Options were granted to management and staff for 5,609,650 ordinary shares of 0.1p each at an exercise price of 30p, and 492,790
ordinary shares of 0.1p each at an exercise price of 35.5p, each vesting over a period of 3 years. Further options for 465,670 ordinary
shares of 0.1p each were granted to staff at an exercise price of 0.1p, each vesting over a period of 9 months. The options are
conditional a number of performance conditions and options lapse if employee leaves the Company.
Share Options Issued and as at 31 December 2020 are as follows:
Date
Number of
Shares
Exercise
Price
18 September 2020
18 September 2020
18 September 2020
19 November 2020
325,570
916,680
492,970
113,100
19 November 2020
4,692,970
0.1p
30p
35.5p
0.1p
30p
Exercise Date
Exercise Date
Exercise Date
30%
35%
31 December 2020
31 March 2021
1 January 2021
1 January 2021
1 January 2022
1 January 2022
31 December 2020
31 March 2021
35%
30 June 2021
1 January 2023
1 January 2023
30 June 2021
1 January 2021
1 January 2022
1 January 2023
The estimated fair values of the share options were calculated by applying the Black Scholes Model. The period of exercise of the
options is 10 years for the EMI approved and unapproved scheme and 7 years for the Irish Share Options Scheme. The volatility of the
share of the share price since listing in April 2017 resulted in a volatility coefficient of 45.0%. Due to the high coefficient the Directors
considered that the most appropriate method of calculating the volatility was to use the Company’s share price history as the likelihood
for using comparable listed historic volatility could be misleading.
Date
Number of
Shares
Exercise
Price
18 Sept 2020
19 Nov 2020
325,570
113,100
0.1p
30p
18 Sept 2020
916,680
18 Sept 2020
19 Nov 2020
492,970
4,692,970
30p
35.5p
30p
Exercise Date
Fair Value
Exercise Date
Fair Value
Exercise Date
Fair Value
31 Dec 2020
Share Price
31 Mar 2021
Share Price
30 Jun 2021
Share Price
105, 771
33,930
Exercise Date
1 Jan 2021
275,004
147,891
1,407891
28.7p
17.2p
123,400
39,585
28.7p
17.2p
123,400
39,585
28.7p
17.2p
Exercise Date
1 Jan 2022
320,838
172,540
1,642,540
9.7p
8.1p
3.0p
Exercise Date
1 Jan 2023
320,838
172,540
1,642,540
9.7p
8.1p
3.0p
9.7p
8.1p
3.0p
64
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2017 Management Options
In 2017, the Company had awarded options to key management over 6,720,000 ordinary shares of 1p each. These options were
exercisable after two years provided that the holder of the options is still an employee of the Company. Of these, 3,360,000 have an
exercise price of 5p and 3,360,000 have an exercise price of 6p each.
During the 2019 options over 963,200 ordinary shares of 1p each lapsed when option holders left the employment of the Company.
An amount of £9,010 in 2019 was transferred from the share option-based reserve to retained earnings with respect to these lapsed
options. The cumulation of lapsed options since 2017 has meant that options over only 638,400 ordinary shares of 1p each remain.
Following the share consolidation on 15 September 2020, when every 10 ordinary existing shares of 0.01p was consolidated into one
ordinary share of 0.1p, the outstanding options granted were as follows at 31 December 2020:
Director
Date granted
No. of 0.1p ordinary
shares under option
Exercise
price
Exercise period
Ross Andrews
5 April 2017
63,840
50p-60p
From 5 April 2017 to 5 April 2027
The share option-based charge with respect to all share options for the year was £191,000 (2019: £2,000).
33. Business combinations
On 13 October 2020 the Company issued an Offer Document to the shareholders of Modern Water to acquire the full share capital
of the company. This all share offer was based on the issue of 1 DeepVerge ordinary 0.1p share for every 10 Modern Water 0.25p
ordinary shares. The purchase consideration was paid by the Company through the issue of 55,669,222 ordinary shares of 0.1p each
at an average market price of 23.92 per share, valuing the acquisition at £13,315,114.
33. (a) Acquisition of Modern Water plc
Date acceptance
3 November 2020
9 November 2020
23 November2020
No. of MW
ordinary shares
% acceptance
cumulative
Issued DV shares
Closing Share Price
on listing date
Valuation
Cumulative
406,775,279
17,418,730
96,129,677
77.23%
80.85%
93.46%
40,677491
1,741,870
9,612,946
23.00p
22.50p
24.625p
£9,355,823
£9,747,744
£12,114,932
15 January 2021
36,369,528
100.00%
3,636,915
33.00p
£13,315,114
As at 9 November 2020 based on 80.85% acceptances of the offer by Modern Water plc shareholders the Company gained control
of Modern Water plc as the offer become unconditional.
Fair Value Calculation
As at 31 December 2020 the Company had acquired 93.46% of Modern Water plc shares for a consideration of £12,114,932.
Modern Water has a 30-year legacy and global footprint across industries that monitor for toxicity:
The Directors believe the acquisition will:
• Access to Modern Water distributors and customers across 60 countries and 5 continents
• Access to a brand that is the gold standard for water monitoring and in many countries is the regulatory standard
• Immediate presence in North America and China extending the Company’s reach and expertise with laboratories and trading
entities to expand business in these territories
• Access to a range of equipment and membrane to add to the group's EcoWaterOS vision of a total water monitoring and mitigation
solution that will be enhanced by the group's software and Ai capabilities
• Equipment and expertise to allow the rapid development of the Company’s COVID-19 and pandemic surveillance system
• Generation of recurring revenue opportunities with a range of leading reagents sold with all equipment
65
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
The following table summarises the consideration paid, and the amounts of the assets acquired, the fair value of these assets and
liabilities assumed at the acquisition date of Modern Water plc.
Modern Water plc
Fair value consideration
Initial Consideration
Non Controlling Interest at fair value
Total fair value consideration
Net Asset Acquired
Intangible Asset arising on Acquisition
Tangible fixed assets (note16a)
Intangible assets
Right of use of asset (note14)
Inventory
Trade and other receivables
Bank and cash
Trade and other payables
Lease Liability
Bank Loans
Deferred tax liabilities (note 23)
Total fair value of identifiable net assets
Excess of net assets over consideration
£’000
9,748
2,309
12,057
13,960
273
922
159
1,606
371
739
(2,825)
(177)
(319)
(2,652)
12,057
-
The directors have reviewed the book value of the assets acquired is the same as the fair value as the value attributed on acquisition.
The fair value of acquired trade and other receivables is £371,00. The gross contractual amount for trade and other receivables due
is £237,000, all of which is expected to be collectible. The fair value of Inventory is £1,606,000 as of which is valued at the lower of
cost and net resaleable value.
The following table is the statement of comprehensive income for Modern Water plc’s pre and post-acquisition trading:
Business Combination – Modern Water plc
Statement of Comprehensive Income
Revenue
Costs of sales
Gross profit
Administrative Costs
Operating Profit
Depreciation and amortisation
Exceptional items
EBITDA (loss)/profit before exceptional items
Finance costs
(Loss) before income tax
Income tax credit
FX (loss)/ gain
(Loss)/Profit for the period
313 days ended
08 November 2020
£’000
2,167
(1,501)
666
(2,117)
53 days ended
31 December 2020
£’000
1,121
(735)
386
(392)
(1,451)
468
240
(743)
(33)
(1,484)
-
(20)
(1,504)
(6)
86
-
80
(3)
(9)
-
12
3
66
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
33. (b)
Non-controlling interests
Minority Interest arising from the acquisition of Modern Water plc arising from the dates on which share acceptance from Modern
Water shareholders for the share for share consideration.
Non-controlling interests reserve
Opening balance 1 January 2020
Upon control on acquisition on 9 November 2020
Acquisition of non controlling interest on 23 November 2020
Closing Balance 31 December 2020
% NCI
19.15%
-12.61%
6.54%
Premium on Acquisition of non-controlling interests
Acquisition fair value at 9 November 2020 if 100% ownership
Value of non-controlling interests at 9 November 2020 19.15%
Fair value of non-controlling interest at 23 November 2020 19.15%
Acquired value of non-controlling interest at 23 November 2020 12.61%
Equity movement in retained profits
Fair value on 9 November 2020 of remaining NCI of 6.54%
33. (c) Acquisition of Rinocloud Ltd
Fair value consideration
Deemed consideration of acquisition of share capital at 2 May 2019
Total fair value consideration
Recognised amounts of identifiable assets acquired, and liabilities assumed
Intellectual Property (note 15)
Tangible fixed assets (note16)
Trade and other receivables
Bank and cash
Trade and other payables
Deferred tax liabilities (note 23)
Total fair value of identifiable net assets at 31 December 2019
Excess of net assets over consideration
Total fair value of identifiable net assets at 31 December 2020
2020
£’000
-
2,309
(1,520)
789
2020
£’000
12,057
2,309
2,367
(1,520)
847
789
2019
£’000
3,000
3,000
3,377
-
237
22
(71)
(565)
3,000
-
3,000
67
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
34. Disposal of Visible Youth Ltd
On 2 May 2019, the Company disposed of its subsidiary Visible Youth Ltd. to Enhance Skin Products Inc. for zero consideration. The
sale includes the two subsidiaries of Visible Youth Ltd, Visible Youth Ireland Ltd and Integumen, Inc. The Visible Youth companies
(“Visible Youth”) own the rights to a range of female cosmetic products. As part of the sale, the Company agreed to settle certain
Visible Youth liabilities of £557,000 by:
-
-
arranging cash payments of £226,000 and
issuing 23,637,429 ordinary shares of 0.01p each at an issue price of 1.4p totalling £331,000.
Financial information relating to the discontinued operation for the period to the date of the disposal is set out below:
Statement of Comprehensive Income
2020
£’000
2019
£’000
Administrative Costs
Operating profit/(loss)
Amortisation
Impairment of intangible assets
Exceptional items
EBITDA before exceptional items
Finance costs
Profit/(loss) before income tax
Income tax credit
Profit/(loss) for the period
Discontinued operations exceptional items
Included within administrative expenses are exceptional items as shown below:
Gain on disposal of subsidiary
Total exceptional gain
Details of the gain on disposal of Visible Youth are as follows:
Consideration received:
Total consideration
Liabilities settled by the Company under the sale agreement
Total fair value consideration
Recognised amounts of identifiable liabilities disposed
Trade and other payables
Total fair value of identifiable net liabilities
Excess of net liabilities over consideration (gain on disposal)
-
-
-
-
-
-
-
-
-
-
6
-
-
6
-
-
6
-
6
2020
£’000
-
-
2019
£’000
6
6
£’000
£’000
-
-
-
-
-
-
-
(557)
(557)
(563)
(563)
6
68
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
Discontinued Operations - Visible Youth
Statement of Cash Flows
Profit/(loss) for the year from discontinuing operations
Adjustments for:
– Amortisation
– Impairment of intangible assets
– Gain on disposal of subsidiary
Changes in working capital
– Trade and other payables
Cash Flow from operating activities
Cash flow from financing activities
Loan from parent company
Net cash generated by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of the period
35. Ultimate controlling party
There is no one controlling party.
2020
£’000
-
-
-
-
-
-
-
-
-
-
-
2019
£’000
6
-
-
-
(563)
(557)
557
557
-
-
-
69
DeepVerge Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
36. Post balance sheet events
Completion of Compulsory Acquisition of Modern Water plc
On 19 November 2020 having obtained the acceptances of 93.47% of Modern Water plc shareholder to the offer to acquire the
company the Company commenced compulsory acquisition proceedings under sections 974-991 of the Companies Act 2006.
Date
Type
No of shares
Price at Date
of Listing
Consideration
15 January 2021
Acquisition Shares
3,636,915
33p
£1,200,182
On 15 January 2021 the Company allotted 3,636,915 ordinary 0.1p shares in respect of the compulsory acquisition of all the remaining
Modern Water plc shares. The £1.2m consideration takes the total cost of the 100% acquisition of shares to £13.3m.
Shares issued for cash consideration in 2021:
Transaction
No of shares
Exercise price
Consideration
Date
18 January
25 January
1 February
Share Options
Placing Warrants
Placing Warrants
25,860
535,714
178,570
26 February
Placing Warrants
1,230,738
26 February
26 February
5 March
16 March
23 March
24 March
7 April
13 April
21 April
21 April
29 April
30 April
11 June
25 June
Sub Total
Broker Warrants
Broker Warrants
Placing Warrants
Placing Warrants
Placing Warrants
Placing Warrants
Share Options
Placing Warrants
Placing Warrants
Broker Warrants
Placing Warrants
Placing Warrants
Share Placing
Share Placing
557,999
814,285
17,857
188,071
35,714
78,570
18,102
10,714
221,285
7,050,000
942,857
384,425
21,086,888
12,246,446
45,624,095
0.01p
20p
20p
20p
15p
14p
20p
20p
20p
20p
0.01p
20p
20p
5p
20p
20p
30p
30p
£ 26
£ 107,143
£ 35,714
£ 246,148
£ 83,700
£ 114,000
£ 3,571
£ 37,614
£ 7,143
£ 15,714
£ 18
£ 2,143
£ 44,257
£ 352,500
£ 188,571
£ 76,885
£ 6,326,066
£ 3,673,934
£ 11,315,147
70