Annual Report
and Financial
Statements
VR EDUCATION HOLDINGS PLC
Annual Report and Financial Statements
for the Year Ended 31 December 2018
Registered Number: 613330
for the Year Ended
31 December 2018
Registered Number: 613330
1
Annual report 2018
2
Annual report and financial statements
For the year ended 31 December 2018
Table of contents
Company information
Chairman’s statement
Chief Executive’s review
Chief Financial Officer’s review
Strategic report
Directors’ report
Directors’ responsibilities statement
Corporate governance report
4
5
6
7
8
10
12
13
Independent auditor’s report to the members of VR Education Holdings PLC
21
Consolidated statement of total comprehensive income
Consolidated statement of financial position
Company statement of financial position
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the financial statements
27
28
29
30
31
32
33
34
3
Annual report 2018
Company information
Directors
Secretary
Registered Office
Non-Executive Chairman - Richard Cooper
Executive Director - David Whelan
Executive Director - Sandra Whelan
Executive Director - Séamus Larrissey
Non-Executive Director - Michael Boyce
Non-Executive Director - Tony Hanway
One Advisory Limited
201 Temple Chambers
3 - 7 Temple Avenue London
EC4Y 0DT
United Kingdom
Unit 9 Cleaboy Business Park
Old Kilmeaden Road
Waterford
X91 AX83
Ireland
Registered Number
613330
Bankers
Auditor
Nominated Adviser
Euronext
Growth Advisor
Allied Irish Banks
Dunmore Road
Waterford
Ireland
PKF Littlejohn LLP
1 Westferry Circus
Canary Wharf
London
E14 4HD
United Kingdom
Cairn Financial Advisers Llp
Cheyne House
62-63 Cheapside
London
EC2V 6AX
United Kingdom
J&E Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
Brokers
4
Stockdale Securities Limited
100 Wood Street
London
EC2V 7AN
United Kingdom
J&E Davy
Davy House
49 Dawson Street
Dublin
Ireland
Chairman’s statement
for the year ended 31 December 2018
I am pleased to present the annual report and financial statements of VR Education Holdings PLC for the year ended 31
December 2018.
Overview of the year
The Company’s shares were admitted to AIM in the United Kingdom and to the Enterprise Securities Market (ESM, now
called Euronext Growth), a market regulated by Euronext Dublin, in March 2018 and raised £6m gross of expenses for
future expansion. Along with the listing, the board of three executive directors and myself as non-Executive Chairman,
was complemented by the recruitment of two highly experienced business people, Tony Hanway and Michael Boyce. This
strong board aims to support the executive team in driving the business forward.
Review of the business
VR Education Holdings PLC is dedicated to transforming education globally by providing new tools to educators
and corporate trainers allowing them to provide high quality, low cost content in a virtual networked social learning
environment.
The ENGAGE platform, the Group’s proprietary VR Education platform, was commercially launched in December 2018
as version 1.0. It provides a platform for creating, sharing and delivering proprietary and third-party VR content for
educational and corporate training purposes. ENGAGE version 1.0 follows comprehensive testing of ENGAGE Alpha
during 2017 and 2018, which included multiple virtual locations, screen sharing capabilities, interactive lessons, virtual
whiteboards and multiuser live 360 video playback via YouTube. A key feature of ENGAGE is the ability for educators and
trainers to use the software to create their own VR lessons and presentations on ENGAGE using VR tools provided by the
Group or third parties without the need for programming or animation skills.
The Group also produces award winning standalone content to showcase the potential of Virtual Reality / Augmented
Reality (“VR/AR”) as a tool for educational purposes. Our first release (Apollo 11 VR) has won multiple awards including a
Time Warner award and was one of virtual reality’s first big hits when it released on the Oculus Rift and HTC Vive. A High
Definition version of this experience was launched in November 2018. Our second release (Titanic VR) was released as an
early access experience in November 2017 and as a full experience in August 2018. This has also been very well received
and won best PSVR experience in the 2018 UploadVR awards. The Group will continue to release standalone content to
promote educational VR/AR and drive users to the Engage platform.
Future developments in the business
Since the full commercial release of ENGAGE, the Group’s online virtual learning and corporate training platform, the
Group has progressed with the onboarding of Shenandoah University and released additional learning content from
Oxford University. In addition, ENGAGE users have held multiple live CPD events using the platform, one of which was part
of the event known as ‘MIT Hackathon Week’ hosted by MIT. As stated in the Group’s Admission Document at the time of
its IPO, the Directors believe that a key feature of ENGAGE is the ability for educators and trainers to use the software to
create their own VR lessons and presentations on ENGAGE using VR tools provided by the Group or third parties through
ENGAGE.
Demand for the Group’s VR showcase experiences, comprising Apollo 11 VR and Titanic VR, remains in line with
management’s expectations with new experiences, including Raid on the Ruhr (Dambusters Experience) expected to
launch in H1 2019 and Space Shuttle Commander (Working Title) expected in H2 2019.
Richard Cooper
Chairman
5 March 2019
5
Annual report 2018 Chief Executive’s review
for the year ended 31 December 2018
2018 was an important year for VR Education and one in which it successfully delivered on the operational milestones
that were clearly set out at the time of the Group’s IPO. During the period the Group was admitted to AIM and to the
Enterprise Securities Market (now called Euronext Growth), released various new showcase experiences and also
completed the full commercial release of ENGAGE, its online virtual learning and corporate training platform, with full
payment capabilities. The Group has also expanded the development and marketing team, completed projects with the
BBC and Oxford University and released Part 2 of Titanic VR.
The Group continues to execute on its strategy of focusing on the commercialisation of ENGAGE whilst launching further
showcase experiences to drive awareness, add content to the ENGAGE platform and deliver incremental revenue.
VR Education has already started to raise brand awareness by showcasing the ENGAGE platform and its capabilities at
high profile tradeshows and conferences around the world. The Group has recently attended the BETT Conference in
London in January 2019 and GESS Dubai in February 2019, one of the largest educational events, held annually in the UAE,
and will be attending a number of major education conferences in 2019.
ENGAGE
The Group successfully released the ENGAGE platform on 13 December 2018 via the Steam network and its own website
www.engagevr.io. ENGAGE now supports Oculus Rift, HTC Vive, HTC Vive Pro, Windows Mixed Reality and standard PC
display devices. With the launch of ENGAGE the Group also released new content provided by Oxford University and
additional features such as enhanced web-based media streaming, desktop streaming, selfie avatar generations, Pro
and Free licensing, cloud file sharing and a full web-based management system for creating events, quizzes, content
and enhanced account management.
2019 is a pivotal year for ENGAGE with the majority of business development and marketing focused on the platform.
Showcase experiences
In addition to developing ENGAGE, the Group creates showcase experiences, not only to generate revenue but to also
build up the Group’s VR asset base. These can be reused by external educators on the ENGAGE platform, whilst also
improving the Group’s reputation and attracting developer talent.
At the end of the Period, the Group had built two paid-for downloadable showcase VR experiences, being the award-
winning Apollo 11 VR experience and the Titanic VR experience.
Apollo 11 VR continued to sell well during the year. As at 31 December 2018, Apollo 11 VR had been downloaded a total of
160,000 times. Titanic VR has been very well received since its full launch in August 2018. As at 31 December 2018, Titanic
VR had been downloaded a total of 20,000 times with the majority of downloads coming from its PlayStation version
which was released towards the end of November 2018.
Current trading and outlook
2019 is going to be a busy year for the Group with continued focus on the promotion of ENGAGE and generation of sales
on the platform, together with the release of two new showcase experiences. The first experience to be released in 2019 is
titled “Raid on the Ruhr” and is based on the Dambusters mission from World War II, to be released in H1 2019. The second
experience, a larger space-related project, is scheduled for release in H2 2019.
In summary, 2018 has been a solid year for VR Education with the team growing from 20 to 34 employees and the
successful release of three new products. The focus for 2019 is the ENGAGE platform and with the release of second-
generation VR hardware, such as the Oculus Quest, VR Education is well positioned to remain the leader of next
generation educational content and tools.
I would like to thank our new and existing shareholders for their support and the Group looks forward to capitalising on
significant market opportunities during the course of 2019 and beyond.
David Whelan
Chief Executive Officer
5 March 2019
6
Chief Financial Officer’s review
for the year ended 31 December 2018
Revenue for the year was up 15% on the prior year from €624k to €716k, driven by the continued success of the Apollo 11 VR
experience, the release of the full version of Titanic VR and the completion of “1943: Berlin Blitz” for the BBC.
EBITDA loss was €1.5 million compared to a loss of €0.5 million in the prior year, in line with management expectations.
Loss before tax, after a non-cash convertible debt conversion fair value loss of €2.6 million and associated conversion
costs of €0.3 million, was a loss of €4.9 million, in line with management expectations, compared to a loss in the prior
year of €0.6 million.
Operating cashflows were a net outflow of €2.1 million for the period. The current run-rate of staff costs and other
ongoing costs is approximately €250k per month.
The Group’s cash position at 31 December 2018 was €3.5 million with no debt.
Séamus Larrissey
Chief Financial Officer
5 March 2019
7
Annual report 2018 Strategic report
for the year ended 31 December 2018
The Directors present herewith their strategic report for the year ended 31 December 2018.
Results and Dividends
The loss for the year after taxation amounted to €4,943,906 (2017: €623,699). No dividends were paid during the year (2017:
€Nil) and as such an amount of €4,943,906 was debited to reserves.
Review of the business and future developments
The review of the business and future developments are set out in the Chairman’s Statement.
Key Performance Indicators
Revenue
Revenue and revenue growth tracks the Groups performance against the strategic aim to grow the business.
Revenue for the year was €716k compared to €625k in 2017, an increase of 15%. The Group expect to see further growth in
revenue in 2019 with the commercial release of ENGAGE and the full launch of Titanic VR occurring in Q4 2018.
Unit Downloads
Unit downloads tracks the number of downloads across the various sales platforms of the Groups VR experiences which
allows monitoring of the performance of both the experiences and the platforms they are sold on.
Unit downloads for the year totalled approximately 80,000 compared to 65,000 in 2017, an increase of 23%. With additional
VR experiences to be launched in 2019 we would expect to see further growth in unit downloads.
Cash & Cash Equivalents
Tracking the cash balance monitors the conversion of revenue into cash ensuring that cash is available for
reinvestment.
Cash & cash equivalents at 31 December 2018 was €3.5m compared to €0.1m in 2017, an increase of 3265%. This arose
from the oversubscribed IPO on 12 March 2018 where €6.75m, before expenses, was raised.
Principal Activity
The principal activity of the Group is the development of the educational Virtual Reality platform ‘ENGAGE’. The Group also
develops and sells Virtual Reality experiences for the education market.
Principal Risks and Uncertainties
The Group’s strategy is to follow an appropriate risk policy, which effectively manages exposures related to the
achievement of business objectives. The key risks which the Group face are detailed as follows:
Activity
Risk
Impact
Control(s)
Technology Risk
Fast moving market that is
subject to changing trends
and technological advances.
Being behind market leaders
or the provision of non-
standard material for which
there is a limited target
audience, consequently
reducing potential for profit/
revenue.
The Company regularly
conducts market research
to be aware of upcoming
trends, and it aims to achieve
‘first mover’ advantage in
the VR Educational sector to
manage this risk.
8
Strategic Report (continued)
Activity
Risk
Impact
Control(s)
Business
performance
Company may not perform
as expected.
Adverse consequences such
as management distraction,
disposal and reduced profit.
Financial Risk
Adequate financial and
business controls.
Error or fraud, leading to a
loss in reputation, business
partners and customers.
Critical Person Risk
Loss of key management or
development staff.
Operational impact of loss of
key staff could see a delay in
product / service delivery.
Data Protection
Risk
Loss of customer personal
information.
Loss of reputation, fines and
potential litigation.
This risk is managed through
a number of measures:
authorisation of purchases
and capital requirement;
ensuring the appropriate
management team is in
place; budget and business
planning; monthly reporting
and variance analysis;
financial controls; key
performance indicators; and
regular forecasting.
The Company exercises
financial and business
control through a
combination of: qualified
and experienced financial
personnel; dual signatories;
performance analysis;
budgeting and cash flow
forecasting; local audit to
international standards; and
clearly defined approval
limits.
The nature and operation of
the board ensures that issues
are disseminated to all board
members in a timely manner
which would help address the
loss of any key staff. Keyman
insurance policy is also in
place for the CEO.
Payment processing handled
by reputable third party
(Stripe); GDPR policies in
place and made available
to new and existing users;
best practise policy and
procedure in place for storing
user personal data.
Going Concern
The financial information is presented on the going concern basis.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. As such the Directors continue to adopt the going concern basis of accounting in
preparing the Financial Information.
Sandra Whelan
Director
5 March 2019
Séamus Larrissey
Director
5 March 2019
9
Annual report 2018
Directors’ report
for the Year Ended 31 December 2018
The Directors present herewith their annual report and audited financial statements for the year ended 31 December
2018.
Results and Dividends
The results for the period are set out in the Strategic Report on page 8-9. The Directors do not propose to declare a
dividend.
Directors
The present Directors are as listed on page 4 and, unless otherwise indicated, have served throughout the period.
Directors’ and Secretary’s interests in shares
The direct and indirect interests of the Directors and secretary in the share capital of the Company at the beginning and
the end of the period were as follows:
31/12/2018
31/12/2017
Ordinary Shares
Share Options Ordinary Shares
Share Options
Richard Cooper
David Whelan
Sandra Whelan
Séamus Larrissey
Michael Boyce
Tony Hanway
1,000,000
1,000,000
38,665,000
38,665,000
-
-
88,000
910,940
499,942
100,000
-
-
-
-
1
-
-
-
Substantial shareholdings
As at 28 February 2019, the following interests in 3% or more of the issued share capital appear in the register:
David Whelan
Sandra Whelan
Octopus Investments
Enterprise Ireland
Unicorn AIM VCT plc
Suir Valley Funds ICAV
Kernel Seed Fund 2009
Barry Downes
Transactions Involving Directors
Transactions involving Directors are disclosed within note 26.
10
-
-
-
-
-
-
20.0%
20.0%
10.7%
9.8%
8.2%
7.2%
6.8%
6.8%
Directors’ Report (continued)
Events after the reporting period
The Company has evaluated all events and transactions that occurred after 31 December 2018 up to the date of signing
of the financial statements.
No material subsequent events have occurred that would require adjustment to or disclosure in the financial statements.
Research and development
Being at the forefront of a competitive industry and in order to strengthen its market position the Group need to continue
to break new ground by investing in the development and trial of new technologies. The Group aims to provide educators
the tools they need to create their own content in virtual classrooms or virtual training environments and thus improving
Customer experience.
Accounting Records
The measures that the Directors have taken to secure compliance with the requirements of sections 281 to 285 of the
Companies Act 2014 with regard to the keeping of accounting records, include the provision of appropriate resources to
maintain adequate accounting records throughout the company, including the employment of appropriately qualified
personnel and the maintenance of computerised accounting systems.
The accounting records of the Company are held at their registered office at Unit 9, Cleaboy Business Park, Waterford,
Ireland.
Branches outside the state
The Company has a branch established in the United Kingdom.
Political Donations
There were no political donations made during the current or prior year.
Disclosure of information to the Auditor
Each Director has taken steps that they ought to have taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Company’s auditor is aware of that information. The Directors
confirm that there is no relevant information that they know of and of which they know the auditor is unaware.
On behalf of the board
Sandra Whelan
Director
5 March 2019
Séamus Larrissey
Director
5 March 2019
11
Annual report 2018
Directors’ responsibilities statement
for the Year Ended 31 December 2018
The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with
applicable Irish law and regulations.
Irish Company law requires the Directors to prepare financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance with accounting standards issued by the Financial
Reporting Council including IFRS.
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 assets, liabilities and financial position of the Company as at the financial year end date and of
the profit or loss of the Company for the financial year and otherwise comply with the Companies Act 2014.
In preparing these financial statements the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether the financial statements have been prepared in accordance with applicable accounting
standards, identify those standards, and note the effect and the reasons for any material departure; 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 ensuring that the Company keeps or causes to be kept adequate accounting records
which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial
position and profit or loss of the Company to be determined with reasonable accuracy and enable them to ensure that
the financial statements and Directors’ Report comply with the Companies Act 2014 and enable the financial statements
to be audited. They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of
the Company and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website, www.vreducationholdings.com. Legislation in the Republic of Ireland governing the preparation
and dissemination of the Financial Statements may differ from legislation in other jurisdictions.
The Company is compliant with AIM Rule 26 regarding the Company’s website.
The Directors are responsible for ensuring that the Company is compliant with AIM Rule 26 which is discussed further in
the Corporate Governance Report on page 13-20.
On behalf of the board
Sandra Whelan
Director
5 March 2019
Séamus Larrissey
Director
5 March 2019
12
Corporate governance report
for the Year Ended 31 December 2018
As Chairman of VR Education Holdings plc I have overall responsibility for corporate governance and in promoting high
standards throughout the Company. As well as leading and chairing the Board my responsibilities are to ensure:
• committees are properly structured and operate with appropriate terms of reference;
• the performance of individual directors, the Board and its committees are reviewed on a regular basis;
• the Company has a coherent strategy and sets objectives against this; and
• there is effective communication between the Company and its shareholders.
All the Directors of VR Education Holdings plc believe strongly in the importance of good corporate governance for the
creation of shareholder value over the medium to long-term and to engender trust and support amongst the Company’s
wider stakeholders.
In March 2018, changes to the AIM rules required the formal adoption by all AIM companies of a recognised corporate
governance code by 28 September 2018. On its admission to AIM in March 2018 the Directors undertook to take account of
the requirements of the QCA guidelines to the extent they consider it appropriate having regard to the Company’s size,
board structure, stage of development and resources.
In light of the new requirements under AIM rule 26, the Board have decided to formally adopt and adhere to the QCA code
(revised in April 2018).
The QCA code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers
to be appropriate arrangements for growing companies and asks companies to provide an explanation about how
they are meeting the principles through the prescribed disclosures. The Directors have considered how they apply each
principle and below we provide an explanation of the approach taken in relation to each. Any areas of non-compliance
are explained in the text below. There were no key governance related matters that occurred during the year.
Richard Cooper
Chairman
5 March 2019
13
Annual report 2018 Corporate governance report (continued)
for the Year Ended 31 December 2018
Principle
Application
Establish a strategy
and business model
which promotes
long-term value for
shareholders
The Board has concluded that the highest medium and long-term value can be
delivered to its shareholders by the adoption of a single strategy for the Company - to
transform education globally by providing new tools to educators and corporate trainers,
consequently allowing them to provide high quality, low cost content in a virtual networked
social learning environment. To achieve this vision the Company’s principal activity is to be
active in the Virtual Reality Sector, and develop and sell Virtual Reality experiences for the
education market.
The Company intends to deliver shareholder returns through capital appreciation
and, ultimately, distribution via dividends. The principal challenge to delivering capital
appreciation is uncertainty in relation to the performance of Immersive VR Education
Limited, although the Board takes steps to mitigate these risks. Further challenges to VR
Education’s strategy and long-term goals are highlighted in the Risk Management section
below.
Seek to understand
and meet shareholder
needs and
expectations
The Company places great importance on the need for effective communication and
constructive dialogue with investors and the media. To ensure that existing and potential
investors and contacts can track its progress and obtain news and updates as soon
as available, it encourages registration to the Company’s news alert service, as well as
providing communications through Interim and Annual Reports.
The Company’s website, www.vreducationholdings.com, is used for both financial and
general news relevant to shareholders.
The Chair, Richard Cooper, acts as a liaison for shareholders, although queries through the
Company’s website are directed to the COO, Sandra Whelan, who monitors and liaises with
shareholders on minor queries.
The Executive Directors also meet shareholders and other investors/potential investors
regularly within the results cycle, and the whole Board aims to participate at the AGM.
The AGM will provide an opportunity to meet, listen and present to shareholders, and
shareholders are encouraged to attend. In addition, the Company is open to receiving
feedback from key stakeholders, and will take action where appropriate.
Take into account
wider stakeholder and
social responsibilities
and their implications
for long-term success
The Board recognises that the long-term success of the Company is reliant upon the
efforts of employees, contractors, suppliers, regulators and many other stakeholders.
The Board has put in place a range of processes and systems to ensure that there is
close oversight and contact with its key resources and relationships. The Company aims
to be very responsive to all stakeholder queries, monitoring message boards on various
platforms (emails, social media) for all products on a daily basis, responding with technical
assistance or product information as requested within 24 hours.
14
Corporate governance report (continued)
for the Year Ended 31 December 2018
Principle
Application
Take into account
wider stakeholder and
social responsibilities
and their implications
for long-term success
(continued)
All employees within the Group are valued members of the team, and the Company
seeks to implement provisions to retain and incentivise all its employees. The Group offers
equal opportunities regardless of race, gender, gender identity or reassignment, age,
disability, religion of sexual orientation. The Company has a policy to conduct annual
employee reviews, seeking to understand any issues within the workforce. Employees are
incentivised through team building days out and various employee wellness schemes
and plans.
The Company has close ongoing relationships with a broad range of its stakeholders and
provides them with the opportunity to raise issues and provide feedback to the Company.
The Company conducts customer reviews, which broaden communication and the
opportunity for feedback, as well as holding weekly internal management meetings
whereby all aspects of the business are discussed and any issues that arise are actioned
by the following week. Furthermore, the Company holds weekly product meetings to
ensure that all employee feedback regarding product creation, implementation and
processes are taken on board, changed and/or improved, where necessary. The Company
has adopted an agile method whereby products follow a two-week sprint process to
ensure a smooth process.
VR Education is looking at helping and contributing to the local community, and has
sponsored a table at the 2018 Annual Gala Ball in aid of Crumlin Children’s Hospital.
Additionally, the COO, Sandra Whelan, has spoken on behalf of the Company at the
National Mind Over Matter initiative in aid of mental health awareness, where all proceeds
went to AWARE.
The Group also has no significant environmental impact, but will continue to monitor and
will take action if this changes in the future.
Embed effective
risk management,
considering both
opportunities and
threats, throughout the
organisation
The Board recognises the need for an effective and well-defined risk management
process and it oversees and regularly reviews the current risk management and internal
control mechanisms. The Strategic Report also outlines the key risks to the business, see
page 8.
The Company has a risk register which identifies risks, evaluates the risk level (level of
impact and the probability of the risk materialising), and the principal person responsible
for each risk.
The Board has established appropriate reporting and control mechanisms to ensure the
effectiveness of its control systems. The Audit Committee has delegated responsibility
for ensuring that the financial performance of the Company is properly monitored and
reported.
The Board currently considers that there are no risk factors that are considered High
Risk Areas.
15
Annual report 2018 Corporate governance report (continued)
for the Year Ended 31 December 2018
Principle
Application
Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
(continued)
Maintain the Board
as a well-functioning,
balanced team led by
the Chair
An internal audit function is not yet considered necessary or practical due to the size of
the Company and the day to day control exercised by the Executive Directors. However,
the Board will continue to monitor the need for an internal audit function. The Board has
established appropriate reporting and control mechanisms to ensure the effectiveness of
its control systems.
The Board regularly reviews the mechanisms of internal control it has implemented,
assessing for effectiveness.
The Board comprises:
• CEO - David Whelan
• COO - Sandra Whelan
• CFO - Séamus Larrissey
•
•
• Non-Executive director - Michael Boyce. Michael is currently providing sales
consulting services to the Group under a six month consulting contract.
Independent Non-Executive director and Chairman - Richard Cooper
Independent Non-Executive director - Tony Hanway
Richard Cooper and Séamus Larrissey were appointed to the Board on 1 and 29 November
2017, respectively.
Both Michael Boyce and Tony Hanway were appointed on 16 February 2018.
Biographical details of the Directors can be found here http://www.vreducationholdings.
com/content/about-us/board.asp. The letters of appointment of all Directors are available
for inspection at the Company’s registered office during normal business hours.
All the Non-Executive Directors are expected to dedicate at least 2 days per month to the
Company.
One third of Board are subject to re-election at each AGM.
Meetings are open and constructive, with every Director participating fully. Senior
management can also be invited to meetings, providing the Board with a thorough
overview of the Company.
The Board is satisfied it has a suitable balance between independence on the one hand,
and knowledge of the Company on the other. All Directors are encouraged to use their
independent judgement and to challenge all matters, whether strategic or operational,
enabling the Board to discharge its duties and responsibilities effectively.
The Board aims to meet six times in the year and a calendar of meetings and principal
matters to be discussed is agreed at the beginning of each year. During the year the
board met at 5 dedicated board meetings at which all Directors were present. No
committee meetings were held but given the nature of the Company at an early stage all
decisions were taken by the board as a whole. In order to be efficient, the Directors meet
formally and informally both in person and by telephone.
16
Corporate governance report (continued)
for the Year Ended 31 December 2018
Principle
Application
Maintain the Board
as a well-functioning,
balanced team led by
the Chair (continued)
Board and Committee document authors are made aware of proposed monthly deadlines
through the calendar of meetings assembled at the beginning of the year. Board papers
are collated, compiled into a Board Pack, and circulated at least one week before meetings,
allowing time for full consideration and necessary clarifications before the meetings.
The Company has Audit, Remuneration, and Compliance Committees. The Committees
have the necessary skills and knowledge to discharge their duties effectively.
Directors’ conflict of interest
The Company has effective procedures in place to monitor and deal with conflicts of
interest. The Board is aware of the other commitments and interests of its Directors, and
changes to these commitments and interests are reported to and, where appropriate,
agreed with the rest of the Board.
Ensure that between
them the Directors
have the necessary
up-to-date
experience, skills and
capabilities
The Non-Executive Directors have both a breadth and depth of skills and experience to
fulfil their roles. The Company believes that the current balance of skills across the Board
as a whole reflects a very broad range of personal, commercial and professional skills,
providing the ability to deliver the Company’s strategy for the benefit of shareholders over
the medium and long-term. The Non-Executive Directors meet without the presence of
the Executive Directors during the year, and also maintain ongoing communications with
Executives between formal Board meetings.
Biographical details of the Directors can be found on the Company’s website.
In addition to their general Board responsibilities, the Directors, including the Non-
Executives, are encouraged to be involved in specific workshops or meetings, in line with
their individual areas of expertise. This allows skill-sets to be kept up to date.
ONE Advisory Limited has been contracted by the Company to act as its Company
Secretary, and has been given the responsibility for ensuring that Board procedures
are followed and that the Company complies with all applicable rules, regulations and
obligations governing its operation, as well as helping the Chairman maintain excellent
standards of corporate governance. If required, the Directors are entitled to take
independent legal advice and if the Board is informed in advance, the cost of the advice
will be reimbursed by the Company.
The Board shall review annually the appropriateness and opportunity for continuing
professional development whether formal or informal.
17
Annual report 2018 Corporate governance report (continued)
for the Year Ended 31 December 2018
Principle
Application
Evaluate Board
performance
based on clear and
relevant objectives,
seeking continuous
improvement
At present, this aspect of the Code is not complied with as the Directors consider that the
Company and Board are not yet of a sufficient size or suitably developed for a full Board
evaluation to make commercial and practical sense, given the stage of the Company.
In the frequent Board meetings/calls, Directors can discuss any areas where they feel a
change would benefit the Company, and the Company Secretary and other Company
advisers remain on hand to provide impartial advice. The Board will keep this under
review as the Company develops.
Promote a corporate
culture that is based
on ethical values and
behaviours
The Board has elected not to establish a Nominations Committee, preferring instead that
the Board should, itself, deal with such matters, including succession planning and the
balance of the Board. The Company operates on a retirement by rotation policy, and one
third of Board are subject to re-election at each AGM.
The Board recognises that its decisions regarding strategy and risk will impact the
corporate culture of the Company as a whole and that this will impact the performance
of the Company. The Board is aware that the tone and culture set by the Board will greatly
impact all aspects of the Company as a whole and the way that employees behave. The
corporate governance arrangements that the Board has adopted are designed to ensure
that the Company delivers long term value to its shareholders, and that shareholders
have the opportunity to express their views and expectations for the Company in a
manner that encourages open dialogue with the Board.
A large part of the Company’s activities are centred upon an open and respectful
dialogue with employees, clients and other stakeholders. Therefore, the importance
of sound ethical values and behaviours is crucial to the ability of the Company to
successfully achieve its corporate objectives. The Board places great importance on this
aspect of corporate life and seeks to ensure that this flows through all that the Company
does. The Directors consider that at present the Company has an open culture facilitating
comprehensive dialogue and feedback and enabling positive and constructive
challenge.
All of the Company’s policies are made available to all employees and are included in
an employee handbook. These are ‘Must Read Policies’ which employees are required
to read and acknowledge the policies and which Sandra Whelan, COO, monitors and
updates where necessary. The Company also has an Anti-Bribery and Corruption Policy
in place to ensure the highest standards of personal and professional ethical behaviour
are adhered to. Additionally, as the Company conducts regular employee reviews and
internal meetings and has a general close-knit working environment, the Directors are
able to determine the extent to which ethical values and behaviours are recognised and
respected.
The Company has adopted, with effect from the date on which its shares were admitted
to AIM, a code for Directors’ and employees’ dealings in securities which is appropriate
for a company whose securities are traded on AIM and ESM and is in accordance with the
requirements of the Market Abuse Regulation which came into effect in 2016. The Directors
seek to align their interests with shareholders.
18
Corporate governance report (continued)
for the Year Ended 31 December 2018
Principle
Application
Maintain governance
structures and
processes that
are fit for purpose
and support good
decision-making by
the Board
The Board is committed to, and ultimately responsible for, high standards of corporate
governance, and has chosen to adopt the QCA Code. We review our corporate governance
arrangements regularly and expect to evolve these over time, in line with the Company’s
growth. The Board delegates responsibilities to Committees and individuals as it sees
fit, with the Chair being responsible for the effectiveness of the Board, and the Executive
Directors being accountable for the management of the Company’s business and primary
contact with shareholders, clients and partners.
The Chair is responsible for shareholder communications, the leadership of the Board
and ensuring its effectiveness in all aspects of its role, including creating the right Board
dynamic and ensuring that all important matters, in particular strategic decisions and
corporate governance arrangements, receive adequate time and attention at Board
meetings.
The Executive Directors are responsible for the day-to-day running of the business, the
leadership of the management team and the development and execution of corporate
strategy. The Non-Executive Directors are tasked with constructively challenging the
decisions of executive management and satisfying themselves that the systems of
business risk management and internal financial controls are robust.
The Board has adopted appropriate delegations of authority which sets out matters which
are reserved to the Board as set out below:
Internal Controls
• Strategy and Management
• Structure and Capital
• Financial Reporting and Controls
•
• Finance
• Contracts
• Communications
• Board Membership and other Appointments
• Delegation of Authority
• Corporate Governance Matters
• Approval of Policies
The Board delegates authority to three Committees to assist in meeting its business
objectives whilst ensuring a sound system of internal control and risk management. The
Committees meet independently of Board meetings.
Audit Committee
The Audit Committee has 2 members, Richard Cooper (Chair) and Tony Hanway. The CFO
and external auditors attend meetings by invitation. The Audit Committee is responsible
for making recommendations on the appointment of auditors and the audit fee, and
for ensuring that the financial performance of the Company is properly monitored and
reported.
19
Annual report 2018 Corporate governance report (continued)
for the Year Ended 31 December 2018
Principle
Application
Maintain governance
structures and
processes that
are fit for purpose
and support good
decision-making by
the Board (continued)
Audit Committee (continued)
In addition, the Audit Committee will receive and review reports from management and
the auditors relating to the interim report, the annual report and accounts and the internal
control systems of the Company. The Audit Committee shall meet not less than twice each
financial year.
No separate Audit Committee report is presented to shareholders as the Board does
not consider at present that this would improve the quality of communication with
Shareholders given the simple structure of the Company. The Board will continue to review
this approach.
Remuneration Committee
The Remuneration Committee has 2 members, Tony Hanway (Chair) and Richard Cooper.
The members are all Independent Non-Executive Directors. Other members of the Board
may attend the Committee’s meetings at the request of the Committee Chairman. The
Remuneration Committee is responsible for the review and recommendation of the scale
and structure of remuneration of the Executive Directors, the company secretary and such
other members of the executive management as it is designated to consider, including any
bonus arrangements or the award of share options with due regard to the interests of the
Shareholders and the performance of the Company. The Remuneration Committee shall
meet not less than twice a year.
No separate Remuneration Committee report is presented to shareholders as the Board
does not consider at present that this would improve the quality of communication
with Shareholders given the simple structure of the Company. The Board will continue to
review this approach. Further details of Directors Remuneration is included in Note 8 to the
Financial Statements.
Compliance Committee
The Compliance Committee has three members, Richard Cooper (Chair), Tony Hanway and
Michael Boyce. The Compliance Committee will have oversight of the Company’s duties
and satisfy itself that the Company has procedures in place to ensure compliance with
applicable rules and regulations, including but not limited to the AIM Rules for Companies,
the ESM Rules for Companies and the Market Abuse Regime. The Compliance Committee
will meet at such times and frequency as necessary.
The Board has elected not to establish a Nominations Committee, preferring instead that
the Board should, itself, deal with such matters, including succession planning and the
balance of the Board. Therefore, the Board will review Board composition.
The Chair and the Board continue to monitor and evolve the Company’s corporate
governance structures and processes, and maintain that these will evolve over time, in line
with the Company’s growth and development.
Communicate how the
company is governed
and is performing by
maintaining a dialogue
with shareholders
and other relevant
stakeholders
The Board is committed to maintaining effective communication and having constructive
dialogue with its shareholders. The Company intends to have ongoing relationships with
both its private and institutional shareholders as well as shareholder analysts, and for
them to have the opportunity to discuss issues and provide feedback at meetings with the
Company. In addition, all shareholders are encouraged to attend the Company’s Annual
General Meeting. The Board maintains that, if there is a resolution passed at a GM with 20%
votes against, the Company will seek to understand the reason for the result and, where
appropriate, take suitable action.
20
Independent auditor’s report to the
members of VR Education Holdings plc
Opinion
We have audited the financial statements of VR Education Holdings Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 December 2018 which comprise the Consolidated Statement of Comprehensive
Income, the Consolidated and Parent Company Statement of Financial Position, the Consolidated and Parent Company
Statements of Changes in Equity, the Consolidated and Parent Company Statements of Cash Flows and notes to the
financial statements, including a summary of significant accounting policies. The financial reporting framework that has
been applied in their preparation is Irish 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 2014.
In our opinion:
• the Group financial statements give a true and fair view of the assets, liabilities and financial position of the
group as at 31 December 2018 and its loss for the year then ended;
• the Company statement of financial position gives a true and fair view of assets, liabilities and financial
position of the Company as at 31 December 2018;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
• the 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 2014; and
• the Group financial statements and Company financial statements have been prepared in accordance with
the requirements of the Companies Act 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) 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 have fulfilled our ethical responsibilities under, and we remained
independent of the Group in accordance with, ethical requirements applicable in Ireland, including the Ethical Standard
issued by the Irish Auditing and Accounting Supervisory Authority (IAASA) as applied to listed entities. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (Ireland) require us to report to
you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
Our application of materiality
Materiality for the Group and Company financial statements as a whole was set at €110,000. This has been calculated
using a benchmark of 5% of adjusted loss before tax and 2% of gross assets, which we have determined, in our
professional judgement, to be one of the principal benchmarks within the financial statements relevant to the members
of the Group and Company in assessing financial performance.
We report to the Audit Committee all corrected and uncorrected misstatements we identified through our audit in excess
of €5,500. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed
above and in light of other relevant qualitative considerations in forming our opinion.
An overview of the scope of our audit
The Group and its one subsidiary are accounted for from a central location in Waterford, Ireland. We travelled to said
location in order to undertake the audit for the year end 31 December 2018.
21
Annual report 2018 Independent auditor’s report to the
members of VR Education Holdings plc (continued)
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.
Key Audit Matter
The Group carries a material amount in relation to
intangible assets capitalised for costs associated with
development of virtual reality experiences. As a result, the
following risks may arise:
•
Intangible assets may have been incorrectly
capitalised and not conform with the 6 step
criteria detailed in IAS 38.
• The carrying value of the development cost may
•
be overstated and therefore, irrecoverable.
Inappropriate useful economic lives may have
been attributed to assets recognised.
How the scope of our audit addressed the key audit
matter
The work undertaken to mitigate the risk was as follows:
• We verified that the Group has capitalised
development costs on VR projects on the basis
that they meet the 6 step criteria detailed in IAS
38 for that given project.
• Additions in the period have been tested and
agreed to supporting timesheet analysis as all
costs capitalised in the year relate to time spent
by developers and artists. This was corroborated
through discussions with the CEO as to which
employees spent time during the period working
on developing intangibles.
• We have reviewed management’s impairment
assessment and are satisfied that the intangible
balance is free from impairment. This is
supported by Titanic being the first product to
launch and the amount capitalised has been
compared to sales volumes in the subsequent 3
months from the launch date.
• The amortisation balance and accounting policy
have been tested in reference to the market.
The VR experiences are to be amortised over a
3 year period which is in line with competitors
who typically amortise over 2-5 years. VREH
has applied the amortisation charge on a
consumption basis meaning that the charge is
more heavily weighted in the first 6-12 months
from the date of launch, when sales are
expected to be at their highest. This prudent
approach is deemed to be appropriate.
• See note 14 ‘Intangible assets’ for valuation and
disclosure of development costs.
Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the group and parent
company 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
22
Independent auditor’s report to the
members of VR Education Holdings plc (continued)
or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2014
Based solely on the work undertaken in the course of the audit, we report that:
•
•
In our opinion, the information given in the directors’ report is consistent with the financial statements; and
In our opinion, the directors’ report has been prepared in accordance with the Companies Act 2014.
We have obtained all the information and explanations which we consider necessary for the purpose of our audit. In our
opinion, the accounting records of the Company were sufficient to permit the financial statements to be readily and
properly audited and the Company’s statement of financial position and the statement of other comprehensive income
is in agreement with the accounting records.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the company and its environment obtained in the course of the audit, we
have not identified material misstatements in the directors’ report.. The Companies Act 2014 requires us to report to you
if, in our opinion, the disclosures of directors’ remuneration and transactions required by Sections 305 to 312 of the Act are
not made.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
group and parent company 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 group and parent company financial statements, the directors are responsible for assessing the group’s
and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the IAASA’s website at:
https://www.iaasa.ie/Publications/Auditing-standards/
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Section 391 of the Companies Act
2014. 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.
Alistair Roberts (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
5 March 2019
1 Westferry Circus
Canary Wharf
London E14 4HD
23
Annual report 2018
Communicate
Teach
24
Learn
25
Annual report 2018 Financial
Statements
26
Consolidated statement of total
comprehensive income
for the Year Ended 31 December 2018
Continuing Operations
Revenue
Cost of Sales
Gross Profit
Administrative Expenses
Other Income
Operating Loss
Fair value (loss)/gain arising on derivative financial liabilities
Extinguishment Costs
IPO Transaction Costs
Finance Costs
Loss before Income Tax
Income Tax Credit
Note
3
6
6
5
11
9
10
11
12
2018
€
716,345
(239,701)
476,644
(2,247,337)
-
(1,770,693)
(2,638,063)
(267,971)
(237,202)
(29,977)
2017
€
624,487
(300,143)
324,344
(876,858)
60,333
(492,181)
125,764
-
(202,940)
(54,342)
(4,943,906)
(623,699)
-
-
Total comprehensive loss for the year
(4,943,906)
(623,699)
Earnings per Share (EPS)
Basic from continuing operations
13
(0.026)
-
The accompanying notes on pages 34-57 form an integral part of these financial statements.
27
Annual report 2018 Consolidated statement
of financial position
at 31 December 2018
Non-Current Assets
Property, Plant & Equipment
Intangible Assets
Current Assets
Trade and other receivables
Cash and short term deposits
Total Assets
Equity and Liabilities
Equity Attributable to Shareholders
Issued share capital
Share premium
Other reserves
Retained earnings
Total Equity
Non-Current Liabilities
Interest bearing loans and borrowings
Derivative financial liabilities
Current Liabilities
Trade and other payables
Total Liabilities
Total Equity and Liabilities
Note
14
15
17
18
19
19
20
21
24
24
23
2018
€
59,541
956,550
1,016,091
394,113
3,485,186
3,879,299
4,895,391
193,136
21,587,539
(11,314,729)
(5,765,750)
2017
€
57,300
435,791
493,091
238,315
103,577
341,892
834,983
-
-
157,280
(821,844)
4,700,196
(664,564)
-
-
-
195,195
195,195
195,195
4,895,391
907,180
209,348
1,116,528
383,019
383,019
1,499,547
834,983
The accompanying notes on pages 34-57 form an integral
part of these financial statements.
Sandra Whelan
Director
Séamus Larrissey
Director
On behalf of the board
28
5 March 2019
5 March 2019
Company statement of
financial position
at 31 December 2018
Non-Current Assets
Investment in subsidiaries
Current Assets
Trade and other receivables
Cash and short term deposits
Total Assets
Equity and Liabilities
Equity Attributable to Shareholders
Issued share capital
Share premium
Other reserves
Retained earnings
Total Equity
Current Liabilities
Redeemable shares
Trade and other payables
Total Liabilities
Total Equity and Liabilities
Note
2018
€
16
15,028,809
15,028,809
17
18
19
19
20
21
23
5,136,849
753,090
5,889,939
20,918,748
193,136
21,587,539
(212,363)
(687,587)
20,880,725
-
38,023
38,023
20,918,748
The accompanying notes on pages 34-57 form an integral part of these financial statements.
On behalf of the board
Sandra Whelan
Director
5 March 2019
Séamus Larrissey
Director
5 March 2019
2017
€
-
-
18,750
6,250
25,000
25,000
-
-
-
-
-
25,000
-
25,000
25,000
29
Annual report 2018
Consolidated statement
of changes in equity
for the Year Ended 31 December 2018
Balance at 1 January 2017
Total comprehensive income
Loss for the year
Total comprehensive income
Transactions with owners
recognised directly in equity
Transfer to derivative liabilities
Transfer to other reserves arising
from accounting treatment of
acquisition of subsidiary
Share option expense
Balance at 31 December 2017
Balance at 1 January 2018
Total comprehensive income
Loss for the year
Total comprehensive income
Transactions with owners
recognised directly in equity
Share
Capital
Share
Premium
Other
Reserves
Retained
Earnings
Total
€
-
-
-
-
-
-
-
€
-
-
-
-
-
-
-
€
€
€
104,915
(198,145)
(93,230)
-
-
(623,699)
(623,699)
(623,699)
(623,699)
(104,915)
137,100
20,180
-
-
-
(104,915)
137,100
20,180
157,280
(821,844)
(664,564)
Share
Capital
Share
Premium
Other
Reserves
Retained
Earnings
Total
€
€
€
157,280
(821,844)
(664,564)
€
-
-
-
€
-
-
-
-
-
-
(4,943,906)
(4,943,906)
(4,943,906)
(4,943,906)
-
-
-
-
21,780,675
(596,212)
(11,243,464)
367,667
Issue of ordinary shares
193,136
21,587,539
Share Issue Costs
Acquisition of a subsidiary
Share option expense
-
-
-
-
-
-
(596,212)
(11,263,644)
387,847
Balance at 31 December 2018
193,136
21,587,539
(11,314,729)
(5,765,750)
4,700,196
The accompanying notes on pages 34-57 form an integral part of these financial statements.
30
Company statement of
changes in equity
for the Year Ended 31 December 2018
Share
Capital
Share
Premium
Other
Reserves
Retained
Earnings
Total
€
-
-
-
€
-
-
-
€
-
-
-
€
-
-
-
Share
Capital
Share
Premium
Other
Reserves
Retained
Earnings
€
-
€
-
€
-
-
€
-
-
€
-
-
-
Total
€
-
-
(687,587)
(687,587)
(687,587)
(687,587)
Balance at 13 October 2017
Total comprehensive income
Loss for the year
Balance at 31 December 2017
Balance at 1 January 2018
Total comprehensive income
Loss for the year
Total comprehensive income
Transactions with owners
recognised directly in equity
Issue of ordinary shares
193,136
21,587,539
-
Share Issue Costs
Share option expense
-
-
-
-
(596,212)
383,849
-
-
-
21,780,675
(596,212)
383,849
Balance at 31 December 2018
193,136
21,587,539
(212,363)
(687,587)
20,880,725
The accompanying notes on pages 34-57 form an integral part of these financial statements.
31
Annual report 2018 Consolidated statement of cash flows
for the Year Ended 31 December 2018
Continuing Operations
Note
2018
€
2017
€
Loss before income tax
(4,943,906)
(623,699)
Adjustments to reconcile loss before tax to net cash flows:
Depreciation of fixed assets
Amortisation of intangible assets
Fair value loss/(gain) arising on derivative financial liabilities
Non-cash element of extinguishment costs
Non-cash element of advisor warrants
Other non-cash items
Finance Costs
Share Option Expense
Movement in trade & other receivables
Movement in trade & other payables
6
6
11
11
49,984
175,300
36,621
-
2,638,063
(125,764)
174,651
112,381
1,944
29,977
30,145
(155,798)
(187,824)
-
-
-
54,342
20,180
(201,710)
351,339
(2,075,083)
(488,691)
Bank interest & other charges paid
(29,977)
(264)
Net Cash used in Operating Activities
(2,105,060)
(488,955)
Cash Flows from Investing Activities
Purchases of property, plant & equipment
Payments to develop Intangible Assets
Net cash used in Investing Activities
Cash Flows from Financing Activities
14
15
(52,225)
(696,059)
(748,284)
(56,326)
(370,514)
(426,840)
Proceeds from issuance of ordinary shares
6,234,953
Proceeds from issuance of preference shares
Proceeds from issuance of convertible loans
-
-
Net cash generated from Financing Activities
6,234,953
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
3,381,609
103,577
3,485,186
18
18
12,000
250,000
688,000
950,000
34,205
69,372
103,577
32
Company statement of cash flows
for the Year Ended 31 December 2018
Continuing Operations
Loss before income tax
Adjustments to reconcile loss before tax to net cash flows:
Non-cash element of extinguishment costs
Non-cash element of advisor warrants
Non-cash element of redemption of redeemable shares
Finance Costs
Share Option Expense
Movement in trade & other receivables
Movement in trade & other payables
Bank interest & other charges paid
Net Cash used in Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Proceeds from issuance of redeemable shares
Redemption of redeemable shares
Proceeds from issuance of ordinary shares
Net cash generated from Financing Activities
Note
2018
€
(687,587)
174,651
112,381
(18,750)
276
17,518
(5,118,099)
38,023
(5,481,587)
(276)
(5,481,863)
-
-
(6,250)
6,234,953
6,228,703
2017
€
-
-
-
-
-
-
-
-
-
-
-
-
6,250
-
-
6,250
Net increase in cash and cash equivalents
746,840
6,250
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
18
18
6,250
-
753,090
6,250
The non-cash element of extinguishment costs and non-
cash element of advisor warrants reflect the fact that the
group issued warrants to loan note holders, cumulative
redeemable preference shareholders and advisors as part
of the acquisition of Immersive VR Education Limited and
the subsequent IPO transaction.
The non-cash element of redemption of redeemable
shares relates to the accounting treatment for the
cancellation of unpaid redeemable shares during the year.
The accompanying notes on pages 34-57 form an integral
part of these financial statements.
33
Annual report 2018 Notes to the
financial
statements
34
Notes to the
financial
statements
1. General Information
VR Education Holdings plc (“the Company”) is publicly
traded on the Alternative Investment Market (“AIM”) of the
London Stock Exchange and on the Enterprise Securities
Market (“ESM”), a market regulated by Euronext Dublin. The
Company is incorporated and domiciled in the Republic
of Ireland. The registered office is Unit 9, Cleaboy Business
Park, Old Kilmeaden Road, Waterford and the registered
number is 613330.
The Company is the parent company of Immersive
VR Education Limited (“IVRE”). IVRE is incorporated and
domiciled in the Republic of Ireland with the same
registered office as the Company. On 12 March 2018 the
Company acquired Immersive VR Education Limited and
contemporaneously listed on London’s AIM market and
Dublin’s ESM market. As part of the Admission process,
the Group raised £6 million before expenses, through an
oversubscribed placing of 60,000,000 new ordinary shares
at a placing price of 10p each.
The Group is principally engaged in the development
of the educational Virtual Reality platform ‘ENGAGE.
The Company also develops and sells Virtual Reality
experiences for the education market.
2. Summary of Significant Accounting
Policies
The principal accounting policies applied in the
preparation of the Financial Statements are set out below.
These policies have been consistently applied to all the
years presented, unless otherwise stated.
Basis of Consolidation
The consolidated financial statements incorporate those
of VR Education Holdings plc and its subsidiary Immersive
VR Education Limited.
All financial statements are made up to 31 December 2018.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies
used into line with those used by other members of the
group.
All intra-group transactions, balances and unrealised
gains on transactions between group companies are
eliminated on consolidation. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
Subsidiaries are fully consolidated from the date on
Annual report 2018
which control is transferred to the group. They are
deconsolidated from the date on which control ceases.
The Group re-assess whether or not it controls an investee
if facts and circumstances indicate that there are changes
to one or more of the elements of control.
Business Combination
Acquisition of Immersive VR Education Limited
The Company was incorporated on 13 October 2017 and
entered into an agreement to acquire the entire issued
share capital of Immersive VR Education Limited on 12
March 2018. The acquisition was effected by way of issue
of shares. Due to the relative size of the companies,
Immersive VR Education’s shareholders became the
majority shareholders in the enlarged capital of the
Company. The transaction fell outside of IFRS 3 (“Business
Combinations”) and as such has been treated as a group
reconstruction.
Therefore, although the Group reconstruction did
not become unconditional until 12 March 2018, these
consolidated financial statements are presented as if the
Group structure has always been in place, including the
activity from incorporation of the Group’s subsidiaries.
Furthermore, as VR Education Holdings plc was
incorporated on 13 October 2017, while the enlarged
group began trading on 12 March 2018, the Statement of
Comprehensive Income and consolidated Statement of
Changes in Equity and consolidated Cash Flow Statements
are presented as though the Group was in existence for the
whole year. On this basis, the Directors have decided that
it is appropriate the reflect the combination using merger
accounting principles as the transaction falls outside the
scope of IFRS 3 and as such has been treated as a Group
reconstruction. No fair value adjustments have been made
as a result of the combination.
The comparative information presented for the Group is
that of Immersive VR Education Limited.
Significant accounting judgements, estimates and
assumptions
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the
accompanying disclosures, and the disclosure of
contingent liabilities. Uncertainty about these assumptions
and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or
liabilities affected in future periods.
Judgments
In the process of applying the Group’s accounting policies,
management has made the following judgements,
which have the most significant effect on the amounts
recognised in the financial statements:
Capitalised development costs
In applying the requirements of IAS 38 Intangible Assets,
the Group assessed various development projects against
the criteria required for capitalisation. Certain projects
35
that did not meet the criteria regarding the ability to
determine those projects would generate sufficient future
economic benefits were expensed. The judgements reflect
the early stage of the VR/AR market and will change over
time.
Estimates and assumptions
The key assumptions concerning the future and other
key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described
below. The Group based its assumptions and estimates
on parameters available when the financial statements
were prepared. Existing circumstances and assumptions
about future developments, however, may change due to
market changes or circumstances arising that are beyond
the control of the Group. Such changes are reflected in the
assumptions when they occur.
Capitalised development costs impairment review
The Group’s impairment review undertaken to assess
the carrying value of capitalised development costs
includes certain assumptions on future revenues and
costs associated with the underlying technology. Those
cashflows are discounted at an appropriate discount rate.
These estimates and assumptions are reviewed on an
on-going basis. Changes in accounting estimates may
be necessary if there are changes in the circumstances
on which the estimate was based or as a result of new
information or more experience. Such changes are
recognised in the period in which the estimate is revised.
Derivative financial instruments
The Group has assessed the fair value of the derivative
financial liabilities arising on the conversion feature
of convertible secured loan notes and the cumulative
redeemable preference shares. This calculation includes
assumptions on the expected period of exercise, risk free
interest rate and share price volatility. The Group have
engaged third party valuations experts to assist them in
the selection of such assumptions.
Going Concern
The financial statements are presented on a going
concern basis. In forming this opinion, the Directors have
considered all of the information available to them.
This includes management prepared forecasts, due
consideration of the ability to raise funds on the open
market in respect of the dual listing on the Alternative
Investments Market on the London Stock Exchange and
on the Enterprise Securities Market, a market regulated by
Euronext Dublin and the timing as to when such funds will
be received. Based on their consideration of these matters
the Directors believe the Group and Company to be a
going concern.
These financial statements do not include adjustments
relating to the recoverability and classification of recorded
asset amounts nor to the amounts and classification of
liabilities that might be necessary should the group not
continue as a going concern.
Foreign Currency Translation
(a) Functional and Presentation Currency
Items included in the Financial Statements of the Group
are measured using the currency of the primary economic
environment in which the entity operates (“functional
currency”).
The Financial Statements are presented in euro (€), which
is the Group’s functional and presentation currency.
(b) Transactions and Balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions or valuation 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,
except when deferred in other comprehensive income as
qualifying cash flow hedges and qualifying net investment
hedges. Foreign exchange gains and losses that relate to
borrowings and cash and cash equivalents are presented
in the income statement within ‘finance income or costs’.
All other foreign exchange gains and losses are presented
in the income statement within Administrative Expenses.
Current versus non-current classification
The Group presents assets and liabilities in the statement
of financial position based on current/non-current
classification. An asset is current when it is:
• Expected to be realised or intended to be sold or
consumed in the normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after
the reporting period; or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at
least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
•
•
•
It is expected to be settled in the normal operating
cycle
It is held primarily for the purpose of trading
It is due to be settled within twelve months after
the reporting period Or
• There is no unconditional right to defer the
settlement of the liability for at least twelve months
after the reporting period
The Group classifies all other liabilities as non-current.
Segment 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 Board of Directors that makes strategic
decisions.
36
Annual report 2018
Fair value measurement
The Group measures financial instruments such as
derivatives at fair value at each balance sheet date. The
Company has adopted IFRS 9 for the current year and
applied it retrospectively for the preceding financial year
however no material adjustments were identified between
the requirements of IFRS 9 and the methods applied by the
Company in the application of IAS 39.
Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either:
•
•
In the principal market for the asset or liabilityor
In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market must be
accessible by the Group. The fair value of an asset or a
liability is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming that market participants act in their economic
best interest.
The Group uses valuation techniques that are appropriate
in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of
unobservable inputs.
Revenue Recognition
Revenue is measured at the fair value of the consideration
received or receivable, and represents amounts
receivable for goods and services supplied, stated net of
discounts, returns and Value-Added Taxes (VAT).
Under IFRS 15, Revenue from Contracts with Customers, five
key points to recognise revenue have been assessed:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the
contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance
obligations in the contract; and
Step 5: Recognise revenue when (or as) the entity satisfies
a performance obligation.
Revenue” for reporting purposes. Revenue is recognised
when the license key is delivered to the customer, or when
all performance obligations have been achieved.
Revenue is received net of commission from the platforms
where the Group licenses their content. The gross
amount of revenue is recognised in revenue with the
corresponding commission portion recognised in cost of
sales.
Secondly, the Group develops educational VR content
on behalf of customers based on specific customer
requirements. This is considered “Other Revenue” for
reporting purposes. Such revenue is recognised on a
percentage completion basis unless there are significant
performance obligations that would require deferral
until such obligations are delivered. Stage of completion
is measured by reference to labour hours incurred to
date as a percentage of total estimated labour hours for
each contract. When the contract outcome cannot be
measured reliably, revenue is recognised only to the extent
that the expenses incurred are eligible to be recovered.
This is generally during the early stages of development
where the specifications need to pass through the
customer’s approval as part of the development.
The disaggregation of revenue, required under IFRS 15, has
been prepared on the basis of the two revenue streams
outlined above and is included in Note 3.
Government Grants
Government grants are recognised where there is
reasonable assurance that the grant will be received
and all attached conditions will be complied with. When
the grant relates to an expense item, it is recognised as
income on a systematic basis over the periods that the
related costs, for which it is intended to compensate,
are expensed. When the grant relates to an asset, it is
recognised as income in equal amounts over the expected
useful life of the related asset.
Property, Plant and Equipment
All property, plant and equipment is stated at historical
cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Cost may also include transfers from equity of any gains/
losses on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment.
The Group recognises revenue when the amount of
revenue can be reliably measured, it is probable that
future economic benefits will flow to the entity, and specific
criteria have been met for each of the Group’s activities,
as described below. The Group bases its estimates on
historical results, taking into consideration the type of
customer, the type of transaction and the specifics of each
arrangement.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost
of the item 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.
Where the Group makes sales relating to a future financial
period, these are deferred and recognised under ‘deferred
revenue’ on the Statement of Financial Position. The Group
currently has two revenue streams:
Firstly the Group is primarily focused on developing
proprietary educational VR content which is sold through
licences. This is considered “Showcase Experience
Depreciation on assets is calculated using the straight-line
method to allocate their cost less residual value over their
estimated useful lives, as follows:
Office equipment - 3 - 5 years
Furniture, fittings and equipment - 5 years
Leasehold improvements – over the life of the leased asset
37
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at the end of each reporting
period.
Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount, and
are recognised in the income statement.
The Group bases its impairment calculation on detailed
budgets and forecast calculations, which are prepared
separately for each of the Group’s CGUs to which the
individual assets are allocated. These budgets and
forecast calculations generally cover a period of five years.
A long-term growth rate is calculated and applied to
project future cash flows after the fifth year.
Intangible Assets
Research costs are expensed as they are incurred.
Development costs that are directly attributable to the
design and testing of identifiable and unique commercial
software controlled by the Group are recognised as
intangible assets when the following criteria are met:
•
it is technically feasible to complete the software
product so that it will be available for use and sale;
• management intends to complete the software
product and use or sell it;
• there is an ability to use or sell the software
•
product;
it can be demonstrated how the software product
will generate future economic benefits;
• adequate technical, financial and other resources
to complete the development and use or sell the
software product are available; and
• the expenditure attributable to the software
product during its development can be reliably
measured.
Directly attributable costs that are capitalised as part of
the software product include the software development
employee costs and subcontracted development costs.
Other development expenditure that does not meet
these criteria is recognised as an expense as incurred.
Development costs previously recognised as an expense
are not recognised as an asset in a subsequent period.
Computer software development costs recognised as
assets are amortised over their estimated useful lives,
which do not exceed 3 years and commences after the
development is complete and the asset is available for
use. Intangible assets are amortised over their estimated
useful lives based on the pattern of consumption of the
underlying economic benefits. Amortisation is included in
Administrative Expenses.
Impairment of non-financial assets
The Group assesses, at each reporting date, whether
there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing
for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is
the higher of an asset’s or CGU’s fair value less costs of
disposal and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of
those from other assets or groups of assets.
When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
Impairment losses of continuing operations are
recognised in the statement of profit or loss in expense
categories consistent with the function of the impaired
asset.
For assets, an assessment is made at each reporting date
to determine whether there is an indication that previously
recognised impairment losses no longer exist or have
decreased. If such indication exists, the Group estimates
the asset’s or CGU’s recoverable amount.
A previously recognised impairment loss is reversed only
if there has been a change in the assumptions used to
determine the asset’s recoverable amount since the last
impairment loss was recognised. The reversal is limited so
that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had
no impairment loss been recognised for the asset in prior
years.
Trade Receivables
Trade receivables are amounts due from customers
for licenses sold or services performed in the ordinary
course of business. If collection is expected in one year
or less (or in the normal operating cycle of the business if
longer), they are classified as current assets. If not they are
presented as non-current assets.
Trade receivables are recognised initially at fair value,
and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
The Group provides for known bad debts and other
accounts over a certain age in line with Group policy.
The realisation of the asset may differ from the provision
estimated by management.
Cash and Cash Equivalents
In the Statement of Cash Flows, cash and cash equivalents
comprise cash in hand and short term deposits. Bank
overdrafts are shown within borrowings in current liabilities
on the Statement of Financial Position.
Share Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net
of tax, from the proceeds. Where the issuance of the new
shares or options occurs in a subsequent period from
when the incremental costs are incurred these costs are
prepaid until the issuance takes place.
Where the Group purchases its own equity share capital
(treasury shares), the consideration paid, including any
directly attributable incremental costs (net of income
38
taxes) is deducted from equity attributable to the Group’s
equity holders, until the shares are cancelled or reissued.
Where such shares are subsequently reissued, any
consideration received, net of any directly attributable
incremental transaction costs and the related income tax
effects, is included in equity attributable to the Group’s
equity holders.
Share Based Payments
The Group has an equity settled employee incentive plan.
The cost of equity settled transactions with employees
is measured by reference to the fair value at the date at
which they are granted and is recognised as an expense
over the vesting period, which ends on the date on which
the relevant employees become fully entitled to the award.
Fair value is determined using an appropriate pricing
model. In valuing equity-settled transactions, no account
is taken of any vesting conditions, other than conditions
linked to the price of the shares of the Group. No expense is
recognised for awards that do not ultimately vest.
At each reporting date before vesting, the cumulative
expense is calculated, representing the extent to which
the vesting period has expired and management’s
best estimate of the achievement or otherwise of non-
market conditions number of equity instruments that will
ultimately vest. The movement in cumulative expense
since the previous reporting date is recognised in the
profit and loss within administration expenses, with a
corresponding entry in the balance sheet in share options
reserve.
Where the terms of an equity-settled award are modified
or a new award is designated as replacing a cancelled
or settled award, the cost based on the original award
terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the
remainder of the new vesting period for the incremental
fair value of any modification, based on the difference
between the fair value of the original award and the fair
value of the modified award, both as measured on the
date of the modification. No reduction is recognised if this
difference is negative. Where an equity-settled award
is cancelled, it is treated as if it had vested on the date
of cancellation, and any cost not yet recognised in the
Statement of Comprehensive Income for the award is
expensed immediately.
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.
Leases
The determination of whether an arrangement is
(or contains) a lease is based on the substance of
the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset
Annual report 2018
(or assets) and the arrangement conveys a right to use the
asset (or assets), even if that asset is (or those assets are)
not explicitly specified in an arrangement.
A lease is classified at the inception date as a finance lease
or an operating lease. A lease that transfers substantially
all the risks and rewards incidental to ownership to the
Group is classified as a finance lease.
An operating lease is a lease other than a finance lease.
Operating lease payments are recognised as an operating
expense in the statement of comprehensive income in
administrative expenses on a straight-line basis over the
lease term.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
carried at amortised cost; any difference between the
proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the
period of the borrowings, using the effective interest
method.
Fees paid on the establishment of loan facilities are
recognised as transaction costs of the loan to the extent
that it is probable that some or all of the facility will be
drawn down. To the extent that there is no evidence that
it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity
services, and amortised over the period of the facility to
which it relates.
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 end of the reporting
period.
Borrowing costs
General and specific borrowing costs directly attributable
to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial
period of time to get ready for their intended use or sale,
are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use or
sale.
Investment income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalisation. All other borrowing costs are
recognised in the income statement within finance costs
in the period in which they are incurred.
Convertible Financial Instruments
Convertible financial instruments issued by the Group
comprise convertible loan notes and convertible
redeemable Preference Shares that can be converted
to ordinary share capital at the option of the holder. The
number of shares to be issued may vary with changes in
their fair value.
39
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.
Research and development tax credit
The Group undertakes certain research and development
activities that qualify for the receipt of a research and
development (R&D) tax credit from the Irish tax authorities.
Such grants are recognised as a credit against related
costs on a cash receipts basis.
New standards, interpretations and amendments
adopted by the Company
On 1 January 2018 the Company adopted IFRS 9 – Financial
Instruments. No other new standards were adopted in the
year.
The Company has not applied the following new and
revised IFRSs that have been issued but are not yet
effective:
Application
Date of
Standard
(Periods
Commencing
on or after)
1 January 2019
Reference
Title
Summary
IFRS 16
Leases
Principles
for the
recognition,
measurement,
presentation
and disclosure
of leases
The adoption of these Standards and Interpretations is
not expected to have a material impact on the financial
information of the Company in the period of initial
application when they come into effect.
Convertible Financial Instruments (continued)
The derivative component arising from the conversion
option is recognised at fair value. The debt component
is recognised initially as the difference between the
fair value of the convertible financial instrument as a
whole and the fair value of the derivative. Any directly
attributable transaction costs are allocated against the
liability.
Subsequent to initial recognition, the debt component
of the convertible instrument is measured at amortised
cost using the effective interest rate method. The
derivative component is re-measured at fair value at each
subsequent balance sheet date.
Current and Deferred Income Tax
The tax expense for the period comprises current and
deferred tax. Tax is recognised in the income statement,
except to the extent that it relates to items recognised
directly in equity. In this case the tax is also recognised
directly in other comprehensive income or directly in
equity, respectively.
The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted
at the end of the reporting period in the countries where
the Group operates and generates taxable income.
Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts
in the Financial Statements. However, the deferred tax is
not accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business
combination that, at the time of the transaction, affects
neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that
have been enacted, or substantially enacted, by the end
of the reporting period and are expected to apply when
the related deferred income tax asset is realised, or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the
extent that it is probable that future taxable profit will be
available against which the temporary differences can be
utilised.
Deferred income tax assets and liabilities are offset
when there is a legally enforceable right to offset current
40
3. Segment Reporting
Revenue by Type
Showcase experience revenue
Other revenue
Total Revenue
4. Capital Management
2018
€
592,362
123,983
716,345
2017
€
592,617
31,870
624,487
For the purpose of the Company’s capital management, capital includes issued capital, convertible preference shares,
share premium and all other equity reserves. The primary objective of the Group’s capital management is to maximise
the shareholder value.
Group
Interest bearing loans and borrowings
Derivative financial liabilities
Trade and other payables
Less: cash and short term deposits
Net Debt
Equity
Total Equity
Capital and net debt
5.Other Income
Industry awards proceeds
2018
€
-
-
195,194
(3,485,186)
(3,289,992)
4,296,872
4,296,872
1,006,880
2018
€
-
2017
€
907,180
209,348
383,019
(103,577)
1,395,970
(664,564)
(664,564)
731,406
2017
€
60,333
41
Annual report 2018 6.a Expenses by nature
Depreciation charges
Amortisation expense
Operating Lease Payments
Foreign Exchange (Gain) / Loss
Other Expenses
Wages and salaries capitalised
Other expenses capitalised
Total cost of sales and administrative expenses
Disclosed as:
Cost of sales
Administrative expenses
Total cost of sales and administrative expenses
2018
€
49,984
175,300
36,839
(35,027)
2,956,001
3,183,097
(586,937)
(109,122)
2,487,038
239,701
2,247,337
2,487,038
6.b Auditor Remuneration
Services provided by the Company’s auditor
During the year, the Company obtained the following services from the Company’s auditor:
Fees payable to the Company’s auditor for the audit of the financial
statements
Tax
Other
2018
€
42,173
11,688
40,776
2017
€
36,621
-
25,115
7,725
1,478,054
1,547,515
(313,501)
(57,013)
1,177,001
300,143
876,858
1,177,001
2017
€
56,000
-
-
42
7. Employees
Employee Benefit Expense
Wages and salaries
Social security costs
Defined contribution pension costs
Share option expense
Capitalised employee costs
Total Employee Benefit Expense
2018
€
1,380,687
136,910
8,961
30,145
(586,937)
969,766
2017
€
731,186
62,887
-
20,180
(313,501)
500,752
Average Number of People Employed
2018
2017
Average number of people (including executive Directors) employed:
Operations
Administration
Marketing
Total Average Headcount
22
3
2
27
15
2
-
17
43
Annual report 2018 8. Directors remuneration
Below is the Directors’ remuneration for the year ended 31 December 2018 and for the year ended 31 December 2017:
31 December 2018
Group
Directors’ fees
paid
Pension benefits
paid
Options issued
Total
Executive Directors
David Whelan
Sandra Whelan
Séamus Larrissey
Non-executive Directors
Richard Cooper
Michael Boyce
Tony Hanway
€
€
114,181
85,807
86,500
96,077
37,143
23,807
2,017
2,100
2,833
-
-
-
€
-
-
4,779
€
116,198
87,907
94,112
13,917
109,994
-
-
37,143
23,807
443,515
6,950
18,696
469,191
Group
Directors’ fees
Pension benefits
Options issued
31 December 2017
Executive Directors
David Whelan
Sandra Whelan
Séamus Larrissey
Non-executive Directors
Richard Cooper
Michael Boyce
Tony Hanway
€
70,000
60,000
34,638
-
-
-
At 31 December 2018
164,638
€
-
-
-
-
-
-
-
€
-
-
2,944
-
-
-
Total
€
70,000
60,000
37,582
-
-
-
2,944
167,582
The options issued are a non-cash amount and are accounted for in line the treatment of the other share options issued
to employees under IFRS 2. Further notes on Share Based Payments are included in Note 22.
During the year ended 31 December 2018, Richard Cooper received a fee in relation to the IPO transaction of £50,000.
During the year ended 31 December 2018, Michael Boyce received a fee in relation to consultancy
services provided to the Company, separate to his role as a Non-Executive Director of £12,031.
44
9. Extinguishment Costs
Legal and professional fees paid on behalf of redeemable secured loan note
holders and cumulative redeemable preference shares holders
Monitoring fee and interest paid post conversion
Warrant Costs
Total Extinguishment Costs
2018
€
51,500
41,820
174,651
267,971
2017
€
-
-
-
-
As part of the reorganisation process which occurred prior to the IPO all loan note holders and cumulative redeemable
preference share note holders converted their holdings into ordinary shares. During this process the Group agreed to
pay:
• all interest that would have accrued on these loan notes for the 12 month period from the date of Admission
had such loan notes remained in issue.
• all monitoring fees that would have accrued for the 12 months period from the date of Admission had such
agreements not been terminated.
The group also issued warrants to the loan note holders and cumulative redeemable preference shareholders over such
number of new Ordinary Shares in the Company as is equal to 3 per cent. of the issued Ordinary Shares at Admission,
exercisable at a 50 per cent. premium to the Issue Price expiring 36 months from Admission.
10. IPO Transaction Costs
Legal and professional fees
Total IPO Transaction Costs
2018
€
237,202
237,202
2017
€
202,940
202,940
Included in Other Reserves
596,212
-
The transaction costs relate to the admission of the Group to the AIM market of the London Stock Exchange and the ESM
market of the Irish Stock Exchange on 12 March 2018.
45
Annual report 2018 11. Finance Costs
Interest expense:
- Notional interest on non-current borrowings
- Interest payable on convertible loan notes
- Dividend on redeemable convertible preference shares
- Bank charges
Total finance costs
2018
€
-
27,105
1,356
1,516
29,977
2017
€
34,472
14,387
5,219
264
54,342
Fair value (loss) / gain on derivative financial liability
(2,638,063)
125,764
The fair value loss on derivative financial liabilities arose in 2018 from the conversion of convertible debt and preference
shares to ordinary equity in Immersive VR Education Limited prior to its acquisition by the Group.
12. Income Tax Expense
Current tax:
Current tax on loss for the year
Total current tax
Deferred tax (Note 25)
Income Tax Expense
2018
€
-
-
-
-
-
2017
€
-
-
-
-
The tax assessed for the year differs from that calculated using the standard rate of corporation tax in Ireland (12.5%). The
differences are explained below:
2018
€
2017
€
Loss Before Tax
(4,943,906)
(623,699)
Tax calculated at domestic tax rates applicable to loss in
Ireland of 12.5%
(617,988)
(77,962)
Tax effects of:
- Depreciation in excess of capital allowances
- Expenses not deductible for tax purposes
- Tax losses for which no deferred tax asset was recognised
Total tax expense
4,033
406,488
207,467
-
3,178
29,572
45,212
-
46
13. Earnings per share (EPS)
Loss attributable to equity holders of the Group:
Continuing Operations
Weighted average number of shares for Basic EPS
Basic loss per share from continuing operations
14. Property, Plant & Equipment
2018
€
(4,943,906)
193,136,406
(0.026)
Leasehold
improvements
Fixtures,
fittings and
equipment
Office
Equipment
€
€
2017
€
(623,699)
1
-
Total
€
49,053
56,326
105,379
52,225
45,505
38,663
84,168
46,070
130,238
157,604
10,453
32,215
42,668
43,972
86,640
41,500
43,598
11,458
36,621
48,079
49,984
98,063
57,300
59,541
€
-
15,601
15,601
4,740
20,341
-
3,284
3,284
4,607
7,891
12,317
12,450
3,548
2,062
5,610
1,415
7,025
1,005
1,122
2,127
1,405
3,532
3,483
3,493
Group
Cost of Valuation
At 1 January 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
Depreciation
At 1 January 2017
Charge (note 6)
At 31 December 2017
Charge (note 6)
At 31 December 2018
Net Book Amount
At 31 December 2017
At 31 December 2018
Depreciation expense of €49,984 (2017: €36,621) has been charged in ‘Administrative Expenses’.
47
Annual report 2018 15. Intangible Assets
Group
Cost of Valuation
At 1 January 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
Amortisation
At 1 January 2017
Charge
At 31 December 2017
Charge
At 31 December 2018
Net Book Value
At 31 December 2017
At 31 December 2018
Software in
development
costs
€
65,277
370,514
435,791
696,059
1,131,850
-
-
-
175,300
175,300
435,791
956,550
Total
€
65,277
370,514
435,791
696,059
1,131,850
-
-
-
175,300
175,300
435,791
956,550
The software being developed relates to the creation of three virtual reality experiences and an online virtual learning
and corporate training platform.
ENGAGE is an online virtual learning and corporate training platform currently in development by the Company. A
desktop version was released in December 2018 and a mobile version is expected in H1 2019. Amortisation will commence
once the mobile version is launched.
Titanic VR which is available for sale across all major VR capable platforms since November 2018 has commenced being
amortised in the period.
Raid on the Ruhr and a Space Shuttle experience are currently in development with expected release during 2019. They
are currently not being amortised.
Amortisation expense of €175,300 (2017: €Nil) has been charged in ‘Administrative Expenses’.
An impairment review was carried out at the balance sheet date. No impairment arose.
48
16. Investments in Subsidiaries
Company
At Incorporation – 13 October 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
€
-
-
-
15,028,809
15,028,809
Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid.
On 12 March 2018 the Company has acquired all of the issued capital of Immersive VR Education Limited for a
consideration of €15,000,000 which was settled by issuing 133,089,739 Ordinary Shares in the Company. The Company
incurred expenses totalling €28,809 as part of the transaction.
Name
Country of
incorporation and
residence
Immersive VR Education Limited
Ireland
Nature of business
Virtual Reality
Technology
Proportion of equity
shares held by the
company
100%
This subsidiary undertaking is included in the consolidation. The proportion of the voting rights in the subsidiary
undertaking held directly by the Parent Company does not differ from the proportion of ordinary shares held.
17. Trade and Other Receivables
Group
Company
2018
€
2017
€
Trade receivables
180,129
105,450
Less: provision for impairment of
receivables
-
-
Trade receivables - net
180,129
105,450
2018
€
-
-
-
Amounts due from related parties
Prepayments
Other debtors
VAT
-
178,650
4,991
30,343
394,113
-
5,058,589
107,778
23,830
1,257
53,062
-
25,198
238,315
5,136,849
2017
€
-
-
-
-
-
18,750
-
18,750
As at 31 December 2018, trade receivables of €180,129 (2017: €105,450) were deemed fully recoverable. No bad debt
provision charge was incurred during 2018 (2017: €Nil)
49
Annual report 2018
17. Trade and Other Receivables (continued)
The carrying amounts of the Company’s trade and other receivables are denominated in the following currencies:
Group
Company
2018
€
53,028
127,101
2017
€
20,821
84,629
180,129
105,450
2018
€
-
-
-
Euro - Neither past due nor impaired
Dollar - Neither past due nor
impaired
18. Cash and short-term deposits
Cash at bank and on hand
Group
Company
2018
€
3,485,186
3,485,186
2017
€
103,577
103,577
2018
€
753,090
753,090
2017
€
-
-
-
2017
€
6,250
6,250
19. Issued Share Capital and Premium
At 01 January 2017
Ordinary Shares Issued
At 31 December 2017
Shares issued as consideration for
reverse merger
Number of
shares
Ordinary shares
Share premium
Total
-
1
1
€
-
-
-
€
-
-
-
€
-
-
-
133,089,739
133,090
14,866,910
15,000,000
Ordinary Shares Issued
60,046,666
60,046
6,720,629
6,780,675
At 31 December 2018
193,136,406
193,136
21,587,539
21,780,675
On 12 March 2018 the Company acquired Immersive VR Education Ltd for a purchase price of €15 million through the issue
133,089,739 new ordinary shares of €0.001 and became the legal parent of the Group. On 12 March 2018 the Company
listed on London’s AIM market and Dublin’s ESM market. As part of the Admission process, the Group raised £6 million
(€6,772,773) before expenses, through an oversubscribed placing of 60,000,000 new ordinary shares at a placing price of
£0.10 (€0.1127) per share.
50
20. Other Reserves
At 1 January 2017
Transfer to derivative liabilities
Transfer to other reserves arising from accounting treatment of
acquisition of subsidiary
Share option expense
At 31 December 2017
At 1 January 2018
Share issue costs
Acquisition of a subsidiary
Share option expense
At 31 December 2018
21. Retained Earnings
At 1 January 2017
Loss for the year
At 31 December 2017
At 1 January 2018
Loss for the year
At 31 December 2018
Group
€
104,915
(104,915)
137,100
20,180
157,280
157,280
Company
€
-
-
-
-
-
-
(596,212)
(596,212)
(11,263,644)
387,847
(11,314,729)
Group
€
(198,145)
(623,699)
(821,844)
(821,844)
(4,943,906)
(5,765,750)
-
383,849
(212,363)
Company
€
-
-
-
-
(687,587)
(687,587)
51
Annual report 2018
22. Share Based Payments
During the year ended 31 December 2018, VR Education Holdings plc introduced a share-based payment scheme
for employee remuneration (“the 2018 Scheme”) to replace the scheme previously in operation within Immersive VR
Education Limited (“the 2016 Scheme”). The 2018 Scheme and the 2016 schemes are classified equity settled share based
payment plans. Recipients under the scheme are awarded options over ordinary shares of the Company.
On the 12 March 2018, the options under the 2016 Scheme were cancelled as part of the Capital Restructure and Listing
process and replaced with options under the 2018 Scheme under the equivalent terms and conditions as the 2016
scheme, and a stock split which gave rise to the issue of 740 shares for every 1 share held. The options granted under the
2016 Scheme had vesting periods of up to 36 months. The replacement of the options did not give rise to any additional
income statement expense in 2018.
There were 311,108 employee options granted during 2018 at an exercise price of €0.135 per share and these vest subject
to continued service by the employee over a period of 3 years. Options expire at the end of a period of 7 years from the
Grant Date or on the date on which the option holder ceases to be an employee.
Share-based payment expense with Director
On 12 March 2018, VR Education Holdings plc granted options to purchase 1m ordinary shares to Richard Cooper, the
Chairman of the Company. The options vest if the market capitalisation of the Company equals 2.5 times the market
capitalisation on admission to listing for a consecutive period of 30 days. Except in the event of a change in control (see
below) the options, which are exercisable at a price of £0.0001, cannot be exercised for a period of two years and expire
on 12 March 2023. The market capitalisation requirement is a “market condition” under IFRS 2 and the valuation of the
option, which amounted to €0.668, takes this market condition into account.
In the event of a change in control, in the two years after admission to listing, the options are exercisable at prices
ranging from £0.0001 to £0.10. The change in control scenarios gave rise to option values of €0.018 - €0.112.
The movement in employee share options and weighted average exercise prices are as follows for the reporting periods
presented:
2018 Scheme 2016 Scheme
At 1 January
2018
-
2018
4,208
Capital restructure and Listing process
3,113,920
(4,208)
Granted during period
At 31 December
Options outstanding at 31 December
Number of shares
Weighted average remaining contractual life
Weighted average exercise price per share
-
-
-
1,311,108
4,425,028
4,425,028
3.75 years
€0.028
Range of exercise price
€0.0001 - €0.135
Exercisable at 31 December
Number of shares
Weighted average exercise price per share
1,997,556
€0.026
2017
-
-
4,208
4,208
4,208
4.3 years
€19.21
€19.21
893
€19.21
52
22. Share Based Payments (continued)
No options were exercised during the period. The weighted average exercise price of options granted during the period
was €0.032 (2017: €19.21). The expense recognised in respect of employee share based payment expense and credited to
the share based payment reserve in equity was €30,144 (2017: €20,180).
Advisor Warrants
As part of the listing process and as set out in the admission document, the Company issued warrants over 5,018,328
shares at an exercise price of £0.15, subject to expiry on various dates up to 12 March 2023. The warrants were valued
under the Black Scholes model. The expense recognised during the period was €162,871 of which €112,381 was recognised
in the income statement and €50,490 in equity.
Investor Warrants
As part of the arrangements for the listing process and as set out in the admission document, the Company issued
warrants over 5,794,092 shares at an exercise price of £0.15, subject to expiry on 12 March 2023. The warrants were valued
under the Black Scholes model. The expense of €174,651 was recognised in the income statement during the period.
Investor Warrants (continued)
The Company has measured the fair value of the services received as consideration for equity instruments of the
Company, indirectly by reference to the fair value of the equity instruments. The table below sets out the options and
warrants that were issued during the period and the principal assumptions used in the valuation.
Employee
Director
Advisor
Investor
Number of options / warrants
311,108
1,000,000
5,018,328
5,794,092
Share price at date of grant
£0.11
£0.10
Grant date
Vesting period
Exercise price
Volatility
Option life
Dividend yield
Risk free investment rate
26 Apr 18
12 Mar 18
12 Mar 18
12 Mar 18
3 years
2 years
-
£0.10
£0.15
€0.135
£0.001-£0.10
57%
54.4-59.2%
54.4-57.3%
7 years
5 years
22 months – 5
years
0%
0.14%
0%
0%
0.5-1.16%
0.8-1.16%
-
£0.10
£0.15
57.3%
3 years
0%
0.87%
Fair value per option at grant date
€0.058
€0.018-€0.112
€0.018-€0.030
€0.030
Weighted average remaining
contractual life in years
6.3
4.2
2.7
2.2
53
Annual report 2018 23. Trade and Other Payables
Trade Payables
PAYE/PRSI
Redeemable shares
Accrued Expenses
Group
Company
2018
€
28,263
46,923
-
120,009
195,195
2017
€
18,225
45,983
25,000
293,811
383,019
2018
€
9,169
16,362
2017
€
-
-
-
25,000
12,492
38,023
-
25,000
Terms and conditions of the above financial liabilities:
• Trade payables are non-interest bearing and are normally settled on 30-day terms
• PAYE/PRSI payables are non-interest bearing and are normally settled on 30-day terms
• Accrued expenses are non-interest bearing are settled over varying terms throughout the year
24. Non-current Liabilities
Group
Company
Borrowings
Redeemable convertible secured
loan notes
Cumulative Convertible Redeemable
Preference Shares
Total Borrowings
Derivative financial liabilities on
conversion feature of
redeemable secured loan notes and
cumulative redeemable
preference shares
Total Non-current Liabilities
2018
€
-
-
-
-
-
2017
€
776,155
131,025
907,180
209,348
1,116,528
2018
€
2017
€
-
-
-
-
-
-
-
-
-
-
Immediately prior to the acquisition of Immersive VR Education Limited (“IVRE”) by the Company on 12 March 2018 the
existing redeemable secured loan notes and cumulative redeemable preference shares with IVRE were redeemed for
Ordinary Equity of IVRE.
54
24. Non-current Liabilities (continued)
The 2016 Kernel Loan Agreement which resulted in Kernel holding €240,000 in redeemable secured loan notes was
redeemed at €19.21 for 12,493 ordinary shares in IVRE. As part of the acquisition of IVRE by the Company, Kernel were
issued 9,244,820 ordinary shares in the Company, using a share swap ratio of 740 to 1.
The 2017 Kernel Loan Agreement which resulted in Kernel holding €400,000 in redeemable secured loan notes was
redeemed at €83.916 for 4,767 ordinary shares in IVRE. As part of the acquisition of IVRE by the Company, Kernel were
issued 3,527,580 ordinary shares in the Company, using a share swap ratio of 740 to 1.
The 2017 Suir Valley Ventures Loan Agreement which resulted in Suir Valley Ventures holding €288,000 in redeemable
secured loan notes was redeemed at €19.21 for 14,992 ordinary shares in IVRE. As part of the acquisition of IVRE by the
Company, Suir Valley Ventures were issued 11,094,080 ordinary shares in the Company, using a share swap ratio of 740 to 1.
The 2017 Enterprise Ireland Agreement which resulted in Enterprise Ireland holding €250,000 in Cumulative Convertible
Redeemable Preference Shares was redeemed at €19.21 for 13,014 ordinary shares in IVRE. As part of the acquisition of IVRE
by the Company, Enterprise Ireland were issued 9,630,360 ordinary shares in the Company, using a share swap ratio of
740 to 1.
Derivative financial liabilities on
conversion feature of
redeemable secured loan notes and
cumulative redeemable
preference shares
Group
Company
2018
€
Balance as at beginning of period
209,348
Transfer from other reserves
Movement in current period
Redemption of loan notes and
preference shares
-
2,638,063
(2,847,411)
2017
€
-
104,915
104,433
-
Balance as at end of period
-
209,348
2018
€
2017
€
-
-
-
-
-
-
-
-
-
-
25. Deferred Tax
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related
tax benefit through future taxable profits is probable. The Company did not recognise deferred income tax assets of
€410,683 (2017: €79,597) in respect of losses and depreciation in excess of capital allowances amounting to €3,285,467
(2016: €636,773) that can be carried forward against future taxable income.
55
Annual report 2018 26. Related Parties
During the year the Directors received the following emoluments:
Directors
2018
€
Group
2017
€
Aggregate emoluments
450,465
164,638
Share option expense
18,696
469,161
2,944
167,582
2018
€
406,787
18,696
425,483
Company
2017
€
-
-
-
Included in the above is an amount of €96,077 (2017: €Nil) paid to Luclem Estates and Advisory Limited, a company in
which Richard Cooper, a director of the Company, is also a director. These fees relate to Richard Cooper’s consultancy
services to the Company. As at 31 December 2018 €Nil was outstanding.
27. Operating Leases
The Company leases a motor vehicle and office space under non-cancellable operating lease agreements with lease
terms between three years and four years nine months.
The lease expenditure charged to the income statement during the year is disclosed in Note 6.
Future minimum rentals payable under non-cancellable operating leases as at 31 December are, as follows:
Motor Vehicles
Within one year
After one year but not more than five
years
Land and buildings
Within one year
After one year but not more than five
years
2018
€
6,570
3,285
Group
2017
€
6,570
9,854
9,855
16,424
2018
€
25,000
53,125
Group
2017
€
25,000
78,125
78,125
103,125
Company
2017
€
-
-
-
Company
2017
€
-
-
-
2018
€
-
-
-
2018
€
-
-
-
56
28. Ultimate controlling party
The Directors believe that there is no ultimate controlling party as no one shareholder has control of the Company.
57
Annual report 2018 58
Notes
Annual report 2018
59
VR Education Holdings PLC
Unit 9 Cleaboy Business Park
Old Kilmeaden Road
Waterford
X91 Ax83
Ireland
Tel: +353-51-585-837
Web: immersivevreducation.com
Email: info@immersivevreducation.com
60