Annual Report
and Financial
Statements
for the Year Ended
31 December 2019
Registered Number: 613330
1
Annual report 2019
2
Annual report and financial statements
For the year ended 31 December 2019
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
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF VR EDUCATION HOLDINGS PLC
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
1
2
3
6
7
9
11
12
20
28
29
30
31
32
33
34
35
3
Annual report 2019
Company information
Directors
Secretary
Registered office
Non-Executive Chairman - Richard Cooper
Chief Executive Officer - David Whelan
Chief Operating Officer - Sandra Whelan
Chief Financial Officer - 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
Registered number
613330
Bankers
Auditor
Nominated adviser
Allied Irish Bank
Dunmore Road
Waterford
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London
E14 4HD
United Kingdom
Cairn Financial Advisers LLP
Cheyne House
62-63 Cheapside
London
EC2V 6AX
United Kingdom
Euronext growth advisor J&E Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
Brokers
Shard Capital Partners LLP
23rd Floor, 20 Fenchurch Street
London
EC3M 3BY
United Kingdom
J&E Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
1
Chairman’s
statement
for the year ended 31 December 2019
I am pleased to present the Annual Report and Financial
Statements of VR Education Holdings PLC, a company
incorporated in the Republic of Ireland, for the year ended
31 December 2019 (‘FY-2019’).
Overview of the year
This is the second set of Financial Statements I am proud
to present to shareholders following the successful
fundraising and IPO in March 2018.
Revenues in FY-2019 grew by 43% to €1.0 million (FY-2018:
€0.7 million) generating a gross profit margin of 61% and
gross profit of €622k (FY-2018: €476k).
Review of the business
VR Education 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.
Following the commercial launch of the ENGAGE platform
(the Group’s proprietary VR education platform), in
December 2018, the Group has actively developed and
promoted this against technological and commercial
headwinds, the latter mainly associated with Brexit in the
UK. Nevertheless, the perseverance of the management
team has led the Group to recently sign, among others,
two partnerships with HTC Corporation and Victory XR,
based in Taiwan and the US respectively.
The Group also continues to produce award winning
standalone content to showcase the potential of
Virtual Reality / Augmented Reality (‘VR/AR’) as a tool for
educational purposes. The 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 was
released on the Oculus Rift and the HTC Vive back in 2016. A
High Definition version of this experience was subsequently
launched in November 2018. This title has generated in
excess of €1.6 million in revenues since its launch to the
year end, one of the few VR titles that has broken the €1.0
million revenue mark. Titanic VR and Shuttle Commander,
launched in Q4 2018 and Q4 2019 respectively, continue to
perform well and have together generated €0.6 million in
revenues since their launch.
COVID-19
COVID-19 has had a significant impact on many
companies across the globe and the Group is still feeling
the effects of this. Prior to the mandated lockdown put
in place in the Republic of Ireland, the Group made the
prudent decision for all of its employees to work remotely
to ensure their safety. This action has not had any
negative effect on productivity within the Group as all our
employees have remained dedicated and professional
throughout this difficult period.
The global COVID-19 pandemic has generated significant
demand for VR solutions and there have been high levels
of interest for conferencing and collaboration tools. The
ENGAGE platform is the ideal tool to meet the needs of the
remote working world and the Group has been working
hard since the year end to ensure the platform is available
to those who want to use it.
Future developments in the business
Since the year end, the Group has largely focused on
expanding its distribution of the ENGAGE platform into the
US and Asian markets. A number of deals have been closed
in the US with many more at varying stages in the sales
cycle. Most progress has been made in the Asian market,
where the HTC Vive Ecosystem Conference was held
virtually inside the ENGAGE platform in conjunction with
HTC Corporation (‘HTC’) on 19 March 2020 and the success
of this event has created a significant number of further
opportunities for the Group.
Following the HTC Vive Ecosystem Conference, a
commercial agreement was entered into with HTC to
grant them exclusive rights to resell the ENGAGE platform
in Greater China on a revenue share basis, with a
guaranteed minimum revenue each year for the Group
from HTC. Separately, in June 2020, HTC invested €3.0
million at a €12.0 million pre-money valuation to further the
development of ENGAGE and to facilitate increased sales
and marketing of the platform.
Demand for the Group’s VR showcase experiences,
comprising Apollo 11 VR, Titanic VR and Shuttle Commander,
remain in line with management’s expectations with a new
experience expected to launch in H2-2020.
The recent impetus in global demand for the Group’s core
product coupled with a strengthening of our balance
sheet following our strategic partnership with HTC,
provides the Board with confidence about the Group’s
prospects for FY-2020 and beyond.
Your executive directors have done an outstanding job
in maturing the company, upselling its products and
securing vital commercial partnerships. They have of
course been greatly aided by the tireless efforts of a
talented pool of staff, and I would like to extend my thanks
to all of them.
Richard Cooper
Chairman
15 June 2020
2
Annual report 2019 Chief Executive’s
review
for the year ended 31 December 2019
Review of the Year
2019 has allowed VR Education to identify and overcome
many hurdles which had subdued growth to date. I
believe the Group is now well placed to become a leader
in immersive communications. The COVID-19 pandemic
has transformed the Group’s fortunes as businesses,
corporations and educational institutes globally
are now seeking better alternatives to video-based
communications due to limitations with collaborative
tasks and the drawbacks of larger group communications
via video as a medium. Our recently announced strategic
partnership with HTC will ensure that the Group has
continued support for marketing, sales and business
development as HTC will sell the ENGAGE platform
exclusively in Greater China and non-exclusively in the
rest of the world. This partnership will serve to further both
companies’ objectives and goals.
ENGAGE Hardware Milestone
2019 was also a transformative year for the Group as some
key hardware hurdles were overcome. ENGAGE became
available on standalone devices such as the Oculus Quest,
Pico VR and Vive Focus. This was of critical importance
as the previous two years proved that pitching a virtual
training solution or communications tool to corporations
using PC based equipment would not succeed as a major
limiting issue for most companies is the ease of use of the
VR device. Up to recently, demos would involve setting up
a PC or laptop with multiple cables before ENGAGE could
be used. This often proved cumbersome for potential
customers with the perception that users would need
some technical knowledge to achieve a good end-user
experience. During early 2019, the ENGAGE development
team gained access to multiple standalone devices which
allowed them to port ENGAGE to work cross- platform
across all standalone devices and PC-based devices. For
the first time our business developers could simply pull a
headset out of their bag and place the customer into the
experience with minimum fuss.
XR Finally Becoming Mainstream
In my opinion, it cannot be understated how important
standalone devices are to the success of the Extended
Reality “XR” industry as a whole and manufacturers like
Facebook/Oculus have not been able to keep up with
demand. Sales of the Oculus Quest headset have suffered
from retail shortages since its release in March 2019 and
continued shortages due to manufacturing issues caused
by COVID-19 as many components are manufactured in
China. The Facebook/Oculus headset has sold extremely
well and could possibly have sold more but sales were
limited to one per person at retail stores and devices
were not made available to business or education users
as almost all stock was diverted to retail stores for the
2019 holiday period. The impact of Covid-19 on global
questioning of outsourcing manufacturing to China
remains uncertain, but a wider manufacturing base is
regarded by us as highly positive.
Facebook/Oculus ISV Programme
In October 2019, the Group’s ENGAGE platform was selected
by Facebook to become part of its ISV programme
which works with enterprise developers and software
companies to engage with Oculus in order to accelerate
customer adoption of VR solutions built for Oculus
enterprise products. As a result, following the roll-out of
Oculus for Business which was scheduled for early 2020,
VR Education’s ENGAGE platform will, for the first time, be
available via a special portal for Oculus enterprise clients
to access and connect with. In addition, the Group will
be one of only a few select developers who will be able
to provide services using Facebook equipment as well as
receiving additional support from them. This programme
was originally set for release in early 2020 however due to
the effect of COVID-19 on manufacturing and the limited
number of devices available for enterprise users we have
not seen a full deployment of this programme to date and
dependent on progress by Facebook we hope it will now
happen in H2-2020.
Platform Agnostic
Facebook/Oculus was not the only hardware manufacturer
to release standalone devices during 2019 with HTC and
Pico seeing releases of comparable headsets in mid-2019
and early 2020 respectively. The ENGAGE team worked hard
to support both the HTC Vive Focus Plus and Pico Neo 2
and the platform now has parity across all devices. Being
platform agnostic, ENGAGE has mitigated some of the key
challenges with resourcing devices however, stock is still
limited across the world as manufacturing is only starting
to recommence as China’s factories return to work post
COVID-19 lockdown.
Showcase Experiences
During 2019 the Group continued to see strong sales of
its showcase experiences Apollo 11 VR and Titanic VR on
various VR platforms. In the second half of 2019 the Group
released its third showcase experience on PlayStation VR
named “Shuttle Commander” which puts you in control for
some of the Shuttle’s most famous missions.
Sales continued strongly across all platforms and the
Group plans to release Shuttle Commander on PC- based
VR devices and the Oculus Quest later in FY20.
In May 2019 the Group announced the signature of a deal
with the US Rocket and Space Centre in Alabama for
the installation of Apollo 11 VR as a ticketed exhibit. This
exhibit proved immensely popular with visitors and on
conclusion of a successful trial period, the Group secured
a twelve month extension of this deal which was signed in
December 2019.
3
Post year end highlights
COVID-19 Effect
Throughout 2019 the ENGAGE platform became more
popular with educators and corporations using it for
small meetings and events. The ENGAGE user base
grew significantly in the latter part of 2019 as users got
access to standalone devices and attended events held
inside ENGAGE. In the early part of 2020, as the COVID-19
pandemic took hold in China and Italy, the president of HTC
China, Alvin Wang Graylin, attended one such event being
held inside the ENGAGE platform and decided to contact
VR Education.
At the time, HTC had just recently cancelled its annual Vive
Developer Conference, which was due to be held on the
Chinese mainland in March 2020 and HTC was seeking a
way to provide the event virtually without the limitations
of standard video-based platforms. The ENGAGE team
worked very closely with the HTC team in China for
several weeks and on 19 March 2020 the complete HTC
Vive Ecosystem Conference was held inside the ENGAGE
platform with over one thousand attendees logged into
the platform and over 1.1 million viewers watching the
live stream throughout China. The HTC Vive Ecosystem
Conference was a great success as ENGAGE allowed
users from within China to connect with the outside world
in a fully networked virtual environment with keynote
speakers from Qualcomm, China Mobile, Nvidia, X Prize and
HTC to name a few. Since this event, the Group has been
inundated with requests for virtual events from various
corporations and event groups and it is anticipated that
the Group will see a growing market for this type of service
in the future.
A huge number of large physical events have been
cancelled due to the worldwide COVID-19 pandemic and,
as a result of this continued disruption, the Group expects
that the event space will evolve to a scenario where
smaller groups will attend the physical event and there
will be increased demand for virtual services. Further
opportunity for these types of services will arise with global
business travel anticipated to reduce significantly, remote
worker employment to become more normalised and the
ever-increasing home school market to see accelerated
growth in life under COVID-19. The world has been forced
online to complete simple tasks such as meetings, classes
and events and people are now seeing the limitations of
using current communication systems which broadcast
video and audio.
Running a video conference call with more than six people
is difficult as participants talk over each other quite often
and users can become disengaged with the format as
they sit and watch video. Running virtual meetings and
events inside the ENGAGE platform is as close as you can
get to real life by sitting in a virtual room with virtual people
interacting in a natural way.
ENGAGE also has major benefits with very low bandwidth
requirements and its spatial recording systems allowing
for the replay of events as if they were happening live and
allowing users to move within the recording if needed. As
a comparison, an hour-long piece of content with up to
50 users all inside the ENGAGE platform being spatially
recorded is only 80MB in size, whereas, an hour-long video
recording from competitors like Zoom or Skype will be over
1GB for any type of quality recording.
Overall, it is the Group’s strong belief that following
COVID-19, the world will be a very different place with
business travel becoming less common, increasing
numbers of remote workers and a sharp increase in
the home school market. The Group also believes the
ENGAGE platform provides users with a better alternative
to services like Microsoft Teams, Skye, Zoom and Adobe
Connect and VR Education is now in a strong place to
implement its plans, with strategic partnerships being
made which place the Group in a prime position for this
new era of global communications.
HTC Investment / Partnership
Due to the success of the virtual Vive Ecosystem
Conference in March, HTC wanted to create a stronger
relationship with VR Education and offered the Group a
partnership which included not only investment but a
strategic commercial agreement. HTC has been one of
the global leaders in the VR hardware space over the past
five years, releasing many products in the VR industry.
VR Education believes that working alongside a leading
VR technology Company such as HTC, achieving closer
integration between teams on hardware and software
development, means that the Group and the ENGAGE
platform will stay ahead of the curve and its competitors
when it comes to the latest in innovation and incorporating
the next generation technologies.
The commercial partnership ensures that VR Education,
which has primarily been a software technology company,
now has sales, marketing and business development
support from HTC with HTC having exclusivity in China
and a non-exclusive agreement in place for the rest of the
world. This agreement includes a revenue share model
for revenue generated globally with a fixed minimum
quarterly payment amount of €75,000 per quarter,
commencing from Q1 2021.
Victory XR Content Partnership
In April 2020, VR Education and VictoryXR agreed terms of
a revenue share agreement, in which VictoryXR will import
its extensive content library onto the ENGAGE platform and
provide its services remotely to school children across the
US. VictoryXR specialises in US-based science curriculum
content and virtual animal dissections, both in the VR and
AR space. To date VictoryXR has created more than 240
unique VR and AR learning experiences spanning more
than 50 different learning units.
Students using the ENGAGE platform will be both in
physical schools and home schooled, including those
whose access to traditional schooling has been impacted
by COVID-19 due to lockdown. Qualified educators will run
live virtual classes via ENGAGE and additional educational
content produced by VictoryXR will be available for replay
via the ENGAGE platform.
4
Annual report 2019 Future Trading and Outlook
Many different aspects have come together over the
past six months to accelerate the adoption of the ENGAGE
platform. Some aspects were expected and planned
for. However, COVID-19 has accelerated all areas of the
business in a way no one could have predicted just a few
months ago.
When the Group looks at what has happened over the past
six months, we see that VR mass adoption is finally starting
to take place due to standalone devices becoming
increasingly popular.
Telecommunications companies are also taking a vested
interest in pushing XR to the masses as they seek to upsell
their 4G customers to 5G subscriptions and see XR as a
way to push this forward. To this end VR Education has
been working with Deutsche Telekom and Qualcomm
Technologies with a partnership announced in December
2019 as new devices are set to be introduced to the market
soon.
The Group now has a content partner with VictoryXR in the
education space and a strong strategic partnership with
HTC.
The COVID-19 pandemic has caused global disruption
in all walks of life and forced the world to work online. We
expect companies and educational institutes will seek
to drastically reduce costs post COVID-19 with physical
events, workplaces and even schools becoming fully
digital in the months and years to come. The Group
believes the ENGAGE platform is perfectly positioned to
meet the needs of this new world as the seeds which
were planted over the previous three years are now
starting to grow and bear fruit. We are confident for the
future prospects of the Group and look forward to further
updating shareholders as we progress through 2020.
David Whelan
Chief Executive Officer
15 June 2020
5
Chief Financial Officer’s review
for the year ended 31 December 2019
I am pleased to report that revenue for the year was up 43% on the prior year from €716k to €1,024k, driven by the
continued success of the showcase experiences on the PlayStation, Oculus and Steam platforms coupled with revenue
generated from our newly released ENGAGE platform and our exhibition in the US Space and Rocket Center in Alabama.
EBITDA loss was €1.4 million compared to a loss of €1.5 million in the prior year, in line with management expectations.
Loss before tax was €1.9 million, in line with management expectations, compared to a loss in the prior year of €4.9
million.
Operating cashflows were a net outflow of €1.2 million for the period. The current run-rate of staff costs and other
ongoing costs is approximately €250k per month.
At the balance sheet date, trade and other receivables were €205k, marginally ahead of trade and other payables at
€193k. Trade receivables represented an average of 52 debtor days (2018: 92 days)
The Group’s cash position at 31 December 2019 was €1.3 million with no debt. Following the receipt of subscription funds
from HTC, the Group’s cash position was approximately €3.4m.
Séamus Larrissey
Chief Financial Officer
15 June 2020
6
Annual report 2019 Strategic report
for the year ended 31 December 2019
The Directors present herewith their strategic report for the year ended 31 December 2019.
Results and Dividends
The loss for the year after taxation amounted to €1,939,786 (2018: €4,943,906). No dividends were paid during the year
(2018: €Nil) and as such an amount of €1,939,786 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 Group’s performance against the strategic aim to grow the business.
Revenue for the year was €1,024k compared to €716k in 2018, an increase of 43%. The Group expects to see further growth
in revenue in 2020 with commercial contracts expected with numerous customers on ENGAGE and the expected launch
of a new showcase experience occurring in H2 2020.
Unit Downloads
Unit downloads tracks the number of downloads across the various sales platforms of the Group’s 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 95,000 compared to 80,000 in 2018, an increase of 19%. With additional
VR experiences to be launched in 2020 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 2019 was €1.3m compared to €3.5m in 2018, a decrease of 63%.
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.
7
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
15 June 2020
Séamus Larrissey
Director
15 June 2020
8
Annual report 2019
Directors’ report
for the Year Ended 31 December 2019
The Directors present herewith their annual report and audited financial statements for the year ended 31 December
2019.
Results and Dividends
The results for the period are set out in the Strategic Report on page 7-8. The Directors do not propose to declare a
dividend.
Directors
The present Directors are as listed on page 1 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:
Richard Cooper
David Whelan
Sandra Whelan
Séamus Larrissey
Michael Boyce
Tony Hanway
31/12/2019
31/12/2018
Ordinary Shares
Share Options Ordinary Shares
Share Options
1,070,400
1,000,000
1,000,000
1,000,000
38,665,000
38,665,000
-
-
38,665,000
38,665,000
-
-
88,000
910,940
88,000
910,940
499,942
100,000
-
-
499,942
100,000
Substantial shareholdings
As at 12 June 2020, the following interests in 3% or more of the issued share capital appear in the register:
HTC Corporation
David Whelan
Sandra Whelan
Enterprise Ireland
Octopus Investments
Unicorn AIM VCT plc
Suir Valley Funds ICAV
Kernel Seed Fund 2009
Barry Downes
Transactions Involving Directors
Transactions involving Directors are disclosed within note 24.
9
-
-
20.0%
16.0%
16.0%
7.9%
7.2%
6.6%
5.7%
5.5%
5.4%
Directors’ Report (continued)
Events after the reporting period
The Company has evaluated all events and transactions that occurred after 31 December 2019 up to the date of signing
of the financial statements.
On 12 June 2020, the Company issued 48,284,102 ordinary shares at a €0.0621 (£0.0547) per share to HTC Corporation
raising €3,000,000 before costs are deducted. The proceeds will be primarily used to further develop and enhance the
Company’s proprietary ENGAGE platform and build out its sales and marketing capability. The proceeds will also be used
to a lesser extent to produce additional showcase experiences which support the uptake of the ENGAGE platform and
clearly demonstrate its potential.
Research and development
Being at the forefront of a competitive industry and in order to strengthen its market position the Group needs 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
15 June 2020
Séamus Larrissey
Director
15 June 2020
10
Annual report 2019
Directors’ responsibilities statement
for the Year Ended 31 December 2019
TThe 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 Group and Parent Company financial statements in accordance with accounting standards
issued by the Financial Reporting Council including International Financial Reporting Standards as adopted by the
European Union (IFRSs).
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 Group and Parent Company as at the financial year
end date and of the profit or loss of the Group and Parent 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 apply them consistently;
• make judgements and accounting 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 Group
and Parent 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 Group and Parent Company, enable at any time the assets,
liabilities, financial position and profit or loss of the Group and Parent 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 Group and Parent 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 12-19.
On behalf of the board
Sandra Whelan
Director
15 June 2020
Séamus Larrissey
Director
15 June 2020
11
Corporate governance report
for the Year Ended 31 December 2019
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.
This report follows the Quoted Companies Alliance Corporate Governance (QCA Code) guidelines, which 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. The Board considers that the Company complies
with the requirements of the QCA Code to the extent they consider it appropriate having regard to the Company’s size,
board structure, stage of development and resources. The Board recognises that the Company does not fully comply
with the 10 principles and general provisions of the QCA Code but does use it as a benchmark in assessing its corporate
governance standards. 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
15 June 2020
12
Annual report 2019 Corporate governance report (continued)
for the Year Ended 31 December 2019
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 establish
ENGAGE as the world’s leading digital education and corporate training platform. Our
company’s vision for the future is to see virtual reality become a staple tool for education
and corporate training globally. The core objective is to provide students, educators and
corporate trainers with an alternative to attending brick and mortar institutes or expensive
onsite simulated training. Further details can be found on the Focus & Strategy page on the
Company’s website.
The Company intends to deliver shareholder returns through capital appreciation. 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 Principal Risks and Uncertainties section, pages 7-8.
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
where possible. The AGM typically provides an opportunity to meet, listen and present to
shareholders, and shareholders are encouraged to attend where possible. 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.
13
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 such as flexible hours which was introduced successfully in H2 2019.
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 staff member to participate in a significant fundraiser for a local cancer
support centre in Waterford (SOLAS Centre).
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
pages 7-8.
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.
14
Annual report 2019 Corporate governance report (continued)
for the Year Ended 31 December 2019
Principle
Application
Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
(continued)
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.
Maintain the Board
as a well-functioning,
balanced team led by
the Chair
The Board comprises:
• CEO - David Whelan
• COO - Sandra Whelan
• CFO - Séamus Larrissey
•
•
•
Independent Non-Executive Director and Chairman - Richard Cooper
Independent Non-Executive Director - Tony Hanway
Independent Non-Executive Director - Michael Boyce.
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 five times, and a schedule of attendance is set out below:
Director Attendance
5/5
Richard Cooper
5/5
David Whelan
Sandra Whelan
5/5
Séamus Larrissey 5/5
3/5
Tony Hanway
4/5
Michael Boyce
In order to be efficient, the Directors meet formally and informally both in person and by
telephone.
15
Principle
Application
Maintain the Board
as a well-functioning,
balanced team led by
the Chair (continued)
Board papers are collated, compiled into a Board Pack, and circulated to the Board in
advance of each Board meeting, allowing time for full consideration and necessary
clarifications.
The Company has an Audit and a Remuneration Committee. 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. https://
immersivevreducation.com/about-us/board-of-directors/
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.
The Board shall review annually the appropriateness and opportunity for continuing
professional development whether formal or informal.
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 Company’s Nomad is consulted on all matters and all Directors have access to
independent professional advice, if required.
Neither the Board nor its Committees have sought external advice on a significant matter.
16
Annual report 2019 Corporate governance report (continued)
for the Year Ended 31 December 2019
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 it 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, a code for Directors’ and employees’ dealings in securities
which is appropriate for a company whose securities are traded on AIM and Euronext
Growth 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.
17
Principle
Application
Maintain governance
structures and
processes that
are fit for purpose
and support good
decision-making by
the Board (continued)
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 these to evolve 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:
• Strategy and Management
• Structure and Capital
• Financial Reporting and Controls
•
Internal 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.
18
Annual report 2019 Corporate governance report (continued)
for the Year Ended 31 December 2019
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 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.
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 are included in Note 7 to the
Financial Statements.
Other Committees
Where previously the Board has appointed a Compliance Committee, the Board feels that
matters of such importance should be dealt with by the Board as a whole. Compliance
matters are included in a report put together by the Company Secretary and discussed at
every Board meeting.
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 as a whole 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. 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.
19
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 2019 which comprise the Consolidated Statement of Comprehensive Income,
the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company
Statements of 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 financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as
at 31 December 2019 and of the group’s and parent company’s loss for the year then ended;
•
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
•
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union and as applied in accordance with the provisions of the Companies Act 2014; and
•
the 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 and parent company 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.
Emphasis of matter
We draw your attention to note 2 of the financial statements, which describes the group’s and parent company’s
assessment of the COVID-19 impact on its ability to continue as a going concern. The group and parent company
have explained that the events arising from the COVID-19 outbreak do not impact its use of the going concern basis of
preparation nor do they cast significant doubt about the group’s and parent company’s ability to continue as a going
concern for a period of at least twelve months from the date when the financial statements are authorised for issue.
Our opinion is not modified in this respect.
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.
20
Annual report 2019 Independent auditor’s report to the
members of VR Education Holdings plc (continued)
Our application of materiality
The materiality applied to the group financial statements was €100,000. This has been calculated using a benchmark of
5% of adjusted loss before tax which we have determined, in our professional judgement, to be the principal benchmark
within the financial statements relevant to the members of the Group in assessing financial performance. The materiality
applied to the parent company financial statements was €25,000 based upon 5% of the loss before tax. Performance
materiality was 70% of overall materiality.
We report to the Audit Committee all corrected and uncorrected misstatements we identified through our audit in excess
of €5,000. 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
In designing our audit, we determined materiality and assessed the risk of material misstatement in the financial
statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors
and considered future events that are inherently uncertain. We also addressed the risk of management override of
controls, including among other matters consideration of whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
The Group and its one subsidiary are accounted for from a central location in Waterford, Ireland.
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
How the scope of our audit addressed
the key audit matter
Valuation and recoverability of intangible assets
(refer note 14)
The work undertaken to mitigate the risk was as follows:
• Verified the capitalised development costs meet
The Group carries a material amount of intangible
assets in relation to capitalised costs associated with the
development of virtual reality experiences. As a result, the
following risks arise:
• Costs may have been incorrectly capitalised and
not conform with all the 6 step criteria detailed in
IAS 38.
• The carrying value of the development cost may be
overstated and not fully recoverable.
• The amortisation period may not represent the
useful economic lives of each developed product.
the eligibility criteria detailed in IAS 38 for that given
project.
• Substantively tested additions in the year back to
supporting documentation to include timesheet
analysis and payroll records.
• Discussed the progress of each significant
development project with management to
understand the stage of development reached and
progress against budget in terms of timing and
costs incurred.
• Recalculated amortisation charged in the year on
a sample basis and confirmed in accordance with
the disclosed accounting policy.
• Reviewed and challenged management’s
assessment of impairment for projects under
development and, for those products which are
commercially available, considered whether there
are any indicators of impairment.
21
Independent auditor’s report to the
members of VR Education holdings plc (continued)
Key Audit Matter
Going concern (refer note 2)
The group and parent company are currently loss
making. Additional funds will need to be raised during the
going concern period in excess of those forecast from
trading and to enable product development to continue
as planned.
Recoverability of investment in subsidiary and
intercompany receivable in the Parent Company
(refer notes 15 and 16)
The parent company has a material carrying value
of its investment in subsidiary undertaking, including
the intercompany receivable. There is a risk that these
balances are not fully recoverable and should be
impaired.
How the scope of our audit addressed
the key audit matter
The work undertaken to mitigate this risk was as follows:
• Obtained and reviewed cash flow forecasts
prepared for the period ending December 2022.
We have tested and challenged management on
the key assumptions underlying those forecasts,
including sensitivity analysis and stress testing for
the potential ongoing effects of COVID-19.
• Considered the accuracy of previous forecasts to
actual results, particularly regarding development
costs and revenue.
• Checked and agreed the going concern disclosures
in the financial statements.
• As disclosed in Note 25 to the financial statements,
the Group has subsequent to the year-end received
an investment of €3 million from HTC on 12 June
2020.
The work undertaken to mitigate this risk was as follows:
• Assessed the carrying values by reference to the
subsidiary’s underlying net assets and trading
performance.
• Assessed credit losses in accordance with IFRS 9
criteria and agreed payment terms.
• Assessed recoverability with reference to the
budgets and cash flow forecasts prepared for
going concern purposes.
22
Annual report 2019 Independent auditor’s report to the
members of VR Education Holdings plc (continued)
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
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.
23
Independent auditor’s report to the
members of VR Education Holdings plc (continued)
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.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 June 2020
15 Westferry Circus
Canary Wharf
London E14 4HD
24
Annual report 2019 Communicate
Teach
25
Teach
Learn
26
Annual report 2019 Financial
Statements
27
27
Consolidated statement of total
comprehensive income
for the Year Ended 31 December 2019
Continuing Operations
Revenue
Cost of Sales
Gross Profit
Administrative Expenses
Operating Loss
Fair value loss arising on derivative financial liabilities
Extinguishment Costs
IPO Transaction Costs
Finance Costs
Loss before Income Tax
Note
3
5
2019
€
1,024,148
(401,487)
622,661
2018
€
716,345
(239,701)
476,644
5
(2,555,449)
(2,247,337)
(1,932,788)
(1,770,693)
10
8
9
10
-
-
-
(6,998)
(2,638,063)
(267,971)
(237,202)
(29,977)
(1,939,786)
(4,943,906)
Income Tax credit
-
-
Total comprehensive loss for the year attributable to owners of
the parent
11
(1,939,786)
(4,943,906)
Earnings per Share (EPS) attributable to owners of the parent
Basic from continuing operations
12
(0.010)
(0.026)
The accompanying notes on pages 35-54 form an integral part of these financial statements.
28
Annual report 2019 Consolidated statement
of financial position
for the Year Ended 31 December 2019
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
Lease liabilities
Current Liabilities
Trade and other payables
Lease liabilities
Total Liabilities
Total Equity and Liabilities
Note
13
14
16
17
18
18
19
20
2019
€
115,930
1,433,733
1,549,663
204,904
1,292,852
1,497,756
3,047,419
2018
€
59,541
956,550
1,016,091
394,113
3,485,186
3,879,299
4,895,391
193,136
193,136
21,587,539
21,587,539
(11,287,395)
(11,314,729)
(7,705,536)
(5,765,750)
2,787,744
4,700,196
34,057
-
22
192,893
32,725
225,618
259,675
195,195
-
195,195
195,195
3,047,419
4,895,391
The accompanying notes on pages 35-54 form an integral
part of these financial statements.
Sandra Whelan
Director
Séamus Larrissey
Director
On behalf of the board
15 June 2020
15 June 2020
29
Company statement of
financial position
for the Year Ended 31 December 2019
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
Trade and other payables
Total Liabilities
Total Equity and Liabilities
Note
2019
€
2018
€
15
15,028,809
15,028,809
15,028,809
15,028,809
16
17
18
18
19
20
5,353,433
5,136,849
166,411
753,090
5,519,844
5,889,939
20,548,653
20,918,748
193,136
193,136
21,587,539
21,587,539
(194,087)
(1,173,957)
(212,363)
(687,587)
20,412,631
20,880,725
22
136,022
136,022
38,023
38,023
20,548,653
20,918,748
The accompanying notes on pages 35-54 form an integral part of these financial statements.
On behalf of the board
Sandra Whelan
Director
Séamus Larrissey
Director
15 June 2020
15 June 2020
30
Annual report 2019 Consolidated statement
of changes in equity
for the Year Ended 31 December 2019
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)
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
Acquisition of a subsidiary
Share option expense
-
-
-
-
-
-
(596,212)
(11,263,644)
387,847
-
-
-
-
21,780,675
(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
Share
Capital
Share
Premium
Other
Reserves
Retained
Earnings
Total
€
€
€
€
€
Balance at 1 January 2019
193,136
21,587,539
(11,314,729)
(5,765,750)
4,700,196
Total comprehensive income
Loss for the year
Total comprehensive income
Transactions with owners
recognised directly in equity
-
-
-
-
-
-
(1,939,786)
(1,939,786)
(1,939,786)
(1,939,786)
Share option expense
-
-
27,334
-
27,334
Balance at 31 December 2019
193,136
21,587,539
(11,287,395)
(7,705,536)
2,787,744
The accompanying notes on pages 35-54 form an integral part of these financial statements.
31
Company statement of
changes in equity
for the Year Ended 31 December 2019
Share
Capital
Share
Premium
Other
Reserves
Retained
Earnings
€
-
-
-
€
-
-
-
€
-
-
-
Balance at 1 January 2018
Total comprehensive income
Loss for the year
Total comprehensive income
Transactions with owners
recognised directly in equity
Total
€
-
€
-
(687,587)
(687,587)
(687,587)
(687,587)
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
Share
Capital
Share
Premium
Other
Reserves
Retained
Earnings
Total
€
€
€
€
€
Balance at 1 January 2019
193,136
21,587,539
(212,363)
(687,587)
20,880,725
Total comprehensive income
Loss for the year
Total comprehensive income
Transactions with owners
recognised directly in equity
Share option expense
-
-
-
-
-
(486,370)
(486,370)
(486,370)
(486,370)
18,276
-
18,276
Balance at 31 December 2019
193,136
21,587,539
(194,087)
(1,173,957)
20,412,631
The accompanying notes on pages 35-54 form an integral part of these financial statements.
32
Annual report 2019 Consolidated statement of cash flows
for the Year Ended 31 December 2019
Continuing Operations
Note
2019
€
2018
€
Loss before income tax
(1,939,786)
(4,943,906)
Adjustments to reconcile loss before tax to net cash flows:
Depreciation of fixed assets
Amortisation of intangible assets
Fair value loss 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
Bank interest & other charges paid
Net Cash used in Operating Activities
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
5
5
10
10
13
14
81,108
412,976
-
-
-
-
6,998
27,334
189,210
(2,302)
49,984
175,300
2,638,063
174,651
112,381
1,944
29,977
30,145
(155,798)
(187,824)
(1,224,462)
(2,075,083)
(6,998)
(29,977)
(1,231,460)
(2,105,060)
(35,793)
(890,159)
(925,952)
(52,225)
(696,059)
(748,284)
Proceeds from issuance of ordinary shares
-
6,234,953
Payment of lease liabilities
Net cash generated from financing activities
(34,922)
(34,922)
-
6,234,953
Net (decrease) / increase in cash and cash equivalents
(2,192,334)
3,381,609
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
17
17
3,485,186
1,292,852
103,577
3,485,186
33
Company statement of cash flows
for the Year Ended 31 December 2019
Continuing Operations
Note
2019
€
2018
€
Loss before income tax
(486,370)
(687,587)
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
-
-
-
348
18,276
174,651
112,381
(18,750)
276
17,518
Movement in trade & other receivables
(216,584)
(5,118,099)
Movement in trade & other payables
97,999
38,023
Bank interest & other charges paid
(586,331)
(5,481,587)
(348)
(276)
Net Cash used in Operating Activities
(586,679)
(5,481,863)
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Redemption of redeemable shares
Proceeds from issuance of ordinary shares
Net cash generated from financing activities
-
-
-
-
-
(6,250)
6,234,953
6,228,703
Net (decrease) / increase in cash and cash equivalents
(586,679)
746,840
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
17
17
753,090
6,250
166,411
753,090
The non-cash element of extinguishment costs and non-cash element of advisor warrants in the year ended 31
December 2018 reflect the fact that the company 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 35-54 form an integral part of these financial statements.
34
Annual report 2019 Notes to the
financial
statements
35
Notes to the
financial
statements
deconsolidated from the date on which control ceases.
Control is achieved when the group is exposed, or has
rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through
its power over the investee.
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.
1. General Information
Business Combination
VR Education Holdings plc (“the Company”) is publicly
traded on the Alternative Investment Market (“AIM”) of
the London Stock Exchange and on the Euronext Growth
Market (“Euronext Growth”), 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 Euronext Growth 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 2019.
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
which control is transferred to the group. They are
Acquisition of Immersive VR Education Limited
The Company 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.
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 that
did not meet the criteria regarding the ability to determine
36
Annual report 2019 whether 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 in 2018 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 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 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
and the receipt of €3m subscription for ordinary shares
from HTC on 12 June 2020 the Directors believe the Group
and Company to be a going concern.
In response to the significant impact that the coronavirus
pandemic is having on the global economy, that Group
has reviewed the potential impact upon on its business
and revenue generation. The Directors anticipate
experience sales will be relatively unaffected both during
and immediately after the lockdown period, however there
is scope to adjust levels of expenditure in the longer term,
if required.
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. Thus, the Directors continue
to adopt the going concern basis of accounting in
preparing the financial statements.
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.
37
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.
Fair value measurement
The Group measures financial instruments such as
derivatives at fair value at each balance sheet date. The
Company has applied IFRS 9 for all periods presented.
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 liability Or
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.
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.
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
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.
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.
38
Annual report 2019 Depreciation on assets is calculated using the straight-line
method to allocate their cost less residual value over their
estimated useful lives, as follows:
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.
Office equipment - 3 - 5 years
Furniture, fittings and equipment - 5 years
Leasehold improvements – over the life of the leased asset
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.
Right-of-use assets are depreciated over the shorter of
the asset’s useful life and the lease term on a straight line
basis.
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.
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
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.
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 holds the trade receivables with the objective of
collecting the contractual cash flows.
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.
39
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.
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 Group leases office premises and motor vehicles
under rental contracts for fixed periods but may contain
extension options. Lease terms are negotiated on
an individual basis and contain different terms and
conditions. The lease agreements entered into by the
Group do not impose any covenants other than the
security interests in the leased assets that are held by the
lessor.
From 1 January 2019 leases are recognised as a right-
of-use asset and a corresponding liability at the date at
which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
• Fixed payments less any lease incentives receivable;
• Variable lease payments that are based on an index
or a rate;
• The exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
• Payments of penalties for terminating the lease.
Lease payments to be made under reasonably certain
extension options are also included in the measurement of
the liability.
The lease payments are discounted using the interest
rate implicit in the lease. If that rate cannot be readily
determined the lessee’s incremental borrowing rate is
used. Lease payments are allocated between principal
and finance cost. The finance charge is charged to profit
or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the
liability.
Payments associated with short-term leases (12 months or
less) and leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss.
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.
40
Annual report 2019 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.
offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities, and when
the deferred income tax assets and liabilities relate to
income taxes levied by the same taxation authority on
either the taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
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
The Group and Company have applied the following
standards and amendments for the first time from 1
January 2019:
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatments
Annual Improvements to IFRS Standards 2015-2017 Cycle
The Group adopted all of the requirements of IFRS 16 –
Leases retrospectively from 1 January 2019, but has not
restated comparatives for the 2018 reporting period as
permitted under the transition provisions in the standard.
The reclassifications and the adjustments arising from the
new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019.
On adoption of IFRS 16, the Group recognised lease
liabilities in relation to leases which had previously been
categorised as operating leases. These liabilities were
measured at the present value of the remaining lease
payments. The change in policy increased right-of-use
assets and lease liabilities by €77,370.
Other than as described above, there has been no
material impact on the financial statements as a result of
the adoption of the new and amended standards.
The Group and Company have not applied the following
new and revised IFRSs that have been issued but are not
yet effective:
Amendments to references to the conceptual framework
in IFRS standards – effective 1 January 2020
Amendments to IFRS 3 Business Combinations – effective 1
January 2020
Amendments to IAS 1 and IAS 8: Definition – effective 1
January 2020
The Directors believe that these new and amended
standards are not expected to have a material impact on
the Group and Company.
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.
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
41
3. Segment Reporting
Revenue by Type
Showcase experience revenue
ENGAGE revenue
Other revenue
Total Revenue
4. Capital Management
2019
€
806,408
92,141
125,599
1,024,148
2018
€
592,362
-
123,983
716,345
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
Lease liabilities
Trade and other payables
Less: cash and short-term deposits
Net Funds
Equity
Total Equity
Capital and net funds
5.a Expenses by nature
Depreciation charges
Amortisation expense
Operating Lease Payments
Foreign Exchange Gain
Other Expenses
Wages and salaries capitalised
Other expenses capitalised
2019
€
(66,782)
(192,893)
1,292,852
1,033,177
2,787,744
2,787,744
3,820,921
2019
€
81,108
412,976
7,709
(12,184)
3,357,486
3,847,095
(811,205)
(78,954)
2018
€
-
(195,194)
3,485,186
3,289,992
4,700,196
4,700,196
7,990,188
2018
€
49,984
175,300
36,839
(35,027)
2,956,001
3,183,097
(586,937)
(109,122)
Total cost of sales and administrative expenses
2,956,936
2,487,038
42
Annual report 2019 5.a Expenses by nature (continued)
Disclosed as:
Cost of sales
Administrative expenses
Total cost of sales and administrative expenses
2019
€
401,487
2,555,449
2,956,936
5.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 – corporate finance services
6. Employees
Employee Benefit Expense
Wages and salaries
Social security costs
Defined contribution pension costs
Share option expense
Capitalised employee costs
Total Employee Benefit Expense
2019
€
47,509
4,213
-
2019
€
1,846,750
188,440
16,811
27,334
(811,205)
1,268,130
2018
€
239,701
2,247,337
2,487,038
2018
€
42,173
11,688
40,776
2018
€
1,380,687
136,910
8,961
30,145
(586,937)
969,766
Average Number of People Employed
2019
2018
Average number of people (including executive Directors)
employed:
Operations
Administration
Marketing
Total Average Headcount
43
30
3
4
37
22
3
2
27
7. Directors remuneration
Below is the Directors’ remuneration for the year ended 31 December 2019 and for the year ended 31 December 2018
31 December 2019
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
€
€
161,500
127,500
122,551
51,724
76,760
27,429
3,025
3,150
4,250
-
-
-
€
-
-
1,576
16,700
-
-
€
164,525
130,650
128,377
68,424
76,760
27,429
567,464
10,425
18,276
596,165
Group
Directors’ fees
Pension benefits
Options issued
31 December 2018
€
€
Executive Directors
David Whelan
Sandra Whelan
Séamus Larrissey
Non-executive Directors
Richard Cooper
Michael Boyce
Tony Hanway
At 31 December 2018
114,181
85,807
86,500
96,077
37,143
23,807
443,515
2,017
2,100
2,833
-
-
-
€
-
-
4,779
13,917
-
-
Total
€
116,198
87,907
94,112
109,994
37,143
23,807
469,191
6,950
18,696
The options issued are a non-cash amount and are accounted for in line with the treatment of the other share options
issued to employees under IFRS 2. Further notes on Share Based Payments are included in Note 21.
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 2019, Michael Boyce received a fee in relation to consultancy services provided to the
Company, separate to his role as a Non-Executive Director, of £43,549 (2018: £12,031).
44
Annual report 2019 8. 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
2019
€
-
-
-
2018
€
51,500
41,820
174,651
267,971
As part of the reorganisation process which occurred prior to the IPO in 2018 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-month 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.
9. IPO Transaction Costs
Legal and professional fees
Total IPO Transaction Costs
Included in Other Reserves
2019
€
-
-
-
2018
€
237,202
237,202
596,212
The transaction costs relate to the admission of the Group to the AIM market of the London Stock Exchange and the
Euronext Growth market of Euronext Dublin on 12 March 2018.
10. Finance Costs
Interest expense:
- Interest payable on convertible loan notes
- Dividend on redeemable convertible preference shares
- Lease interest
- Bank charges
Total finance costs
2019
€
-
-
4,988
2,010
6,998
2018
€
27,105
1,356
-
1,516
29,977
Fair value loss on derivative financial liability
-
(2,638,063)
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.
45
11. Income Tax
Current tax:
Current tax on loss for the year
Total current tax
Deferred tax (Note 23)
Income Tax
2019
€
-
-
-
-
2018
€
-
-
-
-
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:
2019
€
2018
€
Loss Before Tax
(1,939,786)
(4,943,906)
Tax calculated at domestic tax rates applicable to loss in
Ireland of 12.5%
(242,473)
(617,988)
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
12. Earnings per share (EPS)
Loss attributable to equity holders of the Group:
7,364
45,449
189,660
-
2019
€
4,033
406,488
207,467
-
2018
€
Continuing Operations
(1,939,786)
(4,943,906)
Weighted average number of shares for Basic EPS
193,136,406
193,136,406
Basic loss per share from continuing operations
(0.010)
(0.026)
46
Annual report 2019 13. Property, Plant & Equipment
Leasehold
improvements
Fixtures,
fittings and
equipment
Office
Equipment
Right of use
assets
Total
€
€
€
Group
Cost of Valuation
At 1 January 2018
Additions
At 31 December 2018
IFRS 16 Adjustment
Additions
15,601
4,740
20,341
-
-
5,610
1,415
7,025
-
-
At 31 December 2019
20,341
7,025
Depreciation
At 1 January 2018
Charge (note 5)
At 31 December 2018
IFRS 16 Adjustment
Charge (note 5)
At 31 December 2019
Net Book Amount
At 31 December 2018
At 31 December 2019
3,284
4,607
7,891
-
4,607
12,498
12,450
7,843
2,127
1,405
3,532
-
1,405
4,937
3,493
2,088
€
-
-
-
118,820
26,882
105,379
52,225
157,604
118,820
62,675
145,702
339,099
-
-
-
43,998
34,921
78,919
48,079
49,984
98,063
43,998
81,108
223,169
-
59,541
66,783
115,930
84,168
46,070
130,238
-
35,793
166,031
42,668
43,972
86,640
-
40,175
126,815
43,598
39,216
Depreciation expense of €81,108 (2018: €49,984) has been charged in ‘Administrative Expenses’.
47
14. Intangible Assets
Group
Cost of Valuation
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Amortisation
At 1 January 2018
Charge
At 31 December 2018
Charge
At 31 December 2019
Net Book Value
At 31 December 2018
At 31 December 2019
Software in
development
costs
€
435,791
696,059
1,131,850
890,159
Total
€
435,791
696,059
1,131,850
890,159
2,022,009
2,022,009
-
175,300
175,300
412,976
-
175,300
175,300
412,976
588,276
588,276
956,550
1,433,733
956,550
1,433,733
The software being developed relates to the creation of 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 the mobile version was released in December 2019. Amortisation
commenced when the mobile version 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 launched during 2019 and amortisation commenced during the period. Space
Shuttle was developed during 2019 remains in development for the Oculus Quest and PC platforms at 31 December 2019.
Amortisation will commence when Space Shuttle is launched on Oculus Quest and PC in H1 2020.
Amortisation expense of €412,976 (2018: €175,300) has been charged in ‘Administrative Expenses’.
An impairment review was carried out at the balance sheet date. No impairment arose.
48
Annual report 2019 15. Investments in Subsidiaries
Company
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
€
-
15,028,809
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.
16. Trade and Other Receivables
Group
Company
2019
€
2018
€
Trade receivables
146,649
180,129
Less: provision for impairment of
receivables
-
-
Trade receivables - net
146,649
180,129
2019
2018
€
-
-
-
€
-
-
-
Amounts due from related parties
-
-
5,337,389
5,058,589
Prepayments
Other debtors
VAT
53,047
178,650
16,044
53,062
3,775
1,433
204,904
4,991
30,343
394,113
-
-
-
25,198
5,353,433
5,136,849
As at 31 December 2019, trade receivables of €146,649 (2018: €180,129) were fully performing and deemed fully
recoverable. No bad debt provision charge was incurred during 2019 (2018: €Nil).
49
16. Trade and Other Receivables (continued)
Euro - Neither past due nor impaired
Dollar - Neither past due nor
impaired
Group
Company
2019
€
35,828
110,821
2018
€
53,028
127,101
146,649
180,129
2019
2018
€
-
-
-
€
-
-
-
17. Cash and short-term deposits
The carrying amounts of the Company’s trade and other receivables are denominated in the following currencies:
Group
Company
2019
€
2018
€
Cash at bank and on hand
1,292,852
3,485,186
1,292,852
3,485,186
18. Issued Share Capital and Premium
2019
€
166,411
166,411
2018
€
753,090
753,090
Number of
shares
Ordinary shares
Share premium
Total
At 1 January 2018
1
€
-
€
-
€
-
Shares issued as consideration for
reverse merger
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 and at 31
December 2019
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 Euronext Growth 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
Annual report 2019
19. Other Reserves
At 1 January 2018
Share issue costs
Acquisition of a subsidiary
Share option expense
At 31 December 2018
At 1 January 2019
Share option expense
At 31 December 2019
20. Retained Earnings
At 1 January 2018
Loss for the year
At 31 December 2018
At 1 January 2019
Loss for the year
At 31 December 2019
Group
€
157,280
(596,212)
(11,263,644)
387,847
(11,314,729)
(11,314,729)
27,334
11,287,395
Group
€
(821,844)
(4,943,906)
(5,765,750)
(5,765,750)
(1,939,786)
Company
€
-
(596,212)
-
383,849
(212,363)
(212,363)
18,276
194,087
Company
€
-
(687,587)
(687,587)
(687,587)
(486,370)
(7,705,536)
(1,173,957)
21. 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 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.
51
21. Share Based Payments (continued)
There were 133,089 (2018: 311,108) employee options granted during 2019 at an exercise price of €0.10 (2018: €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
2019
€
-
-
-
-
-
-
2018
€
4,208
(4,208)
-
-
-
-
At 1 January
2019
€
4,425,028
2018
€
-
Capital restructure and Listing process
-
3,113,920
Granted during period
Forfeited during period
133,089
(92,591)
1,311,108
-
At 31 December
4,465,526
4,425,028
Options outstanding at 31
December
Number of shares
4,465,526
4,425,028
Weighted average remaining
contractual life
2.79 years
3.75 years
Weighted average exercise price per
share
€0.028
€0.028
Range of exercise price
€0.0001 – €0.135
€0.0001-€0.135
Exercisable at 31 December
Number of shares
2,658,450
1,997,556
Weighted average exercise price
per share
€0.028
€0.026
No options were exercised during the period. The weighted average exercise price of options granted during the period
was €0.11 (2018: €0.032). The expense recognised in respect of employee share based payment expense and credited to
the share based payment reserve in equity was €27,334 (2018: €30,144).
Advisor Warrants
During 2018, 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 €Nil (2018: €162,871).
52
Annual report 2019 21. Share Based Payments (continued)
Investor Warrants
During 2018, 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. An expense of €Nil (2018: €174,651) was recognised in the income statement
during the period.
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
133,089
1 Jan 2019
3 years
£0.11
€0.1127
57%
7 years
0%
0.14%
€0.071
6.0
2018
€
9,169
16,362
-
12,492
38,023
Number of options / warrants
Grant date
Vesting period
Share price at date of grant
Exercise price
Volatility
Option life
Dividend yield
Risk free investment rate
Fair value per option at grant date
Weighted average remaining contractual life in years
22. Trade and Other Payables
Trade Payables
PAYE/PRSI
Redeemable shares
Accrued Expenses
Group
Company
2019
€
25,709
45,739
-
121,445
192,893
2018
€
28,263
46,923
-
120,009
195,195
2019
€
10,109
13,276
101,126
11,511
136,022
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
• VAT payables are non-interest bearing and are normally settled on 60-day terms
• Accrued expenses are non-interest bearing are settled over varying terms throughout the year
53
23. 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
€556,688 (2018: €410,683) in respect of losses and depreciation in excess of capital allowances amounting to €4,453,504
(2018: €3,285,467) that can be carried forward against future taxable income.
24. Related Parties
During the year the Directors received the following emoluments:
Directors
Aggregate emoluments
Share option expense
Group
Company
2019
€
549,181
18,276
567,457
2018
€
450,465
18,696
469,161
2019
€
549,181
18,276
2018
€
406,787
18,696
567,457
425,483
Included in the above is an amount of €51,516 (2018: €96,077) 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 2019 €Nil was outstanding.
25. Events after the reporting date
On 12 June 2020, the Company issued 48,284,102 ordinary shares at a €0.0621 (£0.0547) per share to HTC Corporation
raising €3,000,000 before costs are deducted. The proceeds will be primarily used to further develop and enhance the
Company’s proprietary ENGAGE platform and build out its sales and marketing capability. The proceeds will also be used
to a lesser extent to produce additional showcase experiences which support the uptake of the ENGAGE platform and
clearly demonstrate its potential.
The assessment of the COVID-19 pandemic will need continued attention and will evolve over time. COVID-19 is
considered to be a non-adjusting post statement of financial position event and no adjustment is made or required
in these financial statements as a result. The development and duration of the COVID-19 pandemic make it difficult to
predict the ultimate impact on the Group and Company at this stage. This will have some implications for the operations
of the Group and Company in the future however the Directors consider the impact will be minimal. Management will
continue to assess the impact of COVID-19 on the Group and Company, however, it is not possible to quantify the impact
at this stage.
26. Ultimate controlling party
The Directors believe that there is no ultimate controlling party as no one shareholder has control of the Company.
54
Annual report 2019 55
Annual report 2019
56
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
57