[ADVERT]
Share Name Share Symbol Market Type Share ISIN Share Description
Integumen Plc LSE:SKIN London Ordinary Share GB00BMGWZY29 ORD 0.1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 28.00 28.00 29.00 0.00 01:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Personal Goods 0.8 -2.4 0.3 93.3 32

Deepverge PLC Final Results

30/06/2021 5:28pm

UK Regulatory (RNS & others)


Integumen (LSE:SKIN)
Historical Stock Chart


From Jun 2021 to Sep 2021

Click Here for more Integumen Charts.

TIDMDVRG

RNS Number : 7313D

Deepverge PLC

30 June 2021

30 June 2021

DeepVerge plc

("DeepVerge" or the "Company")

Final Results for the year ended 31 December 2020

GBP10m funding in place to maintain significant pace of growth across the Group

Consolidated group revenue increased by 445%

DeepVerge (AIM: DVRG), the environmental and life science group of companies that develops and applies AI and IoT technology for the analysis and identification of bacteria, virus and toxins , is pleased to announce it audited financial results for the year ended 31 December 2020. Extracts from the Company's Annual Report are included at the end of this announcement and the full Annual Report is available on the Company's website at www.deepverge.com/investors/

2020 has been another rapid growth year for DeepVerge. The Group performed better than expected with our first EBITDA profitable quarter in Q4, 2020, before costs of Modern Water acquisition. Revenues for the year exceeded the Company guided number by 10%, derived from higher revenues per client and expansion into new areas requiring an increase of both employees and laboratory capacity. 2020 has set the standard for 2021.

Gerry Brandon, CEO of DeepVerge plc, commented:

"Having grown from five full time employees in August 2018 to 57 today, and an additional 60 to join over the next few months, the Company continues to expand at a record rate with our first profitable EBITDA quarter in Q4, 2020. Despite a substantial increase in investment for new products, services and higher administration costs associated with the acquisition of Modern Water plc in November 2020, comparable like-for-like annual EBITDA losses fell by 37% to just GBP0.668m (2019: GBP1.03m)* "

Highlights:

-- Total 2020 revenue GBP6.650m including pre-acquisition Modern Water revenue, up 553% (2019: GBP1.017m)

o Consolidated group revenue increased by 445% to GBP4.483m (2019 restated: GBP0.823m)

o H2, 2020 revenue growth of 247% over H1 revenue

-- Strong sales in Q4 2020 delivered the Company's first EBITDA profitable quarter (excluding exceptional costs associated with the acquisition of Modern Water)

-- Group staff number increased by 27 ( 268%) to 43 employees (2019: 16) and Share Option program implemented

-- *EBITDA losses fell by 37% to GBP0.668m (2019: GBP1.053m), excluding exceptional items and share option scheme of GBP191,000 (2019: GBP2,000)

   --     EBITDA losses fell by 19% to GBP0.859m (2019: GBP1.055m), excluding exceptional items 

-- Administration costs increased to GBP4.561m (2019: GBP2.973m) with Modern Water acquisition and Labskin expansion

   --     Operating loss of GBP2.718m ( 2019: GBP 2.371 m) after providing for: 

o Depreciation of GBP 0.172m ( 2019: GBP0.101m)

o Amortisation of GBP0.941m ( 2019: GBP0.442m)

o Impairment of intangible assets GBPnil (2019 : GBP0.241m)

o Impairment of investments GBP0.354m (2019: GBPnil)

o Exceptional costs of GBP0.391m (2019: GBP0.532m) one-off transaction costs relating to acquisition activities

   --     GBP13.3m all-share Acquisition of Modern Water 

Post-year-end highlights

-- GBP10m Placing and Subscription to fund scale, meet increased demand and expand revenues across the Group

o At 30 pence per 0.1p ordinary share

o 100% increase in share price since previous December 2019 placing at 15 pence equivalent per 0.1p ordinary share (1.5p per 0.01p ordinary share before 10:1 consolidation)

-- FY 2021 revenue guidance remains at GBP10m with GBP3.6m already received in Modern Water Q1 orders

-- Group staff numbers expand to meet demand with 57 at 29 June 2021 compared to 43 at year end

-- The Labskin Division sealed reputation as a leading diagnostics partner with global partners and new service offerings

o 18 of the top 20 global pharma companies

o Virtual clinical trials with remote collection of human volunteer's skin microbiome

o New solution for the collection of volunteer microbiomes to allow for lab controlled clinical trials of advanced skin models (pigmented, acne, atopic dermatitis, psoriasis) and human microbiomes

o As the data bank of remote volunteers grow, higher accuracy and increased reliability of virtual product testing will eliminate early human trial and error testing leading to faster time to market

-- Building of a data repository to allow Artificial Intelligence ("AI") modelling of skin conditions and ingredient effects

o Launch of Skin Trust Club AI Skincare App and Home Test Kit with xx members

-- Self-administered skin swab from home-test-kit allows the clinical trial or Skin Trust Club participant to conduct a simple test without interaction

-- Environmental Health division also continues to grow apace with new equipment, solutions, labs and services creating a strong $5.0m (GBP3.6m) sales pipe for Microtox and MicroTrace in Q1 alone

o New equipment rolling off production lines on three continents to meet demand across the Microtox and MicroTrace range with new range of real-time surveillance services in Water Quality Monitoring

o New solutions to detect contaminants of concern and forever chemicals through Microsaic Systems, mass spectroscopy-based identification systems and with the Aptamer Group

o Two New Containment Level 3 (Virus) level labs at our York UK facility

o New services to detect dangerous pathogens, including contagious infections as well as community detection of opioids

-- Successful completion of Phase 3 field trials in which Microtox PD achieved real-time detection and transmission of data, specific to SARS-CoV-2 in wastewater treatment plants at multiple sites

o Public Health England access to the SARS-CoV-2 virus at Category 3 lab with University of Aberdeen, Genoa, Italy and Liverpool University

-- Identified the virus S-Protein in quantities at 40 femtogram per millilitre ("Fg/mL")

-- Close to 100% sensitivity and specificity on DeepVerge's Microtox BT nano-optofluidic chip

o Master service agreement with EPS Group to install, calibrate, service and maintain Microtox PD units which, subject to negotiation with undisclosed parties, have the potential to be installed in multiple European countries

   --    40 subject breath test clinical trial concluded at Royal College of Surgeons, Ireland 

o 16 independently confirmed as COVID-19 positive with PCR tests

o Breath samples were tested on the Microtox(R) BT nano-optofluidic chip surface with Affimer(R) reagents ("Avacta Group") and Optimers ("Aptamer Group")

o Detection of the live virus confirmed indicating 9 times increase in digital spectrum signal on the Microtox(R) BT compared to control

o Microtox(R) BT delivered results in under 60 seconds from breath samples

o Subject to successful completion of additional human trials, the Microtox BT would be expected to meet the criteria for UK, MHRA's Target Product Profile Rapid Breath Test with potential roll out of COVID-19 and other pathogen breath tests later this year

-- Memorandum of Understanding for a Joint Venture with China Resources Environmental Protection Development Limited to cover the manufacture, assembly and sale of environmental monitoring equipment

-- Establishment of a new AI centre of excellence in Cork, Ireland to play key role in real-time detection of SARS-CoV-2 in Ireland and across Europe .

Outlook

SARS-CoV-2 and COVID-19 Testing has been underway between DeepVerge and Modern Water since our joint collaboration and development announcement in June 2020. We have now successfully detected SARS-CoV-2 in wastewater treatment plants with equipment installed and data continuing to transmit alerts on the identification of the virus, in real-time. These are exciting developments, and the Company will update the market on an extended roll out across multiple jurisdictions, expected in H2 this year.

The Board provided guidance for 2021 revenue of GBP10m in January 2021 and remains well on track and expects the business will continue to grow across all divisions in the Group.

Contacts:

 
                                                   +44 (0) 7340 055 
 DeepVerge plc              Gerard Brandon, CEO     648 
 SPARK Advisory Partners 
  Limited                   Neil Baldwin/Andrew    +44 (0) 113 370 
  (Nominated Adviser)        Emmott                 8974 
 Turner Pope Investments    Andy Thacker/James     +44 (0) 20 3657 
  (TPI) Limited (Broker)     Pope                   0050 
 

Chairman's Statement

For the year ended 31 December 2020

Dear Fellow Shareholder,

In my second year as Chairman, I have pleasure presenting the Company's report and results for the year ended 31 December 2020.

Our Business

DeepVerge Plc ("DeepVerge", "Group" or "the Company") was incorporated and registered in England and Wales on 28 May 2016 and was admitted to trading on the AIM market of London Stock Exchange plc on 5 April 2017. Following on from the strategic acquisition of artificial intelligence software company, Rinocloud Limited, in 2019, DeepVerge has applied artificial intelligence to life science and environmental test services for bacteria, viruses and toxins across the Group generating revenue growth, culminating in the first quarterly positive EBITDA in Q4, 2020 (excluding exceptional costs associated with the acquisition of Modern Water plc) .

Labskin has its cloud-based eco-system that validates skincare products and ingredients, remotely for clients, and has delivered strength to the core business growth in 2020, building on the already growing list of multi-year, framework agreements with many global Top 20 skincare and healthcare companies. In just over two years, the Labskin division's laboratory space has increased from 924 sq. ft in 2018 to 9,378 sq. ft in 2020.

The Company recently launched the Skin Trust Club Artificial Intelligence Skincare App and Home Test Kit that provide simple, at-home skin microbiome testing for personalised skincare and skin health tracking. These were in development throughout 2020. The self-administered skin swab is a remote trial and allows the consumer to conduct each stage of the trial without interaction. Skin Trust Club's DNA Test generates a report that consumers can use to manage their custom skincare regime. Analysis of skin attributes provides information to create hundreds of different product combinations to suit a person's unique skin microbiome.

The Company's acquisition of Modern Water plc ("Modern Water") completed in November 2020 and expanded DeepVerge's offering to include environmental data management, monitoring and analysis of water contamination using AI. The Group has over 3,000 units installed in over 60 countries serving clients in water utilities, public health authorities and industrial manufacturers. The Group is introducing new equipment to meet demand across its Microtox and MicroTrace ranges with a new range of real-time surveillance services in water quality monitoring.

Results

Yet again, this year has been transformational for DeepVerge, attributable to enhancing an already successful business model, better than expected with our first EBITDA profitable quarter in Q4, 2020, before costs of Modern Water acquisition. Revenues for the year exceeded the Company guided number by 10% and growth in sales is reflected in higher revenues per client, increased demand requiring additional employees across all subsidiaries during lockdown, no COVID-19 furlough and expansion of laboratory space throughout 2020 and into 2021.

Highlights:

-- Total 2020 revenue GBP6.650m including pre-acquisition Modern Water revenue, increase of 553% from 2019 GBP1.017m revenue;

   --     Consolidated group revenue GBP4.483m (2019: GBP0.823m); 
   --     EBITDA losses before exceptional items reduced by 19% to GBP0.859m (2019: GBP1.055m); 
   --     H2, 2020 revenue growth of 3.47 times H1 revenue; 

-- Strong sales in Q4 2020 delivered the Company's first EBITDA profitable quarter (excluding exceptional costs associated with the acquisition of Modern Water);

-- Administration costs increased to GBP4.561m (2019: GBP2.973m) with Modern Water acquisition and Labskin expansion;

   --      Operating loss of GBP2.718m ( 2019: GBP 2.371 m) after providing for: 

o Depreciation of GBP 0.172m ( 2019: GBP0.101m);

o Amortisation of GBP0.941m ( 2019: GBP0.442m);

o Impairment of intangible assets GBPnil (2019: GBP0.241m);

o Impairment of investments GBP0.354m (2019: GBPnil);

-- Exceptional costs of GBP0.391m (2019: GBP0.532m) were one-off transaction costs relating to acquisition

activities;   GBP13.315m all-share Acquisition of Modern Water. 

Post Year-End Highlights

-- GBP10m Placing and Subscription to fund scale, meet increased demand and expand revenues across the Group

o At 30 pence per 0.1p ordinary share;

o 100% increase in share issue price since previous December 2019 placing at 15 pence equivalent per 0.1p ordinary share (1.5p per 0.01p ordinary share before 10:1 consolidation).

Further information on our products, technologies and advances Post-Year-End can be found in the Chief Executive's Report.

Corporate governance

I believe that good corporate governance is important to support our future growth and the Board, which has extensive experience in publicly listed companies and running companies in the personal healthcare sector, is committed to the highest standards.

Outlook

COVID-19 presented challenges for the global economy but multiple opportunities for the Group. The move from selling equipment to providing services and consumables gave the Group scope to expand substantially into 2021 with our real-time water contamination detection and environment sector solutions, contributing to increased demand with additional staff recruited over the lock-down period and announcement of up to a further 60 staff required in the next few months. The outcome has resulted in an increase of new and core business from Labskin, Modern Water and the new Skin Trust Club consumer division.

SARS-CoV-2 and COVID-19 Testing has been underway between DeepVerge and Modern Water since our joint collaboration and development announcement in June 2020. The most recent RNS has confirmed the successful SARS-CoV-2 detection in wastewater treatment plants with equipment installed and data continuing to transmit alerts on the identification of the virus, in real-time. These are exciting developments, and the Company will update the market on an extended roll out across multiple jurisdictions, expected in H2 this year.

The Board provided guidance for 2021 revenue of GBP10m in January 2021 and remains and remains well on track and expects the business will continue to grow across all divisions in the Group.

Ross Andrews

Chairman

30 June 2021

Chief Executive's Statement

For the year ended 31 December 2020

Dear Fellow Shareholder,

We have grown from 5 full time employees in August 2018 to nearly 60 today and recently announced of an additional 60 to join over the next few weeks and months. The Chief Executive's Statement reflects a year in the life of the Company, but the growth and success comes from the people who breathe the life and soul into the Group, making a difference every day. So, I present the Company's results for the year ended 31 December 2020 below on behalf of the DeepVerge Team.

DeepVerge

DeepVerge is an environmental and life science group of companies that develops and applies AI and IoT technology for the analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent data analytics to scientifically prove the impact of skincare product claims on skin microbiome for most of the top 20 global cosmetic company clients and remotely detect and identify in real-time, dangerous pathogens, such as SARS-CoV-2 in wastewater treatment plants, drinking water, rivers, lakes and reservoirs.

Our core services:

   --      Regulated environmental toxicology services; 

-- Human skin equivalent platform to validate and verify the safety and impact on client products for regulatory authority approval;

-- AI and microbiome platform to facilitate clinical trials for skincare companies and remote test-kits for consumer skin;

-- Monitoring and data analytics platform for real-time detection and identification of pathogens in water and wastewater.

Highlights:

-- Total 2020 revenue GBP6.650m including pre-acquisition Modern Water revenue, increase of 553% from 2019 GBP1.017m revenue;

   --     Consolidated group revenue increased by 445% to GBP4.483m (2019 restated: GBP0.823m); 
   --     H2 2020 revenue GBP3.479m an increase of 247% from H12020 GBP1.004m revenue; 

-- Strong sales in Q4 2020 delivered the Company's first EBITDA profitable quarter (excluding exceptional costs associated with the acquisition of Modern Water);

-- Group staff number increased by 27 ( 268%) to 43 employees (2019: 16) and Share Option program implemented

   --     EBITDA losses  fell by 37% to GBP0.668m (2019: GBP1.053m), 

o excluding exceptional items and share option scheme of GBP191,000 (2019: GBP2,000) ;

   --     EBITDA losses  fell by 19% to GBP0.859m (2019: GBP1.055m), 

o excluding exceptional items)

-- Administration costs increased to GBP4.561m (2019: GBP2.973m) with Modern Water acquisition and Labskin expansion;

   --     Operating loss of GBP2.718m ( 2019: GBP 2.371 m) after providing for: 

o Depreciation of GBP 0.172m ( 2019: GBP0.101m);

o Amortisation of GBP0.941m ( 2019: GBP0.442m);

o Impairment of intangible assets GBPnil (2019 : GBP0.241m);

o Impairment of investments GBP0.354m (2019: GBPnil);

o Exceptional costs of GBP0.391m (2019: GBP0.532m) were one-off transaction costs relating to acquisition activities;

   --     GBP13.315m all-share acquisition of Modern Water. 

Post-year-end highlights

-- GBP10m Placing and Subscription to fund scale, meet increased demand and expand revenues across the Group

o At 30 pence per 0.1p ordinary share;

o 100% increase in share price since previous December 2019 placing at 15 pence equivalent per 0.1p ordinary share (1.5p per 0.01p ordinary share before 10:1 consolidation).

-- FY 2021 revenue guidance remains at GBP10m with GBP3.6m already received in Modern Water orders in Q1.

-- Group staff numbers continues to grow to meet demand and as at 30 June 2021 stands at 57 up from 43 at year end

-- The Labskin Division has sealed its reputation as a leading diagnostics partner with global partners and new service offerings

o We work with 18 of the top 20 global pharma companies;

o Virtual clinical trials with remote collection of human volunteer's skin microbiome;

-- New solution for the collection of volunteer microbiomes to allow for lab controlled clinical trials of advanced skin models (pigmented, acne, atopic dermatitis, psoriasis) and human microbiomes;

-- As the data bank of remote volunteers grow the higher the accuracy and increased reliability of virtual product testing can be provided to clients eliminating early human trial and error testing and faster time to market;

-- Building of a data repository to allow AI modelling of skin conditions and ingredient effects;

o Launch of Skin Trust Club Artificial Intelligent (A.I.) Skincare App and Home Test Kit

-- 2,000 members in the Alpha test with more than 5,000 before we stopped accepting for the Beta of which we will throttle back to complete.

-- Self-administered skin swab from home-test-kit allows the clinical trial or Skin Trust Club participant to conduct a simple test without interaction;

-- DNA test that generates a report consumers can use to manage their custom skincare regimen. Analysis of skin attributes provides information to create hundreds of different product combinations to suit a person's unique skin microbiome;

-- Environmental Health division also continues to grow apace with new equipment, solutions, labs and services creating a strong $5.0m (GBP3.6m) sales pipe for Microtox and MicroTrace in Q1 alone

o New equipment rolling off production lines on three continents to meet demand across the Microtox and MicroTrace range with new range of real-time surveillance services in Water Quality Monitoring

o New solutions to detect contaminants of concern and forever chemicals through Microsaic systems, mass spectroscopy-based identification systems and our work with the Aptamer Group

o Two New Containment Level 3 (Virus) level labs at our York UK facility

o New services to detect dangerous pathogens, including contagious infections as well as community detection of opioids.

-- Initial data from ongoing Phase III COVID-19 detection studies demonstrates ability to identify and detect the virus

o Public Health England access to the SARS-CoV-2 virus at Category 3 lab with University of Aberdeen, Genoa, Italy and Liverpool University

-- Identified the virus S-Protein in quantities at 40 femtogram per millilitre ("Fg/mL")

-- Close to 100% sensitivity and specificity on DeepVerge's Microtox BT nano-optofluidic chip

o 40 subject breath test clinical trial concluded at Royal College of Surgeons, Ireland

-- 16 independently confirmed as COVID-19 positive with PCR tests

-- Breath samples were tested on the Microtox(R) BT nano-optofluidic chip surface with Affimer(R) reagents ("Avacta Group") and Optimers ("Aptamer Group")

-- Detection of the live virus confirmed indicating 9 times increase in digital spectrum signal on the Microtox(R) BT compared to control

-- Microtox(R) BT delivered results in under 60 seconds from breath samples

o Subject to completion of additional human trials, the Microtox BT would be expected to meet the criteria for UK, MHRA's Target Product Profile Rapid Breath Test which would enable us to roll out the COVID-19 and other pathogen breath tests later this year

-- On 26 April, Skin Trust Club iOS App went live after successful completion of 2,000 Alpha skin tests

-- On 28 April the Company announced it had entered into a Memorandum of Understanding for a Joint Venture with China Resources Environmental Protection Development Limited to cover the manufacture, assembly and sale of environmental monitoring equipment.

-- On the 6 May the Company announced the establishment of a new AI centre of excellence in Cork, Ireland to play key role in real-time detection of SARS-CoV-2 in Ireland and across Europe . In addition, the Irish headcount, based on growing demand, is expected to triple in 2021 adding up to 60 new hires for roles in data science, physics and epidemiology.

-- On 24 June the Company announced the successful completion of Phase 3 field trials in which Microtox PD achieved real-time detection and transmission of data, specific to SARS-CoV-2, in wastewater treatment plants at multiple sites . As a result, Modern Water entered into a master service agreement with EPS Group to install, calibrate, service and maintain Microtox PD units which, subject to negotiation with undisclosed parties, have the potential to be installed in multiple European countries.

The Company has transformed its business model to apply artificial intelligence to life science and environmental test services for bacteria, viruses and toxins. Key activities of the business are as follows:

Labskin

Labskin is a 3D human skin equivalent test platform that scientifically proves the impact of skincare product claims in healthcare, life sciences, skin microbiome clinical trials, pharmaceutical and cosmetics industries. The Labskin division's laboratory space has increased from 924 sq. ft in 2018 to 9,378 sq. ft in 2021 and the team works with leading skincare companies such as Stryker, L'Oréal and Kimberly-Clark. Labskin's virtual clinical trials with remote collection of human volunteers' skin microbiome provides a solution for the collection of volunteer microbiomes to allow for lab-controlled trials of advanced skin models and human microbiomes. As the data bank of remote volunteers grow, the higher the accuracy and increased reliability of virtual product testing that can be provided to clients, eliminating early human trial and error testing and resulting in a faster time to market.

Skin Trust Club

The Company recently launched the Skin Trust Club Artificial Intelligence Skincare App and Home Test Kit that provide simple, at-home skin microbiome testing for personalised skincare and skin health tracking. The self-administered skin swab is a remote trial and allows the participant to conduct each stage of the trial without interaction. Skin Trust Club's DNA Test generates a report that consumers can use to manage their custom skincare regime. Analysis of skin attributes provides information to create hundreds of different product combinations to suit a person's unique skin microbiome.

Modern Water Plc

On 13 October 2020 the Company made an offer to acquire Modern Water Plc. The offer consisted of one Company share for ten Modern Water Plc shares. The Company issued 55,669,222 ordinary shares at an average 23.92p per share, valuing the acquisition at GBP13,315,114. On 9 November 2020 the Company acquired majority control of Modern Water Plc and on 15 January 2021 the acquisition was completed. Modern Water plc was de-listed from AIM on 9 December 2020. Modern Water is expert in the development of analytical instruments and technology for monitoring toxicity in water, soil, food and industry. The Company believes that valuable emerging synergies exist between Rinocloud AI and Modern Water technology.

Drinking and Wastewater Analysis

The Company gained control of Modern Water in November 2020 expanding DeepVerge's offering to include environmental data management, monitoring and analysis of water contamination using AI. The Group has over 3,000 units installed in over 60 countries serving clients in water utilities, public health authorities and industrial manufacturers. The Group is introducing new equipment to meet demand across its Microtox and MicroTrace ranges with a new range of real-time surveillance services in water quality monitoring. It is also developing, in partnership with Microsaic Systems and the Aptamer Group, a range of binders to detect contaminants of concern and forever chemicals. The Company has two new containment level 3 (virus) labs at its York facility and is also introducing new services targeting dangerous pathogens including contagious infections as well as community detection of opioids.

SARS-CoV-2 and COVID-19 Testing

With access to the SARS CoV-2 virus at a category 3 laboratory with the University of Aberdeen and Liverpool University, the Company's Microtox(R) unit is able to identify the virus S-Protein in quantities at 40 femtogram per millimetre ("Fg/mL"). The results were close to 100% sensitivity and specificity on DeepVerge's Microtox(R) nano-optofluidic chip and Microtox(R), using AI was able to detect super-spreaders (with a high viral load), average spreaders and the lower limit sufficient to pick up the low emitters (asymptomatic). The effectiveness of Microtox(R) was demonstrated in a 40 subject clinical trial conducted with the cooperation of the Royal college of Surgeons, Ireland, where 16 subjects were independently confirmed as COVID-19 positive with PCR tests. Breath samples were tested on the Microtox(R) BT nano-optofluidic chip surface with Affimer reagents and Optimers.

Detection of the live virus was confirmed indicating 9 times increase in digital spectrum signal on the Microtox compared to control. Microtox delivered results in under 60 seconds from breath samples. Subject to completion of additional human trails, the Microtox BT would be expected to meet the criteria for UK, MHRA's Target Production Profile Rapid Breath Test.

Disruptive Business Model

DeepVerge has advanced its core business model with Labskin AI platform to create a fundamental change in topical skin related clinical and medical device trial costs. Changes go far beyond incremental savings resulting in:

-- Physical presence of human volunteers can be eliminated using remote clinical trials testing;

   --      Swab of test subject's skin is taken and applied to Labskin; 
   --      Instantly creates twin test subject; 
   --      Recruitment time is shorter as location is irrelevant, or at least within posting distance; 
   --      Project management and supervision time and personnel are reduced substantially; 
   --      AI integration delivers comparative analytical data plus human test response data; 
   --      Reduces error - highlighting test subjects who are not sticking to test regime; 
   --      Increases accuracy; 
   --      Clients win, Clinical Research Organisation wins and Labskin wins extra revenues; 

-- Our commercial focus is on distribution using sales, marketing and distribution channels of collaboration partners as well as adding to the combined knowledge with our team that understand bacteria, fungi and viruses;

-- We have a full team of IT and web services professionals that understand 'online' and SEO, bringing our partner businesses fully online, through ecowaterOS and RinoDrive, which is so necessary in a COVID-19 world;

-- Sales and Marketing includes an inside sales team, brand and marketing specialists that complement our partners traditional sales models;

   --      Flexible enough to facilitate scientific procedures that need to be updated. 

3-Step Strategic Plan Across All Divisions

   1.      Grow Profits Across Related Markets 

We will continue to leverage existing blue-chip clients and collaboration partner relationships to secure additional high value product test service contracts with additional sales resources.

   2.      Product & Service Investment 

Roll-out of physical and digital cloud-based reporting services to keep our Life Science and Environmental Health offering competitive and relevant to our clients is key to delivering more value to our clients and increasing revenue per client in return. We maintain this approach by extending our technical resources to enhance product and service development. The addition and continued development of AI data analytics capabilities from our Rinocloud division, and the continued growth in revenue because of that, shows we are on the right track.

   3.      Collaboration & Acquisition 

We actively pursue a broader portfolio of services through revenue shared collaboration and acquisition options. These areas have been previously mentioned in RNS announcements and include, but are not limited to, data analytics, software and biophysics integration services. All of these lead to extending the scope and reach of all divisions. As mentioned above the key criteria in our collaboration and partner targets are to increase revenue per client and earnings from repurposed assets to enhance shareholder value.

As noted from the recent RNS on the positive results of wastewater treatment plant installations of Microtox PD, the Company has signed master service and commercial agreements with Avacta Group plc and Aptamer Group Limited for binding agents, installation, maintenance, a service agreement with EPS Group for Europe and will update the market on an extended roll out across multiple jurisdictions for detection of SARS-CoV-2 in real-time, expected in H2 this year. We look forward to updating you on the progress of this strategy as we go forward.

Gerard Brandon

Chief Executive Officer

   30   June 2021 

The Board

Ross Andrews, Non-Executive Chairman

Ross was appointed Chairman on 21 May 2019, having been a non-executive director since April 2017. He is a corporate financier with over 30 years' experience, has a strong understanding of corporate governance regimes and is chairman and non-executive director of several UK listed companies. In 2018, he established Guild Financial Advisory, a corporate finance boutique focused on ambitious and fast-growing companies.

Gerard Brandon (Chief Executive Officer)

Gerard was appointed Director and CEO of DeepVerge in August 2018. Previously, he joined Cellulac Limited (Ireland) as its Chief Executive Officer in May 2012 and assumed the same role for Cellulac plc in October 2013. In 1996 he became founder and CEO of Alltracel Pharmaceuticals PLC, where he built a team that oversaw numerous patents granted on refined cellulose. Alltracel was admitted to trading on AIM in 2001. In 2004, he was appointed as a Managing Partner for Farmabrand Private Equity. In 2009, he was appointed as an Executive Consultant to Eplixo Limited. He is a Fellow of the Ryan Academy of Entrepreneurs in Dublin.

Camillus Glover (Chief Financial Officer)

Camillus was appointed Director and COO of DeepVerge on 8 August 2018. On 29 August 2018 he took over as Chief Financial Officer. Previously, he joined Cellulac Limited (Ireland) as Chief Financial Officer in May 2012 and assumed the same role for Cellulac plc in October 2013. He is a member of the Institute of Chartered Accountants Ireland. In 2003, he joined Alltracel Pharmaceuticals plc as Commercial Director and was appointed Chief Operations Officer in 2005 until it was acquired in 2008 by Hemcon Medical Technologies ("Hemcon"). Between 2009 and 2012, he was VP of Global Business Development for Hemcon prior to joining Cellulac plc.

Fionan (Fin) Murray, (Chief Operations Officer)

Fin is the founder of Rinocloud Limited. He was appointed Sales Director of DeepVerge on 2 May 2019 following the acquisition of Rinocloud Ltd. On 26 February 2020 he was appointed COO of DeepVerge. He is a seasoned sales executive with more than 30 years' experience in worldwide distribution deals, selling complex software solutions into the multi-national corporate sectors in financial services, biotech, utilities and government departments. He is former CEO of LeT Systems Ltd and a senior executive at KBC Bank and Kindle Banking systems. He was appointed Chief Operations Officer on 26 February 2020.

Dr Nigel Burton (Non-Executive Director)

Nigel was appointed non-executive director of the Company on 10 November 2020 following the acquisition of Modern Water where Nigel was a non-executive director. Nigel worked for over 14 years as an investment banker at leading London City institutions including UBS Warburg and Deutsche Bank, including serving as a Managing Director responsible for the energy and utilities industries. Following these roles Nigel spent 15 years as Chief Financial Officer or Chief Executive Officer of a number of private and public companies and is a Non-Executive Director of a number of other listed companies including BlackRock Throgmorton Trust, eEnergy Group, Microsaic Systems and Location Sciences .

Strategic Report

For the year ended 31 December 2020

Review of the business

A comprehensive review of the year is given in the Chairman's and Chief Executive's Statements on pages 2 to 8.

Principal risks and uncertainties

The Directors continually identify, monitor and manage the risks and uncertainties of the Group. Risk is inherent in all businesses. Set out below are certain risk factors which could have an impact on the Group's long-term performance and mitigating factors adopted to alleviate these risks. This list does not purport to be an exhaustive summary of the risks affecting the Group.

Management and employees

The Group's future success will be dependent on key employees and their on-going relationships with customers. The Group encourages customer contacts to be maintained by more than one individual. Key employees are incentivised through a mixture of competitive remuneration and sales commission. Main Board Directors are incentivised as detailed in the Directors' Remuneration Report.

Early stage of operations

DeepVerge is an early commercial stage company. The acquisition of both Rinocloud Limited and Modern Water has generated substantial growth in revenue and increased product and service offerings which allows visibility on long term sales pipeline activity. This integration of all divisions has had a relatively short-term track record of product sales and new service offerings, but recent funding has secured the resources to balance growth of product and service supply with demand for these offerings from our clients.

Delay in product launches

The Group has identified product and service development projects to take to market, some of which required specific funding to proceed. The recent funding is no guarantee that these projects will be completed within anticipated timescales, and while they have resulted in viable products and services, they remain at early stage to understand the size of the opportunities across the Group. The Group's strategy involves, inter alia, running clinical studies on its products to create verifiable data which can be used in marketing campaigns to differentiate the Group's products from competitors. The Skin Trust Club, a consumer skincare home test kit for skin microbiome was launched recently. If the clinical studies and roll out of services to consumers take longer than expected, or fail to establish the anticipated numbers signing up, this could be damaging to the Group's prospects.

Potential funding requirement for further development

Any future collaboration, partnership, joint venture expansion, activity, acquisitions and/or business development may require additional capital and the Group may seek to raise additional funds through equity or debt financings or from other sources. There can be no guarantee that the necessary funds will be available on a timely basis, on favourable terms, or at all, or that such funds if raised, would be sufficient.

Competition risk

The Group's current and future potential competitors include, amongst others, major multinational healthcare and environmental health companies with substantially greater resources than those of the Group. There can be no assurance that competitors will not succeed in developing systems, products and services that are more effective or economic than any of those developed by the Group, which would render the Group's products obsolete or otherwise non-competitive. The Group seeks to reduce this risk by ensuring that a professional and high standard product and service is provided to its customers, maintaining confidentiality agreements and selecting leading businesses in their respective fields as collaboration and joint development partners capable of addressing significant competition, should it arise.

Currency exchange risk

The Company's financial statements are denominated in pounds sterling, its functional currency. The Company plans to increase its sales and activities in the USA and the EU which may be impacted by exchange rate fluctuations in future. Following the acquisition of Modern Water additional dollar costs will arise which will be hedged against dollar sales.

COVID-19 risk

Management is constantly reviewing the impact of COVID-19 with clients and partners to assess manufacturing and supply of services stress. These include, but are not limited to, restrictions on the supply of materials that enable the Group to supply goods and services to clients. This review process is designed to provide advance warning to be able to manage impacts on the business and to assist clients meet their needs where reliance on the delivery of our goods and services from the Group is critical.

Financial risk management

The Group has instigated certain financial risk management policies and procedures which are set out in note 3 to the financial statements.

Companies Act S.172 Statement

The Directors are fully appraised of their responsibilities under section 172(1) of the Companies Act 2006 and

are so advised and updated on a regular basis by the Company Secretary of DeepVerge plc.

Business

The Group's strategic plan was designed to have a long-term beneficial impact on the Group and our customers by delivering the range of products and services as the go-to brand for animal testing alternatives for human skin, within Labskin, the go-to brand for environmental health testing in water and wastewater in Modern Water. The Directors will continue to operate the business within tight budgetary control and in line with regulatory requirements.

Employees

The Group has increased employees because of increased demand as well as ahead of expected future demand for products and services. Management of HR is critical to the delivery of the Group's strategic plan. The Directors ensure that the Group complies with all employment laws in the respective jurisdictions of each subsidiary and have implemented appropriate standards and systems to monitor and to ensure the welfare of all employees. For more detail on how the Directors support the employees, see Corporate And Social Responsibility report in this Annual Report.

Stakeholder engagement

The Group has built and maintained relationships with shareholders, advisers and suppliers. The Directors have taken steps to develop and strengthen them through dialogue and engagement. These relationships are regularly monitored at Board level. The Chairman ensures that he is available to discuss issues with key shareholders outside of the shareholder meetings which are held. The Company complies with its disclosure obligations as set out in the AIM Rules for Companies, published by London Stock Exchange to ensure that shareholders are updated on key developments on a timely basis.

Governance

The Board recognises that good standards of corporate governance help the Group to achieve its strategic goals and is vital for the success of the Company. For more detail on the corporate governance of the Group, see Corporate Governance Report in this annual report.

Disclosure of information to the Auditors

The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make him aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Outlook

Key Performance Indicators (KPIs)

The key performance indicators currently used by the Group are revenue, adjusted EBITDA and cash resources. The Group intends to establish other key performance indicators in due course once the Group has matured sufficiently. The Group does not use and does not at present intend to use non-financial key performance indicators.

Review of strategy and business model

Since 2019, DeepVerge Plc has completed a number of strategic acquisitions and the most recent being Modern Water, under the Company's control since 9 November 2020. With 30+ years of institutional knowledge of virus, bacteria, toxins and parasites in water and wastewater, Modern Water complements the knowledge within Labskin of virus, bacteria and toxins on human skin. The addition of a digital platform which was originally created for Labskin can now be extended to facilitate data accumulated from equipment already installed in more than 60 countries and using AI to identify in real-time dangerous pathogens across the group.

This physical laboratory-grown 3D human skin equivalent, developed specifically to host bacteria, virus and fungi on human skin in our test laboratories, incorporates a digital artificial intelligence to enhance clinical research, medical device and life science testing in physical real-world and virtual digital simulated form. Labskin allows our clients in skincare, healthcare, pharmaceutical manufacturers and the cosmetic industry to test and validate their product claims on human-like skin in a real-world environment with full access to multiple state-of-the-art partner technologies.

Because of the changes to the business model the Company is seeing an improved pipeline of activity. The Rinocloud acquisition and its development team has integrated well, as much of the work in collaboration had commenced prior to completion of the transaction. Moving to a higher value service offering and now including detection and predictive services across the Group is both exciting and challenging. With an increased order pipeline, the Company requires additional infrastructure and expertise. The announcements throughout 2020 of increased laboratory space and personnel growth has secured immediate organic growth from all divisions. The data analytics and use of artificial intelligence to enhance the capabilities of existing equipment and services of both the life science and environmental health divisions, opens opportunities to explore options of collaboration, partnership and acquisitive growth to achieve Company goals of meeting increased demands from our clients, regulatory compliance and enhance shareholder value.

Environment

The Directors consider that the nature of the Group's activities is not inherently detrimental to the environment.

Employees

The Group places value on the involvement of its employees and they are regularly briefed on the Group's activities. The Group closely monitors staff attrition rates which it seeks to maintain at current low levels and aims to structure staff compensation levels at competitive rates in order to attract and retain high calibre personnel.

Disabled employees

Applications for employment by disabled persons are always fully considered, bearing in mind the specific aptitudes of the applicant involved. It is the policy of the Group that the training, career development and promotion of disabled persons, as far as possible, be identical with that of other employees.

Social, community, and human rights

The Board recognises that the Group has a duty to be a good corporate citizen and to respect the laws, and where appropriate the customs and culture of the territories in which it operates. It contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices.

The Strategic Report was approved by the Board on 30 June 2021 and signed on its behalf by:

Gerard Brandon

Chief Executive Officer

Report of the Directors

For the year ended 31 December 2020

The Directors have pleasure in submitting this report together with the audited financial statements of DeepVerge Plc for the year ended 31 December 2020.

Corporate details

DeepVerge Plc is incorporated in England and Wales with registration number 10205396. The registered office is York Biotech Campus, Sand Hutton, York, North Yorkshire, YO41 1LZ.

Directors

The Directors who held office during the year and as at the date of signing the financial statements were as follows:

Gerard Brandon

Camillus Glover

Ross Andrews

Fin Murray

Nigel Burton (Appointed on 10 November 2020)

Principal activities

The Group is an environmental and life science group of companies that develops and applies AI and IoT technology to analytical instruments for the analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent data analytics to scientifically prove the impact of skincare product claims on skin microbiome for most of the top 20 global cosmetic company clients and remotely detect and identify in real-time, dangerous pathogens, such as SARS-CoV-2 in wastewater treatment plants, drinking water, rivers, lakes and reservoirs.

Our core services:

   --      Regulated environmental toxicology services; 

-- Human skin equivalent platform to validate and verify the safety and impact on client products for regulatory authority approval;

-- AI and microbiome platform to facilitate clinical trials for skincare companies and remote test-kits for consumer skin;

-- Monitoring and data analytics platform for real-time detection and identification of pathogens in water and wastewater.

Dividends

There were no dividends paid or proposed by the Company during the period (2019: none).

Going concern

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements.

The Directors have prepared cash flow projections to determine funding requirements of the Group.

During June 2021 the Company raised GBP10m by issuing new shares to fund accelerated sales opportunities and for general working capital purposes.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual report and consolidated financial statements.

Directors' interests

The interests of the Directors who served during the year and previous year in the share capital of the Company (all held beneficially) as at 31 December 2020 were as follows:

Ordinary Shares of 0.1p each

Gerard Brandon

8,414,483(1)

Camillus Glover 4,250,670

Ross Andrews 323,846

Fin Murray 8,786,758

Nigel Burton 1,883,167

   (1)   Includes 194,942 shares held by family member 

Substantial shareholdings

At the date of signing of these financial statements, the following interests in 3% or more of the issued Ordinary Share capital had been notified to the Company:

                                                                                                                                                       Number                                Percentage of issued 

Shareholder of shares share capital

Helium Rising Stars Fund 9,571,943 4.45%

Fionan Murray 8,786,758 4.08%

Gerard Brandon 8,219,901 3.82%

Post balance sheet events

The following events have taken place since the year end:

Ordinary Shares Issued

In the period from 1 January 2021 to date of the signing of these financial statements subscribers have exercised warrants over 3,824,485 Ordinary Shares of 0.1p each at an exercise price of 20p raising a total of GBP764,897.

In the period from 1 January 2021 to date of the signing of these financial statements staff employees have exercised options over 43,962 Ordinary Shares of 0.1p each at an exercise price of 0.1p raising a total of GBP44.

In the period from 1 January 2021 to date of the signing of these financial statements Turner Pope International exercised warrants over 8,422,284 Ordinary Shares of 0.1p at exercise prices ranging from 5p to 15p, at an average of 6.53p per Ordinary Share of 0.1p raising a total of GBP500,200.

On 7 June 2021 the Company raised GBP10 million by way of a firm and conditional placing of 33,333,334 Ordinary Shares of 0.1p at a placing price of 30 pence per share. The first firm placing on 11 June 2021 of 21,086,888 Ordinary Shares raised GBP6.32 million. The second conditional placing on 24 June 2021 of 12,246,446 Ordinary Shares raised GBP3.68 million.

At the date of signing these financial statements, the Company had an issued share capital of 215,138,276 Ordinary Shares of 0.1p each and 223,685,232 deferred Ordinary Shares of 0.99p each.

Director Purchase of Ordinary Shares

On 12 April 2021 Ross Andrews, Director, purchased 1,000,000 Ordinary Shares of 0.1p each on the open market at an average price of 33.72p per share.

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group and the Parent Company for that period. In preparing these financial statements, the Directors are required to:

   --      select suitable accounting policies and then apply them consistently; 
   --      make judgements and accounting estimates that are reasonable and prudent; 

-- state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Parent Company and enable them to ensure that the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Parent Company's website (www.deepvergeplc.com). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the annual report and the accounts, taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group and the Parent Company's performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Report of the Directors confirm that, to the best of their knowledge:

-- the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company;

-- the Parent Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company; and

-- the Chairman's Statement and Chief Executive's Statement include a fair review of the development of the business and the position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that it faces.

Directors' liability insurance

The Company maintains Directors and Officers liability insurance, which is reviewed annually and is considered to be adequate by the Company and its insurance advisers.

Independent auditors

Jeffreys Henry LLP were appointed during the year and have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

Companies Act S.172 Statement

The Directors are fully appraised of their responsibilities under section 172(1) of the Companies Act 2006 and

are so advised and updated on a regular basis by the Company Secretary of DeepVerge plc.

Business

The Group's strategic plan was designed to have a long-term beneficial impact on the Group and our customers by delivering the range of products and services as the go-to brand for animal testing alternatives for human skin, within Labskin, the go-to brand for environmental health testing in water and wastewater in Modern Water. The Directors will continue to operate the business within tight budgetary control and in line with regulatory requirements.

Employees

The Group has increased employees because of increased demand as well as ahead of expected future demand for products and services. Management of HR is critical to the delivery of the Group's strategic plan. The Directors ensure that the Group complies with all employment laws in the respective jurisdictions of each subsidiary and have implemented appropriate standards and systems to monitor and to ensure the welfare of all employees. For more detail on how the Directors support the employees, see Corporate And Social Responsibility report in this Annual Report.

Stakeholder engagement

The Group has built and maintained relationships with shareholders, advisers and suppliers. The Directors have taken steps to develop and strengthen them through dialogue and engagement. These relationships are regularly monitored at Board level. The Chairman ensures that he is available to discuss issues with key shareholders outside of the shareholder meetings which are held. The Company complies with its disclosure obligations as set out in the AIM Rules for Companies, published by London Stock Exchange to ensure that shareholders are updated on key developments on a timely basis.

Governance

The Board recognises that good standards of corporate governance help the Group to achieve its strategic goals and is vital for the success of the Company. For more detail on the corporate governance of the Group, see Corporate Governance Report in this annual report.

Disclosure of information to the Auditors

The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make him aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Annual General Meeting

A copy of the notice convening the Annual General Meeting will be sent out shortly under separate cover.

   The Directors' report was approved by the Board on 30   June 2021 and signed on its behalf by: 

Gerard Brandon

Chief Executive Officer

Corporate Governance Statement

For the year ended 31 December 2020

Compliance

The Directors recognise the value of the principles of the Corporate Governance Code for Small and Mid-Size Quoted Companies issued by the Quoted Companies Alliance (QCA) .

The following statement describes how the Group seeks to address the principles underlying the Code where practicable and appropriate for a company of this size.

Board composition and responsibility

The Board currently comprises five Directors. The Non-executive Chairman, three executive Directors and two non-executive Director. The Board has determined that the Non-executive Directors are independent in character and judgement and that there are no relationships or circumstances which could materially affect or interfere with the exercise of their independent judgement. The Board is satisfied with the balance between executive and non-executive Directors which allows it to exercise objectivity in decision making and proper control of the Group's business. The Board considers this composition is appropriate in view of the size and requirements of the Group's business and the need to maintain a practical balance between executives and non-executives.

All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and are subject to re-election at least every three years. The Board does not automatically re-nominate non-executive Directors for election by shareholders. The terms of appointment of the non-executive Directors can be obtained by request to the Company Secretary.

The Board's primary objective is to focus on adding value to the assets of the Group by identifying and assessing business opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved for Board decisions include strategic long-term objectives and capital structure of major transactions. There is a division of responsibilities between the Non-Executive Chairman, who is responsible for the overall strategy of the Group, and the CEO, who is responsible for implementing the strategy and day to day running of the Group. He is assisted by the CFO and the COO.

Board meetings

26 Board meetings were held during the period. The Director's attendance record during the period is as follows:

Gerard Brandon 25

Camillus Glover 26

Ross Andrews 13

Fin Murray 13

Nigel Burton (Appointed 10 November 2020) 3

Audit and Risk Committee membership and activities

The Chair of the Audit Committee is Non-executive Director Ross Andrews. The Committee welcomed Dr Nigel Burton to the Board as a second Non-executive Director during the year and the third member of the Committee is Executive Director Fin Murray. All three Directors possess the necessary depth of financial and commercial expertise to fulfil their role. Although not members of the Audit Committee, the CEO and CFO are also invited to attend meetings, unless they have a conflict of interest. Other senior members of the business are invited to attend meetings as appropriate. The Audit Committee met twice for scheduled meetings during the year.

Key activities during the year

-- Reviewed the Annual Report and Accounts, including whether they were fair, balanced and understandable, the material judgements and estimates, going concern and viability statements.

   --      Considered the external auditor's report on the full- and half-year audits. 
   --      Reviewed the full- and half-year results announcements. 

-- Appraised the effectiveness and performance of our external auditors, assessed their independence and objectivity, and recommended their reappointment.

   --      Considered the external audit fees and terms of engagement. 

Financial reporting

The Committee's primary responsibility in relation to the Group's financial reporting is to review, with management and the external auditor, the quality and appropriateness of the annual and half-yearly financial statements. The Committee focuses on the quality of accounting policies and practices, the appropriateness of underlying assumptions, judgements and estimates made by management, key audit matters identified by the external auditor, the clarity of the disclosures and compliance with financial reporting standards, an assessment of whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy, and advising the Board on the form and basis underlying the three step strategic plan.

Nomination Committee membership and activities

The Chair of the Nomination Committee is Non-executive Director Ross Andrews. The Board welcomed Dr Nigel Burton to the Board as Non-executive Director during the year and Dr Burton joined the Nomination Committee as its second Non-executive Director. The third member of the Committee is executive Director Fin Murray. All three Directors possess the necessary depth of management and commercial expertise to fulfil their role. Although not members of Nomination Committee, the CEO and CFO are also invited to attend meetings, unless they have a conflict of interest. Other senior members of the business are invited to attend meetings as appropriate. The Nomination Committee met twice for scheduled meetings during the year.

By appointing Dr Nigel Burton to the Board we are ensuring that we have the world- class experience, skills and expertise necessary to drive the Group forward through its three step strategic plan.

.

In the coming year, the Committee will turn its focus to ensuring the continued growth of the executive and senior management team.

Remuneration Committee membership and activities

The Chair of the Remuneration Committee is Non-executive Director Ross Andrews Dr Nigel Burton joined the Committee as the second as Non-executive Director. The third member of the Committee is executive Director Fin Murray . Appropriate members of the management team, as well as the Committee's advisers, are invited to attend meetings as appropriate, unless there's a potential conflict of interest. The remuneration of Non-executive Directors, is determined by the Executive Directors. The Remuneration Committee met twice for scheduled meetings during the year.

During the year the Committee:

- Determined and recommended to the Board the Group's overall remuneration policy.

- Determined and recommended to the Board the remuneration of Executive Directors.

- Monitored, reviewed and approved the levels and structure of remuneration for other senior managers.

Internal control

The Directors are responsible for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance regarding the reliability of financial information used within the business and for publication and that the assets are safeguarded. There are inherent limitations in any system of internal control and accordingly even the most effective system can provide only reasonable, but not absolute, assurance with respect to the preparation of financial reporting and the safeguarding of assets.

The Group, in administering its business has put in place strict authorisation, approval and control levels within which senior management operates. These controls reflect the Group's organisational structure and business objectives. The control system includes clear lines of accountability and covers all areas of the organisation. The Board operates procedures which include an appropriate control environment through the definition of the above organisation structure and authority levels and the identification of the major business risks.

Internal financial reporting

The Directors are responsible for establishing and maintaining the Group's system of internal reporting and as such have put in place a framework of controls to ensure that the on-going financial performance is measured in a timely and correct manner and that risks

are identified as early as is practicably possible. There is a comprehensive budgeting system and monthly management accounts are prepared which compare actual results against both the budget and the previous year. They are reviewed and approved by the Board, and revised forecasts are prepared on a regular basis.

Relations with shareholders

The Company reports to shareholders twice a year. The Company dispatches the notice of its Annual General Meeting, together with a description of the items of special business, at least 21 days before the meeting. Each substantially separate issue is the subject of a separate resolution and all shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The Chairman of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which may be relevant to their work. The Chairman advises the meeting of the details of proxy votes cast on each of the individual resolutions after they have been voted on in the meeting.

The Chairman and the non-executive Directors intend to maintain a good and continuing understanding of the objectives and views of the shareholders.

Corporate social responsibility

The Board recognises that it has a duty to be a good corporate citizen and is conscious that its business processes minimise harm to the environment, contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices.

Report of the Remuneration Committee

For the year ended 31 December 2020

Statement of compliance

This report does not constitute a Directors Remuneration Report in accordance with the Directors Remuneration Regulations 2007 which do not apply to the Company as it is not fully listed. This report sets out the Group policy on Directors' remuneration, including emoluments, benefits and other share-based awards made to each Director.

Policy on Executive Directors' remuneration

Remuneration packages are designed to motivate and retain executive Directors to ensure the continued development of the Company and to reward them for enhancing value to shareholders. The main elements of the remuneration package for executive Directors are basic salary or fees, performance related bonuses, benefits and share option incentives.

Directors' remuneration

The remuneration of the Directors of the Company for the year ended 31 December 2020 and 2019 is shown below:

 
                                                     2020      2019 
                                                  GBP'000   GBP'000 
-----------------------------------------------  --------  -------- 
 Non-Executive Directors 
 Ross Andrews                                          49     41 
  Nigel Burton (appointed 10 November 2020)             8       - 
 Tony Richardson ( resigned on 21 May 2019)             -         5 
                                                       57        46 
-----------------------------------------------  --------  -------- 
 Executive Directors 
 Gerard Brandon (1)                                   173       131 
 Camillus Glover (1)                                  141       110 
 Fin Murray (appointed 2 May 2019)                    129        79 
 Helmut Schlieper ( resigned on 6 August 2018)          -         1 
                                                      443       321 
-----------------------------------------------  --------  -------- 
 Total fees and emoluments                            500       367 
-----------------------------------------------  --------  -------- 
 

(1) The salary of Gerard Brandon and Camillus Glover from the period 6 August 2018 to 30 June 2019 is for non-cash consideration and these Directors

may elect to have accrued salary settled by the allotment of new ordinary shares subject to certain conditions. The element of non-cash consideration

in 2019 was for Gerard Brandon GBP56,000 (2018: GBP48,000) and for Camillus Glover GBP51,000 (2018: GBP42,000).

Directors' share options

2017 Share Option Scheme

In April 2017, the Company awarded options to five officers of the Company over 6,720,000 ordinary shares of 1p each. These options were exercisable after two years provided that the holder of the options is still an employee of the Company.

Four of the officers have since left the Company, resulting in 6,081,600 of the options lapsing.

There have been a number of share reorganisations in the interim period and the remaining options under the scheme as at 31 December 2020 were as follows:

 
                              No. of ordinary 
                               shares under    Exercise 
Director       Date granted    option           price    Exercise period 
                                               50p-60p   From 5 April 2017 to 5 
Ross Andrews   5 April 2017       63,840        (1)       April 2027 
 

(1) 50% of the shares will vest at an exercise price of 50p and 50% at an exercise price of 60p 0.1p ordinary shares .

2020 Employee Share Option Scheme

On 18 September 2020 the Company implemented a group wide share option scheme for staff. The scheme incorporated an EMI Share Option Scheme for UK employees, a Share Option Scheme for Irish employees and Non-Approved Scheme to recognise the work and to reward, retain and recognise their contribution to date and their importance to the Company going forward. The share option program will reward the innovation that has been delivered by all team associates, across the DeepVerge Group, and put in place, motivation for our most valuable assets to continue to deliver shareholder value over the next 3 years. The EMI share options will lapse on 18 September 2030 and the Irish Share Options will lapse on 17 September 2027. No share options have been granted to PDMRs.

On 19 November 2020 share options were awarded to the directors of Company:

 
 
                 Exercise     Exercise     Exercise     Exercise   Exercise    Share Option Scheme 
                                  Date         Date         Date 
                    Price   1 Jan 2021   1 Jan 2022   1 Jan 2023     Period 
 ------------------------  -----------  -----------  -----------  ---------  --------------------- 
                                                                                  EMI Share Option 
 Gerard Brandon       30p      240,000      280,000      280,000   10 years                 Scheme 
                                                                              Ireland Share Option 
 Fionan Murray        30p      225,000      262,500      262,500    7 years                 Scheme 
 Camillus                                                                     Ireland Share Option 
  Glover              30p      225,000      262,500      262,500    7 years                 scheme 
 Ross Andrews         30p       60,000       70,000       70,000   10 years    Non-Approved Scheme 
 Nigel Burton         30p       50,000       58,333       58,334   10 years    Non-Approved Scheme 
 
 

The fair value calculation of the share options has been calculated using the Black Scholes Model. The charge to the income statement in 2020 for the director share options is as follows:

 
                                                          2020      2019 
 Director                                                 GBP'000   GBP'000 
-------------------------------------------------------  --------  -------- 
 Gerard Brandon                                            9         - 
 Camillus Glover                                            8        - 
 Fionan Murray                                              8        - 
 Ros Andrews                                               2         - 
 Nigel Burton                                               2        - 
 Total                                                     29       - 
-------------------------------------------------------  --------  -------- 
 Full details of the Share Option Scheme appear in Note 
  32. 
 

Independent Auditor's Report to the Members of DeepVerge Plc

For the year ended 31 December 2020

Opinion

We have audited the financial statements of DeepVerge Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2020 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

-- the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2020 and of the group's loss for the year then ended;

-- the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

-- the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

-- the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the entity's ability to continue to adopt the going concern basis of accounting included reviews of expected cash flows for a period of 12 months, to determine expected cash burn, which was compared to the liquid assets held in the entity.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.

 
 Key audit matter                                  How our audit addressed the key audit 
                                                    matter 
 Impairment of intangible assets 
 
  During the year, as part of the Modern                  Intangibles are only assessed for 
  Water acquisition, the group acquired                   impairment when indicators of impairment 
  intangible assets with a fair value                     exist. We have considered the life 
  of GBP14,882,000 and with a useful                      cycle, public perception through 
  economic life of 10 years. Consequently,                the share price of the Company and 
  the group carried intangible assets                     the 
  of GBP18,241,000 (2019: GBP3,654,000)                   fair value of intangibles held by 
  at the yearend relating to intellectual                 the Company. 
  property and development costs. 
                                                          We have performed the following audit 
  The risk is that the useful economic                    procedures: 
  life of the intangible assets may 
  be different to the management assumptions               *    Obtained management's forecast for future value in 
  or technological advancements may                             use of the intangible assets; 
  render its market value below its 
  carrying value. 
 
  EBITDA, which is considered by management                *    Assessed the reliability of forecasts by agreeing to 
  to be a key metric and is included                            historical inputs; 
  as a KPI in the strategic report, 
  is directly impacted by the amount 
  of costs capitalised. 
                                                           *    Reviewed management and challenged management on 
                                                                their judgements of the forecasted sales and 
                                                                estimates useful life of the intangible assets; 
 
 
 
                                                           *    assessed the appropriateness and applicability of 
                                                                discount rate applied to the current business 
                                                                performance; 
 
 
 
                                                           *    Assessed the ongoing projects viability and ensured 
                                                                they met the criteria defined in the accounting 
                                                                standards for intangibles; and 
 
 
 
                                                           *    Tested the clerical accuracy of management's 
                                                                forecast. 
 
 
 
                                                           *    confirmed cost and useful life by reviewing the 
                                                                underlying contracts for purchase of the intangible 
                                                                assets, including those acquired on acquisition of 
                                                                subsidiary during the year; 
 
 
 
                                                           *    reviewed the latest management accounts to assess 
                                                                post year end cashflows due to the technology and 
                                                                patents held; and 
 
 
 
                                                           *    As all the capitalised intangibles relate to 
                                                                enhancing its product, no impairment is required. 
 
 
 
                                                          Based on the audit work performed 
                                                          we are satisfied, that although there 
                                                          are inherent uncertainties associated 
                                                          with the forecast and estimation 
                                                          of useful economic life of intangible 
                                                          assets, the directors have made reasonable 
                                                          assumptions about the valuation and 
                                                          useful economic life of intangible 
                                                          assets, based on past experience 
                                                          and expected future revenues. We 
                                                          are also satisfied that all necessary 
                                                          disclosures have been made in the 
                                                          consolidated financial statements. 
                                                  ------------------------------------------------------------------- 
 Valuation of investments in and recoverability 
  of amounts due from subsidiaries 
 
  The parent company carried Investments                  We have performed the following audit 
  in subsidiaries of GBP15,603,000                        procedures: 
  (2019: GBP3,488,000). 
                                                           *    reviewed management's assessment of future operating 
  The parent company also had amounts                           cashflows and indicators of impairment; 
  owed by subsidiary undertakings of 
  GBP2,934,000 (2019: GBP3,609,000) 
  at the year end. 
                                                           *    assessed the methodology used by management to 
  Management's assessment of the recoverable                    estimate the future profitability of companies in the 
  amounts from investments in and loans                         group and recoverable value of the investment, in 
  to subsidiaries requires estimation                           conjunction with any intra-group balances, to ensure 
  and judgement around assumptions                              that the method used is appropriate; 
  used, including the cash flows to 
  be generated from continuing operations. 
  Changes to assumptions could lead 
  to material changes in the estimated                     *    assessed the reasonableness of the key assumptions 
  recoverable amount, impacting the                             used in management's estimates of recoverable value, 
  value of investment in the subsidiary,                        in line with the economic and industry statistics 
  amounts recoverable from the subsidiaries                     relevant to the business; 
  and resulting impairment charges. 
 
  The directors have assessed the recoverability 
  of intercompany balances and have                        *    confirmed that any adverse changes in key assumptions 
  concluded that they are recoverable                           will not would not materially increase the impairment 
  apart from the balance due from Innovenn                      loss; 
  UK Limited of GBP3.185m that has 
  been impaired. 
 
  There is a risk that the subsidiaries                    *    challenged cash inflows from revenue generating 
  may not be able to trade as expected                          activities and the key assumptions applied in 
  in the future and therefore the investment                    arriving at the expected revenues for the foreseeable 
  and the amounts recoverable may be                            future; 
  impaired. 
 
 
                                                           *    assessed the appropriateness and applicability of 
                                                                discount rate applied to the current business 
                                                                performance; 
 
 
 
                                                           *    assessed the reasonability of cash outflows, 
                                                                including contracted costs, research expenditure and 
                                                                expected capital expenditure; 
 
 
 
                                                           *    reviewed the latest management accounts for all 
                                                                entities in the group to confirm reasonability of 
                                                                assumption used in the cashflow forecast. 
 
 
 
                                                          Based on the audit work performed 
                                                          we are satisfied that the management 
                                                          have made reasonable assumptions 
                                                          in arriving at the value of the companies 
                                                          in the group based on net present 
                                                          value of future cashflow and the 
                                                          amounts are disclosed in accordance 
                                                          with the reporting framework, and 
                                                          no further impairment loss should 
                                                          be recognised in the parent company 
                                                          financial statements. 
                                                  ------------------------------------------------------------------- 
 Business combination - valuation 
  of intangible assets 
                                                          We have performed the following audit 
  Management acquired 93.46% interest                     procedures: 
  in a subsidiary for consideration 
  of GBP12,115,000 during the year.                        *    critically reviewed the consolidation workings, 
                                                                consolidation journals and assessed how the entity 
  We identified a risk that the fair                            was accounted for at the point of acquisition to 
  value of intangible assets may not                            ensure principals of IFRS 3 have been adhered; 
  have been accurately derived when 
  accounting for the business combination. 
 
                                                           *    reviewed the share purchase agreement to ensure 
                                                                considerations was included at fair value and the 
                                                                fair values of the assets and the liabilities agreed 
                                                                to the consolidation workings provided by man 
                                                                agement; 
 
 
 
                                                           *    reviewed the share purchase agreement for any clauses 
                                                                which could have future impact on the valuation of 
                                                                assets acquired; 
 
 
 
                                                           *    discussed the future operation of the newly acquired 
                                                                subsidiary and synergies expected from the 
                                                                acquisition; 
 
 
 
                                                           *    Obtained management's forecasts for the intangibles 
                                                                of the business acquired ; 
 
 
 
                                                           *    Assessed the reliability of forecasts by agreeing 
                                                                amounts to actual results to date and plans ; and 
 
 
 
                                                           *    Reviewed management and challenged management on 
                                                                their judgements of the forecasted sales; 
 
 
 
                                                           *    assessed the appropriateness and applicability of 
                                                                discount rate applied to the current business 
                                                                performance; 
 
 
 
                                                           *    reviewed the consolidated financial statements to 
                                                                ensure all the necessary disclosures were made; 
 
 
 
                                                          Based on the audit work performed 
                                                          we are satisfied that the acquired 
                                                          entity has been accurately consolidated 
                                                          and all necessary disclosures have 
                                                          been made in the financial statement 
                                                          of the group. 
                                                  ------------------------------------------------------------------- 
 

Our application of materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:

 
                        Group financial statements      Company financial statements 
 Overall materiality    GBP243,000 (2019: GBP93,000).   GBP196,000 (2019: GBP93,000). 
                       ------------------------------  ------------------------------ 
 How we determined it   Based on 1% of Gross Assets     Based on 1% of Gross Assets 
                         (2019: 1% of Gross Assets).     (2019: 1% of Gross Assets). 
                       ------------------------------  ------------------------------ 
 Rationale for          We believe that Gross Assets    We believe that Gross Assets 
  benchmark applied      are a primary measure used      are a primary measure used 
                         by shareholders in assessing    by shareholders in assessing 
                         the financial position          the financial position 
                         of the group, and is a          of the group, and is a 
                         generally accepted auditing     generally accepted auditing 
                         benchmark.                      benchmark. 
                       ------------------------------  ------------------------------ 
 

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between GBP5,000 and GBP60,000.

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above GBP11,050 (Group audit) (2019: GBP4,650) and GBP8,900 (Company audit) (2019: GBP4,650) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

An overview of the scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgments, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.

The Group financial statements are a consolidation of eight reporting units, comprising the Group's operating businesses and holding companies.

We performed audits of the complete financial information for DeepVerge Plc, Innovenn UK Limited, Integumen Ireland Limited, Stoer Ireland Limited, Rinocloud Limited and Modern Water Plc, reporting units, which were individually financially significant and accounted for over 100% of the Group's revenue and over 99% of the Group's absolute loss before tax (i.e. the sum of the numerical values without regard to whether they were profits or losses for the relevant reporting units).

The Group engagement team performed all audit procedures, with the exception of the audits of Lifesciencehub UK Limited and Lifesciencehub Ireland Limited, which were performed by a component auditor in The Republic of Ireland where the audited financial statements were reviewed.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-- the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-- the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

-- adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-- the parent company financial statements are not in agreement with the accounting records and returns; or

   --      certain disclosures of directors' remuneration specified by law are not made; or 
   --      we have not received all the information and explanations we require for our audit. 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 14, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

-- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

-- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control.

-- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

-- Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern.

-- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

-- Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:

   www.frc.org.uk/auditorsresponsibilities   This description forms part of our auditor's report. 

Use of this report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Sanjay Parmar (Senior Statutory Auditor)

For and on behalf of Jeffreys Henry LLP, Statutory Auditor

Finsgate

5-7 Cranwood Street

London EC1V 9EE

   30   June 2021 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2020

 
 
                                                                2020      2019 
                                                     Notes   GBP'000   GBP'000 
------------------------------------------------  --------  --------  -------- 
 Continuing operations 
 Revenues *                                              5     4,483       823 
 Costs of sales                                              (2,639)     (221) 
------------------------------------------------  --------  --------  -------- 
 Gross profit                                                  1,844       602 
 Administrative Costs                                    6   (4,561)   (2,973) 
 Operating loss                                              (2,717)   (2,371) 
------------------------------------------------  --------  --------  -------- 
  Depreciation                                        6,16       172       101 
  Amortisation                                     6,14,15       941       442 
  Impairment of intangible assets                     6,15         -       241 
  Impairment of Investment                              17       354         - 
  Exceptional items                                    6,7       391       532 
 EBITDA before exceptional items                               (859)   (1,055) 
------------------------------------------------  --------  --------  -------- 
 Finance costs                                          11     (183)      (26) 
 Loss before income tax                                      (2,900)   (2,397) 
 Taxation                                               12       182       126 
------------------------------------------------  --------  --------  -------- 
 (Loss) for the year from continuing operations              (2,718)   (2,271) 
 Profit for the year from discontinued 
  operations                                            34         -         6 
------------------------------------------------  --------  --------  -------- 
 Loss for the year                                           (2,718)   (2,265) 
------------------------------------------------  --------  --------  -------- 
 
 Other comprehensive income 
------------------------------------------------  --------  --------  -------- 
 Currency translation differences                                 33       (8) 
------------------------------------------------  --------  --------  -------- 
 Total comprehensive loss for the year                       (2,685)   (2,273) 
------------------------------------------------  --------  --------  -------- 
 
 
 
 Loss per share from continuing and discontinued 
  operations attributable to owners of the 
  parent during the year                                 Pence   Pence 
 Basic and diluted loss per 0.1p ordinary 
  share** 
 From continuing operations                         13    2.1p    2.8p 
 From discontinued operations                       13    0.0p    0.0p 
-------------------------------------------------  ---  ------  ------ 
 From loss for the year                             13    2.1p    2.8p 
-------------------------------------------------  ---  ------  ------ 
 
 
 
 
 
 

* 2020 Revenue excludes GBP2,167,000 Modern Water 2020 pre-acquisition revenue.

** On 16 September 2020 share consolidation of 0.01p ordinary share in 10: 1 conversion to 0.1p new ordinary share.

The notes on pages 32 to 70 are an integral part of these consolidated financial statements.

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement account.

The loss for the parent Company for the year was GBP 1,590,000 (2019: GBP1,384,000).

Consolidated and Company's Statement of Financial Position

As at 31 December 2020

 
                                                 Group      Group    Company    Company 
                                                  2020       2019       2020       2019 
                                      Notes    GBP'000    GBP'000    GBP'000    GBP'000 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Assets 
 Non-current assets 
 Intangible assets                       15     18,241      3,654         38         53 
 Property, plant and equipment           16        874        471          -          - 
 Right of use assets                     14        569        503          -          - 
 Investments in subsidiaries             17          -          -     15,603      3,488 
 Loans to subsidiary undertakings        29          -          -      2,867      3,259 
 Other investments                       17        354        708        354        708 
 Total non-current assets                       20,038      5,336     18,862      7,508 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Current assets 
 Inventories                             19      1,347         85          -          - 
 Trade and other receivables             20      1,448        549        246        407 
 Cash and cash equivalents               21      1,441      1,193        451      1,115 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Total current assets                            4,236      1,827        697      1,522 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Total assets                                   24,274      7,163     19,559      9,030 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 
 Equity attributable to owners 
 Share capital                           25      2,380      2,322      2,380      2,322 
 Share premium account                   27     25,069     11,743     25,069     11,743 
 Retained loss                           26   (18,964)   (15,400)   (19,851)   (15,076) 
 Foreign currency reserve                27      (226)      (259)          -          - 
 Reverse acquisition reserve             27    (2,843)    (2,843)          -          - 
 Capital redemption reserve              27      9,519      9,519      9,519      9,519 
 Share based equity reserve              27        197          6        197          6 
----------------------------------  -------  ---------  ---------  ---------  --------- 
     Sub total                                  15,132      5,088     17,314      8,514 
 Non-controlling interests               33        789          -          -          - 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Total equity                                   15,921      5,088     17,314      8,514 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 
   Non-current liabilities 
 Deferred tax liabilities                23      2,780        500          -          - 
 Deferred revenue                        16         24          -          -          - 
 Lease liability                         14        358        402          -          - 
 Borrowings                              24        583        135        583          - 
 Total non-current liabilities                   3,745      1,037        583          - 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Current liabilities 
 Trade and other payables                22      2,667        693        745        516 
 Deferred tax liabilities                23        328         61          -          - 
 Lease Liability                         14        264        102          -          - 
 Borrowings                              24      1,349        182        917          - 
 Total current liabilities                       4,608      1,038      1,662        516 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Total liabilities                               8,353      2,075      2,245        516 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 Total equity and liabilities                   24,274      7,163     19,559      9,030 
----------------------------------  -------  ---------  ---------  ---------  --------- 
 

The notes on pages 32 to 70 are an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board on 30 June 2021.

Camillus Glover DeepVerge Plc

Chief Financial Officer Registered no: 10205396

Consolidated and Company's Statement of Cash Flows

For the year ended 31 December 2020

 
 
                                                                              Group     Group   Company        Company 
                                                                               2020      2019      2020           2019 
                                                                    Notes   GBP'000   GBP'000   GBP'000        GBP'000 
---------------------------------------------------------------  --------  --------  --------  --------  ------------- 
 Cash Flow from operating activities 
---------------------------------------------------------------  --------  --------  --------  --------  ------------- 
 Cash used in operations                                               28   (2,098)   (2,281)   (4,141)        (2,887) 
 Taxation                                                              12        77        32         -              - 
 Net Interest (paid)/received                                          11     (183)      (26)      (90)            (2) 
 Net cash used in operating activities                                      (2,205)   (2,275)   (4,231)        (2,889) 
---------------------------------------------------------------  --------  --------  --------  --------  ------------- 
 
 Cash flow from investing activities 
 Acquisition of subsidiary net of cash balance                         33       739        22       739             22 
 Payments to acquire intangibles                                       15     (488)     (213)         -              - 
 Purchase of property, plant and equipment                             16     (296)     (138)         -              - 
 Net cash used in investing activities                                         (45)     (329)       739             22 
---------------------------------------------------------------  --------  --------  --------  --------  ------------- 
 
 Cash flow from financing activities 
 Proceeds from issuance of ordinary shares                                    1,328     3,961     1,328          3,961 
 Proceeds from new loans                                                      1,500         -     1,500              - 
 Capital element of finance lease                                             (125)      (19)         -              - 
 Repayments on borrowings                                                     (205)     (171)         -              - 
 Net cash generated by financing activities                                   2,498     3,771     2,828          3,961 
---------------------------------------------------------------  --------  --------  --------  --------  ------------- 
 
 Net increase/ (decrease) in cash and cash equivalents                          248     1,167     (664)          1,094 
 Cash and cash equivalents at beginning of year                               1,193        26     1,115             21 
 Effects of exchange rate changes on cash and cash equivalents                    -         -         -              - 
 Cash and cash equivalents at end of year                              21     1,441     1,193       451          1,115 
---------------------------------------------------------------  --------  --------  --------  --------  ------------- 
 

Consolidated Statement of Changes in Shareholders' Equity

 
                                                                                    Capital     Share 
   Group                                                Foreign       Reverse   redempt-ion     based 
                       Share      Share    Retained    currency   acquisition       reserve    equity   Non-controlling 
                     capital    premium    earnings     reserve       reserve                 reserve         interests     Total 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
                     GBP'000    GBP'000     GBP'000     GBP'000       GBP'000       GBP'000   GBP'000                     GBP'000 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 At 1 January 
  2019                 2,260      3,662    (13,221)       (251)       (2,843)         9,519        90                       (784) 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Changes in 
 equity for the 
 year 
 ended 31 
 December 2019 
 Loss for the 
  year                     -          -     (2,265)           -             -             -         -                 -   (2,265) 
 Currency 
  translation 
  differences              -          -           -         (8)             -             -         -                 -       (8) 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Total 
  comprehensive 
  loss 
  for the year             -          -     (2,265)         (8)             -             -         -                 -   (2,273) 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Transactions 
 with the owners 
 Shares issued 
  during the year         62      8,419           -           -             -             -         -                 -     8,481 
 Costs of Share 
  issue                    -      (338)           -           -             -             -         -                 -     (338) 
 Share 
  option-based 
  charge                   -          -           -           -             -             -         2                 -         2 
 Transferred from 
  Share based 
  equity reserve           -          -          86           -             -             -      (86)                 -         - 
 Total 
  contributions 
  by and 
  distributions 
  to owners               62      8,081          86           -             -             -      (84)                 -     8,145 
 At 31 December 
  2019                 2,322     11,743    (15,400)       (259)       (2,843)         9,519         6                 -     5,088 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Changes in 
 equity for the 
 year 
 ended 31 
 December 2020 
 Loss for the 
  year                     -          -     (2,718)           -             -             -         -                 -   (2,718) 
 Non-controlling 
  interests (note 
  33)                      -          -       (846)           -             -             -         -               789      (57) 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Currency 
  translation 
  differences              .          -           -          33             -             -         -                 -        33 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Total 
  comprehensive 
  loss 
  for the year             -          -     (3,564)          33             -             -         -               789   (2,742) 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Transactions 
 with the owners 
 Shares issued 
  during the year         58     13,326           -           -             -             -         -                 -    13,384 
 Costs of Share                       -           -           -             -             -         -                           - 
 issue                                                                                                                - 
 Share 
  option-based 
  charge                   -          -           -           -             -             -       191                 -       191 
 Transfer from             -          -           -           -             -             -         -                           - 
 Share based 
 equity reserve                                                                                                       - 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
 Total 
 contributions by 
 and 
 distributions to 
 owners                    -          -           -           -             -             -         -                 -         - 
 At 31 December 
  2020                 2,380     25,069    (18,964)       (226)       (2,843)         9,519       191               789    15,921 
-----------------  ---------  ---------  ----------  ----------  ------------  ------------  --------  ----------------  -------- 
                                                                      Capital   Share based 
   Company                                    Share    Retained    redemption        equity 
                          Share capital     premium    earnings       reserve       reserve                       Total 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
                                GBP'000     GBP'000     GBP'000       GBP'000       GBP'000                     GBP'000 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 At 1 January 
  2019                            2,260       3,662    (13,778)         9,519            90                       1,753 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 Changes in 
 equity for the 
 year 
 ended 31 
 December 2019 
 Loss for the 
  year                                -           -     (1,384)             -             -                     (1,384) 
 Total 
  comprehensive 
  loss 
  for the year                        -           -     (1,384)             -             -                     (1,384) 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 Transactions 
 with the owners 
 Shares issued 
  during the year                    62       8,419           -             -             -                       8,481 
 Costs of Share 
  issue                               -       (338)           -             -             -                       (338) 
 Share 
  option-based 
  charge                              -           -           -             -             2                           2 
 Transferred from 
  Share based 
  equity reserve                      -           -          86             -          (86)                           - 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 Total 
  contributions 
  by and 
  distributions 
  to owners                          62       8,081          86             -          (84)                       8,145 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 At 31 December 
  2019                            2,322      11,743    (15,076)         9,519             6                       8,514 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 Changes in 
 equity for the 
 year 
 ended 31 
 December 2020 
 Loss for the 
  year                                -           -     (1,590)             -             -                     (1,590) 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 Total 
  comprehensive 
  loss 
  for the year                        -           -     (1,590)             -             -                     (1,590) 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 Shares issued 
  during the year                    58      13,326           -             -             -                      13,384 
 Costs of Share                                                                                                       - 
 issue                                            -           -             -             - 
 Share 
  option-based 
  charge                              -           -           -             -           191                         191 
 Subsidiary loan 
  forgiveness 
  (note 17)                           -           -     (3,185)             -             -                     (3,185) 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 Total 
 contributions by 
 and 
 distributions to 
 owners                               -           -           -             -             -                           - 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 At 31 December 
  2020                            2,380      25,069    (19,851)         9,519           197                      17,314 
-----------------  --------------------  ----------  ----------  ------------  ------------  --------  ---------------- 
 
 

Notes to the Financial Statements

For the year ended 31 December 2020

1. General information

DeepVerge Plc is a company incorporated in England and Wales. The registered number of the Company is 10205396. At General Meeting of shareholders on 15 September 2020 the company changed its name from Integumen Plc to DeepVerge Plc.

The Company is a public limited company admitted to trading on the AIM market of the London Stock Exchange since 5 April 2017. The address of the registered office is York Biotech Campus, Sand Hutton, York, YO41 1LZ.

The Company is an environmental and life science group whose principal activities is the development and application of AI and IoT technology to analytical instruments for the analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent data analytics to scientifically prove the impact of skincare product claims on skin microbiome and the remote detection and identification in real-time, dangerous pathogens, such as SARS-CoV-2 in wastewater treatment plants, drinking water, rivers, lakes and reservoirs.

The financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group's trading companies operate. The Group comprises DeepVerge Plc and its subsidiary companies as set out in note 17.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The policies have been consistently applied throughout the year, unless otherwise stated.

Basis of preparation

The consolidated financial statements of DeepVerge Plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. Practice is continuing to evolve on the application and interpretations of IFRS.

The consolidated financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

Under Section 479A of the Companies Act 2006, exemptions from an audit of the accounts for the financial year ended 31 December 2019 have been taken all subsidiary companies of the Company as listed in Note 17 Investments. As required, the Company guarantees all outstanding liabilities to which the subsidiary companies listed are subject at the end of the financial year, until they are satisfied in full and the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary companies listed above is liable in respect of those liabilities.

Changes in accounting policies and disclosures

(a) New and amended standards adopted by the Group

There are no IFRS or IFRIC interpretations that are effective for the first time in this financial period that would be

expected to have a material impact on the Group.

(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been

early adopted by the Company in the 31 December 2020 financial statements.

Amendment to IFRS 16, 'Leases' Covid-19 Related Rent Concessions: 1 April 2021

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2: 1 January 2021

Amendments to IAS 1, Presentation of financial statements' on classification of liabilities: 1 January 2022

A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 17, and some annual improvements

on IFRS 1, IFRS 9, IAS 41 and IFRS 16: 1 January 2022

The Directors anticipate that the adoption of these standard and the interpretations in future period will have no

material impact on the financial statements of the company.

Going concern

The financial statements have been prepared on the assumption that the company is a going concern. When assessing the foreseeable future, the Directors have looked at the forecast for the next 12 months from the date of this report, expected growth in revenues, some of which is contracted, the cash at bank available, loan facilities and existing liabilities as at the date of approval of this report and are satisfied that the Group should be able to cover its working capital requirements.

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. Since January 2021 the Company has raised GBP11.3m, before expenses, for shares issued. See note 36 for full details.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual report and consolidated financial statements.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary and associated undertakings. Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally accompanying a shareholding of more than fifty per cent of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The Group's share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in the comprehensive income with a corresponding adjustment in the carrying amount of the investment.

(a) Acquisition accounting

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments.

(b) Reverse acquisition accounting

The acquisition of Innovenn UK Limited and its subsidiary by DeepVerge Plc on 17 November 2016 has been accounted using the principles of reverse acquisition accounting. Although the Group financial statements have been prepared in the name of the legal parent, DeepVerge Plc, they are in substance a continuation of the consolidated financial statements of the legal subsidiary, Innovenn UK Limited. The following accounting treatment has been applied in respect of the reverse accounting:

The assets and liabilities of the legal subsidiary, Innovenn UK Limited are recognised and measured in the Group financial statements at the pre-combination carrying amounts, without restatement of fair value. The retained earnings and other equity balances recognised in the Group financial statements reflect the retained earnings and other equity balances of Innovenn UK Limited immediately before the business combination and the results of the period from 1 January 2014 to the date of the business combination are those of Innovenn UK Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, DeepVerge Plc, including the equity instruments issued in order to effect the business combination.

Foreign currency translation

(a) Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in sterling, which is the functional and presentational currency of the main operating entities.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within 'administrative expenses', except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentational currency as follows:

-- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

   --      income and expenses for each income statement are translated at average exchange rates; and 
   --      all resulting exchange differences are recognised in other comprehensive income. 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors who make strategic decisions.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition for its intended use.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only where it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Any borrowing costs associated with qualifying property plant and equipment are capitalised and depreciated at the rate applicable to that asset category.

Depreciation on assets is calculated using the straight-line method or reducing balances method to allocate their cost to its residual values over their estimated useful lives, as follows:

   Fixtures and fittings                                     20% - 33% 
   Plant and machinery                                    16% - 20% 

The assets' residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying value is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognised in administration expenses in the income statement.

Intangible assets

Intellectual property rights

Intellectual property rights relate to patents, and licences acquired by the Group. Amortisation is calculated using the straight-line method over the expected life of 5 - 10 years and is charged to administrative expenses in the income statement.

Development costs

Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the group are recognised as intangible assets when the following criteria are met:

-- it is technically feasible to complete the product so that it will be available for use;

-- management intends to complete the product and use or sell it;

-- there is an ability to use or sell the project;

-- it can be demonstrated how the products will generate probable future economic benefits;

-- adequate technical, financial and other resources to complete the development and to use or sell the product are available; and

-- the expenditure attributable to the product during its development can be reliably measured. Directly attributable costs that are capitalised as part of the product include employee costs and an appropriate portion of relevant overheads.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use using the straight-line method over the expected life of 5 - 10 years and is charged to administrative expenses in the income statement.

Know how acquired as part of business combinations is capitalised at fair value at the date of acquisition. Following the

initial recognition, the carrying amount of the know how is its cost less accumulated amortisation and any accumulated

impairment losses. Amortisation is charged on the basis of the estimated useful life on a straight-line basis and the

expense is taken to the Statement of Comprehensive Income which management estimate to be ten years.

Impairment of non-financial assets

Assets that have an indefinite life such as goodwill are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of the money and the risks specific to the asset which the estimates of future cash flows have not been adjusted.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognised in the income statement immediately. If goodwill is impaired however, no reversal of the impairment is recognised in the financial statements.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is based on estimated selling price in the ordinary course of business, less further costs expected to be incurred to completion and disposal. Provision is made for obsolete, slow-moving or defective items where appropriate.

Financial instruments

Recognition and initial measurement

Financial assets and financial liabilities are initially classified as measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss when the group becomes a party to the contractual provisions of the instrument.

Financial assets at amortised cost

The group's financial assets at amortised cost comprise trade and other receivables. These represent debt instruments with fixed or determinable payments that represent principal or interest and where the intention is to hold to collect these contractual cash flows.

They are initially recognised at fair value, included in current and non-current assets, depending on the nature of the transaction, and are subsequently measured at amortised cost using the effective interest method less any provision for impairment.

Financial liabilities at amortised cost

Financial liabilities at amortised cost comprise trade and other payables, and borrowings. They are classified as current and non-current liabilities depending on the nature of the transaction, are subsequently measured at amortised cost using the effective interest method.

Financial assets at fair value through other comprehensive income (FVOCI)

Financial assets at fair value through other comprehensive income are comprised of the investment in Cellulac plc. The election has been made to designate this asset as FVOCI. FVOCI assets are recognised and measured at fair value with gains and losses recognised in OCI.

The fair value measurement of the group's financial and non- financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy').

Level 1 - Quoted prices in active markets

Level 2 - Observable direct or indirect inputs other than Level 1 inputs

Level 3 - Inputs that are not based on observable market data

The group measures financial instruments relating to other investments at fair value using Level 3, as the investment is not listed, and has no readily available market price.

Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Impairment

In accordance with IFRS 9 an expected loss provisioning model is used to calculate an impairment provision. We have implemented the IFRS 9 simplified approach to measuring expected credit losses ('ECL') arising from trade and other receivables, being a lifetime expected credit loss. In the previous year the incurred loss model is used to calculate the impairment provision.

Research and development

Research expenditure is written off to the statement of comprehensive income in the year in which it is incurred. Development expenditure is written off in the same way unless the Directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected to benefit.

Trade and other receivables

Trade receivables are initially recognised at fair value, being the original invoice amount, and subsequently measured at amortised cost less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. Trade receivables that are less than three months past due date are not considered impaired unless there are specific financial or commercial reasons that lead management to conclude that the customer will default. Older debts are considered to be impaired unless there is sufficient evidence to the contrary that they will be settled. The amount of the provision is the difference between the asset's carrying value and the present value of the estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of less than three months, reduced by overdrafts to the extent that there is a right of offset against other cash balances.

For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above net of outstanding bank overdrafts.

Share capital

Ordinary Shares and Deferred shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary Shares or options are deducted from the share premium account.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and

subsequently measured at amortised cost using the effective interest method.

Borrowings

Borrowings are recognised initially at the fair value of proceeds received, ne of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Borrowing costs are expensed in the consolidated Group income statement under the heading 'finance costs'. Arrangement and facility fees together with bank charges are charged to the income statement under the heading 'administrative costs'.

Current and deferred income tax

The tax expense comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income where the associated tax is also recognised in other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is recognised, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised in respect of all temporary differences except where the deferred tax liability arises from the initial recognition of goodwill in business combinations.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and tax losses, to the extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will be sufficient taxable profits against which the future reversal of the underlying temporary differences can be deducted.

The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance sheet date.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Exceptional items

These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one-off items relating to business combinations, such as acquisition expenses.

Leases

Right of use assets

The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.Short-term leases and leases of low-value assets.

The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below GBP5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Employee benefits

Pension obligations

Group companies operate a pension scheme with defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity with the pension cost charged to the income statement as incurred. The Group has no further obligations once the contributions have been paid.

Revenue recognition

(a) Revenue from sale of goods

Revenue represents the fair value of consideration received or receivable for goods delivered to customers in the normal course of business, net of trade discounts and VAT.

(b) Revenue from services to customers

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue represents the fees and commissions, net of discounts, derived from services provided to and invoiced to customers. Revenue is recognised in the period in which the service is performed, in accordance with contractual arrangements. Income billed in advance of the performance of service is deferred and income in respect of work carried out but not billed at the period end is accrued. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the costs recognised that are recoverable.

(c) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

(d) Royalty and licence income

Royalty and licence income is recognised on an accruals basis in accordance with the substance of the relevant agreements.

Dividend distribution

Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

3. Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (foreign exchange risk and cash flow interest rate risk), credit risk, liquidity risk, capital risk and fair value risk. The Group's overall risk management programme focuses on the unpredictability of the financial markets and seeks to minimise the potential adverse effects on the Group's financial performance. The Group does not use derivative financial instruments to hedge risk exposures.

Risk management is carried out by the head office finance team. It evaluates and mitigates financial risks in close co-operation with the Group's operating units. The Board provides principles for overall risk management whilst the head office finance team provides specific policy guidance for the operating units in terms of managing foreign exchange risk, credit risk and cash and liquidity management.

(a) Market risk

Foreign exchange - cash flow risk

The Group's presentational currency is sterling although it operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily between GBP and both Dollars and Euro such that the Group's cash flows are affected by fluctuations in the rate of exchange between sterling and the aforementioned foreign currencies.

Management do not use derivative financial instruments to mitigate the impact of any residual foreign currency exposure not mitigated by the natural hedge within the business model. The Group does not speculate in foreign currencies and no operating Company is permitted to take unmatched positions in any foreign currency.

Foreign exchange - Fair value risk

Translation exposures that arise on converting the results of overseas subsidiaries are not hedged. Net assets held in foreign currencies are hedged wherever practical by matching borrowings in the same currency. The principal exchange rates used by the Group in translating overseas profits and net assets into Euro are set out in the table below.

Average rate Year end rate Average rate Year end rate Compared to Sterling 2020 2020 2019 2019

Euro 0.89 0.90 0.88 0.85

US Dollar 0.78 0.73 0.78 0.76

A 5% strengthening of the foreign exchange rates as at 31 December 2020, and for the year then ended, would have increased the net liabilities by GBP 59,000 (2019: GBP43,000). A 5% weakening would have had an equal and opposite effect.

Cash flow and fair value interest rate risk

The Group has assets in the form of cash and cash equivalents and limited interest-bearing liabilities which relate to long-term borrowing. Interest rates on cash and cash equivalents are currently zero whilst interest rates on bank borrowings are 4.25% over the banks Cost of Funds Rate and therefore expose the Group to fair value interest rate risk. The Group does not speculate on future changes in interest rates.

It is the Group's policy not to trade in derivative financial instruments. The Group does not use interest rate swaps.

(b) Credit risk

Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary and operating business unit is responsible for managing and analysing the credit risk for each of their new customers before standard payment and delivery terms and conditions are offered. Credit risk is managed at the operating business unit level and monitored at the Group level to ensure adherence to Group policies. If there is no independent rating, local management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.

Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers.

(c) Liquidity risk

Cash flow forecasting is performed in the individual operating entities of the Group and is aggregated by Group finance. Group finance monitors cash and cash flow forecasts and it is the Group's liquidity risk management policy to maintain sufficient cash and available

funding through an adequate amount of cash and cash equivalents and committed credit facilities from its bankers. Due to the dynamic nature of the underlying businesses, the head office finance team aims to maintain flexibility in funding by keeping sufficient cash and cash equivalents available to fund the requirements of the Group.

The Group's policy in relation to the finance of its overseas operations requires that sufficient liquid funds be maintained in each of its subsidiaries to support short and medium-term operational plans. Where necessary, short-term funding is provided by the parent Company. Typically, excess funds are placed as short-term deposits, to provide a balance between interest earnings and flexibility.

The table below analyses the Group's non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

                                                                                                                Less than            Between            Between       More than 

Notes one year 1 and 2 years 2 and 5 years 5 years Total

                                                                                                                       GBP'000                  GBP'000                  GBP'000                GBP'000          GBP'000 

At 31 December 2020:

Borrowings 24 1,349 583 - - 1,932

Trade and other payables 22 2,667 - - - 2,667

At 31 December 2019:

Borrowings 24 182 135 - - 317

Trade and other payables 22 693 - - - 693

(d) Capital risk management

The Group's objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and non-current borrowings" as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is the sum of net debt plus equity.

Government grant

A government grant is recognised only when there is reasonable assurance that (a) the entity will comply with any conditions attached to the grant and (b) the grant will be received. The grant is recognised as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis

4. Critical accounting estimates and judgements

In the process of applying the Group's accounting policies, management has made accounting judgements in the determination of the carrying value of certain assets and liabilities. Due to the inherent uncertainty involved in making assumptions and estimates, actual outcomes will differ from those assumptions and estimates. The following judgements have the most significant effect on the amounts recognised in the financial statements.

(a) Business combinations

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets

acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill.

The acquisition of Modern Water in November 2020 includes an assessment and valuation of the intangible assets acquired

(b) Impairment of cost of investments

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates as set out in note 15. In addition, the Group has also considered the impairment of the investments in the subsidiary undertakings.

(c) Intangible assets (including capitalised development costs and know how)

The assessment of the future economic benefits generated by these separately identifiable intangible assets and the determination of its amortisation profile involve a significant degree of judgement based on management estimation of future potential revenue and profit and the useful life of the assets. Reviews are performed regularly to ensure the recoverability of these intangible assets. Should the intangible asset be deemed irrecoverable it will be impaired in the period.

5. Segmental analysis

   (a)   Reportable segments 

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Marker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources. With the Company gaining control of Modern Water on 9 November 2020 for management reporting purposes the group is organised into three operating segments of (i) Life Science, (ii) Data AI and (iii) Monitoring.

Administrative expenses which are directly attributable to the three main operating Divisions (comprised of business development, sales, operations and technical expenditure) are reported as expenditure in the respective Division. However, a significant proportion of the Group's expenditure (legal, marketing, finance, facilities and directors' expenditure) is managed and reported centrally. A proportion of these charges have been recharged to subsidiary companies. As the commercial activities of the Group continue to develop, this financial information is expected to evolve further.

Currently the key operating performance measures used by the CODM are revenue, EBITDA and cash resources.

 
                                                              2020                                                                   2019 
                  -------------------------------------------------------------------------------------------  ----------------------------------------------- 
                                                                                                                 Life      Data    Monitor 
                    Life Science         Data AI          Monitor-ing           Central            Total        Science     AI       -ing    Central    Total 
                       GBP000             GBP000             GBP000             GBP000             GBP000       GBP000    GBP000   GBP000    GBP000    GBP000 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 Revenue                     2,443                919              1,121                   -            4,483       565      258         -         -       823 
 Cost of Sales             (1,483)              (421)              (735)                   -          (2,639)     (221)        -         -         -     (221) 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 Gross Profit                  960                498                386                   -            1,844       344      258         -         -       602 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 
 Admin expenses 
  *                        (1,213)              (477)              (283)               (729)          (2,703)     (756)    (298)         -     (603)   (1,657) 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 EBITDA                      (253)                 21                103               (729)            (859)     (412)     (39)         -     (603)   (1,055) 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 
 Depreciation**              (146)                (1)               (23)                 (2)            (172)     (100)        -         -         -     (101) 
 Amortization                (114)              (141)               (64)               (622)            (941)      (16)     (87)         -     (339)     (442) 
 Impairment                      -                  -                  -               (354)            (354)         -        -         -     (241)     (241) 
 Exceptional 
  items                          -                  -                  -               (391)            (391)         -     (31)         -     (501)     (532) 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 Operational 
  (Loss)/Profit              (513)              (121)                 13             (2,159)          (2,717)     (529)    (158)         -   (1,684)   (2,371) 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 Finance Costs                (34)                  -                (3)               (146)            (183)      (23)        -         -       (3)      (26) 
 (Loss)/Profit 
  before tax                 (564)              (169)                  3             (2,304)          (2,900)     (552)    (158)         -   (1,687)   (2,397) 
----------------  ----------------  -----------------  -----------------  ------------------  ---------------  --------  -------  --------  --------  -------- 
 Taxation                       77                  -                  -                 105              182        32        -         -        94       126 
 (Loss)/Profit 
  for the Year               (487)              (169)                  3             (2,199)          (2,718)     (520)    (158)         -   (1,593)   (2,271) 
----------------  ----------------  -----------------  -----------------  ------------------                   --------  -------  --------  --------  -------- 
 
 
 

*Admin expenses excludes Depreciation, Amortisation, Impairment and Exceptional Costs

**Depreciation includes Capital Grant amortisation of GBP1k

   (b)   Geographical information 

Disclosure of group revenue by geographical location is follows:

 
                                2020      2019 
                             GBP'000   GBP'000 
--------------------------  --------  -------- 
 United Kingdom                  612       222 
 Europe                          264       270 
 United States of America      2,680       112 
 Rest of World                   927       219 
 Total revenue                 4,483       823 
--------------------------  --------  -------- 
 

Revenues of GBP2,639,000 (2019: GBP534,000) are derived from 3 (2019: 4) customers each representing more than 10% of the group revenue.

6. Expenses - analysis by nature

 
                                                            2020      2019 
                                                         GBP'000   GBP'000 
------------------------------------------------------  --------  -------- 
 Employee benefit expense (note 9)                         1,415       824 
 Depreciation (note 16)                                      173       101 
 Capital Grants amortization (note 16)                       (1)         - 
 Amortisation right of use asset (note 14)                   144        21 
 Amortisation (note 15)                                      797       421 
 Impairment of intangible assets (note 15)                     -       241 
 Impairment of investment (note 17b)                         354         - 
 Exceptional items (note 7)                                  391       532 
 Auditors' remuneration - audit of the parent company 
  and consolidation                                           20        16 
 Auditors' remuneration - other services                      30        30 
 Foreign exchange differences                                 50        25 
 Share option-based charge                                   191         2 
 Other expenses                                              997       760 
------------------------------------------------------  --------  -------- 
 Total administrative costs                                4,561     2,973 
------------------------------------------------------  --------  -------- 
 

7. Exceptional items

Included within administrative expenses are exceptional items as shown below:

 
 
                                                            2020      2019 
                                                         GBP'000   GBP'000 
 -----------------------------------------------------  --------  -------- 
 Exceptional items include: 
 - Transaction costs relate to business acquisitions         391       532 
 Total exceptional items                                     391       532 
------------------------------------------------------  --------  -------- 
 

8. Directors' remuneration

The remuneration of the Directors in DeepVerge Plc who held office during the year ended 31 December 2020 was as follows:

 
 
                                             2020      2019 
                                          GBP'000   GBP'000 
---------------------------------------  --------  -------- 
 Aggregate emoluments                         471       365 
 
   Share option-based charge (note 32)         29         2 
---------------------------------------  --------  -------- 
 Total Directors' remuneration                500       367 
---------------------------------------  --------  -------- 
 

A breakdown of Directors' remuneration has been provided on page 18.

9. Employee benefit expense

 
 
                                                          2020      2019 
                                                       GBP'000   GBP'000 
----------------------------------------------------  --------  -------- 
 Wages and salaries                                      1,387       744 
 Social security costs                                     113        67 
 Pension Costs                                              25        13 
 Other Benefits                                              9         - 
 Capitalised salaries during the Year to Intangible      (119)         - 
  Assets 
----------------------------------------------------  --------  -------- 
 Total employee benefit expense                          1,415       824 
----------------------------------------------------  --------  -------- 
 Share option based charge (note 32)                       162         - 
----------------------------------------------------  --------  -------- 
 

10. Average number of people employed

 
                                                             2020   2019 
                                                               No     No 
----------------------------------------------------------  -----  ----- 
 Average number of people (including Executive Directors) 
  employed was: 
 Administration                                                13      5 
 Operations and research                                       18      8 
 Sales and marketing                                            6      3 
----------------------------------------------------------  -----  ----- 
 Total average number of people employed                       37     16 
----------------------------------------------------------  -----  ----- 
 

The total number of employees at 31 December 2020 was 43 (2019: 16)

11. Finance costs

 
                                               2020      2019 
                                            GBP'000   GBP'000 
-----------------------------------------  --------  -------- 
 Interest expense: 
 - Bank borrowings                               93        18 
 - Other finance costs                           25         - 
 - Interest on right of use asset leases         25         5 
 - Other interest                                40         3 
-----------------------------------------  --------  -------- 
 Finance costs                                  183        26 
-----------------------------------------  --------  -------- 
 

12. Income tax expense

 
                                                         2020      2019 
 Group                                                GBP'000   GBP'000 
---------------------------------------------------  --------  -------- 
 Current tax: 
 Current tax for the year                                             - 
 Research and development tax credit                     (77)      (32) 
---------------------------------------------------  --------  -------- 
 Total current tax (credit)/charge                       (77)      (32) 
---------------------------------------------------  --------  -------- 
 
 Deferred tax (note 23): 
 Origination and reversal of temporary differences      (105)      (94) 
---------------------------------------------------  --------  -------- 
 Total deferred tax                                     (105)      (94) 
---------------------------------------------------  --------  -------- 
 Income tax (credit)/charge                             (182)     (126) 
---------------------------------------------------  --------  -------- 
 

The tax on the Group's results before tax differs from the theoretical amount that would arise using the standard tax rate applicable to the profits of the consolidated entities as follows:

 
                                                             2020      2019 
                                                          GBP'000   GBP'000 
-------------------------------------------------------  --------  -------- 
 Loss before tax                                          (2,900)   (2,397) 
-------------------------------------------------------  --------  -------- 
 
 Tax calculated at domestic tax rates applicable to UK 
  standard rate of tax of 19% (2019 - 19%)                  (551)     (455) 
 Tax effects of: 
 - Impact of actual tax rates                                  11        18 
 - Expenses not deductible for tax purposes                   140        27 
 - Research and development tax credit                       (77)      (32) 
 - Losses carried forward                                     295       316 
 Tax (credit)                                               (182)     (126) 
-------------------------------------------------------  --------  -------- 
 

There are no tax effects on the items in the statement of comprehensive income. The effect of losses is discussed in note 23.

13. Loss per share

At a General Meeting of the Company on 15 September 2020 a share consolidation was approved. With effect from 16 September 2020 all ordinary shares of 0.01 pence each were consolidated into new ordinary shares of 0.1 pence each, on a 10 for 1 basis.

The following table illustrates the basic loss for both 2020 and 2019 when converting a 10:1 consolidation for all 0.01 pence ordinary shares in issue pre-15 September 2020 to 0.1 pence new ordinary shares.

( a) Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 
                                                                           2020           2019 
 Loss from continuing operations                                   GBP2,718,000   GBP2,271,000 
 (Profit) from discontinued operations                                        -     (GBP6,000) 
----------------------------------------------------------  -------------------  ------------- 
 Loss attributable to owners of the parent                         GBP2,718,000   GBP2,265,000 
----------------------------------------------------------  -------------------  ------------- 
 
 Weighted average number of 0.1p Ordinary Shares in issue           128,715,344     80,739,573 
 
 Basic loss per ordinary share 
----------------------------------------------------------  -------------------  ------------- 
 From continuing operations                                                2.1p           2.8p 
 From discontinued operations                                              0.0p           0.0p 
----------------------------------------------------------  -------------------  ------------- 
 From loss for the year                                                    2.1p           2.8p 
----------------------------------------------------------  -------------------  ------------- 
 

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The options and warrants are anti-dilutive in view of the losses in the year. Details of warrants outstanding are given in note 25.

14. Right of use of assets and lease liabilities

 
 Right of use assets                2020      2019 
 Leasehold Property              GBP'000   GBP'000 
------------------------------  --------  -------- 
 As at 1 January                     503         - 
 On acquisition of subsidiary                    - 
  (note 33)                          159 
 Additions                            48       525 
 Amortisation                      (144)      (21) 
 Foreign Exchange Movements            3       (1) 
------------------------------  --------  -------- 
 As at 31 December                   569       503 
------------------------------  --------  -------- 
 
 
 Lease Liabilities                    2020       2019 
                                   GBP'000    GBP'000 
------------------------------   ---------  --------- 
 As at 1 January                       504          - 
 On acquisition of subsidiary                       - 
  (note 33)                            191 
 Additions                              44        522 
 Interest expense                       25          5 
 Lease Payments                      (150)       (24) 
 Foreign Exchange Movements              8          1 
-------------------------------  ---------  --------- 
 As at 31 December                     622        504 
-------------------------------  ---------  --------- 
 Current                               264        102 
 Non-current                           358        402 
-------------------------------  ---------  --------- 
 

15. Intangible fixed assets

 
 Group                                          Development Costs and Intellectual Property Rights      Total 
                                                                                           GBP'000    GBP'000 
---------------------------------------------  ---------------------------------------------------  --------- 
 Cost 
 At 1 January 2019                                                                           1,968      1,968 
 On acquisition of subsidiary (note 33)                                                      3,377      3,377 
 Additions                                                                                     201        201 
 Exchange differences                                                                          (1)        (1) 
 At 31 December 2019                                                                         5,545      5,545 
---------------------------------------------  ---------------------------------------------------  --------- 
 
 Amortisation 
 At 1 January 2019                                                                           1,250      1,250 
 Charge for the year - continuing operations                                                   421        421 
 Impairment - continuing operations                                                            241        241 
 Exchange differences                                                                         (21)       (21) 
--------------------------------------------- 
 At 31 December 2019                                                                         1,891      1,891 
---------------------------------------------  ---------------------------------------------------  --------- 
 
 Net book value 
 At 31 December 2019                                                                         3,654      3,654 
---------------------------------------------  ---------------------------------------------------  --------- 
 
 Cost 
 At 1 January 2020                                                                           5,545      5,545 
 On acquisition of subsidiary (note 33)                                                     14,882     14,882 
 Additions                                                                                     488        488 
 Exchange differences                                                                           60         60 
 At 31 December 2020                                                                        20,975     20,975 
---------------------------------------------  ---------------------------------------------------  --------- 
 
 Amortisation 
 At 1 January 2020                                                                           1,891      1,891 
 On acquisition of subsidiary                                                                    -          - 
 Charge for the year - continuing operations                                                   797        797 
 Exchange differences                                                                           46         46 
 At 31 December 2020                                                                         2,734      2,734 
---------------------------------------------  ---------------------------------------------------  --------- 
 
 Net book value 
 At 31 December 2020                                                                        18,241     18,241 
---------------------------------------------  ---------------------------------------------------  --------- 
 
 
 Company                Development Costs and Intellectual Property Rights      Total 
                                                                   GBP'000    GBP'000 
---------------------  ---------------------------------------------------  --------- 
 Cost 
 At 1 January 2019                                                      75         75 
 Additions                                                               -          - 
 At 31 December 2019                                                    75         75 
---------------------  ---------------------------------------------------  --------- 
 
 Amortisation 
 At 1 January 2019                                                       -          - 
 Charge for the year                                                    22         22 
 At 31 December 2019                                                    22         22 
---------------------  ---------------------------------------------------  --------- 
 
 Net book value 
 At 31 December 2019                                                    53         53 
---------------------  ---------------------------------------------------  --------- 
 
 Cost 
 At 1 January 2020                                                      75         75 
 Additions                                                               -          - 
 At 31 December 2020                                                    75         75 
---------------------  ---------------------------------------------------  --------- 
 
 Amortisation 
 At 1 January 2020                                                      22         22 
 Charge for the year                                                    15         15 
 At 31 December 2020                                                    37         37 
---------------------  ---------------------------------------------------  --------- 
 
 Net book value 
 At 31 December 2020                                                    38         38 
---------------------  ---------------------------------------------------  --------- 
 

At 31 December 2020, the Group had intangible assets arising from intellectual property recognised on acquisitions, development costs on certain research and development and licence agreements.

Management performed an impairment analysis to determine the fair value of the intangible assets. In assessing fair value, the estimated future cash flows of each underlying business unit were discounted to their present value that reflects management's current market assessments of the time value of the money and were adjusted for risks specific to each business segment

For the purpose of impairment testing, other intangible assets are allocated to the operating segments to which they relate as set out below and is compared to their recoverable value.

The recoverable amounts were determined using the higher of the CGU fair value less costs of disposal (FV) and value in use (VIU) calculations. The fair value less costs of disposal method calculates the fair value of each CGU based on the Company's share price and the selling prices of comparable businesses. The VIU method requires the estimation of future cash flows before tax and the selection of a suitable discount rate in order to calculate the net present value (NPV) of these cash flows. The discount rates applied to each CGU for the value in use projections were between 8% and 12% and all assumptions were reviewed at the end of the year and revised where necessary.

The key assumptions for the Labskin, Data AI and Monitoring divisions fair value in use calculations are sales (volume, new product and services delivery, geographic growth) and gross margin. Management's forecasts are based on the current five-year business plan and assume the Division delivers, on average, double digit revenue growth and maintains stable profit margins, based on past experience in this market. A discount rate of 10% and a terminal growth rate of 2% were used to calculate the NPV.

The estimate of recoverable amount is particularly sensitive to the revenue growth rate and the assumption of a terminal value. This was stress tested by reducing revenue growth by 10% and removing the terminal value entirely which show that no impairment would be recognised.

Management is not currently aware of any other reasonably possible changes to key assumptions that would cause a unit's carrying amount to exceed its recoverable amount.

The remaining intangible asset value is predominantly our actively managed patent portfolio, which is continually reviewed for impairment in the normal course of business and the individual patents are also amortised on an annual basis over their lives.

As a result of the impairment analysis, the Directors have decided that the current value represents fair value so no impairment of intangible asset for the year (2019: GBP241,000).

16. Property, plant and equipment

a) Fixed Assets

 
 Group                                           Fixtures and fittings      Total 
                                                               GBP'000    GBP'000 
---------------------------------------------   ----------------------  --------- 
 Cost 
 At 1 January 2019                                                 149        149 
 Additions                                                         540        540 
 On acquisition of subsidiary (note 33)                             10         10 
 Exchange differences                                              (2)        (2) 
 At 31 December 2019                                               697        697 
----------------------------------------------  ----------------------  --------- 
 Depreciation 
 At 1 January 2019                                                 117        117 
 On acquisition of subsidiary (note 33)                             10         10 
 Charge for the year - continuing operations                       101        101 
 Exchange differences                                              (2)        (2) 
---------------------------------------------- 
 At 31 December 2019                                               226        226 
----------------------------------------------  ----------------------  --------- 
 
   Net book value 
 At 31 December 2019                                               471        471 
----------------------------------------------  ----------------------  --------- 
 
 Cost 
 At 1 January 2020                                                 697        697 
 Additions                                                         320        320 
 On acquisition of subsidiary (note 33)                            273        273 
 Exchange differences                                                3          3 
 At 31 December 2020                                             1,293      1,293 
----------------------------------------------  ----------------------  --------- 
 Depreciation 
 At 1 January 2020                                                 226        226 
 On acquisition of subsidiary (note 33)                              -          - 
 Charge for the year                                               173        187 
 Exchange differences                                               20          6 
 At 31 December 2020                                               419        419 
----------------------------------------------  ----------------------  --------- 
 
   Net book value 
 At 31 December 2020                                               874        874 
----------------------------------------------  ----------------------  --------- 
 

Ulster Bank borrowings as detailed in note 24 are secured with a floating charge against the assets of Innovenn UK Limited, which include the above fixtures and fittings.

Barclays Bank borrowings as detailed in note 24 are secured by a fixed and floating charge against the assets of Modern Water plc and all of its subsidiary companies through a cross guarantee.

The Company had no property, plant and equipment.

b) Capital Grants

 
 Group                     2020       2019 
                        GBP'000    GBP'000 
--------------------  ---------  --------- 
 Cost 
 At 1 January                 -          - 
 Additions                   25          - 
 At 31 December              25          - 
--------------------  ---------  --------- 
 
 Amortisation 
 At 1 January                 -          - 
 Charge for the year        (1)          - 
 At 31 December             (1)          - 
--------------------  ---------  --------- 
 
 Net book value 
 At 31 December              24          - 
--------------------  ---------  --------- 
 

17. Investments

(a) Investments in subsidiaries

 
                                           Investments   Loan to Subsidiaries 
 Company                                       GBP'000                GBP'000 
----------------------------------------  ------------  --------------------- 
 At 1 January 2019                                 729                      - 
 Acquisition during the year (note 33b)          3,000                      - 
 Impairment provision                            (241)                      - 
 Loans advanced                                      -                  3,259 
----------------------------------------  ------------  --------------------- 
 At 31 December 2019                             3,488                  3,259 
----------------------------------------  ------------  --------------------- 
 
 
 At 1 January 2020                          3,488    3,259 
 Acquisition during the year (note 33a)    12,115        - 
 Impairment provision                           -        - 
  Loans repaid                                  -    (325) 
----------------------------------------  -------  ------- 
 At 31 December 2020                       15,603    2,934 
----------------------------------------  -------  ------- 
 

Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid, less impairments.

On 2 May 2019 the Company acquired the entire share capital of Rinocloud Limited for a consideration of GBP3.0m.

At 23 November 2020 the Company had acquired 93.47% of the share capital of Modern Water plc at a value of GBP12.1m.

On 9 November 2020 the company acquired control of Modern Water, with 80.85% of acceptances on that date of the share holders at that date. As at 31 December 2020 acceptances were at 93.47% and the compulsory acquisition of the remaining shares was completed on 15 January 2021. The completed share transaction for a consideration of GBP13.3m.

Amounts owing from subsidiary companies greater than one year have been classified as non-current assets in the financial statements. The total amount owing at 31 December 2020 is GBP6,195,000 (2019: GBP3,259,000) before Director review below.

Management performed an impairment analysis to determine the fair value of the investments in, and loans to, subsidiaries. In assessing fair value, the estimated future cash flows of each investment were discounted to their present value that reflects management's current market assessments of the time value of the money and were adjusted for risks specific to each investment.

The result of the impairment analysis supported a fair value of GBP15,602,000 (2019: GBP3,488,000) for the Company's investments which resulted in an impairment of GBPnil (2019: GBP241,000). With regard to the fair value of the loans of subsidiaries the Directors considered it reasonable for the Company to forgive loans to the value of GBP3.185m (2019: GBPnil) with regard to monies due from Innovenn UK, reflecting historic expenditure made by Innovenn UK for which the whole of the Group is now benefiting from. This results in a fair value of GBP3,010,000 (2019: GBP3,259,000) in loans to subsidiaries, at 31 December 2020. Discount rate used to arrive at fair value was 10%.

The subsidiaries of DeepVerge Plc are as follows:

Name of Company Proportion Held Class of

Shareholding           Country of Incorporation 

Innovenn UK Limited 100% (direct) Ordinary United Kingdom

Integumen Ireland Limited 100% (indirect) Ordinary Ireland

Lifesciencehub UK Limited 100% (direct) Ordinary United Kingdom

Lifesciencehub Ireland Limited 100% (indirect) Ordinary Ireland

Rinocloud Limited 100% (direct) Ordinary Ireland

STOER Ireland Limited 100% (direct) Ordinary Ireland

Integumen Limited 100% (direct) Ordinary United Kingdom

Modern Water plc* 100% (direct) Ordinary United Kingdom

Modern Water Holdings Limited ^ 100% (direct) Ordinary

United Kingdom

   Modern Water Technology (Shanghai) Co Limited^          100% (indirect)       Ordinary China 

Aguacure Limited^ 100% (indirect) Ordinary United Kingdom

Surrey Aquatechnology Limited^ 100% (indirect) Ordinary

United Kingdom

MW Monitoring Limited^ 100% (indirect) Ordinary United Kingdom

Cymtox Limited^ 100% (indirect) Ordinary United Kingdom

Modern Water INC^ 100% (indirect) Ordinary USA

MW Monitoring IP Limited^ 100% (indirect) Ordinary United Kingdom

MW Monitoring Limited^ 100% (indirect) Ordinary United Kingdom

   Modern Water Nominees Limited^                                      100% (indirect)       Ordinary 

United Kingdom

Modern Water Technologies LCC^ 70% (indirect) Ordinary Oman

Poseidon Water Limited^ 51% (indirect) Ordinary United Kingdom

   Encylco Water Technology (Zheijang) Co. Ltd^                     49% (indirect)       Ordinary 

China

* Modern Water plc was acquired by the Company in an all share offer for the entire issued capital of Modern Water plc

^ A Modern Water plc subsidiary.

On 9 November 2020, 80.85% of Modern Water plc shareholders agreed to the Company share offer. On 17 November 2020, the close of the formal acceptance period, 93.47% of Modern Water plc shareholders agreed to the Company share offer.

As more than 90% of Modern Water Plc shareholders agreed to the Company share offer, under sections 974-991 of the Companies Act 2006, the Company was entitled to acquire the minority shareholders. On 15 January 2021 the Company allotted a further 3,636,915 0.1p ordinary shares to complete the acquisition of Modern Water plc.

b) Other investments

 
 
 Company                          2020      2019 
                               GBP'000   GBP'000 
----------------------------  --------  -------- 
 Carrying amount: 
 At 1 January                      708       708 
 Impairment during the year      (354)         - 
----------------------------  --------  -------- 
 End of the year                   354       708 
----------------------------  --------  -------- 
 

In August 2018, the Company acquired 9.35% of the ordinary shares of Cellulac plc for a consideration of GBP708,000 through the issue of 82,844,388 ordinary shares of 0.01p each.

COVID-19 travel restrictions has impacted in the short term on large scale applications of the Cellulac energy reduction and water processing projects. Although the long-term value of the technology has not changed the Directors have taken the view that a reduction of GBP354,000 (2019: GBPnil) in the carrying value of the asset is prudent given the uncertainty in relation to COVID-19 restrictions continuing into the future.

18. Financial instruments by category

(a) Assets

 
                                            Group     Group   Company   Company 
                                             2020      2019      2020      2019 
                                          GBP'000   GBP'000   GBP'000   GBP'000 
---------------------------------------  --------  --------  --------  -------- 
 31 December 
 Assets as per balance sheet 
 Trade and other receivables excluding 
  prepayments and corporation tax           1,288       466       237       388 
 Cash and cash equivalents                  1,441     1,193       451     1,115 
 Total                                      2,729     1,659       620     1,503 
---------------------------------------  --------  --------  --------  -------- 
 

(b) Liabilities

 
                                       Group     Group   Company   Company 
                                        2020      2019      2020      2019 
                                     GBP'000   GBP'000   GBP'000   GBP'000 
----------------------------------  --------  --------  --------  -------- 
 31 December 
 Liabilities as per balance sheet 
 Borrowings                            1,932       317     1,500         - 
 Lease Liabilities                       622       504         -         - 
 Trade and other payables              2,669       693       745       516 
 Total                                 5,223     1,514     2,245       516 
----------------------------------  --------  --------  --------  -------- 
 

Liabilities in the analysis above are all categorised as 'other financial liabilities at amortised cost' for the Group and Company.

c) Credit quality of financial assets

The Group is exposed to credit risk from its operating activities (primarily for trade receivables and other receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Trade receivables

The credit quality of trade receivables that are neither past due date nor impaired have been assessed based on historical information about the counterparty default rate. The Group does not hold any other receivable balances with customers, whose past default has resulted in the non-recovery of the receivables balances.

Cash at bank

The credit quality of cash has been assessed by reference to external credit ratings, based on reputable credit agencies' long-term issuer ratings:

 
               2020      2019 
  Rating    GBP'000   GBP'000 
---------  --------  -------- 
 A - AAA      1,441     1,193 
 Total        1,441     1,193 
---------  --------  -------- 
 

19. Inventories

 
                                       Group     Group 
                                        2020      2019 
                                     GBP'000   GBP'000 
----------------------------------  --------  -------- 
 Raw materials and finished goods      1,347        85 
 Inventory                             1,347        85 
----------------------------------  --------  -------- 
 

There are no inventories in the Company. The Directors consider that the carrying amount of inventory approximates to their fair value.

20. Trade and other receivables

 
                                                  Group     Group   Company   Company 
                                                   2020      2019      2020      2019 
                                                GBP'000   GBP'000   GBP'000   GBP'000 
-----------------------------------------  ------------  --------  --------  -------- 
 Trade receivables                                1,061       402         -         - 
 Less: provision for impairment of 
  trade receivables                                (53)      (32)         -         - 
-----------------------------------------  ------------  --------  --------  -------- 
 Trade receivables - net                          1,008       370         -         - 
 Prepayments and accrued income                     160        83        10        19 
 Amounts owed by subsidiary undertakings              -         -        67       350 
 Taxation                                           177        81        68        32 
 Other receivables                                  103        15       101         6 
                                                  1,448       549       246       407 
-----------------------------------------  ------------  --------  --------  -------- 
 

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

The carrying amounts of the Group's trade and other receivables denominated in foreign currencies were as follows:

 
                 Group     Group   Company   Company 
                  2020      2019      2020      2019 
               GBP'000   GBP'000   GBP'000   GBP'000 
------------  --------  --------  --------  -------- 
 Sterling          697       375         -       407 
 US Dollars        537         -         -         - 
 Euro              163       174         -         - 
                 1,397       549         -       407 
------------  --------  --------  --------  -------- 
 

21. Cash and cash equivalents

 
                                Group     Group   Company   Company 
                                 2020      2019      2020      2019 
                              GBP'000   GBP'000   GBP'000   GBP'000 
---------------------------  --------  --------  --------  -------- 
 Cash at bank and on hand       1,441     1,193       451     1,115 
 Cash and cash equivalents      1,441     1,193       451     1,115 
---------------------------  --------  --------  --------  -------- 
 

The Group's cash and cash equivalents are held in non-interest-bearing accounts. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

22. Trade and other payables

 
                                           Group     Group   Company   Company 
                                            2020      2019      2020      2019 
                                         GBP'000   GBP'000   GBP'000   GBP'000 
--------------------------------------  --------  --------  --------  -------- 
 Trade payables                            1,714       159       271        83 
 Amounts due to group companies                -         -         -         - 
  (note 29) 
 Amounts due to connected parties              -         -         -         - 
  (note 29) 
 Social security and other taxes             181        30         2         - 
 Accrued expenses and deferred income        652       480       352       433 
 Other creditors                             120        24       120         - 
                                           2,667       693       745       516 
--------------------------------------  --------  --------  --------  -------- 
 

23. Deferred income tax

Deferred tax liabilities

 
 Deferred tax balances were as follows:                 Group     Group 
                                                         2020      2019 
                                                      GBP'000   GBP'000 
---------------------------------------------------  --------  -------- 
 Deferred tax liability to be recovered after more 
  than one year                                         2,951       500 
 Deferred tax liability to be recovered within one 
  year                                                    345        61 
                                                        3,296       561 
---------------------------------------------------  --------  -------- 
 
 Deferred tax liabilities were made up as follows: 
 Accelerated tax depreciation                           3,296       561 
                                                        3,296       561 
---------------------------------------------------  --------  -------- 
 
 
 The movement on the deferred tax income tax account      Group     Group 
  is as follows: 
                                                           2020      2019 
                                                        GBP'000   GBP'000 
-----------------------------------------------------  --------  -------- 
 At 1 January                                               561        90 
 On acquisition of subsidiary                             2,840       565 
 Income statement movement - continuing operations 
  (note 12)                                               (105)      (94) 
  At 31 December                                          3,296       561 
-----------------------------------------------------  --------  -------- 
 
 

There were no deferred tax liabilities in the Company.

Deferred tax assets

Deferred income tax assets are recognised to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of approximately GBP 1,566,000 (2019: GBP1,204,000) mainly in respect of tax losses amounting to approximately GBP8,684,000 (2019: GBP6,697,000) that can be carried forward against future taxable income. An average tax rate of 18% (2019: 18%) has been used.

There was no deferred tax asset recognised for the Company.

24. Borrowings

 
                       Group     Group   Company   Company 
                        2020      2019      2020      2019 
                     GBP'000   GBP'000   GBP'000   GBP'000 
------------------  --------  --------  --------  -------- 
 Non-current 
 Bank borrowings         583       135       583         - 
 Other borrowings          -         -         -         - 
                         583       135       583         - 
------------------  --------  --------  --------  -------- 
 
 Current 
 Bank borrowings       1,187       182       917         - 
 Other borrowings        162         -         -         - 
                       1,349       182       917         - 
------------------  --------  --------  --------  -------- 
 

The maturity profile of bank borrowings was as follows:

 
                            Group     Group   Company   Company 
                             2020      2019      2020      2019 
                          GBP'000   GBP'000   GBP'000   GBP'000 
-----------------------  --------  --------  --------  -------- 
 Amounts falling due 
 Within 1 year              1,349       182       917         - 
 Between 1 and 2 years        583       135       583         - 
 Between 2 and 5 years          -         -         -         - 
 Total borrowings           1,932       317     1,500         - 
-----------------------  --------  --------  --------  -------- 
 

Security on bank borrowings

As at 31 December 2020 loan balance of GBP139,000 (2019: GBP318,000) was owing to Ulster Bank Ireland . The 5-year term loan bearing a fixed coupon of 4.33% annually over the bank's cost of funds matures in August 2021. The loan is secured with a floating charge against the assets of Innovenn UK Limited.

On 29 July 2020 the Company signed a GBP3,000,000 loan facility with Riverfort Global Opportunities PCC Limited and YA II PN, Ltd with a 3-year term. On the date of signing the Company drew down GBP1,500,000, 50% of the facility, as a 24-month loan with the first six months interest only. The interest applicable to outstanding drawdown amounts is 1.05% per month with a repayment fee of 8% payable on the date the principal sums are repaid. The amount of the loan outstanding at 31 December 2020 was GBP1,500,000 (2019: GBPnil). The loan is secured by a cross-company guarantee.

As at 31 December 2020 loan balance of GBP131,000 (2019: GBP440,000) was owing to Barclays Bank by Modern Water plc. The loan attracts an interest rate of 8% above the Barclays base rate. The loan is secured by a fixed and floating charge over the assets of Modern Water plc and all subsidiary companies through a cross guarantee. The loan was fully repaid in March 2021 and a statement of satisfaction releasing the security was registered with Companies House on 7 May 2021.

The Company has been compliant with its banking covenants throughout the year. The bank borrowings are repayable by monthly instalments. The Company is not exposed to interest rate changes or contractual re-pricing dates at the end of the reporting period, as the borrowings are fixed in nature.

The fair value of both current and non-current borrowings equals their carrying amount, as the impact of discounting is not significant.

The Group's bank borrowings are denominated in Sterling, Dollars and Euro.

25. Share capital

 
                                               Group     Group   Company   Company 
                                                2020      2019      2020      2019 
                                             GBP'000   GBP'000   GBP'000   GBP'000 
------------------------------------------  --------  --------  --------  -------- 
 165,877,296 0.1p Ordinary shares 
  (2019: 1,072,416,903 0.01p o ordinary) 
  Ordinary shares of 0.01p) 
 ordinary shares)                                166       108       166       108 
 223,685,232 (2019: 223,685,232) Deferred 
  shares of 0.99p                              2,214     2,214     2,214     2,214 
------------------------------------------  --------  --------  --------  -------- 
 Total                                         2,380     2,322     2,380     2,322 
------------------------------------------  --------  --------  --------  -------- 
 

During the year, the following ordinary shares were issued:

Placing subscribers warrants exercise of 0.01p ordinary shares during 2020:

 
 Date granted    Number of shares   Exercise price   Consideration 
    30 May              3,000,000        1.5p           GBP 45,000 
   5 January            3,333,332        1.5p           GBP 50,000 
   7 August             1,715,714         2p            GBP 34,314 
   14 August           26,071,429         2p           GBP 521,429 
   14 August            3,333,333        1.5p           GBP 50,000 
   24 August            1,249,999         2p            GBP 25,000 
   26 August            1,928,573         2p            GBP 38,571 
   28 August           13,464,286         2p           GBP 269,286 
  8 September             500,000         2p            GBP 10,000 
 10 September           4,417,857         2p            GBP 88,357 
   Sub Total           59,014,523                    GBP 1,131,957 
 

On 15 September 2020 a share consolidation was approved at General Meeting such that existing warrants for ordinary shares of 0.01 pence each were consolidated into warrants for one new ordinary share of 0.1 pence in nominal value on a 10 for 1 basis with effective date of 16 September 2020.

Placing subscribers warrants exercise of 0.1p ordinary shares during 2020:

 
 Date granted    Number of shares   Exercise price   Consideration 
 16 September              42,500        20p             GBP 8,500 
 25 September              82,142        20p            GBP 16,428 
 25 September             266,666        15p            GBP 40,000 
   2 October               10,000        20p             GBP 2,000 
  9 November              178,571        20p            GBP 35,714 
  10 November              40,000        20p             GBP 8,000 
   Sub Total              619,879                      GBP 110,643 
 

Shares in lieu of invoice issue at 0.1p ordinary shares during 2020:

 
 Date granted    Number of shares   Exercise price   Consideration 
  9 November               81,967        30p            GBP 25,000 
 

Shares issued for Modern Water plc shares offer agreement in 2020:

 
 Date granted    Number of shares   Exercise price   Consideration 
  3 November           40,677,491        23p          GBP 9,355,823 
  9 November            1,741,870       22.5p           GBP 391,921 
  17 November           9,612,946       24.7p         GBP 2,369,591 
   Sub Total           52,032,307                    GBP 12,117,335 
 

Share Capital Movement

 
                                                   Ordinary Share   Ordinary Share 
                                                            0.01p        0.1p 
----------------------------------  -----------------------------  --------------- 
 As 1 January                                       1,072,416,903                - 
 Issued to 15 September                                59,014,523                - 
 Total 0.01p                                        1,131,431,426                - 
 16 September Share consolidation                               -      113,143,143 
 Issued to 31 December                                          -       52,743,153 
----------------------------------  -----------------------------  --------------- 
 Shares in Issue at 31 December                                 -      165,877,296 
----------------------------------  -----------------------------  --------------- 
 

As at 31 December 2020, the Company had an issued share capital of 165,877,296 ordinary shares of 0.1p each and 223,685,232 deferred shares of 0.99p each.

Share Warrants

As at 1 January 2020 the Company had granted the following warrants:

 
 Warrant holder             Date granted    Number of Ordinary   Exercise   Expiry date 
                                              shares of 0.01p      price 
                                                   each 
 Turner Pope Investments 
  (TPI) Ltd                 5 April 2017             1,800,000    6.25p     5 April 2022 
                              5 January                                      5 January 
 Placing subscribers             2018               14,066,666     1.5p         2023 
                              5 January                                      5 January 
 Hybridan LLP                    2018                1,000,000     1.5p         2023 
 Turner Pope Investments      5 January                                      5 January 
  (TPI) Ltd                      2018                  300,000     1.5p         2023 
 Placing subscribers         2 May 2019             95,624,999     2.0p      2 May 2021 
 Turner Pope Investments 
  (TPI) Ltd                  2 May 2019              8,142,857     1.4p      2 May 2022 
 Turner Pope Investments     16 December                                    16 December 
  (TPI) Ltd                      2019                5,279,999     1.5p         2022 
                                                   126,214,521 
 

Share warrants granted during the year

On 15 September 2020 warrants of 18,905,021 ordinary shares of 0.01p to the value of GBP375,000 were granted to Riverfort Global Opportunities PCC Ltd and YA II PN Ltd as a condition of the Loan Agreement entered into on 29 July 2020. The exercise price of the warrants is 2.57868 pence for each ordinary share with an exercise period of 48 months ending on 15 September 2024. Following the share consolidation both Riverfort and YA II PN Ltd hold warrants to subscribe for 945,251, at exercise price of 25.7868 pence, per new ordinary shares of 0.1 pence.

On 9 November 2020 the Company gained control of Modern Water in the share for share acquisition of Modern Water. The consideration was for the issue of 1 DeepVerge ordinary 0.1p share for every 10 Modern Water 0.25p ordinary shares. As at this date warrants to subscribe for 70,500,000 Modern Water ordinary shares with an exercise price of 0.5p per share were held by JIM Nominees, acting as nominees for Turner Pope International, broker to Modern Water. JIM Nominees elected to exchange outstanding warrants over 70,500,000 Modern Water ordinary shares for warrants over 7,050,000 DeepVerge ordinary 0.1p shares with same exercises times.

Share warrants exercised during the year

For the period 1 January 2020 to 15 September 2020

- A total of 9,666,665 ordinary shares of 0.01p each were issued to various placing subscribers for the exercised warrants granted on 5 January 2018 at 1.5p per ordinary share of 0.01p.

- A total of 49,347,858 ordinary shares of 0.01p each were issued to various placing subscribers for the exercised warrants granted on 2 May 2019 at 2p per ordinary share of 0.01p.

On 15 September 2020 a share consolidation was approved at General Meeting such that existing warrants for ordinary shares of 0.01 pence each were consolidated into warrants for one new ordinary share of 0.1 pence in nominal value on a 10 for 1 basis with effective date of 16 September 2020.

For the period 16 September 2020 to 31 December 2020

- A total of 266,666 ordinary shares of 0.1p each were issued to various placing subscribers for the exercised warrants granted on 5 January 2018 at 15p per ordinary share of 0.1p.

- A total of 4,274,501 ordinary shares of 0.1p each were issued to various placing subscribers for the exercised warrants granted on 2 May 2019 at 20p per ordinary share of 0.1p.

Share warrants at end of year

As of 31 December 2020, valid share warrants in issue were:

 
   Warrant holder          Date        Ordinary     Exercise   Expiry   Outstanding 
                            granted       shares      Price      Date     at 30 June 
                                         of 0.1p                          2021 
                                           each 
    Turner Pope 
     Investments            5 Apr                                5 Apr 
     (TPI) Ltd               2017          180,000     62.5p      2022   180,000 
                            5 Jan                               5 Jan 
    Placing subscribers      2018          173,334     15p       2023    173,334 
                            5 Jan                               5 Jan 
    Hybridan LLP             2018          100,000     15p       2023    100,000 
    Turner Pope 
     Investments            5 Jan                               5 Jan 
     (TPI) Ltd               2018           30,000     15p       2023    - 
                            2 May                               2 May 
    Placing subscribers      2019        4,274,501     20p       2021    - 
    Turner Pope 
     Investments            2 May                               2 May 
     (TPI) Ltd               2019          814,285     14p       2022    - 
    Turner Pope 
     Investments            16 Dec                              16 Dec 
     (TPI) Ltd               2019          527,999     15p       2022    - 
    Riverfort Global 
     Opportunities          15 Sep                              15 Sep 
     PCC                     2020          945,251   25.7868p    2024    945,251 
                            15 Sep                              15 Sep 
    YA II PN, Ltd            2020          945,251   25.7868p    2024    945,251 
    Turner Pope                          7,050,000                       - 
     Investments            9 Nov                               16 Feb 
     (TPI) Ltd               2020       15,040,621      5p       2023     2,343,836 
                                      ------------                      ---------------------- 
 

26. Retained earnings

 
                                          Group    Company 
                                        GBP'000    GBP'000 
------------------------------------  ---------  --------- 
 At 1 January 2019                     (13,221)   (13,778) 
                                      ---------  --------- 
 Loss for the year                      (2,265)    (1,384) 
 Transfer from Share Option reserve          86         86 
------------------------------------  ---------  --------- 
 At 31 December 2019                   (15,400)   (15,076) 
------------------------------------  ---------  --------- 
 
 At 1 January 2020                     (15,400)   (15,076) 
------------------------------------  ---------  --------- 
 Loss for the year                      (2,718)    (1,590) 
 Subsidiary loan forgiveness                  -    (3,185) 
 Premium on acquisition of NCI            (846)          - 
 At 31 December 2020                   (18,964)   (19,851) 
------------------------------------  ---------  --------- 
 

27. Other reserves

Group

 
                                                                                             Share 
                                                   Foreign        Reverse       Capital      based 
                                         Share    currency    acquisition    Redemption     equity 
                                       premium     reserve        reserve       reserve    reserve 
                                       GBP'000     GBP'000        GBP'000       GBP'000    GBP'000 
----------------------------------   ---------  ----------  -------------  ------------  --------- 
 At 1 January 2019                       3,662       (251)        (2,843)         9,519         90 
-----------------------------------  ---------  ----------  -------------  ------------  --------- 
 Issue of ordinary shares (note          8,419           -              -             -          - 
  25) 
 Costs of Share issue                    (338)           -              -             -          - 
 Currency translation differences            -         (8)              -             -          - 
 Transfer to retained earnings 
  (note 32)                                  -           -              -             -       (86) 
 Share option-based charge (note 
  32)                                        -           -              -             -          2 
 At 31 December 2019                    11,743       (259)        (2,843)         9,519          6 
-----------------------------------  ---------  ----------  -------------  ------------  --------- 
 
 At 1 January 2020                      11,743       (259)        (2,843)         9,519          6 
 Issue of ordinary shares (note         13,326           -              -             -          - 
  25) 
 Currency translation differences            -          33              -             -          - 
 Share option-based charge (note 
  32)                                        -           -              -             -        191 
 At 31 December 2020                    25,069       (226)        (2,843)         9,519        197 
-----------------------------------  ---------  ----------  -------------  ------------  --------- 
 

The reverse acquisition reserve arose as result of the reverse acquisition of Innovenn UK Limited and its subsidiary by DeepVerge Plc.

Currency translation differences arose from the translation of the net investment in foreign subsidiaries.

Company

 
                                                        Capital 
                                                     Redemption       Share based 
                                    Share premium       reserve    equity reserve 
                                          GBP'000       GBP'000           GBP'000 
 At 1 January 2019                          3,662         9,519                90 
 Issue of ordinary shares                   8,419             -                 - 
  (note 25) 
 Costs of Share issue                       (338)             -                 - 
 Transfer to retained earnings 
  (note 32)                                     -             -              (86) 
 Share option-based charge 
  (note 32)                                     -             -                 2 
 At 31 December 2019                       11,743         9,519                 6 
---------------------------------  --------------  ------------  ---------------- 
 
 At 1 January 2020                         11,743         9,519                 6 
 Issue of ordinary shares                  13,326                               - 
  (note 25)                                                   - 
 Costs of Share issue                           -             -                 - 
 Transfer to retained earnings                  -                               - 
  (note 32)                                                   - 
 Share option-based charge 
  (note 32)                                     -             -               191 
---------------------------------  --------------  ------------  ---------------- 
 At 31 December 2020                       25,069         9,519               197 
---------------------------------  --------------  ------------  ---------------- 
 

28. Cash used in operations

 
                                                 Group     Group   Company   Company 
                                                  2020      2019      2020      2019 
                                               GBP'000   GBP'000   GBP'000   GBP'000 
--------------------------------------------  --------  --------  --------  -------- 
 Loss for the year from continuing 
  activities                                   (2,718)   (2,271)   (1,590)   (1,384) 
 Adjustments for: 
 - Depreciation and amortisation                 1,113       543        15        22 
 - Impairment of intangible assets                   -       241        15         - 
 - Impairment of investments                       354         -       354         - 
 - Foreign currency translation 
  of net assets                                     36       (7)        59         4 
 - Exceptional Items                                 -         -         -   (1,332) 
 - Net finance costs                               303        26       210         2 
 - Taxation                                      (182)     (126)         -      (31) 
 - Share option-based charge                       191         2       191         2 
 Changes in working capital 
 - Inventories                                     344        50         -         - 
 - Trade and other receivables                   (513)     (120)   (3,151)        14 
 - Trade and other payables                    (1,026)      (62)     (229)     (184) 
 
   Net cash used in discontinued operations 
   (note 34)                                         -     (557)         -         - 
--------------------------------------------  --------  --------  --------  -------- 
 Net cash generated (used) in operations         2,098   (2,281)   (4,141)   (2,887) 
--------------------------------------------  --------  --------  --------  -------- 
 

29. Related Party Disclosures

Amounts due from connected parties

 
                                   Group     Group   Company   Company 
                                    2020      2019      2020      2019 
                                 GBP'000   GBP'000   GBP'000   GBP'000 
------------------------------  --------  --------  --------  -------- 
 Drive4Growth Company Limited         36        89         -         - 
                                      36        89         -         - 
------------------------------  --------  --------  --------  -------- 
 

The Company owns 9.35% of Cellulac plc (note 17). Gerard Brandon and Camillus Glover are directors of Cellulac Ltd and Cellulac plc.

On 12 June 2020 Cellulac Ltd entered into a loan agreement with the Company whereby Cellulac Limited agreed to lend the Company up to GBP400,000 at an interest rate of 5% to be drawn down no later than 30 September 2020. The Company did avail of the facility and the loan agreement lapsed 1 October 2020.

Fin Murray is a director of Drive4Growth Company Limited which held a sales agency agreement with Rinocloud Ltd until 31 October 2019.

During the year, the Company paid GBP27,000 (2019: GBP17,550) to Dagmara Brandon, close family member of the director Gerard Brandon, for professional services provided to the Company.

The Company

Amounts due from group companies

 
                                                                       Company   Company 
                                                                          2020      2019 
                                                                       GBP'000   GBP'000 
---------------------------  -------------------------------------------------  -------- 
 Innovenn UK Limited                                                     1,188     2,604 
 Lifesciencehub UK Limited                                                 217       208 
 Rinocloud Limited                                                       1,095       350 
 Integumen Ireland Limited                                                 316       370 
 STOER Ireland Limited                                                      51        77 
 Modern Water Plc                                                           67         - 
                                                                         2,934     3,609 
---------------------------  -------------------------------------------------  -------- 
 Non Current Assets                                                      2,867           - 
 Current Assets                                                             67           - 
---------------------------  -------------------------------------------------  ---------- 
 
 

As part of the review of the recoverability of subsidiary indebtedness to the Company the Directors considered the position of Innovenn UK in the group since listing in April 2017 and in particular the contribution the subsidiary has made to the overall group. It was considered reasonable that GBP3,185,000 of monies owing by Innovenn UK to the Company be forgiven and that the ultimate cost of this would be borne by the Company, resulting in the amount owing from Innovenn UK falling to GBP1,188,000.

During the year, the Company charged management charges of GBP105,000 (2019: GBP88,000) to Innovenn UK Limited, GBP84,000 to Rinocloud Limited (2019: GBP71,000), GBP 25,000 to Stoer Ireland Ltd (2019: GBP21,000) and GBP8,000 (2019: GBP7,000) to Lifesciencehub UK Limited .

Rinocloud Limited charged sales and management charges to Innovenn UK Limited of GBP 215,000 (2019: GBP105,000).

During the year, the Company was recharged costs by Integumen Ireland Limited of GBP 280,000 (2019: GBP169,000).

30. Capital commitments

The Group had no capital commitments at 31 December 2020.

   31.   Financial commitments 

The Group had no financial leases.

32. Share options

The Company has achieved multiple positive milestones since 2018 and shareholder value has improved substantially in that time. Team members across the Group have been entirely responsibly for achieving the returns by as much as 500% from the lows of 2018. Therefore, it is only right and fitting that future growth is incentivised for all Team members who contribute to increased returns for shareholders. That is why management have implemented only recently a Share Options Scheme to deliver on this objective.

Management and Staff options

The Company introduced an EMI approved share option scheme for employees in the UK, a Share Options Scheme for employees and in Ireland and an unapproved share options scheme as a means to act as motivation to staff to deliver overall shareholder.

Options were granted to management and staff for 5,609,650 ordinary shares of 0.1p each at an exercise price of 30p, and 492,790 ordinary shares of 0.1p each at an exercise price of 35.5p, each vesting over a period of 3 years. Further options for 465,670 ordinary shares of 0.1p each were granted to staff at an exercise price of 0.1p, each vesting over a period of 9 months. The options are conditional a number of performance conditions and options lapse if employee leaves the Company.

Share Options Issued and as at 31 December 2020 are as follows:

 
     Date        Number of   Exercise   Exercise Date    Exercise Date    Exercise Date 
                   Shares      Price 
--------------  ----------  --------- 
                                             30%              35%              35% 
--------------  ----------  ---------  ---------------  ---------------  --------------- 
 18 September                            31 December 
  2020             325,570       0.1p        2020        31 March 2021     30 June 2021 
 18 September 
  2020             916,680        30p   1 January 2021   1 January 2022   1 January 2023 
 18 September 
  2020             492,970      35.5p   1 January 2021   1 January 2022   1 January 2023 
 19 November                             31 December 
  2020             113,100       0.1p        2020        31 March 2021     30 June 2021 
 19 November 
  2020           4,692,970        30p   1 January 2021   1 January 2022   1 January 2023 
 

The estimated fair values of the share options were calculated by applying the Black Scholes Model. The period of exercise of the options is 10 years for the EMI approved and unapproved scheme and 7 years for the Irish Share Options Scheme. The volatility of the share of the share price since listing in April 2017 resulted in a volatility coefficient of 45.0%. Due to the high coefficient the Directors considered that the most appropriate method of calculating the volatility was to use the Company's share price history as the likelihood for using comparable listed historic volatility could be misleading.

 
   Date       Number     Exercise   Exercise   Fair Value   Exercise    Fair Value   Exercise    Fair Value 
             of Shares     Price      Date                     Date                     Date 
---------  -----------  --------- 
                                     31 Dec      Share       31 Mar       Share       30 Jun       Share 
                                      2020        Price        2021        Price        2021        Price 
---------  -----------  ---------  ---------  -----------  ----------  -----------  ----------  ----------- 
 18 Sept 
  2020         325,570       0.1p   105, 771        28.7p     123,400        28.7p     123,400        28.7p 
 19 Nov 
  2020         113,100        30p     33,930        17.2p      39,585        17.2p      39,585        17.2p 
                                    Exercise                 Exercise                 Exercise 
                                        Date                     Date                     Date 
                                       1 Jan                    1 Jan                    1 Jan 
                                        2021                     2022                     2023 
---------  -----------  ---------  ---------  -----------  ----------  -----------  ----------  ----------- 
 18 Sept 
  2020         916,680        30p    275,004         9.7p     320,838         9.7p     320,838         9.7p 
 18 Sept 
  2020         492,970      35.5p    147,891         8.1p     172,540         8.1p     172,540         8.1p 
 19 Nov 
  2020       4,692,970        30p   1,407891         3.0p   1,642,540         3.0p   1,642,540         3.0p 
 

2017 Management Options

In 2017, the Company had awarded options to key management over 6,720,000 ordinary shares of 1p each. These options were exercisable after two years provided that the holder of the options is still an employee of the Company. Of these, 3,360,000 have an exercise price of 5p and 3,360,000 have an exercise price of 6p each.

During the 2019 options over 963,200 ordinary shares of 1p each lapsed when option holders left the employment of the Company. An amount of GBP9,010 in 2019 was transferred from the share option-based reserve to retained earnings with respect to these lapsed options. The cumulation of lapsed options since 2017 has meant that options over only 638,400 ordinary shares of 1p each remain.

Following the share consolidation on 15 September 2020, when every 10 ordinary existing shares of 0.01p was consolidated into one ordinary share of 0.1p , the outstanding options granted were as follows at 31 December 2020:

 
                              No. of 0.1p ordinary 
                               shares under         Exercise 
Director       Date granted    option                price    Exercise period 
                                                              From 5 April 2017 to 5 
Ross Andrews   5 April 2017          63,840         50p-60p    April 2027 
 

The share option-based charge with respect to all share options for the year was GBP191,000 (2019: GBP2,000).

33. Business combinations

On 13 October 2020 the Company issued an Offer Document to the shareholders of Modern Water to acquire the full share capital of the company. This all share offer was based on the issue of 1 DeepVerge ordinary 0.1p share for every 10 Modern Water 0.25p ordinary shares. The purchase consideration was paid by the Company through the issue of 55,669,222 ordinary shares of 0.1p each at an average market price of 23.92 per share, valuing the acquisition at GBP13,315,114.

33 . (a) Acquisition of Modern Water plc

 
                                                                    Closing Share 
                        No. of MW      % acceptance  Issued DV     Price on listing     Valuation 
Date acceptance       ordinary shares   cumulative    shares             date           Cumulative 
  3 November 
  2020                 406,775,279        77.23%      40,677491        23.00p         GBP9,355,823 
   9 November 
   2020                  17,418,730       80.85%       1,741,870        22.50p         GBP9,747,744 
   23 November2020      96,129,677        93.46%       9,612,946       24.625p         GBP12,114,932 
 
   15 January 
   2021                 36,369,528        100.00%     3,636,915         33.00p         GBP13,315,114 
 

As at 9 November 2020 based on 80.85% acceptances of the offer by Modern Water plc shareholders the Company gained control

of Modern Water plc as the offer become unconditional.

Fair Value Calculation

As at 31 December 2020 the Company had acquired 93.46% of Modern Water plc shares for a consideration of GBP12,114,932. Modern Water has a 30-year legacy and global footprint across industries that monitor for toxicity:

The Directors believe the acquisition will:

   --   Access to Modern Water distributors and customers across 60 countries and 5 continents 

-- Access to a brand that is the gold standard for water monitoring and in many countries is the regulatory standard

-- Immediate presence in North America and China extending the Company's reach and expertise with laboratories and trading entities to expand business in these territories

-- Access to a range of equipment and membrane to add to the group's EcoWaterOS vision of a total water monitoring and mitigation solution that will be enhanced by the group's software and Ai capabilities

-- Equipment and expertise to allow the rapid development of the Company's COVID-19 and pandemic surveillance system

-- Generation of recurring revenue opportunities with a range of leading reagents sold with all equipment

The following table summarises the consideration paid, and the amounts of the assets acquired, the fair value of these assets and liabilities assumed at the acquisition date of Modern Water plc.

 
 
   Modern Water plc                             GBP'000 
---------------------------------------------  -------- 
 Fair value consideration 
 Initial Consideration                            9,748 
  Non Controlling Interest at fair value          2,309 
 Total fair value consideration                  12,057 
---------------------------------------------  -------- 
 
 Net Asset Acquired 
 Intangible Asset arising on Acquisition         13,960 
 Tangible fixed assets (note16a)                    273 
 Intangible assets                                  922 
 Right of use of asset (note14)                     159 
 Inventory                                        1,606 
 Trade and other receivables                        371 
 Bank and cash                                      739 
 Trade and other payables                       (2,825) 
 Lease Liability                                  (177) 
 Bank Loans                                       (319) 
 Deferred tax liabilities (note 23)             (2,652) 
 Total fair value of identifiable net assets     12,057 
---------------------------------------------  -------- 
 Excess of net assets over consideration              - 
---------------------------------------------  -------- 
 

The directors have reviewed the book value of the assets acquired is the same as the fair value as the value attributed on acquisition.

The fair value of acquired trade and other receivables is GBP371,00. The gross contractual amount for trade and other receivables due is GBP237,000, all of which is expected to be collectible. The fair value of Inventory is GBP1,606,000 as of which is valued at the lower of cost and net resaleable value.

The following table is the statement of comprehensive income for Modern Water plc's pre and post-acquisition trading:

 
                                                              53 days ended 
                                                                31 December 
 Business Combination - Modern Water                                   2020 
  plc                                                               GBP'000 
                                            ---------------  -------------- 
                                             313 days ended 
                                                08 November 
                                                       2020 
 Statement of Comprehensive Income                  GBP'000 
----------------------------------------    ---------------  -------------- 
 Revenue                                              2,167           1,121 
 Costs of sales                                     (1,501)           (735) 
------------------------------------------ 
Gross profit                                            666             386 
 Administrative Costs                               (2,117)           (392) 
------------------------------------------ 
 Operating Profit                                   (1,451)             (6) 
------------------------------------------ 
 Depreciation and amortisation                          468              86 
Exceptional items                                       240         - 
 
EBITDA (loss)/profit before exceptional 
 items                                                (743)              80 
 
 Finance costs                                         (33)             (3) 
------------------------------------------ 
(Loss) before income tax                            (1,484)             (9) 
Income tax credit                                         -               - 
 FX (loss)/ gain                                       (20)              12 
------------------------------------------ 
 (Loss)/Profit for the period                       (1,504)               3 
------------------------------------------ 
 

33. (b)

Non-controlling interests

Minority Interest arising from the acquisition of Modern Water plc arising from the dates on which share acceptance from Modern Water shareholders for the share for share consideration.

 
                                                                                2020 
Non-controlling interests reserve                               % NCI        GBP'000 
Opening balance 1 January 2020                                                     - 
Upon control on acquisition on 9 November 2020                 19.15%          2,309 
Acquisition of non controlling interest on 23 November 2020   -12.61%        (1,520) 
Closing Balance 31 December 2020                                6.54%            789 
 
 
                                                                                      2020 
Premium on Acquisition of non-controlling interests                                GBP'000 
Acquisition fair value at 9 November 2020 if 100% ownership                         12,057 
Value of non-controlling interests at 9 November 2020 19.15%                           2,309 
 
Fair value of non-controlling interest at 23 November 2020 19.15%                      2,367 
Acquired value of non-controlling interest at 23 November 2020 12.61%               (1,520 ) 
Equity movement in retained profits                                                      847 
 
Fair value on 9 November 2020 of remaining NCI of 6.54%                                  789 
 
 

33 . (c) Acquisition of Rinocloud Ltd

2019

GBP'000

 
Fair value consideration 
Deemed consideration of acquisition of share capital at 2 May 2019             3,000 
Total fair value consideration                                                 3,000 
Recognised amounts of identifiable assets acquired, and liabilities assumed 
Intellectual Property (note 15)                                                3,377 
Tangible fixed assets (note16)                                                     - 
Trade and other receivables                                                      237 
Bank and cash                                                                     22 
Trade and other payables                                                        (71) 
Deferred tax liabilities (note 23)                                             (565) 
Total fair value of identifiable net assets at 31 December 2019                3,000 
Excess of net assets over consideration                                            - 
 
 
Total fair value of identifiable net assets at 31 December 2020    3,000 
 

34. Disposal of Visible Youth Ltd

On 2 May 2019, the Company disposed of its subsidiary Visible Youth Ltd. to Enhance Skin Products Inc. for zero consideration. The sale includes the two subsidiaries of Visible Youth Ltd, Visible Youth Ireland Ltd and Integumen, Inc. The Visible Youth companies ("Visible Youth") own the rights to a range of female cosmetic products. As part of the sale, the Company agreed to settle certain Visible Youth liabilities of GBP557,000 by:

   -     arranging cash payments of GBP226,000 and 

- issuing 23,637,429 ordinary shares of 0.01p each at an issue price of 1.4p totalling GBP331,000.

Financial information relating to the discontinued operation for the period to the date of the disposal is set out below:

 
                                             2020      2019 
Statement of Comprehensive Income         GBP'000   GBP'000 
 
Administrative Costs                            -         - 
Operating profit/(loss)                         -         6 
 Amortisation                                   -         - 
 Impairment of intangible assets                -         - 
 Exceptional items                              -         6 
EBITDA before exceptional items                           - 
Finance costs                                   -         - 
Profit/(loss) before income tax                 -         6 
Income tax credit                               -         - 
Profit/(loss) for the period                    -         6 
 
 
 

Discontinued operations exceptional items

Included within administrative expenses are exceptional items as shown below:

 
 
                                     2020     2019 
                                  GBP'000  GBP'000 
 
Gain on disposal of subsidiary          -        6 
Total exceptional gain                  -        6 
 
 
Details of the gain on disposal of Visible Youth are as follows:   GBP'000  GBP'000 
Consideration received: 
Total consideration                                                      -        - 
Liabilities settled by the Company under the sale agreement              -    (557) 
Total fair value consideration                                           -    (557) 
 
Recognised amounts of identifiable liabilities disposed 
Trade and other payables                                                 -    (563) 
Total fair value of identifiable net liabilities                         -    (563) 
Excess of net liabilities over consideration (gain on disposal)          -        6 
 
 
Discontinued Operations - Visible Youth                         2020     2019 
Statement of Cash Flows                                      GBP'000  GBP'000 
Profit/(loss) for the year from dis continuing operations          -        6 
Adjustments for: 
- Amortisation                                                     -        - 
- Impairment of intangible assets                                  -        - 
- Gain on disposal of subsidiary                                   -        - 
Changes in working capital 
- Trade and other payables                                         -    (563) 
Cash Flow from operating activities                                -    (557) 
 
Cash flow from financing activities 
Loan from parent company                                           -      557 
Net cash generated by financing activities                         -      557 
 
Net increase in cash and cash equivalents                          -        - 
Cash and cash equivalents at the beginning of period               -        - 
Cash and cash equivalents at the end of the period                 -        - 
 

35. Ultimate controlling party

There is no one controlling party .

36. Post balance sheet events

Completion of Compulsory Acquisition of Modern Water plc

On 19 November 2020 having obtained the acceptances of 93.47% of Modern Water plc shareholder to the offer to acquire the company the Company commenced compulsory acquisition proceedings under sections 974-991 of the Companies Act 2006.

 
                                              Price at Date 
      Date            Type      No of shares    of Listing   Consideration 
                  Acquisition 
15 January 2021      Shares        3,636,915       33p        GBP1,200,182 
 

On 15 January 2021 the Company allotted 3,636,915 ordinary 0.1p shares in respect of the compulsory acquisition of all the remaining Modern Water plc shares. The GBP1.2m consideration takes the total cost of the 100% acquisition of shares to GBP13.3m.

Shares issued for cash consideration in 2021:

 
    Date         Transaction     No of shares  Exercise price  Consideration 
 18 January     Share Options          25,860      0.01p               GBP 26 
 25 January   Placing Warrants        535,714       20p           GBP 107,143 
 1 February   Placing Warrants        178,570       20p            GBP 35,714 
26 February   Placing Warrants      1,230,738       20p           GBP 246,148 
26 February    Broker Warrants        557,999       15p            GBP 83,700 
26 February    Broker Warrants        814,285       14p           GBP 114,000 
  5 March     Placing Warrants         17,857       20p             GBP 3,571 
  16 March    Placing Warrants        188,071       20p            GBP 37,614 
  23 March    Placing Warrants         35,714       20p             GBP 7,143 
  24 March    Placing Warrants         78,570       20p            GBP 15,714 
  7 April       Share Options          18,102      0.01p               GBP 18 
  13 April    Placing Warrants         10,714       20p             GBP 2,143 
  21 April    Placing Warrants        221,285       20p            GBP 44,257 
  21 April     Broker Warrants      7,050,000        5p           GBP 352,500 
  29 April    Placing Warrants        942,857       20p           GBP 188,571 
  30 April    Placing Warrants        384,425       20p            GBP 76,885 
  11 June       Share Placing      21,086,888       30p         GBP 6,326,066 
  25 June       Share Placing      12,246,446       30p         GBP 3,673,934 
           Sub Total               45,624,095                  GBP 11,315,147 
 
, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

FR BLGDLGDXDGBG

(END) Dow Jones Newswires

June 30, 2021 12:28 ET (16:28 GMT)

1 Year Integumen Chart

1 Year Integumen Chart

1 Month Integumen Chart

1 Month Integumen Chart
ADVFN Advertorial
Your Recent History
LSE
SKIN
Integumen
Register now to watch these stocks streaming on the ADVFN Monitor.

Monitor lets you view up to 110 of your favourite stocks at once and is completely free to use.

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V:gb D:20210920 00:31:09