VR Education Holdings Plc (LON:VRE)

VR Education Holdings Plc (LON:VRE)


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VR Education Holdings Plc RNS Release

Final Results


RNS Number : 9450R
VR Education Holdings PLC
06 March 2019
 

For immediate release

6 March 2019

 

VR Education Holdings plc

('VR Education' or the 'Group')

 

Final Results

 

VR Education (AIM: VRE; Euronext Growth: 6VR), a leading virtual reality ('VR') technology company focused on the education space, today announces its maiden audited final results for the year ended 31 December 2018 (the 'Period').

 

Financial Highlights

 

·     Revenue up 15% to €716k (FY 2017: €624k)

·     EBITDA €1.5 million loss (FY 2017: loss of €0.5 million), in line with management expectations

·     Result before tax of €4.9 million loss (FY 2017: loss of €0.6 million), in line with management expectations, which includes:

-      A non-cash fair value loss arising on derivative financial liabilities of €2.6 million[i]

-      Extinguishment costs of €0.3 million[ii]

·     Net cash position at 31 December 2018 of €3.5 million

·     Loss per share for the period of €0.03 (2017:  N/A)

 

i arising from the conversion of convertible debt and preference shares to ordinary equity in Immersive VR Education Limited ("IVRE") prior to the acquisition of IVRE by the Group.

ii comprising a non-cash element of €0.2 million arising from share warrants issued to debt and preference shareholders in IVRE on conversion and €0.1 million cash contributions made by IVRE to debt and preference shareholders as part of the commercial agreements entered into on conversion.

 

Operational Highlights

 

·     Placing to raise £6.0 million gross (£5.1 million net) and admission to the AIM market of the London Stock Exchange and to the Enterprise Securities Market (now called Euronext Growth), a market regulated by Euronext Dublin, on 12 March 2018

·     Full commercial release of ENGAGE, including ENGAGE Education and ENGAGE Enterprise, in December 2018 with first commercial and educational customers signed up

·     Apollo 11 VR educational experience selected to be part of the launch collection for Oculus Go, Oculus' all-in-one VR headset

·     Apollo 11 HD version released on PC, Oculus Rift, HTC Vive, and Windows Mixed Reality

·     Launch of Titanic VR, the Group's highly anticipated immersive gaming experience, in August 2018; now available to purchase on PlayStation, PC, Oculus Rift, HTC Vive, and Windows Mixed Reality

·     Completion of the "1943: Berlin Blitz" experience in collaboration with the BBC - nominated for best Linear Virtual Reality experience at the Venice Film Festival in September 2018

·     Team strengthened with the appointment of key strategic hires including a new Chief Technology Officer

·     Loren Carpenter, one of the founders of Pixar Animation Studios, appointed as an adviser

 

Post Period End Highlights

 

·     Commercial launch of ENGAGE at the BETT conference in London in January 2019 and GESS Dubai event in February 2019

·     "Raid on the Ruhr", a Dambusters experience, announced as the Group's next showcase experience to be launched in H1 2019

 

Richard Cooper, Chairman of VR Education, said: "The successful IPO and fundraise has been followed by a series of significant product launches, and so, a year on from the listing, the Group has both launched its ENGAGE platform in commercial form and has broadened its retail experiences beyond Apollo 11 VR into Titanic VR and 1943: Berlin Blitz.  The Group is therefore well placed to capitalise on these in 2019 and beyond."

 

David Whelan, CEO of VR Education, said: "The Group has continued to make substantial operational progress since its admission to AIM, in line with the strategy outlined at the time of our IPO.

 

The first commercial version of ENGAGE was released on 13 December 2018 with significantly increased functionality.  This introduced the ability for users to record and publish their own content, purchase Pro ENGAGE accounts to access enhanced editing and publishing tools and also the ability to create avatars based on 'selfie' images using our machine learning system, among other major updates.  These new features ensure that the ENGAGE virtual reality platform stands above the competition, providing key production tools to its users.

 

The full version of Titanic VR was released on the US and EU PlayStation Network in November 2018, following release in August 2018 on the Oculus and Steam stores.  This has been well received and early sales figures are promising, with December 2018 being the highest individual month of revenue the Group has ever generated.

 

The Board would like to thank our new and existing shareholders for their support and we look forward to capitalising on significant market opportunities during the course of 2019 and beyond."

 

Investor and Analyst Meeting

 

A meeting for analysts will be held at 11am today, 6 March 2019, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN.  A copy of the Final Results presentation is available at the Company's website: http://www.vreducationholdings.com 

 

An audio webcast of the analysts meeting will be available after 12pm today:

http://webcasting.buchanan.uk.com/broadcast/5c65270ee6e1d92d38f4df4b

 

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

 

- Ends -

 

 

 

For further information, please contact:

VR Education Holdings plc

David Whelan, CEO

Sandra Whelan, COO

 

Tel: +353 87 665 6708

[email protected]

Cairn Financial Advisers LLP (Nominated Adviser)

James Caithie / Liam Murray / Richard Nash

 

Tel: +44 (0) 20 7213 0880

Stockdale Securities Limited (Joint Broker)

Andy Crossley / Richard Johnson

 

Tel: +44 (0) 20 7601 6100

Davy (Joint Broker & Euronext Growth Advisor)

Fergal Meegan / Ronan Veale / Barry Murphy

 

Tel: +353 1 679 6363

 

Buchanan (UK Financial PR)

Henry Harrison-Topham / Chris Lane / Tilly Abraham

 

Tel: +44 (0)20 7466 5000

[email protected]

 

Fuller Marketing (Irish Corporate PR)

Ruth Fuller / Sheila Kelleher

 

Tel: +353 87 981 3176

[email protected]

 

Notes to Editors

 

VR Education, together with its wholly owned subsidiary, is an early stage VR software and technology group based in Waterford, Ireland, dedicated to transforming the delivery methods of education and corporate training by utilising VR technologies to deliver fully immersive virtual learning experiences.  The Group's core focus is the development and commercialisation of its online virtual social learning and presentation platform called ENGAGE, which provides a platform for creating, sharing and delivering proprietary and third-party VR content for educational and corporate training purposes.

 

In addition to the ongoing development of the ENGAGE platform, the Group has also built two downloadable showcase VR experiences, being the award-winning Apollo 11 VR experience and the Titanic VR experience.

 

On 12 March 2018, VR Education listed on the AIM market of the London Stock Exchange and on Euronext Growth, a market regulated by Euronext Dublin.

 

For further information, please visit www.vreducationholdings.com.

 

 

Chief Executive's Review

 

2018 was an important year for VR Education and one in which it successfully delivered on the operational milestones that were clearly set out at the time of the Group's IPO.  During the period the Group was admitted to AIM and to the Enterprise Securities Market (now called Euronext Growth), released various new showcase experiences and also completed the full commercial release of ENGAGE, its online virtual learning and corporate training platform, with full payment capabilities.  The Group has also expanded the development and marketing team, completed projects with the BBC and Oxford University and released Part 2 of Titanic VR.

 

The Group continues to execute on its strategy of focusing on the commercialisation of ENGAGE whilst launching further showcase experiences to drive awareness, add content to the ENGAGE platform and deliver incremental revenue.

 

VR Education has already started to raise brand awareness by showcasing the ENGAGE platform and its capabilities at high profile tradeshows and conferences around the world.  The Group has recently attended the BETT Conference in London in January 2019 and GESS Dubai in February 2019, one of the largest educational events, held annually in the UAE, and will be attending a number of major education conferences in 2019.

 

ENGAGE

 

The Group successfully released the ENGAGE platform on 13 December 2018 via the Steam network and its own website www.engagevr.io.  ENGAGE now supports Oculus Rift, HTC Vive, HTC Vive Pro, Windows Mixed Reality and standard PC display devices.  With the launch of ENGAGE the Group also released new content provided by Oxford University and additional features such as enhanced web-based media streaming, desktop streaming, selfie avatar generations, Pro and Free licensing, cloud file sharing and a full web-based management system for creating events, quizzes, content and enhanced account management.

 

2019 is a pivotal year for ENGAGE with the majority of business development and marketing focused on the platform.

 

Showcase experiences

 

In addition to developing ENGAGE, the Group creates showcase experiences, not only to generate revenue but to also build up the Group's VR asset base.  These can be reused by external educators on the ENGAGE platform, whilst also improving the Group's reputation and attracting developer talent.

 

At the end of the Period, the Group had built two paid-for downloadable showcase VR experiences, being the award-winning Apollo 11 VR experience and the Titanic VR experience.

 

Apollo 11 VR continued to sell well during the year.  As at 31 December 2018, Apollo 11 VR had been downloaded a total of 160,000 times.  Titanic VR has been very well received since its full launch in August 2018.  As at 31 December 2018, Titanic VR had been downloaded a total of 20,000 times with the majority of downloads coming from its PlayStation version which was released towards the end of November 2018.

 

Current trading and outlook

2019 is going to be a busy year for the Group with continued focus on the promotion of ENGAGE and generation of sales on the platform, together with the release of two new showcase experiences.  The first experience to be released in 2019 is titled "Raid on the Ruhr" and is based on the Dambusters mission from World War II, to be released in H1 2019.  The second experience, a larger space-related project, is scheduled for release in H2 2019.

 

In summary, 2018 has been a solid year for VR Education with the team growing from 20 to 34 employees and the successful release of three new products.  The focus for 2019 is the ENGAGE platform and with the release of second-generation VR hardware, such as the Oculus Quest, VR Education is well positioned to remain the leader of next generation educational content and tools.

 

I would like to thank our new and existing shareholders for their support and the Group looks forward to capitalising on significant market opportunities during the course of 2019 and beyond.

 

David Whelan

Chief Executive Officer

6 March 2019

 

 

 

Financial Review

 

Revenue for the year was up 15% on the prior year from €624k to €716k, driven by the continued success of the Apollo 11 VR experience, the release of the full version of Titanic VR [for Oxford University] and the completion of "1943: Berlin Blitz" for the BBC.

 

EBITDA loss was €1.5 million compared to a loss of €0.5 million in the prior year, in line with management expectations.

 

Loss before tax, after a non-cash convertible debt conversion fair value loss of €2.6 million and associated conversion costs of €0.3 million, was a loss of €4.9 million, in line with management expectations, compared to a loss in the prior year of €0.6 million.

 

Operating cashflows were a net outflow of €2.1 million for the period.  The current run-rate of staff costs and other ongoing costs is approximately €250k per month.

 

The Group's cash position at 31 December 2018 was €3.5 million with no debt.

 

 

Séamus Larrissey

Chief Financial Officer

6 March 2019

 

 

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

for the Year Ended 31 December 2018

 

 

 

Note

2018

 

2017

Continuing Operations

 

 

 

 

 

 

 

Revenue

3

716,345

 

624,487

Cost of Sales

6

(239,701)

 

(300,143)

Gross Profit

 

476,644

 

324,344

 

 

 

 

 

Administrative Expenses

6

(2,247,337)

 

(876,858)

Other Income

5

-

 

60,333

Operating Loss

 

(1,770,693)

 

(492,181)

 

 

 

 

 

Fair value (loss)/gain arising on derivative financial liabilities

 

11

 

(2,638,063)

 

125,764

Extinguishment Costs

9

(267,971)

 

-

IPO Transaction Costs

10

(237,202)

 

(202,940)

Finance Costs

11

(29,977)

 

(54,342)

Loss before Income Tax

 

(4,943,906)

 

(623,699)

 

 

 

 

 

Income Tax Credit

12

-

 

-

Total comprehensive loss for the year

 

(4,943,906)

 

(623,699)

 

 

 

 

 

Earnings per Share (EPS)

 

 

 

 

Basic from continuing operations

 

13

 

(0.026)

 

 

-

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 31 December 2018

 

 

Note

2018

 

2017

 

 

 

Non-Current Assets

 

 

 

 

Property, Plant & Equipment

14

59,541

 

57,300

Intangible Assets

15

956,550

 

435,791

 

 

1,016,091

 

493,091

Current Assets

 

 

 

 

Trade and other receivables

17

394,113

 

238,315

Cash and short term deposits

18

3,485,186

 

103,577

 

 

3,879,299

 

341,892

Total Assets

 

4,895,391

 

834,983

 

 

 

 

 

Equity and Liabilities

 

 

 

 

 

 

 

 

 

Equity Attributable to Shareholders

 

 

 

 

Issued share capital

19

193,136

 

-

Share premium

19

21,587,539

 

-

Other reserves

20

(11,314,729)

 

157,280

Retained earnings

21

(5,765,750)

 

(821,844)

Total Equity

 

4,700,196

 

(664,564)

Non-Current Liabilities

 

 

 

 

Interest bearing loans and borrowings

24

-

 

907,180

Derivative financial liabilities

24

-

 

209,348

 

 

-

 

1,116,528

Current Liabilities

 

 

 

 

Trade and other payables

23

195,195

 

383,019

 

 

195,195

 

383,019

Total Liabilities

 

195,195

 

1,499,547

Total Equity and Liabilities

 

4,895,391

 

834,983

 

 

 

COMPANY STATEMENT OF FINANCIAL POSITION

at 31 December 2018

 

 

 

Note

2018

 

2017

 

 

 

Non-Current Assets

 

 

 

 

Investment in subsidiaries

16

15,028,809

 

-

 

 

15,028,809

 

-

Current Assets

 

 

 

 

Trade and other receivables

17

5,136,849

 

18,750

Cash and short term deposits

18

753,090

 

6,250

 

 

5,889,939

 

25,000

Total Assets

 

20,918,748

 

25,000

 

 

 

 

 

Equity and Liabilities

 

 

 

 

 

 

 

 

 

Equity Attributable to Shareholders

 

 

 

 

Issued share capital

19

193,136

 

-

Share premium

19

21,587,539

 

-

Other reserves

20

(212,363)

 

-

Retained earnings

21

(687,587)

 

-

Total Equity

 

20,880,725

 

-

Current Liabilities

 

 

 

 

Redeemable shares

 

-

 

25,000

Trade and other payables

23

38,023

 

-

Total Liabilities

 

38,023

 

25,000

Total Equity and Liabilities

 

20,918,748

 

25,000

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the Year Ended 31 December 2018

 

 

 

 

Share

Capital

Share

Premium

Other Reserves

Retained

Earnings

Total

 

Balance at 1 January 2017

-

-

104,915

(198,145)

(93,230)

 

Total comprehensive income

 

 

 

 

 

Loss for the year

-

-

-

(623,699)

(623,699)

Total comprehensive income

-

-

-

(623,699)

(623,699)

 

Transactions with owners

recognised directly in equity

 

 

 

Transfer to derivative liabilities

-

-

(104,915)

-

(104,915)

Transfer to other reserves arising from accounting treatment of acquisition of subsidiary

 

 

 

-

 

 

 

-

 

 

 

137,100

 

 

 

-

 

 

 

137,100

Share option expense

-

-

20,180

-

20,180

Balance at 31 December 2017

-

-

157,280

(821,844)

(664,564)

 

 

 

 

Share

Capital

Share

Premium

Other Reserves

Retained

Earnings

Total

 

Balance at 1 January 2018

-

-

157,280

(821,844)

(664,564)

 

Total comprehensive income

 

 

 

 

 

Loss for the year

-

-

-

(4,943,906)

(4,943,906)

Total comprehensive income

-

-

-

(4,943,906)

(4,943,906)

 

Transactions with owners

recognised directly in equity

 

 

 

Issue of ordinary shares

193,136

21,587,539

-

-

21,780,675

Share Issue Costs

-

-

(596,212)

-

(596,212)

Acquisition of a subsidiary

-

-

(11,263,644)

-

(11,243,464)

Share option expense

-

-

387,847

-

367,667

Balance at 31 December 2018

193,136

21,587,539

(11,314,729)

(5,765,750)

4,700,196

 

 

 

 

COMPANY STATEMENT OF CHANGES IN EQUITY

for the Year Ended 31 December 2018

 

 

 

 

Share

Capital

Share

Premium

Other Reserves

Retained

Earnings

Total

 

Balance at 13 October 2017

-

-

-

-

-

 

Total comprehensive income

 

 

 

 

 

Loss for the year

-

-

-

-

-

Balance at 31 December 2017

-

-

-

-

-

 

 

 

 

 

Share

Capital

Share

Premium

Other Reserves

Retained

Earnings

Total

 

Balance at 1 January 2018

-

-

-

-

-

 

Total comprehensive income

 

 

 

 

 

Loss for the year

-

-

-

(687,587)

(687,587)

Total comprehensive income

 

 

 

(687,587)

(687,587)

 

Transactions with owners

recognised directly in equity

 

 

 

Issue of ordinary shares

193,136

21,587,539

-

-

21,780,675

Share Issue Costs

-

-

(596,212)

-

(596,212)

Share option expense

-

-

383,849

-

383,849

Balance at 31 December 2018

193,136

21,587,539

(212,363)

(687,587)

20,880,725

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the Year Ended 31 December 2018

 

 

 

Note

2018

 

2017

Continuing Operations

 

 

 

 

 

 

 

Loss before income tax

 

(4,943,906)

 

(623,699)

Adjustments to reconcile loss before tax to net cash flows:

 

 

 

 

Depreciation of fixed assets

6

49,984

 

36,621

Amortisation of intangible assets

6

175,300

 

-

Fair value loss/(gain) arising on derivative financial liabilities

 

11

 

2,638,063

 

 

(125,764)

Non-cash element of extinguishment costs

 

174,651

 

-

Non-cash element of advisor warrants

 

112,381

 

-

Other non-cash items

 

1,944

 

-

Finance Costs

11

29,977

 

54,342

Share Option Expense

 

30,145

 

20,180

Movement in trade & other receivables

 

(155,798)

 

(201,710)

Movement in trade & other payables

 

(187,824)

 

351,339

 

 

(2,075,083)

 

(488,691)

Bank interest & other charges paid

 

(29,977)

 

(264)

Net Cash used in Operating Activities

 

(2,105,060)

 

(488,955)

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

Purchases of property, plant & equipment

14

(52,225)

 

(56,326)

Payments to develop Intangible Assets

15

(696,059)

 

(370,514)

Net cash used in investing activities

 

(748,284)

 

(426,840)

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

Proceeds from issuance of ordinary shares

 

6,234,953

 

12,000

Proceeds from issuance of preference shares

 

-

 

250,000

Proceeds from issuance of convertible loans

 

-

 

688,000

Net cash generated from financing activities

 

6,234,953

 

950,000

 

 

 

 

 

Net increase in cash and cash equivalents

 

3,381,609

 

34,205

Cash and cash equivalents at beginning of year

18

103,577

 

69,372

Cash and cash equivalents at end of year

18

3,485,186

 

103,577

 

The non-cash element of extinguishment costs and non-cash element of advisor warrants reflect the fact that the group issued warrants to loan note holders, cumulative redeemable preference shareholders and advisors as part of the acquisition of Immersive VR Education Limited and the subsequent IPO transaction.

 

 

COMPANY STATEMENT OF CASH FLOWS

for the Year Ended 31 December 2018

 

 

 

Note

2018

 

2017

Continuing Operations

 

 

 

 

 

 

 

Loss before income tax

 

(687,587)

 

-

Adjustments to reconcile loss before tax to net cash flows:

 

 

 

 

Non-cash element of extinguishment costs

 

174,651

 

-

Non-cash element of advisor warrants

 

112,381

 

-

Non-cash element of redemption of redeemable shares

 

 

(18,750)

 

 

-

Finance Costs

 

276

 

-

Share Option Expense

 

17,518

 

-

Movement in trade & other receivables

 

(5,118,099)

 

-

Movement in trade & other payables

 

38,023

 

-

 

 

(5,481,587)

 

-

Bank interest & other charges paid

 

(276)

 

-

Net Cash used in Operating Activities

 

(5,481,863)

 

-

 

 

 

 

 

Cash Flows from Investing Activities

 

-

 

-

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

Proceeds from issuance of redeemable shares

 

-

 

6,250

Redemption of redeemable shares

 

(6,250)

 

-

Proceeds from issuance of ordinary shares

 

6,234,953

 

-

Net cash generated from financing activities

 

6,228,703

 

6,250

 

 

 

 

 

Net increase in cash and cash equivalents

 

746,840

 

6,250

 

 

 

 

 

Cash and cash equivalents at beginning of year

18

6,250

 

-

 

 

 

 

 

Cash and cash equivalents at end of year

18

753,090

 

6,250

 

The non-cash element of extinguishment costs and non-cash element of advisor warrants reflect the fact that the group issued warrants to loan note holders, cumulative redeemable preference shareholders and advisors as part of the acquisition of Immersive VR Education Limited and the subsequent IPO transaction.

 

The non-cash element of redemption of redeemable shares relates to the accounting treatment for the cancellation of unpaid redeemable shares during the year.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.    General Information

 

VR Education Holdings plc ("the Company") is publicly traded on the Alternative Investment Market ("AIM") of the London Stock Exchange and on the Enterprise Securities Market ("ESM"), a market regulated by Euronext Dublin.  The Company is incorporated and domiciled in the Republic of Ireland. The registered office is Unit 9, Cleaboy Business Park, Old Kilmeaden Road, Waterford and the registered number is 613330.

 

The Company is the parent company of Immersive VR Education Limited ("IVRE"). IVRE is incorporated and domiciled in the Republic of Ireland with the same registered office as the Company.  On 12 March 2018 the Company acquired Immersive VR Education Limited and contemporaneously listed on London's AIM market and Dublin's ESM market.  As part of the Admission process, the Group raised £6 million before expenses, through an oversubscribed placing of 60,000,000 new ordinary shares at a placing price of 10p each.

 

The Group is principally engaged in the development of the educational Virtual Reality platform 'Engage'.  The Company also develops and sells Virtual Reality experiences for the education market.

 

2.    Summary of Significant Accounting Policies

 

The principal accounting policies applied in the preparation of the Financial Statements are set out below.  These policies have been consistently applied to all the years presented, unless otherwise stated.

 

Basis of Consolidation

The consolidated financial statements incorporate those of VR Education Holdings plc and its subsidiary Immersive VR Education Limited.

 

All financial statements are made up to 31 December 2018.  Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

 

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.  Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

 

Subsidiaries are fully consolidated from the date on which control is transferred to the group.  They are deconsolidated from the date on which control ceases.

 

The Group re-assess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.

 

Business Combination

 

Acquisition of Immersive VR Education Limited

The company was incorporated on 13 October 2017 and entered into an agreement to acquire the entire issued share capital of Immersive VR Education Limited on 12 March 2018.  The acquisition was effected by way of issue of shares. Due to the relative size of the companies, Immersive VR Education's shareholders became the majority shareholders in the enlarged capital of the Company.  The transaction fell outside of IFRS 3 ("Business Combinations") and as such has been treated as a group reconstruction.

 

Therefore, although the Group reconstruction did not become unconditional until 12 March 2018, these consolidated financial statements are presented as if the Group structure has always been in place, including the activity from incorporation of the Group's subsidiaries.

 

Furthermore, as VR Education Holdings plc was incorporated on 13 October 2017, while the enlarged group began trading on 12 March 2018, the Statement of Comprehensive Income and consolidated Statement of Changes in Equity and consolidated Cash Flow Statements are presented as though the Group was in existence for the whole year.  On this basis, the Directors have decided that it is appropriate the reflect the combination using merger accounting principles as the transaction falls outside the scope of IFRS 3 and as such has been treated as a Group reconstruction.  No fair value adjustments have been made as a result of the combination.

 

The comparative information presented for the Group is that of Immersive VR Education Limited.

 

Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.  Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

 

Judgments

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

 

Capitalised development costs

In applying the requirements of IAS 38 Intangible Assets, the Group assessed various development projects against the criteria required for capitalisation.  Certain projects that did not meet the criteria regarding the ability to determine those projects would generate sufficient future economic benefits were expensed.  The judgements reflect the early stage of the VR/AR market and will change over time.

 

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.  The Group based its assumptions and estimates on parameters available when the financial statements were prepared.  Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

 

Capitalised development costs impairment review

The Group's impairment review undertaken to assess the carrying value of capitalised development costs includes certain assumptions on future revenues and costs associated with the underlying technology.  Those cashflows are discounted at an appropriate discount rate.  These estimates and assumptions are reviewed on an on-going basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information or more experience.  Such changes are recognised in the period in which the estimate is revised.

 

 

Derivative financial instruments

The Group has assessed the fair value of the derivative financial liabilities arising on the conversion feature of convertible secured loan notes and the cumulative redeemable preference shares.  This calculation includes assumptions on the expected period of exercise, risk free interest rate and share price volatility.  The Group have engaged third party valuations experts to assist them in the selection of such assumptions.

 

Going Concern

 

The financial statements are presented on a going concern basis.  In forming this opinion, the Directors have considered all of the information available to them.  This includes management prepared forecasts, due consideration of the ability to raise funds on the open market in respect of the dual listing on the Alternative Investments Market on the London Stock Exchange and on the Enterprise Securities Market, a market regulated by Euronext Dublin and the timing as to when such funds will be received.  Based on their consideration of these matters the Directors believe the Group and Company to be a going concern.

 

These financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the group not continue as a going concern.

 

Foreign Currency Translation

 

(a) Functional and Presentation Currency

Items included in the Financial Statements of the Group are measured using the currency of the primary economic environment in which the entity operates ("functional currency").

 

The Financial Statements are presented in euro (€), which is the Group's functional and presentation currency.

 

(b) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.  Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'finance income or costs'.  All other foreign exchange gains and losses are presented in the income statement within Administrative Expenses.

 

Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.  An asset is current when it is:

·     Expected to be realised or intended to be sold or consumed in the normal operating cycle

·     Held primarily for the purpose of trading

·     Expected to be realised within twelve months after the reporting period; or

·     Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

 

All other assets are classified as non-current.

 

 

A liability is current when:

·     It is expected to be settled in the normal operating cycle

·     It is held primarily for the purpose of trading

·     It is due to be settled within twelve months after the reporting period Or

·     There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

 

The Group classifies all other liabilities as non-current.

 

              Segment Reporting

 

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

 

Fair value measurement

The Group measures financial instruments such as derivatives at fair value at each balance sheet date.  The Company has adopted IFRS 9 for the current year and applied it retrospectively for the preceding financial year however no material adjustments were identified between the requirements of IFRS 9 and the methods applied by the Company in the application of IAS 39.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

 

·     In the principal market for the asset or liability Or

·     In the absence of a principal market, in the most advantageous market for the asset or liability

 

The principal or the most advantageous market must be accessible by the Group.  The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

 

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods and services supplied, stated net of discounts, returns and Value-Added Taxes (VAT).

 

Under IFRS 15, Revenue from Contracts with Customers, five key points to recognise revenue have been assessed:

Step 1: Identify the contract(s) with a customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

 

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity, and specific criteria have been met for each of the Group's activities, as described below.  The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

 

Where the Group makes sales relating to a future financial period, these are deferred and recognised under 'deferred revenue' on the Statement of Financial Position.  The Group currently has two revenue streams:

 

Firstly the Group is primarily focused on developing proprietary educational VR content which is sold through licences.  This is considered "Showcase Experience Revenue" for reporting purposes. Revenue is recognised when the license key is delivered to the customer, or when all performance obligations have been achieved.

 

Revenue is received net of commission from the platforms where the Group licenses their content.  The gross amount of revenue is recognised in revenue with the corresponding commission portion recognised in cost of sales.

 

Secondly, the Group develops educational VR content on behalf of customers based on specific customer requirements.  This is considered "Other Revenue" for reporting purposes. Such revenue is recognised on a percentage completion basis unless there are significant performance obligations that would require deferral until such obligations are delivered.  Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract.  When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.  This is generally during the early stages of development where the specifications need to pass through the customer's approval as part of the development.

 

The disaggregation of revenue, required under IFRS 15, has been prepared on the basis of the two revenue streams outlined above and is included in Note 3.

 

Government Grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.  When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.  When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

 

Property, Plant and Equipment

All property, plant and equipment is stated at historical cost less depreciation.  Historical cost includes expenditure that is directly attributable to the acquisition of the items.  Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.  The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

 

Depreciation on assets is calculated using the straight-line method to allocate their cost less residual value over their estimated useful lives, as follows:

 

Office equipment - 3 - 5 years

Furniture, fittings and equipment - 5 years

Leasehold improvements - over the life of the leased asset

 

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

 

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and are recognised in the income statement.

 

Intangible Assets

Research costs are expensed as they are incurred.  Development costs that are directly attributable to the design and testing of identifiable and unique commercial software controlled by the Group are recognised as intangible assets when the following criteria are met:

 

·     it is technically feasible to complete the software product so that it will be available for use and sale;

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

·     there is an ability to use or sell the software product;

·     it can be demonstrated how the software product will generate future economic benefits;

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

·     the expenditure attributable to the software product during its development can be reliably measured.

 

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and subcontracted development costs.

 

Other development expenditure that does not meet these criteria is recognised as an expense as incurred.  Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

 

Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed 3 years and commences after the development is complete and the asset is available for use.  Intangible assets are amortised over their estimated useful lives based on the pattern of consumption of the underlying economic benefits.  Amortisation is included in Administrative Expenses.

 

Impairment of non-financial assets

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired.  If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount.  An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use.  The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

 

When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

 

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated.  These budgets and forecast calculations generally cover a period of five years.  A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

 

Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset.

 

For assets, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased.  If such indication exists, the Group estimates the asset's or CGU's recoverable amount.

 

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised.  The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

 

Trade Receivables

Trade receivables are amounts due from customers for licenses sold or services performed in the ordinary course of business.  If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets.  If not they are presented as non-current assets.

 

Trade receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

 

The Group provides for known bad debts and other accounts over a certain age in line with Group policy.  The realisation of the asset may differ from the provision estimated by management.

 

Cash and Cash Equivalents

In the Statement of Cash Flows, cash and cash equivalents comprise cash in hand and short term deposits.  Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position.

 

Share Capital

Ordinary shares are classified as equity.

 

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.  Where the issuance of the new shares or options occurs in a subsequent period from when the incremental costs are incurred these costs are prepaid until the issuance takes place.

 

Where the Group purchases its own equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Group's equity holders, until the shares are cancelled or reissued.  Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Group's equity holders.

 

Share Based Payments

The Group has an equity settled employee incentive plan.  The cost of equity settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award.  Fair value is determined using an appropriate pricing model.  In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Group.  No expense is recognised for awards that do not ultimately vest.

 

At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions number of equity instruments that will ultimately vest.  The movement in cumulative expense since the previous reporting date is recognised in the profit and loss within administration expenses, with a corresponding entry in the balance sheet in share options reserve.

 

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period.  In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification.  No reduction is recognised if this difference is negative.  Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the Statement of Comprehensive Income for the award is expensed immediately.

 

Trade Payables

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

 

Leases

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease.  The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset (or assets) and the arrangement conveys a right to use the asset (or assets), even if that asset is (or those assets are) not explicitly specified in an arrangement.

 

A lease is classified at the inception date as a finance lease or an operating lease.  A lease that transfers substantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease.

 

An operating lease is a lease other than a finance lease.  Operating lease payments are recognised as an operating expense in the statement of comprehensive income in administrative expenses on a straight-line basis over the lease term.

 

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred.  Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method.

 

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down.  To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services, and amortised over the period of the facility to which it relates.

 

Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

 

Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

 

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.  All other borrowing costs are recognised in the income statement within finance costs in the period in which they are incurred.

 

                Convertible Financial Instruments

Convertible financial instruments issued by the Group comprise convertible loan notes and convertible redeemable Preference Shares that can be converted to ordinary share capital at the option of the holder.  The number of shares to be issued may vary with changes in their fair value.

 

The derivative component arising from the conversion option is recognised at fair value.  The debt component is recognised initially as the difference between the fair value of the convertible financial instrument as a whole and the fair value of the derivative.  Any directly attributable transaction costs are allocated against the liability.

 

Subsequent to initial recognition, the debt component of the convertible instrument is measured at amortised cost using the effective interest rate method.  The derivative component is re-measured at fair value at each subsequent balance sheet date.

 

Current and Deferred Income Tax

The tax expense for the period comprises current and deferred tax.  Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity.  In this case the tax is also recognised directly in other comprehensive income or directly in equity, respectively.

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group operates and generates taxable income.  Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.  It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements.  However, the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss.  Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.

 

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

 

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

 

Research and development tax credit

The Group undertakes certain research and development activities that qualify for the receipt of a research and development (R&D) tax credit from the Irish tax authorities.  Such grants are recognised as a credit against related costs on a cash receipts basis.

 

New standards, interpretations and amendments adopted by the Company

On 1 January 2018 the company adopted IFRS 9 - Financial Instruments.  No other new standards were adopted in the year.

 

The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective:

 

Reference

 

Title

 

Summary

 

Application Date of Standard (Periods Commencing on or after)

 

IFRS 16

Leases

Principles for the recognition, measurement, presentation and disclosure of leases

 

1 January 2019

 

 

 

 

 

 

 

The adoption of these Standards and Interpretations is not expected to have a material impact on the financial information of the Company in the period of initial application when they come into effect.

 

 

3.    Segment Reporting

 

 

 

2018

 

2017

Revenue by Type

 

 

 

 

 

Showcase experience revenue

592,362

 

592,617

Other revenue

123,983

 

31,870

Total Revenue

716,345

 

624,487

 

 

 

 

 

 

4.    Capital Management

 

For the purpose of the Company's capital management, capital includes issued capital, convertible preference shares, share premium and all other equity reserves.  The primary objective of the Group's capital management is to maximise the shareholder value.

 

Group

2018

 

2017

 

 

 

 

 

 

Interest bearing loans and borrowings

-

 

907,180

Derivative financial liabilities

-

 

209,348

Trade and other payables

195,194

 

383,019

Less: cash and short term deposits

(3,485,186)

 

(103,577)

Net Debt

(3,289,992)

 

1,395,970

Equity

4,296,872

 

(664,564)

Total Equity

4,296,872

 

(664,564)

Capital and net debt

1,006,880

 

731,406

 

 

 

 

 

5.    Other Income

 

2018

 

2017

 

 

Industry awards proceeds

-

 

60,333

 

6.    a. Expenses by nature

 

2018

 

2017

 

 

Depreciation charges

49,984

 

36,621

Amortisation expense

175,300

 

-

Operating Lease Payments

36,839

 

25,115

Foreign Exchange (Gain) / Loss

(35,027)

 

7,725

Other Expenses

2,956,001

 

1,478,054

 

3,183,097

 

1,547,515

Wages and salaries capitalised

(586,937)

 

(313,501)

Other expenses capitalised

(109,122)

 

(57,013)

Total cost of sales and administrative expenses

2,487,038

 

1,177,001

 

 

6.    a. Expenses by nature (continued)

 

Disclosed as:

Cost of sales

239,701

 

300,143

Administrative expenses

2,247,337

 

876,858

Total cost of sales and administrative expenses

2,487,038

 

1,177,001

 

 

b. Auditor Remuneration

 

Services provided by the Company's auditor

During the year, the Company obtained the following services from the Company's auditor:

 

 

2018

 

2017

 

 

Fees payable to the Company's auditor for the audit of the financial statements

Tax

Other

 

42,173

11,688

40,776

 

 

56,000

-

-

 

 

7.    Employees

 

Employee Benefit Expense

2018

 

2017

 

 

Wages and salaries

1,380,687

 

731,186

Social security costs

136,910

 

62,887

Defined contribution pension costs

8,961

 

-

Share option expense

30,145

 

20,180

Capitalised employee costs

(586,937)

 

(313,501)

Total Employee Benefit Expense

969,766

 

500,752

 

Average Number of People Employed

 

2018

 

 

2017

 

 

 

 

Average number of people (including executive Directors)

 

 

 

employed:

 

 

 

Operations

22

 

15

Administration

3

 

2

Marketing

2

 

-

Total Average Headcount

27

 

17

 

 

8.    Directors remuneration

 

Below is the directors remuneration for the year ended 31 December 2018 and for the year ended 31 December 2017.

 

 

31 December 2018

 

Group

 

Directors' fees

Pension benefits

Options issued

Total

 

Executive Directors

 

 

 

 

David Whelan

114,181

2,017

-

116,198

Sandra Whelan

85,807

2,100

-

87,907

Séamus Larrissey

 

Non-executive Directors

86,500

2,833

4,779

94,112

Richard Cooper

96,077

-

13,917

109,994

Michael Boyce

37,143

-

-

37,143

Tony Hanway

23,807

-

-

23,807

 

443,515

6,950

18,696

469,191

 

 

 

31 December 2017

 

Group

 

Directors' fees

Pension benefits

Options issued

Total

 

Executive Directors

 

 

 

 

David Whelan

70,000

-

-

70,000

Sandra Whelan

60,000

-

-

60,000

Séamus Larrissey

 

Non-executive Directors

34,638

-

2,944

37,582

Richard Cooper

-

-

-

-

Michael Boyce

-

-

-

-

Tony Hanway

-

-

-

-

At 31 December 2018

164,638

-

2,944

167,582

 

The options issued are a non-cash amount and are accounted for in line the treatment of the other share options issued to employees under IFRS 2. Further notes on Share Based Payments are included in Note 22.

During the year ended 31 December 2018, Richard Cooper received a fee in relation to the IPO transaction of £50,000.

During the year ended 31 December 2018, Michael Boyce received a fee in relation to consultancy services provided to the company, separate to his role as a Non-Executive Director of £12,031.

 

9.    Extinguishment Costs

 

2018

 

2017

 

 

Legal and professional fees paid on behalf of redeemable secured loan note holders and cumulative redeemable preference shares holders

 

 

51,500

 

 

 

-

Monitoring fee and interest paid post conversion

41,820

 

-

Warrant Costs

174,651

 

-

Total Extinguishment Costs

267,971

 

-

 

As part of the reorganisation process which occurred prior to the IPO all loan note holders and cumulative redeemable preference share note holders converted their holdings into ordinary shares.  During this process the Group agreed to pay:

 

-     all interest that would have accrued on these loan notes for the 12 month period from the date of Admission had such loan notes remained in issue.

-     all monitoring fees that would have accrued for the 12 months period from the date of Admission had such agreements not been terminated.

 

The group also issued warrants to the loan note holders and cumulative redeemable preference shareholders over such number of new Ordinary Shares in the Company as is equal to 3 per cent. of the issued Ordinary Shares at Admission, exercisable at a 50 per cent. premium to the Issue Price expiring 36 months from Admission.

 

 

10.  IPO Transaction Costs

 

2018

 

2017

 

 

Legal and professional fees

237,202

 

202,940

Total IPO Transaction Costs

237,202

 

202,940

Included in Other Reserves

596,212

 

-

 

The transaction costs relate to the admission of the Group to the AIM market of the London Stock Exchange and the ESM market of the Irish Stock Exchange on 12 March 2018.

 

 

11.  Finance Costs

 

2018

 

2017

 

 

Interest expense:

 

 

 

- Notional interest on non-current borrowings

-

 

34,472

- Interest payable on convertible loan notes

27,105

 

14,387

- Dividend on redeemable convertible preference shares

1,356

 

5,219

- Bank charges

1,516

 

264

Total finance costs

29,977

 

54,342

Fair value (loss) / gain on derivative financial liability

(2,638,063)

 

125,764

 

The fair value loss on derivative financial liabilities arose in 2018 from the conversion of convertible debt and preference shares to ordinary equity in Immersive VR Education Limited prior to its acquisition by the Group.

 

 

12.  Income Tax Expense

 

2018

 

2017

 

 

Current tax:

-

 

 

Current tax on loss for the year

-

 

-

Total current tax

-

 

-

Deferred tax (Note 25)

-

 

-

Income Tax Expense

-

 

-

 

The tax assessed for the year differs from that calculated using the standard rate of corporation tax in Ireland (12.5%).  The differences are explained below:

 

 

2018

 

2017

 

 

Loss Before Tax

(4,943,906)

 

(623,699)

 

 

 

 

Tax calculated at domestic tax rates applicable to loss in

Ireland of 12.5%

 

 

(617,988)

 

 

(77,962)

Tax effects of:

 

 

 

- Depreciation in excess of capital allowances

4,033

 

3,178

- Expenses not deductible for tax purposes

406,488

 

29,572

- Tax losses for which no deferred tax asset was recognised

207,467

 

45,212

Total tax expense

-

 

-

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

13.  Earnings per share (EPS)

 

2018

 

2017

Loss attributable to equity holders of the Group:

 

Continuing Operations

(4,943,906)

 

(623,699)

Weighted average number of shares for Basic EPS

193,136,406

 

1

Basic loss per share from continuing operations

(0.026)

 

-

 

 

14.  Property, Plant & Equipment

 

 

 

Group

 

Leasehold

improvements

Fixtures,

fittings and equipment

 

Office

Equipment

 

 

Total

 

Cost of Valuation

 

 

 

 

At 1 January 2017

-

3,548

45,505

49,053

Additions

15,601

2,062

38,663

56,326

At 31 December 2017

15,601

5,610

84,168

105,379

Additions

4,740

1,415

46,070

52,225

At 31 December 2018

20,341

7,025

130,238

157,604

 

Depreciation

 

 

 

 

At 1 January 2017

-

1,005

10,453

11,458

Charge (note 6)

3,284

1,122

32,215

36,621

At 31 December 2017

3,284

2,127

42,668

48,079

Charge (note 6)

4,607

1,405

43,972

49,984

At 31 December 2018

7,891

3,532

86,640

98,063

 

Net Book Amount

 

 

 

 

At 31 December 2017

12,317

3,483

41,500

57,300

At 31 December 2018

12,450

3,493

43,598

59,541

 

Depreciation expense of €49,984 (2017: €36,621) has been charged in 'Administrative Expenses'.

 

 

15.  Intangible Assets

 

 

 

Group

Software in development costs

 

 

 

Total

 

 

Cost of Valuation

 

 

 

At 1 January 2017

65,277

 

65,277

Additions

370,514

 

370,514

At 31 December 2017

435,791

 

435,791

Additions

696,059

 

696,059

At 31 December 2018

1,131,850

 

1,131,850

 

Amortisation

 

 

 

At 1 January 2017

-

 

-

Charge

-

 

-

At 31 December 2017

-

 

-

Charge

175,300

 

175,300

At 31 December 2018

175,300

 

175,300

 

Net Book Value

 

 

 

 

At 31 December 2017

435,791

 

435,791

At 31 December 2018

956,550

 

956,550

 

 

The software being developed relates to the creation of three virtual reality experiences and an online virtual learning and corporate training platform.

 

ENGAGE is an online virtual learning and corporate training platform currently in development by the Company.  A desktop version was released in December 2018 and a mobile version is expected in H1 2019.  Amortisation will commence once the mobile version is launched.

 

Titanic VR which is available for sale across all major VR capable platforms since November 2018 has commenced being amortised in the period.

 

Raid on the Ruhr and a Space Shuttle experience are currently in development with expected release during 2019.  They are currently not being amortised.

 

Amortisation expense of €175,300 (2017: €Nil) has been charged in 'Administrative Expenses'.

 

An impairment review was carried out at the balance sheet date. No impairment arose.

 

 

16.  Investments in Subsidiaries

 

 

 

 

Company

 

 

At Incorporation - 13 October 2017

 

 

-

Additions

 

 

-

At 31 December 2017

 

 

-

Additions

 

 

15,028,809

At 31 December 2018

 

 

15,028,809

 

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

 

On 12 March 2018 the Company has acquired all of the issued capital of Immersive VR Education Limited for a consideration of €15,000,000 which was settled by issuing 133,089,739 Ordinary Shares in the Company. The Company incurred expenses totalling €28,809 as part of the transaction.

 

 

 

Name

Country of incorporation and residence

 

 

Nature of business

Proportion of equity shares held by the company

 

Immersive VR Education Limited

 

Ireland

Virtual Reality Technology

 

100%

 

This subsidiary undertaking is included in the consolidation.  The proportion of the voting rights in the subsidiary undertaking held directly by the Parent Company does not differ from the proportion of ordinary shares held.

 

 

17.  Trade and Other Receivables

 

Group

 

Company

 

2018

2017

 

2018

2017

 

 

 

 

 

 

 

 

Trade receivables

180,129

105,450

 

-

-

Less: provision for impairment of receivables

-

-

 

-

-

Trade receivables - net

180,129

105,450

 

-

-

Amounts due from related parties

-

-

 

5,058,589

-

Prepayments

178,650

107,778

 

53,062

-

Other debtors

4,991

23,830

 

-

18,750

VAT

30,343

1,257

 

25,198

-

 

394,113

238,315

 

5,136,849

18,750

 

As at 31 December 2018, trade receivables of €180,129 (2017: €105,450) were deemed fully recoverable. No bad debt provision charge was incurred during 2018 (2017: €Nil).

 

 

17.  Trade and Other Receivables (continued)

 

The carrying amounts of the Company's trade and other receivables are denominated in the following currencies:

 

 

Group

 

Company

 

2018

2017

 

2018

2017

 

 

 

 

 

 

 

 

Euro - Neither past due nor impaired

53,028

20,821

 

-

-

Dollar - Neither past due nor impaired

127,101

84,629

 

-

-

 

180,129

105,450

 

-

-

 

 

18.  Cash and short-term deposits

 

 

Group

 

Company

 

2018

2017

 

2018

2017

 

 

 

 

 

 

 

 

Cash at bank and on hand

3,485,186

103,577

 

753,090

6,250

 

3,485,186

103,577

 

753,090

6,250

 

 

19.  Issued Share Capital and Premium

 

 

 

Number of shares

Ordinary shares

Share premium

Total

 

 

At 01 January 2017

-

-

-

-

Ordinary Shares Issued

1

-

-

-

At 31 December 2017

1

-

-

-

Shares issued as consideration for reverse merger

133,089,739

133,090

14,866,910

15,000,000

Ordinary Shares Issued

60,046,666

60,046

6,720,629

6,780,675

At 31 December 2018

193,136,406

193,136

21,587,539

21,780,675

 

On 12 March 2018 the Company acquired Immersive VR Education Ltd for a purchase price of €15 million through the issue 133,089,739 new ordinary shares of €0.001 and became the legal parent of the Group.  On 12 March 2018 the Company listed on London's AIM market and Dublin's ESM market.  As part of the Admission process, the Group raised £6 million (€6,772,773) before expenses, through an oversubscribed placing of 60,000,000 new ordinary shares at a placing price of £0.10 (€0.1127) per share.

 

 

20.  Other Reserves

 

 

Group

 

Company

 

 

At 1 January 2017

104,915

 

-

Transfer to derivative liabilities

(104,915)

 

-

Transfer to other reserves arising from accounting treatment of acquisition of subsidiary

137,100

 

-

Share option expense

20,180

 

-

At 31 December 2017

157,280

 

-

 

At 1 January 2018

157,280

 

-

Share issue costs

(596,212)

 

(596,212)

Acquisition of a subsidiary

(11,263,644)

 

-

Share option expense

387,847

 

383,849

At 31 December 2017

(11,314,729)

 

(212,363)

 

 

21.  Retained Earnings

 

 

 

Group

 

Company

 

 

At 1 January 2017

(198,145)

 

-

Loss for the year

(623,699)

 

-

At 31 December 2017

(821,844)

 

-

 

At 1 January 2018

(821,844)

 

-

Loss for the year

(4,943,906)

 

(687,587)

At 31 December 2017

(5,765,750)

 

(687,587)

 

 

22.  Share Based Payments

 

During the year ended 31 December 2018, VR Education Holdings plc introduced a share-based payment scheme for employee remuneration ("the 2018 Scheme") to replace the scheme previously in operation within Immersive VR Education Limited ("the 2016 Scheme").  The 2018 Scheme and the 2016 schemes are classified equity settled share based payment plans.  Recipients under the scheme are awarded options over ordinary shares of the Company.

 

On the 12 March 2018, the options under the 2016 Scheme were cancelled as part of the Capital Restructure and Listing process and replaced with options under the 2018 Scheme under the equivalent terms and conditions as the 2016 scheme, and a stock split which gave rise to the issue of 740 shares for every 1 share held.  The options granted under the 2016 Scheme had vesting periods of up to 36 months.  The replacement of the options did not give rise to any additional income statement expense in 2018.

 

 

22.  Share Based Payments (continued)

 

There were 311,108 employee options granted during 2018 at an exercise price of €0.135 per share and these vest subject to continued service by the employee over a period of 3 years. Options expire at the end of a period of 7 years from the Grant Date or on the date on which the option holder ceases to be an employee.

 

Share-based payment expense with Director

 

On 12 March 2018, VR Education Holdings plc granted options to purchase 1m ordinary shares to Richard Cooper, the Chairman of the Company.  The options vest if the market capitalisation of the Company equals 2.5 times the market capitalisation on admission to listing for a consecutive period of 30 days. Except in the event of a change in control (see below) the options, which are exercisable at a price of £0.0001, cannot be exercised for a period of two years and expire on 12 March 2023.  The market capitalisation requirement is a "market condition" under IFRS 2 and the valuation of the option, which amounted to €0.668, takes this market condition into account.

 

In the event of a change in control, in the two years after admission to listing, the options are exercisable at prices ranging from £0.0001 to £0.10.  The change in control scenarios gave rise to option values of €0.018 - €0.112.

 

The movement in employee share options and weighted average exercise prices are as follows for the reporting periods presented:

 

 

2018 Scheme

2016 Scheme

 

2018

2018

 

2017

At 1 January

-

4,208

 

-

Capital restructure and Listing process

3,113,920

(4,208)

 

-

Granted during period

1,311,108

-

 

4,208

At 31 December

4,425,028

-

 

4,208

 

 

 

 

 

 

Options outstanding at 31 December

 

 

 

 

 

Number of shares

4,425,028

-

 

4,208

Weighted average remaining contractual life

 

3.75 years

 

 

 

4.3 years

Weighted average exercise price per share

Range of exercise price

 

€0.028

€0.0001 - €0.135

 

 

 

€19.21

€19.21

 

 

 

 

 

 

Exercisable at 31 December

 

 

 

 

 

Number of shares

1,997,556

 

 

893

Weighted average exercise price per share

 

€0.026

 

 

 

€19.21

 

No options were exercised during the period.  The weighted average exercise price of options granted during the period was €0.032 (2017: €19.21).  The expense recognised in respect of employee share based payment expense and credited to the share based payment reserve in equity was €30,144 (2017: €20,180).

 

 

Advisor Warrants

 

As part of the listing process and as set out in the admission document, the Company issued warrants over 5,018,328 shares at an exercise price of £0.15, subject to expiry on various dates up to 12 March 2023.  The warrants were valued under the Black Scholes model.  The expense recognised during the period was €162,871 of which €112,381 was recognised in the income statement and €50,490 in equity.

 

Investor Warrants

 

As part of the arrangements for the listing process and as set out in the admission document, the Company issued warrants over 5,794,092 shares at an exercise price of £0.15, subject to expiry on 12 March 2023.  The warrants were valued under the Black Scholes model.  The expense of €174,651 was recognised in the income statement during the period.

 

The Company has measured the fair value of the services received as consideration for equity instruments of the Company, indirectly by reference to the fair value of the equity instruments.  The table below sets out the options and warrants that were issued during the period and the principal assumptions used in the valuation.

 

 

Employee

Director

Advisor

Investor

 

 

 

 

 

Number of options / warrants

311,108

1,000,000

5,018,328

5,794,092

Grant date

26 Apr 18

12 Mar 18

12 Mar 18

12 Mar 18

Vesting period

3 years

2 years

-

-

Share price at date of grant

£0.11

£0.10

£0.10

£0.10

Exercise price

€0.135

£0.001-£0.10

£0.15

£0.15

Volatility

57%

54.4-59.2%

54.4-57.3%

57.3%

Option life

7 years

5 years

22 months - 5 years

3 years

Dividend yield

0%

0%

0%

0%

Risk free investment rate

0.14%

0.5-1.16%

0.8-1.16%

0.87%

Fair value per option at grant date

€0.058

€0.018-€0.112

€0.018-€0.030

€0.030

Weighted average remaining contractual life in years

6.3

4.2

2.7

2.2

 

 

23.  Trade and Other Payables

 

 

 

Group

 

Company

 

2018

2017

 

2018

2017

 

 

 

 

 

 

 

 

Trade Payables

28,263

18,225

 

9,169

-

PAYE/PRSI

46,923

45,983

 

16,362

-

Redeemable shares

-

25,000

 

-

25,000

Accrued Expenses

120,009

293,811

 

12,492

-

 

195,195

383,019

 

38,023

25,000

 

                Terms and conditions of the above financial liabilities:

·     Trade payables are non-interest bearing and are normally settled on 30-day terms

·     PAYE/PRSI payables are non-interest bearing and are normally settled on 30-day terms

·     Accrued expenses are non-interest bearing are settled over varying terms throughout the year

 

24.  Non-current Liabilities

 

 

Group

 

Company

 

2018

2017

 

2018

2017

 

 

Borrowings

 

 

 

 

 

Redeemable convertible secured loan notes

-

776,155

 

-

-

Cumulative Convertible Redeemable Preference Shares

-

131,025

 

-

-

Total Borrowings

-

907,180

 

-

-

 

 

Derivative financial liabilities on conversion feature of

redeemable secured loan notes and cumulative redeemable

preference shares

-

209,348

 

-

-

Total Non-current Liabilities

-

1,116,528

 

-

-

 

 

24.  Non-current Liabilities

 

Immediately prior to the acquisition of Immersive VR Education Limited ("IVRE") by the Company on 12 March 2018 the existing redeemable secured loan notes and cumulative redeemable preference shares with IVRE were redeemed for Ordinary Equity of IVRE.

 

The 2016 Kernel Loan Agreement which resulted in Kernel holding €240,000 in redeemable secured loan notes was redeemed at €19.21 for 12,493 ordinary shares in IVRE.  As part of the acquisition of IVRE by the Company, Kernel were issued 9,244,820 ordinary shares in the Company, using a share swap ratio of 740 to 1.

 

The 2017 Kernel Loan Agreement which resulted in Kernel holding €400,000 in redeemable secured loan notes was redeemed at €83.916 for 4,767 ordinary shares in IVRE.  As part of the acquisition of IVRE by the Company, Kernel were issued 3,527,580 ordinary shares in the Company, using a share swap ratio of 740 to 1.

 

The 2017 Suir Valley Ventures Loan Agreement which resulted in Suir Valley Ventures holding €288,000 in redeemable secured loan notes was redeemed at €19.21 for 14,992 ordinary shares in IVRE.  As part of the acquisition of IVRE by the Company, Suir Valley Ventures were issued 11,094,080 ordinary shares in the Company, using a share swap ratio of 740 to 1.

 

The 2017 Enterprise Ireland Agreement which resulted in Enterprise Ireland holding €250,000 in Cumulative Convertible Redeemable Preference Shares was redeemed at €19.21 for 13,014 ordinary shares in IVRE.  As part of the acquisition of IVRE by the Company, Enterprise Ireland were issued 9,630,360 ordinary shares in the Company, using a share swap ratio of 740 to 1.

 

Derivative financial liabilities on conversion feature of

redeemable secured loan notes and cumulative redeemable

preference shares

 

 

 

Group

 

 

 

 

Company

2018

2017

 

2018

2017

 

 

 

 

 

 

 

Balance as at beginning of period

209,348

-

 

-

-

Transfer from other reserves

 

104,915

 

-

-

Movement in current period

2,638,063

104,433

 

-

-

Redemption of loan notes and preference shares

 

(2,847,411)

 

-

 

-

-

Balance as at end of period

-

209,348

 

-

-

 

 

25.  Deferred Tax

 

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.  The Company did not recognise deferred income tax assets of €410,683 (2017: €79,597) in respect of losses and depreciation in excess of capital allowances amounting to €3,285,467 (2016: €636,773) that can be carried forward against future taxable income.

 

26.  Related Parties

 

During the year the Directors received the following emoluments:

 

 

Group

 

Company

 

2018

2017

 

2018

2017

Directors

 

 

 

 

 

 

 

Aggregate emoluments

450,465

164,638

 

406,787

-

Share option expense

18,696

2,944

 

18,696

-

 

469,161

167,582

 

425,483

-

 

Included in the above is an amount of €96,077 (2017: €Nil) paid to Luclem Estates and Advisory Limited, a company in which Richard Cooper, a director of the Company, is also a director.  These fees relate to Richard Cooper's consultancy services to the Company.  As at 31 December 2018 €Nil was outstanding.

 

27.  Operating Leases

 

The Company leases a motor vehicle and office space under non-cancellable operating lease agreements with lease terms between three years and four years nine months.

 

The lease expenditure charged to the income statement during the year is disclosed in Note 6.

 

Future minimum rentals payable under non-cancellable operating leases as at 31 December are, as follows:

 

 

Group

 

Company

 

2018

2017

 

2018

2017

Motor Vehicles

 

 

 

 

 

 

 

Within one year

6,570

6,570

 

-

-

After one year but not more than five years

3,285

9,854

 

-

-

 

9,855

16,424

 

-

-

 

27.  Operating Leases (continued)

 

 

 

Group

 

Company

 

2018

2017

 

2018

2017

Land and buildings

 

 

 

 

 

 

 

Within one year

25,000

25,000

 

-

-

After one year but not more than five years

53,125

78,125

 

-

-

 

78,125

103,125

 

-

-

 

28.  Ultimate controlling party

 

The directors believe that there is no ultimate controlling party as no one shareholder has control of the Company.

 

 

29.  Subsequent Events

 

The Company has evaluated all events and transactions that occurred after 31 December 2018 up to the date of signing of the financial statements.

 

No material subsequent events have occurred that would require adjustment to or disclosure in the financial statements.

- ENDS -

 

 

 


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VR Education Holdings Plc Timeline

Newswire
January 23 2019

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