REG - Deepverge PLC - Acquisition; Loan Facility for global expansion

DeepvergeAnnouncement

17/03/2022 07:00

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RNS Number : 0588F  Deepverge PLC  17 March 2022

17 March 2022

 

DeepVerge PLC

 

("DeepVerge" or "the Company" or "the Group")

 

Acquisition of engineering services company for £1.1 million to assemble
Microtox(®)PD in-house

 

£25 million mezzanine loan to support continued growth of revenues that have
doubled for three successive years

 

DeepVerge (LSE:DVRG.L) announces the acquisition of engineering services
company Glanaco Limited ("Glanaco") for  consideration of, in aggregate,
£1.08 million comprising £0.65 million in equity and £0.43 million in
cash. The equity issue consists of  4,550,000 new ordinary shares of 0.1
pence ("New Ordinary Shares") issued at a price of 14.25p (being the closing
mid-market price at close of business on 14 March 2022) with a 12 month
lock-in and orderly market agreement. The acquisition brings the testing,
assembly and commissioning of new generation of Microtox®PD (real-time
pathogen detection in wastewater) in-house. The New Ordinary Shares to be
issued represent 2.07% of the enlarged issued share capital of the Company.
The consideration paid is calculated at 4.8 times 2021 (unaudited) EBITDA of
£0.222 million. The transaction was simultaneously agreed and completed on 16
March 2022.

The Company has also secured a mezzanine loan facility of up to £25 million
("Facility"), with Riverfort Global Opportunities PCC Limited and YA II PN,
Ltd, available for 3-years in the form of 12-month mezzanine loan notes to
fuel momentum across all divisions of the Group. The initial drawdown of £4
million will be used for;

1.         the Glanaco acquisition;

2.         expansion of manufacturing capacity and laboratory space in
the US for the Skin Trust Club; and

3.         maintaining the growth trajectory of equipment production
and build on the increasing demand the Group is experiencing for its products
and services across all divisions.

The Facility provides flexible draw down facilities at an interest rate of 1%
per month on the outstanding funds drawn down. The loans are convertible at a
40% premium to a 5 day volume weighted average price ("VWAP") prior to the
date of each draw down. Further details are provided in the Loan Facility
section of this document.

 

Gerry Brandon CEO DeepVerge plc commented:

 

"Over the last 3 years, while demand for our core offering has increased year
on year, through the uncertain times that include the global health pandemic,
we invested heavily in adapting the amazing technology in all divisions,
creating next-generation products and services which are now showing worldwide
demand. We also managed supply chain challenges, during the pandemic and the
increasingly isolationist direction of the post-globalisation by using
out-sourced third parties.

 

This £25 million mezzanine loan ensures availability of funds for growth,
avoids stock market fluctuations, eliminates the need for a discounted equity
dilution of shareholders and the Glanaco acquisition underwrites our ability
to take control of our supply chains and manage scale to meet the growing
global demand being experienced by the company."

 

"With our production order book for Q1 2022, the largest in the history of the
Company, these strategic moves keep our mission intact and ensures momentum is
maintained this year and beyond".

 

Areas of investment

 

1. DeepVerge to acquire engineering services company Glanaco for £0.65
million equity @ 14.25p and £0.43 million in cash.

 

Covering 6,000 square meters for assembly and logistics, located in Cork,
Ireland, Glanaco designs, manufactures, assembles, and distributes mechanical
and electronic products in sensor and detection, remote monitoring and robotic
extension solutions. It serves partners and customers in a range of sectors
including local authorities, utilities, oil and gas, mining, data centres and
construction across the EU, UK and US. Glanaco has nine employees.

 

Glanaco has been a collaboration partner and contractor in the production
assembly and testing of Modern Water's Microtox(®)PD equipment since August
2021, as part of the DeepVerge €2.8 million expansion programme, supported
with a €750,000 grant from Irish state support funder, Enterprise Ireland.
This engineering expertise, scalable manufacturing capacity and logistics
facility in Cork, Ireland, along with existing long term supply chain partners
across the world, allows the Modern Water division of DeepVerge to accelerate
production expansion in Europe.

 

The Glanaco acquisition delivers cost savings, increases control and mitigates
risk of supply chain bottlenecks delivering in-house engineering expertise to
drive efficiencies and lower uncertainty where supply chain disruption is seen
as a barrier to global growth. With production in-house and combining with the
existing DeepVerge technology centre of excellence in Fermoy Cork, Ireland and
axis with the York UK, laboratories, this acquisition allows continued
innovation while maintaining rapid deployment of our Modern Water pathogen
detection and identification solutions across Europe, the US, India and China.

 

In the year ended 31 December 2020, the most recent year for which accounts
have been filed, Glanaco Limited posted profits before tax of £214,731 on
turnover of £1.101 million. At 31 December 2020 it had net assets of
£339,978. Its unaudited accounts for the year ended 31 December 2021 show
profits before tax of £218,315 on turnover of £1.362 million, and net assets
at the year end of £524,255.

 

 

2)  Expansion of Skin Trust Club in the US

 

The funding also underwrites the growth plans within the life science
division, comprising both Labskin and Skin Trust Club. The Group will
immediately increase the genome sequencing footprint at its North American
Headquarters in New Castle, Delaware. This includes upgrading the existing
laboratories, adding new equipment, and recruitment of staff at technician,
informatician, scientist and customer services levels.

 

The facility in New Castle, Delaware will facilitate Skin Trust Club roll-out
across cities on the East coast of North America. This expansion plan is
designed to meet expected demand for 2022, based on the proven track record in
the UK, Ireland, following the well-received soft launches in the US late last
year.

 

Skin Trust Club is a consumer market skin testing service, making personalised
skincare a reality. From laboratory test results of the Club member's skin
microbiome - for the first time - gives a comprehensive scientific based, user
friendly, understanding of skin type with recommendations of products and
ingredients, designed to nourish and balance the skin microbiome. 58% of club
members have indicated a desire to manage known skin conditions of the outer
body from scalp to feet and this funding allows the Labskin teamwork towards
medical device accreditation as a medical device test platform for skin
disease diagnosis.

 

Loan Facility

 

The Company has also entered into an agreement whereby it has secured a £25
million 3 year loan facility ("Facility") with Riverfort Global Opportunities
PCC Limited and YA II PN, Ltd (together "the Lenders")

 

Term:

The Commitment Period under the Facility is 3 years from 16 March 2022.  Each
advance ("Advance") must be repaid in full by the first anniversary of each
drawdown ("Maturity Date").

 

Interest:

Interest applies on the outstanding amounts drawn down at a rate of 1.0% per
month.

 

Fees:

An implementation fee of 5% of each Advance in cash is immediately deductible
from the principal amount on transfer of funds.

 

Conversion:

The Lenders may elect, at their discretion, to issue a conversion notice
("Conversion Notice") to convert any unpaid balance into ordinary shares of
0.1p ("Ordinary Shares") in the Company at a subscription price ("Fixed
Premium Placing Price") for all Advances (excluding the Initial Advance)
representing a 40 per cent premium to the average daily volume weighted
average price ("VWAP") for the previous 5 days' trading prior to the drawdown
of the relevant amount ("Reference Price") and for the Initial Advance at a
subscription price (Fixed Premium Placing Price") representing a 40.8 per cent
premium to the VWAP.

 

The VWAP for the previous five trading days ending on 15 March 2022 is
14.2025p making the Fixed Premium Placing Price 20.0p.

 

If prior to the Maturity Date the Company issues and allots new Ordinary
Shares ("New Share Issuance") at a price per share below the Reference Price,
then the Fixed Premium Placing Price shall be amended to 100% of the price per
share in respect of the relevant New Share Issuance.

 

The Company may elect not to repay the Advances that fall due (see below) and,
in such circumstance,  the Lenders will have the option to convert the
Advance's principle and interest and any relevant outstanding fees into the
Company's Ordinary Shares at a price equal to the lower of (a) 80 per cent. of
the average of the two lowest VWAPs in respect of Ordinary Shares during the
10 business days immediately preceding the date of the Conversion Notice and
(b) Fixed Premium Placing Price up until the Maturity Date.

 

Warrants:

The Lenders will receive Warrants of 40 per cent. of the value of each
Advance, with the number of Warrants to be issued is being calculated by
dividing the Advance by the Reference Price. For the Initial Advance
11,265,622 Warrants will be issued with an exercise price of 20.0p (being the
same as the Fixed Premium Placing Price).

 

Conversion Authorities:

At the date of the drawdown of Initial Advance:

a)   (non- pre-emption share) authorities in respect of 25,170,180 Ordinary
Shares will be reserved as available to the Lenders solely in respect of
conversion rights for the Initial Advance; and

 

b)   No authorities required in respect of warrants for the Initial Advance
("Warrants").

 

The Company will convene a general meeting ("GM") before 31 July 2022, at
which a resolution will be put to shareholders to grant the requisite
authorities to issue the Warrants in respect of the Initial Advance and as are
required to satisfy the Lenders conversion rights in respect of the Initial
Advance multiplied by a factor of 1.5.

 

 

Further Advances under the Agreement:

For future Advances under the Agreement the Reference Price will be the
average of the VWAP for the previous five trading days preceding the
applicable Drawdown Date, with the Fixed Premium Placing Price being at a 40
per cent. premium to such Reference Price with regard to conversion rights and
exercise price of applicable Warrants.

 

Security:

Secured by a composite guarantee.

 

Repayment:

No Advance may be prepaid.  The Initial Advance is repaid by the payment of
£500,000 on the last business day of months 7,8,9,10,11 and the balance of
£1,500,000 on the Maturity Date.

 

Other terms:

The Agreement includes general undertakings, warranties and indemnities from
the Company in favour of the Lenders.  Standard events of default provisions
apply, including failure to repay, failure to allot shares, failure to allot
Warrants, ceasing trading on AIM and insolvency.

 

Admission and Total Voting Rights

The New Ordinary Shares were allotted on 17 March 2022. They will be issued
credited as fully paid and will rank pari passu with the existing Ordinary
Shares, including the right to receive all dividends and other distributions
declared, made or paid in respect of Ordinary Shares after Admission.

Application will be made to the London Stock Exchange for the New Ordinary
Shares to be admitted to trading on AIM.  It is expected that the New
Ordinary Shares will be admitted to trading on AIM at 8.00 a.m. on or around
22 March 2022.

Following Admission, the Company's total issued share capital will be
219,706,378. As the Company does not hold any shares in Treasury, this figure
may be used by shareholders in the Company as the denominator for the
calculations by which they will determine if they are required to notify their
interest in, or a change to their interest in, the share capital of the
Company following Admission.

 

 

For further information please contact:

 

 DeepVerge plc                                   Gerard Brandon, CEO         +44 (0) 7340 055 648

 SPARK Advisory Partners Limited                 Neil Baldwin/Andrew Emmott  +44 (0) 113 370 8974

 (Nominated Adviser)

 Turner Pope Investments (TPI) Limited (Broker)  Andy Thacker/James Pope     +44 (0) 20 3657 0050

 

Market Abuse Regulation (MAR) Disclosure

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER
THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF
ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

About DeepVerge plc (www.deepverge.com)

DeepVerge 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 detecting and identifying in real-time,
dangerous pathogens in wastewater treatment plants, drinking water, rivers,
lakes and reservoirs.

 

Skin Trust Club

Skin Trust Club incorporates an 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.

 

Labskin (Life Science Division)

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. Labskin
has been pioneering the development of a laboratory grown human skin platform
for 15 years and is the only commercially available lab-grown full thickness
human skin model that naturally mimic the skins' microbiome. 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
skin microbiome data bank grows, 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. The Labskin test platform and protocols help clients maintain
an optimum real-world environment, when testing their new ingredients and
existing products, that shows the positive or negative impact on skin's
natural microflora.

 

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