REG - Deepverge PLC - Related Party Transaction

DeepvergeAnnouncement

26/11/2021 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211126:nRSZ6612Ta&default-theme=true

RNS Number : 6612T  Deepverge PLC  26 November 2021

 

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

 

26 November 2021

 

DeepVerge plc  ("DeepVerge" or "Company")

 

Related Party Transaction

DeepVerge announces that it is proposing to settle for cash, obligations to
certain Directors relating to their salaries which are currently contracted to
be settled in shares in the Company. The Directors concerned have agreed, in
the best interests of the Company and shareholders, to forego significant
potential gains on these shares in return for a cash sum, which is calculated
based on a 25% uplift on the original value of the salary obligations. This
situation has arisen following a significant rise in the Company's share price
since these arrangements were made in 2018.

 

Ross Andrews, Chairman of DeepVerge, said:

"DeepVerge has been through transformational change since the appointment of
Gerry and Camillus in 2018.  Under their leadership, the Company has been
streamlined to focus on developing a successful revenue-generating
environmental and healthcare business, with revenues increasing year-on-year
by more than 300%.

 

On behalf of the Board, I would like to recognise the hard work of Gerry and
Camillus and their commitment to the business whilst agreeing to receive
shares in lieu of a salary in 2018 and 2019, at a time when the Company was
cash constrained,  as the Company was turned around and has grown.
Furthermore, as a demonstration of their commitment, they have offered to
receive a cash payment at a significant discount to settle the shares that
they are owed.  The Company is in a stable position, both financially and
operationally, and under the continued guidance of its executive team, the
Board believes that DeepVerge has a strong future ahead."

 

Background

On 16 July 2018, when the intention to appoint Gerard Brandon and Camillus
Glover to the Company's board as Chief Executive Officer and Chief Operations
Officer respectively was notified by the Company, the notification included
details of remuneration arrangements for Mr Brandon and Mr Glover such that
for the first year of their appointment, and in order to preserve the
Company's cash balances, their  salaries were to be settled by the issue of
ordinary shares in the Company ("Ordinary Shares"). The number of new Ordinary
Shares to be issued was to be determined on a quarterly basis and issued at
the volume weighted average mid-market closing price ("VWAP") of Ordinary
Shares for the previous 90 days. Mr Brandon and Mr Glover elected to receive
shares in lieu of salary for the period from the date of their appointment as
directors, 8 August 2018 until 30 June 2019, being amounts of £102,500 and
£92,250 respectively.

In aggregate, the number of shares due to be issued to Mr Brandon and Mr
Glover under the above arrangements are as follows:

 Name             Value of salary for which shares were elected to be taken  Number of Ordinary Shares due in settlement of these arrangements†    Average price of shares to be issued (based on relevant 90 day VWAP
                                                                                                                                                   calculations)†
 Gerard Brandon   £102,500                                                   1,255,118                                                             8.17 pence
 Camillus Glover  £92,250                                                    1,129,606                                                             8.17 pence
 Total            £194,750                                                   2,384,724

†adjusted for the 10:1 share consolidation in September 2020.

None of the shares due to Messrs Brandon and Glover have yet been issued.

As the issue of shares in lieu of salary is treated by taxation authorities in
the United Kingdom (for Mr Brandon) and Ireland (for Mr Glover) as
remuneration, income tax and national insurance (or Irish equivalent)
contributions for both employer and employee fall due at the date of payment
of the remuneration, based upon its value at that date.

The Company's mid-market Ordinary Share price at close of business on  25
November 2021 (the date the Company's Independent directors met to consider
this matter) was 27.0 pence, which is a significant premium to the implied
price at which the shares would be issued as set out in the table above.

To issue the shares as above would have the following effects on DeepVerge:

-      Employers' National Insurance (or Irish equivalent) of £40,717
would be payable by the Company;

 

-      DeepVerge would also have to remit income tax and Employees
National Insurance contributions to the taxation authorities (and be
reimbursed by the Directors concerned);

 

-      2,384,724 Shares would be allotted, at an effective blended issue
price of which has the effect of diluting existing shareholders' holdings by
around 1.1%.

It is therefore proposed that instead of settling these amounts by the issue
of shares as contracted (which have a market value of £643,875), the
Directors concerned waive their entitlements to the shares, and instead are
paid the salaries to which these relate in cash via DeepVerge's payroll, at a
premium of 25% - ie a total of £243,438  (compared to the original
entitlement of £194,750) as set out in the table below.

If DeepVerge were to have issued these shares as at 25 November 2021 the
value of the remuneration would be as follows, which is compared to the
proposed settlement.

 Name             No of shares due in settlement of salary  Deemed value of remuneration at 25 November 2021*  Proposed settlement (being a 25% uplift on the original contracted amounts)
 Gerard Brandon   1,255,118                                 £338,882                                           £128,125 in cash
 Camillus Glover  1,129,606                                 £304,994                                           £115,313 in cash
 Total            2,384,724                                 £643,875                                           £243,438 in cash

*this is the gross value of the shares, being the number of shares in the
2(nd) column multiplied by 27.0 pence, being the closing mid-market price of
Ordinary Shares on 25 November 2021.

Issuing the 2,384,724 shares to which the Directors are entitled would result
in a charge to the profit and loss account of £684,592 of which £643,875
would be a non-cash item (notwithstanding DeepVerge would be required to remit
tax and national insurance contributions to the taxation authorities, and be
reimbursed for the tax and employees national insurance contributions by the
Directors concerned) and £40,717 would be a cash item (being the Employers'
national insurance contributions).

It is proposed that, rather than settle these amounts by the issue of shares,
the Directors concerned waive their rights to the shares, which would have a
gross value of £643,875  and instead receive cash of £243,438 (being
£128,125 for Mr Brandon and £115,313 for Mr Glover.)

The "net" cash cost of the proposed settlement amounts in total to £218,115
 more than if the original contracted arrangement prevailed, comprising cash
paid to the Directors less the incremental Employers' national insurance
contributions. The Company concluded a £10 million fundraising in June 2021
and is able to meet the extra cash required to effect this settlement from its
current resources.

Related party transactions

Under the AIM Rules for Companies ("AIM Rules"), directors of the Company,
Gerard Brandon and Camillus Glover are each a related party of the Company,
and the intended amendment to the terms of the settlement of the deferred
remuneration is treated as a related party transaction.

Under the AIM Rules, where a company enters into a related party transaction,
the independent directors of that company are required, after consulting with
the company's nominated adviser, to state whether, in their opinion, the
transaction is fair and reasonable in so far as its shareholders are
concerned.

The Independent Directors, being Ross Andrews, Dr Nigel Burton and Fionan
Murray, have considered the terms of the settlement and note the following:

1)    In June 2021 the Company raised £10 milion in new equity and has the
wherewithal to fund the £258,832 (including employer taxes) cash cost of this
arrangement

2)    The incremental cash cost of paying these salaries now is
significantly less than the tax and national insurance  that would be payable
if the shares were issued

3)    The settlement effectively amounts to DeepVerge buying back 2,384,724
shares at a blended price of 10.85p per share, which is significantly less
than the current share price, and as such saves a dilution to existing
shareholders of around 1.1%.

4)    The Directors concerned are foregoing (gross) gains on the shares to
which they would have been entitled of £449,125.

Having consulted with SPARK, the Company's nominated adviser, the Independent
Directors of the Company believe that the terms of the settlement are fair and
reasonable in so far as the Company's shareholders ("Shareholders") are
concerned.

 

 DeepVerge plc                                        Ross Andrews, Chairman        +44 (0) 1904 40 4036
 SPARK Advisory Partners Limited (Nominated Advisor)  Neil Baldwin / Andrew Emmott  +44 (0) 113 370 8974
 Turner Pope Investments (TPI) Limited (Broker)       Andy Thacker / James Pope     +44 (0) 20 3657 0050

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCPPGMAGUPGGRA