REG - Engage XR Holdings - Final Results
23/05/2023 07:00
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RNS Number : 2488A Engage XR Holdings PLC 23 May 2023
23 May 2023
ENGAGE XR Holdings Plc
("ENGAGE XR", the "Company", or the "Group")
Final Results
ENGAGE XR Holdings Plc (AIM: EXR), a leading metaverse technology company, is
pleased to announce its audited results for the 12 months ended 31 December
2022.
Financial Highlights:
· Total revenue for the Group was up 62% to €3.9 million (2021:
€2.4 million)
· ENGAGE platform revenue grew 86% to €3.3 million (2021: €1.8
million)
· December 2022 was the Company's biggest ever month with €0.6
million in deals closed
· Average contract values increased by 24% to €21k
· Gross margin increased to 82% from 79%
· EBITDA loss was €5.8 million (2021: loss of €2.8 million)
primarily driven by increased headcount. Subsequent cost reduction exercise
has reduced annualised payroll costs by 25%
· The Group's cash position on 31 December 2022 was €2.2 million with
no debt and at 30 April 2023 was €10.3 million
Operational Highlights:
· Ended 2022 with more than 190 enterprise and education clients. This
is now over 200 (as at 30 April 2023)
· More than 70 new customers signed, including Pfizer, MTN, HSBC, KIA,
Pearson, Lenovo, Kuehne & Nagel, Adtalem Global Education and University
of Miami
· Renewing clients included 3M, KPMG, Meta, HTC, BHP and Stanford
University
· Successfully launched the Group's fully featured corporate metaverse
ENGAGE Link in November 2022
· Group partner Victory XR launched 10 metaversities built on ENGAGE.
This has grown with a new round of schools being announced in March 2023. Each
student requires a full ENGAGE license to access the Victory XR content
generating recurring revenue from the Group.
· In September 2022, ENGAGE and Lenovo™ announced a partnership.
ENGAGE will be part of Lenovo's new all in one VRX Headset, expected to be
available from H2 2023
Post period end Highlights:
· The cash balance was significantly strengthened post period end by a
successful €10.5 million (€9.9 million net of expenses) fundraise.
· Ground-breaking concert hosted in ENGAGE in March 2023 by the
renowned international musician, Norman Cook, aka Fatboy Slim
· The Group is gaining traction in the US market. 58% of revenue in Q1
2023 has been derived from North America compared to 30% for FY22, following
deployment of the US sales team in mid-2022
· Q1 2023 reported revenue figures are 40% higher than the same period
in 2022
David Whelan, CEO of ENGAGE XR, said: "2022 was an extremely busy year with
many positives and most metrics going in the right direction despite
turbulence hitting the global tech sector during the second half of the year.
This had a consequential impact on the conversion of our pipeline of
commercial opportunities. During the year, we launched new services on our
platform, added more Fortune 500 companies to our client list, saw revenues
grow throughout the year, and successfully launched ENGAGE Link in November
2022.
"2023 has started encouragingly. We have had some exciting client wins
already, including two of the world's leading banks. How fast and how big our
growth will be remains to be seen. However, the Company has a strong balance
sheet and is now in the best position possible to capitalise on the clear
market opportunity. We are seeing increasing engagement from potential
customers with our technology and platform. Our Lenovo partnership opens up
exciting opportunities, and we are confident that the momentum seen in 2022
will continue into the current financial year and beyond."
Investor Communications
CEO David Whelan and CFO Séamus Larrissey will provide a live presentation
relating to the Group's interim results via the Investor Meet Company platform
on 23 May 2023 at 10:00am (UK).
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9:00am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet ENGAGE
XR Holdings Plc via:
https://www.investormeetcompany.com/engage-xr-holdings-plc/register-investor
(https://www.investormeetcompany.com/engage-xr-holdings-plc/register-investor)
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.
- Ends -
For further information, please contact:
ENGAGE XR Holdings Plc Tel: +353 87 665 6708
David Whelan, CEO info@engagexr.co
Séamus Larrissey, CFO
Sandra Whelan, COO
finnCap Ltd (Nominated Adviser & Joint Broker) Tel: +44 (0) 20 7220 0500
Marc Milmo/ Seamus Fricker (Corporate Finance)
Sunila de Silva (ECM)
Shard Capital Partners LLP (Joint Broker) Tel: +44 (0) 20 7186 9952
Damon Heath / Erik Woolgar
SEC Newgate (Financial Communications) Tel: +44 (0)7540 106 366
Robin Tozer / Naz Zandi engage@secnewgate.co.uk
About ENGAGE XR
ENGAGE XR Holdings plc (AIM: EXR) is metaverse technology company focused on
becoming a leading global provider of virtual communications solutions through
its new fully featured corporate metaverse, ENGAGE Link. A demonstration of
ENGAGE Link is here (https://www.youtube.com/watch?v=ITtz7ErWhMs&t=2s)
The Company also has a proprietary software platform, ENGAGE. ENGAGE provides
users with a platform for creating, sharing, and delivering VR content for
education, training, and online events through its three solutions: Virtual
Campus, Virtual Office, and Virtual Events.
For further information, please visit: www.engagexrholdings.com (LinkedIn:
@Engage XR Holdings plc Twitter: @engage_xr)
CHAIRMAN'S STATEMENT
I am pleased to present the Annual Report and Financial Statements of ENGAGE
XR Holdings PLC ("ENGAGE XR", "the Group" or "the Company") for the year ended
31 December 2022. Our aim is to become a leading global provider of virtual
communications solutions through our proprietary software platform, ENGAGE.
However, it has been a challenging year with an uncertain macro-economic
backdrop which manifested itself most acutely in the "tech crash" in Autumn
2022.
Revenue in the year increased by 62% to €3.9 million. Gross profit increased
by 67% as gross profit benefited from an improved gross profit margin of 82%
(2021: 79%). A longer sales decision-making cycle in our customer base due
to the economic uncertainty in the second half of 2022 meant we were
disappointed not to break through the €4 million revenue barrier.
Earlier in the financial year, the Company made a decision to significantly
increase its sales function and development capability as it sought to
accelerate the market penetration of ENGAGE and expedite the development of
its fully featured corporate metaverse, ENGAGE Link. Staff and contractor
costs rose to €7.0 million, up from €3.7 million in 2021. At the time,
this was the correct decision, but the tech crash meant slower than expected
corporate sales. This led to a downgrading of our guidance for the year and a
cost reduction exercise which reduced annualised payroll costs by 25%.
Additionally, a placing was successfully competed after the year end in
February 2023 to bolster the Group's balance sheet and to help us deliver our
ambitious growth plans.
The Board continue to see meaningful opportunities to exploit metaverse use in
companies in the corporate and education sectors. The Board believes that the
specific areas the Company is targeting, such as remote education, remote
events, and the way in which organisations interact with staff, suppliers and
customers will be transformed by the Metaverse. As a result, the Board remains
very focused on selling to and servicing universities, other education
establishments and global enterprise customers. We now have over 200
Enterprise and Education customers on the ENGAGE platform. Some of the
highlights in the year include the launch of ten Metaversites in the US, and
our collaboration with Lenovo, which has developed into a commercial
relationship.
Post period end, we successfully completed a €10.5 million equity raise
(before expenses) in February 2023 and we have seen a strong start to 2023. We
were also delighted with the response to the ground-breaking concert hosted in
ENGAGE in March 2023 by the renowned international musician, Norman Cook, aka
Fatboy Slim.
The management team and the Board are looking forward to the future with
optimism. I would like to thank everyone at ENGAGE XR in delivering great
progress in what has been a challenging environment. Furthermore, I want to
thank our shareholders for their continued support.
Richard Cooper
Non-Executive Chairman
22 May 2023
CHIEF EXECUTIVE'S REVIEW
Overview
2022 was an extremely busy year with many positives and most metrics going in
the right direction despite turbulence hitting the global tech sector during
the second half of the year. This had a consequential impact on the conversion
of our pipeline of commercial opportunities. During the year we launched new
services on our platform, added more Fortune 500 companies to our client list,
saw revenues grow throughout the year, and successfully launched ENGAGE Link
in November 2022.
The market opportunity
The Board believes that the opportunities created by the metaverse are
significant and that corporates are seeing how elements of the metaverse can
be used to tremendous effect. Not just in terms of how a company interacts
with its customers but also with suppliers and staff. The growth of
metaversities and the use of VR in education is further evidence of the
opportunities created by the metaverse. All these opportunities fit
perfectly into ENGAGE's offering.
From the outset, the ENGAGE platform has been positioned as the metaverse
platform focused on servicing the needs of enterprise customers and
universities. We are targeting organisations looking for immersive corporate
communications, remote collaboration, training and development, education
and remote events. Our technology provides the platform which can help them to
deliver their own metaverse strategies. So far, we have developed over 900
metaworlds for our clients.
2022 saw the continued evolution in the growth of the business. Our partner
Victory XR launched 10 metaversities built on our software This has grown with
a new round of schools being announced in March 2023. All students within
the Victory XR ecosystem require an ENGAGE license which generates recurring
revenue for the Group.
The main development in the period was the successful launch of ENGAGE Link in
November 2022. ENGAGE Link is an evolution of our successful immersive
communications platform. It was specifically developed as a metaverse
platform for corporations, professionals, education organisations, and event
organisers. ENGAGE Link allows the Group's wide-ranging customer base to use
the metaverse to create their own virtual worlds to provide services directly
to clients and engage with employees and suppliers.
Client Growth
Throughout 2022 we dealt with many new enterprise and educational clients.
More than 70 new customers signed during the year, including Pfizer, MTN,
HSBC, KIA, Pearson, Lenovo, Kuehne & Nagel, Adtalem Global Education and
University of Miami.
Renewing clients included 3M, KPMG, Meta, HTC, BHP and Stanford University.
The Company ended 2022 with more than 190 enterprise and education clients,
which is now over 200. Many of our renewing clients now spend more with us and
are purchasing additional services and licenses. There was an average
increase of 24% to our average contract value in the year which is extremely
positive. This is also a strong indication that ENGAGE is offering something
unique in the marketplace and the strength of the names on our client roster
demonstrates this.
We have also started to gain increased traction in the US market from the US
sales team we deployed in mid-2022. 58% of revenue in Q1 2023 has been derived
from North America compared to 30% for FY22, a strong indication that the team
is performing well.
Results
To give more colour on how our year went financially, we achieved some
important milestones which included:
· ENGAGE platform revenue grew 86% in 2022 from €1.8 to €3.3m
· Overall group revenue grew 62% to €3.9m outlining our total focus
on platform growth
· December 2022 was our biggest ever month with €0.6m in deals closed
· Average contract values in the year increased by 24% to €21k
· Gross margin increased to 82% from 79%
2022 saw strong revenue growth during the year. There was an undeniably upward
trend of our average monthly income through the year with that trend
continuing so far during the first half of 2023. Q1 2023 reported figures are
already 40% higher than the same period in 2022.
Growth in Services
As noted above, during 2022 we launched ENGAGE Link where clients can, for the
first time, open a public space and interact directly with each other and
directly with customers, suppliers, and employees. These spaces are akin to
physical locations just like a business might have in a city.
One example of how ENGAGE Link has been successfully used is by major car
manufacturer, Kia. Kia opened a virtual showroom for visitors to find out more
about their products and services.
We expect many of our new and existing clients will progress onto ENGAGE Link
for marketing, networking events, professional services, and recruitment
drives. Enquiries as to how ENGAGE Link can be used are being brought to us
each week.
Lenovo Partnership
In September 2022 we announced that ENGAGE and Lenovo™, one of the world's
largest computer manufacturing and smartphone companies, had entered into a
partnership. The partnership will see ENGAGE available on Lenovo's new all in
one VRX Headset. This is an enterprise-focused VR device.
The new headsets are expected to be available from H2 2023. We have been
training and working with Lenovo's sales team as they look to bundle ENGAGE
software licenses with their new headset. It means ENGAGE software will be
sold by hundreds of salespeople globally to Lenovo's client base, not just a
handful of ENGAGE employees.
The Board are confident that this new channel partner will enable us to grow
our international reach and customer base. This should see further revenue
growth during the second half of 2023 after the headsets arrive on the market.
Lenovo have a large global market share in enterprise and education which is
ENGAGE's target market and should be a fruitful partnership for both parties.
Outlook
Despite 2022 being a year of growth, we believe our market capitalisation does
not reflect the actual progress of the company.
There is growth in all our metrics, and we have reduced our cost base by
approximately 25% in Q1 2023 (compared to Q4 2022). Our product offering has
grown along with our client base. The partnerships we have put in place during
2022 should begin to bear fruit in the coming months.
Although times remain tough for many in the tech industry, we took decisive
actions early. These actions have provided us with a solid foundation and the
Company is poised for strong growth.
2023 has started encouragingly. We have had some exciting client wins already,
including two of the world's leading banks. How fast and how big our growth
will be remains to be seen. However, the Company has a strong balance sheet
and is now in the best position possible to capitalise on the clear market
opportunity. We are seeing increasing engagement from potential customers with
our technology and platform. Our Lenovo partnership opens up exciting
opportunities, and we are confident that the momentum seen in 2022 will
continue into the current financial year and beyond.
David Whelan
Chief Executive Officer
22 May 2023
CHIEF FINANCIAL OFFICER'S REVIEW
I am pleased to report that revenue for the year was up 62% on the prior year
from €2.4 million to €3.9 million, driven by a significant increase in
demand for the ENGAGE platform. ENGAGE revenue was up 86% on the prior year
from €1.8 million to €3.3 million.
EBITDA loss was €5.8 million compared to a loss of €2.8 million in the
prior year and loss before tax was €6.0 million compared to a loss in the
prior year of €3.1 million. This increased EBITDA loss is primarily driven
by increased headcount in the year.
Operating cashflows were a net outflow of €5.5 million for the period. The
current run-rate of staff costs and other ongoing costs is approximately
€0.4m per month.
At the balance sheet date, trade and other receivables were €1.4m, ahead of
trade and other payables at €1.2m. Trade receivables represented an average
of 52 debtor days (2021: 58 days).
The Group's cash position on 31 December 2022 was €2.2 million with no debt.
The cash balance was significantly strengthened post period end by a
successful €10.5 million (€9.9 million net of expenses) fundraise. As at
30 April 2023, the Company's cash position was €10.3 million.
Séamus Larrissey
Chief Financial Officer
22 May 2023
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
for the year ended 31 December 2022
Note 2022 2021
Continuing Operations € €
Revenue 3 3,868,574 2,386,313
Cost of Sales 5 (709,018) (492,396)
Gross Profit 3,159,556 1,893,917
Administrative Expenses 5 (9,133,860) (5,007,421)
Operating Loss (5,974,304) (3,113,504)
Finance Costs 8 (30,581) (16,767)
Loss before Income Tax (6,004,885) (3,130,271)
Income Tax credit 9 - -
Loss for the financial year (6,004,885) (3,130,271)
Other comprehensive income - -
Total comprehensive loss for the year attributable to owners of the parent (6,004,885) (3,130,271)
Earnings per Share (EPS) attributable to owners of the parent
Basic earnings per share 10 (0.021) (0.011)
Diluted earnings per share 10 (0.019) (0.010)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2022
Note 2022 2021
€ €
Non-Current Assets
Property, Plant & Equipment 11 96,085 102,075
Intangible Assets 12 39,492 426,454
135,577 528,529
Current Assets
Trade and other receivables 14 1,365,982 645,890
Cash and short-term deposits 15 2,209,169 7,790,060
3,575,151 8,435,950
Total Assets 3,710,728 8,964,479
Equity and Liabilities
Equity Attributable to Shareholders
Issued share capital 16 290,451 290,451
Share premium 16 33,503,300 33,503,300
Other reserves 17 (11,752,741) (11,775,474)
Retained earnings 18 (19,560,652) (13,555,767)
Total Equity 2,480,358 8,462,510
Non-Current Liabilities
Lease liabilities 20 - 7,883
Current Liabilities
Trade and other payables 21 1,222,488 481,576
Lease liabilities 20 7,882 12,510
1,230,370 494,086
Total Liabilities 1,230,370 501,969
Total Equity and Liabilities 3,710,728 8,964,479
COMPANY STATEMENT OF FINANCIAL POSITION
at 31 December 2022
Note 2022 2021
€ €
Non-Current Assets
Investment in subsidiaries 13 18,765,102 30,477,062
18,765,102 30,477,062
Current Assets
Trade and other receivables 14 3,492 1,035
Cash and short-term deposits 15 486,170 1,476,744
489,662 1,477,779
Total Assets 19,254,764 31,954,841
Equity and Liabilities
Equity Attributable to Shareholders
Issued share capital 16 290,451 290,451
Share premium 16 33,503,300 33,503,300
Other reserves 17 (691,272) (694,055)
Retained earnings 18 (14,001,259) (1,223,374)
Total Equity 19,101,220 31,876,322
Current Liabilities
Trade and other payables 20 153,544 78,519
Total Liabilities 153,544 78,519
Total Equity and Liabilities 19,254,764 31,954,841
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
Share Share Other Reserves Retained Total
Capital Premium Earnings
€ € € € €
Balance at 1 January 2021 241,751 24,547,516 (11,337,058) (10,429,815) 3,022,394
Total comprehensive income
Other comprehensive income - - - - -
Loss for the year - - - (3,130,271) (3,130,271)
Total comprehensive income 241,751 24,547,516 (11,337,058) (13,560,086) (107,877)
Transactions with owners
recognised directly in equity
New shares issued 48,700 8,955,784 - - 9,004,484
Share issue costs - - (538,060) - (538,060)
Share option expense - - 99,644 4,319 103,963
Balance at 31 December 2021 290,451 33,503,300 (11,775,474) (13,555,767) 8,462,510
Share Share Other Reserves Retained Total
Capital Premium Earnings
€ € € € €
Balance at 1 January 2022 290,451 33,503,300 (11,775,474) (13,555,767) 8,462,510
Total comprehensive income
Other comprehensive income - - - - -
Loss for the year - - - (6,004,885) (6,004,885)
Total comprehensive income 290,451 33,503,300 (11,775,474) (19,560,652) 2,457,625
Transactions with owners
recognised directly in equity
Share option expense - - 22,733 - 22,733
Balance at 31 December 2022 290,451 33,503,300 (11,752,741) (19,560,652) 2,480,358
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
Share Share Other Reserves Retained Total
Capital Premium Earnings
€ € € € €
Balance at 1 January 2021 241,751 24,547,516 (247,188) (791,234) 23,750,845
Total comprehensive income
Other comprehensive income - - - - -
Loss for the year - - - (432,140) (432,140)
Total comprehensive income 241,751 24,547,516 (247,188) (1,223,374) 23,318,705
Transactions with owners
recognised directly in equity
New shares issued 48,700 8,955,784 - - 9,004,484
Share issue costs - - (538,060) - (538,060)
Share option expense - - 91,193 - 91,193
Balance at 31 December 2021 290,451 33,503,300 (694,055) (1,223,374) 31,876,322
Share Share Other Reserves Retained Total
Capital Premium Earnings
€ € € € €
Balance at 1 January 2022 290,451 33,503,300 (694,055) (1,223,374) 31,876,322
Total comprehensive income
Other comprehensive income - - - - - -
Loss for the year - - - (12,777,885) (12,777,885)
Total comprehensive income 290,451 33,503,300 (694,055) (14,001,259) 19,098,437
Transactions with owners recognised directly in equity
Share option expense - - 2,783 - 2,783
Balance at 31 December 2022 290,451 33,503,300 (691,272) (14,001,259) 19,101,220
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
Note 2022 2021
Continuing Operations € €
Loss before income tax (6,004,885) (3,130,271)
Adjustments to reconcile loss before tax to net cash flows:
Depreciation of fixed assets 5 80,448 97,458
Amortisation of intangible assets 5 386,962 537,672
Finance Costs 8 30,581 16,767
Share Option Expense 22,733 103,963
Movement in trade & other receivables (720,092) (287,613)
Movement in trade & other payables 740,912 124,155
(5,463,341) (2,537,869)
Bank interest & other charges paid (30,581) (16,767)
Net Cash used in Operating Activities (5,493,922) (2,554,636)
Cash Flows from Investing Activities
Purchases of property, plant & equipment 11 (74,458) (115,699)
Net cash used in investing activities (74,458) (115,699)
Cash Flows from Financing Activities
Proceeds from issuance of ordinary shares - 8,466,424
Payment of lease liabilities (12,511) (38,746)
Net cash generated from financing activities (12,511) 8,427,678
Net (decrease) / increase in cash and cash equivalents (5,580,891) 5,757,343
Cash and cash equivalents at beginning of year 15 7,790,060 2,032,717
Cash and cash equivalents at end of year 15 2,209,169 7,790,060
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
Note 2022 2021
Continuing Operations € €
Loss before income tax (12,777,885) (432,140)
Adjustments to reconcile loss before tax to net cash flows:
Finance Costs 559 629
Share Option Expense 2,783 91,193
Impairment of Investment in Subsidiaries 11,602,935 -
Movement in trade & other receivables (2,457) 8,203,827
Movement in trade & other payables 75,025 17,273
(1,099,040) 7,880,782
Bank interest & other charges paid (559) (629)
Net cash used in Operating Activities (1,099,599) 7,880,153
Cash Flows from Investing Activities
Capital contribution 12 109,025 (15,448,253)
Net cash generated / (used) in investing activities 109,025 (15,448,253)
Cash Flows from Financing Activities
Proceeds from issuance of ordinary shares - 8,466,424
Net cash generated from financing activities - 8,466,424
Net (decrease) / increase in cash and cash equivalents (990,574) 898,324
Cash and cash equivalents at beginning of year 15 1,476,744 578,420
Cash and cash equivalents at end of year 15 486,170 1,476,744
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
ENGAGE XR Holdings plc ("the Company") is publicly traded on the Alternative
Investment Market ("AIM") of the London Stock Exchange and on the Euronext
Growth Market ("Euronext Growth"), a market regulated by Euronext Dublin. The
Company is incorporated and domiciled in the Republic of Ireland. The
registered office is Unit 9, Cleaboy Business Park, Old Kilmeaden Road,
Waterford and the registered number is 613330. The company was previously
known as VR Education Holdings plc.
The Company is the parent company of ENGAGE XR Limited, previously known as
Immersive VR Education Limited. ENGAGE XR Limited is incorporated and
domiciled in the Republic of Ireland with the same registered office as the
Company. On 12 March 2018 the Company acquired ENGAGE XR Limited and
contemporaneously listed on London's AIM market and Dublin's Euronext Growth
market.
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. The consolidated
Financial Statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union issued
by the International Accounting Standards Board ("IASB") including related
interpretations issued by the International Financial Reporting
Interpretations Committee ("IFRIC").
Basis of Consolidation
The consolidated financial statements incorporate those of ENGAGE XR Holdings
plc and its subsidiary ENGAGE XR Limited.
All financial statements are made up to 31 December 2022. 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. Control is achieved when the group is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
The Group re-assess whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the elements
of control.
Business Combination
Acquisition of ENGAGE XR Limited
The Company entered into an agreement to acquire the entire issued share
capital of ENGAGE XR Limited on 12 March 2018. The acquisition was effected by
way of issue of shares. Due to the relative size of the companies, ENGAGE XR'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 ENGAGE XR 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 to reflect the combination using merger accounting
principles as the transaction falls outside the scope of IFRS 3 and as such
has been treated as a Group reconstruction. No fair value adjustments have
been made as a result of the combination.
Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the accompanying disclosures,
and the disclosure of contingent liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected in future
periods.
Judgements
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 whether those projects would generate sufficient future economic
benefits were expensed. The judgements reflect the early stage of the VR/AR
market and will change over time.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the financial statements were
prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising that are
beyond the control of the Group. Such changes are reflected in the assumptions
when they occur.
Capitalised development costs impairment review
The Group's impairment review undertaken to assess the carrying value of
capitalised development costs includes certain assumptions on future revenues
and costs associated with the underlying technology. Those cashflows are
discounted at an appropriate discount rate. These estimates and assumptions
are reviewed on an on-going basis. Changes in accounting estimates may be
necessary if there are changes in the circumstances on which the estimate was
based or as a result of new information or more experience. Such changes are
recognised in the period in which the estimate is revised.
Going Concern
The financial statements are presented on a going concern basis. In forming
this opinion, the Directors have considered all the information available to
them. This includes management prepared forecasts, due consideration of the
ability to raise funds on the open market in respect of the listing on the
Alternative Investment Market on the London Stock Exchange and the timing as
to when such funds will be received.
On 5 March 2023, the Company issued 234,375,000 ordinary shares at a £0.04
(€0.045) as a result of an oversubscribed placing raising €10,500,000
before costs are deducted. The proceeds will be primarily used for working
capital and general corporate purposes and also on sales and marketing to
convert pipeline and capitalise on market opportunity to be deployed over the
next 12-18 months.
Based on their consideration of these matters and the successful fundraise
post year end 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. Thus, the Directors continue to adopt the going
concern basis of accounting in preparing the financial statements.
Foreign Currency Translation
(a) Functional and Presentation Currency
Items included in the Financial Statements of the Group are measured using the
currency of the primary economic environment in which the entity operates
("functional currency").
The Financial Statements are presented in euro (€), which is the Group's
functional and presentation currency.
(b) Transactions and Balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement, except when
deferred in other comprehensive income as qualifying cash flow hedges and
qualifying net investment hedges. Foreign exchange gains and losses that
relate to borrowings and cash and cash equivalents are presented in the income
statement within 'finance income or costs'. All other foreign exchange gains
and losses are presented in the income statement within Administrative
Expenses.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial
position based on current/non-current classification. An asset is current when
it is:
· Expected to be realised or intended to be sold or consumed in the
normal operating cycle
· Held primarily for the purpose of trading
· Expected to be realised within twelve months after the reporting
period; or
· Cash or cash equivalent unless restricted from being exchanged or
used to settle a liability for at least twelve months after the reporting
period
All other assets are classified as non-current.
A liability is current when:
· It is expected to be settled in the normal operating cycle
· It is held primarily for the purpose of trading
· It is due to be settled within twelve months after the reporting
period Or
· There is no unconditional right to defer the settlement of the
liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Segment Reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of
Directors that makes strategic decisions.
Fair value measurement
The Group measures financial instruments such as derivatives at fair value at
each balance sheet date. The Company has applied IFRS 9 for all periods
presented.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place
either:
· In the principal market for the asset or liability; or
· In the absence of a principal market, in the most advantageous market
for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data are available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs.
Revenue Recognition
Revenue is measured at the fair value of the consideration received or
receivable, and represents amounts receivable for goods and services supplied,
stated net of discounts, returns and Value-Added Taxes (VAT).
Under IFRS 15, Revenue from Contracts with Customers, five key points to
recognise revenue have been assessed:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the
contract; and
Step 5: Recognise revenue when (or as) the entity satisfies a performance
obligation.
The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the
entity, and specific criteria have been met for each of the Group's
activities, as described below. The Group bases its estimates on historical
results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Where the Group makes sales relating to a future financial period, these are
deferred and recognised under 'deferred revenue' on the Statement of Financial
Position. The Group currently has two revenue streams:
ENGAGE Revenue
The Group is primarily focused on developing a proprietary VR platform which
is sold through licences and professional services revenue. This is considered
"ENGAGE Revenue" for reporting purposes. Revenue is recognised when the
license is delivered to the customer, or when all performance obligations have
been achieved.
Showcase Experiences
The Group also develops 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.
Other Revenue
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
Right-of-use assets are depreciated over the shorter of the asset's useful
life and the lease term on a straight line basis.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period. Gains and losses on
disposals are determined by comparing the proceeds with the carrying amount,
and are recognised in the income statement.
Intangible Assets
Research costs are expensed as they are incurred. Development costs that are
directly attributable to the design and testing of identifiable and unique
commercial software controlled by the Group are recognised as intangible
assets when the following criteria are met:
· it is technically feasible to complete the software product so that
it will be available for use and sale;
· management intends to complete the software product and use or sell
it;
· there is an ability to use or sell the software product;
· it can be demonstrated how the software product will generate future
economic benefits;
· adequate technical, financial and other resources to complete the
development and use or sell the software product are available; and
· the expenditure attributable to the software product during its
development can be reliably measured.
Directly attributable costs that are capitalised as part of the software
product include the software development employee costs and subcontracted
development costs.
Other development expenditure that does not meet these criteria is recognised
as an expense as incurred. Development costs previously recognised as an
expense are not recognised as an asset in a subsequent period.
Computer software development costs recognised as assets are amortised over
their estimated useful lives, which do not exceed 3 years and commences after
the development is complete and the asset is available for use. Intangible
assets in relation to Showcase Experiences are amortised over their estimated
useful lives based on the pattern of consumption of the underlying economic
benefits. The ENGAGE platform is amortised on a straight line basis over 3
years. 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 holds the trade receivables with the objective of
collecting the contractual cash flows.
The Group provides for known bad debts and other accounts over a certain age
in line with Group policy. The realisation of the asset may differ from the
provision estimated by management.
Cash and Cash Equivalents
In the Statement of Cash Flows, cash and cash equivalents comprise cash in
hand and short-term deposits. Bank overdrafts are shown within borrowings in
current liabilities on the Statement of Financial Position.
Capital Contributions
A capital contribution represents irrevocable, non-repayable amounts
contributed from connected parties. Capital contributions are accounted for as
a contribution when they are approved, through the profit and loss account
reserve.
Share Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds. Where the
issuance of the new shares or options occurs in a subsequent period from when
the incremental costs are incurred these costs are prepaid until the issuance
takes place.
Share Based Payments
The Group has an equity settled employee incentive plan. The cost of equity
settled transactions with employees is measured by reference to the fair value
at the date at which they are granted and is recognised as an expense over the
vesting period, which ends on the date on which the relevant employees become
fully entitled to the award. Fair value is determined using an appropriate
pricing model. In valuing equity-settled transactions, no account is taken of
any vesting conditions, other than conditions linked to the price of the
shares of the Group. No expense is recognised for awards that do not
ultimately vest.
At each reporting date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and
management's best estimate of the achievement or otherwise of non-market
conditions number of equity instruments that will ultimately vest. The
movement in cumulative expense since the previous reporting date is recognised
in the profit and loss within administration expenses, with a corresponding
entry in the balance sheet in share options reserve.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on
the difference between the fair value of the original award and the fair value
of the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative. Where an
equity-settled award is cancelled, it is treated as if it had vested on the
date of cancellation, and any cost not yet recognised in the Statement of
Comprehensive Income for the award is expensed immediately.
Trade Payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not,
they are presented as non-current liabilities. Trade payables are recognised
initially at fair value, and subsequently measured at amortised cost using the
effective interest method.
Leases
The Group leases office premises and motor vehicles under rental contracts for
fixed periods but may contain extension options. Lease terms are negotiated on
an individual basis and contain different terms and conditions. The lease
agreements entered into by the Group do not impose any covenants other than
the security interests in the leased assets that are held by the lessor.
From 1 January 2019 leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is available for
use by the Group. Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
· Fixed payments less any lease incentives receivable;
· Variable lease payments that are based on an index or a rate;
· The exercise price of a purchase option if the Group is reasonably
certain to exercise that option; and
· Payments of penalties for terminating the lease.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined the lessee's incremental
borrowing rate is used. Lease payments are allocated between principal and
finance cost. The finance charge is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
Payments associated with short-term leases (12 months or less) and leases of
low-value assets are recognised on a straight-line basis as an expense in
profit or loss.
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.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
Financial Assets
Initial Recognition and Measurement
In accordance with IFRS9, 'Financial Instruments' the Group has classified its
financial assets as 'Financial assets at amortised cost'. The Group determines
the classification of its financial assets at initial recognition. All
financial assets are recognised initially at fair value plus, in the case of
assets not at fair value through the Statement of Comprehensive Income,
transaction costs that are attributable to the acquisition of the financial
asset and expected credit losses based on historical collection experience of
similar assets.
Subsequent Measurement
The subsequent measurement of financial assets depends on their classification
as described below:
Financial Assets Carried at Amortised Cost
This category applies to trade and other receivables due from customers in the
normal course of business. All amounts which are not interest bearing are
stated at their recoverable amount, being invoice value less provision for any
expected credit losses. These assets are held at amortised cost. The group
classifies its financial assets as at amortised cost only if both of the
following criteria are met:
I. the asset is held within a business model with the objective of
collecting the contractual cash flows; and
II. the contractual terms give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal outstanding.
Financial assets at amortised cost comprise current trade and other
receivables due from customers in the normal course of business and cash and
cash equivalents. The Group does not hold any material financial assets at
fair value through other comprehensive income or at fair value through the
Statement of Comprehensive Income. The Group does not hold any derivatives and
does not undertake any hedging activities.
Trade receivables are initially recognised at their transaction price. The
group does not expect to have any contracts where the period between the
transfer of the promised goods or services to the customer and payment by the
customer exceeds one year. As a consequence, the group does not adjust any of
the transaction prices for the time value of money. Other financial assets are
recognised initially at fair value plus transaction costs that are directly
attributable to the acquisition of the financial asset. Trade and other
receivables are subsequently measured at amortised cost less provision for
expected credit losses.
Impairment of Financial Assets
The Group assesses on a forward looking basis the expected credit losses
associated with its financial assets measured at amortised cost. The Group
applies the simplified approach to providing for expected credit losses
prescribed by IFRS 9, which permits the use of the lifetime expected loss
provision for all trade receivables. To measure the expected credit losses,
trade receivableshave been grouped based on shared credit risk characteristics
and the days past due. For other financial assets at amortised cost, the Group
determines whether there has been a significant increase in credit risk since
initial recognition. The Group recognises twelve month expected credit losses
if there has not been a significant increase in credit risk and lifetime
expected credit losses if there has been a significant increase in credit
risk.
Expected credit losses incorporate forward looking information, take into
account the time value of money when there is a significant financing
component and are based on days past due; the external credit ratings of its
customers; and significant changes in the expected performance and behaviour
of the borrower.
Financial assets are written off when there is no reasonable expectation of
recovery. Where receivables have been written off, the Group continues to
engage in enforcement activity to attempt to recover the receivable due. Where
recoveries are made, these are recognised in the Statement of Comprehensive
Income.
Financial Liabilities
Initial Recognition and Measurement
All financial liabilities are recognised initially at fair value net of
directly attributable transaction costs.
The Group's financial liabilities include trade and other payables.
After initial recognition, interest bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest rate
method (EIR). Gains and losses are recognised in the Statement of
Comprehensive Income when the liabilities are derecognised as well as through
the (EIR) amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included in finance costs in the Statement of Comprehensive
Income. This category generally applies to interest-bearing loans and
borrowings.
Derecognition of Financial Assets and Liabilities
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised when: (1) The rights
to receive cash flows from the asset have expired, or (2) The Group has
transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a
third party under a 'pass-through' arrangement, and either (a) the Group has
transferred substantially all the risks and rewards of the asset, or (b) the
Group has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the assets.
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the Statement of Comprehensive
Income.
New standards, interpretations and amendments adopted by the Group and Company
The group did not adopt any new standards, amendments or interpretations in
year as they did not have a material impact on the financial statements.
New standards, amendments, and interpretations issued but not effective for
the period ended 31 December 2022, and not early adopted
A number of new standards and amendments to standards and interpretations are
effective for annual periods beginning on or after 1 January 2022 and have not
been applied in preparing these financial statements:
· Amendments to IFRS 3: Business Combination
· Amendments to IAS 16: Property, Plant and Equipment
· Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets
· Amendments to IAS 1: Presentation of Financial Statements, Disclosure
of Accounting Policies
· Amendments to IAS8: Definition of Accounting Estimates
None of these is expected to have a significant effect on the financial
statements of the Group or Parent Company.
3. Segment Reporting
2022 2021
Revenue by Type € €
ENGAGE revenue 3,333,218 1,791,416
Showcase experience revenue 373,979 469,467
Other revenue 161,377 125,430
Total Revenue 3,868,574 2,386,313
4. Capital Management
For the purpose of the Company's capital management, capital includes issued
capital, share premium and all other equity reserves. The primary objective of
the Group's capital management is to maximise the shareholder value.
Group 2022 2021
€ €
Lease liabilities (7,882) (20,393)
Trade and other payables (1,222,488) (481,576)
Less: cash and short-term deposits 2,209,169 7,790,060
Net Funds 978,799 7,288,091
Equity 2,480,358 8,462,510
Total Equity 2,480,358 8,462,510
Capital and net funds 3,459,157 15,750,601
5. a. Expenses by nature
2022 2021
€ €
Depreciation charges 80,448 97,458
Amortisation expense 386,962 537,672
Operating Lease Payments 38,833 8,514
Foreign Exchange Gain (2,785) (85,789)
Staff Costs 5,242,101 3,356,152
Contractor Costs 1,772,886 359,729
Other Expenses 2,324,433 1,226,081
Total cost of sales and administrative expenses 9,842,878 5,499,817
Disclosed as:
Cost of sales 709,018 492,396
Administrative expenses 9,133,860 5,007,421
Total cost of sales and administrative expenses 9,842,878 5,499,817
b. Auditor Remuneration
Services provided by the Company's auditor
During the year, the Company obtained the following services from the
Company's auditor:
2022 2021
€ €
Fees payable to the Company's auditor for the audit of the financial
statements
46,600 46,600
6. Employees
Employee Benefit Expense 2022 2021
€ €
Wages and salaries 4,631,127 2,906,329
Social security costs 528,015 314,091
Defined contribution pension costs 60,226 31,769
Share option expense 22,733 103,963
Total Employee Benefit Expense 5,242,101 3,356,152
Average Number of People Employed 2022 2021
Average number of people (including executive Directors)
employed:
Operations 69 44
Administration 4 3
Sales, Marketing and Customer Support 12 2
Total Average Headcount 85 49
7. Directors remuneration
Below is the Directors' remuneration for the year ended 31 December 2022 and
for the year ended 31 December 2021
31 December 2022
Salaries and fees Pension benefits Options / Warrants issued Total
Group
€ € € €
Executive Directors
David Whelan 292,125 5,930 - 298,055
Sandra Whelan 234,208 5,870 - 240,078
Séamus Larrissey 200,250 7,188 - 207,438
Non-executive Directors
Richard Cooper 85,671 - 2,783 88,454
Praveen Gupta - - - -
Kenny Jacobs 27,313 - - 27,313
Frank Poore - - - -
839,567 18,987 2,783 861,338
31 December 2021
Salaries and fees Pension benefits Options / Warrants issued Total
Group
€ € € €
Executive Directors
David Whelan 176,917 4,824 - 181,741
Sandra Whelan 144,417 5,002 - 149,419
Séamus Larrissey 128,167 6,333 - 134,500
Non-executive Directors
Richard Cooper 85,552 - 16,700 102,252
Praveen Gupta - - - -
Kenny Jacobs 3,033 - - 3,033
Frank Poore - - 74,493 74,493
Harry Kloor 23,228 - - 23,228
Tony Hanway 27,000 - - 27,000
588,314 16,159 91,193 695,666
The options issued are a non-cash amount and are accounted for in line with
the treatment of the other share options issued to employees under IFRS 2.
Further notes on Share Based Payments are included in Note 19.
8. Finance Costs
2022 2021
€ €
Interest expense:
- Lease interest 1,099 2,863
- Bank charges 29,482 13,904
Total finance costs 30,581 16,767
9. Income Tax
2022 2021
€ €
Current tax:
Current tax on loss for the year - -
Total current tax - -
Deferred tax (Note 22) - -
Income Tax - -
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:
2022 2020
€ €
Loss Before Tax (6,004,885) (3,130,271)
Tax calculated at domestic tax rates applicable to loss in
Ireland of 12.5% (750,611) (391,284)
Tax effects of:
- Depreciation in excess of capital allowances 4,110 7,400
- Expenses not deductible for tax purposes 18,113 39,780
- Tax losses for which no deferred tax asset was recognised 728,388 344,104
Total tax - -
10. Earnings per share (EPS)
2022 2021
Loss attributable to equity holders of the Group: € €
Continuing Operations (6,004,885) (3,130,271)
Weighted average number of shares for Basic EPS 290,451,146 290,451,146
Effects of dilution from share options and warrants 23,741,560 23,455,846
Weighted average number of ordinary shares adjusted for the effect of dilution 314,192,706 313,906,992
Basic loss per share from continuing operations (0.021) (0.011)
Diluted loss per share from continuing operations (0.019) (0.010)
11. Property, Plant & Equipment
Fixtures,
Leasehold fittings and equipment Office Right of use
Group improvements Equipment assets Total
€ € € € €
Cost of Valuation
At 1 January 2021 20,341 7,025 178,883 156,031 362,280
Additions - - 115,699 - 115,699
At 31 December 2021 20,341 7,025 294,582 156,031 477,979
Additions - - 74,458 - 74,458
At 31 December 2022 20,341 7,025 369,040 156,031 552,437
Depreciation
At 1 January 2021 17,105 6,062 158,387 96,892 278,446
Charge (note 5) 3,236 694 54,781 38,747 97,458
At 31 December 2021 20,341 6,756 213,168 135,639 375,904
Charge (note 5) - 269 67,670 12,509 80,448
At 31 December 2022 20,341 7,025 280,838 148,148 456,352
Net Book Amount
At 31 December 2021 - 269 81,414 20,392 102,075
At 31 December 2022 - - 88,202 7,883 96,085
Depreciation expense of €80,448 (2021: €97,458) has been charged in
'Administrative Expenses'.
Right of use asset relates to properties and vehicles
held under lease.
12. Intangible Assets
Software in development costs
Group Total
€ €
Cost
At 31 December 2021 and 31 December 2021 2,136,231 2,136,231
Amortisation
At 1 January 2021 1,172,105 1,172,105
Charge 537,672 537,672
At 31 December 2021 1,709,777 1,709,777
Charge 386,962 386,962
At 31 December 2022 2,096,739 2,096,739
Net Book Value
At 31 December 2021 426,454 426,454
At 31 December 2022 39,492 39,492
The software being developed relates to the creation of virtual reality
experiences and an online virtual learning and corporate training platform.
ENGAGE is an online virtual learning and corporate training platform currently
in development by the Company. A desktop version was released in December 2018
and the mobile version was released in December 2019. Amortisation commenced
when the mobile version launched.
Titanic VR which is available for sale across all major VR capable platforms
since November 2018 has commenced being amortised in the period. Raid on the
Ruhr launched during 2019 and amortisation commenced during the period. Space
Shuttle launched during 2020 and amortisation commenced during the period.
Amortisation expense of €386,962 (2021: €537,672) has been charged in
'Administrative Expenses'.
An impairment review was carried out at the balance sheet date. No impairment
arose.
13. Investments in Subsidiaries
Company €
At 1 January 2021 15,028,809
Capital Contributions 15,448,253
At 31 December 2021 30,477,062
Additions 100,000
Repayment of Capital contributions (209,025)
Impairment Adjustment (11,602,935)
At 31 December 2022 18,765,102
Investments in subsidiaries are recorded at cost, which is the fair value of
the consideration paid.
On 12 March 2018, the Company acquired all of the issued capital of ENGAGE XR
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.
On 31 December 2021 the Company resolved to enter into a capital contribution
agreement with ENGAGE XR Limited to facilitate the funding of the wholly owned
subsidiary. An amount of €7,263,432 was forwarded during 2021 and
€8,184,821 was converted from the termination of the intercompany loan
agreement in force since 1 January 2020. An amount of €209,025 was repaid by
ENGAGE XR Limited to the Company during 2022. A repayment arises if ENGAGE XR
Limited holds excess funds in a particular currency that is required by ENGAGE
XR Holdings PLC to meet its liabilities as they fall due.
On 14 July 2022 the Company acquired all of the issued share capital of ENGAGE
XR LLC for a consideration of $100,000 which was unpaid at the year end. This
amount was subsequently paid in full post period end.
The Board have recognised an impairment adjustment of €11,602,935 (2021:
€Nil) in the current year to reflect the market capitalisation of the group
at 31 December 2022.
Country of incorporation and residence Proportion of equity shares held by the company
Name Nature of business
Virtual Reality Technology
ENGAGE XR Limited Ireland 100%
Virtual Reality Technology
ENGAGE XR LLC USA 100%
This subsidiary undertakings are included in the consolidation. The proportion
of the voting rights in the subsidiary undertakings held directly by the
Parent Company does not differ from the proportion of ordinary shares held.
14. Trade and Other Receivables
Current Group Company
2022 2021 2022 2021
€ € € €
Trade receivables 552,836 381,568 - -
Less: provision for impairment of receivables - - - -
Trade receivables - net 552,836 381,568 - -
Prepayments 325,413 110,640 2,258 768
Accrued income 446,102 139,512 -
Other debtors 3,100 3,100 - -
VAT 38,531 11,070 1,234 267
1,365,982 645,890 3,492 1,035
As at 31 December 2022, trade receivables of €552,836 (2021: €381,568)
were fully performing and deemed fully recoverable. No bad debt provision
charge was incurred during 2022 (2021: €Nil).
The Group assesses exposure to credit risk arising from outstanding
receivables on an annual basis. The maximum exposure to credit risk at the
reporting date is the carrying value of each of the receivables above. The
Group does not consider the credit risk of any receivable has increased post
recognition.
The Group does not expect any losses from outstanding receivables in the
current year.
The carrying amounts of the Company's trade and other receivables are
denominated in the following currencies:
Group Company
2022 2021 2022 2021
€ € € €
Euro - Neither past due nor impaired 335,635 330,287 - -
Dollar - Neither past due nor impaired 217,201 51,282 - -
552,836 381,568 - -
15. Cash and short-term deposits
Group Company
2022 2021 2022 2021
€ € € €
Cash at bank and on hand 2,209,169 7,790,060 486,170 1,476,744
2,209,169 7,790,060 486,170 1,476,744
16. Issued Share Capital and Premium
Number of shares Ordinary shares Share premium Total
€ € €
At 1 January 2021 241,750,955 241,751 24,547,516 24,789,267
Ordinary Shares Issued 48,350,191 48,350 8,947,034 8,995,384
Exercise of Share Options 350,000 350 8,750 9,100
At 31 December 2021 290,451,146 290,451 33,503,300 33,793,751
At 1 January 2022 and At 31 December 2022 290,451,146 290,451 33,503,300 33,793,751
As at 31 December 2022 the number of shares authorised for issue were
290,451,146 (2021: 290,451,146). The par value of the shares authorised for
issue were €0.001 each (2021: €0.001 each).
On 22 June 2021 following a successful placing, an amount of €9.0 million
was raised by the Group and 48,350,191 ordinary shares were issued at an issue
price of €0.186 per share. Net proceeds after expenses were €8.46
million.
On 5 November 2021, as a result of the exercise of share options, 350,000
ordinary shares in the Company at an exercise price of €0.026 per share
providing the Company with gross proceeds of €9,100.
17. Other Reserves
Group Company
€ €
At 1 January 2021 (11,337,058) (247,188)
Share issue costs (538,060) (538,060)
Share option expense 99,644 91,193
At 31 December 2021 (11,775,474) (694,055)
At 1 January 2022 (11,775,474) (694,055)
Share option expense 22,733 2,783
At 31 December 2022 (11,752,741) (691,272)
18. Retained Earnings
Group Company
€ €
At 1 January 2021 (10,429,815) (791,234)
(Loss)/profit for the year (3,130,271) (432,140)
Share option expense - transfer on exercise 4,319 -
At 31 December 2021 (13,555,767) (1,223,374)
At 1 January 2022 (13,555,767) (1,223,374)
Loss for the year (6,004,885) (12,777,885)
Share option expense - transfer on exercise
At 31 December 2022 (19,560,652) (14,001,259)
Capital contributions represent irrevocable, non-repayable amounts contributed
from connected parties.
19. Share Based Payments
There were 285,714 (2021: 200,000) employee options granted during 2022 at an
exercise price of €0.175 (2021: €0.20) 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.
The movement in employee share options and weighted average exercise prices
are as follows for the reporting periods presented:
2022 2021
At 1 January 4,118,413 4,298,042
Granted during period 285,714 200,000
Exercised during period - (350,000)
Forfeited during period - (29,629)
At 31 December 4,404,127 4,118,413
Options outstanding at 31 December
Number of shares 4,404,127 4,118,413
Weighted average remaining contractual life 1.30 1.37 years
Weighted average exercise price per share €0.047 €0.038
Range of exercise price €0.0001 - €0.20 €0.0001 - €0.20
Exercisable at 31 December
Number of shares 2,718,413 2,585,324
Weighted average exercise price per share €0.031 €0.032
No options (2021: 350,000 options) were exercised during the period (2021: at
a price of €0.026 per share). The weighted average exercise price of options
granted during the period was €0.175 (2021: €0.20). The expense recognised
in respect of employee share-based payment expense and credited to the
share-based payment reserve in equity was €22,733 (2021: €25,151).
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 Black Scholes valuation model.
Employee
Number of options 285,714
Grant date 27 March
Vesting period 3 years
Share price at date of grant €0.21
Exercise price €0.20
Volatility 57%
Option life 7 years
Dividend yield 0%
Risk free investment rate 0.14%
Fair value per option at grant date €0.1102
Weighted average remaining contractual life in years 6.24
The expected life is based on historical data and current expectations and is
not necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumptions that the historical volatility over a
period similar to the life of the options is indicative of future trends,
which may not necessarily be the actual outcome.
On 1 October 2021, 17,406,069 share warrants were granted to Frank Poore upon
his appointment as a non-executive Director, at an exercise price of €0.174
(GBP £0.15) per share. The warrants expire at the end of a period of 5 years
from the grant date or on the date the employee leaves. The vesting
conditions in relation to these options are set out in the table below.
Tranche 1 Tranche 2 Tranche 3
Grant Date 1 October 2021 1 October 2021 1 October 2021
Number of Warrants 5,802,023 5,802,023 5,802,023
Vesting Criteria By end 29 July 2023 By end 29 July 2024 By end 29 July 2025
Exercise Price GBP £0.15 GBP £0.15 GBP £0.15
Trigger Price GBP £0.30 GBP £0.60 GBP £0.90
Volatility 43% 43% 43%
Risk Free Rate of Return 0.62% 0.62% 0.62%
Dividend Yield 0% 0% 0%
Option Life 5 Years 5 Years 5 Years
Fair Value €0.063 €0.031 €0.023
Expense €365,070 €178,441 €134,452
The cumulative expense of €677,963 is recognised in line with the vesting
conditions and on a straight line basis. An amount of €Nil (2021: €74,493)
is included in administration expenses. Frank Poore ceased his employment with
the company on 31 January 2022 and at 31 January 2023 no share warrants
remain. As a result no expense was recognised in 2022.
20. Leases
Amounts recognised in the Statement Of Financial Position
The Statement Of Financial Position shows the following amounts relating to
leases:
Group Company
Right of Use Assets 2022 2021 2022 2021
€ € € €
Buildings - 1,813 - -
Vehicles 7,883 18,579 - -
7,883 20,392 - -
Group Company
Lease Liabilities 2022 2021 2022 2021
€ € € €
Current 7,882 12,510 - -
Non-current - 7,883 - -
7,882 20,393 - -
Amounts recognised in the Consolidated Statement Of Total Comprehensive Income
The Consolidated Statement Of Total Comprehensive Income shows the following
amounts relating to leases:
Depreciation charge of right-of-use assets 2022 2021
€ €
Buildings 1,813 21,758
Vehicles 10,696 16,989
12,509 38,747
Interest expense (included in finance cost) 1,099 2,863
21. Trade and Other Payables
Group Company
2022 2021 2022 2021
€ € € €
Trade Payables 323,684 23,763 6,362 3,653
Amounts Due to Related Parties - - 100,000 -
PAYE/PRSI 225,179 129,972 11,508 25,914
VAT - - - -
Deferred Income 259,111 108,901 - -
Accrued Expenses 414,514 218,940 35,674 48,952
1,222,488 481,576 153,544 78,519
Terms and conditions of the above financial
liabilities:
· Trade payables are non-interest bearing and are normally settled on
30-day terms
· Amounts Due to Related Parties are non-interest bearing and are
settled over varying terms throughout the year
· PAYE/PRSI payables are non-interest bearing and are normally settled
on 30-day terms
· VAT payables are non-interest bearing and are normally settled on
60-day terms
· Deferred income is non-interest bearing and are settled over varying
terms throughout the year
· Accrued expenses are non-interest bearing are settled over varying
terms throughout the year
22. 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 €2,087,214 (2021: €1,313,216) in respect of losses and depreciation in
excess of capital allowances amounting to €16,697,710 (2021: €10,505,731)
that can be carried forward against future taxable income.
23. Related Parties
During the year the Directors received the following emoluments:
Group Company
2022 2021 2022 2021
Directors € € € €
Aggregate emoluments 839,567 588,313 839,567 588,313
Share option expense 2,783 91,193 2,783 91,193
842,350 679,506 842,350 679,506
Included in the above is an amount of € 85,671 (2021: €85,552) 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 2022 €Nil
was outstanding.
24. Capital Management
The capital of the company is managed as part of the capital of the group as a
whole. Full details, are contained in note 4 to the consolidated financial
statements.
25. Events after the reporting date
The Company has evaluated all events and transactions that occurred after 31
December 2022 up to the date of signing of the financial statements.
On 5 March 2023, the Company issued 234,375,000 ordinary shares at a £0.04
(€0.045) as a result of an oversubscribed placing and the HTC subscription
raising €10,500,000 before costs are deducted. The proceeds will be
primarily used for working capital and general corporate purposes and also on
sales and marketing to convert pipeline and capitalise on market opportunity
to be deployed over the next 12-18 months.
No other material subsequent events have occurred that would require
adjustment to or disclosure in the financial statements.
26. Contingent Liabilities
The company has indicated that it will guarantee the liabilities (as defined
in Section 397 of the
Companies Act 2014) of €1,176,828 (2021: €423,455) its Irish subsidiary,
ENGAGE XR Limited for the year ended 31 December 2022.
27. Ultimate controlling party
The Directors believe that there is no ultimate controlling party as no one
shareholder has control of the Company.
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