Dear Fellow Shareholder,

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

Our Business

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

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

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

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

Results

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

Highlights:

·     Total 2020 revenue £6.650m including pre-acquisition Modern Water revenue, increase of 553% from 2019 £1.017m revenue;

·     Consolidated group revenue £4.483m (2019: £0.823m);

·     EBITDA losses before exceptional items reduced by 19% to £0.859m (2019: £1.055m);

·     H2, 2020 revenue growth of 3.47 times H1 revenue;

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

·      Administration costs increased to £4.561m (2019: £2.973m) with Modern Water acquisition and Labskin expansion;

·      Operating loss of £2.718m (2019: £2.371m) after providing for:

o  Depreciation of £0.172m (2019: £0.101m);

o  Amortisation of £0.941m (2019: £0.442m);

o  Impairment of intangible assets £nil (2019: £0.241m);

o  Impairment of investments £0.354m (2019: £nil);

·      Exceptional costs of £0.391m (2019: £0.532m) were one-off transaction costs relating to acquisition activities; £13.315m all-share Acquisition of Modern Water.

Post Year-End Highlights

·     £10m Placing and Subscription to fund scale, meet increased demand and expand revenues across the Group

o  At 30 pence per 0.1p ordinary share;

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

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

Corporate governance

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

Outlook

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

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

The Board provided guidance for 2021 revenue of £10m in January 2021 and remains and remains well on track and expects the business will continue to grow across all divisions in the Group.

Ross Andrews

Chairman

30 June 2021

Dear Fellow Shareholder,

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

DeepVerge

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

Our core services:

·      Regulated environmental toxicology services;

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

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

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

Highlights:

·     Total 2020 revenue £6.650m including pre-acquisition Modern Water revenue, increase of 553% from 2019 £1.017m revenue;

·     Consolidated group revenue increased by 445% to £4.483m (2019 restated: £0.823m);

·     H2 2020 revenue £3.479m an increase of 247% from H12020 £1.004m revenue;

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

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

·     EBITDA losses  fell by 37% to £0.668m (2019: £1.053m),

o  excluding exceptional items and share option scheme of £191,000 (2019: £2,000) ;

·     EBITDA losses  fell by 19% to £0.859m (2019: £1.055m),

o  excluding exceptional items)

·     Administration costs increased to £4.561m (2019: £2.973m) with Modern Water acquisition and Labskin expansion;

·     Operating loss of £2.718m (2019: £2.371m) after providing for:

o  Depreciation of £0.172m (2019: £0.101m);

o  Amortisation of £0.941m (2019: £0.442m);

o  Impairment of intangible assets £nil (2019 : £0.241m);

o  Impairment of investments £0.354m (2019: £nil);

o  Exceptional costs of £0.391m (2019: £0.532m) were one-off transaction costs relating to acquisition activities; 

·     £13.315m all-share acquisition of Modern Water.

Post-year-end highlights

·     £10m Placing and Subscription to fund scale, meet increased demand and expand revenues across the Group

o  At 30 pence per 0.1p ordinary share;

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

·      FY 2021 revenue guidance remains at £10m with £3.6m already received in Modern Water orders in Q1.

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

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

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

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

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

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

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

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

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

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

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

·    Environmental Health division also continues to grow apace with new equipment, solutions, labs and services creating a strong $5.0m (£3.6m) sales pipe for Microtox and MicroTrace in Q1 alone

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

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

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

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

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

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

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

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

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

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

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

§ Detection of the live virus confirmed indicating 9 times increase in digital spectrum signal on the Microtox® BT compared to control

§ Microtox® BT delivered results in under 60 seconds from breath samples

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

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

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

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

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

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

Labskin

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

Skin Trust Club

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

Modern Water Plc  

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

Drinking and Wastewater Analysis

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

SARS-CoV-2 and COVID-19 Testing

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

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

Disruptive Business Model

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

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

·      Swab of test subject's skin is taken and applied to Labskin;

·      Instantly creates twin test subject;

·      Recruitment time is shorter as location is irrelevant, or at least within posting distance;

·      Project management and supervision time and personnel are reduced substantially;

·      AI integration delivers comparative analytical data plus human test response data;

·      Reduces error - highlighting test subjects who are not sticking to test regime;

·      Increases accuracy;

·      Clients win, Clinical Research Organisation wins and Labskin wins extra revenues;

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

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

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

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

3-Step Strategic Plan Across All Divisions

1.      Grow Profits Across Related Markets

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

2.      Product & Service Investment

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

3.      Collaboration & Acquisition

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

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

Gerard Brandon

Chief Executive Officer

30 June 2021

Ross Andrews, Non-Executive Chairman

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

Gerard Brandon (Chief Executive Officer)

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

Camillus Glover (Chief Financial Officer)                       

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

Fionan (Fin) Murray, (Chief Operations Officer)

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

Dr Nigel Burton (Non-Executive Director)

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

Review of the business

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

Principal risks and uncertainties

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

Management and employees

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

Early stage of operations

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

Delay in product launches

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

Potential funding requirement for further development

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

Competition risk

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

Currency exchange risk

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

COVID-19 risk

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

Financial risk management

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

Companies Act S.172 Statement

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

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

Business

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

Employees

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

Stakeholder engagement

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

Governance

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

Disclosure of information to the Auditors

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

Outlook

Key Performance Indicators (KPIs)

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

Review of strategy and business model

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

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

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

Environment

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

Employees

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

Disabled employees

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

Social, community, and human rights

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

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

Gerard Brandon

Chief Executive Officer

Report of the Directors

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

Corporate details

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

Directors

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

Gerard Brandon                                                  

Camillus Glover                                                   

Ross Andrews                                                      

Fin Murray                                                           

Nigel Burton                                                          (Appointed on 10 November 2020)

Principal activities

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

Our core services:

·      Regulated environmental toxicology services;

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

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

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

Dividends

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

Going concern

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

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

During June 2021 the Company raised £10m by issuing new shares to fund accelerated sales opportunities and for general working capital purposes.

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

Directors' interests

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

                                                                                                                                                                                                                                                                                                                                                                                                                                                Ordinary Shares of 0.1p each          

Gerard Brandon                                                                                                                         8,414,483¹

Camillus Glover                                                                                                                           4,250,670                                             

Ross Andrews                                                                                                                                 323,846                                                                

Fin Murray                                                                                                                                   8,786,758

Nigel Burton                                                                                                                                1,883,167                                              

¹ Includes 194,942 shares held by family member

Substantial shareholdings

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

Helium Rising Stars Fund                                                                                                                 9,571,943                                                          4.45%

Fionan Murray                                                                                                                       8,786,758                                                          4.08%

Gerard Brandon                                                                                                                    8,219,901                                                          3.82%

Post balance sheet events

The following events have taken place since the year end:

Statement of Directors' responsibilities

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

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

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

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

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

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

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

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

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

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

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

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

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

Directors' liability insurance

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

Independent auditors

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

Companies Act S.172 Statement

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

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

Business

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

Employees

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

Stakeholder engagement

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

Governance

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

Disclosure of information to the Auditors

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

Annual General Meeting

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

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

Gerard Brandon

Compliance

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

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

Board composition and responsibility

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

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

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

Board meetings

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

Gerard Brandon                                                                                                                   25

Camillus Glover                                                                                                                    26

Ross Andrews                                                                                                                       13

Fin Murray                                                                                                                            13

Nigel Burton                            (Appointed 10 November 2020)                                     3

Audit and Risk Committee membership and activities

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

Key activities during the year

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

·      Considered the external auditor's report on the full- and half-year audits.

·      Reviewed the full- and half-year results announcements.

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

·      Considered the external audit fees and terms of engagement.

Financial reporting

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

Nomination Committee membership and activities

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

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

. 

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

Remuneration Committee membership and activities

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

During the year the Committee:

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

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

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

Internal control

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

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

Internal financial reporting

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

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

Relations with shareholders

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

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

Corporate social responsibility

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

Statement of compliance

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

Policy on Executive Directors' remuneration

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

Directors' remuneration

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

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

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

in 2019 was for Gerard Brandon £56,000 (2018: £48,000) and for Camillus Glover £51,000 (2018: £42,000).

Directors' share options

2017 Share Option Scheme

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

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

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

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

2020 Employee Share Option Scheme

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

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

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