DEV.L Regulatory News (DEV)

Dev Clever Holdings plc

Christopher Jeffries

Chief Executive Officer and Executive Chairman

Nicholas YdlibiChief Financial Officer

+44 (0) 330 058 2922

Novum Securities Limited - Joint Broker

& Financial Adviser

Colin Rowbury

David Coffman

+44 (0) 20 7399 9400

Buchanan Communications

Richard Oldworth / Chris Lane

+44 (0) 207 466 5105

Note

Year ended 31 October 2020

Year ended 31 October 2019

£

£

Continuing operations

Revenue

4

1,254,734

480,585

Cost of sales

5

(703,607)

(521,782)

Gross profit / (loss)

551,127

(41,197)

Administrative expenses

5

(1,637,728)

(999,660)

Loss from operations

(1,086,601)

(1,040,857)

Fair value gain on financial assets at fair value through profit and loss

14

77,518

-

Finance income

8

240

811

Finance costs

8

(47,411)

(24,601)

Loss before tax

(1,056,254)

(1,064,647)

Tax credit

10

118,557

45,016

Loss for the period from continuing operations

(937,697)

(1,019,631)

Other comprehensive income:

Items not reclassified to profit or loss in subsequent periods:

Total other comprehensive income for the period

-

-

Total comprehensive income for the period attributable to shareholders

(937,697)

(1,019,631)

Earnings per share

Basic (pence per share)

11

(0.22)

(0.29)

Diluted (pence per share)

11

(0.22)

(0.29)

Adjusted basic (pence per share)

11

(0.19)

(0.23)

Adjusted diluted (pence per share)

11

(0.19)

(0.23)

Note

As at 31 October 2020

As at 31 October 2019

£

£

Non-current assets:

Goodwill

12

240,145

-

Intangible assets

12

818,723

157,673

Property, plant & equipment

13

105,481

 41,706

Financial assets at fair value through profit and loss

14

138,653

1,125

1,303,002

200,504

Current assets:

Inventories

2,650

6,200

Trade and other receivables

16

1,132,018

156,614

Cash and cash equivalents

17

1,032,473

496,707

2,167,141

659,521

Total assets

3,470,143

860,025

Current liabilities:

Trade and other payables

18

(345,071)

(135,481)

Deferred income

18

(210,145)

(603)

Loans and borrowings, amounts falling due within one year

19

(90,583)

(47,727)

(645,799)

(183,811)

+Non-current liabilities:

Loans and borrowings, amounts falling due after more than one year

19

(318,681)

(89,847)

Deferred tax

20

(25,866)

(16,464)

(344,547)

(106,311)

Total liabilities

(990,346)

(290,122)

Net assets

2,479,797

569,903

Share capital

22

4,712,197

3,884,017

Merger reserve

22

(2,499,900)

(2,499,900)

Share premium reserve

22

1,977,447

246,246

Other Reserves

22

323,237

110,212

Retained earnings

22

(2,033,184)

(1,170,672)

Total equity to shareholders

2,479,797

569,903

Note

As at 31 October 2020

As at 31 October 2019

£

Non-current assets:

Goodwill

12

183,928

-

Investments

15

2,500,000

2,500,000

2,683,928

2,500,000

Current assets:

Trade and other receivables

16

3,572,882

1,425,472

Cash and cash equivalents

17

938,806

325,374

4,511,688

1,750,846

Total assets

7,195,616

4,250,846

Current liabilities:

Trade and other payables

18

(77,396)

(72,112)

(77,396)

(72,112)

Non-Current Liabilities:

Loans and borrowings

19

(250,882)

-

(250,882)

-

Total liabilities

(328,278)

(72,112)

Net assets

6,867,338

4,178,734

Share capital

22

4,712,197

3,884,017

Share premium reserve

22

1,977,447

246,246

Other reserves

22

323,237

110,212

Retained earnings

22

(145,543)

(61,741)

Total equity to shareholders

6,867,338

4,178,734

Share capital

Merger reserve

Share premium reserve

Other reserves

Retained earnings

Total

Note 22

Note 22

Note 22

Note 22

Note 22

£

£

£

£

£

£

Balance at 01 November 2018

100

-

-

-

(151,041)

(150,941)

Loss after taxation for the period

-

-

-

-

(1,019,631)

(1,019,631)

Total comprehensive loss for the period

-

-

-

-

(1,019,631)

(1,019,631)

Transactions with owners

Acquired on acquisition of subsidiary

2,499,900

(2,499,900)

-

-

-

-

Pre IPO, IPO and subscription

1,013,000

-

-

-

-

1,013,000

Conversion of convertible loan facility

220,000

-

-

-

-

220,000

Issue of warrants

22,900

-

-

-

-

22,900

Placing

128,117

-

246,246

-

-

374,363

Share based payments

-

-

-

110,212

-

110,212

3,883,917

(2,499,900)

246,246

110,212

-

720,844

Balance at 31 October 2019

3,884,017

(2,499,900)

246,246

110,212

(1,170,672)

569,903

Adoption of IFRS 16 leases

(3,598)

(3,598)

Loss after taxation for the period

-

-

-

-

(937,697)

(937,697)

Total comprehensive loss for the period

-

-

-

-

(941,295)

(941,295)

Transactions with owners

Issue of ordinary shares

828,180

-

1,866,663

-

-

2,694,843

Expenses incurred on issue of ordinary shares

-

(135,462)

-

-

(135,462)

Share-based payments

-

-

-

140,177

-

140,177

Recycle of share-based payments on exercise

-

-

-

(78,783)

78,783

-

Equity component of compound financial instrument

-

-

-

151,631

-

151,631

828,180

-

1,731,201

213,025

78,783

2,851,189

Balance at 31 October 2020

4,712,197

(2,499,900)

1,977,447

323,237

(2,033,184)

2,479,797

Share capital

Share premium reserve

Other reserves

Retained earnings

Total

Note 22

Note 22

Note 22

Note 22

£

£

£

£

£

On incorporation on 26 September 2018

-

-

-

-

-

Loss after taxation for the period

-

-

-

(61,741)

(61,741)

Total comprehensive loss for the period

-

-

-

(61,741)

(61,741)

Transactions with owners

Shares issued on acquisition of Dev Clever Limited

2,500,000

2,500,000

Pre IPO, IPO and subscription

1,013,000

-

-

-

1,013,000

Conversion of convertible loan facility

220,000

-

-

-

220,000

Issue of warrants

22,900

-

-

-

22,900

Placing

128,117

246,246

-

-

374,363

Share based payments

-

-

110,212

-

110,212

3,884,017

246,246

110,212

-

4,240,475

Balance at 31 October 2019

3,884,017

246,246

110,212

(61,741)

4,178,734

Loss after taxation for the period

-

-

-

(162,585)

(162,585)

Total comprehensive loss for the period

-

-

-

(162,585)

(162,585)

Transactions with owners

Issue of ordinary shares

828,180

1,866,663

-

-

2,694,843

Expenses incurred on issue of ordinary shares

(135,462)

-

-

(135,462)

Share-based payments

-

-

140,177

140,177

Recycle of share-based payments on exercise

-

-

(78,783)

78,783

-

Equity component of compound financial instrument

-

-

151,631

-

151,631

828,180

1,731,201

213,025

78,783

2,851,189

Balance at 31 October 2020

4,712,197

1,977,447

323,237

(145,543)

6,867,338

Year ended 31 October 2020

Year ended 31 October 2019

£

£

Cash flows from operating activities:

Loss before tax

(1,056,254)

(1,064,647)

Adjustments for:

Depreciation

55,808

14,692

Amortisation of intangibles

99,747

11,207

Impairment of intangibles

-

174,085

Fair value gain on financial assets through profit and loss

(77,518)

-

Finance Income

(240)

(811)

Finance costs

47,411

24,601

Share-based payment expenses

140,177

110,212

Decrease / (increase) in inventories

3,550

(6,200)

Increase in trade and other

receivables

(836,562)

(37,220)

Increase / (decrease) in trade and other payables

318,704

(18,723)

Income tax paid

(14,700)

-

Income tax received

-

96,057

Net cash flows used in operating activities

(1,319,877)

(696,747)

Cash flows from investing activities:

Payments to acquire property, plant and equipment

(33,584)

(26,642)

Payments to develop intangible assets

(686,138)

(211,488)

Payments to acquire investments

(60,010)

(1,125)

Acquisition of subsidiary undertaking

(100,000)

-

Net cash flows used in investing activities

(879,732)

(239,255)

Cash flows from financing activities:

Net proceeds from issue of equity

2,454,313

1,421,362

Proceeds from borrowings

400,000

-

Repayment of borrowings

(68,592)

(31,818)

Finance lease payments on right of use assets

(26,713)

-

Interest received

240

811

Interest paid

(23,873)

(30,335)

Net cash flows from financing activities

2,735,375

1,360,020

Net increase in cash and cash equivalents in the year

535,766

424,018

Cash and cash equivalents at beginning of period

496,707

72,689

Cash and cash equivalents at end of period

1,032,473

496,707

Cash and cash equivalents

1,032,473

496,707

Non-cash movements not disclosed within the consolidated statement of cash flows:

Consideration shares issued on acquisition of Phenix Digital Limited £83,928. Further details of the total consideration paid for Phenix Digital is presented in note 28 Business combination.

Equity component of the convertible loan £151,631. Further details of the treatment of the convertible loan is presented in note 19 Loans and borrowings

Year ended 31 October 2020

Year ended 31 October 2019

£

£

Cash flows from operating activities:

Loss before tax

(162,585)

(61,741)

Adjustments for:

Impairment of loan to subsidiary undertaking

80,111

-

Finance income

(91,704)

(52,431)

Finance costs

23,654

-

Share-based payment expenses

140,177

110,212

Increase in trade and other

receivables

(224,485)

(18,654)

Increase in trade and other payables

96,862

61,013

Net cash flows (used in)/from operating activities

(137,970)

38,399

Cash flows from investing activities:

Loans to subsidiary undertakings

(2,049,475)

(1,233,000)

Repayments of loan from subsidiary undertaking

46,435

98,596

Acquisition of subsidiary

(100,000)

-

Net cash flows used in investing activities

(2,103,040)

(1,134,404)

Cash flows from financing activities:

Net proceeds from issue of equity

2,454,313

1,421,362

Proceeds from borrowings

400,000

-

Interest received

129

17

Net cash flows from financing activities

2,854,442

1,421,379

Net increase in cash and cash equivalents in the year

613,432

325,374

Cash and cash equivalents at beginning of period

325,374

-

Cash and cash equivalents at end of period

938,806

325,374

Cash and cash equivalents

938,806

325,374

Non-cash movements not disclosed within the consolidated statement of cash flows:

Consideration shares issued on the acquisition of Phenix Digital Limited £83,928. Further details of the total consideration paid for Phenix Digital is presented in note 28 Business combination.

Equity component of the convertible loan £151,631. Further details of the treatment of the convertible loan are presented in note 19 Loans and borrowings.

1

General Information

Dev Clever Holdings Plc ("the Company") is publicly traded on the Standard List of the London Stock Exchange. The Company is incorporated and domiciled in England and Wales. Its registered office is Ventura House, Ventura Park Road, Tamworth, Staffordshire, B78 3HL and the registered number is 11589976.

The Company is the parent company of Dev Clever Limited ("DevClever") and Phenix Digital Limited. Dev Clever is incorporated and domiciled in England and Wales with the same registered office as the Company. Phenix Digital Limited is incorporated and domiciled in England and Wales with the registered office being Creative Industries Centre, Wolverhampton Science Park, Wolverhampton, West Midlands, WV10 9TG.

The Group is principally engaged in the development of immersive software products that deliver customer engagement, through both its careers platform Launchyourcareer.com, supported by VICTAR VR, and through its Agency Services offering.

2

Summary of significant accounting policies

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

Basis of preparation

These consolidated financial statements have been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards ("IFRS") in conformity with the requirements of the Companies Act 2006.

The preparation of financial statements requires management to exercise its judgement in the process of applying accounting policies. The areas involving a higher degree of judgement, or areas where assumptions and estimates are significant to the financial information, are disclosed in note 3.

The presentational and functional currency of the Company is Sterling. Results in these financial statements have been prepared to the nearest £1.

Initial business combination

IFRS 3 Business Combination requires that a transaction in which a company with substantial operations ('operating company') arranges to be acquired by a shell company should be analysed to determine whether it is a business combination. The original acquisition of DevClever Limited by Dev Clever Holdings in a share for share exchange of the entire share capital of both entities, was indicative of DevClever Limited being the accounting acquiror. As Dev Clever Holdings had no other assets or liabilities other than its holding in DevClever Limited, it did not satisfy the definition of a business. As a result, the acquisition did not meet the definition of a business combination under IFRS 3 and fell outside the scope of IFRS 3. The Directors considered the requirements of IFRS 10 for the production of consolidated accounts through the application of the reverse acquisition methodology but without the need for recognising goodwill. As a result:

• the consolidated financial statements of the legal parent, Dev Clever Holdings plc have been prepared as a continuation of the financial statements of the operating company, DevClever Limited. The opening net assets of Dev Clever Limited were recognised at book value and a merger reserve has been established to write down the nominal value of equity in Dev Clever Holdings, at the time of the acquisition, to the nominal value of the share capital in Dev Clever Limited, at that time.

• the opening net assets of Dev Clever Limited have been recognised at book value.

• a merger reserve has been established to write down the nominal value of equity in Dev Clever Holdings, at the time of the acquisition, to the nominal value of the share capital in Dev Clever Limited, at that time. The merger reserve of £2,499,900 represents the difference between the nominal value of equity in Dev Clever Holdings of £2,500,000 and the nominal value of equity in Dev Clever Limited of £100.

Basis of consolidation

Subsequent to the initial establishment of the Group the acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to the majority of voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date on which control ceases. The Group re-assesses 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.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

The consolidated financial statements incorporate those of Dev Clever Holdings plc and its subsidiaries DevClever Limited and Phenix Digital Limited. All financial statements are made up to 31 October 2020. Where necessary, adjustments have been made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other parts of the Group. 

In the parent company financial statements, investments in subsidiaries are accounted for at cost less impairment. Where the trade and assets of a subsidiary have been transferred to another subsidiary within the Group, the investment held by the parent company is re-categorised as goodwill.

The Dev Clever Holdings plc and DevClever Limited accounts have been prepared for the year ended 31 October 2020. The Phenix Digital Limited accounts have been consolidated for the period from the date of acquisition, on 13 March 2020, to 31 October 2020.

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.

Adoption of new and revised standards

The Company has adopted all recognition, measurement and disclosure requirements of IFRS in conformity with the requirements of the Companies Act 2006 including any new and revised standards and Interpretations of IFRS in effect for financial periods commencing on or after 1 January 2019. Within these financial statements, the Company has adopted the following standards and amendments for the first time:

IFRS 16 - Leases

Effective from 1 November 2019, the Group adopted IFRS 16 - Leases ("IFRS 16"), which replaces IAS 17 - Leases and related interpretations. The Group adopted the requirements of IFRS 16 - Leases retrospectively from 1 November 2019 but has not restated comparatives for the 2019 reporting period as permitted under the transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 November 2019. 

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been categorised as operating leases. These liabilities were measured at the present value of the remaining lease payments. The change in policy increased right-of-use assets by £84,249 and lease liabilities by £87,847. 

Under IFRS 16, the Group accretes interest on its lease liabilities. At 31 October 2020, the carrying value of these lease liabilities amounted to £61,135 with £29,205 of this balance shown as short-term lease liabilities and the remaining portion of £31,930 reflected under non-current liabilities

The property lease asset, reported as a right of use asset within Property, Plant and Equipment, is depreciated on a straight-line basis over the remaining life of lease.

Other than as described above, there has been no material impact on the financial statements as a result of the adoption of the new and amended standards.

Standards which are in issue but not yet effective

Standard

Description

Effective date for annual periods beginning on or after

Amendments to References to Conceptual Framework in IFRS Standards

01-Jan-20

IFRS 3

Amendments to IFRS 3 "Business Combinations" to clarify the definition of a business

01-Jan-20

IAS 1

Amendments to IAS 1, "Presentation of Financial Statements" regarding the definition of "material"

01-Jan-20

IAS 8

Amendments to IAS 8, "Accounting Policies, Changes in Accounting Estimates and errors" regarding the definition of "material"

01-Jan-20

The Group has not early adopted any of the above standards.

Going concern

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled "Guidance on Risk Management and Internal Control and Related Financial and Business Reporting".

The Directors have prepared detailed financial forecasts and cash flows looking at least 12 months from the date of approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period. To pressure test the resilience of the cash position, the directors only took into consideration incremental revenues that have already been contractually committed, with no uplift in sales recognised for the increased investment in sales and marketing resource built into the plan for existing markets within the UK and US. No revenues were recognised for the forthcoming launch the Group's careers' education platform in India, although the forecast also took into consideration both the committed and uncommitted costs associated with the launch. The approach adopted by the Directors also mitigates against the possible risk of on-going disruption as a result of the Covid pandemic. 

Due consideration has also been given to the ability to raise funds on the open market in respect of the listing on the standard list of the London Stock Exchange and the timing as to when such funds will be received.

On 25 January 2021 the Group raised gross proceeds of £2.0 million, net £1.9 million, through the issuance of 20 million new ordinary shares of 1p to Intrinsic Capital (Jersey) Limited at a subscription price of 10p per share. The subscription forms the second tranche of the subscription agreement entered into by the Company with Intrinsic on 13 May 2020.

On 2 February 2021 the Group announced an equity subscription agreement with One Nine Two Pte Limited. The agreement provided for an initial subscription of 20 million new ordinary shares in Dev Clever at a subscription price of 20p per share to raise gross proceeds of £4.0 million, net £3.8 million, conditional upon approval at a general meeting of the Company to an increase in the authority granted to the Directors to allot shares and disapply pre-emption rights. The agreement provided for a further subscription of 20 million ordinary shares at an exercise price of 30 pence per share to raise gross proceeds of £6.0 million to be completed automatically once the share price of the Group closed at or above 34p per share for a period of 5 consecutive days. The further subscription is valid for a period of nine months from the date of completion of the first subscription. The Company also granted One Nine Two Pte Limited a warrant over 40 million new ordinary shares at an exercise price of 50p per share, subject to completion of the further subscription. The warrant is exercisable in whole or in part at any time until the second anniversary of the completion of the first subscription.

Following the passing of the relevant resolution at the general meeting, the Group received the proceeds of the initial subscription on 22 February.

On 25 February, the Company announced the novation of the subscription agreement with One Nine Two Pte Limited in favour of Sitius Limited, an investment vehicle wholly owned by Dr David von Rosen. On the same date, Intrinsic Capital (Jersey) Limited entered into an agreement with Sitius to assign 30 million of its remaining subscription rights to 60 million new ordinary shares in the Company at an exercise price of 10p per share. ICJL and Sitius Limited completed their subscriptions to these shares, following the publication of the Company's Prospectus on 17 March, raising gross proceeds of £6.0 million, net £5.6 million.

Based on their consideration of these matters, the Directors believe the Group and Company to be a going concern. In response to the significant impact that the coronavirus pandemic is having on the global economy, the Group has reviewed the potential impact upon on its business and revenue generation. The Directors anticipate that whilst sales will continue to be restricted during and immediately after lockdown periods, the current pandemic presents a long-term opportunity as education embraces the need to adopt alternative ways of learning, including the adoption of remote and immersive technology. The Group also remains well placed, through its Engage platform, to take advantage of return to normality as the hospitality sector looks to encourage customers back into establishments once restrictions have eased. There is also the scope to adjust levels of expenditure in the longer term, if required.

In light of the above projections, the Directors are confident that the Company has sufficient working capital to honour all of its obligations to creditors as and when they fall due. In reaching this conclusion, the Directors have considered the forecast cash headroom, the resources available to the Company and the potential impact of changes in forecast growth and other assumptions, including the potential to avoid or defer certain costs and to reduce discretionary spend as mitigating actions in the event of such changes. Accordingly, the Directors continue to adopt the going concern basis in preparing these consolidated financial statements.

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sales of goods of services in the ordinary course of the Company's activities. Revenue is measured at as the fair value of the consideration received or receivable and is shown net of value added taxes, rebates and discounts.

Under IFRS 15 - Revenue from Contracts with Customers, five stages of revenue recognition have been applied to the Group's revenue:

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;

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

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

Commercial development projects, customisation of software and set up fees

Client-driven development entails direct co-operation between the development team and the client towards a client-defined goal. Such agreements are individually evaluated to determine if revenue is recognised at a point in time or over time based on the delivery of contractual milestones that are aligned to the satisfaction of performance obligations within the underlying contract / project brief.

Software subscription fees

Software is licenced to customers via subscription on fixed term agreements. Where the client has obtained control of the licence and the ability to use and obtain substantially all the benefits from it, revenue is recognised. The client obtains control when a contract is agreed, the licence delivered, and the client has the right to use it.

Where a client subscribes to a software licence but the Company continues to maintain control of the on-going hosting, support, maintenance and upgrade activity, revenue is recognised on time elapsed and thus rateably over the term of the agreement. These customers simultaneously receive and consume the benefit of their software licence as we perform.

Support, maintenance and hosting contracts

Revenue is recognised in accordance with the performance obligations contained with the associated support, maintenance and hosting agreement. Revenue is typically recognised based on time elapsed and thus rateably over the term of the agreement. Under our standardised support agreement, our performance obligation is to stand ready to provide technical product support and unspecified updates, upgrades and enhancements on a when-and-if-available basis. Our customers simultaneously receive and consume the benefit of these support services as we perform.

Operating profit

Operating profit comprises the Company's revenue for the provision of services, less the costs of providing those services and administrative overheads, including depreciation and amortisation of the Company's non-current assets.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The CODM, 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.

A business segment is a group of assets and operations, engaged in providing products or services that are subject to risks and returns that are different from those of other operating segments. 

The Board of Directors assess the performance of the operating segments based on the measures of revenue, gross profit, operating profit and assets employed.

Finance costs

Finance costs represent the cost of borrowings and are accounted for on an amortised cost basis in the income statement using the effective interest rate.

Dividends

Dividends to the Company's shareholders are recognised when the dividends are approved for payment.

Earnings per share

Earnings per share represents the portion of the Company's profit / (loss) from continuing operations attributable to each outstanding share of the Company's ordinary share capital. 

Diluted earnings per share represents the portion of the Company's profit / (loss) from continuing operations attributable to each outstanding share of the Company's ordinary share capital after taking into consideration the conversion of all outstanding employee share options and advisor warrants.

Adjusted earnings per share is an internal management measure of earnings per share in which the profit / (loss) from continuing operations has been adjusted to remove the effect of certain non-operating income and expenses. Management believes that this measure more accurately reflects the underlying operational performance of the business and its associated cash flow.

In determining the adjusted earnings per share, management has removed the costs associated with the Company's IPO of £nil (2019: £112,770) and the share-based payments expense incurred in the period of £140,177 (2019: £110,212). 

Property, plant and equipment

Purchased property, plant and equipment is stated at cost less accumulated depreciation and any provision for impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on the following bases:

Right of use assets

Life of lease

Straight line

Computer equipment

1 to 3 years

Straight line

Fixtures and fittings

3 to 10 years

Straight line

The asset's residual values and useful economic lives are reviewed by the Directors and adjusted, if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable value.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other (losses) or gains in the income statement. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.

Goodwill

Goodwill arising on the acquisition of a subsidiary undertaking is determined as the difference between the fair value of the assets, including any intangible assets arising on acquisition, and liabilities acquired, and the fair value of consideration paid. Goodwill, which is classified as an intangible asset with an indefinite life, is subject to an annual impairment review.

Further detail of the goodwill arising on the acquisition of Phenix Digital Limited can be found in note 12 Intangible assets and note 28 Business combinations.

Goodwill arising on the transfer of trade between subsidiaries

A transfer of trade between subsidiaries is defined as a type of restructure in which the trade ands operations, including the transfer of staff and novation of sales contracts, of one subsidiary is transferred to another subsidiary in the Group. The transfer of trade and assets is accounted for within the parent company through the re-categorisation of the investment in the transferor as goodwill.

Further detail of the goodwill arising in the Company's statement of financial position and the re-categorisation of its investment in Phenix Digital as goodwill can be found in note 12 Intangible assets - Company and note 15 Investments

Intangible assets: Customer Relationships

Customer relationship assets reflect the recognition of future contractual revenue streams arising on acquisition. The assets are valued at the net present value of the future contracted revenue stream, discounted at the Group's cost of capital.

Customer relationship assets are amortised, to cost of sales, over the remaining life of the contract.

Intangible assets: Internal Use Software - Software Development

An internally generated development intangible asset arising from the Company's product development is recognised if, and only if, the Company can demonstrate all of the following:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale

• its intention to complete the intangible asset and use or sell it

• its ability to use or sell the intangible asset

• how the intangible asset will generate probable future economic benefits

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset

• its ability to measure reliably the expenditure attributable to the intangible asset during its development

Internally generated development intangible assets are amortised, as a cost of sale, on a straight-line basis over their useful lives of up to three years. Amortisation is charged to the income statement from when the asset becomes available to use. 

Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Impairment of property, plant and equipment, and intangible assets

At each balance sheet date, the Company reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than it carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. In the case of a cash-generating unit, any impairment loss is charged first to any goodwill in the cash-generating unit and then pro rata to the other assets of the cash- generating unit.

Financial assets at fair value through profit or loss

The Group may undertake bespoke development activity for customers within Agency Services for which it receives equity shares as part consideration for the services it has provided. These assets are treated as financial assets at fair value through profit or loss, being financial assets held for trading that include investments in unlisted securities. 

The Group recognises these assets at fair value, which it determines based on the degree to which fair value is observable:

· Level 1 fair value measurements being those derived from inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

· Level 2 fair value measurements being those derived from valuation techniques that includes inputs for the asset or liability that are not based on observable market data (unobservable inputs).

· Level 3 assets whose fair value cannot be determined by using observable inputs or measures, such as market prices or models. Level 3 assets are typically very illiquid, and fair values can only be calculated using estimates or risk-adjusted value ranges.

Details of these assets and their valuation are included in note 14 Assets Held at Fair Value to these financial statements.

Investments

Investments in subsidiaries are carried at cost less accumulated impairment losses, in the Company's balance sheet. On disposal, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Company becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contracted rights to the cash flows from the financial asset expire or when the contracted rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired. Financial assets and financial liabilities are initially measured at their fair value. Transaction costs attributable to the acquisition of a financial asset or financial liability are added or deducted from the fair value of the financial asset or financial liability.

At each reporting date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised based on the classification of the financial asset.

Loans and receivables (including trade receivables, prepayments, deposits and other receivables, cash and bank balances) are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. At each reporting date subsequent to initial recognition, loans and receivables are carried at amortised cost using the effective interest method, unless when there is objective evidence that the asset is impaired. Impairment is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset's recoverable amount can be related objectively to an event occurring after the impairment is recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(a) Trade and other receivables

Trade and other receivables are recognised at their fair value. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the assets are impaired. Trade and other receivables are shown in note 21 as "loans and receivables".

(b) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits held on call with banks. Cash and cash equivalents are shown in note 21 as "loans and receivables".

Financial liabilities and equity

(c) Trade and other payables

Trade payables are recognised at their fair value. Trade and other payables are shown in note 21 as "other financial liabilities".

(d) Deferred income

Where the Group invoices a customer for revenues, or receives payment for those revenues, in advance of the satisfaction of the associated performance obligation, those revenues are deferred and are disclosed as deferred income on the Statement of Financial Position. The revenue is recognised in the Statement of Comprehensive Income once the associated performance obligation is satisfied.

(e) Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (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 income statement.

(f) Convertible loan note

The convertible loan note agreement, entered into by the Company on 20 January 2020, has been classified as a compound financial instrument under IAS 32. The fair value of the liability component is valued at the net present value of the contracted future cash flows, discounted at the Company's cost of borrowing, and is reported within "Loans and borrowings: amounts falling due in more than one year". Interest imputed on the liability component is amortised to the statement of comprehensive income on a straight-line basis over the life of the instrument. The equity component represents the residual amount after deducting the amount for the liability from the value of the funds received and is reported within "Other reserves". Further details of the loan note can be found in note 19.

(g) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of issue costs.

Employee benefits

The Company operates a defined contribution auto-enrolment pension scheme for employees of the Company. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension costs charged in the income statement are the contributions payable to the scheme in respect of the accounting period.

Current tax

The tax currently payable is based on taxable profit or loss for the year. Taxable profit or loss differs from the profit or loss for the financial year as reported in the statement of total comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Where tax credits are received in respect of allowable research and development expenditure, these are recognised in the statement of comprehensive income.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Equity

Equity comprises the following:

• Share capital, representing the number of shares subscribed at nominal value;

• Merger reserve, relating to the adjustment required to account the acquisition of DevClever Limited as a reverse acquisition

• Share premium, representing the additional amount of funds received in excess of the nominal value of the shares and recorded net of associated transaction costs;

• Other reserves comprising (i) share-based payment reserves, in respect of the charge for share based payments arising on the grant of employee share options and advisor warrants, in accordance with International Financial Reporting Standard 2; and (ii) the equity component of a compound financial instrument realised during the year;

• Retained income represents the cumulative earnings of the Group attributable to equity shareholders.

Share based payments

The costs of equity settled transactions are measured at their fair value at the date at which they are granted. The cost of advisor warrants is recognised at the grant date as they are issued in respect of services already received. The cost of equity settled transactions with employees is charged to the income statement as an expense over the vesting period, on a straight-line basis, which ends of the date on which the relevant employees become fully entitled to the award. Non-market vesting conditions are taken into consideration by adjusting the numbers of options expected to vest, at each statement of financial position date, such that the cumulative charge recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition. The movement in cumulative expense since the previous reporting date is recognised in the statement of comprehensive income within administration expenses with a corresponding entry in the statement of financial position in the relevant share-based payment reserve.

Fair value is determined using the Black-Scholes model, details of which are given in note 9 Share based payments.

3

Critical accounting estimate and judgements

The preparation of these consolidated financial statements requires the Directors to make judgements and estimates that affect the reported amounts of assets and liabilities at each reporting date and the reported amounts of revenue during the reporting periods. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. Information about such judgements and estimations are contained in individual accounting policies. The key judgements and sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of assets or liabilities within the next accounting period are outlined below:

Capitalisation of development costs

The Group recognises costs incurred on development projects as an intangible asset which satisfies the requirements of IAS 38. The calculation of the costs incurred includes the time spent by certain employees on the development project, as recorded through their timesheets and the invoiced costs of third-party contractor resource. The decision whether to capitalise and how to determine the period of economic benefit of a development project requires judgement over the commercial viability of the project and the prospect of selling the related software to new or existing customers.

The Group capitalised £686,138 of internal development costs in the year (2019: £204,058). Details of the development costs capitalised in the year are shown in note 12 Intangibles.

Impairment of internally generated intangible assets

An impairment review of the Company's development costs is undertaken at least annually. This review involves the use of judgement to consider the future projected income streams that will result from the aforementioned costs. The expected future cash flows are modelled and discounted over the expected life of the assets in order to test for impairment using the Group's cost of capital of 9.3% as the discount rate.

No impairment charge was made in the year (2019: £174,085). In the prior year, an impairment charge was made to write down the previously capitalised development costs associated with the Group's gaming experiences. This followed a decision taken by the Board to suspend further development activity in this area and to concentrate on accelerating the development of the Group's careers education platforms. Details of the impairment of internally generated intangible assets are shown in note 12 intangibles.

Impairment of goodwill

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of a Cash Generating Unit (CGU) is determined from value in use calculations. The key assumptions for these calculations are externally derived long-term growth rates, discount rates and cash flow forecasts derived from the most recent financial budgets and forecasts approved by management covering a three-year period. Rates applied are:

• Long term growth rate 2.0%

• Discount rate / cost of capital 9.3%

Budgets and forecasts are based on expectations of future outcomes taking into account past experience adjusted for revenue growth from both new business and like for like growth and taking into consideration external economic factors. Cash flows beyond the three-year period are extrapolated using estimated growth rates based on local expected economic conditions and do not exceed the long-term average growth rate for that country. The discount rates are based on the Group's weighted average cost of capital. Further details on impairment testing are provided in note 12 - Intangibles.

Fair valuation of assets and liabilities arising on the acquisition of Phenix Digital

On 13 March 2020, the Group acquired the entire share capital of Phenix Digital Limited in exchange for consideration comprising a combination of new Ordinary 1p shares in Dev Clever Holdings Plc and cash. In establishing the fair value of assets acquired, the directors have exercised their judgement in establishing the existence of any intangible assets acquired and their associated fair values. 

The directors judged the fair value of customer relationships acquired to be the present value of the remaining contractual income flows discounted at the Group's cost of capital of 9.3%.

Further details of the customer relationship intangible are provided in note 28 Business combination.

4

Revenue

2020

2019

£

£

Development and set up fees

1,070,474

311,941

Subscription, hosting and support fees

184,260

168,644

1,254,734

480,585

In the year to 31 October 2020, revenue from 3 of the Company's major customers represented more than 10% of the Company's revenue. Revenue related to those customers was £450,679, £300,510 and £101,770 respectively. In the year to 31 October 2019, revenue from 3 of the

Company's major customers accounted for more than 10% of the Company's revenue. Revenue relating to those customers was £83,358, £79,720 and £45,388 respectively. The major customers were different year on year.

All revenues are from external customers and can be attributed to the following geographical locations, based on the customers' location as follows:

2020

2019

£

£

United Kingdom

790,886

434,413

Rest of Europe

-

77

Asia Pacific

450,679

11,095

USA

13,169

35,000

1,254,734

480,585

5

Expenses by nature

2020

2019

£

£

Cost of sales

Salary and other employee costs

563,064

370,598

Third party contractors

403,663

143,982

Less: software development costs capitalised

(387,038)

(202,143)

Amortisation of software

99,747

11,207

Impairment of capitalised software development costs

-

174,085

Direct materials and charges

24,171

24,053

Total cost of sales

703,607

521,782

Administration expenses

Salary and other employee costs

936,331

435,975

Third party contractors

20,596

10,000

Depreciation

55,808

14,692

Legal, professional and regulatory fees

270,007

305,208

Information technology and telecommunications

159,031

92,844

Advertising and promotion

88,707

41,738

Travel expenses

48,329

24,121

Premises

45,278

61,217

Other administration expenses

13,641

13,865

Total administration expenses

1,637,728

999,660

Auditors remuneration

2020

2019

£

£

Fees payable to the Company's auditor and associates

For the audit of the Group and Company financial statements

37,328

34,000

Corporate finance in relation to work as reporting accountant for the prospectus in FY2020 and listing in 2019

16,000

22,937

Other assurance services

1,680

1,500

55,008

58,437

6

Segmental analysis

The chief operating decision maker considers the Group's segments to be by geographical location and by revenue type.

Year ended 31 October 2020

Educate

Agency

Total

£

£

£

Revenue by geographical location

United Kingdom

111,327

679,559

790,886

Asia Pacific

450,679

-

450,679

USA

3,294

9,875

13,169

565,300

689,434

1,254,734

Year ended 31 October 2019

Educate

Agency

Total

£

£

£

Revenue by geographical location

United Kingdom

122,304

312,109

434,413

Rest of Europe

-

77

77

Asia Pacific

-

11,095

11,095

USA

-

35,000

35,000

122,304

358,281

480,585

Segmental analysis

As reported in FY 2019 Annual Report, last year end the Group made the decision to concentrate its management focus and capital resources on the Educate business and its virtual reality careers guidance platform. The Engage customer loyalty and Other segments were merged into a single segment entitled Agency. The prior period comparatives for Agency represent the summation of the previously separately disclosed Engage and Other segments. 

Year ended 31 October 2020

Educate

Agency

Total

£

£

£

Revenue by type

Development and set up fees

476,332

594,142

1,070,474

Subscription, hosting and support fees

88,968

95,292

184,260

565,300

689,434

1,254,734

Cost of sales

(183,774)

(519,833)

(703,607)

Gross profit by segment

381,526

169,601

551,127

Operating loss by segment

(438,005)

(508,419)

(946,424)

Costs not allocated by segment:

Share based payment expenses

(140,177)

Fair value gain on financial assets at fair value

77,518

Finance income

240

Finance costs

(47,411)

Tax credit

118,557

Total comprehensive income for the period attributable to shareholders

(937,697)

Year ended 31 October 2019

Educate

Agency

Total

£

£

£

Revenue by type

Development and set up fees

27,043

284,898

311,941

Subscription, hosting and support fees

95,261

73,383

168,644

122,304

358,281

480,585

Cost of sales

(139,404)

(382,378)

(521,782)

Gross profit / (loss) by segment

(17,100)

(24,097)

(41,197)

Operating loss by segment

(280,747)

(536,276)

(817,023)

Costs not allocated by segment:

IPO fees

(113,622)

Share based payment expenses

(110,212)

Finance income

811

Finance costs

(24,601)

Tax credit

45,016

Total comprehensive income for the period attributable to shareholders

(1,019,631)

The segmental analysis above reflects the parameters applied by the Board when considering the Group's monthly management accounts. Costs not allocated to segments include share-based payment expenses, listing costs, finance income and expense and taxation expenses.

Year ended 31 October 2020

Educate

Agency

Total

£

£

£

Financial position

Net current assets

944,352

439,811

1,384,163

Net assets

1,718,534

624,083

2,342,617

Year ended 31 October 2019

Educate

Agency

Total

£

£

£

Financial position

Net current assets

166,300

309,410

475,710

Net assets

149,470

420,433

569,903

7

Particulars of staff

The average number of persons employed by the Group, including Directors, during the year was:

2020

2019

No.

No.

Product development

18

12

Sales and administration

9

9

27

21

The aggregate payroll costs of these persons were:

2020

2019

£

£

Wages and salaries

1,223,798

683,114

Social security costs

130,522

64,525

Pension costs - defined contribution plan

21,185

11,217

Share based payments - employee option expense

123,890

47,717

1,499,395

806,573

Being:

Salary and other employee costs reported within cost of sales

563,064

370,598

Salary and other employee costs reported within administration expenses

936,331

435,975

1,499,395

806,573

Less: wages and salaries capitalised within software development costs

(331,227)

(186,678)

1,168,168

619,895

The Company employed two members of staff, being the Non-Executive Directors, at a total cost of £42,644 (2019: £31,355).

Key management remuneration

Remuneration of the key management team, including Directors, during the year was as follows

2020

2019

£

£

Aggregate emoluments including short-term employee benefits

460,102

197,400

Social security costs

56,890

21,987

Pension costs - defined contribution plan

5,028

2,190

Share based payments - employee option expense

87,373

27,594

609,393

249,171

Key management personnel include the Directors and Tim Heaton, the Chief Operating Officer, Julian Carter, the Managing Director of Agency Services and Richard Lee, the Global Sales Director (Educate). The key management remuneration in respect of Tim Heaton is for the period to 26 May 2020, on which date he was appointed as an Executive Director of the Company.

Directors' remuneration is detailed within the Remuneration Report. Details of key manager remuneration are outlined below (FY 2019 £nil).

Key manager

Salary and fees

Taxable benefits

Bonus

Pension related benefits

Consultancy fees

2020 Total

£

£

£

£

£

£

Tim Heaton

67,869

6,108

16,967

1,357

-

92,301

Keith Hayes

-

-

-

-

40,000

40,000

Richard Lee

12,000

1,040

-

-

-

13,040

Julian Carter

2,962

300

-

-

-

3,262

Total

82,831

7,448

16,967

1,357

40,000

108,603

Tim Heaton's salary is in respect of the period 1 November 2019 to 25 May 2020 at which time he became an executive director. Details of his directors' emoluments are disclosed within the Remuneration Report.

Keith Hayes provided his services to the Group as a self-employed contractor, on a part-time basis, receiving consultancy fees of £40,000 in the year ending 31 October 2020. Keith was employed by the Group on a full-time basis on 30 November 2020.

Remuneration for Richard Lee and Julian Carter relates to the period following their appointments on 14 September 2020 and 19 October 2020 respectively.

Directors' remuneration

Remuneration of the Directors during the period was as follows:

2020

2019

£

£

Aggregate emoluments including short-term employee benefits

352,856

184,000

Pension costs - defined contribution plan

3,671

2,190

Directors' remuneration

356,527

186,190

Social security costs

43,074

20,237

Share based payments - employee option expense

54,006

27,594

453,607

234,021

Chris Jeffries, the Executive Chairman and CEO, was the highest paid director. Details of his remuneration are detailed in the Remuneration Report.

8

Finance income and expense

2020

2019

£

£