TIDMDVRG
RNS Number : 6612T
Deepverge PLC
26 November 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED
UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014
WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL)
ACT 2018, AS AMED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO
BE IN THE PUBLIC DOMAIN
26 November 2021
DeepVerge plc ("DeepVerge" or "Company")
Related Party Transaction
DeepVerge announces that it is proposing to settle for cash,
obligations to certain Directors relating to their salaries which
are currently contracted to be settled in shares in the Company.
The Directors concerned have agreed, in the best interests of the
Company and shareholders, to forego significant potential gains on
these shares in return for a cash sum, which is calculated based on
a 25% uplift on the original value of the salary obligations. This
situation has arisen following a significant rise in the Company's
share price since these arrangements were made in 2018.
Ross Andrews, Chairman of DeepVerge, said:
"DeepVerge has been through transformational change since the
appointment of Gerry and Camillus in 2018. Under their leadership,
the Company has been streamlined to focus on developing a
successful revenue-generating environmental and healthcare
business, with revenues increasing year-on-year by more than
300%.
On behalf of the Board, I would like to recognise the hard work
of Gerry and Camillus and their commitment to the business whilst
agreeing to receive shares in lieu of a salary in 2018 and 2019, at
a time when the Company was cash constrained, as the Company was
turned around and has grown. Furthermore, as a demonstration of
their commitment, they have offered to receive a cash payment at a
significant discount to settle the shares that they are owed. The
Company is in a stable position, both financially and
operationally, and under the continued guidance of its executive
team, the Board believes that DeepVerge has a strong future
ahead."
Background
On 16 July 2018, when the intention to appoint Gerard Brandon
and Camillus Glover to the Company's board as Chief Executive
Officer and Chief Operations Officer respectively was notified by
the Company, the notification included details of remuneration
arrangements for Mr Brandon and Mr Glover such that for the first
year of their appointment, and in order to preserve the Company's
cash balances, their salaries were to be settled by the issue of
ordinary shares in the Company ("Ordinary Shares"). The number of
new Ordinary Shares to be issued was to be determined on a
quarterly basis and issued at the volume weighted average
mid-market closing price ("VWAP") of Ordinary Shares for the
previous 90 days. Mr Brandon and Mr Glover elected to receive
shares in lieu of salary for the period from the date of their
appointment as directors, 8 August 2018 until 30 June 2019, being
amounts of GBP102,500 and GBP92,250 respectively.
In aggregate, the number of shares due to be issued to Mr
Brandon and Mr Glover under the above arrangements are as
follows:
Name Value of salary Number of Ordinary Average price
for which Shares due in settlement of shares to be
shares were of these arrangements issued (based on
elected to relevant 90 day
be taken VWAP calculations)
Gerard Brandon GBP102,500 1,255,118 8.17 pence
----------------- -------------------------- --------------------
Camillus Glover GBP92,250 1,129,606 8.17 pence
----------------- -------------------------- --------------------
Total GBP194,750 2,384,724
----------------- -------------------------- --------------------
adjusted for the 10:1 share consolidation in September 2020.
None of the shares due to Messrs Brandon and Glover have yet
been issued.
As the issue of shares in lieu of salary is treated by taxation
authorities in the United Kingdom (for Mr Brandon) and Ireland (for
Mr Glover) as remuneration, income tax and national insurance (or
Irish equivalent) contributions for both employer and employee fall
due at the date of payment of the remuneration, based upon its
value at that date.
The Company's mid-market Ordinary Share price at close of
business on 25 November 2021 (the date the Company's Independent
directors met to consider this matter) was 27.0 pence, which is a
significant premium to the implied price at which the shares would
be issued as set out in the table above.
To issue the shares as above would have the following effects on
DeepVerge:
- Employers' National Insurance (or Irish equivalent) of
GBP40,717 would be payable by the Company;
- DeepVerge would also have to remit income tax and Employees
National Insurance contributions to the taxation authorities (and
be reimbursed by the Directors concerned);
- 2,384,724 Shares would be allotted, at an effective blended
issue price of which has the effect of diluting existing
shareholders' holdings by around 1.1%.
It is therefore proposed that instead of settling these amounts
by the issue of shares as contracted (which have a market value of
GBP643,875), the Directors concerned waive their entitlements to
the shares, and instead are paid the salaries to which these relate
in cash via DeepVerge's payroll, at a premium of 25% - ie a total
of GBP243,438 (compared to the original entitlement of GBP194,750)
as set out in the table below.
If DeepVerge were to have issued these shares as at 25 November
2021 the value of the remuneration would be as follows, which is
compared to the proposed settlement.
Name No of shares Deemed value of Proposed settlement
due in settlement remuneration at (being a 25% uplift
of salary 25 November 2021* on the original
contracted amounts)
Gerard Brandon 1,255,118 GBP338,882 GBP128,125 in cash
------------------- ------------------- ---------------------
Camillus Glover 1,129,606 GBP304,994 GBP115,313 in cash
------------------- ------------------- ---------------------
Total 2,384,724 GBP643,875 GBP243,438 in cash
------------------- ------------------- ---------------------
*this is the gross value of the shares, being the number of
shares in the 2(nd) column multiplied by 27.0 pence,
being the closing mid-market price of Ordinary Shares on 25 November 2021.
Issuing the 2,384,724 shares to which the Directors are entitled
would result in a charge to the profit and loss account of
GBP684,592 of which GBP643,875 would be a non-cash item
(notwithstanding DeepVerge would be required to remit tax and
national insurance contributions to the taxation authorities, and
be reimbursed for the tax and employees national insurance
contributions by the Directors concerned) and GBP40,717 would be a
cash item (being the Employers' national insurance
contributions).
It is proposed that, rather than settle these amounts by the
issue of shares, the Directors concerned waive their rights to the
shares, which would have a gross value of GBP643,875 and instead
receive cash of GBP243,438 (being GBP128,125 for Mr Brandon and
GBP115,313 for Mr Glover.)
The "net" cash cost of the proposed settlement amounts in total
to GBP218,115 more than if the original contracted arrangement
prevailed, comprising cash paid to the Directors less the
incremental Employers' national insurance contributions. The
Company concluded a GBP10 million fundraising in June 2021 and is
able to meet the extra cash required to effect this settlement from
its current resources.
Related party transactions
Under the AIM Rules for Companies ("AIM Rules"), directors of
the Company, Gerard Brandon and Camillus Glover are each a related
party of the Company, and the intended amendment to the terms of
the settlement of the deferred remuneration is treated as a related
party transaction.
Under the AIM Rules, where a company enters into a related party
transaction, the independent directors of that company are
required, after consulting with the company's nominated adviser, to
state whether, in their opinion, the transaction is fair and
reasonable in so far as its shareholders are concerned.
The Independent Directors, being Ross Andrews, Dr Nigel Burton
and Fionan Murray, have considered the terms of the settlement and
note the following:
1) In June 2021 the Company raised GBP10 milion in new equity
and has the wherewithal to fund the GBP258,832 (including employer
taxes) cash cost of this arrangement
2) The incremental cash cost of paying these salaries now is
significantly less than the tax and national insurance that would
be payable if the shares were issued
3) The settlement effectively amounts to DeepVerge buying back
2,384,724 shares at a blended price of 10.85p per share, which is
significantly less than the current share price, and as such saves
a dilution to existing shareholders of around 1.1%.
4) The Directors concerned are foregoing (gross) gains on the
shares to which they would have been entitled of GBP449,125.
Having consulted with SPARK, the Company's nominated adviser,
the Independent Directors of the Company believe that the terms of
the settlement are fair and reasonable in so far as the Company's
shareholders ("Shareholders") are concerned.
DeepVerge plc Ross Andrews, Chairman +44 (0) 1904 40 4036
SPARK Advisory Partners
Limited (Nominated Neil Baldwin / Andrew
Advisor) Emmott +44 (0) 113 370 8974
------------------------ ---------------------
Turner Pope Investments Andy Thacker / James
(TPI) Limited (Broker) Pope +44 (0) 20 3657 0050
------------------------ ---------------------
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