26 February 2021

VR Education Holdings PLC

("VRE" or the "Group")

Final Results

VR Education (AIM: VRE; Euronext Growth: 6VR), a virtual reality ('VR') technology company, announces its results for the year ended 31 December 2020.

VRE is focused on becoming a leading global provider of virtual communications solutions through its proprietary software platform, ENGAGE. Having signed contracts with 60 clients during 2020, the Group's core focus is on scaling the revenue, client and user base on ENGAGE through three solutions: Virtual Campus, Virtual Office and Virtual Events.

Financial Highlights:

·  Group revenue increased by 38% to €1.4 million (2019: €1.0 million) driven by a significant increase in new clients and activity on ENGAGE

·    ENGAGE revenue was up 550% to €0.6 million (2019: €0.1 million) following the onset of global lockdowns

·   Gross profit increased by 63% to €1 million (2019: €0.6 million) as gross margin improved as proportion of revenue from ENGAGE increased

·    Cash position on 31 December 2020 was €2.0 million with no debt

Operational Highlights:

·  Acceleration of demand for ENGAGE Platform and partnerships with major organisations, including smart mobile device manufacturer HTC Corporation, Sky Ireland, Tokyo Global Gateway and Victory XR, a leading provider of VR and AR education solutions

·  Value of ENGAGE Subscriptions grew to more than €1.8 million with average deal size increasing.  60 customers signed contracts in 2020.

·    Following onset of Covid, launched Engage Events in March hosting virtual events for a range of companies and organisations, including the European Commission, Facebook, HTC, Vodafone, Xprize and Yahoo

·    Substantial increase in potential user base through the launch of ENGAGE Mobile (for Android and iOS) enabling customers to use ENGAGE without a VR headset or device

·    ENGAGE launched to HTC customers in Greater China Region under the Vive Session brand, following strategic investment from HTC in May 2020

·    The official release of ENGAGE on the Facebook/Oculus Quest Store in November 2020

COVID-19

·   The pandemic generated significant demand for remote and virtual communication solutions offered by VRE. Meets using ENGAGE provide a more immersive alternative to traditional video-based solutions such as MS Teams and Zoom

·    Strong demand for ENGAGE's Virtual Campus and Virtual Office enabling users to virtually meet work colleagues or attend company meetings. Also used for virtual office parties and graduation ceremonies

Medium-Term Outlook

In January 2021 VRE launched an ambitious strategy to achieve a €10 million annualised revenue milestone for ENGAGE during 2023 - 2025 (the" Medium Term Outlook"):

·   To generate €10 million ENGAGE revenue from 500 active enterprise customers and 100,000 monthly users

·    To deliver a gross margin in excess of 80% once ENGAGE revenue is between €5 million and €10 million annually

·    To retain at least 80% of ENGAGE customers

·    To grow average annual contract value to in excess of €20,000, reflecting the targeted Enterprise and Institutional client base and ENGAGE value proposition

David Whelan, CEO, VRE, said: "2020 was a formative year for VRE. Having launched our software platform ENGAGE 13 months earlier, we were well positioned to benefit from the pandemic-driven demand for virtual and remote modes of communication and interaction. In 2020, we successfully commercialised our Virtual Office, Virtual Campus and Virtual Events solutions with a number of multi-national enterprises and international institutions. We are now focussed on building our sales organisation and partnerships to bring ENGAGE to the broadest possible audience in 2021.

"Following the onset of the pandemic, the shift to remote working, online learning and virtual events led to a significant increase in demand for virtual communications solutions such as ENGAGE. The pandemic has been a catalyst in terms of permanently changing the traditional practices and mindsets of companies and organisations towards communication. At VRE, we can see this change through the diversity of our growing user base which includes large blue-chip companies and leading international organisations, as well as our own behaviour such as hosting all our daily team meetings in  VR. The use of virtual communications is only set to grow."

Investor Presentation

CEO David Whelan and CFO Séamus Larrissey will provide a live presentation relating to the Full Year Results via the Investor Meet Company platform today at 10:00am GMT.

The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet VR Education via: https://www.investormeetcompany.com/vr-education-holdings-plc/register-investor 

For further information, please contact:

Notes to Editors:

VR Education is (AIM: VRE; Euronext Growth: 6VR) is a leading virtual reality ('VR') technology company focused on becoming the world's largest crossed reality ('XR') communications, training and virtual events platform provider. The Irish based Group's core focus is the commercialisation of its online virtual communications platform called ENGAGE, which provides a platform for creating, sharing and delivering proprietary and third-party XR content in education, training and online events.

On 12 March 2018, VR Education listed on the AIM market of the London Stock Exchange and on the Enterprise Securities Market, a market regulated by Euronext Dublin.  For further information, please visit www.vreducationholdings.com.

CHAIRMAN'S STATEMENT for the year ended 31 December 2020

I am pleased to present the Annual Report and Financial Statements of VR Education Holdings PLC ("VRE" or "the Group"), a company incorporated in the Republic of Ireland, for the year ended 31 December 2020 ('FY-2020').

Overview of the year

This is the third set of financial statements I am proud to present to shareholders following the successful fundraising and IPO in March 2018.  VRE is an early stage, growing company with unique intellectual property in both content and operating software in the world of Virtual Reality ("VR").

Revenues in FY-2020 grew by 38% to €1.4 million (FY-2019: €1.0 million) generating a gross profit margin of 72% and gross profit of €1,013k (FY-2019: €622k).

COVID-19

VRE has the bulk of its operations in Waterford in the Republic of Ireland. Prior to the Republic's mandated lockdown, the Group made the prudent decision to have all 37 employees work remotely to ensure their safety. This action has not had any negative effect on productivity within the Group as all employees have remained dedicated and professional throughout this difficult period.

Our ability to utilise our own products for conferences as well as other meeting facilities has proved to be invaluable, not least as it gave us greater insights into the needs of customers and our ability to serve them. As an example, the Group now holds all its daily stand-up and design meetings inside the ENGAGE platform which has proved very successful. VRE has also hired new staff from the US and UK who will always work remotely. These employees only attend staff meetings and events virtually. This has helped the Group improve the platform making it easier to sell platform licenses to companies such as HTC, Facebook and others.

The only negative impact COVID-19 has had on the Group to date has been the closure of all museums and exhibits which have been hosting VRE content on a revenue share basis. We expect this to have cost in the region of €300k in 2020.  However, as locations reopen in the latter part of 2021 and 2022, the Group expects to see revenues in this area bounce back and increase as VRE works with more locations on new installations.

Development of ENGAGE

The Group's proprietary VR education platform ENGAGE was commercially launched in December 2018.  VRE has developed and promoted ENGAGE against both technological and commercial headwinds, including the lack of availability of suitable hardware. The commercial issues were mainly associated with Brexit in the UK where companies reduced technology spending due to the uncertainty it caused. 

In July 2020, ENGAGE Mobile launched on Android phones and tablets, with the iOS version for iPhones and iPads later released in December 2020. Users can now host virtual events without a VR headset or device, thereby expanding ENGAGE's addressable user base as it enables increased use of ENGAGE by large corporations to host virtual events. This was a major milestone achieved during the year and highlights VRE's ability to quickly adapt to the market.

Furthermore, the management team's perseverance has led the Group to sign partnerships with major organisations, including one of the leading world's smart mobile device manufacturers HTC Corporation and US-based Victory XR, a leading provider of VR and Augmented Reality ("AR") education solutions. The partnership with HTC has provided a platform and opportunity for ENGAGE within the Asian region, which is an area forecast to experience rapid growth in the VR market. The fact that these companies, with the robustness of their investment criteria, partnered with VRE is a terrific endorsement of ENGAGE and the opportunities it provides.

The ENGAGE platform is the ideal tool to meet the needs of the remote working world. The global COVID-19 pandemic has generated significant demand for VR solutions and there have been high levels of interest in our conferencing and collaboration tools. Our most popular products via the ENGAGE platform are our virtual campus and virtual offices where users can login to a persistent location and meet work colleagues to attend company meetings and events. Proving very popular late last year were virtual office parties and virtual graduation ceremonies. The Group has been working hard since the year end to ensure the platform is available to those who want to use it, releasing the platform on mobile phones, tablets, and iOS devices.

Standalone content

The Group also continues to produce award-winning standalone content to showcase VR/AR's potential as a tool for educational purposes. Our first release Apollo 11 VR about the first mission to the moon has won multiple awards including a Time Warner "Future of Storytelling" award. Apollo 11 VR was one of first big VR hits when released on the Oculus Rift and the HTC Vive in 2016. A High-Definition version was re-released in November 2018. Apollo 11 VR has generated more than €1.9 million in revenues since its launch to this year-end. Furthermore, Titanic VR and Shuttle Commander, which launched in Q4 2018 and Q4 2019 respectively, continue to perform well and have generated a combined €1.1 million in revenues since their launches.

Although our standalone experiences have been highly successful for the group in the past, our focus is now principally on the delivery of ENGAGE as the next big communication, education and collaboration platform seeking to replace Microsoft Teams and Zoom for large group conferences and virtual events.

Outlook

There has been considerable progress in 2021, and VRE is now well placed to deliver long-term value to shareholders, initially through the execution of its medium-term outlook as announced on 22 January 2021. Management view the ENGAGE total addressable market to be between $10bn and $25bn based on the expected compound annual growth rate ("CAGR") of between 12-23% forecast within the global team collaboration, global e-learning and global virtual events markets as per Grand View Research and Facts & Factors. 

I would like to take this opportunity to thank the management and employees for their hard work in what has been a challenging environment.  Furthermore, I want to thank our shareholders for their continued support.

Richard Cooper

Chairman

25 February 2021

CHIEF EXECUTIVE'S REVIEW for the year ended 31 December 2020

Review of the Year

ENGAGE - Significant Progress Made

2020 was a challenging year, however it provided a significant opportunity for VRE. This was illustrated with the significant accelerated growth of the Group's ENGAGE platform. During the year, over 60 commercial deals were signed to use the platform, compared to three in the previous financial year.

In the past six months, the user base of ENGAGE has increased by more than 700%. Revenue from the platform is now outstripping all other sources of revenue for the Group, with all metrics pointing to the continued accelerated growth of the platform in 2021 and beyond.  The significant progress made by the Group in FY20, including key partnerships such as HTC, Sky Ireland, and Tokyo Global Gateway, provides an opportunity to scale the business and create a path to profitability in the short to medium term.

Partnership with HTC

In May 2020, the Group announced that HTC had purchased a 20% equity stake in the Group. The acquisition of the stake followed the success of HTC's annual Vive developer conference inside the ENGAGE platform. The platform hosted over 1,000 concurrent VR users with 1.1 million viewers watching the live stream.  Furthermore, VRE negotiated a commercial deal with HTC to resell ENGAGE services inside China under the Vive Session brand.

In October 2020, ENGAGE was launched in China following months of work with HTC.  Revenue from this partnership is expected to be generated from Q2 2021.  ENGAGE China has been rebranded as Vive Sessions inside the China region. HTC is working closely with the ENGAGE team on a new enterprise and education offering, which will be available later in 2021.  The APAC region, particularly China, South Korea and Japan, will be the key driver of the global virtual reality market through until 2030.  The Group's partnership with HTC, the market leader in Asia for immersive hardware, places VRE in a strong position to capitalise on this market, providing customers with a combined hardware and software offering.

Additional Platforms

In 2020 the ENGAGE platform successfully hosted virtual events for a range of companies including Facebook, Vodafone, Xprize, the European Commission, Yahoo and HTC. This demand has continued into 2021 with multiple events already confirmed for the first half of 2021 including a number of HTC conferences.

Before 2020, the most significant barrier to adoption for the Group's ENGAGE platform was its accessibility.  ENGAGE was only available on PC based VR devices. This barrier was overcome during the year through the launch of ENGAGE Mobile on Android phones and tablets in July 2020, with the iOS version for iPhones and iPads released in December 2020.  This has enabled increased use of ENGAGE by large corporations to host virtual events.

Facebook/Oculus Quest Release

The official release of ENGAGE on the Facebook/Oculus Quest Store in November 2020 was another milestone. The ENGAGE application was front and centre on the store under collaboration applications. This positioning drove many requests from corporations to host the ENGAGE platform for ease of installation and updates.  Facebook has also become a commercial user of ENGAGE by signing up for an enterprise account for internal use cases. 

The progress made in 2020 means that ENGAGE is now available to a global audience and easy to install on a range of platforms and devices. This has resulted in increased revenues and continued growth in ENGAGE users month on month.

ENGAGE Broadening Userbase

Originally, ENGAGE was marketed as an education and training platform to provide remote distance learning as well as tools for educators to create content. The platform has evolved to enable a broad spectrum of different use cases generating revenues for the Group in different ways.

ENGAGE now has three main types of users, which are:

·    Education clients using ENGAGE Virtual Campus for remote classes offering persistent virtual campus locations, private branded learning environments with the ability to create and publish content and use virtual collaboration tools.

·    Enterprise clients using ENGAGE Virtual Office for remote team collaboration and meetings offering persistent virtual office locations, private branded office environments with the ability to use virtual collaboration tools and virtual sales presentation tools.

·    Event clients using ENGAGE Virtual Events to host safe large scale virtual events offering unique content possibilities with a large cost saving over traditional events.

Revenue from these three streams is currently evenly split. However, the Group expects to see a marked increase in Virtual Events and Virtual Office usage during 2021 now that the ENGAGE platform is accessible on a broader range of devices.

The Group now views ENGAGE as a comprehensive communications platform and believes that competition for future growth will be against video and text-based platforms such as Zoom, Microsoft Teams and Slack. While video-based platforms are primarily designed for one-on-one communication and not suited to hosting "virtual events" or large group meetings, ENGAGE provides a differentiated offering to the competition, as the platform was specifically designed to enable large groups to meet and interact naturally in virtual spaces. To this end, the Group is currently undertaking a rebranding of ENGAGE and will be investing in its marketing and business development to continue to support its growth trajectory.

ENGAGE Total Addressable Market (TAM)

The Group has estimated that ENGAGE's total addressable market is between $10bn and $25bn, which is determined as follows as per Grand View Research and Facts & Factors:

·    Global team collaboration software market size of $10 billion in 2020 with forecasted CAGR of 12.7% during the period 2020 to 2027;

·    Global e-learning market size of $165 billion in 2020 with forecasted CAGR of 14.6% during the period 2020 to 2026; and

·    Global events market size of $94 billion 2020 with forecasted CAGR of 23.2% during the period 2019 to 2027.

This presents a compelling opportunity for ENGAGE as the requirement for virtual, remote communications in response to COVID-19 and working-from-home phenomenon is accelerating forecast growth rates in these markets and the market share for VR and next generation solutions. The Group is well positioned with its current product offering to take advantage of this large global market and high growth forecasts.

Showcase Experiences

Showcase Experiences was an important part of the business and a key generator of revenue in prior years.  However, the Group's focus is now on scaling the ENGAGE platform. Our Showcase Experiences continued to sell strongly on a range of different platforms throughout 2020.  Shuttle Commander was released on the popular Oculus Quest platform in September, and later PC-based VR devices via the Steam network in November.

Outlook

On 22 January 2021, VRE announced the Group's medium-term outlook. The Group is targeting €10 million ENGAGE revenue generated from 500 active enterprise customers and 100,000 monthly users during the period FY-2023 to FY-2025. These key performance indicators are supported by the Group's strategy, strong ENGAGE momentum and large global addressable market. This outlook captures and quantifies the upward trend targeted by the ENGAGE platform.

Furthermore, the Group is targeting a gross margin in excess of 80% once ENGAGE revenue is between €5 million - €10 million, a forecast retention rate of ENGAGE customers of at least 80% and estimated growth in average annual contract value in excess of €20,000, reflecting the targeted Enterprise and Institutional client base and ENGAGE value proposition.

In the past six months, we have begun to prove the monetisation strategy of ENGAGE, with over 60 commercial deals signed to use the platform in FY-2020. The strategy's efficacy is also evident in the increasing average ENGAGE deal sizes, with some of our earlier commercial clients purchasing additional accounts and services leading to larger purchase orders.

With just two full-time business developers for the majority of 2020, the Group has closed deals during the year worth more than €1.8 million, which should be recognised over the next 36 months.  The Group has now hired an additional four business developers.  VRE will begin to allocate increased funding to the marketing and promotion of the ENGAGE platform as we look to grow in 2021 and beyond.

Following the deployment of the ENGAGE platform on the Chinese mainland in collaboration with HTC in late 2020, we expect to see the first revenues generated from this partnership realised in the first half of 2021. ENGAGE is now available on almost every platform globally, opening major opportunities where sales were previously limited to a small but growing marketplace.

VRE has made significant operational progress and achieved several key milestones during 2020. With a workforce of in excess of 50 people at the year end we will continue to grow the team during 2021 with strategic hires planned in a number of areas within the organisation to drive the growth of the business.

As the Group moves into 2021, it is well-positioned with increasing revenue, growing numbers of ENGAGE users, and an expanding market opportunity. As we look to scale the business and increase market share, VRE is poised to capitalise on its strong position in China.  China is the fastest-growing immersive market in the world. The Group looks forward to capitalising on the many exciting opportunities on the horizon.  VRE is focused on identifying new strategic partnerships to support the Group's growth and expansion in 2021.

We are looking forward to the future with confidence.

David Whelan

Chief Executive Officer

25 February 2021

CHIEF FINANCIAL OFFICER'S REVIEW for the year ended 31 December 2020

I am pleased to report that revenue for the year was up 38% on the prior year from €1.0 million to €1.4 million, driven by a significant increase in demand for the ENGAGE platform. ENGAGE revenue was up 500% on the prior year from €0.1 million to €0.6 million.

EBITDA loss was €2.1 million compared to a loss of €1.4 million in the prior year and loss before tax was €2.7 million compared to a loss in the prior year of €1.9 million. This increased EBITDA loss is driven by reduced capitalisation of developer staff costs in 2020 in line with International Accounting Standards which were required to go through the income statement in 2020.

Operating cashflows were a net outflow of €2.0 million for the period.  The current run-rate of staff costs and other ongoing costs is approximately €250k per month.

At the balance sheet date, trade and other receivables were €358k, marginally ahead of trade and other payables at €357k. Trade receivables represented an average of 74 debtor days (2019: 52 days)

The Group's cash position on 31 December 2020 was €2.0 million with no debt. The cash balance was significantly strengthened during the year by a successful €3.0 million (€2.93 million net of expenses) share subscription by HTC.

Séamus Larrissey

Chief Financial Officer

25 February 2021

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

for the Year Ended 31 December 2020

The accompanying notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 31 December 2020

The accompanying notes form an integral part of these financial statements.

COMPANY STATEMENT OF FINANCIAL POSITION

at 31 December 2020

The accompanying notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the Year Ended 31 December 2020

The accompanying notes form an integral part of these financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY

for the Year Ended 31 December 2020

  The accompanying notes form an integral part of these financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS

for the Year Ended 31 December 2020

The accompanying notes form an integral part of these financial statements.

COMPANY STATEMENT OF CASH FLOWS

for the Year Ended 31 December 2020

The accompanying notes form an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1.   General Information

VR Education Holdings plc ("the Company") is publicly traded on the Alternative Investment Market ("AIM") of the London Stock Exchange and on the Euronext Growth Market ("Euronext Growth"), a market regulated by Euronext Dublin. The Company is incorporated and domiciled in the Republic of Ireland. The registered office is Unit 9, Cleaboy Business Park, Old Kilmeaden Road, Waterford and the registered number is 613330.

The Company is the parent company of Immersive VR Education Limited ("IVRE"). IVRE is incorporated and domiciled in the Republic of Ireland with the same registered office as the Company. On 12 March 2018 the Company acquired Immersive VR Education Limited and contemporaneously listed on London's AIM market and Dublin's Euronext Growth market. As part of the Admission process, the Group raised £6 million before expenses, through an oversubscribed placing of 60,000,000 new ordinary shares at a placing price of 10p each. On 12 June 2020 HTC Corporation invested €3.0 million in the Group and were issued 48,284,102 ordinary shares at an issue price of €0.062 per share.  Net proceeds after expenses were €2.94 million.

The Group is principally engaged in the development of the educational Virtual Reality platform ENGAGE. The Company also develops and sells Virtual Reality experiences for the education market.

2.   Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of the Financial Statements are set out below.  These policies have been consistently applied to all the years presented, unless otherwise stated. The consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union issued by the International Accounting Standards Board ("IASB") including related interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").

Basis of Consolidation

The consolidated financial statements incorporate those of VR Education Holdings plc and its subsidiary Immersive VR Education Limited.

All financial statements are made up to 31 December 2020. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Subsidiaries are fully consolidated from the date on which control is transferred to the group.  They are deconsolidated from the date on which control ceases. Control is achieved when the group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The Group re-assess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.

Business Combination

Acquisition of Immersive VR Education Limited

The Company entered into an agreement to acquire the entire issued share capital of Immersive VR Education Limited on 12 March 2018. The acquisition was effected by way of issue of shares. Due to the relative size of the companies, Immersive VR Education's shareholders became the majority shareholders in the enlarged capital of the Company. The transaction fell outside of IFRS 3 ("Business Combinations") and as such has been treated as a group reconstruction.

Therefore, although the Group reconstruction did not become unconditional until 12 March 2018, these consolidated financial statements are presented as if the Group structure has always been in place, including the activity from incorporation of the Group's subsidiaries.

Furthermore, as VR Education Holdings plc was incorporated on 13 October 2017, while the enlarged group began trading on 12 March 2018, the Statement of Comprehensive Income and consolidated Statement of Changes in Equity and consolidated Cash Flow Statements are presented as though the Group was in existence for the whole year. On this basis, the Directors have decided that it is appropriate to reflect the combination using merger accounting principles as the transaction falls outside the scope of IFRS 3 and as such has been treated as a Group reconstruction. No fair value adjustments have been made as a result of the combination.

Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgments

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Capitalised development costs

In applying the requirements of IAS 38 Intangible Assets, the Group assessed various development projects against the criteria required for capitalisation. Certain projects that did not meet the criteria regarding the ability to determine whether those projects would generate sufficient future economic benefits were expensed. The judgements reflect the early stage of the VR/AR market and will change over time.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Capitalised development costs impairment review

The Group's impairment review undertaken to assess the carrying value of capitalised development costs includes certain assumptions on future revenues and costs associated with the underlying technology. Those cashflows are discounted at an appropriate discount rate. These estimates and assumptions are reviewed on an on-going basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information or more experience. Such changes are recognised in the period in which the estimate is revised.

Going Concern

The financial statements are presented on a going concern basis. In forming this opinion, the Directors have considered all the information available to them. This includes management prepared forecasts, due consideration of the ability to raise funds on the open market in respect of the dual listing on the Alternative Investment Market on the London Stock Exchange and on the Enterprise Securities Market, a market regulated by Euronext Dublin and the timing as to when such funds will be received. Based on their consideration of these matters and following receipt of €3m subscription for ordinary shares from HTC on 12 June 2020, 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, that Group has reviewed the potential impact upon on its business and revenue generation. The Directors anticipate experience sales will be relatively unaffected both during and immediately after the lockdown period, however there is scope to adjust levels of expenditure in the longer term, if required.

These financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the group not continue as a going concern. Thus, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Foreign Currency Translation

(a) Functional and Presentation Currency

Items included in the Financial Statements of the Group are measured using the currency of the primary economic environment in which the entity operates ("functional currency").

The Financial Statements are presented in euro (€), which is the Group's functional and presentation currency.

(b) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'finance income or costs'. All other foreign exchange gains and losses are presented in the income statement within Administrative Expenses.

Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

·    Expected to be realised or intended to be sold or consumed in the normal operating cycle

·    Held primarily for the purpose of trading

·    Expected to be realised within twelve months after the reporting period; or

·    Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

·    It is expected to be settled in the normal operating cycle

·    It is held primarily for the purpose of trading

·    It is due to be settled within twelve months after the reporting period Or

·    There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

The Group classifies all other liabilities as non-current.

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

Fair value measurement

The Group measures financial instruments such as derivatives at fair value at each balance sheet date. The Company has applied IFRS 9 for all periods presented.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

·    In the principal market for the asset or liability; or

·    In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods and services supplied, stated net of discounts, returns and Value-Added Taxes (VAT).

Under IFRS 15, Revenue from Contracts with Customers, five key points to recognise revenue have been assessed:

Step 1: Identify the contract(s) with a customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

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

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

Where the Group makes sales relating to a future financial period, these are deferred and recognised under 'deferred revenue' on the Statement of Financial Position. The Group currently has two revenue streams:

ENGAGE Revenue

The Group is primarily focused on developing a proprietary VR platform which is sold through licences and professional services revenue. This is considered "ENGAGE Revenue" for reporting purposes. Revenue is recognised when the license is delivered to the customer, or when all performance obligations have been achieved.

Showcase Experiences

The Group also develops proprietary educational VR content which is sold through licences. This is considered "Showcase Experience Revenue" for reporting purposes. Revenue is recognised when the license key is delivered to the customer, or when all performance obligations have been achieved.

Revenue is received net of commission from the platforms where the Group licenses their content. The gross amount of revenue is recognised in revenue with the corresponding commission portion recognised in cost of sales.

Other Revenue

The Group develops educational VR content on behalf of customers based on specific customer requirements. This is considered "Other Revenue" for reporting purposes. Such revenue is recognised on a percentage completion basis unless there are significant performance obligations that would require deferral until such obligations are delivered. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered. This is generally during the early stages of development where the specifications need to pass through the customer's approval as part of the development.

The disaggregation of revenue, required under IFRS 15, has been prepared on the basis of the two revenue streams outlined above and is included in Note 3.

Government Grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

Property, Plant and Equipment

All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation on assets is calculated using the straight-line method to allocate their cost less residual value over their estimated useful lives, as follows:

Office equipment - 3 - 5 years

Furniture, fittings and equipment - 5 years

Leasehold improvements - over the life of the leased asset

Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight line basis.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and are recognised in the income statement.

Intangible Assets

Research costs are expensed as they are incurred. Development costs that are directly attributable to the design and testing of identifiable and unique commercial software controlled by the Group are recognised as intangible assets when the following criteria are met:

·    it is technically feasible to complete the software product so that it will be available for use and sale;

·    management intends to complete the software product and use or sell it;

·    there is an ability to use or sell the software product;

·    it can be demonstrated how the software product will generate future economic benefits;

·    adequate technical, financial and other resources to complete the development and use or sell the software product are available; and

·    the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and subcontracted development costs.

Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed 3 years and commences after the development is complete and the asset is available for use. Intangible assets in relation to Showcase Experiences are amortised over their estimated useful lives based on the pattern of consumption of the underlying economic benefits. The ENGAGE platform is amortised on a straight line basis over 3 years. Amortisation is included in Administrative Expenses.

Impairment of non-financial assets

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset.

For assets, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount.

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

Trade Receivables

Trade receivables are amounts due from customers for licenses sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not they are presented as non-current assets.

Trade receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The Group holds the trade receivables with the objective of collecting the contractual cash flows.

The Group provides for known bad debts and other accounts over a certain age in line with Group policy. The realisation of the asset may differ from the provision estimated by management.

Cash and Cash Equivalents

In the Statement of Cash Flows, cash and cash equivalents comprise cash in hand and short-term deposits. Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position.

Share Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where the issuance of the new shares or options occurs in a subsequent period from when the incremental costs are incurred these costs are prepaid until the issuance takes place.

Share Based Payments

The Group has an equity settled employee incentive plan. The cost of equity settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Group. No expense is recognised for awards that do not ultimately vest.

At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the profit and loss within administration expenses, with a corresponding entry in the balance sheet in share options reserve.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the Statement of Comprehensive Income for the award is expensed immediately.

Trade Payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

Leases

The Group leases office premises and motor vehicles under rental contracts for fixed periods but may contain extension options. Lease terms are negotiated on an individual basis and contain different terms and conditions. The lease agreements entered into by the Group do not impose any covenants other than the security interests in the leased assets that are held by the lessor.

From 1 January 2019 leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

·    Fixed payments less any lease incentives receivable;

·    Variable lease payments that are based on an index or a rate;

·    The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

·    Payments of penalties for terminating the lease.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined the lessee's incremental borrowing rate is used. Lease payments are allocated between principal and finance cost. The finance charge is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Payments associated with short-term leases (12 months or less) and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.

Current and Deferred Income Tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case the tax is also recognised directly in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. However, the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Research and development tax credit

The Group undertakes certain research and development activities that qualify for the receipt of a research and development (R&D) tax credit from the Irish tax authorities. Such grants are recognised as a credit against related costs on a cash receipts basis.

New standards, interpretations and amendments adopted by the Group and Company

The Group and Company have applied the following standards and amendments for the first time from 1 January 2020:

Amendments to references to the conceptual framework in IFRS standards

Amendments to IFRS 3 Business Combinations

Amendments to IAS 1 and IAS 8: Definition

There has been no material impact on the financial statements as a result of the adoption of the new and amended standards.

There are no new and revised IFRSs that have been issued but are not yet effective that the Directors believe are expected to have a material impact on the Group and Company.

2.   Segment Reporting

3.   Capital Management

For the purpose of the Company's capital management, capital includes issued capital, convertible preference shares, share premium and all other equity reserves. The primary objective of the Group's capital management is to maximise the shareholder value.

4.   a. Expenses by nature         

Disclosed as:

b. Auditor Remuneration

Services provided by the Company's auditor

During the year, the Company obtained the following services from the Company's auditor:

5.   Employees

6.   Directors remuneration

Below is the Directors' remuneration for the year ended 31 December 2020 and for the year ended 31 December 2019

The options issued are a non-cash amount and are accounted for in line with the treatment of the other share options issued to employees under IFRS 2. Further notes on Share Based Payments are included in Note 19.

During the year ended 31 December 2019, Michael Boyce received a fee in relation to consultancy services provided to the Company, separate to his role as a Non-Executive Director, of £43,549.

7.   Finance Costs

8.   Income Tax

The tax assessed for the year differs from that calculated using the standard rate of corporation tax in Ireland (12.5%). The differences are explained below:

9.   Earnings per share (EPS)

10. Property, Plant & Equipment

Depreciation expense of €70,747 (2019: €81,108) has been charged in 'Administrative Expenses'.

11. Intangible Assets

The software being developed relates to the creation of virtual reality experiences and an online virtual learning and corporate training platform.

ENGAGE is an online virtual learning and corporate training platform currently in development by the Company. A desktop version was released in December 2018 and the mobile version was released in December 2019. Amortisation commenced when the mobile version launched.

Titanic VR which is available for sale across all major VR capable platforms since November 2018 has commenced being amortised in the period. Raid on the Ruhr launched during 2019 and amortisation commenced during the period. Space Shuttle launched during 2020 and amortisation commenced during the period.

Amortisation expense of €583,829 (2019: €412,976) has been charged in 'Administrative Expenses'.

An impairment review was carried out at the balance sheet date. No impairment arose.

12. Investments in Subsidiaries

Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid.

On 12 March 2018, the Company has acquired all of the issued capital of Immersive VR Education Limited for a consideration of €15,000,000 which was settled by issuing 133,089,739 Ordinary Shares in the Company. The Company incurred expenses totalling €28,809 as part of the transaction.

This subsidiary undertaking is included in the consolidation. The proportion of the voting rights in the subsidiary undertaking held directly by the Parent Company does not differ from the proportion of ordinary shares held. 

13. Trade and Other Receivables

Amounts due from related parties relates to an intercompany loan agreement entered into on 1 January 2020 between the parent company and the subsidiary undertaking. The interest rate on this agreement is 14% per annum and the loan is due for repayment no later than the date falling 10 years from the date of the agreement.

As at 31 December 2020, trade receivables of €286,469 (2019: €146,649) were fully performing and deemed fully recoverable. No bad debt provision charge was incurred during 2020 (2019: €Nil).

The Group assesses exposure to credit risk arising from outstanding receivables on an annual basis. The maximum exposure to credit risk at the reporting date is the carrying value of each of the receivables above.

The Group does not expect any losses from outstanding receivables in the current year.

The carrying amounts of the Company's trade and other receivables are denominated in the following currencies:

14. Cash and short-term deposits

15. Issued Share Capital and Premium

As at 31 December 2020 the number of shares authorised for issue were 241,750,955 (2019: 193,136,406)

On 12 June 2020 HTC Corporation invested €3.0 million in the Group and were issued 48,284,102 ordinary shares at an issue price of €0.062 per share.  Net proceeds after expenses were €2.94 million.

On 22 June 2020, as a result of the exercise of share options, 330,447 ordinary shares in the Company at an exercise price of €0.026 per share providing the Company with gross proceeds of €8,592.

16. Other Reserves

17. Retained Earnings

18. Share Based Payments

During the year ended 31 December 2018, VR Education Holdings plc introduced a share-based payment scheme for employee remuneration ("the 2018 Scheme") to replace the scheme previously in operation within Immersive VR Education Limited ("the 2016 Scheme"). The 2018 Scheme and the 2016 schemes are classified equity settled share-based payment plans.  Recipients under the scheme are awarded options over ordinary shares of the Company.

There were 200,000 (2019: 133,089) employee options granted during 2020 at an exercise price of €0.10 (2019: €0.10) per share and these vest subject to continued service by the employee over a period of 3 years. Options expire at the end of a period of 7 years from the Grant Date or on the date on which the option holder ceases to be an employee.

The movement in employee share options and weighted average exercise prices are as follows for the reporting periods presented:

330,447 options were exercised during the period at a price of €0.026 per share. The weighted average exercise price of options granted during the period was €0.10 (2019: €0.11). The expense recognised in respect of employee share-based payment expense and credited to the share-based payment reserve in equity was €21,057 (2019: €27,334).

The Company has measured the fair value of the services received as consideration for equity instruments of the Company, indirectly by reference to the fair value of the equity instruments.  The table below sets out the options and warrants that were issued during the period and the principal assumptions used in the Black Scholes valuation model.

The expected life is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumptions that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

19. Trade and Other Payables

            Terms and conditions of the above financial liabilities:

·    Trade payables are non-interest bearing and are normally settled on 30-day terms

·    PAYE/PRSI payables are non-interest bearing and are normally settled on 30-day terms

·    VAT payables are non-interest bearing and are normally settled on 60-day terms

·    Accrued expenses are non-interest bearing are settled over varying terms throughout the year

21. Deferred Tax

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Company did not recognise deferred income tax assets of €899,370 (2019: €556,688) in respect of losses and depreciation in excess of capital allowances amounting to €7,194,960 (2019: €4,453,504) that can be carried forward against future taxable income.

22. Related Parties

During the year the Directors received the following emoluments:

Included in the above is an amount of €68,295 (2019: €51,516) paid to Luclem Estates and Advisory Limited, a company in which Richard Cooper, a director of the Company, is also a director. These fees relate to Richard Cooper's consultancy services to the Company. As at 31 December 2020 €Nil was outstanding.

23. Events after the reporting date

The Company has evaluated all events and transactions that occurred after 31 December 2020 up to the date of signing of the financial statements.

No material subsequent events have occurred that would require adjustment to or disclosure in the financial statements.

24. Contingent Liabilities

The company has indicated that it will guarantee the liabilities (as defined in Section 397 of the

Companies Act 2014) of its Irish subsidiary, Immersive VR Education Limited for the year ended

31 December 2020.

25. Ultimate controlling party

The Directors believe that there is no ultimate controlling party as no one shareholder has control of the Company.