Deepverge
Deepverge, a biotech firm based in Dublin, has seen its stock freefall 60% since the start of the month after announcing that its prospective revenues would be ‘approximately 45-50%’ of previous estimates.
The company, which produces a range of CBD cosmetics and offers its proprietary Labskin technology to a number of other brands, informed investors via an RNS on April 17 that it has been forced to revise its revenue forecast for 2022 ‘following the appointment of a new CFO’.
Earlier this year (January 9), Deepverge released a ‘revenue update’ suggesting that unaudited revenues for 2022 were approximately £17.8m, slightly below market expectations, but up from £9.3m in 2021.
The company stipulated that this figure would have hit £18m ‘but for the significant element of recently signed contracts now falling for delivery in the current year’.
However, following the appointment of a new financial director on February 7 as part of the ‘the process of strengthening the board’, and the resignation of its auditor Jeffreys Henry LLP on March 24, the new management team undertook a ‘comprehensive review of all major contracts’.
Said review found that revenues from a number of key contracts were ‘incorrectly recognised in excess of works completed’, meaning that revenues for 2022 are now expected to be ‘45-50% of the £17.2m revenue figure provided by the previous executive management team’.
The ‘vast majority’ of revenue shortfall from the year is reportedly expected to be recognised this year, while £10m of deliverables are expected to be recognised as turnover in 2023 and 2024.
Deepverge said its current cash balance is around £1m, which it believes is ‘sufficient’ to continue operations as a going concern as it explores funding options.
Chairman Ross Andrews said: “Whilst it is extremely disappointing that 2022 revenues are likely to be so far below the figures provided by the previous executive management team, I’m confident that the new management has robust plans in place to deliver the order book during 2023 and 2024.”
Days later, Deepverge announced that amounts totalling £1.4m are currently owed to Microsaic, and that a ‘settlement plan’ has been proposed to ensure these payments are met.
As the two companies share a director, Nigel Burton, the finalisation of the settlement plan will fall to be treated as a related party transaction, and will require notification, under AIM Rule 13.
SEED/South West Brands
In late February, AIM-listed investment vehicle SEED announced that it had now requested a full repayment of a convertible loan note (CLN) worth over £100k from its investee company South West Brands (SWB), after the initial repayment deadline passed.
This week, the company announced that South West Brands (SWB), which sells a range of CBD products online and through a number of major UK retailers, has now been sold to rival UK CBD brand OTO.
According to a recent RNS, SWB has entered into a ‘sale and purchase agreement’ with OTO worth £6.23m.
This amount will be paid entirely in shares of the CBD brand, which is yet to turn a profit, seeing SEED receive a total of £423k in OTO’s ordinary shares ‘following the conversion of the convertible loan notes SEED holds in SWB and will be repaid in cash of £167k’.
“Following a total investment into SWB of £500,000 by SEED, the total return represented by the Sale is £590,000, a blended return of 1.18 times the original investment.
“Following the completion of the Sale, SEED will hold 71,502 ordinary shares representing 1.4% of OTO.”
Yooma Wellness
The Aquis-listed cannabis company’s financial woes showed no signs of abating this week, as it announced that it would be unable to file its full-year 2022 financial figures by the deadline of May 1, 2023.
Yooma said that the ‘financial and operational challenges faced by the company over the past several months have consumed significant financial and management resources’, resulting in delays meaning its external auditor was unable to conduct the necessary procedures.
It has reportedly now ‘resolved these issues to the extent required to allow the audit to proceed’, and expects to complete its annual filings on or before May 31, 2023.
However, due to the delay, Yooma said that it expects to be issued with a cease trade order (CTO) in the Ontario Securities Commission in Canada, where its shares are also listed.
It stipulated that ‘there can be no assurance that the Company will be able to remedy its filing default and have the CTO lifted in a timely manner or at all’.
The news followed a financial update published in February, where it revealed that alongside ongoing restructuring efforts which saw it exit from the US market last year, it would now also be exiting the Japanese market.
Vertex, a Japanese wellness brand which Yooma purchased in 2021 for US$12m, will see ownership ‘return to the vendors’ amid a new settlement agreement reached by the two parties.
As part of the settlement, Vertex and the vendors will exchange mutual releases ‘which will result in the discharge of approximately $12m in debts, obligations and interest payments’.
