Warwick Acoustics Limited - Accounts to registrar (filleted) - small 18.2

REGISTERED NUMBER: 04451674 (England and Wales)

WARWICK ACOUSTICS LIMITED

UNAUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2019

Page

Company Information

1

Statement of Financial Position

2

to

3

Notes to the Financial Statements

4

to

10

DIRECTORS:

Dr D R Billson

Dr M A Grant

R J Kendrick

Mercia Fund Management (Nominees) Limited

G Waters

A J Hawken

D Roberts

SECRETARY:

Brodies Secretarial Services Limited

REGISTERED OFFICE:

MIRA Technology Park

Suite 1.02, NW05

Watling Street

Nuneaton

Warwickshire

CV10 0TU

REGISTERED NUMBER:

04451674 (England and Wales)

ACCOUNTANTS:

Duncan & Toplis Limited

The Gables

Bishop Meadow Road

Loughborough

Leicestershire

LE11 5RE

BANKERS:

Barclays Bank Plc

150 Parade

Leamington Spa

Warwickshire

CV32 4AG

FIXED ASSETS

Intangible assets

4

2,744,074

2,239,950

Property, plant and equipment

5

142,998

126,758

Investments

6

1

1

2,887,073

2,366,709

CURRENT ASSETS

Inventories

252,624

305,899

Debtors

7

457,268

395,156

Cash at bank

774,488

351,723

1,484,380

1,052,778

CREDITORS

Amounts falling due within one year

8

1,580,968

1,265,017

NET CURRENT LIABILITIES

(96,588

)

(212,239

)

TOTAL ASSETS LESS CURRENT LIABILITIES

2,790,485

2,154,470

CAPITAL AND RESERVES

Called up share capital

10

420,154

379,257

Share premium

13,934,054

11,402,361

Share option reserve

402,667

315,392

Retained earnings

(11,966,390

)

(9,942,540

)

2,790,485

2,154,470

The company is entitled to exemption from audit under Section 477 of the Companies Act 2006 for the year ended 30 September 2019.

The members have not required the company to obtain an audit of its financial statements for the year ended 30 September 2019 in accordance with Section 476 of the Companies Act 2006.

The directors acknowledge their responsibilities for:

(a)	ensuring that the company keeps accounting records which comply with Sections 386 and 387 of the Companies Act 2006 and

(b)

preparing financial statements which give a true and fair view of the state of affairs of the company as at the end of each financial year and of its profit or loss for each financial year in accordance with the requirements of Sections 394 and 395 and which otherwise comply with the requirements of the Companies Act 2006 relating to financial statements, so far as applicable to the company.

The financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

In accordance with Section 444 of the Companies Act 2006, the Income Statement has not been delivered.

The financial statements were approved and authorised for issue by the Board of Directors on 3 December 2019 and were signed on its behalf by:

Dr M A Grant - Director

1.	GENERAL INFORMATION

Warwick Acoustics Limited (Formerly Warwick Audio Technologies Limited) is a Private Company, Limited by

shares, registered in England and Wales.

The company's registered office address and principal place of business is MIRA Technology Park Suite 1.02,

Nw05, Watling Street, Nuneaton, United Kingdom, CV10 0TU.

The company's registered number is 04451674.

The financial statements are presented in sterling which is the functional currency of the company and

rounded to the nearest £.

The significant accounting policies applied in the preparation of these financial statements are set out below.

These policies have been consistently applied to all years presented unless otherwise stated.

The financial statements cover the individual entity.

Sonoma Acoustics Limited is a subsidiary of the company, however the company is exempt by virtue of size

from the requirement to prepare group accounts.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" including the provisions of Section 1A "Small Entities" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Related party exemption

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party

transactions with wholly owned subsidiaries within the group.

Revenue

Revenue is measured at the fair value of the consideration received or receivable, excluding discounts, rebates,

value added tax and other sales taxes.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost

less any accumulated amortisation and any accumulated impairment losses.

SAP Implementation in Progress are being amortised evenly over their estimated useful life of three years.

Development costs are being amortised evenly over their estimated useful life of eight years.

Website is being amortised evenly over its estimated useful life of three years.

Sap implementation in progress

No amortisation has been charged on SAP implementation in progress as this is an ongoing project, and the

directors have judged that the useful economic life of this software will not be realised until completion of the

project.

Property, plant and equipment

Property, plant and equipment is stated at cost less depreciation. Depreciation is provided at rates calculated

to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

Office construction

Straight line over 24 months

Tooling

Straight line over 36 months

Other assets

Straight line over 36 months

Investments in subsidiaries

Investments in subsidiary undertakings are recognised at cost less impairment.

Inventories

Inventories are valued at the lower of cost and fair value less costs to complete and sell, after making due

allowance for obsolete and slow moving items.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to

the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or

substantively enacted by the statement of financial position date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the

statement of financial position date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different

from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and

laws that have been enacted or substantively enacted by the year end and that are expected to apply to the

reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that

they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Research and development

Research expenditure is written off to the income statement in the year in which it is incurred. Development

expenditure is written off in the same way unless the directors are satisfied as to the technical, commercial and

financial viability of individual projects. In this situation, the expenditure is capitalised and amortised over the

period during which the company is expected to benefit.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the

statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate

of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the

operating result.

Share-based payment

The cost and corresponding increase in equity in respect of equity-settled share-based payment transactions

with employees are measured by reference to the fair value of equity instruments issued at the date of grant.

Amounts are expensed on a straight line basis over the vesting period based on the estimate of shares that will

eventually vest and adjusted for the effect of non market-based vesting conditions. The cost and fair value of

the liability incurred in respect of cash-settled transactions is measured using an appropriate option pricing

model with changes in fair value recognised in profit or loss for the period.

Going concern

The Company has significant retained losses which has highlighted the need to consider the appropriateness of

preparing the financial statements on a going concern basis.

The Company continues to successfully pursue its strategy of becoming a significant provider of premium

in-car audio solutions by 2025. The Company seeks to disrupt the $8bn automotive audio market based on its

patented Electrostatic (ES) Transducer modules. Car manufacturers (OEMs) tell us our ES modules offer them

significant benefits in power efficiency improvements, weight reduction, acoustical quality, the ability to

pursue new cabin design themes within the vehicle, and cost savings.

Those benefits are particularly relevant to a global industry that is being reshaped by government

environmental policies. New EU and Chinese emissions targets announced this year for 2025 and beyond are

forcing OEMs to develop Full Electric and Plug-in hybrid vehicles. New technologies that save power and

weight, and that are seen to be ecologically advantageous are being sought now to meet these emissions

targets.

The Company believes this underlying legislative framework provides a highly robust basis on which it will

build future success. It further believes that this environment provides the company with the opportunity to

ultimately become the standard means for in-car audio delivery.

In 2019, the Company built out a series of relationships with major car manufacturers and entered into the

first paid for Proof of Concept (POC) contracts with OEMs. Those contracts will demonstrate a number of

in-vehicle use cases. As at the year end, the Company was in discussions regarding a further 5 POCs, and had

opened discussions with a wide range of OEMs interested in engaging with the business. While there is no

guarantee of successful conclusion of any of those discussions, the company is confident that it will continue

to both expand its pipeline of prospects and secure revenue-generating engineering contracts, a key step

towards securing production supply contracts in future years.

In parallel with its automotive business, the Company continues to develop its headphone presence with the

launch in 2019 of the ultra-high end APERIO headphone system. Review samples have already received

significant critical acclaim from the press at a level in excess of that received for the Sonoma. In its review of

the APERIO in September 2019, HiFi+ Chris Martens called "The finest headphone system I have ever heard".

Retailing at approximately £20,000 per unit, the APERIO has already received a number of advanced orders

and is expected to go into full production at the end of 2019.

During the year, the Company completed a multistage funding round, raising from existing and new

shareholders a total of £2.487m.

The Company also entered into a further convertible loan of £110k with a major shareholder, Britania Limited.

With the progress the company continues to make in executing its stated strategy, shareholders continue to

demonstrate support of the business and of management's strategy through the support of further funding

rounds. This support is given while taking into account the typical multiyear sell in cycles of the automotive

industry. This, coupled with commercial progress made to date, gives the directors confidence that funding to

continue the business through the coming twelve months will be forthcoming.

The directors considered a period in excess of 12 months from the date of approval of the financial statements

when making this assessment and consider that in preparing the financial statements, they have taken into

account all information that could reasonably be expected to be available.

On this basis they consider that it is appropriate to prepare the financial statements on the going concern

basis.

3.	EMPLOYEES AND DIRECTORS

The average number of employees during the year was 10 (2018 - 8 ) .

4.	INTANGIBLE FIXED ASSETS

Other

intangible

assets

£

COST

At 1 October 2018

2,545,182

Additions

824,523

At 30 September 2019

3,369,705

AMORTISATION

At 1 October 2018

305,232

Charge for year

320,399

At 30 September 2019

625,631

NET BOOK VALUE

At 30 September 2019

2,744,074

At 30 September 2018

2,239,950

5.	PROPERTY, PLANT AND EQUIPMENT

Plant and

machinery

etc

£

COST

At 1 October 2018

322,172

Additions

96,954

Disposals

(15,730

)

At 30 September 2019

403,396

DEPRECIATION

At 1 October 2018

195,414

Charge for year

80,714

Eliminated on disposal

(15,730

)

At 30 September 2019

260,398

NET BOOK VALUE

At 30 September 2019

142,998

At 30 September 2018

126,758

6.	FIXED ASSET INVESTMENTS

Shares in

group

undertakings

£

COST

At 1 October 2018

and 30 September 2019

1

NET BOOK VALUE

At 30 September 2019

1

At 30 September 2018

1

The fixed asset investment relates to Sonoma Acoustics Limited, a wholly owned subsidiary. The trade and

assets of Sonoma Acoustics Limited were transferred to Warwick Acoustics Limited on 28th September 2018.

As part of this agreement, an amount of nil (2018: £878,889) owed to Warwick Acoustics Limited by Sonoma

Acoustics Limited was waived. This was recognised in the income statement as an amount written off on

investments.

7.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2019

2018

£

£

Trade debtors

125,698

-

Amounts owed by group undertakings

6,799

105,378

Other debtors

324,771

289,778

457,268

395,156

8.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2019

2018

£

£

Trade creditors

93,420

193,653

Taxation and social security

25,542

22,005

Other creditors

1,462,006

1,049,359

1,580,968

1,265,017

9.	SECURED DEBTS

The following secured debts are included within creditors:

2019

2018

£

£

Loan Notes

1,110,000

1,000,000

The loan notes are each secured with a fixed and floating charge over the assets of the company.

It is agreed that after the year end the outstanding loans of £1,000,000 due to Mercia Investment Plan LP

(Acting by Its General Partner Mercia (General Partner) Limited) and £110,000 due to Britania Limited, along

with the interest accrued on these loans, will be converted into shares. These conversions are expected to

happen in May 2020.

10.	CALLED UP SHARE CAPITAL

2019

2018

£

£

Allotted, called up and fully paid

749,815,288 Ordinary of £0.0001 each

74,982

75,038

244,443,343 C Ordinary of £0.001 each

244,443

244,443

1,007,291,871 D Ordinary of £0.0001 each

100,729

59,776

420,154

379,257

During the year an issue of 569,867 Ordinary £0.0001 shares made in 2018, with a total nominal value of £57

was reversed. Consideration of £114 was repaid resulting in a decrease of £57 in share premium.

During the year the company issued nil (2018: nil) C Ordinary £0.001 shares and 409,535,702 (2018: nil ) D

Ordinary £0.0001 shares with a total nominal value of £40,954 (2018: nil). Total consideration of £2,572,704

(2018: £nil) was received which resulted in a share premium of £2,531,750 (2018: nil).

During the year share options for directors vested with a fair value of £131,645 (2018: £213,907) which has

been recognised with an increase in the share option reserve. Share options which vested previously with a fair

value of £44,370 were returned to the company in the year. This has been recognised with a decrease in the

share option reserve.

11.	OTHER FINANCIAL COMMITMENTS

The company has the following commitments due as follows:

2019

2018

£

£

In one year

54,176

18,176

2-5 years

1,515

19,691

55,691

37,867