NURON_LIMITED - Accounts

The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true

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

Nuron Limited is a private company limited by shares incorporated in England and Wales. The registered office is Fieldfisher Riverbank House, 2 Swan Lane, London, England, EC4R 3TT.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The company has contracted £399k of revenue in the calendar quarter ending March ’23, resulting in a first quarterly trading profit, and has been successful in securing increasingly larger orders from its customer base. The company operates in sectors with high levels of demand and multiple challenges to be met, hence a high potential for growth. nuron has scarce, high- value skills in infrastructure monitoring, measurement, robotics and data science which our clients tell us they value greatly. The company continues to diversify its sectors of operation, clients and projects and has increased the level of qualified opportunities for its services.true

The directors have prepared forecasts for a period of 12 months from the approval of these financial statements. The cash flows are based on a number of possible scenarios that reflect the commercial opportunities in the sales pipeline of the business as well as business that the company expects to identify in the future.

Additionally, the company has a loan facility in place and repayments for that loan were expected to begin in January 2023, although the company has since secured an amendment to the loan facility to defer loan repayments to January 2024. This amendment is subject to certain conditions that, if not met, will require loan repayments to commence in July 2023.

The directors recognise that the potential risks around whether target revenues will be achieved and whether the conditions for the loan amendment will be achieved present a material uncertainty that may cast significant doubt on the ability of the company to continue as a going concern. However, the directors are confident that the company will be able to meet its forecast revenue targets and that the conditions within the loan amendment agreement will be satisfied. Thus, the directors are confident that the company will continue in operational existence for the foreseeable future. The directors therefore continue to adopt the going concern basis in preparing these financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Recurring revenue

Revenue arising from service contracts is recognised based on the period to which the service is provided or when the contracted service is completed. Where revenue is derived from long term leases of network infrastructure it is recognised on straight-line basis over the term of the lease and maybe subject to performance based incentives or penalties according to contractually agreed criteria.

Research costs related to original and planned investigation, undertaken with the prospect of gaining new scientific or technical knowledge are expensed in the period incurred.

Development costs relating to the development of products or the improvement of existing technologies are deferred and the costs are amortised over the periods expected to benefit from them, Amortisation will only start once the commercial production has commenced, when the developed product or services come into use or fees from the licensing of any associated intellectual property are recognised.

Development costs will only be deferred to the extent:

•     there is a clearly defined project

•     expenditure is separately identifiable

•     the project is commercially viable

•     the project is technically feasible

•     project income is expected to outweigh cost

•     resources are available to complete the project

Costs relating to the filing of patents are treated as development costs to the extent that they meet the capitalisation criteria laid down in this accounting policy.

During the year the company incurred costs which met both criteria.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Executive directors and employees have been granted share options under the company share option scheme. At grant date, the fair value of the options is measured, and recognised over the period until the options vest as an employment expense with a corresponding increase in equity. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

The total amount to be expensed is determined by reference to the fair value of the options granted a) including any market performance conditions; b) excluding the impact of any service and non market performance vesting conditions, such as profitability levels, sales growth targets and continuing service and c) including the impact of any non vesting conditions, such as any savings requirements.

Non market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the company revises its estimates of the number of options that are expected to vest based on meeting service and non market vesting conditions. It recognised the impact of revisions to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Government grants receivable are based on an agreed rate of reimbursement of eligible costs, subject to a maximum amount. Government grants are recognised as income to match them with the related cost. Income is not recognised until there is reasonable assurance that it will be received.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Significant judgements and estimates which affect the financial statements are limited to the stage of completion, and therefore cost, of research projects at the year end.

The average monthly number of persons (including directors) employed by the company during the year was:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2021 - 3).

Loans consist of one bank loan and two loans from Innovate UK, which is a UK government agency.

The Natwest BBLS loan is repayable by monthly instalments of £470 commencing 12 months from the date of initial drawdown of the loan, being 30 June 2020. Interest is charged at a fixed rate of 2.5% per annum with an initial interest free period for the first 12 months. The loan has been guaranteed by the UK government.

The first Innovate UK loan is repayable by instalments of £35,696 on a quarterly basis commencing 48 months from the date of initial drawdown of the loan, being 31 October 2018. Interest is charged at a fixed rate of 3.7% per annum and the loan is secured by a fixed and floating charge over all property, assets and undertakings of the company. A legal charge is also held by the lender over the intellectual property to be developed and/or acquired in connection with the loan agreement.

Following the end of the accounting period, new terms were agreed with Innovate UK to defer the repayment by instalments to 30 January 2024, when they will then commence in equal quarterly instalments as per the original agreement. The financial statements reflect the position at the balance sheet date and further disclosure has been made in note 22.

The second Innovate UK loan (continuity loan) is repayable on a quarterly basis commencing 84 months from the date of initial drawdown of the loan, being 18 August 2020. Interest is charged at a fixed rate of 7.4% per annum and the loan is secured by a fixed and floating charge over all property, assets and undertakings of the company. A legal charge is also held by the lender over the intellectual property to be developed and/or acquired in connection with the loan agreement.

Each ordinary share has full rights in the company with respect to voting, dividends and distribution. Redeemable preference shares have been recognised as a debt instrument due to the substance of the agreement.

The company operates an equity settled share based remuneration scheme (EMI Scheme) for employees.

The contractual life of an option is ten years from grant and the options are exercisable from the fifth anniversary of employment.

95,597 of the share options were exercisable during the year of which only 11,901 were exercised. The total share based payment expenses has been calculated however, no charge has been recognised in the current period as the options are out of the money. The following table illustrates the number and weighted average exercise prices of, and movements in, share options during the period:

The options outstanding at 30 June 2022 had an exercise price ranging from £0.17 to £8.82, and a remaining contractual life of 3 and a half years to 8 and a half years.

The option pricing model used was the Black Scholes model.

This reserve records the amount above the nominal value received for shares sold, less transaction costs.

Other reserves comprise of a capital contribution reserve of £1,000,000 (2021: £1,000,000) and a preference share reserve of £17,376 (2021: £nil).

The capital contribution reserve relates to capital contributions made by existing investors in accordance with the investment agreement entered into on 10 August 2018. The investment agreement gave the company entitlement to a capital contribution totalling £1,000,000 upon achieving the required milestones.

The preference share reserve relates to redeemable preference shares issued by the company on 20 December 2021. There are 1,200,000 10p shares totalling £120,000. Due to the nature of the agreement, the shares were recognised as a debt instrument in the financial statements and recognised at amortised cost using a market rate effective interest rate. The difference between the face value of the loan and the amount initially recognised has been recognised as the preference share reserve, which reflects the benefit transferred to the company by the shareholder due to the preference shares being free of any interest, dividends or redemption premium. The company recognises an annual transfer from the preference share reserve to retained earnings of an amount equal to the interest expense recognised under the amortised cost method.

The retained earnings reserve records retained earnings and accumulated losses.

As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:

The auditor's report was unqualified.

Following the end of the accounting period, the company entered into negotiations with its lender, Innovate UK, to amend the terms of the £649,000 loan. Under the original terms, the loan was repayable by instalments of £35,696 on a quarterly basis commencing 48 months from the date of initial drawdown of the loan, being 31 October 2018.

New terms were agreed with Innovate UK to defer the repayment by instalments to 30 January 2024, when they will then commence in equal quarterly instalments as per the original agreement. The amount currently shown in the financial statements as payable within one year therefore will not fall due until more than one year after the balance sheet date.

The directors consider Mr M Ainger to be the ultimate controlling party.