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Registered number: 09752004
AERALIS LTD
FINANCIAL STATEMENTS
FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER 2022
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AERALIS LTD
REGISTERED NUMBER: 09752004
BALANCE SHEET
AS AT 31 DECEMBER 2022
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Debtors: amounts falling due after more than one year
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime and in accordance with the provisions of FRS 102 Section 1A - small entities.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of comprehensive income in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 3 to 13 form part of these financial statements.
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AERALIS LTD
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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Comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Shares issued during the year
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Total transactions with owners
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
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Comprehensive income for the period
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Total comprehensive income for the period
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Contributions by and distributions to owners
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Shares issued during the period
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Total transactions with owners
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The notes on pages 3 to 13 form part of these financial statements.
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
AERALIS Ltd is a private company, limited by shares, registered in England. The company's registered number is 09752004 and the registered office address is Bury Lodge, Bury Road, Stowmarket, Suffolk, IP14 1JA.
The principal activities are the development and manufacture of a modular military aircraft system.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The directors have assessed the prospects and expected cash flows of the company for at least the twelve months from the date of approval of these financial statements. In making this assessment, sensitised forecasts which include flexing of revenue, future fundraising and the removal of uncontracted expenditure have been prepared. In making their going concern assessment the directors have taken into account a £5,000,000 convertible loan advanced by Barzan Holdings LLC on 18 April 2023 which has provided additional working capital to the company. The loan is due for repayment on 31 January 2024. However, in the event that repayment is not made, the loan and accrued interest shall convert into ordinary shares and therefore a cash outflow can be avoided. When taking into account the ability of the company to avoid a cash outflow through conversion of the loan to equity, and on the basis of these forecasts and wider commercial expectations of the business, the directors have concluded that they expect the company to be able to meet its liabilities as and when they fall due for the next twelve months from the date of approval of these financial statements, and have therefore concluded it is appropriate to prepare the financial statements on a going concern basis.
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of Comprehensive Income within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
The turnover shown in the profit and loss account represents amounts invoiced during the year, exclusive of VAT. Turnover is recognised by stage of completion and is measured against work completed / milestones achieved.
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance Sheet. The assets of the plan are held separately from the Company in independently administered funds.
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than employees, profit or loss is charged with fair value of goods and services received.
Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
While the company is loss making, the income tax credit represents amounts recoverable from R&D tax credits applicable at the balance sheet date.
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
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Long-term leasehold property
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The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or in case of an out-right short-term loan that is not at market rate, the financial asset or liability is measured, initially at the present value of future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost, unless it qualifies as a loan from a director in the case of a small company, or a public benefit entity concessionary loan.
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Judgments in applying accounting policies and key sources of estimation uncertainty
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The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The following are the significant judgements used in applying the accounting policies of the Group that have the most significant effect on the financial statements:
Revenue
Assessing the stage of completion and the proportion of costs incurred requires judgement against the overall expected cost and work still to be completed on a project by project basis.
Estimates based on each project ongoing at the balance sheet date include whether the project will make a profit or a loss on completion.
R&D tax credits
Determination of whether R&D tax credit claims are recoverable. Factors taken into consideration include the history of such claims being accepted and repaid by the relevant tax authority.
Fair value of share options granted
The assessment of fair value of share options at year end is determined using the Black Scholes Model which takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the peer group companies. There is significant judgement in determining the inputs such as expected price volatility and share prices, as the company shares are not traded. Also, the expected number of options to vest and vesting periods are also areas of judgement.
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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The average monthly number of employees, including directors, during the year was 19 (2021 - 1).
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Long-term leasehold property
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Charge for the year on financed assets
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The net book value of land and buildings may be further analysed as follows:
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Due after more than one year
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Prepayments and accrued income
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Cash and cash equivalents
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Creditors: Amounts falling due within one year
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Other taxation and social security
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Accruals and deferred income
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Allotted, called up and fully paid
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775,677 (2021 - 771,677) ordinary shares of £0.000003 each
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Consideration recieved for the issue of the 4,000 shares on 1st April 2022 was £50,000.
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EMI scheme
Under the terms of the Board-approved share-based scheme, equity-settled share options have been, and may be, issued to the Company’s eligible officers and employees. Options granted have a life of 10 years (with an expiry date of 2032). The options granted vest in full on the occurrence of an exit event. There has been no share option charge recognised in the year. The Company is unable to directly measure the fair value of employee services received. Instead, the fair value of share options granted is estimated at the date of grant using a Black-Scholes-Merton model. It takes into account the expected share price volatility of the company via referencing to its comparator companies.
The exercise price of the share options is equal to the market price of the underlying shares on the date of grant. There are no cash settlement alternatives for the officers and employees. Share based payment expenses are modified based on the Directors expectation as to the number of options that will ultimately vest.
In 2022, there are 16 employees (2021: 0) involved in the scheme.
The remaining contractual life for the share options outstanding as at 31 December 2022 was 9 years (2021: 0 years).
Movements in EMI scheme share options during the year
The following reconciles the share options outstanding at the beginning and end of the year:
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Weighted average exercise price (pence)
2022
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Weighted average exercise price
(pence)
2021
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Outstanding at the end of the year
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
10.Share based payments (continued)
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Option pricing model used
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Black-Scholes-Merton model
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Weighted average fair values at the measurement date
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Risk-free interest rate (%)
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Expected life of share options (years)
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Weighted average share price (£)
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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At 31 December 2022 the Company had capital commitments as follows:
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Contracted for but not provided in these financial statements
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The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £209,435 (2021 - £9,000). Contributions totalling £nil (2021 - £nil) were payable to the fund at the balance sheet date and are included in creditors.
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Commitments under operating leases
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At 31 December 2022 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Related party transactions
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During the financial year there was no investment from Barzan Holdings LLC (significant shareholder) (2021 - £10,502,408). However, a Director invested £50,000 in the year for 4,000 shares. The total value invoiced in the period to Barzan Holdings LLC was £578,054 (no VAT) (2021 - £355,500) and the amount owing from Barzan Holdings LLC at the balance sheet date was £141,974 (2021 - £71,100 owing to Barzan Holdings LLC). Revenue recognised in the period was £452,687 (2021 - £480,867). During the year, the Company incurred expenditure on arm's length commercial terms of £216,264 (2021: £93,452) with entities controlled by certain directors. No amounts were outstanding at either balance sheet date.
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AERALIS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Post balance sheet events
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On the 18th of April 2023 Aeralis received a £5,000,000 convertible loan from Barzan Holdings LLC, a significant shareholder. The loan carries an annual interest rate of eight per cent. All outstanding Loan Notes, together with any interest which has accrued, subject to compliance with Applicable Law, shall automatically convert into fully paid Ordinary Shares on occurrence of (if applicable) a Qualifying Financing or a Change of Control. The number of shares received on conversion depends on the event that triggers the conversion. The loan is due for repayment on 31 January 2024. However, in the event that repayment is not made, the loan and accrued interest shall convert into such number as ordinary shares that would give the noteholder 50.1% of the then issued and fully diluted share capital of the Company.
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First time adoption of FRS 102
The policies applied under the entity's previous accounting framework are not materially different to FRS 102 and have not impacted on equity or profit or loss.
The Company adopted FRS 102 as the basis of preparation of its financial statements for the first time for the 17 month period ended 31 December 2021.
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The auditors' report on the financial statements for the year ended 31 December 2022 was unqualified.
The audit report was signed on 28 July 2023 by Christopher Cork (Senior Statutory Auditor) on behalf of Haysmacintyre LLP.
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