Vertical Aerospace Ltd 6-K, filed Aug 3, 2023
Vertical Aerospace Ltd. (EVTL)
About this 6-K
Vertical Aerospace Ltd filed this 6-K on August 3, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO SECTION 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2023
Commission File Number: 001-41169
(Exact Name of Registrant as Specified in Its Charter)
Unit 1 Camwal Court, Chapel Street
Bristol BS2 0UW
United Kingdom
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ⌧ Form 40-F ☐
INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K
On August 3, 2023, Vertical Aerospace Ltd. (the “Company”) issued a press release announcing its financial results for the six months ended June 30, 2023, a copy of which is furnished as Exhibit 99.1 hereto.
The Company's unaudited condensed consolidated interim financial statements for the six months ended June 30, 2023 and related notes thereto and an operating and financial review and prospects with respect to the six months ended June 30, 2023 are attached as Exhibits 99.2 and 99.3, respectively, to this Report on Form 6-K. This Report on Form 6-K also attaches Exhibit 101, which contains Interactive Data File disclosure in accordance with Rule 405 of Regulation S-T.
INCORPORATION BY REFERENCE
Exhibits 99.2 and 99.3 and Exhibits 101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE and 101.DEF to this Report on Form 6-K are hereby incorporated by reference into the Company’s Registration Statement on Form F-3 (File No. 333-270756) (including any prospectuses forming a part of such registration statements) and to be a part thereof from the date on which this Report on Form 6-K is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
EXHIBIT INDEX
Exhibit No. |
| Description |
99.1 | | Press release of Vertical Aerospace Ltd. dated August 3, 2023. |
99.2 | | Unaudited condensed consolidated interim financial statements for the six months ended June 30, 2023 |
99.3 | | Operating and financial review and prospects with respect to the six months ended June 30, 2023 |
101.INS | | Inline XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Linkbase Document |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| VERTICAL AEROSPACE LTD. | |
| | |
Date: August 3, 2023 | By: | /s/ Stephen Fitzpatrick |
| | Stephen Fitzpatrick |
| | Chief Executive Officer |
| Press Release 03 August 2023 1 Vertical Aerospace Announces First Half-Year 2023 Financial Results Company Issues Shareholder Letter London, UK & New York, USA – 03 August 2023 Vertical Aerospace Ltd. (“Vertical” or the “Company”) (NYSE: EVTL; EVTLW), a global aerospace and technology company that is pioneering zero emission aviation, announces its financial results for the six months ended June 30, 2023. The Company has also issued a shareholder letter in conjunction with the filing of its first half-year results, which is posted to its investor relations website at investor.vertical-aerospace.com. Stephen Fitzpatrick, Vertical Founder and CEO, said: “We have seen fantastic momentum at Vertical in the first half of 2023 across our testing, certification, and commercial efforts. We have conducted our first untethered flights of our full-scale VX4, been granted a Design Organisation Approval from the CAA, and brought South Korea into our launch markets, with Kakao Mobility as a new customer. We are maintaining our disciplined spend with a £36m net operating loss for the first half of 2023. Over the next year, from 1 August 2023, we expect to spend c.£80m. Over this timeframe we will substantially progress our flight test programme both with crewed tests of our current prototype, and assembly and rigorous testing of our upgraded second full-scale VX4.” First Half-Year 2023 and Recent Operational Highlights • Vertical has continued to advance its flight test activities with progress in its thrustborne flight test campaign (including lifting, hovering, flying and landing vertically, by the thrust of the aircraft’s propulsion system). The flight tests have included numerous hovers, both tethered and untethered, as well as expanding the low-speed flight envelope with the Company’s full-scale VX4 prototype aircraft under remotely piloted conditions and powered by our proprietary battery systems. • Vertical is progressing the build of its second prototype VX4, which will incorporate learnings from tests conducted to date and advancements in its partners’, and its own in-house technology. |
| Press Release 03 August 2023 2 • Vertical has continued to make progress with its certification activities for the VX4 aircraft, including a detailed familiarisation session with the CAA on the aircraft design and certification basis. Further technical discussions are being advanced with the CAA, and technical familiarisation sessions with EASA, the FAA and the Japan Civil Aviation Bureau are expected before the end of 2023. Additionally, in June 2023, Brazil’s National Civil Aviation Agency informed the CAA that it has accepted Vertical’s application for validation of its type certificate in Brazil, which will enable the Company’s operations in Brazil. • In July 2023, Vertical announced the appointment of Stuart Simpson as Chief Financial Officer, joining in September 2023. Stuart is a seasoned leader, most recently serving as the Group Chief Financial Officer of Avast, a FTSE 100 company. Previously, Mr. Simpson held the roles of Interim Chief Executive Officer, Chief Financial Officer and Chief Operating Officer at Royal Mail, also a FTSE 100 company. Mr. Simpson has a long history in the automotive industry, working for General Motors and Rolls Royce and Bentley Motor Car Company. • In May 2023, Vertical announced that it is partnering with South Korean mobility-as-a-service company, Kakao Mobility, to evaluate and advance commercially sustainable urban air mobility travel solutions in South Korea. Kakao Mobility has agreed to pre-order, subject to certain conditions, up to 50 VX4 aircraft. The parties agreed to establish a joint working group with Kakao Mobility to drive the commercialisation of AAM services in South Korea, including the exploration of network and fleet planning, infrastructure requirements, regulatory development, and consumer awareness of eVTOL mobility solutions. First Half-Year 2023 and Recent Financial Highlights • Vertical reported a net operating loss of £36.0m for the six months ended June 30, 2023, compared to a net operating loss of £39.5m for the six months ended June 30, 2022. • The net operating loss for the period primarily includes the continued investment in the development of Vertical’s second full-scale prototype aircraft, and costs supporting our thrustborne flight campaign. • As of June 30, 2023, Vertical had cash and cash equivalents of £89.7m. Financial Outlook • The 2023 capital plan continues to remain on track, with net cash outflows to be used in operating activities in the second half of the year expected to be between £40m and £45m. • Net cash outflows incurred in the third quarter of the year will be in relation to the advancement of our airborne flight test programme and further investment in our second full scale prototype aircraft. • As previously announced, to support our ongoing capital requirements, fund our future operations and remain as a going concern, Vertical intends to raise additional capital during 2023. The above forward-looking statements reflect our expectations for the six months ending December 31, 2023 as of August 3, 2023, and are subject to substantial uncertainty. Our results are based on assumptions that we believe to be reasonable as of this date, but may be materially affected by many factors, as discussed below in “Forward-Looking Statements.” |
| Press Release 03 August 2023 3 About Vertical Aerospace Vertical Aerospace is pioneering electric aviation. The company was founded in 2016 by Stephen Fitzpatrick, an established entrepreneur best known as the founder of the OVO Group, a leading energy and technology group and Europe’s largest independent energy retailer. Vertical has focused on building the most experienced and senior team in the eVTOL industry, who have previously certified and supported over 30 different civil and military aircraft and propulsion systems. Vertical has forged strong relationships with industry-leading players to develop the various components of its aircraft and build a sophisticated eVTOL ecosystem, creating efficiencies across the manufacturing processes, aircraft operations and maintenance. Vertical’s ordinary shares listed on the NYSE in December 2021 under the ticker “EVTL”. Find out more: vertical-aerospace.com About the VX4 eVTOL Aircraft Vertical’s VX4 eVTOL is projected to be capable of transporting a pilot and up to four passengers, traveling distances of up to 100 miles, and achieving a cruise speed of 150 miles per hour, while producing minimal noise and zero operating emissions. Find out more: vertical-aerospace.com For more information: Vertical Media Ambika Sharma nepeanverticalteam@nepean.co.uk +44 759 647 4020 Vertical Investors Eduardo Royes investors@vertical-aerospace.com + 1 646 200 8871 |
| Press Release 03 August 2023 4 Unaudited Condensed Consolidated Interim Statement of Comprehensive Income H1’2023 £ 000 H1’2022 £ 000 Research and development expenses (27,500) (19,396) Administrative expenses (24,266) (23,466) Related party administrative expenses (42) - Other operating income 15,845 3,407 Operating loss (35,963) (39,455) Finance income 32,333 42,497 Finance cost (8,140) (20,063) Net finance income/(costs) 24,193 22,434 Loss before tax (11,770) (17,021) Income tax expense - - Net loss for the period (11,770) (17,021) Foreign exchange translation differences (6,922) 9,482 Total comprehensive loss for the period (18,692) (7,539) |
| Press Release 03 August 2023 5 Unaudited Condensed Consolidated Interim Statement of Cashflows H1’2023 £ 000 H1’2022 £ 000 Cash flows from operating activities Net loss for the period Adjustments to cash flows from non-cash items: Depreciation and amortization Depreciation on right of use assets Finance (income)/costs Share based payment transactions (11,770) 990 327 (24,193) 7,056 (17,021) 832 189 (22,434) 7,294 (27,590) (31,140) Working capital adjustments: (Increase) in trade and other receivables (Decrease)/increase in trade and other payables (863) (4,603) (1,499) (30,442) Net cash (outflow) from operating activities (33,056) (63,081) Cash flows from investing activities Decrease in financial assets at amortized cost Acquisitions of property plant and equipment Acquisition of intangible assets Interest received on deposits 59,886 (1,304) (73) 2,337 - (167) (393) - Net cash inflow/(outflow) from operating activities 60,846 (560) Cash flows from financing activities Proceeds from issues of shares Payments to lease creditors 180 (349) - (235) Net cash (outflow) from financing activities (169) (235) Net increase/(decrease) in cash at bank 27,621 (63,876) Cash at bank as at January 1 62,927 212,660 Effect of foreign exchange rate changes (855) 8,768 Cash at bank as at June 30 89,693 157,552 |
| Press Release 03 August 2023 6 Unaudited Condensed Consolidated Interim Statement of Financial Position 30 June 2023 £ 000 31 December 2022 £ 000 Assets Non-current assets Property, plant and equipment Right of use assets Intangible assets 3,336 2,784 1,529 2,690 3,121 2,048 7,649 7,859 Current assets Trade and other receivables Financial assets at amortized cost Restricted cash Cash and cash equivalents 19,727 - 1,700 89,693 18,864 59,886 1,700 62,927 111,120 143,377 Total assets 118,769 151,236 Equity Share capital Other reserve Share premium Accumulated deficit 17 91,168 257,838 (352,648) 16 94,857 257,197 (344,752) Total equity (3,625) 7,318 Non-current liabilities Lease liabilities Provisions Derivative financial liabilities Trade and other payables 2,259 317 100,834 3,933 2,645 365 115,247 4,153 107,343 122,410 Current liabilities Lease liabilities Warrant liabilities Trade and other payables 676 2,727 11,648 516 4,961 16,031 15,051 21,508 Total liabilities 122,394 143,918 Total equity and liabilities 118,769 151,236 |
| Press Release 03 August 2023 7 Forward-Looking Statements This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to our current expectations and views of future events. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements as contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Any express or implied statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements, including, without limitation, statements regarding the design and manufacture of the VX4, our future results of operations and financial position, including with respect to the second half of 2023, our plans for capital expenditures, our business strategy and plans and objectives of management for future operations, anticipated management changes and related timing, certification and the commercialization of the VX4 and our ability to achieve regulatory certification of our aircraft product on any particular timeline or at all, expectations surrounding pre-orders and commitments, the features and capabilities of the VX4, expected financial performance and operational performance, liquidity, growth and profitability strategies, our ability and plans to raise additional capital to fund our operations and related timing, our plans to mitigate the risk that we are unable to continue as a going concern, as well as statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate,” “will,” “aim,” “potential,” “continue,” “are likely to” and similar statements of a future or forward-looking nature. Forward-looking statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected, including, without limitation: our limited operating history without manufactured non-prototype aircraft or completed eVTOL aircraft customer order; our history of losses and the expectation to incur significant expenses and continuing losses for the foreseeable future; the market for eVTOL aircraft being in a relatively early stage; our potential inability to produce, certify or launch aircraft in the volumes or timelines projected; the potential inability to obtain the necessary certifications for production and operation within any projected timeline, or at all; any accidents or incidents involving eVTOL aircraft could harm our business; our dependence on partners and suppliers for the components in our aircraft and for operational needs; the potential that certain strategic partnerships may not materialize into long-term partnership arrangements; all of the pre-orders received are conditional and may be terminated at any time and any pre-delivery payments may be fully refundable upon certain specified dates; any circumstances; the inability for our aircraft to perform at the level we expect and may have potential defects; any potential failure to effectively manage our growth; our inability to recruit and retain senior management and other highly skilled personnel, our ability to raise additional funds when we need or want them, or at all, to fund our operations; our limited cash and cash equivalents and recurring losses from our operations raise significant doubt (or raise substantial doubt as contemplated by PCAOB standards) regarding our ability to continue as a going concern; we have previous identified material weaknesses in our internal controls over financial reporting which if we fail to properly remediate, could adversely affect our results of operations, investor confidence in us and the market price of our ordinary shares; as a foreign private issuer we follow certain home country corporate governance rules, are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company; and the other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (“SEC”) on March 22, 2023, as such factors may be updated from time to time in our other filings with the SEC. Any forward-looking statements contained in this press release speak only as of the date hereof and accordingly undue reliance should not be placed on such statements. We disclaim any obligation or undertaking to update or revise any forward-looking statements contained in this press release, whether as a result of new information, future events or otherwise, other than to the extent required by applicable law. Source: Vertical Aerospace Ltd. |
Exhibit 99.2
Vertical Aerospace Ltd
Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022
Contents
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Notes to the Unaudited Condensed Consolidated Interim Financial Information | | 6 |
1
Vertical Aerospace Ltd
Unaudited Condensed Consolidated Interim Statements of Income and Comprehensive Income
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Research and development expenses |
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Administrative expenses |
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Related party administrative expenses |
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Other operating income |
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Operating loss |
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Finance income |
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Finance costs |
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Net finance income |
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Loss before tax |
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Income tax expense |
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Net loss for the period |
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Foreign exchange translation differences | | | | ( | | |
Total comprehensive loss for the period | | | | ( | | ( |
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Basic and diluted loss per share | | 7 | | ( | | ( |
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
Items of other comprehensive income may be reclassified to profit or loss.
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Vertical Aerospace Ltd
Unaudited Condensed Consolidated Interim Statements of Financial Position
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Non-current assets |
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Equity |
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Share capital |
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Other reserves |
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Accumulated deficit |
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Total equity |
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Provisions |
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Trade and other payables | | 10 | | | | |
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Lease liabilities |
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Warrant liabilities | | 11 | | | | |
Trade and other payables |
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Total liabilities |
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Total equity and liabilities |
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The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
3
Vertical Aerospace Ltd
Unaudited Condensed Consolidated Interim Statements of Cash Flows
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| | | | 6 months ended | | 6 months ended |
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Cash flows from operating activities |
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Net loss for the period |
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Adjustments to cash flows from non-cash items |
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Depreciation and amortization |
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Depreciation on right of use assets |
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Finance (income)/costs |
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Share based payment transactions |
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Working capital adjustments |
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Increase in trade and other receivables |
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Decrease in trade and other payables |
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Net cash (outflow) from operating activities |
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Cash flows from investing activities |
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Decrease in financial assets at amortized cost | | | | | | — |
Acquisitions of property plant and equipment |
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Acquisition of intangible assets |
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Interest income on deposits | | | | | | — |
Net cash inflow/(outflow) from investing activities |
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Cash flows from financing activities |
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Proceeds from issue of shares | | 13 | | | | — |
Payments to lease creditors |
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Net cash (outflow) from financing activities |
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Net increase/(decrease) in cash at bank |
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Cash at bank, beginning of the period |
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Effect of foreign exchange rate changes |
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The accompanying accounting policies and notes form an integral part of these Unaudited Condensed Consolidated Interim Statements.
The Group has revised the previously reported financial information, when such amounts are presented for comparative purposes for the six months period ended June 30, 2023, to correct an error identified in relation to the classification of foreign exchange rate changes in the statement of cash flows presented in the condensed consolidated financial information for the six months period ended June 30, 2022 - See note 2 for further detail.
4
Vertical Aerospace Ltd
Unaudited Condensed Consolidated Interim Statements of Changes in Equity
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At January 1, 2022 |
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Loss for the period |
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Translation differences | | | | — | | — | | | | — | | |
Total comprehensive loss | | | | — | | — | | | | ( | | ( |
Share based payment transactions | | 9, 12 | | — | | | | | | | | |
Reclassification of warrants | | 11 | | — | | — | | | | — | | |
At June 30, 2022 |
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At January 1, 2023 |
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Loss for the period |
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Translation differences |
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Total comprehensive loss |
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Share based payment transactions | | 9, 12 | | — | | — | | | | — | | |
Exercise of Share Options | | 9, 12 | | | | | | — | | — | | |
Transfer of reserves | | | | — | | — | | ( | | | | — |
At June 30, 2023 |
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The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
5
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022
1General information
Vertical Aerospace Ltd (the “Company”, or the “Group” if together with its subsidiaries) is incorporated under the Companies Law (as amended) of the Cayman Islands.
The address of its principal executive office is: Unit 1 Camwal Court, Bristol, United Kingdom. The Company’s shares are listed on the New York Stock Exchange.
The ultimate controlling party is Stephen Fitzpatrick.
These financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£’000) except when otherwise indicated. These financial statements were approved by the board of directors on July 27, 2023.
Principal activities
The principal activity of the Company and its wholly owned subsidiary, Vertical Aerospace Group Ltd (“VAGL”), is the development and commercialization of vertical take-off and landing electrically powered aircraft (“eVTOL”). The Group’s main operations are in the United Kingdom.
2Significant accounting policies
Basis of preparation
This unaudited condensed consolidated interim financial report for the half-year reporting period ended 30 June 2022 has been prepared in accordance with International Financial Reporting Standards (IFRS) applicable to the preparation of interim financial statements, IAS 34 Interim Financial Reporting.
The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2022.
The accounting policies adopted are consistent with those of the previous financial year.
The unaudited condensed consolidated interim financial report has been prepared on a historical cost basis, as modified by the revaluation of certain financial assets and liabilities (including derivative financial instruments) which are recognized at fair value through profit and loss.
Items included in the unaudited condensed consolidated interim financial report are measured using the currency of the primary economic environment in which the entity and its subsidiaries operate (‘the functional currency’). The financial information is presented in pounds sterling (‘£’ or ‘GBP’), which is the Group’s functional and presentation currency, and all amounts are presented in and rounded to the nearest thousand unless otherwise indicated.
6
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
2Significant accounting policies (continued)
Basis of consolidation
Vertical Aerospace Ltd is the parent of the Group. Details of the material subsidiaries are as follows:
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Name of subsidiary |
| Principal activity |
| Registered office |
| Proportion of ownership interest and voting rights held 2023 |
| 2022 | |
| Development and commercialisation of eVTOL technologies. | | Unit 1, Camwal Court, Bristol, United Kingdom BS2 0UW | | % | % |
All intercompany balances and transactions have been eliminated in consolidation.
Significant accounting policies and key accounting estimates
The accounting policies adopted are consistent with those of the previous financial year, with the exception of newly adopted policies as discussed below.
Revision to comparative period for correction of immaterial error
In connection with the preparation of the Group's condensed consolidated financial information for the six months period ended June 30, 2023, an error was identified in relation to the classification of foreign exchange rate changes in the statement of cash flows presented in the condensed consolidated financial information for the six months period ended June 30, 2022.
An item of £
The revision has no impact on the condensed consolidated statement of financial position, statement of income and comprehensive income and statement of changes in equity. The Group has evaluated these amounts and has concluded that they should be corrected by revising the previously reported financial information when such amounts are presented for comparative purposes for the six months period ended June 30, 2023.
Going concern
Management has prepared a cashflow forecast for the Group and has considered the ability for the Group to continue as a going concern for the foreseeable future, being at least 12 months after approving this financial information.
The Group is currently in the research and development phase of its journey to commercialize eVTOL technology. Commensurate with being in the development phase, the Group has invested heavily in research to support the development of its aircraft. The Group is not currently generating revenue and has incurred net losses and net cash outflows from operating activities since inception. As of June 30, 2023, the Group had £
Within the next 12 months following the date of this report, management expects the funding requirements to be approximately £
7
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
2Significant accounting policies (continued)
The Group will need to raise additional capital to fund its future operations and remain as a going concern, before the Group uses all of its existing resources. There can be no assurance that the Group will be able to obtain additional funding on acceptable terms and thus have sufficient funds to meet Group’s funding requirements. As a result, the timely completion of financing is important for the Group’s ability to continue as a going concern.
The dependency on raising additional capital indicates that a material uncertainty exists that may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) on the Group’s ability to continue as a going concern and therefore the Group may be unable to realise the assets and discharge the liabilities in the normal course of business. The consolidated financial statements have been prepared assuming that the Group will continue as a going concern, which contemplates the continuity of operations, realisation of assets and the satisfaction of liabilities in the ordinary course of business and do not include any adjustments that would result if the Group were unable to continue as a going concern.
Changes in accounting policy
A number of amended standards became applicable for the current reporting period. The group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards:
1.IFRS 17 Insurance Contracts
2.Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
3.Definition of Accounting Estimates – Amendments to IAS 8
4.Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
3Critical accounting judgements and key sources of estimation uncertainty
The preparation of the unaudited condensed consolidated interim financial information in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial information and the reported amounts of expenses during the reporting period.
The Company’s most significant estimates and judgments involve valuation of the Company’s stock-based compensation or consideration, including the fair value of common stock and market-based restricted stock units, in addition to the fair valuation of derivative liabilities.
These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Such estimates often require the selection of appropriate valuation methodologies and models and may involve significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions, financial inputs, or circumstances.
In preparing these unaudited condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2022.
8
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
4Other operating income
The analysis of the Group’s other operating income for the period is as follows:
|
| 6 months ended |
| 6 months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 |
| | £ 000 | | £ 000 |
Government grants |
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R&D tax relief |
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| |
|
| |
| |
Government grants
The group receives government grants relating to specific research and development activities relating to eVTOL technologies and is recognised in the period to which the expense it is intended to fund relates. The grant is made to fund research and development expenditure and is recognised in profit or loss in the period to which the expense it is intended to fund relates.
R&D tax relief
The R&D tax relief relates to the research and development tax reliefs provided by the UK Government in support of UK companies working on innovative projects in science and technology.
5Expenses by nature
Included within administrative expenses, research and development expenses and related party administrative expenses are the following expenses.
|
| 6 months ended |
| 6 months ended |
| | June 30, | | June 30, |
|
| 2023 |
| 2022 |
| | £ 000 | | £ 000 |
Research and development staff costs (excluding share-based payment expenses) | | | | |
Research and development consultancy | | | | |
Research and development components, parts and tooling |
| |
| |
Total Research and Development expenses | | | | |
Administrative staff costs (excluding share-based payment expenses) | | | | |
Share based payment expenses | | | | |
Consultancy costs |
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Legal and financial advisory costs |
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IT hardware and Software costs |
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Related party administrative expenses |
| |
| — |
Insurance and premises expenses |
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Other administrative expenses |
| |
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Expense on short term leases |
| — |
| |
Depreciation expense |
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| |
Amortisation expense |
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| |
Depreciation on right of use property assets | | | | |
Total administrative expenses | | | | |
Total administrative and research and development expenses |
| |
| |
9
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
5Expenses by nature (continued)
Staff costs excluding share-based payment expenses relates primarily to salary and salary related expenses, including social security and pension contributions.
6Finance income
|
| 6 months ended |
| 6 months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 |
| | £ 000 | | £ 000 |
In-kind interest on convertible loan notes |
| ( |
| ( |
Foreign exchange loss |
| — |
| ( |
Interest expense on leases |
| ( |
| ( |
Other |
| ( |
| ( |
Total finance costs |
| ( |
| ( |
| | | | |
Interest income on deposits | | | | — |
Foreign exchange gain | | | | — |
Fair value movements on convertible loan notes (note 13) | | | | |
Fair value movements on warrant liabilities (note 11) | | | | |
Total finance income | | | | |
| | | | |
Total net finance income |
| |
| |
7Loss per share
Basic earnings per share, in this case a loss per share, is calculated by dividing the loss for the period attributable to ordinary equity holders of the parent by the number of ordinary shares outstanding.
Because a net loss for all period presented has been reported, diluted loss per share is the same as basic loss per share. Therefore, all potentially dilutive common stock equivalents are antidilutive and have been excluded from the calculation of net loss per share.
The calculation of loss per share is based on the following data:
|
| 6 months ended |
| 6 months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 |
| | £ 000 | | £ 000 |
Net loss for the period |
| ( |
| ( |
|
| £ | | £ |
Basic and diluted loss per share |
| ( |
| ( |
|
| No. of shares |
| No. of shares |
Weighted average issued shares |
| |
| |
10
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
8Trade and other receivables
|
| June 30, |
| December 31, |
| | 2023 | | 2022 |
| | £ 000 | | £ 000 |
Government receivables |
| |
| |
Prepayments |
| |
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Other receivables |
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|
| |
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Included within Government receivables is £
9Share capital and reserves
Allotted, called up and fully paid shares
| | June 30, | | December 31, | ||||
| | 2023 | | 2022 | ||||
|
| No. |
| £ |
| No. |
| £ |
Ordinary of $ |
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|
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Ordinary shares have full voting rights, full dividend rights. The Company is authorised to issue
Other reserves
During the period other reserves increased by £
Nature and purpose of other reserves
The share-based payments reserve is used to recognise the grant date fair value of options issued to employees but not exercised. The translation reserve arises as a result of the retranslation of overseas subsidiaries in consolidated financial statements. The warrant reserve is used to recognise the fair value of warrants issued in exchange for a fixed amount of cash or another financial asset for a fixed number of the Company’s ordinary shares (‘fixed-for-fixed condition’).
Share Premium
On May 3, 2023 a total of
11
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
10Trade and other payables
Amounts falling due within one year:
|
| June 30, |
| December 31, |
| | 2023 | | 2022 |
| | £ 000 | | £ 000 |
Trade payables |
| |
| |
Accrued expenses |
| |
| |
Social security and other taxes |
| |
| |
Outstanding defined contribution pension costs |
| |
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| |
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Amounts falling due after more than one year:
|
| June 30, |
| December 31, |
| | 2023 | | 2022 |
| | £ 000 | | £ 000 |
Deferred fees and charges |
| |
| |
The Group’s exposure to market and liquidity risks, including maturity analysis, related to trade and other payables is disclosed in note 15 Financial risk management and impairment of financial assets.
11Warrant Liability
The following warrants are in issue but not exercised:
|
| June 30, |
| December 31, |
| | 2023 | | 2022 |
| | Number | | Number |
Public Warrants |
| |
| |
Mudrick Warrants |
| |
| |
Outstanding, end of period |
| |
| |
Recorded as a liability, the following shows the change in fair value during the period ended June 30, 2023:
|
| £ 000 |
December 31, 2022 |
| |
Change in fair value |
| ( |
Exchange differences on translation | | ( |
June 30, 2023 |
| |
Each public warrant entitles the registered holder to purchase
12
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
12Share-based payments
The Group has established two employee option plans. The EMI Scheme was closed to employees during 2021, and the 2021 Incentive Plan was implemented in 2022. For more information about the option plans, please refer to the Group’s annual financial statements for the year ended December 31, 2022. The total expense recognised by the company during the year in respect of these plans is shown below:
| | | | |
|
| June 30, 2023 |
| June 30, 2022 |
| | £’000 | | £’000 |
EMI Scheme |
| |
| |
2021 Incentive plan |
| |
| — |
Non-Executive Director awards |
| |
| — |
Suppliers and partners |
| — |
| |
Total Expense Recognised |
| |
| |
The summary of options granted under the plans were as follows:
EMI Scheme
|
| June 30, 2023 | | December 31, 2022 | ||||
| | | | Average | | | | Average |
| | | | exercise price | | | | exercise price |
| | Number | | (£) | | Number | | (£) |
Outstanding, start of period |
| | | | | |
| |
Granted during the period |
| — | | — | | — |
| — |
Grant arising due to scheme modification |
| — | | — | | |
| |
Exercised during the period | | ( | | | | ( | | |
Forfeited during the period |
| ( | | | | ( |
| |
Outstanding, end of period |
| | | | | |
| |
The number of options which were exercisable at June 30, 2023 was
2021 Incentive Plan
|
| June 30, 2023 | | December 31, 2022 | ||||
| | | | Average | | | | Average |
| | | | exercise price | | | | exercise price |
| | Number | | (£) | | Number | | (£) |
Outstanding, start of period |
| | | | | — |
| — |
Granted during the period |
| | | — | | |
| |
Grant arising due to scheme modification |
| — | | — | | — |
| — |
Exercised during the period | | ( | | — | | — | | — |
Forfeited during the period |
| ( | | | | ( |
| |
Outstanding, end of period |
| | | | | |
| |
13
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
12Share-based payments (continued)
The number of options which were exercisable at June 30, 2023 was
The average exercise price presented above relates to CSOP options only. All options granted during the year were immediately vesting nil cost options.
In addition to the above, a total of
The fair value of all options granted during the period has been determined with reference to the share price at grant date.
13Derivative financial liabilities
Convertible Senior Secured Notes consists of the following:
|
| Mudrick |
| | £ 000 |
As at December 31, 2022 |
| |
Fair value movements |
| ( |
In-kind interest paid |
| |
Exchange differences on translation |
| ( |
As at June 30, 2023 |
| |
On December 16, 2021 Mudrick Capital Management purchased Convertible Senior Secured Notes of an aggregate principal amount of £
In accordance with IFRS 9, this is treated as a hybrid instrument and is designated it in entirety as fair value through profit or loss. The valuation methods and assumptions are shown in note 14.
The Company has elected to pay interest in-kind at
Several covenants exist including retention of $
14
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
14Financial instruments
To provide an indication about the reliability of the inputs used in determining fair value, the Company classifies its financial instruments into the three levels prescribed under the accounting standards.
Financial liabilities at fair value through profit and loss:
| | June 30, 2023 | | December 31, 2022 | ||||||||
| | £000 | | £000 | ||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Level 1 |
| Level 2 |
| Level 3 |
Convertible Senior Secured Notes |
| — |
| — |
| |
| — |
| — |
| |
Warrant liabilities |
| |
| — |
| — |
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| — |
| — |
|
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| — |
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| — |
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The fair value of financial instruments is deemed to be equivalent to the carrying value.
Level 1: The fair value of financial instruments traded in active is based on quoted market prices at the end of the reporting period. As such, warrants issued but not exercised are valued with reference to the observable market price as at the period end date ($
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for the issued Convertible Senior Secured Notes.
The fair value of the convertible senior secured notes has been estimated using an option pricing model, in accordance with the International Valuation Standards definition of “market value”. The following inputs have been used:
|
| June 30, 2023 |
| December 31, 2022 |
|
Risk-free rate (%) |
| | | | |
Dividend yield (%) |
| | | | |
Volatility (%) |
| | | | |
Credit spread (%) |
| | | | |
No changes were made during the period ended June 30, 2023 to the valuation techniques applied as at December 31, 2022. For more information about the convertible senior secured notes, please refer to the Group’s annual financial statements for the year ended December 31, 2022.
15Financial risk management and impairment of financial assets
The Group’s activities expose it to a variety of financial risks including market risk, credit risk, foreign exchange risk and liquidity risk.
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, arising principally from prepayments to suppliers and deposits with the Group’s bank.
Also included in Cash at bank is £
15
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
15Financial risk management and impairment of financial assets (continued)
The carrying amount of financial assets represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the balance sheet date was £
The allowance account of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly. The Group provides for impairment losses based on estimated irrecoverable amounts determined by reference to specific circumstances and the experience of management of debtor default in the industry.
On that basis, the loss allowance as at June 30, 2023 and December 31, 2022 was determined as £
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s financial position. The Group’s principal exposure to market risk is exposure to foreign exchange rate fluctuations. There are currently no currency forwards, options, or swaps to hedge this exposure.
Foreign exchange risk
The Group is exposed to foreign exchange risk arising from exposure to various currencies in the ordinary course of business. The Group received funding in USD, and subsequently holds cash in both USD and GBP. The majority of the Group’s trading costs are in GBP. The Group also has supply contracts denominated in USD and EUR. The Group holds sufficient cash in both USD and GBP to satisfy its trading costs in each of these currencies. The Company may be exposed to material foreign exchange risk in subsequent period as a result of the significance of the USD denominated Convertible Senior Secured Notes in particular relative to USD cash deposits held (which were $
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Group’s management uses short and long-term cash flow forecasts to manage liquidity risk. Forecasts are supplemented by sensitivity analysis which is used to assess funding adequacy for at least a 12-month period. The Company manages its cash resources to ensure it has sufficient funds to meet all expected demands as they fall due.
16
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
15Financial risk management and impairment of financial assets (continued)
Maturity analysis
|
| |
| Between 2 and 5 |
| After more than |
| |
| | Within 1 year | | years | | 5 years | | Total |
30 June 2023 | | £ 000 | | £ 000 | | £ 000 | | £ 000 |
Trade and other payables |
| |
| |
| — |
| |
Lease liabilities |
| |
| |
| |
| |
Convertible senior secured notes |
| — |
| |
| — |
| |
|
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| | | | | | | | |
31 December 2022 |
|
|
|
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|
|
|
Trade and other payables |
| |
| |
| — |
| |
Lease liabilities |
| |
| |
| |
| |
Convertible senior secured notes |
| — |
| |
| — |
| |
|
| |
| |
| |
| |
Capital management
The Group’s objective when managing capital is to ensure the Group continues as a going concern; and grows in a sustainable manner. Given the ongoing development of eVTOL aircraft with minimal revenues, the Group relies on funding raised from the Business Combination transaction and other equity investors. Cash flow forecasting is performed on a regular basis which includes rolling forecasts of the Group’s liquidity requirements to ensure that the Group has sufficient cash to meet operational needs.
16Related party transactions
Key management personnel compensation
Key management personnel are the members of the Board.
|
| June 30, |
| June 30, |
| | 2023 | | 2022 |
| | £ 000 | | £ 000 |
Salaries and other short term employee benefits |
| |
| |
Payments to defined contribution pension schemes |
| |
| |
Share-based payments |
| |
| |
|
| |
| |
Aggregate gains made on the exercise of share options for the Directors during the period totalled £
Summary of transactions with other related parties
During the period ending June 30, 2023 Imagination Industries Ltd, a company wholly and solely controlled by Stephen Fitzpatrick, charged the Group management fees of £
17
Vertical Aerospace Ltd
Notes to the Unaudited Condensed Consolidated Interim Financial Information for the six months ended June 30, 2023 and June 30, 2022 (continued)
16Related party transactions (continued)
On April 21, 2023, the Board agreed to a succession plan, transitioning the chairperson of the Board during the course of 2023. Dómhnal Slattery has served as the Board’s chairperson since shortly following the Company’s listing on the New York Stock Exchange.
As previously disclosed, in January 2022, the Company and Stephen Fitzpatrick entered into an option agreement with Mr. Slattery, pursuant to which Mr. Fitzpatrick granted Mr. Slattery an option to purchase up to an aggregate of
On April 21, 2023, Mr. Slattery, Mr. Fitzpatrick and the Company entered into an option termination agreement, pursuant to which the parties have agreed to terminate the Call Option in consideration for specified payments of up to an aggregate of $
A total of
On January 23, 2023, Michael Cervenka resigned from the Board of Directors.
17Events occurring after the reporting period
On August 2, 2023 Mr. Slattery resigned as chairperson and director, and Mr. Flewitt was appointed as chairperson, in each case effective as of August 3, 2023. In connection with this, the option termination agreement referred to in note 16 was amended with effect from August 2, 2023, as a result of which the remaining payment is conditional only on the Company’s maintenance of a minimum pre-order book.
Also as previously disclosed on July 3, 2023, the Company appointed Stuart Simpson as its new Chief Financial Officer, effective September 11, 2023. On August 2, 2023, Vincent Casey, who previously served as the Company’s CFO between November 2020 and February 2023 and who remained a director on the Board following his resignation as CFO, notified the Board of his resignation as a member of the Board, effective as of August 3, 2023.
18
Exhibit 99.3
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of the financial condition and results of operations of Vertical Aerospace Ltd. (“our”, “we” or the “Company”) should be read in conjunction with our unaudited condensed consolidated interim financial statements and the related notes included elsewhere in this filing, as well as our audited consolidated financial statements and the related notes included in our Annual Report on Form 20-F for the year ended December 31, 2022 (the “Annual Report”). The following discussion is based on our financial information prepared in accordance with International Financial Reporting Standards, (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Forward-Looking Statements” section of this filing and in the “Risk Factors” section of our Annual Report. Our actual results could differ materially from those contained in any forward-looking statements.
Overview
Our purpose is to revolutionize the way we travel in a more sustainable world. We are a global aerospace and technology company that is pioneering zero-emissions aviation, focused on designing, manufacturing and selling a zero operating emission electric vertical takeoff and landing (“eVTOL”) aircraft for use in the advanced air mobility (“AAM”) market, using the most cutting-edge technology from the aerospace, automotive and energy industries.
Founded in 2016, we come from a deep aerospace and automotive mindset and have already designed, built and flown two prototype eVTOL aircraft in 2018 and 2019. We are currently developing, and are progressing towards the certification of, our flagship eVTOL, the VX4, which is underway in its flight test campaign. We are targeting the VX4 to be capable of transporting a pilot and up to four passengers, traveling distances of up to 100 miles, and achieving cruise speeds of 150 mph, while producing minimal noise and zero operating emissions.
The VX4 aircraft is being designed around existing certifiable technology, as well as certain novel technology such as the batteries and powertrain. Our experienced team has previously certified and supported the development of over 30 aircraft and propulsion systems around the world. We are currently one of the only eVTOL designers and original equipment manufacturers (“OEMs”) actively pursuing certification from the United Kingdom’s Civil Aviation Authority (the “CAA”) or the European Union Aviation Safety Agency (“EASA”) with a winged vehicle. We aim to have our aircraft certified to the same safety standards as commercial airlines, rather than the significantly lower standards to which similarly sized helicopters are currently certified. EASA has also confirmed that it will concurrently validate the CAA certification for the VX4, which means the certification and validation process will run simultaneously in both jurisdictions. Both regulators are using Special Conditions (SC)-VTOL as the basis for certification of new eVTOL aircraft. By achieving certification of our VX4 eVTOL aircraft from the CAA and EASA, we will be able to leverage the work done with our home regulator to have the certification validated by other regulators where we intend to operate, including the United States Federal Aviation Authority (the “FAA”).
In March 2023, we announced that the CAA issued an eVTOL Design Organisation Approval (“DOA”) to our wholly-owned subsidiary, Vertical Aerospace Group Limited (“VAGL”). UK and European aerospace companies cannot hold a type certificate without being granted a DOA. The DOA authorises VAGL to conduct design activities and issue design approvals within the DOA’s scope of approval.
We are developing a sophisticated eVTOL ecosystem that allows us to focus on providing a high-quality experience. Our in-house expertise covers design, certification, assembly and manufacture, pilot experience, end-user experience and base platform performance. We aim to be one of the leading eVTOL aircraft OEMs, selling globally certified eVTOL aircraft to a variety of customers, including, commercial airlines, aircraft leasing companies, business aviation, existing helicopter operators as well as new operators in the AAM market, providing both OEM sales and aftermarket services to our customers. We also believe there is a potential market to provide OEM sales to a variety of industries beyond traditional airline and helicopter customers, such as tourism, where there is an opportunity to replace existing transportation options like minibuses, and the cargo and logistics industry, where there is potential to partner with global logistics firms and large retail customers. There is a further opportunity to generate revenue from other sectors such as emergency services, as eVTOL aircraft can be used for emergency patient and supplies transport, particularly in densely
populated areas or military logistics transport, among other potential uses. We plan to explore the potential development of versions of the VX4 for such scenarios. Our strategy is to forge partnerships in key markets with partners that have existing demand and are local trusted brands with market-specific knowledge. We believe that by partnering with such market players, we can extend their business models and build a market ecosystem that will allow us to expand our proposition over time. Our focus on system integration and establishment of an industrial supply chain is expected to enable rapid scaling of production of our aircraft.
The Business Combination
On June 10, 2021, we entered into a business combination agreement with Broadstone Acquisition Corp. (“Broadstone”), which was consummated on December 16, 2021 (the “Business Combination”). The Business Combination had a significant impact on our capital structure and operating results, helping to facilitate our product development, manufacturing and commercialization. The most significant change in our reported financial positions was a net increase in cash (as compared to our consolidated balance sheet at June 30, 2021) of approximately $286 million. As a result of the Business Combination, we became a U.S. public company listed on the New York Stock Exchange, which required us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We have incurred, and expect to continue to incur, additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources.
Recent Developments
Flight Test Campaign
We have continued to advance our flight test activities with progress in our thrustborne flight test campaign (including lifting, hovering, flying and landing vertically, by the thrust of the aircraft’s propulsion system). The flight tests have included numerous hovers, both tethered and untethered, as well as expanding the low-speed flight envelope with the VX4 prototype aircraft under remotely piloted conditions and powered by our proprietary battery systems.
Executive Officer Appointment
In July 2023, we announced that the Board of Directors appointed Stuart Simpson as Chief Financial Officer, joining us in September 2023. Mr. Simpson is a seasoned leader, most recently serving as the Group Chief Financial Officer of Avast, a FTSE 100 company. Previously, Mr. Simpson held the roles of Interim Chief Executive Officer, Chief Financial Officer and Chief Operating Officer at Royal Mail, a FTSE 100 company. Mr. Simpson has a long history in the automotive industry, working for General Motors and Rolls Royce and Bentley Motor Car Company.
Kakao Mobility
In May 2023, we announced that we are partnering with South Korean mobility-as-a-service company, Kakao Mobility, to evaluate and advance commercially sustainable urban air mobility travel solutions in South Korea. Kakao Mobility has agreed to pre-order, subject to certain conditions, up to 50 VX4 aircraft. We agreed to establish a joint working group with Kakao Mobility to drive the commercialization of AAM services in South Korea, including the exploration of network and fleet planning, infrastructure requirements, regulatory development, and consumer awareness of eVTOL mobility solutions.
Certification Progress
We have continued to make progress with our certification activities for the VX4 aircraft, including a detailed familiarization session with the CAA on the aircraft design and certification basis. Further technical discussions are being advanced with the CAA, and we then expect to have technical familiarization sessions with EASA, the FAA and the Japan Civil Aviation Bureau before the end of 2023. Additionally, in June 2023, Brazil’s National Civil Aviation Agency informed the CAA that it has accepted our application for validation of our type certificate in Brazil, which will enable the Company’s operations in Brazil. We continue to target certification by the end of 2026.
Key Factors Affecting Operating Results
Commercialization
The full-scale VX4 prototype has now been built and completed a series of rigorous ground-based tests, including lift, vibration and propeller thrust. In September 2022, we successfully began the first stages of a flight test campaign with our VX4 prototype under CAA approvals, which included a crewed tethered hover. We have continued to advance our flight test activities, also under CAA approvals, with recent progress in our thrustborne flight test campaign, first including numerous remotely piloted hovers, both tethered and untethered, before expanding the low-speed flight envelope. We are also progressing the build of our second prototype VX4, which will incorporate learnings from tests conducted to date and advancements in our partners’ and our own in-house technology. The VX4’s flight test campaign will continue and progress towards the next stages in our flight test program, which we expect will include piloted flights at increasing altitudes and speeds and demonstration of the transition from vertical lift to horizontal forward flight.
We have deployed a sales strategy engaging in direct sales to operator customers and third-party distribution networks. Our salesforce has targeted prospects from a pool of over 5,000 airlines with ICAO codes worldwide that are seeking to capitalize on the growth of the AAM market. As part of this approach, we have entered into arrangements with several commercial partners for multiple pre-orders and pre-order options for our aircraft. Customers include American Airlines, Virgin Atlantic, Avolon, Bristow, Marubeni, Kakao Mobility, Iberojet, FLYINGGROUP as well as (through Avolon’s VX4 placements) Japan Airlines (JAL), Gol, Gözen Holdings and AirAsia. In January 2023, Marubeni made a pre-delivery payment to reserve delivery slots for the first 25 VX4 aircraft of its conditional pre-order of up to 200 aircraft. In addition, American Airlines has committed to pay a pre-delivery payment upon the satisfaction of certain conditions, including entering into a master purchase agreement that will contain the final terms for the purchase of the aircraft, in exchange for our commitment to reserve delivery slots for the first 50 VX4 aircraft of American Airline’s conditional pre-order of up to 250 aircraft, with an option to purchase an additional 100 aircraft. All such pre-orders, options and commitments are not legally binding, conditional and may be terminated without penalty at any time by either party and any pre-delivery payments may be fully refundable upon certain circumstances.
Development of the Advanced Air Mobility Market
We believe that deploying a new type of aerial mobility network in cities represents an extensive market opportunity that we expect to expand over time. We intend to seize on the untapped demand for getting into and out of city centers globally, as certain existing travel methods can be impractical, inconvenient or unaffordable. Our long-term financial performance ultimately depends on the demand for such short distance aerial transportation and the growth of the AAM market. We believe that we have a significant opportunity to meet this untapped demand in the AAM market. We, and the eVTOL sector more generally, seek to displace the current incumbents by taking market-share and/or benefitting from the incremental growth in demand.
There are two critical factors that will enable us to secure a prominent position in the AAM market: firstly, our ability to develop, certify and manufacture our aircraft, and secondly, the adoption of eVTOL as an alternative mode of transport by both operators and consumers. Our success in development and manufacturing will be dependent on overcoming several challenges around key manufacturing considerations, such as wing borne capability and battery efficacy. We plan to continue to invest in our infrastructure, research and development efforts and workforce to ensure that we will be able to deliver our aircraft to our customers in a timely manner.
While we believe that there will be a significant market for AAM in the future, there is a possibility that consumer resistance may be significant, as there may be misconceptions about eVTOL safety, performance and reliability. Additional factors impacting the pace of adoption of AAM and aerial transportation include but are not limited to: perceptions about eVTOL quality and cost; perceptions about the limited range over which eVTOL may be flown on a single battery charge; the evolution and availability of competing forms of transportation, such as ground or air taxi or ride-hailing services; the development of adequate infrastructure; consumers’ perception about the convenience and cost of transportation using eVTOL relative to ground-based alternatives; and, in particular, improvements in fuel efficiency, autonomy, or electrification of cars. In addition, macroeconomic factors could impact demand for AAM services, particularly if end-user pricing is at a premium to ground-based transportation alternatives. If the market for AAM does not develop as expected, this would impact our ability to generate revenue or grow our business.
Competition
We face immediate competition from other eVTOL manufacturers, suppliers and operators as well as ground-based mobility solutions and local and regional incumbent helicopter and aircraft charter services. While we expect to be one of the pioneering companies to market eVTOL aircraft, we expect this industry to be increasingly competitive, and it is possible that our competitors could launch in one or more markets before us. Even if we are among the first to market, any anticipated advantages may not crystallize if new companies or existing aerospace companies launch competing solutions in the markets in which we intend to operate and/or if any of our competitors obtain large-scale capital investment to speedily scale up their distribution capability. Existing AAM operators may also take actions to protect their customer base, which could prevent us from gaining market share in markets in which we intend to operate. For a more comprehensive discussion, please see Item 3.D. “Risk Factors — Risks Related to Our Business and Industry” in our Annual Report.
Regulatory Landscape
We are, and will be, subject to significant regulation relating to aircraft safety and testing, accessibility, battery safety and testing and environmental regulation in the United Kingdom, European Union, the United States and other markets. These requirements create additional costs and possibly production delay in connection with design, testing and manufacturing of our aircraft. For more information, see Item 4.B. "Business Overview- Our Regulatory Strategy" and Item 3.D. "Risk Factors - Risks Related to Our Regulatory Environment" in our Annual Report.
A. Operating Results
Components of Results of Operations
Revenue
We are currently in the research and development phase of our journey to commercialization of eVTOL technology. We have not generated any revenue from design, development, manufacturing, engineering and sale or distribution of our aircraft. No revenue was generated during the six months ended June 30, 2023.
Operating Expenses
Research and Development Expenses
Research and development expenses consist of relevant staff costs, including salary and benefits, third party engineering consultants, materials, equipment, components and tooling, and program consumables and testing. Costs associated with development projects such as aircraft programs, component programs and software products are expensed rather than capitalized as intangible assets under construction. We expect research and development expenses to increase as we continue to develop our aircraft technology. The accounting policies applied remain consistent with those of the previous financial year and corresponding interim reporting period. For more information about our accounting policy for intangible assets, refer to Note 2 in our Annual Report.
Administrative Expenses
Administrative expenses consist of the costs associated with employment of our non-engineering staff, including salary and benefits, the costs associated with our premises, and the depreciation of our fixed assets, including depreciation of “right of use” assets in relation to our leased property. We expect administrative expenses to increase as our overall activity levels increase due to the construction and operation of our final assembly facility and as we hire additional personnel and consultants to support our compliance with the applicable provisions of the Sarbanes-Oxley Act and other SEC rules and regulations.
Administrative expenses also include share-based payment expenses in connection with the vesting of certain 2021 Incentive Plan and EMI options during the six months ended June 30, 2023.
See Note 5 to our unaudited condensed consolidated interim financial information statements included elsewhere in this filing.
Related Party Administrative Expenses
Related party administrative expenses consists of costs from Imagination Industries Incubator Ltd. (“i3”), which is an entity controlled by Stephen Fitzpatrick, our majority shareholder and CEO. The nature of these costs is the provision of a limited number of flexible desk space at the United House in London, UK.
Other Operating Income
Other operating income consists of government grants to support our development activities as well as the research and development credit related to United Kingdom research and development tax relief schemes.
Total Finance Income
Finance Income
Finance income consist primarily of fair value movements on our convertible loan notes and warrants, interest calculated on lease liabilities and both realized and unrealized foreign exchange movements that have been created due to the fluctuation of exchange rates between the US dollar, euro and the other currencies that we use for our operations.
Results of Operations
The following table sets forth the unaudited condensed consolidated interim statements of operations in British pounds sterling for the periods presented.
| | Six Months Ended June 30, |
| ||||
| | 2023 | | 2022 | | |
|
| | (in £ thousands) | | (in £ thousands) | | % Change |
|
Research and development expenses |
| (27,500) |
| (19,396) |
| 42 | % |
Administrative expenses |
| (24,266) |
| (23,466) |
| 3 | % |
Related party administrative expenses |
| (42) |
| — |
| — | |
Other operating income |
| 15,845 |
| 3,407 |
| 365 | % |
Operating loss |
| (35,963) |
| (39,455) |
| (9) | % |
Finance income/(costs) |
| 24,193 |
| 22,434 |
| 8 | % |
Loss before tax |
| (11,770) |
| (17,021) |
| (31) | % |
Income tax expense |
| — |
| — |
| — | |
Net loss |
| (11,770) |
| (17,021) |
| (31) | % |
For the six months ended June 30, 2022 and 2023
Research and development expenses
Research and development expenses increased by £8,104 thousand, or 42%, from £19,396 thousand during the six months ended June 30, 2022 to £27,500 thousand during the six months ended June 30, 2023. This increase was primarily due to increased research and testing activity in relation to our aircraft.
Specifically, we have increased our focus on research and development associated with our prototype aircraft in order to deliver our thrustborne flight test campaign. This has been achieved through investing our personnel dedicated specifically to our research and development activity, resulting in associated staff costs increasing by £5,193 thousand, or 78%, from £6,689 thousand during the six months ended June 30, 2022 to £11,882 thousand during the six months ended June 30, 2023.
As we progress through our test flight program, we have continued to invest in certain proprietary features of our aircraft, including our battery system and propeller design. We have also incurred a high level of spending with our strategic partners, which we believe is key to the success of the anticipated milestones associated with our prototype program. Our spend on components, parts and tooling has increased by £3,398 thousand, or 71%, from £4,771 thousand during the six months ended June 30, 2022 to £8,169 thousand during the six months ended June 30, 2023.
Administrative expenses
Administrative expenses increased by £800 thousand, or 3%, from £23,466 thousand during the six months ended June 30, 2022 to £24,266 thousand during the six months ended June 30, 2023. This increase relates to the investment in enabling and support functions required in order to facilitate our research and development activity.
Related party administrative expenses
Related party administrative expenses increased by £42 thousand, from £nil during the six months ended June 30, 2022 to £42 thousand during the six months ended June 30, 2023. This increase relates to the provision of flexible office and desk space by i3.
Other operating income
Operating income increased by £12,438 thousand, or 365%, from £3,407 thousand during the six months ended June 30, 2022 to £15,845 thousand during the six months ended June 30, 2023.
Income from R&D tax relief increased from £2,193 thousand for the six months ended June 30, 2022 to £13,971 thousand for the six months ended June 30, 2023, as a result of increased eligible R&D expenditure during the period. This also includes an additional £7,549 thousand received relating to eligible research and development expenditure incurred in the prior year; claimed in accordance with the SME R&D tax relief scheme. Amounts received in prior periods were claimed in accordance with the R&D expenditure credit scheme.
Income from government grants increased from £1,214 thousand during the six months ended June 30, 2022 to £1,874 thousand during the six months ended June 30, 2023. In 2022, VAGL was awarded a government grant by the United Kingdom’s Aerospace Technology Institute and Innovate U.K; with the resultant Category Enhanced Battery Development grant period commenced on February 1, 2023. The receivable instalments are recognized in other operating income as the matching sanctioned expenditure is incurred, with a retrospective claim process.
Finance income (net of finance costs)
Finance income increased by £1,759 thousand, or 8%, from £22,434 thousand during the six months ended June 30, 2022 to £24,193 thousand during the six months ended June 30, 2023. This reflects foreign exchange gains made during the period. Please see Note 6 to our unaudited condensed consolidated interim financial statements included elsewhere in this filing.
Off-Balance Sheet Arrangements
We did not have during the period presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
JOBS Act
We are an emerging growth company, as defined in the JOBS Act. We intend to rely on certain reduced reporting and other requirements that are otherwise generally applicable to public companies. As an emerging growth company, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, which would otherwise be required beginning with our second annual report on Form 20-F, and (ii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis).
Recent Accounting Pronouncements
Certain new accounting standards and interpretations have been issued by the IASB, but are not yet effective for the December 31, 2023 reporting period and have not been early adopted by us and our subsidiaries. These standards are not expected to have a material impact on us in the current or future reporting periods or in connection with foreseeable future transactions. Please see Note 2 to our unaudited condensed consolidated interim financial statements included elsewhere in this filing.
B. Liquidity and Capital Resources
The functional currency of the Company is USD and the functional currency of VAGL is GBP. The financial statements are presented in GBP, which is the Company and VAGL’s presentation currency. Note that in this section certain narrative financial information is shown in GBP and other information is shown in USD; typically, this is because we have incurred the majority of our costs in the UK and in GBP, while we expect customer payments and any external funding to be raised in USD.
We have incurred net losses since inception and to date have not generated any revenue from the design, development, manufacturing, engineering and sale or distribution of electric aircraft. Commensurate with being in the development phase of our journey to commercialization of the VX4, we have invested heavily in research to support the development of our aircraft. As of June 30, 2023, we had £89.7 million of cash and cash equivalents on hand including short-term deposits. We maintain cash balances with financial institutions in excess of insured limits.
We have prepared a cash flow forecast and have considered our ability to continue as a going concern for the foreseeable future, being at least 12 months following the date of this filing. Within the next 12 months following the date of this filing, we expect our funding requirements to be approximately £80 million, which will be used primarily to fund the creation and testing of the prototype aircraft, support the certification process and invest in personnel across both engineering and support functions. Our forecast is based on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect.
We will need to raise additional capital to fund our future operations and remain as a going concern, before we use all of our existing resources. There can be no assurance that we will be able to obtain additional funding on acceptable terms and thus have sufficient funds to meet our funding requirements. As a result, the timely completion of financing is important for our ability to continue as a going concern when we have exhausted our existing resources.
These factors indicate that a material uncertainty exists that may raise significant doubt (or substantial doubt as contemplated by PCAOB standards) about our ability to continue as a going concern and therefore we may be unable to realize our assets and discharge our liabilities in the normal course of business. Please refer to Note 2 to our unaudited condensed consolidated interim financial statements included elsewhere in this filing.
Our future capital requirements will depend on many factors, including:
| ● | research and development expenses as we continue to develop our eVTOL aircraft; |
| ● | expenditures in the expansion of our testing and certification capacities; |
| ● | additional operating costs and expenses for production ramp-up and raw material procurement costs; |
| ● | general and administrative expenses as we scale our operations; |
| ● | interest expense from any debt financing activities; and |
| ● | selling and distribution expenses as we build, brand and market our electric aircraft. |
We received approximately $253 million in connection with the Business Combination, which included $94 million in proceeds from the PIPE Investment and $192 million from the Convertible Senior Secured Notes, which consummated substantially simultaneously with the Business Combination, net of transaction costs. In addition, as at June 30, 2023 we had received $8.5 million, and may receive up to approximately a further $87 million net of transaction costs in connection with and over the remaining three-year term of the Equity Subscription Line that commenced on August 5, 2022, which would further support our capital requirements towards our business milestones. see “Equity Subscription Line”. Additionally, as previously disclosed, we intend to raise additional capital during 2023.
We have also received conditional pre-orders and pre-order options, including from American Airlines, Avolon, Bristow, Iberojet, Virgin Atlantic and Marubeni, among others. Certain of these pre-orders require that the purchaser pay a pre-delivery payment, which is credited against any future amount due and payable. While the customer’s obligation to pay such pre-delivery payments is subject to various conditions, and they are expected to be refundable in certain circumstances, we expect to receive them prior to delivering aircraft to each customer.
Until we generate sufficient operating cash flow to cover our operating expenses, working capital needs and planned capital expenditures, or if circumstances evolve differently than anticipated, we expect to utilize a combination of available pre-delivery payments, government funding, plus equity and debt financing, to fund any future capital needs. If we raise funds by issuing equity securities, there may be dilution to our shareholders. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of ordinary shares. Additionally, if we raise funds by issuing debt securities, these debt securities may have rights, preferences, and privileges senior to those of preferred and common shareholders. The terms of debt securities or borrowings may impose significant restrictions on our operations. Adequate additional financing may not be available to us on acceptable terms, or at all. The capital markets have in the past, and may in the future, experience periods of upheaval and the availability and cost of equity and debt financing may be impacted by global macroeconomic conditions such as international political conflict, supply chain issues and rising inflation and interest rates. Further, the global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, rising interest and inflation rates, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. All of these factors could impact our liquidity and future funding requirements, including but not limited to our ability to raise additional capital when needed on acceptable terms, if at all. The duration of an economic slowdown is uncertain and the impact on our business is difficult to predict.
Our principal uses of cash in recent periods have been funding our research and development activities and other personnel costs. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from our customers, the expansion of sales and marketing activities, the timing and extent of spending to support our development efforts. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing we may not be able to raise such financing on acceptable terms or at all. If we are unable to raise additional capital or generate cash flows necessary to continue our research and development and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition. If adequate funds are not available, we may need to reconsider our expansion plans or limit our research and development activities, which could have a material adverse impact on our business prospects and results of operations.
Convertible Senior Secured Notes
On October 26, 2021, we entered into a convertible note subscription agreement (the “Convertible Senior Secured Notes Subscription Agreement”) by and among the Company, Broadstone and Mudrick Capital Management L.P. (the “Convertible Senior Secured Notes Investor”). Concurrently with the consummation of the Business Combination, pursuant to the terms of the Convertible Senior Secured Notes Subscription Agreement, (i) the Convertible Senior Secured Notes Investor purchased Convertible Senior Secured Notes of and from the Company in an aggregate principal amount of $200,000,000 for an aggregate purchase price of $192,000,000 (the “Purchase Price”), and the Company issued and sold to the Convertible Senior Secured Notes Investor the Convertible Senior Secured Notes in consideration for the payment of the Purchase Price, and (ii) the Company issued to the Convertible Senior Secured Notes Investor 4,000,000 warrants, each representing the right to purchase one ordinary share at a price of $11.50 per share (the “Convertible Notes Warrants”).
The Convertible Senior Secured Notes are initially convertible into up to 18,181,820 ordinary shares (excluding any interest, and subject to adjustments as provided in the indenture governing the Convertible Senior Secured Notes (“Indenture”) at an initial conversion rate of 90.9091 ordinary shares per $1,000 principal amount of Convertible Senior Secured Note, subject to adjustments to such rate as provided in the Indenture, at any time prior to the close of business on the second scheduled trading day immediately before the maturity date of the Convertible Senior Secured Notes.
Upon the occurrence of a Fundamental Change (as defined in the Indenture), then the Convertible Senior Secured Notes Investor has the right, at its option, to require us to repurchase for cash all or any portion of its Convertible Senior Secured Notes in principal amounts of $1,000 or an integral multiple thereof, at a fundamental change repurchase price equal to the principal amount of the Convertible Senior Secured Notes to be repurchased plus, if repurchased before the second anniversary of issuance, certain make-whole premiums, plus accrued and unpaid interest to, but excluding, the repurchase date.
The Convertible Senior Secured Notes bear interest at the rate of 7.00% per annum if we elect to pay interest in cash or 9.00% per annum if we elect to pay interest in-kind, and interest is paid semi-annually in arrears. As of June 30, 2023, the Company elected to pay all incurred interest in-kind in an amount equal to $28,179 thousand. Upon the occurrence, and during the continuation, of an event of default, an additional 2.00% will be added to the stated interest rate. The Convertible Senior Secured Notes will mature on the fifth anniversary of issuance and will be redeemable at any time by us, in whole but not in part, for cash, at par plus, if redeemed before the second anniversary of issuance, certain make-whole premiums as specified in the indenture governing the Convertible Senior Secured Notes. Subject to the terms of the Indenture, VAGL provided full and unconditional guarantees under the Convertible Senior Secured Notes upon consummation of the Business Combination. The Convertible Senior Secured Notes Subscription Agreement also contains other customary representations, warranties, covenants and agreements of the parties thereto.
Equity Subscription Line
On August 5, 2022, we entered into the Purchase Agreement and Nomura Registration Rights Agreement with Nomura. Pursuant to the Purchase Agreement, we have the right to sell to Nomura up to $100 million in aggregate gross purchase price of our newly issued ordinary shares from time to time during the three-year term of the Purchase Agreement (the “Equity Subscription Line”). The purchase price of our ordinary shares that we elect to sell Nomura pursuant to the Purchase Agreement is determined by reference to the volume weighted average price of the ordinary shares (“VWAP”) during an applicable purchase period on the day of the applicable purchase date for which we have timely delivered written notice to Nomura directing it to purchase ordinary shares under the Purchase Agreement, less a fixed 4.25% discount to such VWAP. Sales of ordinary shares pursuant to the Purchase Agreement, and the timing of any sales, are solely at our option, and we are under no obligation to sell any securities to Nomura under the Purchase Agreement. Pursuant to the Nomura Registration Rights Agreement, we filed a registration statement with the SEC registering 20 million ordinary shares of the Company to be sold to Nomura under the Purchase Agreement. As of June 30, 2023, we had sold approximately 1.1 million ordinary shares of the 20 million ordinary shares registered for resale under the Equity Subscription Line at a weighted average share price of $7.70, net of transaction costs.
Aerospace Technology Institute (“ATI”) Grant Funding Program
VAGL is the recipient of an ATI grant from the U.K. Government totaling up to £14.3 million from the U.K.’s announced aggregate investment of £113 million in hydrogen and all-electric flight technologies across all grant recipients. This grant is being drawn down in installments over the duration of the project, which is expected to continue through 2025. The grant is being used by the Company to develop a prototype propulsion battery system for aerospace applications, including as part of the Company’s eVTOL aircraft. Receipt of the grant follows the issuance by the applicable government agency of the formal grant offer letter and entry into by the Company of a collaboration agreement with a university partner, both of which events occurred in March 2023, and is also subject to the terms and conditions of the award set out in the grant offer letter (which include, among others, that the ATI funding will contribute only 50% of the Company’s eligible costs in connection with the prototype battery development).
Cash Flows
The following table presents the summary consolidated cash flow information for the periods presented.
|
| Six Months Ended June 30, | ||
| | 2023 |
| 2022 |
| | (in £ thousands) | ||
Net cash (outflow) from operating activities |
| (33,056) |
| (63,081) |
Net cash inflow/(outflow) from investing activities |
| 60,846 |
| (560) |
Net cash (outflow) from financing activities |
| (169) |
| (235) |
Cash flows from operating activities
Net cash used in operating activities decreased by £30,025 thousand, or 48%, from £63,081 thousand for the six months ended June 30, 2022 to £33,056 thousand for the six months ended June 30, 2023. This decrease was primarily due to the payment of significant creditor balances during the prior period, including those related to the Business Combination consummated in December 2021.
Cash flows from investing activities
Net cash used in investing activities decreased by £61,406 thousand, from £560 thousand for the six months ended June 30, 2022 resulting in net cash generated of £60,846 thousand for the six months ended June 30, 2023. This movement was primarily due to the maturity of short term deposits placed by the company, which as at June 30, 2023 is presented within cash and cash equivalents.
Cash flows from financing activities
Net cash from financing activities decreased by £66 thousand, or 28%, from £235 thousand for the six months ended June 30, 2022 to £169 thousand for the six months ended June 30, 2023. This decrease was primarily due to proceeds from the issue of share capital during the period.
Material Cash Requirements for Known Contractual and Other Obligations
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheet as of June 30, 2023, while others are considered future commitments. Our contractual obligations primarily consist of research and development expenditure incurred in the advancement of our aircraft program. For information regarding our lease obligations, refer to Note 18 in our Annual Report and Note 5 to our unaudited condensed consolidated interim financial statements included elsewhere in this filing.
C. Research and Development, Patents and Licenses, etc.
For a discussion of our research and development policies, see “Research and Development” in Item 4.B. of our Annual Report and Note 5 to our unaudited condensed consolidated interim financial statements included elsewhere in this filing.
D. Trend Information
Other than as disclosed elsewhere in this filing, we are not aware of any trends, uncertainties, demands, commitments or events during the six months ended June 30, 2023, or since, that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our consolidated financial statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. Our critical accounting estimates and judgments are described in Note 3, Critical accounting judgements and key sources of estimation uncertainty, to our unaudited condensed consolidated interim financial statements included elsewhere in this filing.
Forward-Looking Statements
The above discussion contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to our current expectations and views of future events. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements as contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, whether express or implied, other than statements of historical facts contained in this filing, including without limitation, statements regarding the design and manufacture of our eVTOL aircraft, our future results of operations and financial position, the features and capabilities of the VX4, anticipated management changes and related timing, the anticipated growth of the AAM market, activities under our collaborations and partnerships, our business strategy and plans and objectives of management for future operations, including, among others, statements regarding the liquidity, growth and profitability strategies, our ability and plans to raise additional capital to fund our operations, our plans to mitigate the risk that we are unable to continue as a going concern, our ability to achieve regulatory certification of our aircraft product on any particular timeline or at all, factors and trends affecting our business and guidance as described in this section entitled “Operating and Financial Review and Prospects” are forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “aims,” “potential” or “continue,” “is/are likely to” or the negative of these terms or other similar expressions, though not all forward-looking statements use these words or expressions.
Forward-looking statements involve a number of risks, uncertainties and assumptions, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:
| ● | Our limited operating history and that we have not yet manufactured any non-prototype aircraft or sold any aircraft to eVTOL aircraft customers; |
| ● | If we are unable to produce, certify or launch aircraft in the volumes or timelines projected; |
| ● | Being an early-stage company with a history of losses, we expect to incur significant expenses and continuing losses in the foreseeable future; |
| ● | Our markets are still in relatively early stages of growth, and such markets may not continue to grow, grow more slowly than we expect or fail to grow as large as we expect; |
| ● | Our dependence on our partners and suppliers for the components in our aircraft and for our operational needs; |
| ● | Any accidents or incidents involving eVTOL aircraft, us or our competitors could harm our business; |
| ● | Our eVTOL aircraft may not be certified by transportation authorities for production and operation within any projected timeline, or at all; |
| ● | All of the pre-orders we have received for our aircraft are conditional and may be terminated at any time by either party and any pre-delivery payments may be fully refundable upon certain circumstances; |
| ● | Our aircraft may not perform at the level we expect and may have potential defects; |
| ● | Our business has grown rapidly and expects to continue to grow significantly, and any failure to manage that growth effectively could harm our business; |
| ● | Our dependence on recruiting and retaining our senior management team and other highly skilled personnel; |
| ● | Our business plans require a significant amount of capital and we may not be able to raise additional funds when we need or want them, or at all, to fund our operations, which could force us to curtail or even cease our planned operations and the pursuit of our growth strategy; |
| ● | Our limited cash and cash equivalents and recurring losses from our operations raise significant doubt (or raise substantial doubt as contemplated by PCAOB standards) regarding our ability to continue as a going concern; |
| ● | We previously identified material weaknesses in our internal controls over financial reporting, which if we fail to properly remediate, could adversely affect our results of operations, investor confidence in us and the market price of our ordinary shares; and |
| ● | The other matters described in the section entitled “Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2022. |
We caution you against placing undue reliance on forward-looking statements, which reflect current beliefs and are based on information currently available as of the date a forward-looking statement is made. Forward-looking statements set forth herein speak only as of the date of this filing. We undertake no obligation to revise forward-looking statements to reflect future events, changes in circumstances or changes in beliefs. In the event that any forward-looking statement is updated, no inference should be made that we will make additional updates with respect to that statement, related matters or any other forward-looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements, including discussions of significant risk factors, may appear in our public filings with the SEC, which are accessible at www.sec.gov, and which you are advised to consult.
You should read the above discussion with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.