TIDMAERO
RNS Number : 1547J
Strat Aero PLC
26 June 2017
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
Strat Aero plc / Index: AIM / TIDM: AERO / Sector: Support
Services
26 June 2017
Strat Aero plc ("Strat Aero", the "Company" or the "Group")
Final Results
Strat Aero Plc, the AIM quoted international aerospace company
focused on the Unmanned Aerial Vehicle ("UAV") sector, is pleased
to present its audited final results for the year ended 31 December
2016.
The Annual Report & Accounts for the year ended 31 December
2016 ("Annual Report") will be sent to shareholders today together
with a notice convening a General Meeting ("GM"). The Annual Report
and the notice of GM are available on the Company's website at
www.strat-aero.com.
The GM will be held at the offices of Hill Dickinson, 8th Floor,
The Broadgate Tower, 20 Primrose Street, London EC2A 2EW on 28 July
2017 at 11:00 a.m.
OVERVIEW
-- Strategy to focus on core business divisions - Training &
Education and Survey & Inspection, beginning to yield results
for the Group
-- 99% increase in full year revenue to US$862,988 (2015:
US$433,001) primarily due to the full year impact of the
acquisition of Geocurve, a specialist in the provision of UAV
operated surveys and inspection services to a blue-chip customer
base
-- 72% increase in gross profit to US$593,079 (2015: US$345,747)
-- 41% reduction in loss after taxation to US$3,524,476 (2015: US$5,931,933)
-- US$1.58 million raised pre-expenses in share placings post
period end to strengthen balance sheet
Iain McLure, CEO of Strat Aero plc, commented, "Following my
appointment as CEO part-way through the financial year, Strat Aero
implemented a revised strategy for the Company designed to maximise
our key strengths, skills and revenue opportunities whilst
simultaneously diverting from non-core activities and reducing
Strat Aero's overall cost base. Progress has been made in this
regard over the course of 2016, however this strategy is expected
to have maximum impact for the Group in 2017 and in line with this,
operations and performance in recent months have been encouraging.
I view this as testament to the professionalism and quality of our
people, a successful turnaround strategy and also a line under the
disappointing performance of the previous two years during which
Strat Aero was subject to an acquisition policy which overstretched
the Company's balance sheet and management resources.
"I am confident that by focussing on Strat Aero's two highly
complementary business divisions: Training & Education and
Survey & Inspection, we have a robust business model capable of
providing investors with exposure to the exceptional growth
potential of UAVs and the ability to deliver meaningful shareholder
value. I look forward to providing further updates throughout the
year as we continue to deliver on this strategy."
CHAIRMAN'S STATEMENT
Looking back on 2016, it seems that the papers were peppered
with news relating to 'drones', or as they are more widely referred
to in the business, 'Unmanned Aerial Vehicles ("UAVs")'. Aside from
the obvious military uses, UAVs are increasingly becoming part of
our everyday lives, most famously illustrated by Amazon and the
launch of its widely publicised 'Amazon Prime Air' service in
December 2016. We note that most recently, UAVs have been used to
deliver defibrillators to people suffering cardiac arrest - where
every minute which passes between onset of attack and
defibrillation reduces survival rates by 10%. The need for an
immediate response therefore, which UAVs can provide, is clearly
evident.
However, the uptake in UAV use has also created some unique
challenges - for instance, in 2016 it was reported that there were
over 70 near-misses between UAVs and passenger aircraft near
Heathrow alone. These reports clearly highlight the critical
requirement for more widely-adopted regulations, permitting,
understanding and most significantly professional training when it
comes to UAV usage, as it is a common belief that UAVs will
increasingly become part of the fabric of day to day life across
the globe.
So where does Strat Aero fit in to this mix? Between Amazon and
recreational UAV users, there are a whole host of commercial
applications for UAVs and this is the market we are targeting. We
have a dual approach for maximising market penetration which is as
follows:
1. Training & Education
As UAV technology matures and devices become both more
cost-effective and more capable, individual users and organisations
are looking for training solutions that enable them to operate UAVs
in a broad range of settings. Recognised by the UK's Civil Aviation
Authority as a National Qualified Entity for UAV training design
and delivery, we have developed a range of professional training
solutions for both commercial and public-sector clients.
2. Survey & Inspection
Strat Aero, through its wholly owned subsidiary Geocurve, is a
specialist in providing survey and inspection services using UAVs,
as well as using ground- and water-based survey equipment. Our goal
is to deliver exactly the analysis that our clients require to
maximise the productivity of their teams and minimise asset
downtime.
Looking specifically at the progress made in the two areas
highlighted above in 2016 and in recent months, the key development
in the Training & Education business was the formal grant of
National Qualified Entity ('NQE') status by the UK's Civil Aviation
Authority ('CAA'). This was a pivotal development in the
commercialisation of our training programmes as in order to apply
for a UAV pilot's licence, individuals need to show that they
trained at an NQE certified centre. We saw this recognition of our
services by the CAA as an endorsement of our training programmes
and independent confirmation of the quality of our suite of
commercial teaching courseware.
The grant of NQE status coincided with the launch of several new
training initiatives including the Applied Unmanned Technology
Qualification ('AUTQ'), a course for professional trainers and
pilots. It is unique in its comprehensive focus on safety,
industrial applications and real flying skills. Unlike many
training organisations, Strat Aero flies its own commercial UAV
fleet to deliver inspection and survey services to clients - which
means that real-world learnings can be embedded directly into our
training materials. The driving factor behind the development of
Strat Aero's AUTQ programme has been the need for high level
training for operators providing professional services to
commercial clients. Strat Aero's training has an emphasis on
hands-on flight training and a unique focus on training operators
for their chosen commercial application.
Having already developed our proprietary commercial UAV training
application, we are busy rolling-out our offering via a capital
light strategy, centred on adopting a franchise model with suitable
partners. We have now demonstrated the success of this model
through our agreement with Hong Kong based I-Coach to roll-out our
training programmes in Hong Kong, and the Taiwanese Republic of
China. Our parallel agreement with the Lim Kok Wing University of
Creative Technology is running slower than planned and we
anticipate running the first "train the trainer" course in Kuala
Lumpur in July 2017. Whilst disappointing, this delay is not
expected to have an impact on full year 2017 projections.
Post period end, our first formal AUTQ course in Taiwan was
successfully completed. The course ran for two weeks and was
managed and taught by Mark Wharry, our Director of Training, who is
a leading instructor in the UAV industry. In association with the
Taiwanese Unmanned Aerial Systems Development Association, Mark
successfully trained 24 candidates in a 'train the trainer' style
course. These candidates have since graduated at a formal ceremony
in Taipei, attended by many local businesses and government
dignitaries. We are proud to be able to bring our skills and
expertise to Taiwan, to work with the TWUAS Development Association
and be at the forefront of creating a new and exciting industry in
the country.
Looking now to our Survey & Inspection services offering,
this is conducted through our subsidiary Geocurve. Growth on this
side of the business continues to develop organically through
existing contracts with major blue-chip companies and government
agencies. The most significant recent contract win was the CH2M
contract to work on the Thames 2100 Flood Defence Project on behalf
of the Environment Agency. The contract was awarded in September
2016 after a rigorous competitive tender process and followed the
successful completion of the Isle of Grain survey project where
Geocurve combined multiple UAV flights, land-based surveys and
bathymetric surveys to deliver a suite of video, orthomosaic photo,
3D model and survey products.
This is an ambitious project to be involved with - and one with
enormous benefits for a large number of people as Thames 2100 Flood
Defence Project is aiming to reduce the risk of tidal flooding for
1.25 million people and GBP200 billion worth of property by
replacing and refurbishing the tidal flood defences. TEAM2100 is an
integrated and co-located team comprising the Environment Agency,
global engineering company CH2M, and key supply chain partners and
Strat Aero is delighted to be involved with such highly esteemed
partners on this project.
Financial Overview
The Group recorded revenues of US$862,988 during the year ended
31 December 2016 (2015: US$433,001) generating a gross profit of
US$593,079 (2015: US$345,747). This significant increase is
primarily due to the full year impact of the acquisition of
Geocurve. Costs in 2016 were inflated due to the one-off costs of
US$314,567 arising from the legal action referred to below.
The loss for the year to 31 December 2016 after taxation was
US$3,524,476 (2015: US$5,931,933).
Following the acquisition of Aero Kinetics in December 2015, the
Company filed a legal action on 1 April 2016 in Texas, USA against
Mr W. Hulsey Smith ("Mr. Smith"), the vendor of Aero Kinetics on
counts of fraud and breach of contract arising from
misrepresentations made by Mr. Smith upon which the Company relied
and were material in the Company's decision to acquire Aero
Kinetics. Strat Aero also terminated the services of Mr. Smith in
relation to Aero Kinetics. On 6 April 2016, the Company and its
directors received a defence and counterclaim from Mr. Smith. In
September 2016, the Company settled all litigation and claims
arising from its dispute with Mr. Smith. Under the terms of the
settlement, Strat Aero disclaimed any allegations of fraud against
Mr. Smith and issued Mr. Smith 44,750,645 new Ordinary Shares,
representing at the time approximately 11.75% of the Company's
enlarged issued share capital then in issue. Strat Aero also made a
US$75,000 cash payment to Mr. Smith.
As a result of the settlement, both Strat Aero and Mr Smith are
released from all current and future claims relating to the
Company's acquisition of Aero Kinetics and all debt and loan
obligations relating to the Company's acquisition of Aero Kinetics
are deemed to have either been satisfied or written off. Both
parties agreed to dismiss all pending litigation between them. A
net gain of US$129,476 was realised in 2016 following the
successful settlement of this litigation. The Board took the
prudent action to fully impair the investment in Aero Kinetics as
at 31 December 2015 which amounted to an impairment charge of
US$2,028,235 during the prior year.
Administrative expenses during the year amounted to US$4,189,598
(2015: US$4,180,769). A large proportion of these costs comprised
of wages and salaries, consultancy and professional fees, and
travelling expenses and was attributable to both growth in
headcount and business development activities arising from the
prior acquisition strategy and also due to the one-off costs of the
legal action referred to above. This cost base is being
rationalised in line with the new management's strategic priorities
and administrative costs for 2017 are expected to be significantly
lower than this.
Consolidated net (liabilities)/assets at 31 December 2016
amounted to US$(43,517) (2015: net assets of US$721,546). Cash
balances at the year end amounted to US$3,918 (2015:
US$1,485,257).
During 2016, the Company attracted aggregate investment of
US$2.89 million to implement the Group's operational plans, to
settle the final deferred consideration for Geocurve and resolve
the Aero Kinetics litigation.
Post year end the Company raised an additional US$1.58 million
pre-expenses, through the issue of new shares to investors.
Outlook
The Strat Aero board is keen to draw a line under the
performance of the previous two financial years, where, for a
number of reasons which have been outlined previously, operational
and financial performance was disappointing. We have set ourselves
an ambitious target to achieve run rate breakeven by the end of
2017 and therefore it is with careful optimism that we look to
build on the encouraging trading outcomes that we have achieved so
far in 2017 and advance the robust structure that we now have in
place to prudently, efficiently and sustainably grow the Company.
We plan to utilise our existing skills and expertise to develop the
Strat Aero business as a premium provider of commercial training
for commercial UAV pilots and survey and inspection services for
corporate and public clients.
Whichever way you look at it - UAVs are likely to become an even
more integral part of our lives - and we are determined that Strat
Aero will be a significant component in this rapidly growing
industry.
Acknowledgments
On behalf of the Board, we would like to extend our thanks to
our business partners, customers, associates and valued
shareholders for their continued support throughout the period.
Graham Peck
Executive Chairman
26 June 2017
Enquiries:
Strat Aero plc Tel: +44 (0) 1293 804741
Graham Peck (Chairman)
SP Angel Corporate Finance LLP Tel: +44 (0) 20 3470
0470
Nominated Adviser and Joint
Broker
Stuart Gledhill
Jeff Keating
Beaufort Securities Limited Tel: +44 (0) 20 7382
8300
Joint Broker
Elliot Hance
Cornhill Capital Ltd
Joint Broker
Colin Rowbury Tel: +44 (0) 20 7710
9610
St Brides Partners Ltd Tel: +44 (0) 20 7236
1177
Financial PR
Susie Geliher
Frank Buhagiar
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
Year Year
ended ended
2016 2015
Continuing operations Note US$ US$
----------------------------------------- ---- ----------- -----------
Revenue 5 862,988 433,001
Cost of sales 6 (269,909) (87,254)
----------------------------------------- ---- ----------- -----------
Gross profit 593,079 345,747
Administration expenses 6 (4,189,598) (4,180,769)
Gain on foreign exchange 6 3,292 130
Impairment 13 - (2,028,235)
----------------------------------------- ---- ----------- -----------
Operating loss (3,593,227) (5,863,127)
Finance costs 10 (43,441) (68,812)
Finance income 34 6
Loss before income tax (3,636,634) (5,931,933)
Income tax expense 11 112,158 -
----------------------------------------- ---- ----------- -----------
Loss for the year attributable
to owners of the parent (3,524,476) (5,931,933)
----------------------------------------- ---- ----------- -----------
Other Comprehensive Income
Items that may be subsequently
reclassified to profit or loss:
Currency translation difference 53,029 7,581
----------------------------------------- ---- ----------- -----------
Total comprehensive income for
the year attributable to owners
of the parent (3,471,447) (5,924,352)
----------------------------------------- ---- ----------- -----------
Earnings per ordinary share attributable
to owners of the parent during
the year (expressed in cents per
share)
Basic and diluted 12 (1.38) (6.31)
----------------------------------------- ---- ----------- -----------
The notes on pages 24 to 51 of the Annual Report form part of
these Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
2016 2015
Note US$ US$
------------------------------ ---- ------------ -----------
Non-current assets
Intangible assets 13 1,763,384 2,230,833
Property, plant and equipment 14 179,189 372,142
------------------------------ ---- ------------ -----------
Total non-current assets 1,942,573 2,602,975
------------------------------ ---- ------------ -----------
Current Assets
Inventories 16 - 88,488
Trade and other receivables 17 210,255 462,814
Cash and cash equivalents 18 3,918 1,485,257
Total current assets 214,173 2,036,559
------------------------------ ---- ------------ -----------
Total assets 2,156,746 4,639,534
------------------------------ ---- ------------ -----------
Equity attributable to owners
of the parent
Share capital 19 4,130,803 2,292,836
Share premium 19 7,217,308 6,171,415
Other reserves 21 (751,486) (574,010)
Translation reserve 17,111 (35,918)
Retained loss (10,657,253) (7,132,777)
------------------------------ ---- ------------ -----------
Total equity (43,517) 721,546
------------------------------ ---- ------------ -----------
Current liabilities
Trade and other payables 22 1,323,866 1,956,798
Borrowings 23 98,688 390,000
------------------------------ ---- ------------ -----------
Total current liabilities 1,422,5534 2,346,798
------------------------------ ---- ------------ -----------
Non-current liabilities
Borrowings 23 417,555 1,211,036
Deferred tax liabilities 24 360,154 360,154
------------------------------ ---- ------------ -----------
Total non-current liabilities 777,709 1,571,190
------------------------------ ---- ------------ -----------
TOTAL LIABILITIES 2,200,263 3,917,988
------------------------------ ---- ------------ -----------
TOTAL EQUITY AND LIABILTIES 2,156,746 4,639,534
------------------------------ ---- ------------ -----------
The notes on pages 24 to 51 of the Annual Report form part of
these Financial Statements.
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
2016 2015
Note US$ US$
------------------------------------ ---- ----------- -----------
Non-current assets
Intangible assets 13 92,520 155,421
Property, plant and equipment 14 2,575 4,172
Investment in subsidiary
undertakings 15 1,177,957 1,413,434
Trade and other receivables 17 1,706,103 1,144,620
------------------------------------ ---- ----------- -----------
Total non-current assets 2,979,155 2,717,647
------------------------------------ ---- ----------- -----------
Current Assets
Trade and other receivables 17 74,928 175,455
Cash and cash equivalents 18 2,065 1,131,304
------------------------------------ ---- ----------- -----------
Total current assets 76,993 1,306,759
------------------------------------ ---- ----------- -----------
TOTAL ASSETS 3,056,148 4,024,406
------------------------------------ ---- ----------- -----------
Equity attributable to shareholders
Share capital 19 4,130,803 2,292,836
Share premium 19 7,217,308 6,171,415
Other reserves 21 105,612 283,088
Translation reserve (627,680) (261,437)
Retained loss (8,658,527) (6,389,216)
------------------------------------ ---- ----------- -----------
Total equity 2,167,516 2,096,686
------------------------------------ ---- ----------- -----------
Current liabilities
Trade and other payables 22 789,944 1,164,045
Borrowings 23
----------- 23 98,688 -
------------------------------------ ---- ----------- -----------
Total current liabilities 888,632 1,164,045
------------------------------------ ---- ----------- -----------
Non-current liabilities
Borrowings 23 - 763,675
------------------------------------ ---- ----------- -----------
Total non-current liabilities - 763,675
------------------------------------ ---- ----------- -----------
TOTAL LIABILITIES 888,632 1,927,720
------------------------------------ ---- ----------- -----------
TOTAL EQUITY AND LIABILITIES 3,056,148 4,024,406
------------------------------------ ---- ----------- -----------
The notes on pages 24 to 51 of the Annual Report form part of
these Financial Statements.
These Financial Statements were approved by the Board of
Directors and authorised for issue on 30 June 2017 and were signed
on its behalf by:
The loss for the financial year dealt with in the financial
statements of the Parent Company, Strat Aero Plc, was US$2,269,311
(2015: loss of US$5,991,023). As permitted by Section 408 of the
Companies Act 2006, no separate statement of comprehensive income
is presented in respect of the Parent Company.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
Attributable to owners of the parent
-----------------------------------------------------------------------
Share Share Other Translation Retained
capital premium reserves reserve loss Total
US$ US$ US$ US$ US$ US$
----------------------- --------- --------- --------- ----------- ------------ -----------
As at 1 January 2015 1,301,737 1,642,449 (856,384) (68,582) (1,200,844) 818,376
----------------------- --------- --------- --------- ----------- ------------ -----------
Loss for the year - - - - (5,931,933) (5,931,933)
Other comprehensive
income for the year
Currency translation
difference - - - 32,664 - 32,664
----------------------- --------- --------- --------- ----------- ------------ -----------
Total comprehensive
income for the year - - - 32,664 (5,931,933) (5,899,269)
----------------------- --------- --------- --------- ----------- ------------ -----------
Proceeds from shares
issued
(net of costs) 911,625 4,067,429 - - - 4,979,054
Non cash share issues 79,474 461,537 283,730 - - 824,741
Warrants exercised
------------------ - - (1,356) - - (1,356)
----------------------- --------- --------- --------- ----------- ------------ -----------
Transactions with
owners, recognised
directly in equity 991,099 4,528,966 282,374 - - 5,802,439
----------------------- --------- --------- --------- ----------- ------------ -----------
As at 31 December
2015 2,292,836 6,171,415 (574,010) (35,918) (7,132,777) 721,546
----------------------- --------- --------- --------- ----------- ------------ -----------
As at 1 January 2016 2,292,836 6,171,415 (574,010) (35,918) (7,132,777) 721,546
----------------------- --------- --------- --------- ----------- ------------ -----------
Loss for the year - - - - (3,524,476) (3,524,476)
----------------------- --------- --------- --------- ----------- ------------ -----------
Other comprehensive
income for the year
Currency translation
difference - - - 53,029 - 53,029
----------------------- --------- --------- --------- ----------- ------------ -----------
Total comprehensive
income for the year - - - 53,029 (3,524,476) (3,471,447)
----------------------- --------- --------- --------- ----------- ------------ -----------
Proceeds from shares
issued
(net of costs) 1,213,885 222,953 83,391 - - 1,520,229
Non cash share issues* 624,082 682,438 - - - 1,306,520
Warrants expired
- Aero Kinetics** - - (120,365) - - (120,365)
Warrants expired
- Other*** - 140,502 (140,502) -- - -
Transactions with
owners, recognised
directly in equity 1,837,967 1,045,893 (177,476) - - 2,706,384
----------------------- --------- --------- --------- ----------- ------------ -----------
As at 31 December
2016 4,130,803 7,217,308 (751,486) 17,111 (10,657,253) (43,517)
----------------------- --------- --------- --------- ----------- ------------ -----------
The notes on pages 24 to 51 of the Annual Report form part of
these Financial Statements.
* Non cash share issues comprise of issue of shares where no
cash consideration was received.
** 'Warrants expired - Aero Kinetics' represents the expiry of
warrants that were initially issued in the acquisition of Aero
Kinetics by the Strat Aero Group. The warrants have expired on
settlement of the Aero Kinetics related litigation.
*** Warrants expired - other' are warrants that have expired in
the current financial year.
Attributable to equity shareholders
Share Share Other Translation Retained Total
capital premium reserves reserve earnings
US$ US$ US$ US$ US$ US$
----------------------- --------- --------- ---------- ------------ ----------- -----------
As at 1 January
2015 1,301,737 1,642,449 714 (77,896) (398,193) 2,469,811
----------------------- --------- --------- ---------- ------------ ----------- -----------
Loss for the year - - - - (5,991,023) (5,991,023)
Other comprehensive
income for the period
Currency translation
difference - - - (183,541) - (183,541)
----------------------- --------- --------- ---------- ------------ ----------- -----------
Total comprehensive
income for the period - - - (183,541) (5,991,023) (6,174,564)
----------------------- --------- --------- ---------- ------------ ----------- -----------
Proceeds from shares
issued
(net of costs) 911,625 4,067,429 - - - 4,979,054
Non cash share issues 79,474 461,537 283,730 - - 824,741
Warrants exercised - - (1,356) - - (1,356)
----------------------- --------- --------- ---------- ------------ ----------- -----------
Transactions with
owners, recognised
directly in equity 991,099 4,258,966 282,374 - - 5,802,439
----------------------- --------- --------- ---------- ------------ ----------- -----------
As at 31 December
2015 2,292,836 6,171,415 283,088 (261,437) (6,389,216) 2,096,686
----------------------- --------- --------- ---------- ------------ ----------- -----------
As at 1 January
2016 2,292,836 6,171,415 283,088 (261,437) (6,389,216) 2,096,686
----------------------- --------- --------- ---------- ------------ ----------- -----------
Loss for the year - - - - (2,269,311) (2,269,311)
----------------------- --------- --------- ---------- ------------ ----------- -----------
Other comprehensive
income for the year
Currency translation
difference - - - (366,243) - (366,243)
----------------------- --------- --------- ---------- ------------ ----------- -----------
Total comprehensive
income for the year - - - (366,243) (2,269,311) (2,635,554)
----------------------- --------- --------- ---------- ------------ ----------- -----------
Proceeds from shares
issued
(net of costs) 1,213,885 222,953 83,391 - - 1,520,229
Non cash share issues 624,082 682,438 - - 1,306,520
Warrants expired
- Aero Kinetics - - (120,365) - - (120,365)
Warrants expired
- Other - 140,502 (140,502) - - -
Transactions with
owners, recognised
directly in equity 1,837,967 1,045,893 (177,476) - - 2,706,384
----------------------- --------- --------- ---------- ------------ ----------- -----------
As at 31 December
2016 4,130,803 7,217,308 105,612 (627,680) (8,658,527) 2,167,516
----------------------- --------- --------- ---------- ------------ ----------- -----------
The notes on pages 24 to 51 of the Annual Report form part of
these Financial Statements.
Non cash share issues comprise of issue of shares where no cash
consideration was received.
'Warrants expired - Aero Kinetics' represents the expiry of
warrants that were initially issued at the acquisition of Aero
Kinetics by the Strat Aero Group. The warrants have expired on
settlement of the Aero kinetics related litigation.
Warrants expired - other' are warrants that have expired in the
current financial year.
Group Group Company Company
2016 2015 2016 2015
Note US$ US$ US$ US$
--------------------------------- ---- ----------- ----------- ----------- -----------
Cash Flows from Operating
Activities
Loss for the year before
tax (3,636,634) (5,931,933) (2,381,459) (5,991,023)
Depreciation of property,
plant and equipment 176,206 83,860 992 1,125
Amortisation of intangible
assets 425,787 211,503 40,671 45,849
Share based payments 14,889 194,760 14,889 194,760
Impairments - 2,028,235 1,218,651 4,477,659
Interest income (34) (6) (15) -
Finance costs 43,441 68,812 34,402 -
Foreign exchange on operating
activities 71,484 173,467 (15,454) 59,886
Taxation 112,158 - 112,148 -
Decrease/(Increase) in
inventories - (88,488) - -
Decrease/(Increase) in
trade and other receivables 252,559 (139,144) 100,527 13,466
(Decrease)/Increase in
trade and other payables (314,832) 473,685 129,476 264,327
Cash used in operations (2,854,976) (2,925,249) (745,172) (933,951)
Interest expense 10 (43,441) (68,812) (34,402) -
--------------------------------- ---- ----------- ----------- ----------- -----------
Net cash used in operating
activities (2,898,417) (2,994,061) (799,574) (933,951)
--------------------------------- ---- ----------- ----------- ----------- -----------
Cash Flows used in Investing
Activities
Purchases of intangible
assets 13 (1,086) - - -
Purchases of property,
plant and equipment 14 - (64,471) - (4,425)
Purchase of subsidiaries
(net of cash acquired
in the Group) - (970,177) - (980,643)
Interest income 34 6 15 -
Loans to subsidiary undertakings - - (1,780,134) (2,115,606)
Net cash used in investing
activities (1,052) (1,034,642) (1,780,119) (3,100,674)
--------------------------------- ---- ----------- ----------- ----------- -----------
Cash Flows from Financing
Activities
Net proceeds from borrowings 98,688 244,881 98,688 -
Issue of shares, net
of issue costs 1,520,229 5,165,927 1,520,229 5,165,927
--------------------------------- ---- ----------- ----------- ----------- -----------
Net cash generated from
financing activities 1,618,917 5,410,808 1,618,917 5,165,927
--------------------------------- ---- ----------- ----------- ----------- -----------
Net (Decrease)/increase
in cash and cash equivalents (1,280,552) 1,382,105 (940,776) 1,131,302
Exchange losses on cash
and cash equivalents (200,787) (3,665) (188,463) -
Cash and cash equivalents
at beginning of year 1,485,257 106,817 1,131,304 2
--------------------------------- ---- ----------- ----------- ----------- -----------
Cash and cash equivalents
at 31 December 2016 3,918 1,485,257 2,065 1,131,304
--------------------------------- ---- ----------- ----------- ----------- -----------
Major non-cash transactions
On 17 March 2016 the Company issued 4,575,209 new ordinary
shares of 1p each as consideration for the conversion of US$390,000
of convertible loan notes.
On 13 July 2016 the Company issued 37,489,288 new ordinary
shares of 1p each at a price of 1p, settling the outstanding
balance due of GBP374,893 representing the final instalment in the
acquisition of Geocurve.
On 29 September 2016 the Company issued 44,750,645 new ordinary
shares of 0.1p each at a price of 0.7p in settlement of all
litigation and claims arising from the AK dispute with Mr W. Hulsey
Smith, the Chief Executive Officer of Aero Kinetics Holdings
LLC.
On 28 November 2016 the Company issued 3,428,571 new ordinary
shares of 0.1p each at a price of 0.35p in settlement of consulting
fees liabilities amounting to GBP12,000.
The notes on pages 24 to 51 of the Annual Report form part of
these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
1 General information
Strat Aero Plc (the "Company") and its subsidiaries (together
the "Group") undertake the development, marketing and selling of
training programmes and software in the aviation industry. The
Company is incorporated and domiciled in the UK and its registered
office is The Beehive, City Place, Gatwick Airport, West Sussex,
RH6 0PA.
The Company's shares are quoted on the AIM market of the London
Stock Exchange plc.
2 Summary of accounting policies
The principal accounting policies applied in the preparation of
these Consolidated Financial Statements are set out below. These
policies have been consistently applied in the year presented,
unless otherwise stated.
(a) Basis of preparation
The Consolidated Financial Statements of Strat Aero Plc have
been prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee (IFRIC)
interpretations as adopted by the European Union and the Companies
Act 2006 applicable to companies reporting under IFRS. The
Consolidated Financial Statements have also been prepared under the
historical cost convention.
The Financial Statements are presented in US Dollars (US$)
rounded to the nearest dollar.
The preparation of financial statements in conformity with IFRSs
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's Accounting Policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the Financial
Statements are disclosed in Note 4.
(b) Going concern basis
The Financial Statements have been prepared assuming the Group
and Company will continue as a going concern. Under the going
concern assumption, an entity is ordinarily viewed as continuing in
business for the foreseeable future with neither the intention nor
the necessity of liquidation, ceasing trading or seeking protection
from creditors pursuant to laws or regulations.
The assessment has been made based on the Group's economic
prospects which have been included in the financial budget for the
years 2017-2019, and for managing working capital, in particular
for the twelve months from the date of approval of the Financial
Statements. Consideration has also been given in respect of the
Group's past losses and its net current liability position at the
year end.
The nature of the business in which Strat Aero operates creates
a degree of uncertainty as to the timing of acquisition and value
of contracts due to the relative revenues of the UAV market. The
Directors are in discussions with various parties in relation to
numerous potential contracts which are expected to contribute
positively to cash flow in the short term and in preparing the
financial budgets consider the opportunities currently open and
their ability to convert them.
The Directors have also considered the ability of the Group to
raise funds on the open market and has demonstrated the ability to
do so through share issues during the year and after the reporting
date although the Directors note that this is not necessarily
indicative of their ability to raise future funds. The Group's
business activities together with the factors likely to affect its
future development, performance and position are set out in the
Strategic Report. The Group's objectives, policies and processes
for managing its capital, its financial risk management objectives,
details of its financial instruments and its exposure to credit and
liquidity risk can be found in the Strategic Report and in Note
25.
Based in these assumptions, the Directors have a reasonable
expectation that the Group and Company have adequate resources to
continue in operational existence for the foreseeable future and
therefore have adopted the going concern basis of preparation in
these Financial Statements.
The Financial Statements do not include any adjustment that may
be required should the Group and Company be unable to continue as a
going concern. Going concern is referred to in the Independent
Auditor's Report as an emphasis of matter.
(c) New and amended standards
(i) New and amended standards mandatory for the first time for
the financial year beginning 1 January 2016
There were no IFRSs or IFRIC interpretations that were effective
for the first time for the financial year beginning 1 January 2016
that had a material impact on the Group or Company.
(ii) New standards, amendments and Interpretations in issue but
not yet effective or not yet endorsed and not early adopted
The standards and interpretations that are relevant to the Group
or Company, issued, but not yet effective, up to the date of
issuance of the Financial Statements are listed below. The Company
and Group intend to adopt these standards, if applicable, when they
become effective.
Effective
Standard Impact on initial application date
IAS 7 (Amendments) Disclosure Initiative *1 January
2017
IAS 12 (Amendments) Recognition of Deferred *1 January
Tax 2017
IAS 38 (Amendments) Clarification of Acceptable 1 January
Methods of Amortisation 2016
IFRS 9 Financial Instruments 1 January
2018
IFRS 15 Revenue from Contracts 1 January
with Customers 2018
IFRS 16 Leases 1 January
2019
Annual Improvements 2015 - 2016 Cycle *1 January
2018
* Subject to
EU endorsement
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the Group.
The Group is evaluating the impact of the new or amended
standards above. The new or amended standards are not expected to
have a material impact on the Group's results or shareholders'
funds.
(d) Basis of consolidation
Acquisition of Strat Aero International Inc and Strat Aero
International Limited by Strat Aero Plc
The Company was incorporated on 1 July 2014 and entered into an
agreement to acquire the entire issued and to be issued share
capital of Strat Aero International Inc and Strat Aero
International Limited on 16 July 2014. The acquisition was effected
by way of issue of shares. Both of the Group's trading
subsidiaries, Strat Aero International Inc and Strat Aero
International Limited were incorporated on 12 December 2013
respectively and had commenced operational activities on 1 January
2014.
In determining the appropriate accounting treatment for this
transaction, the Directors considered IFRS 3 "Business
Combinations" (Revised 2008). However, they concluded that this
transaction fell outside the scope of IFRS 3 (revised 2008) since
the transaction described above represents a combination of
entities under common control.
In accordance with IAS 8 "Accounting Policies, changes in
accounting estimates and errors", in developing an appropriate
accounting policy, the Directors have considered the pronouncements
of other standard setting bodies and specifically looked to
accounting principles generally accepted in the United Kingdom ("UK
GAAP") for guidance (FRS 6 - Acquisitions and mergers) which does
not conflict with IFRS and reflects the economic substance of the
transaction.
Under UK GAAP, the assets and liabilities of both entities are
recorded at book value, not fair value (although adjustments are
made to achieve uniform accounting policies), intangible assets and
contingent liabilities are recognised only to the extent that they
were recognised by the legal acquirer in accordance within
applicable IFRS, no goodwill is recognised, any expenses of the
combination are written off immediately to the statement of
comprehensive and comparative amounts, if applicable, are restated
as if the combination had taken place at the beginning of the
earliest accounting year presented.
Therefore, although the Group reconstruction did not become
unconditional until 21 August 2014, these Consolidated Financial
Statements are presented as if the Group structure has always been
in place, including the activity from incorporation of the group's
principal subsidiary. All entities had the same management as well
as majority shareholders.
As Strat Aero Plc was incorporated on 1 July 2014, while the
enlarged group began trading on 16 July 2014, the comparative
information in the Statement of Comprehensive Income and
Consolidated Statement of Changes in Equity and Consolidated Cash
Flow Statements are presented as though the Group was in existence
for the whole prior year, being that commencing on 12 December 2013
and ending on 31 December 2014.
On this basis, the Directors have decided that it is appropriate
to reflect the combination using merger accounting principles as a
group reconstruction under FRS 6 - Acquisitions and mergers in
order to give a true and fair view. No fair value adjustments have
been made as a result of the combination.
Subsidiaries
Except for the transactions described above, the Consolidated
Financial Statements include the Financial Statements of the
Company and its subsidiaries made up to 31 December each year.
Subsidiaries are all entities over which the Group has control.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group.
When necessary, adjustments are made to the Financial Statements
of subsidiaries to bring their accounting policies into line with
the Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
(e) Business combinations
Aside from the initial establishment of the Group as described
in 2(d) the acquisition of other subsidiaries have been accounted
for using the acquisition method of accounting.
The consideration transferred for the acquisition is the fair
value of the assets transferred, the liabilities incurred to the
former owners of the acquire and the equity interests issued by the
Group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date.
The Group recognises any non-controlling interest in the acquiree
at the non-controlling interest's proportionate share of the
recognised amounts of the acquiree's identifiable net assets.
Acquisition related costs are expensed as incurred.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39, either in the Income Statement or as a change to other
comprehensive income. Contingent consideration that is classified
as equity is not re-measured, and its subsequent settlement is
accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of
the consideration transferred and the fair value of non-controlling
interest over the identifiable net assets acquired and liabilities
assumed.
(f) Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
("CODM"). The CODM is deemed to be the Chief Executive Officer and
the Chief Financial Officer.
Operating segments are identified on the basis of internal
reports that are regularly reviewed by the CODM to allocate
resources and to assess performance. Using the Group's internal
management reporting as a starting point, two reporting segments
set out in note 5 have been identified.
(g) Foreign currencies
Functional and presentation currency
The individual financial statements of each Group company are
measured in the currency of the primary economic environment in
which it operates (its functional currency) being US Dollar or
Pounds Sterling. For the purpose of the Group Financial Statements,
the results and financial position are expressed in US Dollars,
which is the presentation currency for the Group and company.
Transactions and balances
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing on the dates of the transactions. At the
Statement of Financial Position date, monetary assets and
liabilities that are denominated in foreign currencies are
translated at the rates prevailing on the Statement of Financial
Position date. Exchange differences arising on the settlement of
monetary items, and on the translation of monetary items at the
Statement of Financial Position date, are included in the Statement
of Comprehensive Income for the year.
Group companies
The results and financial position of the Group companies (none
of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
-- assets and liabilities for each Statement of Financial
Position presented are translated at the closing rate at the date
of that Statement of Financial Position;
-- income and expenses for each Statement of Comprehensive
Income presented are translated at average exchange rates unless
this average is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of
the transactions; and
-- all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations are taken
to shareholders' equity. When a foreign operation is partially
disposed of or sold, exchange differences that were recorded in
equity are recognised in Statement of Comprehensive Income as part
of the gain or loss on sale.
(h) Intangible assets
Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred, the amount
of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the
acquiree over the fair value of the identifiable net assets
acquired. If the total of consideration transferred,
non-controlling interest recognised and previously held interest
measured at fair value is less than the fair value of the net
assets of the subsidiary acquired, in the case of a bargain
purchase, the difference is recognised directly in the Statement of
Comprehensive Income.
For the purpose of impairment testing, goodwill acquired in a
business combination is allocated to each of the CGUs, or groups of
CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is
allocated represents the lowest level within the entity at which
the goodwill is monitored for internal management purposes.
Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of the CGU containing the
goodwill is compared to the recoverable amount, which is the higher
of value in use and the fair value less costs of disposal. Any
impairment is recognised immediately as an expense and is not
subsequently reversed.
Customer lists and intellectual property rights are shown at
historic costs, less amortisation. Costs associated with
maintaining intellectual property rights are recognised as an
expense as incurred. Costs incurred in development have been
capitalised, on the basis that the Company will have access to
future economic benefits deriving from ownership of this new
technology.
Development costs that are directly attributable to the design
and testing of identifiable and unique software products controlled
by the Company are recognised as intangible assets when the
following criteria are met:
-- it is technically feasible to complete the software product
so that it will be available for use;
-- management intends to complete the software product and use or sell it;
-- there is an ability to use or sell the software product;
-- it can be demonstrated how the software product will generate
probable future economic benefits;
-- adequate technical, financial and other resources to complete
the development and use or sell the software product are available;
and
-- the expenditure attributable to the software product during
its development can be reliably measured.
The Group's Intangible assets are amortised at 20% per annum on
a straight line basis.
At each year end date, the Group reviews the carrying amounts of
its intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value, less costs to
sell, and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value, using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
(i) Property, plant and equipment
All property, plant and equipment are shown at cost less
subsequent depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the Income
Statement during the financial year in which they are incurred.
Depreciation is charged so as to write off the cost of assets
over their useful economic lives, using the straight-line method,
which is considered to be as follows:
-- Plant and equipment - 5 years
-- Motor Vehicles - 3 to 5 years
The assets' residual values and useful lives are reviewed, and,
if appropriate, asset values are written down to their estimated
recoverable amounts, at each Statement of Financial Position
date.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amounts, and are included in Statement
of Comprehensive Income.
(j) Impairment of non-financial assets
Intangible assets that have an indefinite useful life or
intangible assets not ready to use are not subject to amortisation
and are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs of disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are largely independent cash inflows (cash-generating units). Prior
impairments of non-financial assets (other than goodwill) are
reviewed for possible reversal at each reporting date.
(k) Financial assets
The Group and Company has classified all of its financial assets
as loans and receivables. The classification depends on the purpose
for which the financial assets were acquired. Management determines
the classification of its financial assets at initial
recognition.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets. The Group's loans and
receivables comprise trade and other receivables and cash and cash
equivalents in the Statement of Financial Position.
Loans and receivables are initially recognised at fair value
plus transaction costs and are subsequently carried at amortised
cost using the effective interest method, less provision for
impairment.
(l) Impairment of financial assets
The Group and Company assesses at the end of each reporting year
whether there is objective evidence that a financial asset, or a
group of financial assets, is impaired. A financial asset, or a
group of financial assets, is impaired, and impairment losses are
incurred, only if there is objective evidence of impairment as a
result of one or more events that occurred after the initial
recognition of the asset (a "loss event"), and that loss event (or
events) has an impact on the estimated future cash flows of the
financial asset, or group of financial assets, that can be reliably
estimated.
The criteria that the Group and Company uses to determine that
there is objective evidence of an impairment loss include:
-- significant financial difficulty of the issuer or obligor;
-- a breach of contract, such as a default or delinquency in interest or principal repayments.
The amount of the loss is measured as the difference between the
asset's carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been
incurred), discounted at the financial asset's original effective
interest rate. The asset's carrying amount is reduced, and the loss
is recognised in the profit or loss.
If, in a subsequent year, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the trade and other receivables credit rating), the
reversal of the previously recognised impairment loss is recognised
in the Statement of Comprehensive Income.
(m) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined using the first-in, first-out (FIFO)
method. The cost of finished goods and work in progress comprises
design costs, raw materials, direct labour, other direct costs and
related production overheads (based on normal operating
capacity).
Net realisable value is the estimated selling price in the
ordinary course of business, less applicable variable selling
expenses. Costs of inventories include the transfer from equity of
any gains/losses on qualifying cash flow hedges for purchases of
raw materials.
(n) Trade and other receivables
Trade receivables are amounts due from customers for merchandise
sold or services performed in the ordinary course of business. If
collection is expected in one year or less (or in the normal
operating cycle of the business if longer), they are classified as
current assets. If not, they are presented as non-current
assets.
(o) Cash and cash equivalents
In the Statement of Cash Flows, cash and cash equivalents
comprise cash in hand and deposits held at call with banks.
(p) Share capital and reserves
Equity comprises the following:
-- "Share Capital" represents ordinary shares issued at par value
-- "Deferred Shares" represents notional shares arising on the
redenomination of the nominal share capital from 1p to 0.1p on
August 12 2016.
-- "Share Premium" represents the premium paid on shares issued above par value; and
-- "Retained earnings" represents retained losses.
-- "Merger reserve" - The merger arose from the difference
between the carrying value of the investment and the nominal value
of the shares of subsidiaries upon consolidation under merger
accounting.
-- Share option reserve - represents the fair value of unexpired warrants at the issue date.
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
(q) Share-based payments
The Group operates a number of equity-settled, share-based
compensation plans, under which the entity receives goods or
services from employees or third party suppliers as consideration
for equity instruments of the Company. The fair value of the
equity-settled share based payments are recognised as an expense in
the Statement of Comprehensive Income or charged to equity
depending on the nature of the services provided or instruments
issued.
(r) Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities. Trade payables are recognised
initially at fair value, and subsequently measured at amortised
cost using the effective interest method.
(s) Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
Income Statement over the year of the borrowings using the
effective interest method.
(t) Compound financial instruments
Compound financial instruments issued by the Group comprise
convertible notes that can be converted to share capital at the
option of the holder. The number of shares to be issued does not
vary with changes in their fair value.
The liability component of a compound financial instrument is
recognised initially at the fair value of a similar liability that
does not have an equity conversion option. The equity component is
recognised initially at the difference between the fair value of
the compound financial instrument as a whole and the fair value of
the liability component. Any directly attributable transaction
costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to their initial recognition, the liability component
of a compound financial instrument is measured at amortised cost
using the effective interest method. The equity component of a
compound financial instrument is not remeasured subsequent to
initial recognition, except on conversion or expiry.
(u) Revenue recognition
The Group generates its revenue from the provision of
consultancy and survey services performed on a 'time and materials'
basis and the delivery of commercial pilot training solutions.
Revenues are recognised on these products at the point of sale and
when services are rendered to clients as per the terms of specific
contracts. In the case of fixed price contracts, revenues are
recognised on a percentage of completion basis. Turnover is stated
net of value added tax in respect of continuing activities. The
third revenue stream, the Unmanned Aerial Systems ("UAS") Pilot
Training and Services division, has generated only initial revenue
during the year under review.
(v) Current and deferred income tax
The tax charge/(credit) represents tax currently payable less a
credit for deferred tax. The tax currently payable is based on
taxable profit for the year. Taxable profit differs from the loss
for the year as reported in the Consolidated Statement of
Comprehensive Income because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the Statement of Financial
Position date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting loss.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to
apply in the relevant jurisdiction in the year when the liability
is settled or the asset is realised. Deferred tax is charged or
credited to the Consolidated Statement of Comprehensive Income,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity. Deferred tax is not discounted.
Deferred tax assets and liabilities are offset where there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
(w) Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the Statement of
Comprehensive Income on a straight-line basis over the year of the
lease.
3 Financial risk management
i) Group financial risk factors
The Group's activities expose it to a variety of financial
risks. The Group's finance function monitors and manages the
financial risks relating to the operations of the Group. The Group
is exposed to market risks (including foreign exchange risk and
price risk) and credit risk and to a very limited amount interest
rate risk and liquidity risk.
Risk management is carried out by the Board of Directors. The
Board provides written principles for overall risk management, as
well as written policies covering specific areas, such as foreign
exchange risk, interest rate risk and credit risk, to mitigate
financial risk exposures.
Market risk
(a) Foreign exchange risk
Foreign exchange risk arises because the Group has operations
located in various parts of the world whose functional currency is
not the same as the functional currency (GBP Sterling) in which
other Group companies are operating. The Group's net assets arising
from such overseas operations are exposed to currency risk
resulting in gains and losses on retranslation into US Dollar. Only
in exceptional circumstances will the Group consider hedging its
net investments in non-US Dollar operations as generally it does
not consider that the reduction in foreign currency exposure
warrants the cash flow risk created from such hedging techniques.
It is the Group's policy to hold surplus funds over and above
working capital requirements in the Parent Company. The Group
considers this policy minimises any unnecessary foreign exchange
exposure.
In order to monitor the continuing effectiveness of this policy
the Board through their approval of both corporate and capital
expenditure budgets, and review of the currency profile of cash
balances and management accounts, considers the effectiveness of
the policy on an ongoing basis.
(b) Price risk
The Group is not exposed to commodity price risk as a result of
its operations. The Directors will revisit the appropriateness of
this policy should the Group's operations change in size or nature.
The Group has no exposure to equity securities price risk, as it
has no listed equity investments.
Credit risk
Credit risk arises from the Group's trade receivables. Where no
independent rating of customers is available, credit control
assesses the quality of customers by reference to their financial
position, past experience and any other relevant factors.
Interest rate risk management
The Group is not exposed to interest rate risk on financial
liabilities.
Liquidity risk management
The Group manages liquidity risk by maintaining adequate
reserves and by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and
liabilities. The Group seeks to manage financial risk, to ensure
sufficient liquidity is available to meet foreseeable needs and to
invest cash assets safely and profitably.
ii) Capital risk management
The Group manages its capital to ensure that it will be able to
continue as a going concern while maximising the return to
stakeholders. The Group's capital structure primarily consists of
equity attributable to equity holders of the parent, comprising
issued capital, reserves and retained losses.
4 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and judgements concerning the future.
The resulting accounting estimates and judgements will, by
definition, seldom equal the related actual results. The estimates
and judgements that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within
the next financial year are addressed below:
Intangible assets
Intangible assets comprise of development costs, customer lists
and Intellectual Property and are amortised accordingly:
Development costs 5 years
Customer lists 5 years
Intellectual Property 5 years
Useful lives are based on management's estimates of the period
that the assets will generate revenues with such records being
periodically reviewed for continual appropriation.
5 Segmental analysis
Management considers there to be two activities, being the
provision of consultancy and survey services to the international
aviation and industrial markets and training services in respect of
aviation. Accordingly, segmental analysis is reflected in the
Consolidated Group Statements set out herein.
Total revenue comprises:
Revenue from external customers: 2016 2015
US$ US$
------------------------------------- ------- -------
Consultancy and survey 839,271 433,001
Training 23,717 -
------------------------------------- ------- -------
862,988 433,001
------------------------------------- ------- -------
2016 2015
US$ US$
Revenues are generated in a number
of countries analysed as to:
United Kingdom 681,474 320,842
United State of America 157,797 112,159
South East Asia 23,717 -
------------------------------------- ------- -------
862,988 433,001
------------------------------------- ------- -------
2016 2015
US$ US$
The following customers generated
more than 10% of the Group's revenue:
Customer 1 150,796 -
Customer 2 130,337 -
Customer 3 88,681 -
Customer 4 60,577 81,231
Customer 5 - 157,583
---------------------------------------- ------- -------
430,391 238,814
---------------------------------------- ------- -------
Carrying amount of assets
2016 2015
US$ US$
------------------------- --------- ---------
United Kingdom 1,762,982 3,881,985
United States of America 393,764 757,549
------------------------- --------- ---------
2,156,746 4,639,534
------------------------- --------- ---------
Carrying amount of liabilities
2016 2015
US$ US$
------------------------- --------- ---------
United Kingdom 1,461,083 2,508,073
United States of America 739,180 1,409,915
------------------------- --------- ---------
2,200,263 3,917,988
------------------------- --------- ---------
6 Operating expenses by nature
2016 2015
US$ US$
--------------------------------------- --------- ---------
Cost of sales 269,909 87,254
PR, marketing and advertising 139,747 283,882
Wages, salaries and other staff costs
(note 7) 1,764,831 1,150,244
Depreciation 176,206 83,860
Amortisation 425,787 211,503
Operating lease expenses 161,708 130,265
Professional and consultancy fees 1,007,779 1,495,121
Audit fees (note 9) 59,719 59,208
Acquisition related expenses - 130,335
Aero Kinetic litigation net settlement
(gain) (129,477) -
Net foreign exchange (gains) (3,292) (130)
Other expenses 583,298 636,351
--------------------------------------- --------- ---------
4,456,215 4,267,893
--------------------------------------- --------- ---------
7 Staff costs
The average number of employees, including Directors, employed
by the Group was:
2016 2015
No. No.
--------------- ---- ----
Directors 5 4
Development 18 8
Administration 8 4
--------------- ---- ----
31 16
--------------- ---- ----
Employees', including Directors', costs comprise:
2016 2015
US$ US$
-------------------------------------- --------- ---------
Wages, salaries and other staff costs 1,638,477 1,129,441
Social security costs 126,354 20,803
-------------------------------------- --------- ---------
1,764,831 1,150,244
-------------------------------------- --------- ---------
8 Directors
Key management are considered to be Directors.
2016 2015
Group Short Short
term term
employee employee
benefits Other Total benefits Other Total
US$ US$ US$ US$ US$ US$
---------------- --------- ----- ------- --------- ------ -------
Graham Peck 20,336 - 20,336 34,387 5,525 39,912
Iain McLure 122,013 - 122,013 - - -
Gerard Dempsey 27,114 - 27,114 10,189 2,762 12,951
Paul Ryan 27,114 - 27,114 10,189 2,762 12,951
Russell Peck - - - 27,878 4,976 32,854
Robert Salluzzo - - - 27,878 4,193 32,071
Tony Dunleavy - - - 7,642 6,906 14,548
Greg Kuenzel - - - 18,340 - 18,340
196,577 196,577 136,503 27,124 163,627
---------------- --------- ----- ------- --------- ------ -------
9 Auditors remuneration
2016 2015
US$ US$
--------------------------------------------------- ------ ------
Fees payable to the Company's auditor
for the audit of the Group and Parent
Company's Financial Statements 10,000 10,000
Fees payable to the Company's auditor
for other services:
Audit of the accounts of subsidiaries 43,541 49,208
Taxation - compliance 6,250 14,432
59,791 73,640
-------------------------------------------------- ------ ------
10 Finance costs
2016 2015
US$ US$
----------------------------------- ------ ------
Interest payable and other finance
costs 43,441 68,812
----------------------------------- ------ ------
43,441 68,812
----------------------------------- ------ ------
11 Tax
No income tax charge was recognised in the Statement of
Comprehensive due to losses incurred.
Group 2016 2015
Income tax expense: US$ US$
-------------------------- --------- ----
Current tax
UK Corporation tax credit (112,158) -
-------------------------- --------- ----
Deferred tax
Current year - -
-------------------------- --------- ----
Tax credit (112,158) -
-------------------------- --------- ----
The tax on Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to the profits of the consolidated entities as
follows:
2016 2015
Group US$ US$
----------------------------------------------- ----------- -----------
Loss before tax (3,636,634) (5,931,933)
----------------------------------------------- ----------- -----------
Tax at the applicable rate of 24.38%
(31 December 2015: 23.87%): (886,514) (1,416,040)
Effect of:
Expenses not deductible for tax purposes 27,015 524,725
Depreciation in excess of capital
allowances /
(capital allowance in excess of depreciation) 146,750 24,406
R&D tax credit (112,158) -
Net tax effect of losses carried forward 712,749 866,909
----------------------------------------------- ----------- -----------
Tax credit for the year (112,158) -
----------------------------------------------- ----------- -----------
The tax rate used is a combination of 20% standard rate of
corporation tax in the UK and US tax rate of 34% to give an
applicable rate of 24.38%.
The Group has tax losses of approximately US$8,291,000 (31
December 2015: US$5,368,000) available to carry forward against
future taxable profits. No deferred tax asset has been recognised
in view of the uncertainty over the timing of future taxable
profits against which the losses may be offset.
12 Earnings per share
Basic earnings per share has been calculated by dividing the
loss attributable to equity holders of the Company after taxation
by the weighted average number of shares in issue during the year.
There is no difference between the basic and diluted loss per share
as the effect on the exercise of options and warrants would be to
decrease the earnings per share.
Since the year end, no warrants have been exercised which may
result in the dilution of the earnings per share in the future.
Details of share options and warrants that were anti-dilutive but
may be dilutive in the future are set out in note 20.
2016 2015
Basic and Diluted US$ US$
----------------------------------- ---------------------- ------------
Loss after taxation (3,524,476) (5,931,933)
----------------------------------- ---------------------- ------------
Weighted average number of shares 255,104,361 93.993,888
----------------------------------- ---------------------- ------------
Earnings per share (cents) (1.38) (6.31)
----------------------------------- ---------------------- ------------
13 Intangible assets
2016 2015
Goodwill - Cost and Net Book Value US$ US$
-------------------------------------------------------- ------------ ------------
At 1 January 14,557 -
Acquisition of subsidiaries (at
fair value) - 2,042,792
Impairments - (2,028,235)
-------------------------------------------------------- ------------ ------------
At 31 December 14,557 14,557
-------------------------------------------------------- ------------ ------------
Customer Intellectual Development
Lists Property Costs Total
Other intangibles US$
- Group US$ US$ US$
------------------------------ --------- ------------- ------------ --------------
Cost
At 1 January 2015 - 233,265 469,372 702,637
Acquisition of subsidiaries 540,232 630,270 633,670 1,804,172
Foreign exchange differences - (11,236) (120) (11,356)
------------------------------ --------- ------------- ------------ --------------
At 31 December 2015 540,232 852,299 1,102,922 2,495,453
------------------------------ --------- ------------- ------------ --------------
Additions - - 1,086 1,086
Foreign exchange differences (6,054) (44,053) (7,500) (57,607)
------------------------------ --------- ------------- ------------ --------------
At 31 December 2016 534,178 808,246 1,096,508 2,438,932
------------------------------ --------- ------------- ------------ --------------
Accumulated amortisation
At 1 January 2015 - 23,327 46,937 70,264
Charge for the year 27,012 59,354 125,137 211,503
Foreign exchange differences - (2,567) (23) (2,590)
------------------------------ --------- ------------- ------------ --------------
At 31 December 2015 27,012 80,114 172,051 279,177
------------------------------ --------- ------------- ------------ --------------
Charge for the year 86,437 141,514 197,836 425,787
Foreign exchange differences (5,403) (3,054) (6,402) (14,859)
------------------------------ --------- ------------- ------------ --------------
At 31 December 2016 108,046 218,574 363,485 690,105
------------------------------ --------- ------------- ------------ --------------
Net book value
At 31 December 2015 513,220 772,185 930,871 2,216,276
------------------------------ --------- ------------- ------------ --------------
At 31 December 2016 426,132 589,672 733,023 1,748,827
------------------------------ --------- ------------- ------------ --------------
Intellectual
Property
Other intangibles - Company US$
------------------------------ -------------
Cost
At 1 January 2015 233,265
Foreign exchange differences (11,235)
-------------------------------- -------------
At 31 December 2015 222,030
-------------------------------- -------------
Foreign exchange differences (36,990)
-------------------------------- -------------
At 31 December 2016 185,040
-------------------------------- -------------
Accumulated amortisation
At 1 January 2015 23,237
Charge for the year 45,849
Foreign exchange differences (2,567)
-------------------------------- -------------
At 31 December 2015 66,519
-------------------------------- -------------
Charge for the year 40,671
Foreign exchange differences (14,670)
-------------------------------- -------------
At 31 December 2016 92,520
-------------------------------- -------------
Net book value
At 31 December 2015 155,421
-------------------------------- -------------
At 31 December 2016 92,520
-------------------------------- -------------
The above intangible assets comprise the Intellectual Property
acquired on 16 July 2014 and 30 September 2015. All research and
development costs not eligible for capitalisation have been
expensed.
The recoverable amount of the above cash-generating units has
been determined based on value in use calculations. The key
assumptions used for value-in-use calculations in 2016 are as
follows:
Gross margin 20-50%
Growth rate 10-45%
Discount
rate 10%
Management determined budgeted gross margin based on past
performance and its expectations of market development. The average
growth rates used are consistent with the forecasts included in
industry reports. The discount rates used are pre-tax, and reflect
specific risks relating to the relevant operating segment.
The recoverable amount calculated based on value in use did not
exceed the carrying value.
14 Property, Plant and Equipment
Plant Motor
& equipment Vehicles Total
Group US$ US$ US$
------------------------------ ------------- ---------- ---------
Cost
At 1 January 2015 194,288 34,032 228,320
Additions 64,471 - 64,471
Acquisition of subsidiary 258,686 85,517 344,203
Foreign exchange differences 633 - 633
------------------------------ ------------- ---------- ---------
At 31 December 2015 518,078 119,549 637,627
------------------------------ ------------- ---------- ---------
Additions - - -
Foreign exchange differences (58,350) (13,465) (71,815)
------------------------------ ------------- ---------- ---------
At 31 December 2016 459,728 106,084 565,812
------------------------------ ------------- ---------- ---------
Accumulated depreciation
At 1 January 2015 19,429 3,403 22,832
Charge for the year 75,544 8,316 83,860
Acquisition of subsidiary 123,696 35,939 159,635
Foreign exchange differences (842) - (842)
------------------------------ ------------- ---------- ---------
At 31 December 2015 217,827 47,658 265,485
------------------------------ ------------- ---------- ---------
Charge for the year 155,739 20,467 176,206
Foreign exchange differences (48,245) (6,823) (55,068)
------------------------------ ------------- ---------- ---------
At 31 December 2016 325,321 61,302 386,623
------------------------------ ------------- ---------- ---------
Net book value
At 31 December 2015 300,251 71,891 372,142
------------------------------ ------------- ---------- ---------
At 31 December 2016 300,251 44,782 179,189
------------------------------ ------------- ---------- ---------
Plant Motor
& equipment Vehicles Total
Company US$ US$ US$
------------------------------- ------------- ---------- --------
Cost
At 1 January 2015 1,039 - 1,039
Additions 4,425 - 4,425
Foreign exchange differences (49) - (49)
------------------------------- ------------- ---------- --------
At 31 December 2015 5,415 - 5,415
------------------------------- ------------- ---------- --------
Additions - - -
Foreign exchange differences (901) - (901)
------------------------------- ------------- ---------- --------
At 31 December 2016 4,514 - 4,514
------------------------------- ------------- ---------- --------
Accumulated depreciation
At 1 January 2015 104 - 104
Charge for the period 1,125 - 1,125
Foreign exchange differencies 14 - 14
------------------------------- ------------- ---------- --------
At 31 December 2015 1,243 - 1,243
------------------------------- ------------- ---------- --------
Charge for the year 992 - 992
Foreign exchange differences (296) - (296)
------------------------------- ------------- ---------- --------
At 31 December 2016 1,939 - 1,939
------------------------------- ------------- ---------- --------
Net book value
At 31 December 2015 4,172 - 4,172
------------------------------- ------------- ---------- --------
At 31 December 2016 2,575 - 2,575
------------------------------- ------------- ---------- --------
15 Investment in subsidiary undertakings
2016 2015
Company US$ US$
----------------------------- --------- ---------
As at 1 January 1,413,434 857,100
Additions - 1,413,433
Foreign exchange differences (235,477) -
Impairments - (857,099)
----------------------------- --------- ---------
Cost at 31 December 1,177,957 1,413,434
----------------------------- --------- ---------
The following are the principal subsidiaries of the Company at
31 December 2016 and at the date of these Financial Statements.
Share
Name of Registered Parent Class capital Nature of
company Address company of shares held business
--------------- ------------------ -------------------- ------------ -------- -----------------
Strat Aero 19500 State Strat Ordinary 100% Provider
International, Highway Aero Plc of aviation
Inc. 249, Suite software,
655, Houston, products
Texas 77070, and services
USA
Strat Aero The Beehive, Strat Ordinary 100% Aviation
International City Place, Aero Plc management
Limited Gatwick and consultancy
Airport, services
West Sussex,
RH6 0PA,
UK
Strat Aero 19500 State Strat N/A 100% Dormant company
International Highway Aero International,
Consultancy 249, Suite Inc
Group, 655, Houston,
LLC Texas 77070,
USA
Strat Aero 19500 State Strat Ordinary 100% Holding company
Holdings, Highway Aero Plc
Inc 249, Suite
655, Houston,
Texas 77070,
USA
Aero Kinetics 19500 State Strat N/A 100% Provider
Labs, LLC Highway Aero Holdings, of aviation
249, Suite Inc software,
655, Houston, products
Texas 77070, and services
USA
Aero Kinetics, 19500 State Strat N/A 100% Provider
LLC Highway Aero Holdings, of aviation
249, Suite Inc software,
655, Houston, products
Texas 77070, and services
USA
Nephos 19500 State Strat N/A 100% Dormant company
Services, Highway Aero Holdings,
LLC 249, Suite Inc
655, Houston,
Texas 77070,
USA
Aero Kinetics 19500 State Aero Kinetics, N/A 100% Dormant company
UAS TC001, Highway LLC
LLC 249, Suite
655, Houston,
Texas 77070,
USA
Geocurve Tintagel Strat Ordinary 100% Aviation
Ltd House London Aero Plc surveying
Road, Kelvedon, and mapping
Colchester,
Essex, CO5
9BP, UK
GN Site Tintagel Geocurve Ordinary 100% Aviation
Engineers House London Ltd surveying
Ltd Road, Kelvedon, and mapping
Colchester,
Essex, CO5
9BP, UK
UKAeroVision Tintagel Geocurve Ordinary 100% Aviation
Limited House Ltd surveying
London and mapping
Road,
Kelvedon,
Colchester,
Essex,
CO5 9BP,
UK
16 Inventories
2016 2015
Group Company Group Company
US$ US$ US$ US$
----------------- ------ -------- ------- --------
Raw materials - - 18,009 -
Work in progress - - 70,479 -
- - 88,488 -
----------------- ------ -------- ------- --------
17 Trade and other receivables
2016 2015
Group Company Group Company
US$ US$ US$ US$
--------------------------- -------- ------------ -------- ------------
Amounts due from group
undertakings - 1,706,103 - 1,144,620
Trade receivables 127,639 - 236,808 -
VAT receivable - 22,708 47,760 69,188
Other receivables 494 11,421 58,276 51,498
Prepayments 82,122 40,799 119,970 54,769
--------------------------- -------- ------------ -------- ------------
At 31 December 210,255 1,781,031 462,814 1,320,075
--------------------------- -------- ------------ -------- ------------
Less: non-current portion - (1,706,103) - (1,144,620)
--------------------------- -------- ------------ -------- ------------
Current portion 210,255 74,928 462,814 175,455
--------------------------- -------- ------------ -------- ------------
The fair value of all receivables is the same as their carrying
values stated above.
Ageing of past due trade receivables 2016 2015
- Group:
US$ US$
------------------------------------- ------- -------
0 - 15 days - -
16 - 30 days 76,418 11,401
Over 30 days 51,221 225,407
------------------------------------- ------- -------
127,639 236,808
------------------------------------- ------- -------
The carrying amount of the Group's trade receivables are
denominated in the following currencies:
2016 2015
US$ US$
----------- ------- -------
US Dollars 23,286 4,400
UK Pounds 104,353 232,408
----------- ------- -------
127,639 236,808
----------- ------- -------
The maximum exposure to credit risk at the reporting date is the
carrying value reported above. The Group does not hold collateral
as security. No provision (2015: nil) has been made at the year-end
in respect of trade receivables.
18 Cash and cash equivalents
2016 2015
Group Company Group Company
US$ US$ US$ US$
------------------------------------------------------- ---------------------- -------------------------- ---------- ----------
Cash at bank and in hand 3,918 2,065 1,485,257 1,131,304
3,918 2,065 1,485,257 1,131,304
------------------------------------------------------- ---------------------- -------------------------- ---------- ----------
The carrying amount of the Group's cash and cash equivalents are
denominated in the following currencies:
2016 2015
Group Company Group Company
US$ US$ US$ US$
--------------------------------- ------------------------------ ---------------------------------------- --------- ---------
US Dollars 4,109 - 202,071 -
UK Pounds (191) 2,065 1,283,186 1,131,304
--------------------------------- ------------------------------ ---------------------------------------- --------- ---------
3,918 2,065 1,485,257 1,131,304
--------------------------------- ------------------------------ ---------------------------------------- --------- ---------
19 Share capital
2016 2015
Issued equity share
capital Number US$ Number US$
Issued and fully
paid
Ordinary shares
of 0.1p (2015:1p)
each 384,285,262 556,377 142,063,771 2,292,836
Deferred shares
of 0.1p each 2,358,954,414 3,574,036 - -
--------------- -------------
4,130,803 2,292,836
--------------- =========== ------------- ===========
Group and Company Ordinary Share
Number shares premium Total
of shares US$ US$ US$
------------------------ ------------ ---------- ---------- ------------
Issued and fully paid
At 1 January 2015 76,968,437 1,301,737 1,642,449 2,944,186
------------------------ ------------ ---------- ---------- ------------
Issue of new shares
- 10 March 2015 7,333,334 110,631 834,186 944,817
Issue of new shares
- 15 October 2015 30,000,000 463,274 1,671,062 2,134,336
Issue of new shares
- 15 December 2015 27,562,000 414,229 2,002,965 2,417,194
Issue of new shares
- 22 December 2015 200,000 2,965 20,753 23,718
As at 31 December 2015 142,063,771 2,292,836 6,171,415 8,464,251
------------------------ ------------ ---------- ---------- ------------
As at 1 January 2016 142,063,771 2,292,836 6,171,415 8,464,251
------------------------ ------------ ---------- ---------- ------------
Issue of new shares
- 17 March 2016 4,575,209 64,476 322,380 386,855
Issue of new shares
- 12 April 2016(4) 35,555,556 506,082 63,260 569,342
Issue of new shares
- 20 April 2016(5) 42,422,222 610,612 76,326 686,938
Issue of new shares
- 13 July 2016 37,489,288 497,145 - 497,145
Issue of new shares
- 1 September 2016(6) 74,000,000 97,192 388,766 485,958
Issue of new shares
- 29 September 2016 44,750,645 58,207 349,423 407,630
Issue of new shares
- 28 November 2016 3,428,571 4,253 10,635 14,889
Share issue costs - - (164,897) (164,897)
------------------------ ------------ ---------- ---------- ------------
As at 31 December 2016 384,285,262 4,130,803 7,217,308 11,348,111
------------------------ ------------ ---------- ---------- ------------
On 17 March 2016 the Company issued 4,575,209 new ordinary
shares of 1p each as consideration for the conversion of US$390,000
of convertible loan notes.
On 12 April 2016 the Company issued 35,555,556 new ordinary
shares of 1p each at a price of 1.125p per share raising
GBP400,000. On the same date the Company issued 8,000,000 warrants
exercisable for three years from the date of grant at an exercise
price of 1.125p.
On 20 April 2016 the Company issued 24,000,000 new ordinary
shares of 1p each and committed to issue a further 18,422,222 new
ordinary shares of 1p each following approval by shareholders at a
general meeting of the Company, raising in aggregate GBP477,250 at
a price of 1.125p per share. On the same date the Company issued
4,242,222 warrants exercisable for three years from the date of
grant at an exercise price of 1.125p.
On 12 May 2016, following approval from shareholders at a
general meeting of the Company, the Company issued the 18,422,222
new ordinary shares of 1p each in connection with the placing on 20
April 2016
On 13 July 2016 the Company issued 37,489,288 new ordinary
shares of 1p each at a price of 1p settling the outstanding balance
due of GBP374,893 representing the final instalment in the
acquisition of Geocurve.
A resolution was passed with effect from 12 August 2016 to
subdivide and re-designate the ordinary shares of the Company.
Accordingly, each of the 262,106,046 ordinary shares in issue of 1p
each in the capital of the Company was subdivided into, and
re-designated as, 262,106,046 ordinary shares of 0.1p and
2,358,954,414 deferred shares of 0.1p each.
On 1 September 2016 the Company issued 74,000,000 new ordinary
shares of 0.1p each at a price of 0.5p per share raising
GBP370,000. On the same date the Company issued 7,400,000 warrants
exercisable for three years from the date of grant at an exercise
price of 0.5p.
On 29 September 2016 the Company issued 44,750,645 new ordinary
shares of 0.1p each at a price of 0.7p as settlement of all
litigation and claims arising from the AK dispute with Mr W. Hulsey
Smith the Chief Executive Officer of Aero Kinetics Holdings
LLC.
On 28 November 2016 the Company issued 3,428,571 new ordinary
shares of 0.1p each at a price of 0.35p in settlement of consulting
fees accrued amounting to GBP12,000.
20 Share based payments
Share Options and Warrants
Share Options and Warrants to subscribe for new Ordinary Shares
in the Company were in issue as follows:
2016 2015
Weighted Weighted
average average
No. of price No. of price
warrants GBP warrants GBP
------------------------- ------------- --------- ----------- ---------
At 1 January 36,139,368 0.08 459,375 0.08
Granted during the
year 19,642,222 0.01 35,879,993 0.08
Lapsed/Exercised during
the year (34,690,968) 0.08 (200,000) 0.08
------------------------- ------------- --------- ----------- ---------
Outstanding at 31
December 21,090,622 0.01 36,139,368 0.08
------------------------- ------------- --------- ----------- ---------
Exercisable at 31
December 21,090,622 0.01 36,139,368 0.08
------------------------- ------------- --------- ----------- ---------
The warrants outstanding at 31 December 2016 had a weighted
average remaining contractual life of 2.5 years (31 December 2015:
1.96 years).
GBP GBP are used in this note as the shares are traded in the UK
and are also issued in GBP currency.
Fair value of warrants
The fair value of the warrants issued during 2016 was determined
using the Black Scholes valuation model. The assumptions used in
applying the Black Scholes pricing model were as follows:
April April September
2016 A 2016 B 2016
Granted on: 12 Apr 20 Apr 1 Sep
2016 2016 2016
Share price at the
date of grant 1.38p 1.23p 0.48p
Exercise price 1.125p 1.125p 0.5p
Expected volatility 28.59% 32.39% 86.65%
Expected warrant life 3 years 3 years 3 years
Risk free rate 1.79% 1.79% 1.79%
The volatility was determined by examining the monthly share
price.
On 12 April 2016 the Company granted 8,000,000 warrants to
subscribe for new ordinary shares at an exercise price of 1.125
pence per share exercisable for a period of 3 years.
On 20 April 2016 the Company granted 4,242,222 warrants to
subscribe for new ordinary shares at an exercise price of 1.125
pence per share exercisable for a period of 3 years.
On 1 September 2016 the Company granted 7,400,000 warrants to
subscribe for new ordinary shares at an exercise price of 0.5 pence
per share exercisable for a period of 3 years.
21 Other reserves
Company Group
Share Share
option option
and warrants Total and warrants Merger Total
reserve reserve reserve
US$ US$ US$ US$ US$
------------------- -------------- ---------- -------------- ---------- ----------
At 1 January 2015 714 714 714 (857,098) (856,384)
Share warrants
issued (note 20) 283,730 283,730 283,730 - 283,730
Share warrants
exercised (note
20) (1,356) (1,356) (1,356) - (1,356)
At 31 December
2015 283,088 283,088 283,088 (857,098) (574,010)
------------------- -------------- ---------- -------------- ---------- ----------
At 1 January 2016 283,088 283,088 283,088 (857,098) (574,010)
------------------- -------------- ---------- -------------- ---------- ----------
Share warrants
issued (note 20) 83,391 83,391 83,391 - 83,391
------------------- -------------- ---------- -------------- ---------- ----------
Share warrants
lapsed (note 20) (260,867) (260,867) (260,867) - (260,867)
------------------- -------------- ---------- -------------- ---------- ----------
At 31 December
2016 105,612 105,612 105,612 (857,098) (751,486)
------------------- -------------- ---------- -------------- ---------- ----------
22 Trade and other payables
2016 2015
Group Company Group Company
US$ US$ US$ US$
--------------------------- ---------- -------- ---------- ----------
Trade payables 549,845 374,993 568,330 150,001
VAT payable 2,535 - - -
Social security and other
taxes 219,865 3,706 116,671 -
Deferred consideration
payable for business
combinations - - 762,145 762,145
Accruals 523,154 399,658 416,945 251,899
Other creditors 28,466 11,587 92,707 -
--------------------------- ---------- -------- ---------- ----------
1,323,865 789,944 1,956,798 1,164,045
--------------------------- ---------- -------- ---------- ----------
23 Borrowings
2016 2015
Group Company Group Company
US$ US$ US$ US$
--------------------------- ---------- -------- ------------ ----------
Convertible loans - - 763,675 763,675
Non-convertible loans - - 381,000 -
Shareholder loans 391,115 - 398,313 -
Other borrowings 125,128 98,688 58,048 -
--------------------------- ---------- -------- ------------ ----------
At 31 December 516,243 98,688 1,601,036 763,675
--------------------------- ---------- -------- ------------ ----------
Less: non-current portion (417,555) - (1,211,036) (763,675)
--------------------------- ---------- -------- ------------ ----------
Current portion 98,688 98,688 390,000 -
--------------------------- ---------- -------- ------------ ----------
In November 2016, the Company entered into a GBP300,000 six
month loan facility with a secured fixed and floating charge with
Farina Investments (UK) Ltd over a six month term. This facility
was extended for a further twelve months from 1 March 2017.
Shareholder loans are unsecured and accrue no interest.
24 Deferred tax
2016 2015
Group Company Group Company
US$ US$ US$ US$
---------------------------- -------- -------- -------- --------
Deferred tax liabilities
Deferred tax liability
after more than 12 months 360,154 - 360,154 -
Deferred tax liabilities 360,154 - 360,154 -
---------------------------- -------- -------- -------- --------
The movement in the deferred tax account is as follows:
2016 2015
Group Company Group Company
US$ US$ US$ US$
--------------------------- -------- -------- -------- --------
At 1 January 360,154 - - -
Acquisition of subsidiary - - 360,154 -
At 31 December 360,154 - 360,154 -
--------------------------- -------- -------- -------- --------
25 Financial instruments
Categories of financial instruments
2016 2016
Group Company
US$ US$
------------------------------------- ---------- ----------
Assets - Loans and receivables
Trade and other receivables
(excluding prepayments) 128,133 1,740,232
Cash and cash equivalents 3,918 2,065
-------------------------------------- ---------- ----------
132,051 1,742,297
------------------------------------- ---------- ----------
Liabilities - At amortised cost
Trade and other payables (excluding
non-financial liabilities) 800,711 789,944
Borrowings 417,555 98,688
-------------------------------------- ---------- ----------
1,218,266 888,632
------------------------------------- ---------- ----------
2015 2015
Group Company
US$ US$
------------------------------------- ---------- ----------
Assets - Loans and receivables
Trade and other receivables
(excluding prepayments) 295,084 1,265,306
Cash and cash equivalents 1,485,257 1,131,304
-------------------------------------- ---------- ----------
1,780,341 2,396,610
------------------------------------- ---------- ----------
Liabilities - At amortised cost
Trade and other payables (excluding
non-financial liabilities) 648,037 1,164,045
Borrowings 1,211,036 763,675
-------------------------------------- ---------- ----------
1,859,073 1,927,720
------------------------------------- ---------- ----------
26 Financial commitments
Operating leases
At 31December 2016 the Group had outstanding commitments for
future minimum lease payments under non-cancellable operating
leases which fall due as follows:
2016 2015
Land Land
and buildings and buildings
US$ US$
------------------------------------- --------------- ---------------
No later than one year 124,988 146,520
Later than one year but no later
than 5 years 126,534 127,099
Total future minimum lease payments 251,522 273,619
------------------------------------- --------------- ---------------
27 Related party transactions
Directors' transactions
For Directors' transactions after the year end see note 29
During the year, Russell Peck provided to Strat Aero
International Inc advances amounting to US$nil (31 December 2015:
US$333,575) to fund its operations and working capital
requirements. The balance outstanding at the year-end was
US$398,313 (31 December 2015: US$398,313).
Directors remuneration is disclosed in note 8.
Parent Company transactions with subsidiary companies
During the year the Company received US$199,137 (31 December
2015: US$184,194) management fees from its subsidiaries. At the
year-end US$1,706,103 was due from the subsidiary companies as
follows (note 17).
- Strat Aero International Limited US$1,220,065 (2015: US$736,085)
- Strat Aero International Inc US$nil (2015: US$nil)
- Geocurve Ltd US$486,038 (2015: US$408,535)
28 Events after the Reporting Year
On 31 January 2017 the Company issued 380,000,000 new ordinary
shares of 0.1p each at a price of 0.1p per share raising
GBP380,000. On the same date the Company issued 418,000,000
warrants exercisable for two years from the date of grant at an
exercise price of 0.225p.
On 21 February 2017, following approval from shareholders at a
general meeting of the Company, the Company issued the 850,000,000
new ordinary shares of 0.1p each at a price of 0.1p per share
raising GBP850,000 in connection with a placing announced on 14
February 2017. In addition, certain directors and a director of a
subsidiary company agreed to subscribe for 250,000,000 Ordinary
Shares at the Placing Price in settlement of outstanding
compensation and expenses accrued since 2015 in the sum of
GBP250,000. On the same date the Company issued 1,170,000,000
warrants exercisable for two years from the date of grant at an
exercise price of 0.225p in conjunction with the two placings.
On the same date a further 50,000,000 new ordinary shares of
0.1p each at a price of 0.1p per share were issued to certain
professional advisors and service providers of Strat Aero in
satisfaction of fees outstanding in the amount of GBP50,000.
On March 1 2017 50,000,000 new ordinary shares in the Company at
a price of 0.1p per ordinary share was issued to Farina Investments
(UK) Ltd in exchange for agreeing new favourable Loan terms and in
consideration of interest accrued to date.
Directors' transactions
The directors and previous directors of the Company who
participated in the February 2017 Placing were as follows:
-- Iain McLure subscribed for 100,000,000 new ordinary shares of 0.1p each for GBP100,000
-- Gerard Dempsey subscribed for 25,000,000 new ordinary shares of 0.1p each for GBP25,000
-- Paul Ryan subscribed for 110,000,000 new ordinary shares of 0.1p each for GBP110,000
-- Russell Peck subscribed for 15,000,000 new ordinary shares of 0.1p each for GBP15,000
** ENDS**
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KMGZVLVDGNZG
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June 26, 2017 06:00 ET (10:00 GMT)
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