LONDON & NEW YORK--(BUSINESS WIRE)--Vertical Aerospace (Vertical) [NYSE: EVTL], a global aerospace and technology company that is pioneering zero emissions aviation, today announces it has been awarded £8 million ($10 million) in grant funding by the UK Government, through the Aerospace Technology Institute (ATI) Programme, to develop its next-generation propellers for use on its VX4 aircraft. The project is the third awarded to Vertical by the ATI Programme and brings total UK Government grant funding t ...

Production and Manufacturing Risks - The company has not yet manufactured any non-prototype aircraft or sold any eVTOL aircraft to customers, indicating a significant risk in achieving commercial production[89]. - The company is currently in the process of evaluating and negotiating contracts with suppliers for planned production aircraft, but may face delays in component procurement[94]. - The company has not constructed a high-volume production facility, and its manufacturing facility plans are still in the concept stage, which could impact production timelines[93]. - The company anticipates significant increases in expenses and continuing losses until it begins commercial manufacturing of its aircraft[100]. - The company faces challenges in obtaining necessary regulatory approvals, which could delay production and impact customer relationships[95]. - The company relies on key suppliers for components, and any disruptions in the supply chain could adversely affect production timelines and costs[103]. - The company expects to incur higher losses in future periods as it ramps up production and marketing efforts[101]. - The company faces risks related to regulatory certification, as no eVTOL aircraft are currently certified for commercial operations by relevant authorities[114]. Market and Competitive Landscape - The market for eVTOL aircraft is still in early stages, and the company's success depends on effective marketing and public perception of advanced air mobility[102]. - The competitive landscape is intensifying, with the risk that competitors may commercialize their technology before the company does[134][136]. - The company faces significant competition from larger corporations with greater resources, which may impact its ability to secure design wins and market share[137]. - The market for electric aircraft is new and untested, characterized by rapidly changing technologies and uncertain customer demands, which poses risks to the company's business prospects[142]. Financial Performance and Funding - The company has incurred net losses since inception and has not generated any revenue from the design, development, manufacturing, engineering, and sale or distribution of electric aircraft[167]. - As of December 31, 2022, the company had £122.8 million in cash and cash equivalents, including short-term deposits[167]. - The company expects funding requirements of approximately £90 million over the next 12 months to support prototype aircraft creation, certification processes, and personnel investments[168]. - The company entered into a Purchase Agreement with Nomura to purchase up to $100 million in ordinary shares, having sold approximately 1.1 million shares at a weighted average price of $7.70, netting about $8.5 million[176]. - The company issued $200 million principal amount of Convertible Senior Secured Notes, convertible at a rate of 90.9091 ordinary shares per $1,000 principal amount, bearing interest at 7.00% per annum[180]. - The company faces significant uncertainty regarding its ability to continue as a going concern, which may adversely affect its share price and ability to obtain financing[167][171]. - The company may need to raise additional capital through equity offerings, which could significantly dilute existing shareholders[170]. Regulatory and Compliance Challenges - The company must develop complex software and technology systems in coordination with partners, and any failure in this area could harm its competitive position[150]. - Regulatory approvals are necessary for the production and sale of aircraft, and failure to obtain these could adversely impact customer relationships and reputation[222]. - Changes in government regulations could impose additional requirements, increasing compliance costs and causing delays in operations[228]. - The company is subject to stringent export and import control laws, which could materially adversely affect its business and financial condition if compliance is not maintained[230]. - The company is subject to various anti-corruption and anti-bribery laws, which if violated, could result in significant fines, penalties, and reputational harm[232]. Operational and Strategic Risks - The company may experience challenges in maintaining confidence among customers and partners, which could affect sales and business relationships[131]. - The aircraft's utilization may be lower than expected due to environmental conditions, impacting financial performance[132]. - There is a shortage of qualified pilots and mechanics, which could hinder the company's ability to sell aircraft at scale and meet growth timelines[140]. - The ongoing COVID-19 pandemic has disrupted manufacturing and supply chains, leading to a global decrease in aircraft sales and potential delays in the company's production schedules[148]. - The ongoing conflict in Ukraine may disrupt design, development, and supply chains, potentially increasing costs and impacting commercialization timelines[209]. Data Privacy and Security Risks - The company may incur significant liabilities and reputational harm if it experiences a security breach, including unauthorized access to customer data[192]. - The company relies on standard contractual clauses for transferring personal data outside the EEA and U.K., which is currently complex and uncertain due to evolving data protection regulations[187]. - The company expects to face additional costs and operational changes due to evolving EU and U.K. privacy laws on cookies and e-marketing, which require informed consent for data collection[189]. - The company engages third-party service providers for data processing, which may expose it to additional risks of cyberattacks and unauthorized access to sensitive information[195]. Internal Control and Governance - The company has identified material weaknesses in its internal control over financial reporting, which may affect the accuracy of financial results[262]. - The company anticipates investing significant resources to enhance and maintain its financial controls and reporting systems[265]. - The company may not be able to maintain an effective internal control environment, which could impair its ability to report financial results accurately[266]. - The company is classified as a "controlled company," allowing it to rely on exemptions from certain NYSE corporate governance standards[259]. Shareholder and Market Considerations - The company does not intend to pay any cash dividends in the foreseeable future, relying on price appreciation for returns on investment[250]. - The company expects to issue additional share capital in the future, which will result in dilution for existing shareholders[249]. - The market price of the company's securities may be volatile, influenced by fluctuations in financial performance and broader market conditions[243]. - The company may be subject to securities class action litigation due to market price volatility, which could divert management's attention and incur substantial expenses[246].

Aircraft Development and Market Potential - The company aims to complete certification of its VX4 eVTOL aircraft and commence manufacturing in 2025, with first deliveries expected in that year [461]. - The VX4 aircraft is designed to transport a pilot and up to four passengers over distances exceeding 100 miles at speeds over 200 mph, producing zero operating emissions [448]. - The urban air mobility market is projected to grow to a total addressable market size of $1 trillion by 2040, indicating significant growth potential for the company [464]. - The company is actively pursuing certification from the CAA and EASA, which is expected to occur concurrently, facilitating global sales efforts [449]. - The company plans to develop a sophisticated eVTOL ecosystem, focusing on high-quality user experiences and system integration [450]. - The company is targeting a sales pipeline from over 5,000 airlines worldwide, leveraging partnerships to expand its market presence [462]. Financial Performance and Projections - The company expects to incur a net increase in cash of approximately $286 million as a result of its Business Combination with Broadstone [459]. - Revenue increased by £45 thousand, or 52%, from £87 thousand in 2020 to £132 thousand in 2021, primarily due to increased activity by VAEL [483]. - The company incurred a net loss of £245,224 thousand in 2021, compared to a net loss of £12,326 thousand in 2020, reflecting a 1,889% increase in losses [501]. - Total finance costs amounted to £32,015 thousand in 2021, a significant increase from a net finance income of £807 thousand in 2020, indicating a 4,067% change [481]. - The company expects to require approximately $450 million from the Business Combination to achieve profitability by 2025, with $130 million needed within the next 12 months for prototype aircraft development and certification [502][503]. Expenses and Cash Flow - Research and development expenses rose by £14,320 thousand, or 144%, from £9,971 thousand in 2020 to £24,291 thousand in 2021, driven by increased research and testing activities related to aircraft [487]. - Administrative expenses surged by £260,500 thousand, or 6,928%, from £3,760 thousand in 2020 to £264,260 thousand in 2021, largely due to share-based payment expenses related to the Business Combination [488]. - Other operating income increased by £9,035 thousand, or 390%, from £2,317 thousand in 2020 to £11,352 thousand in 2021, with government grants contributing £8,829 thousand and R&D tax credits totaling £2,388 thousand [490]. - Net cash used in operating activities increased by £15,538 thousand, or 130%, from £12,012 thousand in 2020 to £27,550 thousand in 2021, primarily due to increased R&D spending [517]. - Net cash used in investing activities rose by £2,666 thousand, or 387%, from £688 thousand in 2020 to £3,354 thousand in 2021, mainly due to the acquisition of intangible assets [518]. - Net cash from financing activities surged by £232,203 thousand, or 1,856%, from £12,510 thousand in 2020 to £244,713 thousand in 2021, driven by proceeds from the Business Combination and PIPE Financing [519]. Capital Requirements and Funding - Future capital requirements will depend on factors such as R&D expenses, capital expenditures for manufacturing, and general administrative expenses as operations scale [504]. - The company had cash and cash equivalents of £212,660 thousand as of December 31, 2021, indicating a need for ongoing funding to cover operating expenses and planned capital expenditures [501]. - The company issued Convertible Senior Secured Notes with an aggregate principal amount of $200,000,000, sold for a purchase price of $192,000,000, and issued 4,000,000 warrants at $11.50 per share [510]. - The Convertible Senior Secured Notes are convertible into up to 18,181,820 ordinary shares at an initial conversion rate of 90.9091 shares per $1,000 principal amount [511]. - The Convertible Senior Secured Notes bear interest at 7.00% per annum if paid in cash or 9.00% if paid in-kind, with an additional 2.00% added during an event of default [513]. Internal Controls and Compliance - The company identified material weaknesses in internal control over financial reporting due to insufficient trained professionals, affecting the design and maintenance of controls [748]. - Remediation activities include hiring additional accounting staff and utilizing external specialists for complex accounting matters [750]. - The company is in the process of implementing an enterprise resource planning system to enhance internal controls over financial reporting [751]. Impact of External Factors - The company is monitoring the impact of the COVID-19 pandemic and the war in Ukraine on its operations, supply chain, and costs [454][458].