Aeristech LimitedBusiness Plan Issue 04 August 2014 Financial Services & Markets Act 2000 Your capital is at risk if you invest in this opportunity. Past performance and future forecasts are not a reliable indicator of future results. This Business Plan is not a prospectus and does not, and is not intended to, constitute an offer or invitation to invest in securities, nor shall it, or any part of it, be relied upon in any way in connection with an offer to subscribe for shares. Private Investor recipients are assumed to possess a certificate of 'High Net Worth' or 'Sophistication' as set out in articles 48 & 50 of the Financial Services & Markets Act 2000 (Financial Promotions) Order 2001. You should seek your own independent advice in relation to the information contained therein. Investment in a new business carries high risks as well as the possibility of high rewards; it is highly speculative and investors should be aware that no established market exists for the trading of shares in private companies. Before investing in a project about which information is given, potential investors are strongly advised to take advice from an authorised person who specialises in advising on investments of this kind. All figures are calculated by Aeristech Ltd. Contents 1 Executive summary 2 2 The Company, Management Team and Shareholdings 4 3 Aeristech Background – Technical and Commercial 5 4 Market Background – Engine Boosting & Downsizing 6 5 Aeristech’s Unique Selling Points versus the Competition 9 6 Business Model 12 7 Revenue and Financial Forecast 14 8 Equity Requirement 18 9 Conclusion / Exit & Return for Investors 19 Appendix A – Directors’ Background 20 Appendix B – Shareholder Breakdown 22 Appendix C – Technology Licensing Model 23 Appendix D – A-Sample Programme Plan 26 Appendix E – Patents Filed and Applied for 28 Appendix F – Aeristech’s Customers and Partners 29 Motor Industry Terms OEM - Original Equipment Manufacturer, a car company such as Ford, Honda, etc. Tier1 Supplier - A company supplying components to an OEM, such as Bosch, Mahle, etc. A-Sample - A pre-production prototype with the same functional attributes (size, weight, performance, etc) of the final product, built using expensive one-off processes. A-sample electronics use the same components, but they are not shrunk, integrated, and packaged as mass-production electronics. OEM's expect to test 10 to 20 A-samples to test in pre-production vehicles before commissioning B-, C-, and D-samples and then to mass production orders. D-Sample - A final prototype ready for mass production boosting – supplying compressed air into an engine supercharging – a type of boosting where power is derived from the engine’s output power turbocharging – a type of boosting where power is derived from exhaust gas waste power advanced boosting – any system for supplying pressurised air to an engine that mitigates (fully or partially) the classic problem of turbo lag electric boosting – an advanced boosting system using electric motor/generators 1 Commercial in Confidence 1 Executive summary 1.1 About the Company Aeristech was founded in 2006 by Bryn Richards with a unique method of turbocharging a vehicle to achieve engine downsizing and CO2 savings. With the help of investors, grants, and automotive customers, Aeristech has proven the technology at prototype level and built a portfolio of patents and intellectual property around high-speed electric motors, compressors, and turbines (“electric boosting”). Aeristech is a company limited by shares, with Bryn Richards as CEO and shareholder, assisted by a diverse team of executive and non-executive talent. 1.2 The Market The market for electric boosting has arrived. The market is driven by the trend towards smaller engines in all car markets. Several economic and legislative factors drive the trend to smaller engines. European CO2 legislation is a primary near-term driver, so Europe leads the trend. However, the market is worldwide. The automotive industry now accepts that advanced boosting technologies, including electric boosting, will be the principle means of achieving engine downsizing beyond today’s state of the art. This consensus on technical direction is new. In the last two years, this consensus has led to the creation of a market for Aeristech’s technologies. 1.3 Aeristech’s Unique Offering According to Aeristech’s inernal engineering analysis and volume cost estimation, Aeristech offers the cheapest, most compact, most easily integrated, and most high-performance technology platform for advanced boosting. Mechanical systems are very bulky and complex, but they entail known component technologies and are often favoured by incumbent turbocharger manufactures. Conventional electric boosting technologies have poor efficiency and performance because of the difficulty in controlling electric motors at very high speeds. Aeristech has patented an efficient and cheap method for controlling high-speed motors and has produced and demonstrated the most high-performance electric compressors and turbines in the world. 1.4 Business Model Aeristech’s exit strategy is based technology licensing to the volume car market and the business model is structured in such a way that all activities are complimentary to that goal. Aeristech completed a research and development phase, working with OEMs and then Tier-1 manufacturers, and then moved into a phase of revenue-earning application development. Aeristech is involved in discussions with Tier-1s regarding licensing. Tier-1s are in various stages of technical and commercial due diligence. As Aeristech’s technology matures, an expanding set of revenue streams become available to Aeristech. These include: Niche vehicle design/development and licensing (eg supercars, motorsport, limited edition) Design/development projects for OEMs/Tier-1s (often in line with licensing discussions) Low-volume manufacture for niche markets and aftermarket Heavy diesel (on- and off-highway) applications in main propulsion and ancillary systems Other electric boosting applications (rail, shipping, power generation) Other high-speed motor/generator applications (robotics, aviation, oil & gas) 2 Commercial in Confidence proof-of-concept stage. 1. These markets therefore need technologies to be developed to A-sample before they are taken up. or by contributing to the development of the technology and company. 1. Aeristech has set out a programme for the next two years to produce and publicise an A-sample unit. Aeristech needs to achieve a final-size.1m for which a 20% equity stake is available. and discussions are ongoing with Tier-1s. Aeristech’s Board has authorised an intake of funds up to £1. Aeristech’s predicted value of an exclusive license deal is £120 million net present value. either by being directly in line with licensing discussions. A-sample unit. However. an exclusive license. once Aeristech has won the application by providing A-sample units for testing by the customer.6 Exit and Return for Investors If successful. Engineering refinement is needed to produce a final size. For example. This is because we believe that Aeristech’s technology has been demonstrated as superior in performance and cost to other electric supercharging and turbocharging technologies. A licensing exit could potentially be achieved before achieving A-sample stage. or an outright buy-out. but it is clear that achieving “A-sample” will open doors with more Tier-1 organisations and accelerate decision making processes within the Tier-1 organisations Aeristech is already engaging.500 per unit to be shared between Aeirstech and its manufacturing partner. Aeristech predicts a net present value of circa £42 million for a non-exclusive license of an electric supercharger. by advancing Aeristech’s market position. Profit margins can be high in niche and low-volume applications. an exclusive license. Multiple licenses.To unlock these revenue streams. 3 Commercial in Confidence . A license is expected within two years for the electric supercharger. in the language of the automotive industry). achieving A-sample stage will strengthen the proposition for Tier-1s. Niche / low-volume manufacture or licensing is expected to lead to medium-term exit opportunities (1-3 years). An advantage of these markets is that they offer a broader array of customers and a greater degree of control than high-volume Tier-1 licensing (being less dependent on the decision making processes and timescales of large Tier-1s). and/or licenses for other electric boosting systems based on Aeristech’s technology will all attract further license revenue. Aeristech’s discussions with Tier-1s align with standard industry practice in technology licensing. Aeristech’s licensing discussions with Tier-1s are very encouraging at Aeristech’s present stage of development. leaving no remaining barrier or risk other than the Tier-1’s own business strategy and perceived market risk. Aeristech could achieve an exit for investors by a disposal to a Tier-1. one supercar application of 2000 units per year (two eSuperchargers per vehicle) is expected to offer profits of £1.5 Equity Requirement Aeristech is presently one step away from A-sample ready – Aeristech has completed the prototype. which could take the form of a non-exclusive license. Aeristech’s technology at A-sample stage will be a prime candidate for licensing and by far the most effective way for a Tier-1 to enter this new market. Aeristech’s strategy is to develop revenue opportunities that support volume technology licensing. depending on the commercial strategy of the Tier-1. These markets tend not to engage in research and development because the costs are spread over a small number of sales. well-engineered. or by selling an annuity from a volume licensing contract or niche manufacturing joint venture. Partnering is almost certainly required in order to cover DFM (design for manufacture) and tooling costs. well-packaged unit to take the product from proof-of-concept complete to product development ready (“A-Sample” ready. In a large and underserved market such as the present electric supercharger market. This structure allows ACT to be either sold or to license its intellectual property outside the remit of Aeristech’s sector of activity. who has worked for 20 years in Formula 1 and high tech start-up companies. The staff is divided into mechanical.2 The Company. electrical and operations teams.3 The Executive and Engineering Teams The Executive team includes Bryn Richards as CEO and Julien Servant as Commercial Director. Aeristech Control Technologies Ltd (ACT) a wholly owned subsidiary of Aeristech owns patents and patent applications in electronics to drive and control high-speed electric motors and generators. the scheme is limited to 10% of the issued shares. 2. the Chairman and CEO are seeking either an investor or trade partner to commercialise the ACT technology.273. including compressors and turbines. and electric vehicles. Management Team and Shareholdings 2. As a separate exercise. Aeristech’s activities are solely directed to commercialising electric turbo-machinery in the automotive sector. EALP and Exceed funds have the right to a Board seat Richard Ashmore – Company Secretary and Accountant 2. These are used in Aeristech turbo-machinery applications and have potential applications in robotics.1 Company Structure Aeristech Ltd (Aeristech) owns patents and patent pending applications in the field of electric turbomachinery. aerospace.998 ordinary shares to its 40 shareholders. 2.2 The Board The Aeristech’s Board members have extensive experience in management.4 Shareholdings Aeristech has issued 3. Details are attached as Appendix A. Duncan Kerr – Observer. Aeristech operates an EMI Share Option Scheme and has granted options amounting to 5% of Aeristech’s issued shares. (Chairman Position Presently Open) Bryn Richards – CEO Julien Servant – Commercial Director Andy Tempest – Non Executive Director Hugh Kemp – Non Executive Director Clare Twemlow – Non Executive Director Clive Banks – Non Executive Director. 4 Commercial in Confidence . finance and the commercialisation of automotive and other new technologies. ACT has the same Board Members as Aeristech and would if appropriate draw on Aeristech’s staff resources. A shareholder breakdown is attached as Appendix B. Aeristech’s Chief Engineer is Kevin Gray. refine the cooling arrangements.2 2009 to 2012 – Engineering Development and Customer Projects In 2010. Tier-1 interest in Aeristech is an important validation of the business model.143. Aeristech raised and entered a development phase to produce superchargers and turbochargers from its core platform technology. but they become involved once they see a mass market. In achieving this. one Tier-1 expects the product to be developed to the level of “A-sample” before they typically consider licensing. and protected a number of new patents. A number of Aeristech’s recent projects have been with Tier-1 companies. The turbocharger required a motor capable of delivering the full load air (mass and pressure) requirements of an engine in less than 1 second. 3.3 2013 onwards – Pre-Production Readiness and Technology Licensing Aeristech expects to license its technology to trial customers and for them to develop the technology for mass production. kept control of. Aeristech has developed.453 of equity and drawn grants to the value of £982. Aeristech is in discussion with three “Tier1”suppliers on that basis. to help them test and develop the technology for mass production. Aeristech will need to develop the shaft geometry. However.3 Aeristech Background – Technical and Commercial To date the Company has raised £2. To become “A sample” ready. 2006 2007 2008 2009 2010 2011 Seed Funding (Private) 2014 14kW eBooster test Bench Test High-speed PM Motor Rapid Acceleration 2013 Engine test with booster and turbine First OEM collaboration Feasibility Non-Funded 2012 Performance FullElectric turbo test with energy storage Vehicle Applications Development Funding (Private and Venture Capital) 3. Aeristech began working with ‘Tier-1’ automotive suppliers. Throughout collaborative and customer projects. after securing a demonstration project with a global European OEM. Tier-1 suppliers typically don’t have internal research programmes. Aeristech has also secured £437k of grant revenues for the 2014/15 financial year.) In addition to working with car manufacturers on their engineering research programmes. 5 Commercial in Confidence . Aeristech produced what we believe to be the world’s fastest accelerating permanent magnet motor (also the world’s fastest. A-sample electric supercharger will be available within 12 months. 3. In 2007. Aeristech has developed a detailed work programme. variable-speed.433. and improve the layout of the electronic components. Aeristech generated revenues of circa £150k in the financial year ending March 2014. (See Appendix C for list of patents both granted and applied for. Aeristech protected this novel concept and associated Intellectual Property through Patent filing. The remaining technical risk is low – engineering development rather than research. Aeristech developed and patented a novel architecture for the electronic hardware driving the motor (or generator). permanent magnet motor with a power greater than 1kW). often tailored to suit the needs of particular customers.1 2006 to 2009 – Early Research and Development Aeristech was founded in 2006 with Angel investor funding to develop a fully electric turbocharger. The license fees and volumes discussed with these companies match Aeristech’s expectations (shown in this plan). the industry is rapidly moving towards engines with a lower cubic capacity but greater specific power (commonly known as “downsizing”). Achieving target performance in a downsized engine requires boosting (pushing more air into the engine). Rapid growth is anticipated in all markets as well as for both petrol and diesel engines. The automotive industry has to rise to the following challenges: Internal Combustion engines need to comply with ever tightening emissions standards Fuel consumption has to be reduced to meet the growing demand for economical cars Customers’ performance expectations have to be fulfilled Facing these constraints. there is a clear trend towards tougher emissions regulations worldwide.2 Emissions Legislation Although today.4 Market Background – Engine Boosting & Downsizing 4. 4. 6 Commercial in Confidence . principally by using smaller engines (downsizing). The engine boosting market is currently experiencing a very fast growth.1 Market Drivers Internal combustion engines will continue to be the predominant means of propulsion for vehicles for many years. incorporating conventional turbochargers. Source: ICCT.3 The Market for Boosting Boosting technologies have been recognised as a critical enabling technology for near-term CO2 emissions reduction in vehicles. the worldwide turbocharger penetration rate could be higher than 40% by 2018. emissions standards vary between countries. Global Passenger Vehicle Standards. According to Honeywell and Just-Auto. 2011 4. superchargers and multi-stage boosting systems. 4. single-turbo systems will not be capable of producing enough boost pressure whilst maintaining acceptable transient response. advanced boosting systems are required. These drawbacks limit the degree of boosting that can be achieved through conventional (mechanical) systems and the amount of engine downsizing and CO2 reduction. where more than one turbocharger is used in tandem.4 The Limits of Conventional Boosting Technologies Conventional turbochargers and superchargers can provide boost. as illustrated by the diagram above. but they have inherent drawbacks. Two stage turbochargers For engine downsizing beyond 30%. expensive and difficult to package in a vehicle. One example is multi-stage boosting. but they still suffer from the inherent limitations (although partially mitigated) of mechanical turbos – mainly the relatively slow transient response. mechanical turbocharger) For extreme downsizing (more than 30% reduction in engine size). The industry-wide near-term focus for CO2 reduction is therefore concentrated on the development of advanced boosting technologies. 7 Commercial in Confidence . Furthermore these systems are complex. Single turbo system (conventional. Multi-stage Two Stage Turbocharger System systems have had many commercial successes. The electric supercharger market introduction is expected in 2016-2017. the electric turbocharger is the cheapest and simplest solution for extreme engine downsizing. 48V for off-road applications. Aeristech provides a turbocharger that is more efficient than a simple mechanical connection (averaged across the broad range of operating points required for vehicle applications) and circumvents the traditional drawback of turbo lag. improving combustion efficiency and reducing emissions of carbon monoxide and nitrous oxide. eliminating extraneous pipework and electronically controlled valves. 4.5 The Role of Electric Superchargers With very fast response time. low-cost. 8 Commercial in Confidence . Installs into a more convenient package space. such as range extender engines for Hybrid powertrains. compact and efficient solution to the automotive industry at all voltage levels: 12V and 48V for passenger car applications. a battery and control unit. with several OEMs committing to integrate these boosting devices within their new vehicle platforms. Packaging and installation is also simpler. and a variable speed electric compressor. and finally high voltage (200V to 400V) for hybrid and fuel cell applications. The Fully Electric Turbocharger – Recovers exhaust energy over the complete driving cycle. eliminating turbo lag.4. the electric supercharger is very effective in addressing the low-speed turbo lag issues associated with downsized engines. or it could be used as the low pressure stage in tandem with a conventional turbocharger. (Note: the fully electric turbocharger is not to be confused with electrically assisted turbochargers – used in F1 but not suitable for road cars. Aeristech’s proprietary electric motor and control technology offer a long-term. Given the availability of Aeristech’s unique enabling technology in electric motors. including deceleration and cruising when it would have been wasted Delivers full boost at low engine speeds using stored energy.) By connecting the turbine and the compressor electrically rather than mechanically and introducing energy storage. Matches air input to fuel input by controlling compressor speed. It incorporates a turbo-generator in the vehicle exhaust.6 The Role of Electric Turbochargers A fully electric turbocharger is a new concept made possible only by Aeristech’s motor and control technology. The electric supercharger can be used as a single stage system on small displacement engines. efficient. They must operate at high speed and achieve rapid changes in speed. 5. the electric supercharger makes a small engine perform like a large engine. The technology is suitable for high-speed and variable-speed applications. operating only while the conventional turbocharger is “lagging”. Interesting Business Case for Tier1 suppliers as new short term market Weaknesses Aeristech is not an incumbent / must partner with a Tier-1 Threats Conventional technology is viable in this application. and cheaper systems. drawing electric energy from the vehicle’s battery (at 12 or 48 volts) and providing compressed air on demand. efficient. Furthermore. Conventional technology can achieve this at low speeds. so they are capable of rapid changes in speed. this is especially useful in transient applications such as automotive turbocharging. High-Voltage eCompressor Applications Hybrid and fuel cell vehicles typically require a high-voltage electric compressor operating at moderate to high power levels. Typically a conventional controller. require IGBT switching components rather than MOSFETs. Strengths Fastest response time Lowest cost Least power required from the vehicle Opportunities OEMs are actively looking for electric superchargers in the near term. and cheaper to manufacture than an equivalent motor based on conventional technology. such as Aeristech’s electric supercharger and turbocharger.2 Low-Voltage Electric Supercharger Applications These are relatively low-power systems. Aeristech believes that it provides the most compact. These eCompressors provide the full air requirement of the engine / fuel cell and are not supplemented by a conventional turbocharger. The job of an electric supercharger is to provide high-pressure air when the driver wants to accelerate. owned by Aeristech Control Technologies Ltd. IGBTs are less tolerant of high-speed applications. but high-speed motors over-stress digital switching components such as MOSFETs and IGBTs.5 Aeristech’s Unique Selling Points versus the Competition 5. lighter. The electric supercharger supplements a conventional turbocharger. 5. although allowing more compact. 9 Commercial in Confidence . Aeristech’s controller becomes the only viable option. By supplementing the conventional turbocharger.3 Higher Power. The technology allows a motor/generator to be more compact.1 Unique and Patented Motor and Controller At the core of Aeristech’s offering is its patented motor/generator and controller. At higher voltage levels. lighter and more compact motors have less inertia. and low-cost alternative for electric superchargers. the components are not stressed at high speed and provide fine control. In Aeristech’s controller. This is accomplished by providing a smooth and wellmodulated input signal to the motor. helping OEMs to downsize their engines and reduce CO2. unlike Aristechs controller requires the IGBTs to operate at ten times the motor frequency. meaning there are competitors. Higher voltage levels. but Aeritech’s control technology reduces the demands on the components and allows them to operate safely and efficiently in high-speed applications. This provides a more convenient package (lower cost) and much higher aerodynamic efficiency (lower CO2) than a conventional turbocharger. but not enough to force very high costs. Threats Eventually. Threats Future component technologies. The top speed is quoted at 70. Opportunities CO2 legislation provides enough pressure to force acceptance of new technology. allowing more engine downsizing and still further reductions on CO2. Further by adding stored energy the turbocharger can respond to any driver demand without perceptible lag. providing medium. could allow competitors to enter the market (although high cost will remain a barrier). Opportunities Hybrid vehicles and then fuel cells are likely to follow the electric supercharger market. make the conventional turbocharger redundant in transient applications such as passenger cars. full-functionality means of delivering CO2 reduction through engine downsizing.Motor Controller Conventional Control System 50 000 Hz 5 000 Hz 150 000 RPM Aeristech Control System 5 000 Hz 5 000 Hz 150 000 RPM Illustrative example of switching frequency reduction using Aeristech’s control system Strengths Able to deliver high-speed operation with conventional components available today.5 Competing Advanced and Electric Boosting Systems Valeo VTES electric compressor Valeo obtained an exclusive license from Control Power Technologites Ltd for a switched reluctance motor driving an turbomachine compressor. Weaknesses At this time. and this limits the maximum boost pressure that can be achieved.and longterm opportunities. 5.4 FullElectric Turbocharger Applications The fullElectric turbocharger is the ultimate low-cost. Weaknesses At this time. Strengths Cheaper than present-day multi-stage turbo systems based on Aeristech’s analysis. and is the only option for higher power. By offering higher speeds and efficiencies. only a few vehicles are moving to a high-voltage architecture. Uses far less battery than hybrid or electric vehicles. and power is typically limited low (<5kW). only a few vehicles are moving to a high-voltage architecture. because of their inherent efficiency and power. 5. Aeristech’s motors and generators. Switched reluctance motors are also known to be noisy and inefficient. 10 Commercial in Confidence . such as silicon carbide. the cost of fuel cells and hybrid architectures will come down. Aeristech can provide more compact and potentially cheaper systems at low power levels.000 RPM. Rotrex and HKS® turbomachine compressors with geared mechanical input These devices use a belt connected to the engine’s crankshaft to power the supercharger. the need to supplement them with superchargers or electrification is reduced (although legislation and mounting consumer expectations increase steadily the demands placed on turbochargers). and Magna are developing systems of this type. Conventional superchargers run at low-speed and are very large. less costly than roots and screw-type conventional mechanical superchargers. Borgwarner. this approach introduces an electric motor to supplement (add or remove power from) the mechanical input. Conventional superchargers Eaton corporation has grown rapidly in recent years. These companies focus on the aftermarket. Because of the mechanical connection to the engine. but the present analysis is that these incremental improvements will not be sufficient and that electrification will be needed if increasingly stringent engine downsizing targets are to be met. 11 Commercial in Confidence . but the cost is much higher than turbomachine compressors. Consequently. By using a planetary transmission. we believe the costs are higher and the benefits are lower with these systems than with Aeristech’s system. At present. and now supplies Jaguar Land Rover. improvements in components are steadily raising the bar of what the conventional control method can achieve. At such an extreme performance specification. This gives a degree of control that is still less than a plain electric compressor and a cost that is higher than either a plain electric compressor or a plain mechanical supercharger. They derive power from the engine’s crankshaft and have little flexibility for control. Whereas Aeristech bypasses these challenges with its innovative architecture. variable geometry turbines (reducing turbo lag and improving off-design efficiency). Rotak geared mechanical supercharger with supplemental electric motor Rotrak is a joint venture between Rotrex and Torotrack. To achieve better control. We believe that Aeristech offers better efficiency and lower cost in all applications and becomes the only viable option in high-pressure or high-power applications. But this approach represents an alternative to Aeristech that allows higher power from a compact turbomachine compressor. expensive. The industry believed for 10 years from 2000 to 2010 that these incremental improvements would be sufficient to enable engine downsizing in the medium and long term. these devices operate high-speed turbomachine compressors. This is a variation of turbomachine compressors with geared mechanical input. components are expensive and design freedom is significantly restricted (eg high efficiency is achievable only in a narrow band of operation). and heavy. Conventional permanent magnet motors and controllers are limited in speed and power by the capabilities of modern electronic components. the installation and operation is less flexible than an electric supercharger. Examples of improvements include high-speed bearings (reducing inertia and turbo lag). conventional permanent magnet motors can operate up to about 80. more efficient. Electric compressors with conventional permanent magnet motors and controllers Bosche. Incremental improvements to conventional turbochargers As conventional turbochargers improve. which are more compact.000 RPM and 6kW. electrically actuated valves and wategates (allowing multi-stage turbochargers). and improvements in materials technologies (allowing tighter packaging and higher temperatures). Their main advantage is that they do not exhibit surge (a technical term for the performance limits of turbomachine compressors in high-pressure applications). but certain risks will need to be mitigated by entering into a joint venture or other commercial partnership with an experienced niche manufacturer in each target market. limited edition) Design/development projects for OEMs/Tier-1s (often in line with licensing discussions) Low-volume manufacture for niche markets and aftermarket Heavy diesel (on. but Aeristech’s Executive Team have identified several risks: 1. These include: Niche vehicle design/development and licensing (eg supercars. 12 Commercial in Confidence . there are some uncertainties around the timing for the introduction of advanced electric boosting systems. working with OEMs and then Tier-1 manufacturers. As Aeristech’s technology matures.1 Risks in Technology Licensing To achieve a technology license and capitalise on the near-term market opportunity for electric superchargers. and recently moved into a phase of revenueearning application development. oil & gas) 6.2 Risks in Accessing Niche and Low-Volume Markets As Aeristech’s technology has matured and passed various research and development milestones it has begun to attract interest from niche and low-volume markets. the vehicle manufacturer or operator absorbs this risk for its suppliers (different from the volume automotive industry). Tier-1s are in various stages of technical investigation and commercial due diligence.6 Business Model Aeristech’s core business model and exit strategy are based on technology licensing to the volume car market through Tier-1 suppliers. Risks include: 1. not research and development. Warranty exposure must be managed.and off-highway) applications in main propulsion and ancillary systems Other electric boosting applications (rail. Aeristech is involved in discussions with Tier-1s regarding technology licensing. Product introduction is also closely linked to new powertrain introduction which life cycle can vary from 4 to 7 years. aviation. Aeristech is seeding the market with a 48V electric supercharger proof of concept prototype. power generation) Other high-speed motor/generator applications (robotics. an expanding set of revenue streams become available to Aeristech. This also allows the Tier-1 to focus on their core business of productionisation. Having an A-Sample ready status allows Aeristech to respond quickly when a new product line opportunity is forthcoming and a Tier-1 makes an enquiry. 2. although smaller than in volume applications. Up-front investment in manufacturing. but certain standards will be required. 6. Tier-1s’ business is productionisation. so the Tier-1 is able to adopt the technology with lower level signoff than will be required pre-A-Sample. Tier-1s business model: Typically Tier-1 suppliers invest in technology or product development with a 2 to 3 years return on investment. Aeristech completed an research and development phase. In many instances. This has proven successful in getting early interest from Tier-1s. so technologies must be sufficiently near to market before Tier-1s invest. motorsport. A new market: As a new market opportunity. shipping. must be managed. The strengths in these markets include the diversity of opportunities and lower barriers to entry. 2. Customer-funded research and development projects allow Aeristech to further develop its core technology.or customer-funded vehicle demonstrator in partnership with an automotive consultancy business such as AVL or Ricardo. 6. Springboard. Therefore. By opening this wide range of markets. as well as accelerate and secure Aeristech’s exit strategy. Aeristech needs to achieve a final-size. and Tier-1 manufacturers are less inclined to develop bespoke solutions for those markets. since niche segments are less sensitive to piece price and do not invest as heavily in tooling. Niche and low-volume applications tend to have less supporting infrastructure to carry out research and development. but it is clear that achieving “A-sample” will open doors with more Tier-1 organisations and accelerate decision making processes within the Tier-1 organisations Aeristech is already engaging. well-packaged unit to take the product from proof-of-concept complete to product development ready (“A-Sample” ready. Aeristech is investigating opportunities to build a grant. This could be done in partnership with a manufacturing centre of expertise such as PERA. For these markets. By refining the technology to A-sample readiness. to complement the research and development programme opportunities Aeristech has presently with OEMs. A joint venture opportunity would be the preferred route for low-volume manufacture.3 Proposed Strategy – A-sample Readiness To unlock these revenue streams. 13 Commercial in Confidence . compared to mass manufacture. A-sample readiness is essential in order to access niche and low-volume markets. Aeristech has a portfolio of patents and know-how sufficient to convince OEM customers to make funds available for limited research and development programmes to allow them to access and explore the portfolio technology. For OEM’s this is viewed as a research and development expense and a precursor to the adoption of the technology. and target strategic collaborative projects for specific applications. By prototyping the manufacturing processes involved in producing Aeristech’s electronic and mechanical components the aSupercharger be pre-mass production ready. 6.An A-sample is nearly a finished product for the purposes of niche markets. however it would also take time and money. build relationships with OEM’s and enhance its value to a potential Tier-1 licensee. Aeristech’s licensing discussions with Tier-1s are very encouraging at Aeristech’s present stage of development. By achieving the A-sample ready stage. This strategy will open a wide range of new markets to Aeristech.6 Low/Medium-Volume Manufacture A further step would be to embark on a self-funded.4 Complimentary Activity – Customer Revenue Projects Aeristech’s management will aim to leverage its A-sample development program to continue to attract the interests from Tier-1 suppliers and OEMs. the A-sample readiness programme will strengthen Aeristech’s revenue base and cash position. or Productiv. Aeristech positions itself to (1) work efficiently with Tier-1s on further product development for mass production and (2) offer near-finished production designs for Niche vehicle applications (where refinement and down-costing expectations are less). an A-sample is close to a finished product. 6. low/medium-volume manufacturing programme. in the language of the automotive industry). Aeristech will be equipped to provide customers and partners with the data they require in order to engage with Aeristech commercially. which do not invest in many stages of cost reduction and product improvement. 6.5 Medium-Term Opportunity – Demonstrator Vehicle A vehicle demonstrator would add value to Aeristech’s offering and help to attract a greater license value. 5 and Appendix C Payments NIC/PAYE 46.) through strategic partnerships with key stakeholders in these markets.000 350. The financial forecast shows three of four revenue streams. Defence.743 120. Even without license revenue.5 and Appendix C. financial contributions for leveraging grant projects outcomes and development of prototype systems. The total Net Present Value of an exclusive agreement is estimated to be worth circa £120 million. FY15 grant income has already been secured to circa £437k through TSB.731) (265.) 14 Commercial in Confidence .750 249.801 436.000 150. Heavy Diesel.000 Direct Costs (incl.333 222. and A-sample readiness.000 180. Technology Licensing to Tier-1 suppliers. although expected. Motorsport. A-sample prog.000 Salaries 317.857 233.000 150.052 55.500 55. Aeristech forecasts steady progress to profitability. *License Revenue: Exclusive and non-exclusive license scenarios have been modelled.000 360.000 400.901 254. But technology licensing will continue to be a priority for Aeristech. From FY16 (FY ending 31st March 2016). revenues from niche and low-volume markets (Niche vehicle manufacturers.000 Director's Remuneration 132.052 (517.000 350. 7.000 350. (See Section 7. Aeronautics.627 144. etc. because we believe it offers a very lucrative potential exit opportunity.000 1.000 180. with three staggered non-exclusive deals providing similar returns.385 957.052 Overheads 179.000 50.385) 152.614) (268.000 Niche and low volume markets - - Licence Revenue - - 329.436 132.1 Financial Forecast to Profitability FY14 FY15 FY16 FY17 £ Actual £ Forecast £ Forecast £ Forecast Sales & Other Receipts (1) Grant Income 179. Customer revenue from engineering services for specific applications.948 Operating Profit (1) Grant value already secured by contract with the Technology Strategy Board. Offhighway.000 200. License revenue.707 822.000 Total Payments 847.110.993 42.000 Total Receipts 450. is not shown because the timing of license negotiations is difficult to predict.743 700.7 Revenue and Financial Forecast Aeristech will target four revenue streams comprising of: UK and EU grants for continued technology development and strategic collaborative work.976 556.829 Customer Revenues 149.) 170.000 See Section 7.357 968. In FY14 Aeristech generated circa £150k revenue from customers and received an additional £180k of grants. This shows a secure and conservative position. 710 -19.796 85.287 411.000 3.500 22.250 11.500 22.000 12.750 68.000 12.079 63.359 473.000 3.7.000 12.750 71.040 48.500 63.720 62.628 1.086 65.250 11.517 23.500 63.500 86.500 22.000 15.645 10.675 Niche markets Licence Revenue - - - - - - - Share Premium - 450.000 11.000 12.1m (20% of Aeristech) in order to add robustness to the business plan and to allow strategic spending to access new markets or seed joint ventures when appropriate.687 - Niche markets Licence Revenue - - - - - - Share Premium - - 150.122 57.179 454.500 22.250 11.063 404.296 68.000 12.477 69.796 11.000 3.862 40.000 3.809 121.296 66.000 15.000 3.500 -6.500 22.000 Salaries NIC/PAYE 23.122 295.2 12-Month Cash Flow Forecast The forecast is based on an intake of cash of £600k from the sale of shares.313 -63.579 11.000 22.000 23.000 17.744 7.359 10.284 482.500 Overheads 12.296 Operating Profit 5.000 43.875 - - 57.750 65. Apr 14 £ Forecast May 14 £ Forecast Jun 14 £ Forecast Jul 14 £ Forecast Aug 14 £ Forecast Sep 14 £ Forecast 50.000 - - - - 600.000 3.500 75.284 482.720 62.388 30.000 3.000 57.000 12.122 137.110.030 3.326 -52.750 814.500 265.086 Closing Bank Balance 121.609 Opening Bank Balance 115.287 Closing Bank Balance 69.717 132.000 3.174 - 23.179 454.500 22.000 19.500 22.000 15.000 3.000 Overheads 12.000 11.122 57.500 22.000 Total Payments 68.796 11.398 120.073 Direct Costs Directors' Salary 19.500 22.645 43.000 27.388 - 30.500 22.750 11.717 Operating Profit 4.000 12.540 474.000 Salaries NIC/PAYE 22.895 27.000 - - - 74.040 74.000 3.000 12. The Board has authorised up to £1.000 19.250 11.628 - 389.687 Direct Costs Directors' Salary 19.477 Oct 14 £ Forecast Nov 14 £ Forecast Dec 14 £ Forecast Jan 15 £ Forecast Feb 15 £ Forecast Mar 15 £ Forecast 62.356 Opening Bank Balance 65.250 70.796 11.165 Sales & Other Receipts Grant Income Customer Revenues Total Receipts Payments FY15 £ Forecast Sales & Other Receipts Grant Income Customer Revenues Total Receipts Payments 15 Commercial in Confidence .317 414.000 11.000 144.392 - 150.000 3.317 414.000 72.000 22.174 23.000 12.796 85.622 144.122 137.000 231.000 18.540 474.622 144.040 48.000 12.000 Total Payments 69.000 3.000 42.040 64. 3 Prototypes.1 billion sales in 2012) Aeristech is engaged with Company B on several fronts with a general interest in Aeristech’s electric supercharger technology at both 12V and 48V levels.) Partnering is almost certainly required in order to cover DFM (design for manufacture) and tooling costs. heavy diesel. These form part of a risk mitigation strategy that could provide significant returns for investors without being dependent on the timing and internal decision making processes of volume Tier-1 manufacturers. Profit margins can be high in niche and low-volume applications. off-highway and other niche applications. once Aeristech has won the application by providing A-sample units for testing by the customer. For example. based on the 2013/14 financial year. A technology licensing deal with Company B would be linked to a commitment from an OEM. Aeristech is now engaged with 3 different Tier-1 suppliers. In parallel. For more information on specific companies that Aeristech works with. but it is an important mechanism to build relationships and develop the technology in collaboration with industry experts.8 billion sales in 2012) Company C have also expressed their interest in Aeristech’s technology and are currently planning an electric supercharger prototype demonstration project for 2014. Aeristech’s 48V electric supercharger is being evaluated as part of this exercise with positive results thus far. (Aeristech will share that profit with any joint venture partner that has invested in tooling costs and other manufacturing up-front costs. Aeristech has engaged supercar manufacturers and is also developing bus. with Company A’s management committed to offer a 48V electric supercharger product to their OEM customers as early as 2017. Aeristech and Company B are engaging in a simulation exercise to evaluate the benefits of integrating Aeristech’s electric supercharger to their turbocharged 3 cylinder engine. This revenue will not lead to an exit for investors. Aeristech forecasts approximately £200k per year of revenue from these sources. Research Collaborations. With the development of an A-Sample. Aeristech’s 48V electric 16 Commercial in Confidence . Company B: 30th largest automotive OEM parts supplier globally ($7. The demonstration project was successfully completed in January 2014. in which case demonstration of the technology at A-sample level is a requisite. 7. Company A is currently in an investigation phase to determine which technology they will take forward to fulfil the market requirements. Aeristech has engaged a UK-based arm of Company B in a collaborative project to demonstrate the feasibility of boosting their range extender engine from 30kW to 50kW power output. see Appendix F.500 per unit. and Niche/Low-Volume Applications Aeristech earns revenue from providing prototypes and engaging in research collaborations with car companies (OEMs and Tier-1s). Aeristech expects to access niche markets where the customer does not have the capability or the infrastructure to engage directly in research and development. one supercar application of 2000 units per year (two eSuperchargers per vehicle) is expected to offer profits of £1.4 Technology Licensing / Buy-Out Opportunities Aeristech has a window of opportunity with a unique offering to become a market leader in the electric supercharger market through a technology licensing model with established Tier-1 suppliers. Company C: 3rd largest automotive OEM parts supplier globally ($32.7. they are building a complete business case to enable their management to take a decision in early 2014. Company A: 4th largest automotive OEM parts supplier globally ($30 billion sales in 2012) This is the most advanced opportunity. at different levels of maturity (see below). In the non-exclusive case. Further details of the assumptions and calculations can be found in Appendix C. The up-front payment is larger in the case of an exclusive license. the model assumes three customers licensing the technology on a 2-year staggered arrangement.5 License Revenue The license model is a standard arrangement for the automotive industry. 7. A license includes an upfront payment and a royalty.supercharger proof of concept has led to Aeristech being seriously considered as a potential technology partner. 17 Commercial in Confidence . With the projected revenue shown in Section 7. accounting for costs associated with customer jobs and further costs associated with runway and operating the business through to profitability in FY17.1m for which a 20% equity stake is available. This includes an element of marketing to further develop customer interest. Aeristech’s Board has authorised an intake of funds up to £1. Section 7 also includes higher cost than the pure A-Sample readiness programme. the funding gap to be filled by equity is £534k.8 Equity Requirement Appendix D shows a requirement for £540k to cover fully-overheaded costs (parts and labour) to achieve an example A-sample and to carry out testing and development to make Aeristech “Asample ready” for a variety of potential applications. 18 Commercial in Confidence . 9 Conclusion / Exit & Return for Investors Aeristech has a unique and valuable offering. designs. Aeristech’s unique offering for FullElectric turbocharging has achieved early commercial traction as a research and development activity with OEMs. and all indications are that there is strong interest in electric supercharging at this time. or by selling an annuity from a volume licensing contract or niche manufacturing joint venture. an exclusive license. which could take the form of a non-exclusive license. depending on the commercial strategy of the Tier-1. While technology licensing remains a lucrative and attractive option with strong market pull. These allow a greater degree of control and well as a broader spectrum of potential customers and joint venture partners for Aeristech. With several industries targeting lower CO2 emissions and lower component costs. early revenue and pull-through from automotive customers. A deal is expected within two years for the electric supercharger. and patents. Aeristech’s discussions with Tier-1s align with standard industry practice for the acquisition of hightech products. Further revenue streams are opening up for Aeristech. an exclusive license. This is expected to achieve steadily greater commercial traction as electric boosting and vehicle electrification trends continue. 19 Commercial in Confidence . Multiple licenses. A Tier-1 licensing opportunity is the most lucrative option. including high-volume technology licensing / buy-out for volume car applications and low-volume / niche opportunities in various industry sectors. FullElectric turbocharging is a further step forward for the field of electric boosting. Aeristech’s predicted value of an exclusive license deal is £120 million net present value. or an outright buy-out. Aeristech predicts a net present value of circa £42 million for a non-exclusive license of an electric supercharger. Aeristech is wellpositioned to serve a variety of customers if the technology can be demonstrated to the correct level of maturity expected by those markets. Aeristech will aim to mitigate risk by seeking revenue from niche and low-volume applications. and/or an outright buy-out will all attract a greater sum. Aeristech could achieve an exit for investors by a disposal to a Tier-1. confirmed by commercial traction. and with electric boosting being a major global trend. engineering and development fulltime. business planning and raising finance for a wide variety of businesses. Author of several patents. For 5 years CEO of Prodrive and of Hawtal Whiting plc.000 of grant funding. led and successfully negotiated a technology licensing deal with a major European OEM. In 2007. His practice offers strategic and financial business advice.on to pursue the concept design. Marketing and Business Development roles within the automotive arena. Finance Director and COO of Group Lotus responsible for two new car development programmes including the "Elise". After graduation in France of a Masters’ degree in Engineering. He developed the business proposition for a lightweight extended range electric delivery van and in 2011 facilitated the formation of Emerald to commercialise the proposition. he held the position of “Senior Business Development Manager” with “Intelligent Energy Ltd” where he secured multi-million pounds contracts with vehicle manufacturers and initiated. who joined Aeristech in December 2012. Previously employed in power generation in Canada and the UK: experience in plant modelling and optimisation. He has experience of leading the negotiation of licencing agreements. He recruited all company staff and put in place the necessary management systems for operation of the Company. service and distribution before forming Altus Business Consulting in 2005. A leading expert in electrical and mechanical machines and. cash flow management and forecasting. 20 Commercial in Confidence .000 of angel investment and £250. Formed AGT strategic consulting in 2007 providing consultancy to Intelligent Energy and Group Lotus. Over the years he has gathered a wealth of experience in the commercialisation of new technologies through technology licensing to Tier1 suppliers and OEMs. development of financial systems and controls. the control of ultra high speed motors. he moved to the UK and started his career as an electronics engineer in Motorsport. as well as strategic planning and energy policy formulation across all energy sectors. He rapidly moved into Sales. During the 3 years from incorporation until Aeristech’s first funding round in 2010 he secured £250. Company Secretary and Accountant: Richard Ashmore Chartered accountant. in particular. he left e.Chartered accountants and freelance finance director services: Richard spent 17 years in senior finance roles across manufacturing. director of "Altus Business Consulting & Accountancy Services" . Before moving to Aeristech.Appendix A – Directors’ Backgrounds CEO: Bryn Richards Founder of Aeristech Limited and inventor of "Hybrid Turbo-Charging Technology". including renewable power and energy storage. Director: Andy Tempest Although a non-executive director he is committed to making himself available to support the Aeristech team when a commercialisation proposition is received. Commercial Director: Julien Servant A trained engineer and commercially minded individual. He has held CEO positions in motor sports and high performance car design companies. ACA qualified with PricewaterhouseCoopers with particular focus on high growth companies. In 1996 with Prodrive the motor sport company he set up and ran their Engineering consultancy division. At Lotus for 16 years as Director of Powertrain running programmes with OEMs worldwide introducing new engine and transmission technology. He has both investment and operational experience across a range of technology businesses. After working as Finance and Compliance Officer at a stockbroker. a shareholder in Aeristech since 2010. Director: Clive Banks A business angel with 12 years experience investing in start-ups. Prior to joining Midven.Director: Clare Twemlow CFO and Member of New Wave Ventures LLP. He has two businesses one provides engineering and project management support the other the commercialisation of an advanced vehicle concept. Director: Hugh Kemp Provides active support. as Product Director directed and project managed the Lotus Elise from concept to production. he co-managed a £30m technology portfolio for a FTSE 350 company – moving on to managing two investee cable television companies as CEO. She has 10 years' experience of Board level positions and is experienced in fund raising and corporate development.xt 21 Commercial in Confidence . with commercial and financial management skills. where he specialised in risk management and corporate derivatives. He learnt his investment skills in the banking industry. has costed Aeristech design proposals. He is passionate about building new businesses and is currently director of several successful companies besides Aeristech. advised on organisation. he managed a composites business. project management and introduced a range of specialist design consultants. most recently at Citibank and BNP Paribas. Observer: Duncan Kerr FSA registered Investment Director co-managing Midven's "Early Advantage £8m Venture Capital Fund". ranging from graduate recruitment to arts and entertainment. 50% 0.500 32.45% 3.669 267.214 1.209 101.44% 2.29% 0.000 37.08% 1.22% 0.31% 0.706 13.17% 0.691 135.008 11.882 5.915 57.321 84.93% 2.852 271.69% 0.684 52.Appendix B – Shareholder Breakdown Shareholder Bryn Richards Clive Banks Daniel Michael Woodroffe Paul Newey Early Advantage Partnership Angels Nominees Ltd Gerard J Blake Gordon Bott Pension Scheme Exceed Partnership LP Mark Siggers New Wave Ventures LLP Timothy Bullock Robert Edward John Bernays Neil Anthony Morris Anthony Marrett MC Trustees Limited (Simon Hunt) Louis Alain Franck-Steier Rosemary Jean Franck Steier Mandy Hutchison James Rock Rupert Geoffrey Ryland Thompson Bob Austin Gary Dixon & Linda Dixon Elaine Lester David Miles Smith Stephen Cheetham Graham Clifton HB&O Retirement Benefit Scheme David Blunn Greg Dyson Vanessa Naylor Miss Radhika Chadha Miss Priyanka Chadha Christopher Paul Corbett Emma Servant Kevin David Higgs Andy Tempest Hugh Kemp David Young Stuart Lawrence Richard Ashmore Martin Palmer Exceed Co-Investment Partnership LP Nicholas Gill Valerie Standing Gill Shares 818.360 14.22% 1.000 22.500 37.59% 2.29% 0.12% 0.17% 0.000 30.000 119.000 10.898 67.000 7.50% 0.000 8.25% 0.12% 1.558 328.260 Percentage 23.39% 0.604 10.07% 1.23% 0.70% 7.429 39.35% 0.305 10.000 2.330 1.47% 9.083 24.26% 0.72% 0.470.59% 9.265 258.000 9.66% 1.06% 0.33% 0.86% 0.39% 7.83% 7.89% 3.330 3.13% 0.64% 0.569 13.08% 0.04% 0.00% 22 Commercial in Confidence .27% 0.66% 2.360 17.680 8.547 5.537 9.844 92.755 42.516 12.000 25.04% 100.360 17.42% 0.52% 1.39% 0.92% 0.370 4.527 325.882 4. C.0L EcoBoost engine: Ford has planned for a global production capacity between 700. shown below.6L and 2.0L petrol engines for the 1 series. the benefits and versatility of Aeristech’s technology and the demand from OEMs for advanced boosting solutions.000. • BMW’s engine plant in Hams Hall (UK).000 2. Commercial Vehicles.000 and 1.000 1. Volume/year 2016 2017 2018 2019 2020 2021 2022 2023 2026 2031 10. and 408. …) The market (automotive) The field of applications (passenger cars.000 750.060 units in 2013 Tier1 Supplier volume prediction Tier-1 Company A agreed to share their initial volume predictions for a 48V electric supercharger. Off-highway) The Geography (Global or specific) For the purpose of this document. X1 and MINI has seen production volumes of 385.000 500. fuel cell compressor. A typical license agreement in the automotive industry will be based on: • • • A royalty fee per system manufactured and sold The royalty fee can be based on a percentage of the Cost of Manufacture (CoM) An upfront payment (around 10% of total License value) is usually paid at the time of signature Several variables will need to be discussed and agreed with potential licensees in order to fix the boundaries of such license agreement.Appendix C – Technology Licensing Model With the current market trends. producing both 1. Several scenarios can be envisaged for such license agreement depending on the customer requirements and market strategy. These volumes are in line with typical engine production volumes and are used in the license model below. here are some examples of engines currently in production: • Ford 1.000 23 Commercial in Confidence .000. These variables will affect the structure and value of such agreement(s): Exclusivity The application (electric supercharger. 3 series. for use in passenger cars and commercial vehicles.000 500.000 100. electric turbocharger.000.0-litre EcoBoost engines per year. Aeristech is in an excellent position to close a licensing agreement within a 2 year period.000 500. non-exclusive license agreement for electric supercharger products for ICE engines. we will describe and detail a typical and proven scenario based on a worldwide.000 2.410 in 2012.1 The Size of the Market Typical engine production volumes In order to realistically estimate the potential volumes of electric supercharger systems.3 million of their 1.000 200. 531 Considering only one customer and one application (48V electric supercharger) the total Net Present Value of such technology licensing is worth circa £42 million.614 £1.093.000 100. 24 Commercial in Confidence .000.2.C.000 500.0% 4. In the following model.000.001 1.0% 3.0% 4.516.416.211 £3.0% 2.0% 5.634 £5.000 5% 100.0% 2.5 15-yearLicense Model (2016-2031) Based on a typical non-exclusive royalty bearing license model for the automotive industry and the above assumptions. the following license model is generated: 2016 2017 2018 2019 2020 Volumes 10.4 Royalty rate Typical royalty rates in the automotive industry for technology licensing can range between 1% and 5% for more conventional devices and up to 10% for disruptive technologies. These royalty rates can vary over time and as a function manufacturing volumes per annum.093.000 200.000 £60.000.180 Total 17.351.2.000 2030 2.000 1.560.000 4% 500.0% 4.0% £11 £9 £7 £6 £6 £4 £3 £3 £112.576 £3.3 Cost of Manufacture The predicted cost of manufacture (y-axis) of Aeristech’s electric supercharger is estimated below as a function of the volume produced per year (x-axis).000 3% 1.001 500.416.000.591 £902.341.001 2% C.000 2025 2.2.000 2031 Unit Cost £225 £181 £169 £155 £155 £145 £135 £135 Royalty rate Royalty £/unit Total Royalty 5.180 £5.000. Aeristech has assumed a decreasing royalty rate with volume ramp-up ranging from 5% to 2%: Volumes Royalty Rates 1 100. C.576 £4.000 500. although an exclusivity case provides higher returns in the first few years. Exclusivity case: It is highly anticipated that a Tier-1 supplier may request exclusivity for this technology (exact boundaries to be defined). 25 Commercial in Confidence . In the case of an exclusive agreement for boosting in the automotive industry. which will attract a much higher license fee. 2 case scenarios are considered below: Non-Exclusive case: This scenario considers a first non-exclusive license agreement in 201516 and subsequent further agreements with 2 additional customers within a 3-4 year period. both scenarios have similar potential returns longer term.6 Projected Revenues Assuming a first license agreement signed in 2015-16. the total Net Present Value of such exclusive agreement is estimated to be worth circa £120 million. As shown below.C.2. 000 broken down as: Material costs: £98. This breaks down according to the table below: 26 Commercial in Confidence .000 for 6 compressor units and 4 control units (budget quantities) Subcontract costs: £52.000 for test equipment and instrumentation Fully overheaded labour with project management is £539.000 for design support in impeller optimisation. 8.2 Mechanical parts WP3.3 Concept design motors WP1. motor optimisation.1 Mechanical parts WP4.5 Concept digital controller WP1.2 Outline turbomachines WP1. and simulation of electronic components Capital expenditure: £40. but design optimisation (for size. As such. The project builds on extensive performance design and test experience from Aeristech’s proof of concept and demonstration programmes. mass.580.4 Concept power electronic WP1.1 Development testing WP5.4 Digital controller WP4 Assembly WP4.3 Dissemination b g b b g b b b g b b Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 b g b g b g b g b b b b b b b b b b b b b b g g b b g b g b g b b b b g b b b b b g b g g b b b b g b b g b b g b b g b g b b b g b b b g b b b b g b g g b 2015 Q1 Q4 g b g b b b g b b b b b g b b b g b g b g b b b b g g b g b b b g b b b b b b g b b g b b b g b b g b b g b b b g g b g g b b b b b b g b b g g b g g g b b b b b b b Milestone: A-Sample A further advantage of an experimental development programme structure is that it produces trial units relatively early in the design cycle.Appendix D – A-Sample Readiness Programme Plan The plan is structured as an experimental development programme.6 Engine simulations WP2 Detailed Design WP2.2 Programme Cost The budget includes external costs of £190.2 Test and Tune A-sample WP5. This approach de-risks the design by reducing the reliance on simulation and design insight at the outset of the project.4 Detailed digital controller WP2.3 Power electronics parts WP3.5 Detailed engine anciliaries WP3 Procurement WP3. 2014 Q3 Q2 Apr-14 May-14 Jun-14 Project management b WP1 Development g WP1.1 Detailed Turbomachines WP2.2 Detailed motor design WP2. procurement and testing activities are spread through a Development phase (WP1) which tails into a Detailed Design phase (WP2). etc) is a new undertaking. giving Aeristech early commercial leverage in unlocking new revenue streams in parallel with the technical A-sample development activity.1 Turbomachines WP3.2 Electrical parts WP5 Testing WP5. efficiency.1 Performance Specs b WP1.3 Detailed power electronic WP2. where design variations are built and tested to gather data and achieve an optimised pre-production design. 1 Turbomachines 3 10% WP3.5d engine anciliaries 6 WP3.516 £17.879 £9.180 £20.5power electronics d WP2.104 £14.212 £46.2 Test and2Tune A-sample unit WP5.4 Detailed 1.5 Concept 2d digital10% controller 10% 100% WP1.5 testing 20% WP5.2 Mechanical 4 parts 10% WP3.480 £8.5 WP4.1 Mechanical 2 parts 10% WP4.3 Concept 2design 10% motors 40% 100% WP1.792 £59.224 £10.448 £36.689 £11.2 Electrical4 parts 10% 5.746 £0 £0 £10.629 £21.459 £6.6 Engine simulations 3 20% 20% 50% WP2.Task Months Eng Mgr Admin Snr DesignDesigner Tech WP1.1 Performance 2 Specifications 20% 60% 200% WP1.424 £0 £0 27 Commercial in Confidence .4 Digital controller 2 10% 5.624 £9.379 £1.3 Ongonig 0testing and dissemination 10% 20% 20% 40% 140% 140% 100% 50% 10% 20% 20% 20% 40% 40% 40% 10% 120% 200% 50% 100% 20% 20% 200% 350% 50% 50% Internal Cost w Overhead £18.759 £7.896 £4.918 £0 £0 £4.172 £5.240 £6.5 WP5.258 £32.3 Detailed 1.032 £7.4 Concept 5d power10% electronics 20% 100% WP1.312 £14.2 Outline Tubomachines 2 Designs 20% 50% WP1.586 £15.584 £23.572 £0 £0 £3.208 £4.5digital controller d WP2.572 £0 £0 £29.786 £19.360 £20.786 £65.340 £7.1 Detailed 3Turbomachines d WP2.612 £9.873 £3.2 Detailed 2motor design WP2.050 £8.5 Detailed 1.670 £41.100 £3.1 Development 3.3 Power electronics 3 parts 10% WP3. pending To be filed 28 Commercial in Confidence . responded. Report received from USA. Recirculate the air to improve compressor efficiency. responded Granted in UK. Turbine Speed Control (PCT/GB2014/050631) Achieve better efficiency from a turbine by actively controlling the load on the turbine shaft.Appendix E – Patents Filed and Applied for Patent Description Hybrid Turbocharger (EP07824564. as in a conventional turbine loaded by a turbocompressor. Compressor Surge Prevention (GB1314270. UK other countries pending Co-developed with Imperial. Aeristech’s new architecture achieve full control without overstressing IGBT/MOSFET components. Granted in EU. Report received from Canada. instead of allowing power to vary with speed squared. and this has been a barrier to entry for electric superchargers / turbochargers. Report received from EU. Motor Control Architecture 2 Confidential Territories Filed UK EU USA Canada UK EU USA China Japan Korea India UK other countries pending Status Granted in UK. Recently entered PTC international process.6) High-speed motor/generators are difficult to control. vent excess air to prevent compressor surge. Requires a controlled high-speed generator (as in Aeristech’s motor control patent).4) Mechanically decoupled turbocharger using a variable frequency AC electric architecture to transfer power between a turbine and a compressor (with optional energy storage and/or crankshaft motor/generator) Motor Control Architecture (EP11740965. responded. responded Report received from USA.8) Using excess power available from a motor drive (as in Aeristech’s high-speed motor). Not yet ready for PTC process. " Simon Reader. Engineering Director.Appendix F – Aeristech’s Customers and Partners Customer list without project details published with permission. "We were pleased with the professional and flexible approach of the Aeristech team. The electric supercharger performed well throughout the programme. enabling our supercharged range extender engine to exceed our performance targets. MAHLE Powertrain Limited Quote provided for publication with permission from Simon Reader 29 Commercial in Confidence . $nor$have$they$been$communicated$by$ Syndicate$Room$Ltd$("Syndicate$Room")$The$Pitch$itself$is$not$regulated$and$has$been$prepared$and$is$ communicated$only$by$the$Company.$comments$and$ information$contained$within$it$(together$the$"Pitch")$are$the$responsibility$of$the$Company$and$have$not$ been$approved$as$a$financial$promotion$by$Syndicate$Room$or$by$any$other$authorised$person$within$the$ meaning$of$the$Financial$Services$and$Markets$Acts$2000$(the$"Act").$No$public$offer$in$any$jurisdiction$is$being$made$by$the$Pitch.$ The$Company$has$not$independently$verified$any$of$the$information.$The$Pitch$does$not$constitute$an$offer$of$or$an$invitation$to$ subscribe$for$securities$to$the$public$that$would$otherwise$be$required$to$comply$with$the$$ Prospectus$Regulations$2005.$and$may$be$subject$to$ updating.$or$who$are$otherwise$exempt.$Syndicate$Room$is$not$responsible$for$the$content$of$the$Pitch.$must$return$the$Pitch$documents$to$the$Company$immediately$and$should$not$read$or$act$upon$any$ of$the$information$contained$within$it.$links$to$other$sites$or$resources$ provided$within$the$Pitch$and$the$Pitch$does$not$purport$to$be$allLinclusive$or$necessarily$to$contain$all$the$ information$that$a$prospective$investor$may$desire$in$investigating$the$Company.$48$or$50A$of$the$Financial$Services$and$ Markets$Act$2000$(Financial$Promotion)$Order$2005.$solely$as$a$guide$for$the$purpose$of$giving$ background$information$to$enable$recipients$to$assess$whether$they$wish$to$place$an$order$to$subscribe$for$ shares$in$the$Company.$$ $ GENERAL$$ Although$the$Company$has$used$publicly$available$information$in$compiling$the$Pitch$and$has$used$ reasonable$efforts$to$check$the$accuracy$of$the$information$in$the$Pitch.$and$to$ return$on$demand.$It$is$being$provided$to$a$limited$number$of$ persons.$by$virtue$of$Articles$43.$Neither$the$Pitch$nor$ any$part$of$it$may$be$copied.$$ $ IMPORTANT$L$PLEASE$READ$CAREFULLY$$ The$Pitch$is$exempt$from$the$general$restriction$(in$section$21$of$the$Act)$on$the$communication$of$ invitations$or$inducements$to$engage$in$investment$activity$on$the$grounds$that$it$is$made$to$persons$who$ are$exempt$from$the$general$restriction.$the$Pitch$and$any$related$documents$or$information$to$the$Company.The$content$of$this$pitch$by$Aeristech$Limited$(the$"Company")$and$the$documents.$published.$No$representation$or$warranty.$in$relation$to$shares$in$any$jurisdiction$in$which$such$offer$or$solicitation$is$unlawful.$or$the$solicitation$of$ an$offer.$disclosed.$By$accepting$the$Pitch$you$are$deemed$to$ undertake$and$warrant$to$the$Company$that$you$will$keep$it$confidential.$Investment$in$the$Company$may$expose$the$individual$concerned$to$a$ significant$risk$of$losing$all$of$the$money$or$other$assets$invested.$and$shall$not$be$used$for$any$purpose$other$than$in$ connection$with$the$proposed$investment$in$the$Company.$its$accuracy$cannot$be$guaranteed.$You$agree$to$indemnify$the$ Company$against$any$losses$incurred$by$the$Company$as$a$result$of$any$unauthorised$disclosure.$is$or$will$ .$$ Syndicate$Room$acts$solely$as$a$facilitator$of$the$Pitches$and$does$not$communicate$the$Pitches$or$any$ financial$promotions$to$Investors.$express$or$implied.$revision$or$amendment.$and$any$'financial$promotion'$inherent$in$a$Pitch$is$communicated$LL exclusively$by$the$Company.$reproduced$or$distributed$to$any$person$at$any$time$ without$the$prior$written$consent$of$the$Company.$each$of$whom$is$considered$to$be$a$legitimate$recipient.$$ Any$recipient$of$the$Pitch$who$does$not$qualify$under$the$terms$of$the$above$exemptions$must$not$view$the$ Pitch.$The$Pitch$is$ primarily$intended$for$release$in$the$United$Kingdom$and$does$not$constitute$an$offer.$The$information$and$opinions$contained$within$the$Pitch$are$strictly$confidential$ and$are$being$made$available$only$to$parties$who$agree$to$keep$them$confidential.$$ $ CONFIDENTIALITY$$ The$Pitch$has$been$prepared$exclusively$by$the$Company.$withdrawal. $employees.$Past$performance$and$forecasts$are$not$reliable$indicators$of$future$results.$negotiations$and$communications.$Neither$the$Company.$shareholders.$partners.$The$Pitch$is$not$ intended$to$form$the$basis$of$any$investment$decision$and$all$liability$for$reliance$on$the$contents$hereof$is$ excluded.$conduct$business$or$receive$the$Pitch.$ Neither$the$Company$nor$any$of$its$agents$shall$have$any$responsibility$for$any$such$matters.$ advisers$and/or$representatives$will$remain$subject$to$contract$and$without$commitment$or$obligation$ unless$and$until$definitive$contracts$are$agreed.$If$you$ are$unsure$about$any$aspect$of$the$information$provided$by$the$company.$ including$in$particular$the$requirements$of$the$Act.$Your$capital$is$at$risk$if$you$invest$in$this$investment.$shareholders.$representative.$The$Company$reserves$the$right$to$terminate$the$procedure$at$any$time$and$to$terminate$any$ discussions$and$negotiations$with$any$prospective$investors$at$any$time$and$without$giving$any$reason.$agents.$warranties$and$other$terms$which$might$be$implied$by$statute.$ $ .$offer$or$sell$shares$and$must$obtain$any$consent.$The$Pitch$should$not$be$construed$as$a$ recommendation$to$prospective$investors$by$the$Company$or$Syndicate$Room$or$any$of$their$respective$ officers$to$invest$in$the$Company.$ Syndicate$Room$nor$any$of$their$advisers.$Recipients$represent$and$warrant$to$the$ Company$and$Syndicate$Room$that$they$are$able$to$receive$the$Pitch$without$contravention$of$applicable$ legal$or$regulatory$restrictions$in$the$jurisdiction$in$which$they$reside.$assurance$or$guarantee$that$those$assumptions$are$correct$or$exhaustive.$approval$or$permission$ required$in$respect$of$any$such$transaction$under$the$laws$and$regulations$in$force$in$any$jurisdiction$to$ which$they$are$subject$or$in$which$any$such$transaction$takes$place$or$in$which$they$possess$the$Pitch.$executed$and$unconditionally$delivered.$$ The$distribution$of$the$Pitch$in$certain$jurisdictions$other$than$the$United$Kingdom$may$be$restricted$by$law$ and$therefore$persons$accessing$the$Pitch$into$whose$possession$the$Pitch$documents$come$should$inform$ themselves$about$and$observe$any$such$restrictions.$you$should$seek$advice$from$an$ independent$financial$adviser.$and$does$not$form$any$commitment$by$the$Company$to$proceed$with$an$ investment.$Investments$in$ startup$and$earlyLstage$companies$are$high$risk.$$ Any$and$all$discussions.$$ $$ RISK$WARNING$$ Potential$investors$should$be$aware$of$the$risks$associated$with$an$investment$in$the$Company$especially$at$ an$early$stage$in$its$development.$Any$person$who$ invests$in$the$Company$at$any$time$must$comply$with$all$applicable$laws$and$regulations$in$force$in$any$ jurisdiction$in$which$they$acquire.$ consultants$or$employees$shall$be$liable$for$any$direct.$all$conditions.$indirect$or$consequential$loss$or$damage$suffered$by$ any$person$relying$on$statements$or$omissions$from$the$Pitch$and$to$the$maximum$extent$permitted$by$ law.$including$through$any$online$forums.$nor$their$respective$directors.$Each$recipient$of$the$Pitch$must$make$its$own$independent$assessment$of$the$information$ provided$by$the$Company$and$is$advised$to$seek$independent$advice$on$the$contents$hereof$from$an$ authorised$person$specialising$in$advising$on$investments$of$the$kind$in$question.$common$law$or$the$law$ of$equity$and$any$such$liability$are$expressly$excluded.$Tax$ treatment$of$this$investment$depends$on$the$individual$circumstances$of$each$investor$and$may$be$subject$ to$change$in$the$future.$Any$failure$to$comply$with$these$restrictions$may$ constitute$a$violation$of$securities$laws$of$any$such$jurisdiction.be$given$by$the$Company.$Any$financial$projections$given$are$illustrative$only$and$none$of$the$projections$or$assumptions$ should$be$taken$as$forecasts$or$promises$on$the$part$of$the$Company$nor$should$they$be$taken$as$implying$ any$indication.$do$not$invest$more$than$you$can$afford$to$lose.$between$ any$recipient$of$the$Pitch$and$the$Company$and$their$respective$directors.$its$advisers$or$any$of$their$respective$directors.$partners$or$ employees$as$to$the$accuracy$or$completeness$of$the$Pitch$or$the$information$or$opinions$contained$ therein.