The company pays distribution charges of up to 6% of the funds raised to introducers and intermediaries. There are no annual ‘fund management’ fees, neither are there any success fees.
The management team do not draw salary until the company is commercial and in a position to make sales, in this case after the successful completion of Stage 2B, and with it’s first invoice for a licence contract, or substantial orders for handheld units. The management team is incentivised by their respective equity stake in the company, and therefore their goal is completely aligned to that of any investor, i.e. a profitable exit generating a significant multiple return on investor funds.
Dependent upon company P/E and market penetration at the time of commercialisation, between 5 and 105 times your original investment. See pages 19 & 20 of the IM for more detail.
By designing, manufacturing and selling ‘handheld’ devices to aviation suppliers and distributors, and designing and licencing ‘built-in’ solutions to aircraft manufacturers. See pages 19 of the IM for more detail.
An IPO of the company in 2018/22 or sooner if market conditions and company financials allow, a refinance or if a trade sale is available earlier at a suitable return for investors and management.
VN ADS would also like to offer Investors an independent exit through Asset Match, see http://www.assetmatch.com.
In 2020 the estimated addressable ‘Hand-held’ target market opportunity will be approximately £2.4bn.
In 2020 the estimated addressable ‘Built-In’ licence target market opportunity will be approximately £5.5bn.
Therefore the total estimated addressable market in 2020 will be approximately £7.9bn. See pages 14, 15 and 19 of the IM for more detail.
The cabin air of all commercial aircraft, except the very recently introduced Boeing 787 is bled off the jet engines and is, therefore susceptible to contamination from engine oil, some ingredients of which are known neurotoxins (TCP). Although the aircraft certification standards promulgated by EASA, FAA etc. stipulate that ‘crew and passenger compartment air must be free from harmful or hazardous concentrations of gases or vapours’ there is no instrumental monitoring of aircraft cabin air. Due to the growing awareness of the grave health consequences of chronic exposure (e.g., the September 2013 judgment in Felderhof v KLM), let alone acute exposure, it is expected that airlines and ultimately regulators will demand onboard sensors capable of continuously monitoring air quality. No such sensor is currently commercially available. See pages 1, 10 to 13 and Schedule 4 of the IM for more detail.
The solution uses a patented fibre-optic technology. This gives the following benefits:
1. The device has the potential to be small, robust and reliable for use in the widely
varying atmospheric conditions in aircraft cabins
2. Fibre-optic technology will deliver the most consistent measurements of the TCP’s across
the widely varying conditions of use in aircraft
3. The cost of manufacture will be low, and due to the high value of the device solution, the
sales price and therefore the margins will be high
4. The device will be software driven, deriving additional profitable, predictable revenues
from multi-year maintenance and support contracts.
See pages 16 & 34 of the IM for more detail.
The initial detection laboratory research completed, and patents have been granted. See page 16 and 34 of the IM.
1. Whilst it has access to a substantial amount of research and data which has been compiled regarding the Aerotoxic project and has a full IP exploitation licence for microfibre optical metering technology granted by the IP owner, the MOMT technology has been proven in the laboratory only, i.e. not in a ‘real world’ aircraft environment
Mitigation – By working sequentially, VNA provides continuous and further proofs, validation of the solution and its application before progressing to the next stage.
2. The design engineering being utilised to enable the MOMT to operate onboard aircraft will be modelled upon known and industry recognised technology, utilising ‘industry standard’ materials. However, it has not been used in conjunction with the aviation industry technology to date and could therefore fail upon airworthiness testing.
Mitigation – by working with aviation industry experts and contractors VN ADS will leverage their industry knowledge, know-how and experience to ensure that the solutions developed will be successful in airworthiness testing.
3. The market uptake for a MOMT type product is unproven. The projects success is driven in one part by the legislation that will follow any successful court claims currently being heard around the world, and public fear generated by the continuing onboard ‘fume events’ now being given the publicity they and the victims concerned deserve. This will eventually force manufacturers to quietly design and build an alternative aircraft fresh air intake system that circumvents the current ‘ bleed air’ option and detection will be a vital part of that process. However, there is no guarantee that the MOMT will become the industry’s ‘preferred’ detection solution.
Mitigation – VN ADS has support from UKTI for this solution and will leverage this position with UK based Operators and Manufacturers to get their buy-in. Furthermore, the VN ADS licence model lends itself to encouraging Governments to buy-into it, as the main economic benefits of jobs, taxes and environmental are still there. Also, in this instance speed to market will be vital to the governments and operators alike, so a ready-made solution that can be licenced with the benefits above will be the one adopted. See pages 10 to 13 of the IM for more detail.
VN ADS has already raised £150K from existing VN Investors. In the history of the management team and existing companies, most of the fundraising activities have been oversubscribed. Furthermore, as the company takes on new investors the fundraising activity becomes more straightforward as current experience is proving that a high level of previous investors, i.e. Previous investors in other VN companies, are subsequently investing in following investment rounds and spreading further investments across the VN company portfolio.
The forecast dilution of shareholders is not guaranteed. However, in the experience of previous projects and fundraises this has not happened. In fact, one of the most recent projects, VN HPG the forecast dilution was reduced significantly (nearly 50% in Round 2) as a result of renegotiation with suppliers. This is one of the many benefits of having the management team as equity participants is that their incentive is to ensure, as far as is possible, that dilution does not happen above the percentages forecast. In the unlikely event that this was required, the management team would communicate with investors the options at that time, and hold a shareholder vote to resolve the issue.
This is based on the management teams experience of similar projects, timelines and developments using the same or similar 3rd party suppliers, and this underpins the teams complete confidence in these time and budgetary forecasts. The team has not missed forecast development or delivery budgets in past projects and companies, so have a demonstrable track-record in this respect. In fact, as mentioned above, the company’s management team has recently demonstrated this by reducing the budget for Stage 2 and 3 down by nearly 50%, (approximately £500K).
As the company does not have any salaried management, or employees, and the fact that all subcontracted projects and developments have fixed-price and time dependent deliverables on service-level based contracts, means that there will be no additional capital requirements.
The company proposes to produce and sell ‘Handheld’ monitoring devices for the existing commercial aircraft, and licence a ‘built-in’ solution to aircraft manufacturers. In the case of the former, VN ADS will outsource the manufacture of the ‘Handheld’ device and sell directly to aircraft operators. See pages 16, 19 and 34 of the IM for more details.
The forecast revenue and EBITDA figures are as a result of projected market penetration of the existing aircraft market for the ‘Handheld’ device, and the projected market penetration of new aircraft for the ‘built-in’ licenced solution. All market data comes from the Boeing & Airbus “Current Market Outlook” document (available on request), projected penetration figures for each market. See pages 15, 16, 19 and 34 of the IM.
The main risk associated with this is an exit of the company before the 3 year share holding period is over. Though not forecast, and unlikely, this will potentially give rise to a ‘claw-back’ of investor tax reliefs, and a capital gain issue for investors. However, the overall effect on Investors would mean a very significant return to investors, even when taking into account the loss of reliefs and resultant CGT, which of course can be potentially mitigate in other HMRC pre-approved SEIS or EIS VN companies.
VN ADS owns a globally exclusive development licence for the use of ‘Mono-fibre Optical Metering Technology’ onboard aircraft, allowing it to utilise existing and future intellectual property and patents to develop and monetise the technology within the aforementioned market. See page 34 of the IM for more details.
Either put your questions in an email, or request a call from us in order to have a telephone conference or meet with one of the management team to discuss your questions and the opportunity in more detail.
Download the High Net Worth self-certification form and the VN ADS investor application form, fill them in with your investment amount and personal details, sign at the bottom and then either scan and email them to email@example.com, or send them along with your cheque to VN Capital Partners, 7/10 Chandos Street, London W1G 9DQ.