REGISTERED NUMBER: 10480941 (England and Wales)

Strategic Report, Report of the Directors and

Financial Statements

for the Year Ended 30 November 2025

for

Advanced Electric Machines Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Statement of Comprehensive Income

10

Balance Sheet

11

Statement of Changes in Equity

12

Notes to the Financial Statements

13

DIRECTORS:

M N O'Neill

J Widmer

REGISTERED OFFICE:

Teal House

10 Teal Farm Way

Washington

Tyne and Wear

NE38 8BG

REGISTERED NUMBER:

10480941 (England and Wales)

SENIOR STATUTORY AUDITOR:

Kevin Shotton BA BFP FCA

AUDITORS:

Clive Owen LLP

Chartered Accountants

& Statutory Auditors

140 Coniscliffe Road

Darlington

County Durham

DL3 7RT

The directors present their strategic report for the year ended 30 November 2025.

The principal activity of Advanced Electric Machines Limited ('the Company') during the year was the design and manufacture of highly sustainable electric motors, generators and integrated drivetrain technologies. Its core innovation is centred on rare-earth-free electric motor solutions, addressing structural industry challenges relating to cost, supply chain resilience and sustainability within the global electrification market. The Company's technology portfolio is being developed for application across commercial and passenger vehicles, off-highway equipment, rail and marine sectors.

The Company operates a business model combining customer-funded application programmes; early-stage commercial product supply and grant supported innovation. Its strategy is to transition from development-led activities toward scalable commercial production and long-term supply partnerships, while selectively unlocking value from differentiated technology platforms through strategic transactions and partnerships with established industry participants.

REVIEW OF BUSINESS

Total income for the year, including commercial revenue, grant income and other operating income, was £2.77 million (2024: £3.11 million). This is consistent with the previous year and reflects the timing and mix of development programmes and the Company's transition from development activity toward commercial deployment. The Company reported a loss before tax of £4.43 million (2024: £8.34 million), with the year-on-year improvement driven by the absence of exceptional costs (2024: £2.40 million) in the current period and a lower operating cost base following restructuring actions undertaken in response to earlier programme changes and reflecting continued investment in product development and manufacturing capability.

Operations

Operationally, the Company made significant progress across its core product families;

• HDRM is a robust, scalable, magnet-free traction platform optimised for cost, durability and integration across largely heavy-duty and industrial applications; serving commercial vehicles, off-highway and the industrial segment

• SSRD is a high-speed, ultra-high-performance platform principally targeted at passenger cars

In the period under review, the HDRM150 motor successfully completed validation and the Production Part Approval Process (PPAP), with initial production deliveries commencing in the fourth quarter of 2025 to a well-established European Tier 1 Commercial Vehicle supplier. Development of the HDRM300 platform continued, alongside expansion of the associated commercial pipeline. The performance of this product has been significantly enhanced by the integration of AEM's patented compressed coil technology; re-engineering of its thermal management system; and increasing its voltage capability in line with market trends.

The Company also progressed the development and strategic positioning of SSRD a next-generation electric drivetrain concept targeted at passenger vehicle applications. SSRD remains in the development phase, with ongoing engineering work focused on design maturation, validation planning and alignment with potential customer requirements.

During the year, the Company entered into a contract to with a global Tier 1 supplier to develop a motor for an application within a European OEM's premium vehicle programme. In addition, the Company has engaged with several other Tier 1 suppliers and OEMs who have expressed interest in the underlying technology and its potential application across future electrified platforms.

The Directors consider SSRD to represent a strategically significant element of the Company's technology portfolio with potential applicability across multiple use cases. Further work is required to progress the platform through validation and into commercial readiness; however, its technical approach and alignment with industry requirements are expected to support continued engagement with potential partners.

As part of its broader strategy, the Company continues to evaluate options for the future development and commercialisation of both its technology platforms. In the case of SSRD, this includes ongoing engagement with industry participants to assess potential collaboration structures that could support its further development, validation and eventual deployment. Given the capital requirements and industrial capabilities needed to bring such a platform to market at scale, the Directors believe that partnership with, or involvement from, an established industry participant may represent an effective route to accessing high volume passenger car markets, accelerating its development and maximising long-term shareholder value.

The Directors monitor the performance of the Company through a combination of financial and operational indicators, including total income, operating profits/losses, cash utilisation, programme delivery milestones and progression of the commercial pipeline. At the current stage of development, priority is given to the successful execution of customer programmes; validation of technology under real-world application conditions; and the conversion of development activity into sustainable commercial revenue streams.

PRINCIPAL RISKS AND UNCERTAINTIES

The directors have considered the Company's key risks and uncertainties and have adopted policies to minimise these risks. Key risks identified are as follows:

Supply chain

The Company operates within a market characterised by evolving customer demand, technological complexity and competitive intensity. Principal risks include variability in the timing and scale of electrification across end markets; execution challenges associated with scaling manufacturing capability; and supply chain optimisation. The Company continues to mitigate these risks through disciplined programme management, close collaboration with customers and the development of broader and more resilient supplier relationships, including longer-term arrangements with key partners.

Funding

The Company has historically relied on funding from its parent company, Advanced Electric Machines Group Limited ('the Group') to support its development and growth. After the year end, the Group secured £10.9 million of Series B equity funding including £3 million of convertible loan notes issued in November 2025 and now converted into Series B shares. In addition it secured a £5 million of government-backed debt. This funding strengthens the Group's financial position and provides the resources required for the Company to continue execution of its development, industrialisation and commercialisation strategy.

Going concern

In light of this funding, the Directors are satisfied that the Company has adequate resources to meet its liabilities as they fall for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

Looking ahead, the Company's strategic focus is on scaling production of the HDRM platform by converting its commercial pipeline into contracted revenues. In addition, the Company will continue to evaluate opportunities to realise value from the SSRD platform through engagement with OEMs and Tier 1 suppliers, with the objective of accelerating its deployment and ensuring it is supported by the scale, infrastructure and market access required for successful commercialisation.

The Directors believe that the Company is well positioned within an evolving and growing market, supported by strong demand drivers for sustainable and rare earth free propulsion solutions and by increasing engagement with global vehicle ecosystem participants.

ON BEHALF OF THE BOARD:

J Widmer - Director

8 July 2026

The directors present their report with the financial statements of the company for the year ended 30 November 2025.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of the research and development, design and manufacture of the business' unique, patented and highly sustainable electric motor, generator and transmission products.

DIVIDENDS

No dividends will be distributed for the year ended 30 November 2025.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 December 2024 to the date of this report.

M N O'Neill

J Widmer

Other changes in directors holding office are as follows:

A Steven - resigned 9 September 2025

M J Woodcock - resigned 10 December 2024

DISCLOSURE IN THE STRATEGIC REPORT

Future developments and financial risk management objectives and policies, which would otherwise be disclosed in the directors' report, are instead disclosed in the strategic report, as permitted by section 414C(11) of the Companies Act 2006.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Clive Owen LLP, are deemed to be reappointed under section 487(2) of the Companies Act 2006.

ON BEHALF OF THE BOARD:

J Widmer - Director

8 July 2026

Opinion

We have audited the financial statements of Advanced Electric Machines Limited (the 'company') for the year ended 30 November 2025 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 30 November 2025 and of its loss for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, to detect material misstatements in respect of irregularities, including fraud. Our audit must be alert to the risk of manipulation of the financial statements and seek to understand the incentives and opportunities for management to achieve this.

We undertake the following procedures to identify and respond to these risks of non-compliance:

- Understanding the key legal and regulatory frameworks that are applicable to the Company. We communicated identified laws and regulations throughout the audit team and remained alert to any indications of non-compliance throughout the audit. We determined the most significant of these to be financial reporting legislation, taxation legislation, health & safety, employment law, company law and ISO9001 regulations.

- Enquiry of directors and management as to policies and procedures to ensure compliance and any known instances of non-compliance.

- Review of board minutes and correspondence with regulators.

- Enquiry of directors and management as to areas of the financial statements susceptible to fraud and how these risks are managed.

- Challenging management on key estimates, assumptions and judgements made in the preparation of the financial statements. These key areas of uncertainty are detailed within note 2 of these financial statements.

- Identifying and testing unusual journal entries, with a particular focus on manual journal entries.

Through these procedures, we did not become aware of actual or suspected non-compliance.

We planned and performed our audit in accordance with auditing standards but owing to the inherent limitations of procedures required in these areas, there is an unavoidable risk that we may not have detected a material misstatement in the accounts. The further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve concealment, collusion, forgery, misrepresentations, or override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Kevin Shotton BA BFP FCA (Senior Statutory Auditor)

for and on behalf of Clive Owen LLP

Chartered Accountants

& Statutory Auditors

140 Coniscliffe Road

Darlington

County Durham

DL3 7RT

8 July 2026

TURNOVER

3

2,629,028

2,883,292

Cost of sales

(2,153,460

)

(1,848,490

)

GROSS PROFIT

475,568

1,034,802

Administrative expenses

(4,867,060

)

(7,038,048

)

(4,391,492

)

(6,003,246

)

Other operating income

138,679

224,217

OPERATING LOSS

5

(4,252,813

)

(5,779,029

)

Exceptional costs

6

-

(2,394,808

)

(4,252,813

)

(8,173,837

)

Interest receivable and similar income

7

25,226

44,843

(4,227,587

)

(8,128,994

)

Interest payable and similar expenses

8

(201,581

)

(213,493

)

LOSS BEFORE TAXATION

(4,429,168

)

(8,342,487

)

Tax on loss

9

883,208

-

LOSS FOR THE FINANCIAL YEAR

(3,545,960

)

(8,342,487

)

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(3,545,960

)

(8,342,487

)

FIXED ASSETS

Intangible assets

10

457,129

21,065

Tangible assets

11

377,214

559,747

834,343

580,812

CURRENT ASSETS

Stocks

12

386,998

410,694

Debtors

13

1,798,770

1,536,359

Cash at bank

2,363,791

4,447,104

4,549,559

6,394,157

CREDITORS

Amounts falling due within one year

14

(1,578,406

)

(2,011,841

)

NET CURRENT ASSETS

2,971,153

4,382,316

TOTAL ASSETS LESS CURRENT LIABILITIES

3,805,496

4,963,128

CREDITORS

Amounts falling due after more than one year

15

(20,738,714

)

(18,408,831

)

PROVISIONS FOR LIABILITIES

19

(122,284

)

(81,410

)

NET LIABILITIES

(17,055,502

)

(13,527,113

)

CAPITAL AND RESERVES

Called up share capital

20

238

238

Share premium

21

9,229,465

9,229,465

Other reserves

21

116,961

99,390

Retained earnings

21

(26,402,166

)

(22,856,206

)

SHAREHOLDERS' FUNDS

(17,055,502

)

(13,527,113

)

The financial statements were approved by the Board of Directors and authorised for issue on 8 July 2026 and were signed on its behalf by:

J Widmer - Director

Called up

share

Retained

Share

Other

Total

capital

earnings

premium

reserves

equity

£

£

£

£

£

Balance at 1 December 2023

238

(14,513,719

)

9,229,465

136,935

(5,147,081

)

Changes in equity

Total comprehensive income

-

(8,342,487

)

-

-

(8,342,487

)

Grant of Share Options

-

-

-

(37,545

)

(37,545

)

Balance at 30 November 2024

238

(22,856,206

)

9,229,465

99,390

(13,527,113

)

Changes in equity

Total comprehensive income

-

(3,545,960

)

-

-

(3,545,960

)

Grant of Share Options

-

-

-

17,571

17,571

Balance at 30 November 2025

238

(26,402,166

)

9,229,465

116,961

(17,055,502

)

1.	STATUTORY INFORMATION

Advanced Electric Machines Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

There were no material departures from that standard.

The principal accounting policies adopted in the preparation of the financial statements are set out below and have remained unchanged from the previous year, and also have been consistently applied within the same accounts.

Going concern

The company is scaling and moving into series production. It has historically met its day to day working capital requirements through loan facilities and the support of equity investors.

Post year end, funding of £6.45m has been secured and the company is in discussions with new and existing investors for further funding by way of investment into the ultimate parent company. The directors believe it is likely that the funds to meet the company's financial obligations for the foreseeable future will be secured.

The ultimate parent company has undertaken to continue to provide sufficient financial support following investment by shareholders and have no intention to request repayment of the creditor balance in the 12 months following date of approval of the financial statements.

Whilst there is no certainty in relation to these matters the directors believe it is appropriate to prepare the accounts on the basis of a going concern.

Reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of paragraph 33.7.

Related party exemption

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

Significant judgements and estimates

In the application of the company's accounting policies, management is required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Significant judgements in applying the company's accounting policies

In preparing these financial statements the directors do not consider there were any significant areas of judgement that were required in applying the company's accounting policies.

Key sources of estimation uncertainty

The estimates and assumptions that have a significant or increased risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Stock provision (note 12)

Stock is recognised at the lower of cost and net realisable value. Provisions are included where stock is deemed to be impaired. Management applies procedures to identify defective, slow moving, and obsolete stock.

Warranty provision (note 19)

This is calculated at a rate of 2% of the gross sales. As the company's products are new to the market and there is no historical statistics to determine the provision rate, management estimation was applied. There have been no material claims from prior year sales.

Impairment of fixed assets (note 11)

The company assesses annually whether assets are impaired. This requires estimating future cash flows based on budgets, forecasts and appropriate discount rates. These estimates involve judgement and changes in assumptions could affect the impairment outcome.

Other estimates included within these financial statements include depreciation and amortisation charges, capitalisation of intangible assets, asset impairments such as provisions against debtors and other provisions held and the valuation of share options issued to employees. None of these estimates are considered to carry significant estimation uncertainty, or to bear significant risk of causing a material misstatement to the carrying amounts of assets and liabilities within the next financial year.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Turnover is a combination of commercial income to private customers and grant funding towards development of the company's products.

Income recognition

Commercial income is recognised when goods have been delivered or made available to the customer or by reference to the stage of completion of services being rendered. Grant funding is recognised as costs are incurred in line with the scope of the agreed project.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.

Computer software is amortised over a period of 1-3 years depending on the individual assets estimated useful life. Development costs are amortised over a period of 3 years.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Assets Under Construction

-

not provided

Plant and machinery

-

33%-50% on cost

Computer equipment

-

33%-50% on cost

Stocks

Stocks are valued at the lower of cost and estimated selling price less costs to complete and sell.

Financial instruments

Basic financial instruments are recognised at amortised cost with changes recognised in profit or loss.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Share options

Certain employees of the company receive remuneration in the form of share-based payments from the parent company, whereby employees render services as consideration for equity instruments.

The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using the Black Scholes model.

That cost would be recognised as wages costs, together with a corresponding increase in equity, over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the parent company's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the parent company's best estimate of the number of equity instruments that will ultimately vest.

3.

TURNOVER

The turnover and loss before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

2025

2024

£

£

Commercial income

689,862

1,080,807

Innovate grant funding

1,939,166

1,802,485

2,629,028

2,883,292

4.	EMPLOYEES AND DIRECTORS

2025

2024

£

£

Wages and salaries

2,908,690

3,862,772

Social security costs

369,844

422,086

Other pension costs

119,702

283,895

3,398,236

4,568,753

The average number of employees during the year was as follows:

2025

2024

Engineering and manufacturing

36

48

Admin and central functions

10

17

Directors

5

7

51

72

Included within wages and salaries for the year is an amount of £nil (2024: £17,789) relating to reorganisation costs which are considered to be exceptional items (see note 6).

2025

2024

£

£

Directors' remuneration

318,542

555,354

Directors' pension contributions to money purchase schemes

86,896

66,241

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

4

5

Information regarding the highest paid director is as follows:

2025

2024

£

£

Emoluments etc

142,545

147,777

Pension contributions to money purchase schemes

15,000

10,625

5.	OPERATING LOSS

The operating loss is stated after charging/(crediting):

2025

2024

£

£

Other operating leases

233,393

213,871

Depreciation - owned assets

351,775

187,039

Development costs amortisation

55,368

-

Computer software amortisation

24,484

1,843

Auditors' remuneration

28,500

27,500

Foreign exchange differences

(7,371

)

(19,604

)

6.	EXCEPTIONAL ITEMS

During the financial year, the Company incurred no exceptional charges (2024: £2,394,809). In the prior year, a provision of £1,935,800 was recognised against components acquired for a specific customer order. The customer subsequently entered bankruptcy before completion of the order, rendering the components unusable and unsaleable in their current form.

In addition, in the prior year, the Company recognised a reorganisation provision of £459,008. This charge arose following the loss of the above customer and the resulting requirement to review and realign the Group's strategic priorities.

The prior year provisions were considered unusual and non-recurring in nature and were therefore classified as exceptional items. This classification was applied to provide transparency and to enable users of the financial statements to better understand their impact on the Company's financial performance.

7.

INTEREST RECEIVABLE AND SIMILAR INCOME

2025

2024

£

£

Deposit account interest

25,226

44,843

8.

INTEREST PAYABLE AND SIMILAR EXPENSES

2025

2024

£

£

Bank interest

-

4

Enterprise Loan interest

22,281

33,698

Intercompany interest

179,300

179,791

201,581

213,493

9.

TAXATION

Analysis of the tax credit

The tax credit on the loss for the year was as follows:

2025

2024

£

£

Current tax:

UK corporation tax

(883,208

)

-

Tax on loss

(883,208

)

-

During the year, the Company transitioned to the R&D intensive scheme, under which the R&D credit is recognised within corporation tax rather than operating income. This results in a corporation tax balance arising from the revised presentation of the credit in the financial statements.

10.	INTANGIBLE FIXED ASSETS

Development

Computer

costs

software

Totals

£

£

£

COST

At 1 December 2024

-

93,020

93,020

Additions

496,948

18,968

515,916

At 30 November 2025

496,948

111,988

608,936

AMORTISATION

At 1 December 2024

-

71,955

71,955

Amortisation for year

55,368

24,484

79,852

At 30 November 2025

55,368

96,439

151,807

NET BOOK VALUE

At 30 November 2025

441,580

15,549

457,129

At 30 November 2024

-

21,065

21,065

11.	TANGIBLE FIXED ASSETS

Assets

Long

Under

Plant and

Computer

leasehold

Construction

machinery

equipment

Totals

£

£

£

£

£

COST

At 1 December 2024

321,076

74,949

722,130

201,771

1,319,926

Additions

5,580

163,662

-

-

169,242

Disposals

-

-

(8,500

)

-

(8,500

)

Reclassification/transfer

-

(169,821

)

169,821

-

-

At 30 November 2025

326,656

68,790

883,451

201,771

1,480,668

DEPRECIATION

At 1 December 2024

147,274

-

447,167

165,738

760,179

Charge for year

97,823

-

227,492

26,460

351,775

Eliminated on disposal

-

-

(8,500

)

-

(8,500

)

At 30 November 2025

245,097

-

666,159

192,198

1,103,454

NET BOOK VALUE

At 30 November 2025

81,559

68,790

217,292

9,573

377,214

At 30 November 2024

173,802

74,949

274,963

36,033

559,747

12.

STOCKS

2025

2024

£

£

Stocks

386,998

410,694

There is no significant difference between the replacement cost of stock and their carrying amounts. Stocks are stated after provisions for impairment of £2,480,720 (2024: £2,796,112).

13.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2025

2024

£

£

Trade debtors

217,821

45,279

Other debtors

1,029,465

651,117

Prepayments and accrued income

551,484

839,963

1,798,770

1,536,359

14.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2025

2024

£

£

Other loans (see note 16)

556,199

694,837

Trade creditors

237,350

193,243

Taxation and social security

99,647

112,369

Other creditors

26,422

42,036

Accruals and deferred income

658,788

969,356

1,578,406

2,011,841