Invinity Energy Regulatory News (IES)

The information contained within this Announcement is deemed by Invinity Energy Systems plc to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").

29 September 2022

Invinity Energy Systems plc

("Invinity" or the "Company")

Interim Results, Current Trading and Board Changes

Invinity Energy Systems plc (AIM: IES) (AQSE: IES) (OTCQX: IESVF), a leading global manufacturer of utility-grade energy storage, is pleased to announce its unaudited consolidated results for the six months ended 30 June 2022 (the "Period") and an update on current trading.

Invinity's management team will host a virtual results presentation and interactive Q&A for shareholders and retail investors at 4pm UK Time on Wednesday 5 October 2022 via Investor Meet Company. Those wishing to join the session can sign up for free via this registration link.

Analysts wishing to cover the results are asked to contact ir@invinity.com to request a pre-recorded results presentation prepared by Invinity executives.

Board Changes

Peter Dixon-Clarke will step down from his role as Chief Financial Officer and from the Board of Invinity, following the release of these Interim Results. Chief Development Officer Jonathan Marren will additionally assume the role of Interim CFO whilst the company concludes the search for a permanent successor. Mr. Dixon-Clarke will remain with the Company for a period to assist in the transition. Peter has been a valued member of the Company's executive management team since his appointment in August 2020 and has made an important contribution to the Group during his tenure as CFO.

HIGHLIGHTS

Financial

· Revenue for the Period of £1.4m (H1 2021: £0.015m);

· Period-end inventory of £10.9m, including prepaid inventory (H1 2021: £8.0m);

· Period-end cash of £16.1m (H1 2021: £10.9)

· The Group remains debt free, excluding leases.

Commercial

Invinity's commercial team has seen significantly increased sales interest in the Company's products, driven in part by the successful delivery and associated press coverage of 7.6 MWh of VS3s delivered to Energy Superhub Oxford, Scottish Water and the European Marine Energy Centre (EMEC) in late 2021 and early 2022. Building on that interest, key developments during the Period included:

· An 8.4 MWh vanadium flow battery ("VFB") system sale to Canadian renewable energy project developer, owner and operator Elemental Energy;

· Securing funding under Phase 1 of the UK Government's Longer Duration Energy Storage (LODES) competition to plan an up to 40 MWh VFB that, if advanced to Phase 2 of the programme, is expected to be the UK's largest flow battery project; and

· Signing an MoU with industrial conglomerate Hyosung Heavy Industries, with the intention to partner with Hyosung to deliver Invinity's VFBs to grid-scale projects in South Korea.

Reflecting this increased sales interest, the Company's latest commercial opportunity pipeline for its VS3 battery product as at 22 September 2022 is summarised below (next-generation product interest, while considerable, is not included in these numbers):

The market continues to hold tremendous opportunities for Invinity's existing and future products. Clients ranging from behind the meter users to large-scale utility developers are engaging with the Company at an increasing rate. Our focus has been on clients ready to commit to orders, a strategy which has nearly doubled the number of potential new contracts approaching close. These Base opportunities, and the group qualified as Advanced that will join them if they progress, are the areas where Invinity's Commercial team are focusing their efforts.

In addition to advancing sales of existing products, Invinity has received positive preliminary feedback from prospective customers regarding its next-generation product in development alongside Gamesa Electric.

Including sales made in the year to date, the Company's delivery backlog currently totals £12.98m, the majority of which Invinity hopes to recognise in the remainder of 2022, subject to suitable logistics arrangements and customer sites being ready to receive and accept Invinity battery shipments. Approximately 80% of the backlog figure relates to two projects, namely Yadlamalka and Elemental Energy.

Operational

During the Period and in the year to date, Invinity made good progress fulfilling its closed sales and enhancing its manufacturing capabilities. Highlights included:

· 93 VS3 battery modules with a total capacity of more than 3 MWh were shipped to site during the Period; 

· Commencement of a significant expansion of its manufacturing capabilities alongside partner Baojia New Energy, activity that was subsequently completed in August 2022 with the shipping of the first consignment of VS3 batteries destined for the Elemental Energy project in Alberta; and

· General improvements to the macro supply chain environment for Invinity as prices begin to normalise. For instance, in the year to date, the Company has observed a c.60% reduction in the cost of shipping its products. Invinity has also benefited from a c.14% reduction in the price of electrolyte and begun to realise economies of scale through its new manufacturing partnership with Baojia.

The Company is also pleased to announce it has now received confirmation from its partners that the Yadlamalka Energy project will be relocated to a second site in South Australia which is being developed by Invinity's customer as a PV + Vanadium Flow Battery project. This confirmation means that the delivery phase of the project can resume and the shipping of 8 MWh of Invinity VS3 batteries, manufacturing of which is already largely complete, can now commence.

Corporate & Strategic

The Period saw Invinity make a number of important strategic developments relating to its products, partners and corporate positioning. These included:

· In March 2022 Invinity's shares, and warrants created in the December 2021 placing, were admitted to trading on the Aquis Stock Exchange to provide increased liquidity for Invinity shareholders;

· In April 2022, Invinity signed a MoU with Hyosung Heavy Industries to initiate a strategic distribution partnership with the Korean firm for the Company's batteries;

· In May 2022, Invinity announced its intention to materially expand its corporate and commercial presence in the U.S. in response to attractive market conditions; and

· In the year to date, Invinity has continued to make good progress towards the milestones and stage gates set out as part of the joint development and commercialisation programme with Gamesa Electric, a wholly owned subsidiary of Siemens Gamesa Renewable Energy.

Post-Period, the Company signed an MoU with U.S. Vanadium in August 2022 with the intention to form a joint venture which aims to manufacture and sell vanadium flow batteries in the United States. The development represents an important step forward in Invinity's U.S. expansion strategy and intends to leverage government support announced as part of the Inflation Reduction Act that was signed into law on 16 August 2022.

Outlook

Invinity expects to make material progress during the remainder of 2022 and beyond on the following key areas:

· Capitalise on positive macro developments to conclude late-stage commercial deals, demonstrating Invinity's VS3 product transition from pilot projects to commercial projects;

· Deliver order backlog to customers, converting inventory into revenue; and

· Progress the development of our next-generation product towards commercial release alongside Gamesa Electric / Siemens Gamesa and take advantage of the strong degree of commercial interest already shown in the product (not currently reflected in the Invinity VS3-only sales pipeline).

Larry Zulch, Chief Executive Officer at Invinity said:

"We have made significant progress in our strategy to establish ourselves as the premier alternative to lithium storage for large-scale, 4- to 12-hour energy storage projects. The kind of progress we've made so far this year isn't always as visible to the public as we would like, but our continued discipline to focus on what we know will be the right outcome is, I strongly believe, the path to Invinity's success in this vital and growing market."

Enquiries:

Notes to Editors

Invinity Energy Systems plc (AIM:IES) (AQSE: IES) (OTCQX: IESVF) manufactures vanadium flow batteries for large-scale, high-throughput energy storage requirements of business, industry and electrical networks.

Invinity's factory-built flow batteries run continually with no degradation for over 25 years, making them suitable for the most demanding applications in renewable energy production. Energy storage systems based on Invinity's batteries are safe, reliable, and economical, and range in size from less than 250 kilowatt-hours to tens of megawatt-hours.

Invinity was created in April 2020 through the merger of two flow battery industry leaders: redT energy plc and Avalon Battery Corporation. With over 33 MWh of systems deployed to date across more than 50 sites in 15 countries, Invinity is active in all major global energy storage markets and has operations in the UK, Canada, USA, China and Australia. Invinity Energy Systems plc is listed on the AIM Market of the London Stock Exchange and on the Aquis Stock Exchange (AQSE). The Company trades in the USA on OTCQX Best Market under the symbol "IESVF".

To find out more, visit invinity.com or call Investor Relations on +44 (0)204 551 0361.

CEO's Report

Invinity's mission, to drive the transition to renewable energy with utility-grade energy storage products, has been substantially supported by global events during this Period and in the year to date. Weather events, melting ice, and the desire for energy sovereignty have led to increased commitments by governments throughout the globe to install renewable energy. By its very nature, renewable energy requires energy storage, now being increasingly supported by governments, particularly in the U.S.

I'm pleased to report that Invinity has made significant progress in its initiatives - close sales, deliver products, and advance the joint development of our next generation product - despite challenges, many of which are, fortunately, now easing, even as some new ones emerge. Noting that the nature of our business and the length of our sales cycle dictates that the majority of our revenue is recognised in the second half of the year, our financial results for the first half of 2022 are discussed below.

H1 2022 Financial Results

Revenue recognised in the six-month period to 30 June 2022 was £1.4m due almost entirely to the successful delivery of the EMEC contract.

The cost of sales charged against the above revenue was £3.7m (2021: £0.8m) of which £1.7m related to movement on inventories, with the balance charged predominantly on other production costs. Over the Period, costs, particularly of electrolyte and shipping, did finally start to reduce, a trend that has continued since. Cost reduction remains a key focus for Invinity - allied with the currently reducing electrolyte and shipping costs, the move to Baojia will also enhance the benefits achieved from our existing manufacturing efficiency gains as noted in the Full Year 2021 results.

Administrative expenses were £8.9m (2021: £5.9m). Of this £3.0m period-on-period increase, £1.1m related to non-payroll research and development, £1.1m to professional fees and £0.7m to payroll costs.

Other items of operating income and expense were £0.9m (2021: £1.9m) predominantly reflecting transfer and decommissioning costs incurred, and to be incurred, as part of the transition from BCI to Baojia as supplier of the balance of systems.

Net of other movements, the above resulted in a loss for the period of £11.6m (2021: £8.8m).

The period closed with an inventory balance of £10.9m, including £5.1m of prepaid inventory, which provides a good head start for subsequent deliveries.

The Period opened with £26.4m of cash, due to the successful fund raising at the end of 2021, and closed with £16.1m, a negative movement of £10.3m. A summary of the cash flows is set out in the table below:

In terms of use of funds, almost all of the £10.3m in the table above was used for operating purposes and is further analysed in the table below.

The £7.8m of cash used for operating costs in the table above equates to a monthly cash burn over the period of £1.3m per month. 

Order Backlog and Commercial Pipeline

Closing sales remains our top priority. We have grown our near-term sales pipeline significantly as market confidence in our products increases, the result of successfully delivering key projects and our ability to bring prospective customers on site to see successful installations. Delays in delivering lithium batteries and the growing realisation that prices of lithium batteries have not only stabilised but are likely to increase have assisted our pipeline growth. We're pleased to see U.S. federal and state government support for energy storage projects in addition to the support for battery manufacture and supply chain support last year. We hope this will set a positive example and be emulated in our other core markets of the UK and Australia.

The UK remains a key market for us, with the BEIS-funded LODES project a significant milestone in demonstrating the next phase of commercialising our batteries. Winning the first phase of the program gives us confidence that we can continue to advance this initiative.

We must acknowledge challenges as one of the first suppliers of alternative-to-lithium products into commercial projects: the substantial interest in our battery performance often requires some form of external stimulus - it may be government grants or subsidies - to incentivise our customers to make the switch away from so-called 'incumbent' technologies. This underscores the importance of the U.S. Inflation Reduction Act and supports our efforts to reduce our product costs. Aligning the various parties involved has led to delays in concluding sales and has allowed us to develop our expertise in navigating various interests and bureaucracies.

Manufacturing, Supply Chain and Delivery

Firstly, I'm very pleased to note that there have been no reportable health & safety incidents at any Invinity sites in the year to date.

A key focus for Invinity during the Period was to successfully deliver our contracted-for products. We learned a tremendous amount delivering, installing and commissioning the UK's largest flow battery, a 5 MWh system at the Energy Superhub Oxford ("ESO"), learnings we are successfully applying to subsequent projects. We believe that ESO represents the most individual flow battery modules (162) ever in one installation and getting them working well together demonstrates our capability to deliver very large grid-scale projects once larger modules are available from our joint development project with Gamesa Electric and Siemens Gamesa.

During the Period, we installed and energised a 1.8 MWh flow battery at EMEC's site in Eday, Orkney, turning episodic tidal power into a consistent electricity source for an electrolyser creating green hydrogen. We commissioned a 0.8 MWh flow battery at a Scottish Water site in Perth, UK alongside solar power in support of Scottish Water's net zero initiative.

Post Period, the Company has continued to deliver customer projects and has taken further steps to expand its operational capabilities in line with the strategy set out in Invinity's 2021 Annual Report. This includes flow batteries shipped to two sites in California, both funded by the California Energy Commission ("CEC") for projects announced in H2 2021. This represents the first shipments of VS3 batteries into the USA.

Invinity's manufacturing and installation teams are fully focused on the delivery and subsequent recognition of revenue on the Yadlamalka and Elemental Energy projects during the remainder of this year. However, as battery deliveries are contingent on external factors often beyond Invinity's control (e.g. customer site works, ancillary equipment delivery) it cannot be guaranteed that all batteries will be delivered and handed over to the customer by the end of 2022.

In relation to the Yadlamalka project, a new site has been confirmed, meaning that the project delivery phase can now commence. The project size, use case, operating strategy, and contractual relationship between Invinity and Yadlamalka Energy remain substantially unchanged from the original project announcement on 24 November 2020. The original Yadlamalka project site remains under parallel development as a future PV + Vanadium Flow Battery project, subject to outstanding permitting issues currently being resolved by the site owner.

We've started shipments from the Company's new manufacturing partner, Baojia New Energy ("Baojia"). This includes the August shipment of 1.1 MWh of Invinity batteries destined for Elemental Energy's 8.4 MWh solar + storage project in Alberta, Canada.

In addition to the successful expansion of manufacturing capacity with Baojia, Invinity has also recently gained UL and CE certification for its VFB products, having already achieved a triple ISO certification award earlier in 2022. These key industrial certifications are awarded to products which adhere to the highest standards of operational excellence and safety and are often required by customers for larger, utility scale projects.

The Company is in the process of completing an independent engineering review of its products alongside leading assurance and risk company, DNV. This activity is being undertaken as part of a wider initiative to gain an independent bankability report for Invinity's products. 

Corporate & Strategic Initiatives

There are three architectonic trends that will drive Invinity's success over the next years:

1) Growing recognition of the central role of battery energy storage in successful deployment of renewable energy;

2) The inability of lithium batteries to meet demand, not only because of concerns about safety and longevity, but because the global transition to EVs will demand more lithium batteries than can be produced, leaving few for stationary energy storage, and those few will be more expensive and take longer to ship; and

3) Proven alternatives to lithium batteries supported by credible companies will be in great demand and Invinity is well-positioned to be such an alternative.

In recognition of these trends, particularly the third one, Invinity has focused on developing strategic partnerships. We have continued to make progress on our next-generation flow battery being jointly developed with Gamesa Electric and Siemens Gamesa Renewable Energy, code-named Mistral.

To enable us to address markets outside of our core three - UK, North America and Australia - we have formed relationships such as the one we've announced with Hyosung regarding the Korean market. Hyosung is an ideal partner with considerable expertise and market access. We anticipate similar announcements for other significant markets in the times to come.

We've announced a relationship with U.S. Vanadium, the most significant producer of vanadium and vanadium electrolyte in the U.S., and our interest in forming a joint venture that will take advantage of U.S. federal and state government support for U.S. manufacturing and supply chain development.

The Company appointed Jonathan Marren as Chief Development Officer to develop these and other prospective strategic partnership and corporate growth opportunities. Jonathan combines considerable expertise in UK and global markets with deep experience with Invinity as board member and Invinity's predecessor redT energy as board member and CFO.

The Company has been executing on a U.S. strategy that includes the aforementioned U.S. Vanadium relationship on the operations side. We engaged EAS Advisors for assistance and commenced trading Invinity shares on the OTCQX Best Market in August to support investors in North America and enhance liquidity.

We started working with Aquis, trading both our shares and warrants on this relatively new and innovative exchange. We received approval from the Short-Term warrant holders to extend the Short-Term warrant maturity to reflect current market conditions and delays in accomplishing some of our stated objectives.

Outlook

Invinity will be focused on the three corporate priorities for the remainder of 2022 and into 2023: 1) conclude commercial deals, demonstrating the transition of the VS3 product from pilot projects to commercial projects; 2) deliver on our backlog of closed contracts to customer sites, converting inventory to revenue; and 3) progress the development of our next-generation product under joint development with Gamesa Electric / Siemens Gamesa, code-named Mistral.

By achieving these priorities, Invinity will be able to benefit from the market trends we anticipate over the next two years that will drive dramatic progress for energy storage in general and Invinity in particular. Those trends start with a growing acknowledgement not just that the transition to renewable energy requires energy storage, but that the duration of energy storage required - filling in the missing hours each day, including be able to operate overnight - matches the capabilities of Invinity's products. Stabilising the grid is critical, but so is a consistent source of supply even from intermittent renewable energy.

The next major market trend is that lithium-ion batteries - Invinity's primary competitor - will be in short supply as the entire global production capacity is used for the transition to EVs from ICE (internal combustion engine) vehicles. We anticipate higher prices and project delays for stationary energy storage projects that use lithium-ion batteries.

The U.S. government support for energy storage projects is highly significant and helpful to Invinity. We already have a number of deals in our near-term sales pipeline which the Inflation Reduction Act has accelerated. Other governments may follow suit, concerned that they won't meet their targets and will fall behind in their commitments to achieve net zero.

Into this mix, Invinity's VS3 product, despite being a predecessor project to Mistral and therefore not as advanced in performance and cost-reduction, becomes increasingly competitive. VS3 functions as a highly capable intermediate step to Mistral, the product we anticipate will establish the market benchmark for alternative-to-lithium storage.

Unaudited financial results for the six months to 30 June 2022

Unaudited consolidated statement of profit and loss

For the six months ended 30 June 2022

The above unaudited consolidated statement of profit and loss should be read in conjunction with the accompanying notes.

Unaudited consolidated statement of comprehensive income

For the six months ended 30 June 2022

The above unaudited consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Unaudited consolidated statement of financial position

At 30 June 2022

The above unaudited consolidated statement of financial position should be read in conjunction with the accompanying notes.

Unaudited consolidated statement of changes in equity

For the six months ended 30 June 2022

For the six months ended 30 June 2021

The above unaudited consolidated statements of changes in equity should be read in conjunction with the accompanying note.

Unaudited consolidated statement of changes in equity

For the year ended 31 December 2021

The above unaudited consolidated statements of changes in equity should be read in conjunction with the accompanying note.

Unaudited consolidated statement of cash flows

For the six months ended 30 June 2022

The above unaudited consolidated statement of cash flows should be read in conjunction with the accompanying note.

Notes

(forming part of the unaudited consolidated historical financial information)

1: General Information

Invinity Energy Systems plc (the 'Company') is a public company limited by shares incorporated and domiciled in Jersey. The registered office address is Third Floor, IFC5, Castle Street, St. Helier, JE2 3BY, Jersey.

The Company is listed on the AIM Market of the London Stock Exchange with the ticker symbol IES.L and on the Aquis Stock Exchange (AQSE). The Company trades in the USA on OTCQX Best Market under the symbol "IESVF".

The principal activities of the Company and its subsidiaries (together the 'Group') relate to the manufacture and sale of vanadium flow battery systems and associated installation, warranty and other services.

2: Summary of significant accounting policies

Basis of preparation

This unaudited condensed consolidated interim financial information for the six-months ended 30 June 2022 (the 'interim financial information') has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union. The financial information should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2021, that were prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The annual report and financial statements for the year ended 31 December 2021 are available on the company's website (www.invinity.com).

This interim financial information has been prepared using the historical cost basis of accounting. The accounting policies applied across all the Group's subsidiaries when preparing the financial information are consistent with those adopted and disclosed in the annual financial statements for the year ended 31 December 2021. The accounting policies have been consistently applied across all Group entities for the purpose of producing this interim financial information.

The financial information included in this document does not comprise statutory accounts within the meaning of Companies (Jersey) Law 1991. The comparative figures for the financial year ended 31 December 2021 are not the company's statutory accounts for that financial year within the meaning of Companies (Jersey) Law 1991. Those accounts have been reported on by the company's auditors and delivered to the Jersey Financial Services Commission.

The report of the auditors included in the annual report and financial statements for the year ended 31 December 2021 was unqualified. However, the auditors' report did contain an emphasis of matter related to the application of the going concern basis of preparation.

The Group's business activities, together with factors likely to affect its future development, performance and position, are set out in the operations and financial review sections of this report.

The financial position of the Group, its cash flows and liquidity position are described in the financial review section.

Going concern

Over the next 12-months the Group expects to receive approximately £7.7m of milestone payments under existing contracts. As these payments become due on the successful delivery of future milestones, they have not yet been recognised in the balance sheet as receivable. Over 80% of the balance relates to two contracts, being Yadlamalka and Elemental.

In addition to the above, and within the next 12-months, the Group expects to close and deliver a number of new contracts. Work is also continuing on the UK Government's LODES competition with an announcement of the winner, or winners, in early 2023 followed by contracting and the payment of a material deposit. LODES, if Invinity is successful, is to be delivered in 2024.

Other than for LODES, which is denominated in GB£, almost all of the contracts discussed above are denominated in US$, Canadian $ or Australian $. As battery material costs are predominantly US$ denominated, this insulates the Group's operational receipts to a large degree against any further devaluation of GB£.

Outside of operational matters, on the 31 August 2022 the Short-Term Warrantholders voted to extend the expiry date of the Short-Term warrants by one year from 15 September 2022 to 15 September 2023. The exercise price of the Short-Term warrants remains unchanged at 150p. Should some, or all, of these warrants be exercised prior to their expiry then the company will receive up to an additional £21.8m of cash.

Whilst the Group continues to demonstrate resilience in the face of ongoing global challenges, as with many operations at this stage of development, it remains reliant on timely receipts and closely managed costs. Should existing contracts be delivered more than three-months late or the Group fail to win LODES, or an equivalent contract, early next year then, assuming the Group maintains its current operational capacity, it will be necessary to raise further funding within the next 12-months in order to continue trading and delivering on the current strategic objectives.

The Group's need to secure receipts through delivering existing contracts, winning new contracts or the exercise of some, or all, of the short-term warrants creates a material uncertainty that casts significant doubt about its ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

In addition to the issues discussed above, the directors have also reviewed other varying and wide-ranging information relating to both present and future conditions when reaching their conclusion on going concern. These included the:

· growing opportunities presented by the emergent energy storage market;

· growing levels of Government engagement and support in its three key markets, particularly the USA with the recent passing of the Inflation Reduction Act and the earmarking of $369bn for transitional energy projects; and

· continued strength in the sales pipeline, currently showing 492 MWh of interest, of which nearly 23 MWh is in final contracting stage.

Estimates and judgments

The preparation of interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and of items of income and expense. Actual results may differ from these estimates.

In preparing this interim financial information, the significant judgments made by management in applying the Group's accounting policies were the same as those that applied to the consolidated financial statements for the year ended 31 December 2021. Similarly, the key sources of estimation uncertainty related to the financial information were the same as those encountered when applying the Group's accounting policies in relation to the preparation of the consolidated financial statements for the year ended 31 December 2021.

Principal risks and uncertainties

In preparing the condensed consolidated financial information, management is required to consider the principal risks and uncertainties facing the Group. In management's opinion the principal risks and uncertainties facing the Group are unchanged since the preparation of the consolidated financial statements for the year ended 31 December 2021. Those risks and uncertainties, together with management's response to them are described in the risk review section of the annual report and financial statements for the year ended 31 December 2021.

Accounting policies

The accounting policies applied in this condensed consolidated financial information are consistent with those applied in preparing the financial statements for the year ended 31 December 2021.

3: Revenue from contracts with customers and income from government grants

Segment information

The Group derives revenue from a single business segment, being the manufacture and sale of vanadium flow battery systems and related hardware together with the provision of services directly related to battery systems sold to customers.

The Group is organised internally to report on its financial and operational performance to its chief operating decision maker, which has been identified as the three executive directors as a group.

All revenues were derived from continuing operations.

Revenue from contracts with customers

Grant income other than revenue

The Group receives grant income to help fund certain projects that are eligible for support, typically in the form of innovation grants. The Group also received grant income related to operating costs under government subsidy programmes as part of national COVID response efforts. The total grant income that was received in the period was as follows:

4: Cost of sales

5: Administrative expenses

6: Staff costs

7: Other items of operating income and expense

In June 2022 the company announced that it would be moving production from Brantingham & Carroll International (BCI), the supplier of its balance of system, to Baojia. An agreement to this effect was signed shortly thereafter in July 2022.

The agreement will make whole certain past under-recoveries by BCI as well as allowing sufficient time to complete the current production orders; transfer the requisite production 'know how' to Baojia and decommission the BCI facility. Accordingly, a provision of $1.6m has been made.

8: Loss per share

The weighted average number of shares used to calculate basic and diluted loss per share as presented in the consolidated statement of comprehensive loss was as follows:

Additional potential shares used in the calculation of diluted earnings per share primarily relate to potential shares that may be issued in satisfaction of in-the-money employee share options. In addition, potentially dilutive shares also relate to warrants to subscribe for ordinary shares in the company that were issued for services or related to financing transactions that have an exercise price lower than the quoted share price and remain outstanding at the relevant period end.

Where additional potential shares have an anti-dilutive impact on the calculation of loss per share calculation, such potential shares are excluded from the weighted average number of shares used in the calculation.

Additional potential shares are anti-dilutive where their inclusion in the calculation of loss per share results in a lower loss per share.

9: Cash flows from operating activities

10: Goodwill and intangible assets

Goodwill

All goodwill is tested annually for impairment. At 31 December 2021, goodwill was tested for impairment using a fair value less costs of disposal methodology by reference to the Company's quoted market capitalisation using the price of 92.5 pence per share at that date. No impairment loss was identified in relation to goodwill. The closing share price on 26 September 2022 was 31p, giving a market capitalisation of £36.0m which may indicate a potential impairment.

Patents and certifications

There have been no events or circumstances that would indicate that the carrying value of patents and certifications may be impaired at 30 June 2022.

11: Property, plant and equipment

The Group has no assets pledged as security. No amounts of interest have been capitalised within property, plant and equipment at 30 June 2022 (2021: £nil).

12: Inventory

13: Other current assets

Prepaid inventory is recognised on inventory payments where physical delivery of that inventory has not yet been taken by the Group and is stated at the lower of cost and net realisable value.

14: Contract related balances

No revenue was recognised in the current or prior periods that was recorded as a contract liability at the end of the previous period.

Provisions related to contracts with customers