Proton Mtr Pwr Regulatory News (PPS)

20 June 2023

Proton Motor Power Systems plc

("Proton", the "Company" or the "Group")

Final Results

Proton Motor Power Systems plc (AIM: PPS), the designer, developer and producer of fuel cells and fuel cell electric hybrid systems with a zero carbon footprint, announces its audited results for the year ended 31 December 2022 (the "Financial Year").

Chairman's statement

Proton Motor Power Systems plc ("Proton Motor") has made further progress this year in proving its technology, building up capacity and sales pipeline. We have strengthened our organisation to be able to deliver complete power supply solutions. Whilst industry and consumer demand for alternative sources of energy continues, the period under review was impacted by the effects of the Russian invasion of Ukraine. Proton Motor´s technology offer continues to mature to remain aligned with this growing demand and supports the continuing commercialisation process of the group.

Highlights

· Total order intake in 2022 of £2,653k (2021: £2,800k), having started the year with five new orders in January - February 2022, we saw a quieter summer period as a result of the Ukraine invasion.

· At the year end the production backlog was £2,950k (2021: £2,514k). Fulfilment of this backlog will result in deliveries of varying configurations of fuel cell systems and also service maintenance charges to customers both in 2023 and 2024.

· 59% of order intake in 2022 (2021: 49%) was derived from the stationary segment, with other orders primarily from the mobile segment. Notable orders announced throughout the year included:

o  further order from E-Trucks Europe for nine HyRange 43 hydrogen fuel cell systems, together with the corresponding maintenance agreement; and

o  a significant order from GKN Hydrogen for 15 S8 stationary fuel cell systems.

· Sales in 2022 were £2,088k (2021: £2,771k), representing an annual change of -25%.

· The operating loss in 2022 was £10,542k vs. £9,121k in 2021 (excluding the effect of embedded derivative in 2021). The increased loss resulted principally from further investment in the technical development area, in staff and infrastructure.

· Cash burn from operating activities has increased during the period from £8,726k in 2021 to £9,207k, in-line with increased investment in staff and technology development and in preparation for our move to new premises. Cash flow is the Group's key financial performance target and our objective is to achieve positive cash flow in the shortest timeframe possible. Current contracts are quoted with up-front payments, reducing reliance on working capital as we continue to invest in our manufacturing capability. The cash position as at 31 December 2022 was £2,579k (31 December 2021: £2,152k).

· A fifteen-year lease agreement has been signed for modern premises which will permit enhanced and efficient production throughflows and provide space to substantially expand the Group's manufacturing, testing and development capacity. The new premises comprises over 13,500 square metres of useable space, of which over 10,500 square metres can be dedicated to production, testing and development with the remainder of the space being devoted to office usage. This represents a seven fold increase in the amount of space available for production when compared to the Company´s current premises.

· In 2022, Proton´s fuel cell system HyRange® won the Prize for Energy 2022 from the federal state of Hesse.

Post year end

· Order intake for the 5 months ended May 2023: £2,552k (5 months ended May 2022: £1,517k).

· At the end of May 2023, the production backlog had a sales value of £4,317k (May 2022: £3,200k). The fulfilment of this backlog will result in deliveries of varying configurations of fuel cell systems and also service maintenance charges to customers both in 2023 and 2024.

· Following the year end, existing loan facilities have been increased by a further €14,500k to ensure operational and investment financing into 2024 with a view to accelerating the investment programme in the face of increasing demand.

Outlook

In the year ahead we are focused on substantially expanding production and development capacity in order to match increasing market demand.

The Board would like to thank all our customers who believe in us, our team of committed employees and our shareholders who have the vision to invest in our mission.

Dr. Nahab, CEO of Proton, commented: "In the year ahead, we will be focused particularly on ramping up production capacity in the new premises and exploiting the current potential order intake and sales and production pipeline.

Posting of accounts and notice of AGM

Notice of the Company's annual general meeting, to be held on 30 June 2023 at 9.30 a.m. BST/10.30 a.m. CET at Proton Motor Fuel Cell GmbH, 7, Benz Street, 82178 Puchheim, Germany, has been sent to shareholders. The Company's audited annual report for the year ended 31 December 2022 will be posted to shareholders shortly and a downloadable version of the annual report and AGM notice will be available on the Company´s website, www.protonmotor-powersystems.com.

For further information:

Strategic report

Business review

Proton Motor Power Systems plc and subsidiaries' ("the Group's") principal activity is the development of hydrogen fuel cells and fuel cell hybrid systems through its German subsidiary Proton Motor Fuel Cell GmbH ("PM").

A fuel cell is a device that converts the chemical energy of a fuel and an oxidant into electricity, with only warm water as a by- product. In principle, it functions like a combustion engine, but without any harmful emissions and does not require recharging as long as an ongoing fuel source, such as hydrogen, is available. It also emits heat which can be used for example to support heating of passenger buses or buildings. This increases the system efficiency significantly.

Fuel cell engines are widely regarded as a potential alternative to internal combustion engines, power from fossil fuels and battery technology. Fuel cell engines produce no noxious gases and pure hydrogen fuel cells produce no harmful emissions such as carbon dioxide. There is a number of types of fuel cell, classified by the type of electrolyte used, including alkali, molten carbonate, proton exchange membrane ("PEM"), phosphoric acid, and solid oxide. Proton Motor has selected a PEM-based fuel cell as the Directors believe that, based on the PEM's start/stop capability, dynamic operation and life time, it is the only technology able to meet the overall criteria which the Group has specified for its intended commercial applications.

Proton Motor Power Systems plc ("Proton Motor") has made further progress this year in proving its technology, building up capacity and its sales pipeline. The Group sees a strong trend in the market for a transition from pure battery-driven vehicles to hybrid systems (fuel cells and batteries), particularly for larger vehicles such as buses and trucks. The Group has significant know-how in fuel cell stacks and hybridisation. Over the years, different applications provide good examples of Proton Motor's in depth know-how. These include: the Deutsche Bahn back-up power solutions; the containerised 100kw power solution for the renewable energy campus at APEX; the fuel cell based power genset HyShelter® 240 for Shell Hydrogen; the HyRail fuel cell system for a rail milling machine for the Austrian company Linsinger; a TriHyBus in Czech Republic; the HyRange® 43 fuel cell system for garbage collecting trucks; and a number of different maritime projects, including the ZEUS project with Fincantieri.

The Group also continues to see an increase in the potential order sizes from the market. To be prepared for this, Proton Motor will be expanding its production capacity to several thousand stacks, fuel cell systems and turnkey solution per year. To facilitate this, Proton has signed a lease agreement for an additional production site, near to its headquarters in Puchheim. Production at the new facility is expected to commence in 2024.

The Group has always recognised the commercial importance and value of protecting its intellectual property ("IP") and, therefore, the need to protect it wherever possible by way of patents and trademarks. The Group's key IP portfolio comprises a mixture of granted patents, patent applications, trademarks, confidential information and know-how.

The Group undertakes comprehensive business planning to define long-term strategic objectives and goals. Annual budgets and operational plans are prepared utilising financial and non-financial Key Performance Indicators ("KPIs"). Business performance is measured by KPIs which include monitoring of actual against budget and rolling forecasts, and R&D project status. These are reported to the Board on a monthly basis. It is difficult to disclose non-financial key performance indicators which are not commercially sensitive, such as the number of fuel cells produced and the fuel cell production cost per kW of output.

The Company began as Magnet Motor, opening its factory in 1980. The technology and application roadmap went from the world's first triple hybrid forklift truck to a fuel cell ship. After that PM developed the triple hybrid Skoda bus in 2008. Containerised power solutions completed the application portfolio. All those applications are powered via our own fuel cell stacks, with a robust design for a long lifetime. The Company established operations close to Munich area and was one of the first German designers and manufacturers of fuel cells.

View to the future

The world is committed to protecting the environment. Cities and governments, pushed by the European Commission, must reduce inner-city pollution drastically. Society and economy have to switch to renewable energy sources such as wind and solar. These energy sources are only available on a fluctuating basis and therefore the need for a long time storage solution is needed, and hydrogen is the only possibility. In this regard the fuel cells will ramp up as the ideal consumers for emission free power and energy supply. China fights against smog in its big cities. After Dieselgate in the US and Europe, electric vehicles with batteries are on the move. All this is generating a market for clean transport and energy. Based on that development, the world market for fuel cell products and solutions is more active than ever.

Beside pure battery solutions, hydrogen fuel cells are in focus. Corporations such as Toyota, Hyundai, and Daimler are pushing the technology forward. Fuel cells provide benefits such as fast refuelling and long range of operation. Hydrogen is reproducible and can make use of surplus energy from wind and solar power. Europe has put major funding programmes in place to set up a hydrogen infrastructure. The same is now happening in Japan, Korea and China. The Chinese government is fully committed to fuel cell technology with major regulatory and funding support.

Proton Motor has profound experience in applications in heavy duty vehicles such as buses and trucks, , stationary power solutions, ships, rail machines and material handling applications. With just over 100 staff members it is relatively small but regarding IP and experience a powerful company. Proton Motor has developed and continues to develop its own fuel cell stacks. Systems are designed from first simulation, prototype up to final solution for volume manufacturing. Proton Motor is cooperating with German and European based companies in the field of fuel cell technology.

Market drivers

The Board views that growth in the fuel cell market will be determined by the following factors:

· The ongoing depletion of fossil fuel reserves;

· United Nations Framework Convention on Climate Change ("UNFCCC") COP legalisation on climate change;

· Strengthening competitiveness on cleantech technology in Europe and making Europe more independent from Asia

· Current and future air quality regulation;

· Growing industrial and consumer demand for alternative sources of energy;

· The potential long term competitiveness of the auto and transportation industries;

· Energy security concerns;

· Limitations of purely battery powered propulsion systems;

· Renewable energy storage systems industrial buildings and private residences;

· Discussions regarding hydrogen as an energy storage for green energy (power to gas);

· A growing global demand for transportation;

· Increasingly urgent demands for healthy breathable air in urban centres and for action to mitigate the adverse aspects of climate change;

· The growing availability and the compelling economics of cleaner fuels; and

· Increasing political commitment to hydrogen on an EU, national and regional level.

Increasing political commitment to hydrogen as an energy source:

European Union (EU)

· The EU originated European Clean Hydrogen Alliance (ECH2A) was announced as part of the New Industrial Strategy for Europe, which was launched on 8 July 2020 within the context of the hydrogen strategy for a climate-neutral Europe.

· The European Clean Hydrogen Alliance aims at an ambitious deployment of hydrogen technologies by 2030, bringing together renewable and low-carbon hydrogen production, demand in industry, mobility and other sectors, and hydrogen transmission and distribution. With the alliance, the EU wants to build its global leadership in this domain, to support the EU's commitment to reach carbon neutrality by 2050. https://www.ech2a.eu/

· Proton Motor has been participating in the ECH2A founding process.

· Proton Motor is already participating in the EU REVIVE project. REVIVE stands for 'Refuse Vehicle Innovation and Validation in Europe'. The project has been running from the beginning of 2018. The objective of REVIVE is to significantly advance the state of development of fuel cell refuse trucks, by integrating fuel cell powertrains into 15 vehicles and deploying them across 8 sites in Europe. It aims to deliver substantial technical progress by integrating fuel cell engines from three suppliers into a mainstream DAF chassis, and developing effective hardware and control strategies to meet highly demanding refuse truck duty cycles.

· There is also the EU JIVE project. The JIVE (Joint Initiative for hydrogen Vehicles across Europe) project seeks to deploy 139 new zero emission fuel cell buses and associated refuelling infrastructure across five countries. JIVE is running for six years from January 2017 and is co-funded by a €32 million grant from the FCH JU (Fuel Cells and Hydrogen Joint Undertaking) under the European Union Horizon 2020 framework programme for research and innovation. The project consortium comprises 22 partners from seven countries.

Federal Republic of Germany

Germany is a prime market for the Proton Group. On 3 June 2020 Germany´s coalition government presented a €130 billion (£114 billion) fiscal stimulus package over two years. This package includes the following elements with regard to the role of hydrogen:

· The 'national fuel cell strategy' will support the hydrogen industry with €7 billion. The goal is to make Germany a global champion in the hydrogen industry and to export it on a global basis. By 2030, Germany plans to install 30 Gigawatt of electrolysers to produce green hydrogen from offshore and onshore alternative energy. Additionally, the German government is seeking to support the shift from fossil energy to hydrogen in all types of industrial processes.

· The automotive (supplier) industry will receive a bonus programme worth €2 billion in the years 2020 and 2021 to invest into R&D for new technology.

· Subsidies worth €1.2 billion for public and private operators of buses and commercial vehicles with alternative power units.

United Kingdom

· UK (November 2020): 5GW of low carbon H2 production by 2030 & £240m in to a Net Zero Hydrogen Fund (part of the UK government's 10-point plan for a Green Industrial Revolution).

Identification of Target Market segments

According to a study conducted by the market research company Global Market Insights the 2021 global fuel cells market size was valued at approximately USD 3.0 billion, The upwards trend in fuel cell demand is foreseen to continue. Expecting a CAGR of 10.1 % during the years 2022-2030, the total market size will exceed USD 8.6 billion in 2030 (Fuel Cell Market Size | Industry Share Report, 2022-2030 (gminsights.com)).

Proton Motor has identified the following broad market segments:

· Stationary applications

· Automotive applications

· Rail

· Maritime

More specifically these include:

· Solutions for renewable energy storage systems based on hydrogen;

· grid independent or grid isolated power supply.

· power supply systems for emergency power systems (e.g. for critical infrastructure or datacentre)

· heavy and light duty vehicles (e.g. trucks, city busses)

· Ships and boats

· rail machines and passenger trains

· off-road applications (e.g. material handling, construction machines)

For this reason the Group has structured its operational business units into the same four segments.

Proton Stationary

This market includes back up power for critical infrastructure, telecoms and data centre installations. Buildings and the storage of renewable energy in hydrogen are also becoming an interesting growing market as evidenced by the installation of the autonomous ecosystem in Switzerland which included one of our fuel cells.

Stationary fuel cell units can replace diesel generators in telecoms, data centres and ecological houses. The benefits for the end user are that fuel cell units require less maintenance than the old polluting generators that are prone to algae build-up in the diesel tank, which causes high maintenance cost. It is also possible to monitor the Proton Motor system remotely, which again saves time and manpower.

Proton Mobility/Rail

This market includes city buses, airport vehicles, trucks, off-road vehicles and other heavy duty vehicles such as fork lift trucks. The mobility sector sees many future challenges with emission free to automated driving with the vehicle becoming a power source itself. Proton Motor is participating in the EU REVIVE project. REVIVE stands for 'Refuse Vehicle Innovation and Validation in Europe'. The project has been started in 2018 and will run until mid 2024. The objective of REVIVE is to significantly advance the state of development of fuel cell refuse trucks, by integrating fuel cell powertrains into 15 vehicles and deploying them across 8 sites in Europe. It aims to deliver substantial technical progress by integrating fuel cell systems from three suppliers into a mainstream DAF chassis and developing effective hardware and control strategies to meet highly demanding refuse truck duty cycles.

Proton Motor is also participating in the EU StasHH Project. The consortium operating together as "StasHH" (Standard-Sized Heavy-Duty Hydrogen) comprises 11 fuel cell module suppliers, 9 original equipment manufacturers and 5 research, test, engineering and/or knowledge institutes and will standardise physical dimensions, flow and digital interfaces, test protocols and safety requirements of the fuel cell modules that can be stacked and integrated in heavy duty applications like forklifts, buses, trucks, trains, ships, and construction equipment. The consortium receives €7.5 million funding from the European Union, through the "Fuel Cells and Hydrogen Joint Undertaking" (FCH JU), in order to kickstart the adoption of fuel cells in the heavy duty sector. The total budget for the StasHH mission is €15.2 million.

Further mobile applications of the Proton Motor technology will be seen in the public transport and logistics arena. Proton Motor was the first company to develop a hybrid range extender battery/fuel cell engine. This technology permits the usage of both systems in an optimised way with long lifetime expectation. In the meantime, the range extender concept is adopted by the industry especially for heavy duty vehicle applications.

The ongoing "Dieselgate" situation and the COP targets present the industry as a whole but in particular the automotive, industry with a huge challenge.

Proton Maritime

Building on the success with our tourist ship in Hamburg, Proton Motor sells the know-how capability to partners to evolve this market. The Group delivered the first feasibility study for an underwater vessel. Proton Motor, again, clearly demonstrates capability within the technology.

Proton Motor is participating in a Bavarian funded project Ma-Hy-Hy together with the main partner Torqeedo. Torqeedo, part of the Deutz Group, is a leader in electric mobility on water offering electric and hybrid drives from 0.5 to 100kW for commercial and recreational use. The project has the target to develop a marine hydrogen hybrid system building kit, which will be able to deliver fuel cell powers between 30 and 120 kW and variable hydrogen storage capacity. The project will complement Torqeedo's existing Deep Blue Hybrid portfolio of marine drive systems.

Power Solutions are becoming tailor-made

CleanTech Power Solutions will become more diverse and more flexible. That is why at Proton Motor we are making our offering of products and services bespoke to customer requirements based on our standard suite of CleanTech products aimed at each market sector in a scalable modular approach. As power requirements increase our approach allows users to simply add additional modules all controlled from our unique software. This shift towards modular standardisation results in accelerated deployment in our target markets with simplification and cost reduction.

Group activities

With the successful setting up of the production lines for the fourth generation PM400 Stack Modules, the HyModule® S8 systems and the HyFrame® systems, the Group has been focusing on selling fuel cell systems with an electrical power output from 8 kW up to 150 kW for mobile, stationary, maritime and rail applications. The Group has increased production of its HyModule® S8 and HyFrame® units, due to regular order income from several customers, including GKN Hydrogen, Umstro and Wilo.

With these fourth-generation fuel cell stacks and systems, the Group has set up strategic partnerships with electrical drive train manufacturers and industrial partners. The systems can be used in combination with a battery connected to a hybrid drive train for electric driven light duty vehicles, trucks, inner city buses or industrial power supply solutions. We also expect growing demand in the near future from manufacturers of municipality maintenance vehicles. Also, the fourth-generation fuel cell stacks will be used for rail and maritime applications.

As part of the EU funded project REVIVE, in which Proton Motor has been a member of the project consortium since 2019, a fuel cell system for integration into a garbage truck has been designed. A Stack Module PM400-144 is being integrated into the HyRange® 43 fuel cell system. The integration into the truck is being carried out together with the vehicle manufacturer, ETrucks, from Belgium. The first system was delivered in 2020. Since then, ETrucks have repeatedly ordered HyRange® 43 fuel cell systems in two designs. One design for mounting under the driver's cabin and the second is for mounting on the roof. In total, ETrucks has ordered 21 HyRange® 43 systems, 11 of which have been delivered to date.

Since mid-2022, the HyShelter® 240 system commissioned by Shell has been in normal operation and was handed over to the operator. In April 2023, Shell ordered an additional two HyShelter® 240 systems which will be delivered in 2024.

The Group's HyFrame® systems are also being used in Hydrogen solutions by the German company Wilo. Since April 2023, three HyFrame® S36 fuel cell systems have been in operation in the H2Powerplant of Wilo at the Wilo headquarters in Dortmund.

After the successful installation of the production line for the HyModule® S8 fuel cell system at the Group's headquarter in Puchheim, in 2022 a first production line for HyFrame® fuel cell systems were installed. In October 2022, the Group signed a rental agreement for a new production facility in Fürstenfeldbruck, near to Proton Motor´s Puchheim headquarter. The new site will be mainly used for the production and commissioning of fuel cell stacks, systems and containerized turnkey solutions. The start of production at the new facility is planned to commence in 2024. The automated fuel cell stack production will be integrated in the new facility. With this new site, Proton will expand its production capacities to several thousand stacks, fuel cell systems and turnkey solutions per year.

Operational Strategy

Sales and growth strategy

Proton Motor is seeking to ramp up capacity to achieve organic growth through its own sales and production capacity and is also seeking to achieve growth by offering licensing partnerships, which will allow manufacture of the complete system locally by a licensing partner. Furthermore, Proton Motor is seeking mutually beneficial cooperations with suitable partners within joint ventures and other such undertakings.

Proton Motor is targeting mid-size technology companies as well as large multinationals as cooperation partners. The Group is specifically looking for partners with market access for its applications and solutions. These partners should already be active in the market for electric power supply solutions or be planning to address those markets. Adding a fuel cell is often seen as the key to solving critical problems associated with pure battery or diesel powered products.

The Group will offer solutions for all four target markets: stationary, automotive, rail and maritime. The Group will also continue its focus on further developing fuel cell stacks and systems.

The sales process always starts with consulting, simulation, packaging study, integration, testing and final roll out with service support. Proton Motor can act as turnkey supplier for a complete solution with all the necessary know-how under one roof. A one-stop CleanTech Power Solution provider. To have its own fuel cell stack gives a complete product offering from stack to final application which the Directors see as necessary to supply customers with a complete and optimised solution. The benefits for customers are obvious. Know-how and solutions are available for a fast integration process, saving time and money for our customers. The Group has signed cooperation agreements with companies, which provide the planning and integration part of a project.

The Group sees growing market demand for safe, secure and clean power world-wide. Data centre demand will be significant in the coming years. The combination of the fuel cell series with a UPS and the optimisation of both systems will help to boost sales in the near future. The newly designed product with capabilities to be integrated and controlled via a smart grid will also have great potential.

Manufacturing strategy

To date, the Group's HyStack® fuel cell modules and fuel cell hybrid systems have been produced in relatively small volumes, on a project-by-project basis, largely utilising a combination of semi-automated processes and manual assembly. In order to meet our manufacturing goals and achieve the market demand, the Directors have: identified target markets and commercial applications;

· established further key commercial partnerships within these target markets;

· designed the Group's fuel cells and fuel cell hybrid systems to meet the engineering requirements for volume manufacturing;

· switched over to a new and more cost effective stack generation which will lead to a decrease in production costs;

· established quality control procedures;

· installed professional commercial test benches to ensure high quality standards for the Group's fuel cells and fuel cell engines;

· built up a new electrical infrastructure for continuous testing;

· reviewed, risk assessed and secured supplier and component manufacturing relationships;

· identified second source suppliers and addressed new suppliers for critical components;

· identified and assessed major commercial factors, such as cost, availability, robustness and durability of components; and

· secured and properly documented necessary regulatory and operational approvals for each application.

Competitive advantages

The Directors are confident that the Group's technology brings the following distinct combination of characteristics to the power systems market:

· zero harmful emissions;

· lower fuel consumption than comparable commercial alternatives;

· silent operation;

· standard fuel cell stack for use in multiple applications;

· modular fuel cell systems for easy customer adoptions;

· a reliable, robust and durable technology; and

· successful integration of fuel cell technology into a hybrid system.

Principal risks and uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. The Board reviews these risks, as outlined in the Corporate Governance Statement, and puts in place policies to mitigate them.

s172(1) statement

The disclosures required for s172 reporting can be found in the respective section of the financial statements.

Outlook

The Group's principal objective is to expand volume manufacturing initially through the investment in our new premises and beyond that with industrial partners based on licence agreements and mutually beneficial cooperations, such as joint ventures. This will enable the Group to achieve a more economically competitive unit cost for its fuel cells and fuel cell hybrid systems. Also the Group will utilize the sales channels of its industrial partners to address various markets and ensure growth of sales volume. The Directors believe that the advanced stage of commercialisation of the Group's technology, coupled with the Group's preferred partnerships, will enable the business to establish itself firmly as a leading, global, fuel cell, fuel cell hybrid system provider.

I would like to personally thank all our customers who believe in us, our team of committed employees and our shareholders who have the vision to invest in our mission.

Consolidated income statement

for the year ended 31 December 2022

Consolidated statement of comprehensive income

for the year ended 31 December 2022

Consolidated Statement of Financial Position

as at 31 December 2022

Statement of Financial Position - Company

as at 31 December 2022

Consolidated Statement of Changes in Equity

for the year ended 31 December 2022

Statements of Changes in Equity - Company

for the year ended 31 December 2022

Share premium

Costs directly associated with the issue of the new shares have been set off against the premium generated on issue of new shares.

Merger reserve

The merger reserve of £15,656,000 arises as a result of the acquisition of Proton Motor Fuel Cell GmbH and represents the difference between the nominal value of the share capital issued by the Company and its fair value at 31 October 2006, the date of the acquisition.

Reverse acquisition reserve

The reverse acquisition reserve (Group only) arises as a result of the method of accounting for the acquisition of Proton Motor Fuel Cell GmbH by the Company. In accordance with IFRS 3 the acquisition has been accounted for as a reverse acquisition.

Share option reserve

The Group operates two equity settled share-based compensation schemes. The fair value of the employee services received for the grant of the share awards/options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share awards/options granted. At each balance sheet date the Company revises its estimate of the number of share awards/options that are expected to vest. The original expense and revisions of the original estimates are reflected in the income statement with a corresponding adjustment to equity. The share option reserve represents the balance of that equity.

Capital contribution reserve

The captial contribution reserves include a balance of £288,291,235 in relation to the gain on release of an embedded derivative held by the shareholders in December 2021. The waiver of a conversion feature on loan instruments, and subsequent derecognition of embedded derivative, was considered to constitute a transaction with owners in their capacity as owners and as such the gain was presented in equity. See Note 22 for further detail.

Consolidated Statement of cash flows

for the year ended 31 December 2022

Statement of cash flows - Company

for the year ended 31 December 2022

Notes to the consolidated financial statements

1. General information

Proton Motor Power Systems plc ("the Company") and its subsidiaries (together "the Group") design, develop, manufacture and test fuel cells and fuel cell hybrid systems as well as the related technical components. The Group's design, research and development and production facilities are located in Germany.

The Company is a public limited liability company incorporated in England and Wales, and domiciled in the UK. The address of its registered office is: c/o Womble Bond Dickson (UK) LLP, 4 More London Riverside, London, England, SE1 2AU. The Company was admitted to the AIM Market of the London Stock Exchange on 31 October 2006 and its shares are quoted on this exchange.

Directors

The Directors who held office during the year and up to the date of approval of this announcement were as follows:

Dr. Faiz Nahab Chief Executive1,3

Helmut Gierse Chairman2

Antonio Bossi Non-Executive Director5

Ali Naini (appointed 31 May 2023)** Non-Executive Director

Sebastian Goldner Chief Technical Officer and Chief Operations Officer

Roman Kotlarzewski Chief Financial Officer and Company Secretary4,6

Manfred Limbrunner Director Governmental Affairs and Funding

1 Chairman of the Remuneration Committee.

2 Chairman of the Audit Committee.

3 Chairman of the Nominations Committee.

4 Member of the Remuneration Committee.

5 Member of the Audit Committee.

6 Member of the Nominations Committee.

** Ali Naini was appointed as a director on 31 May 2023. His base remuneration was set at £nil

2. Summary of significant accounting policies

The Board approved this announcement on 19 June 2023. The financial information included in this announcement does not constitute the Group´s statutory accounts for the years ended 31 December 2022 or 31 December 2021. Statutory accounts for the year ended 31 December 2021 have been delivered to Companies House. The statutory accounts for the year ended 31 December 2022 will be delivered to Companies House accordingly.

Basis of preparation

The consolidated financial statements of the Group and the financial statements of the Company have been prepared in accordance with UK adopted international accounting standards (IFRS) and with those parts of the Companies Act 2006 applicable to those companies reporting under IFRS.

The consolidated financial statements and the financial statements of the Company have been prepared under the historical cost convention and in accordance with IFRS interpretations (IFRS IC) except for embedded derivatives which are carried at fair value through the income statement and on the basis that the Group continues to be a going concern.

Until such time as the Group achieves operational cash inflows through becoming a volume producer of its products to a receptive market it will remain dependent on its ability to raise cash to fund its operations from existing and potential shareholders and the debt market. The Group has historically been dependent on the continuing financial support of its main investors, SFN Cleantech Investment Ltd and Mr Falih Nahab to meet its day-to-day working capital requirements. The Group has loans with SFN Cleantech Investment Ltd of €2.4m and €32.3m and also a loan facility with Mr. Falih Nahab of €56.9m. The repayment date for all loans is 31 December 2025. As such the loans are held as non-current borrowings in the financial statements.

Subsequent to the 2022 year end the following changes to the existing loan facilities were made:

*all loan facilities are denominated in EURO. Balances translated at year end rate to Group presentation currency of British Pound in the table above for information purposes only.

The Group will, at the date of sign off of the accounts, have in place committed facilities from SFN Cleantech Investment Ltd and Mr Falih Nahab of up to €106.1m which will become repayable at the end of 2025. Cash flow forecasts demonstrate that the undrawn portions of these committed facilities enable the Company and the Group to meet its cash requirements for the period up to at least June 2024. The Company and Group are also able to defer discretionary spend during this period to provide further cash flow headroom, should this be required.

At this point in time there has been no indication of circumstances which would lead to either or both SFN Cleantech Investment Ltd and Mr Falih Nahab withdrawing this support beyond June 2024. Both SFN Cleantech Investment Ltd and Mr Falih Nahab have confirmed their intention to fund further investment through the sale of shares in the Company.

Due to the variability of the value of shareholding in the Company and lack of knowledge of other assets held, material uncertainty exists which may cast significant doubt upon the Group and the Company's ability to continue as a going concern. The Directors firmly believe however that the Group and Company remain a going concern on the grounds that both SFN Cleantech Investment Ltd and Falih Nahab have continued to support both entities throughout recent years, as well as funding having been agreed by SFN Cleantech Investment Ltd and Falih Nahab for at least the next 12 months.

The financial statements do not include the adjustments that would result if the Group or Company was unable to continue as a going concern.

3. Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

Recognition of development costs

Self developed intangible assets are recognised where the Group can estimate that it is probable that future economic benefits will flow to the entity. See Note 12.