Proton Mtr Pwr Regulatory News (PPS)

Proton Power Systems plc

("Proton Power" or the "Group")

Interim Results

Proton Power Systems plc (AIM:PPS), the designer, developer and producer of fuel cells and fuel cell electric hybrid systems, today announces its unaudited interim results for the six months ended 30 June 2015.

Highlights:

· Adjusted1 loss after tax for the period reduced to £1,530,000 (2014: £2,642,000)

· Agreement with Deutsche Bahn for the planned diesel generator replacement program. The solution for Deutsche Bahn will be our containerised fuel cell systems utilised as uninterruptible power supply (UPS) applications.

· Continued our growth plans in line with the increased market demand we are experiencing. Our manufacturing facility has increased its investment to meet the orders for our containerised S25 systems and our HyRange25 systems.

· Order received for the first installation for a fuel cell system into a housing block in Switzerland.

· The Group now has a "go to market" strategy for the modular Range Extender (HyRange 25) which is commercially ready for light duty commercial vehicles and city buses.

· Currently finalising plans with an Asian based bus manufacturer for city bus solution.

· The continuous road testing with our 7 tonne truck following our world record trip from Munich to Berlin has proved the reliability and durability of our mobile solution.

· Our HyRange8 system has now been successfully operational with our customers for three years.

· The new HyRange25 is being deployed providing 25kW; the module is scalable, in parallel operation, for high power applications of up to 75/90kW.

· The Group is preparing plans with a semi-conductor manufacturer to utilise its waste hydrogen to generate electricity to meet part of the manufacturer's internal power requirements.

· Cost reduction is now embedded within the Group's culture. We are committed to continued reduction of the cost of our products to meet our customers' demands.

1 Adjusted to exclude the non-cash loss arising from the change in the fair value of the embedded derivatives on shareholder loans.

Ian Peden, Chairman of Proton Power, commented:

"Within the challenging Cleantech market, Proton Power has delivered a good overall performance in the first half year of 2015. As Proton Power is progressing, its determination and drive to bring this new technology to the market is palpable. The goals are within sight and certainly achievable. Proton is focused on its core Stationary, Mobile and Maritime markets and is well positioned to benefit from the growth expected in these particular areas. We continue our growth plan with further investment in our manufacturing facilities and products. In turn delivering successful results for our shareholders, customers, suppliers and employees will follow."

Chairman's and CEO's statement

The Group is pleased to report the following achievements in the first half of 2015:

Business development

A. Fuel cell stack production and development:The Group designs and manufactures fuel cell stacks which are at the heart of all fuel cell applications and now offers a full range of solutions from 3kW to 30kW (peak power). During the first half of 2015, the Group further improved the existing stack designs (PM200) and (PM400) which generate up to 30kW.

Our cost reduction activities have improved the reliability for prolonged operational activity with significant reductions in cost per kW.

B. Power Systems:

The Group offers complete power systems and solutions to its customers. We believe it is essential to provide our customers with a full turnkey proposition including consulting, simulation, packaging study, integration testing and final rollout with after care services and support.

1. Stationary segment

The Group is seeing significant growth in demand for safe power, specifically in data centres, telecom and grid applications. The combination of fuel cell products and UPS provides a complete solution. These products can be delivered as single components, in cabinets or containerised. Standardised fuel cell modules allow scalable power usage for high power applications. Each of our PM Modules with 5kW and 25kW can be used in parallel for higher power demand.

2. Mobility segments - buses and light duty vehicles and maritime.

The Group is also experiencing growing demand in the mobility bus sector. We have completed the HyRange25 system; a modular product which can be used in parallel configurations achieving up to 75/80kW. We are also seeing demand for forklift solutions; as the provider of the world's first triple hybrid system. We expect this market to develop over time but we are well positioned with our unique knowledge in the sector, providing us with a very competitive solution. We are currently in talks with a forklift provider for our solution to this market.

We are seeing significant interest for our solutions in all of our market segments, and our objective is to expand volume manufacturing with industrial partners based on licensing agreements. The Group is committed to the future evolution of PEM fuel cells and is also applying for further funding under new government funded R&D programmes.

The Group continues to grow, increasing its headcount with technology engineers and by improving the manufacturing facilities in Puchheim.

Finance

The turnover for the half year was £387,000 and the adjusted loss after tax for the half year was £1,530,000 which, when added to the non-cash profit arising from the change in the fair value of the embedded derivatives on the shareholder loan resulted in a total loss of £950,000. With the exception of the fair value profit on the embedded derivative, this was in line with the management expectations.

Outlook

The Group continues to expand its worldwide sales activities driven by worldwide attention to pollution and air quality problems particularly in major cities.

We are at an advanced stage of commercialisation of our technology and have a technically proven product and a market ready portfolio of solutions. Continuous cost reductions, driving down the cost per kW will be our platform for growth and the success of our technology in the markets around the world. Together with our Asian strategic partnership plan, we are on-track to be a leading global fuel cell, fuel cell hybrid system, fuel cell/UPS and wind/solar power storage system provider.

The Directors are confident with the outlook of the business and that it has secured future finance to meet its future commitments.

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of changes in equity

Share premium account

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 arose as a result of the acquisition of Proton Motor Fuel Cell GmbH during 2006. The merger reserve represents the difference between the nominal value of the share capital issued by the Company and their fair value at 31 October 2006, the date of the acquisition.

Reverse acquisition reserve

The reverse acquisition reserve arose 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 an equity settled share-based compensation scheme. The fair value of the employee services received for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference fair value of the options granted. At each balance sheet date the Company revises its estimate of the number of 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.

Consolidated statement of cash flows

Notes to the interim report

1. Basis of preparation

The 31 December 2014 consolidated financial statements of Proton Power Systems plc were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to those companies under IFRS. They were also prepared under the historical cost convention and in accordance with IFRS interpretations (IFRICS) 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. The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the 31 December 2014 statutory audited financial statements. No new accounting standards have been adopted by the group since preparing its last annual report.

The Group has chosen not to adopt IAS 34 (Interim Financial Statements) in preparing these financial statements therefore the interim financial information is not in full compliance with IFRS.

The financial information for the year ended 31 December 2014 set out in this interim report is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's audited statutory financial statements for the year ended 31 December 2014 have been filed with the Registrar of Companies. The independent auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

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 dependant on its ability to raise cash to fund its operations from existing and potential shareholders and the debt market.

In preparing the consolidated financial information, Proton Motor Fuel Cell GmbH has been deemed to be the acquirer and the Company, the legal parent, has been deemed to be the acquiree. Under IFRS 3 "Business Combinations", the acquisition of Proton Motor Fuel Cell GmbH by the Company has been accounted for as a reverse acquisition and the consolidated IFRS financial information of the Company is therefore a continuation of the financial information of Proton Motor Fuel Cell GmbH.

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment at least annually, or more frequently where circumstances suggest an impairment may have occurred. Any impairment is recognised immediately in income statement and is not subsequently reversed.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

2. 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.

Impairment of goodwill

The carrying value of goodwill must be assessed for impairment annually, or more frequently if there are indications that goodwill might be impaired. This requires an estimation of the value in use of the cash generating units to which goodwill is allocated. Value in use is dependent on estimations of future cash flows from the cash generating unit and the use of an appropriate discount rate to discount those cash flows to their present value.

Classification and fair value of financial instrumentsThe Group uses judgement to determine the classification of certain financial instruments, in particular convertible loans advanced during the year. Judgement is applied to determine whether the instrument is a debt, equity or compound instrument and whether any embedded derivatives exist within the contracts.

Judgements have been made regarding whether the conversion feature meets the "fixed for fixed" test in each instrument. In the case of each instrument it is deemed it is not met on the basis that the loan is in Euros and shares are in Sterling.

The Group uses valuation techniques to measure the fair value of these financial instruments. In applying these valuation techniques, management use estimates and assumptions that are, as far as possible, consistent with observable market data. Where applicable market data is not observable, management uses its best estimate about the assumptions that market participants would make. These

estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

3. Segmental information

An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other operating segments for which discreet financial information is available and is regularly reviewed by the Chief Operating Decision Maker ("CODM").

Based on an analysis of risks and returns, the Directors consider that the Group has only one identifiable operating segment, green energy.

All non-current assets are located in Germany.

4. Share based payments

The Group has incurred an expense in respect of share options and shares issued to employees as follows:

5. Taxation

Due to losses within the Group, no expenses for tax on income were required in either the current or prior periods.

6. Loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares, share options, however these have not been included in the calculation of loss per share because they are anti dilutive for these periods.

The adjustment to the weighted average number of shares used in the calculation of diluted loss per share reflects share options in issue where the exercise price exceeds the average market price of shares in the period.

No interim dividend has been proposed or paid in relation to the current or prior interim period.

A copy of the interim results for the six months to 30 June 2015 is available from the Company's website at

www.protonpowersystems.com

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