Proton Mtr Pwr Regulatory News (PPS)

RNS Number : 3847M

Proton Power Systems PLC

24 May 2010

 

 

Press Release

24 May 2010

 

 

Proton Power Systems plc

("Proton Power" or "the Group")

 

Preliminary Results

 

Proton Power Systems plc (AIM:PPS), a leading designer, developer and producer of fuel cells and fuel cell electric hybrid systems, today announces its Preliminary Results for the year ended 31 December 2009.

 

John Wall, Executive Chairman of Proton Power, commented: "Proton has had a year of transition from an R&D company to a commercial provider of fuel cells and related applications. During the year we successfully demonstrated the performance of our systems in various applications. We have seen increasing interest in these solutions, in particular in the transport sector, and we are focusing our efforts on promoting our capabilities initially in the German electric mobility market which is seeing significant government support.

 

"Whilst tough economic conditions have impacted on the Group's turnover, we are seeing the economic situation improving and are cautiously optimistic for the current year. We have been fortunate to have the support of our loyal shareholders such as our lead investor Roundstone Properties, who has provided the Group with the necessary funding."

 

Highlights:

·;	Secured £3,934,000 of new funding from convertible loans
·;	Loss: £4,819,000 (2008: £2,798,000)
·;	Revenue: £193,000 (2008: £1,093,432)
·;	Signed a five-year collaboration agreement with Deutsche Mechatronics GmbH to facilitate volume production
·;	Launched the world's first fuel cell triple-hybrid passenger city bus for Skoda Electric in Prague
·;	Completed trial operation of the Bucher Schörling street sweeper in Switzerland
·;	Signed a partnership and exclusivity agreement with L-3 Communications

 

Highlights since the period end:

·;	Convertible loan facility was extended to €4.86 million of which €3.24 million has been drawn down
·;	Signed a Memorandum of Understanding with Smith Electric Vehicles to jointly develop a fuel cell range extender solution
·;	Signed an agreement with SPower GmbH to collaborate on the development, marketing and sales of UPS systems supported by fuel cells

 

For further information:

Proton Power Systems plc
John Wall, Chairman	Tel: +44 (0) 78 0291 7615
Achim Loecher, Group Financial Director	Tel: +49 (0) 89 1276265 50
	www.protonpowersystems.com

 

Arbuthnot Securities Limited
Tom Griffiths / Antonio Bossi	Tel: +44 (0) 20 7012 2000
	www.arbuthnotsecurities.co.uk

 

Media enquiries:

Abchurch Communications Limited
Justin Heath / Monique Tsang / Hannah Sharman	Tel: +44 (0) 20 7398 7712
hannah.sharman@abchurch-group.com	www.abchurch-group.com

 

 

Chairman and CEO's statement

 

Overview

 

We are pleased to report our results for the year ended 31 December 2009, which is our third full year as a public company on the AIM market of the London Stock Exchange.

 

Business development

 

Proton Power had a year of transition from a research and design focused company to an industrialised commercial provider of fuel cells and related applications and technology.

 

During the year Proton Power filed for German government grants for R&D and market introduction projects in the amount of €5.4 million (of which 48% will be grant funded by the German Government) and expects formal government approval in the second half of 2010. These projects are mainly testing and improvements to our own stack design, design and testing for transport applications and development of a new stack generation for high power applications. We have also applied for support for a €3.8 million project for 20 light duty vehicles, to be developed jointly with Smith Electric Vehicles (of which 48% will be grant funded by the German Government).

 

Proton Power has entered into new long-term agreements with contract manufacturers and suppliers. In May 2009 Proton Power signed a five-year collaboration agreement with Deutsche Mechatronics GmbH, a leading contract manufacturer to facilitate the volume production of the Group's fuel cell systems in Germany. An initial project with Deutsche Mechatronics, a 19-inch 5kW fuel cell auxiliary power unit ("APU"), has been jointly developed and was introduced in April 2010 at the Hanover Fair, an influential trade show for the power industry. The modular design of the APU will enable up to 15kW of power output from a 19-inch industrial cabinet for IT and telecom applications. Subsequent to introducing the unit at Hanover, Proton Power has signed an agreement with SPower to collaborate on the development, marketing and sales of uninterruptible power supply ("UPS") systems supported by fuel cells.

 

Proton Power has partnered with leading original equipment manufacturers ("OEMs") and has developed new innovative products during the period, including the world's first triple hybrid passenger bus with Skoda Electric in the Czech Republic, which was one of the top five nominees for the Hanover Fair's Hermes Award, the most important industrial award in Germany. In addition, the triple hybrid drive train won the IDWI Award from the German Chamber of Industry and Commerce Frankfurt.

 

The Bucher Schörling street sweeper powered by a Proton Power fuel cell went into test trial operation in the middle of 2009 in Switzerland and generated significant field data and knowhow for such applications.

 

During the year the tourist ferry ZEMShip Alsterwasser operated reliably in regular use on the Alster River in Hamburg with over 14,000 passengers in total. The operator, ATG, has this year signed a service contract with Proton Power to support the operation of the fuel cell powered ferry for two years until 2012. The ferry will continue operation in regular passenger service. The worldwide interest in the world's first fuel cell passenger ferry is remarkable and we expect that continual operation of the ZEMShip will generate interest for follow-up projects.

 

In February 2010 Proton Power signed a Memorandum of Understanding with the UK's Smith Electric Vehicles, to augment the "e-mobility Movement" (an initiative of the German government to support the market introduction of electric powered vehicles) and to increase the range of their electric vehicles. Both companies agreed to jointly develop a fuel cell range extender solution for the battery powered Edison vehicle. For the above mentioned German funding programme, Proton Power plans to build and market 20 vehicles for German customers during the next 24 months and we are confident that our range extender will help electric vehicle manufacturers break further into their markets.

 

The group has also seen interest in its solutions from outside Europe. In 2009 it signed an agreement with L-3 Communications Combat Propulsion Systems ("L-3 CPS"), in which L-3 CPS will market and sell Proton's fuel cell power systems for use in propulsion systems, marine and UPS applications to the North American military and civilian applications market.

 

During the year, 5kW and 50kW systems of Proton Power's core Product, the PM200 stack, were tested in depth and were proven to be highly reliable on our test benches.

 

The strategic development of the Group has made good progress in the last twelve months. Proton Power has made changes to important positions within the Group, bringing in experienced and qualified staff. Proton Power has also continued to invest in the Group's infrastructure, specifically our testing facilities.

 

The Group has successfully attained DIN EN ISO 9001 quality management certification and in March 2009 received the certificate for Quality and Environmental Standards.

 

Finance

 

Turnover decreased by 82% to £193,000 mainly as a result of project cancellations or delays due to the current economic situation. The loss for the year was £4,819,000.

 

The Company secured new funding in 2009 from convertible loans with a total value of £3,908,000 from the major shareholder Roundstone Properties Limited. £500,000 was converted into ordinary shares in 2009 by issuing 25 million shares at 2p each. Subsequently in 2010 this convertible loan facility was extended to €4.86 million of which €3.24 million has been drawn down.

 

Outlook

The economic situation improved during 2009 and we are cautiously optimistic for the current year. Interest in fuel cell based clean energy applications is very high and Proton Power is recognized as the leading provider of fuel cells and fuel cell applications with in-depth system optimisation and integration know how. The experience we have gained based on our bus, sweeper, passenger car and ferry projects, and the solutions we presented have generated significant interest. We are now the first contact point for such applications for many companies in Europe with interest for environmentally friendly solutions. European government regulations and initiatives support our development.

 

Looking to the future, rising energy prices and demand for environmentally friendly solutions for transportation as well as stationary power will support the growth of our business. Fuel cell solutions offer the best potential to reduce greenhouse gas emissions for power generation.

 

Though there are still challenges remaining in the cost of fuel cell systems, Proton Power is working on cost reduction through development and manufacturing. Economy of scale through volume manufacturing and service contracts pave the road to future profitability.

 

On behalf of the Board we would like to take this opportunity to thank the Proton Power team and our advisors for their hard work and effort and our customers and suppliers for their confidence and support throughout the year.

 

 

 

 

John Wall FCA Chairman

Thomas Melczer CEO

 

 

Consolidated income statement

for the year ended 31 December 2009

 

 

	Note		2009		2008
			£'000		£'000
Continuing operations
Revenue	2,3,4		193		1,093
Cost of sales			(3,150)		(2,514)
Gross loss			(2,957)		(1,421)
Other operating income			73		74
Administrative expenses			(1,844)		(1,416)
Operating loss			(4,728)		(2,763)
Finance income			5		26
Finance costs			(165)		(61)
Loss for the year attributable to equity holders of the parent	5		(4,888)		(2,798)
Loss per share (expressed as pence per share)
Basic	9		(5.3)		(5.4)
Diluted	9		(5.3)		(5.4)

 

 

Consolidated statement of comprehensive income

 

 

			2009		2008
			£'000		£'000
Loss for the period			(4,888)		(2,798)
Other comprehensive income
Exchange differences on translating foreign operations			(487)		187
Other comprehensive income			(487)		187
Total comprehensive income for the period			(5,375)		(2,611)
Attributable to equity holders of the parent			(5,375)		(2,611)

 

Balance sheets

as at 31 December 2009

		Group		Company
	Note	2009	2008	2009	2008
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Intangible assets	10	759	783	-	-
Property, plant and equipment	11	793	362	-	-
Investment in subsidiary	12	-	-	4,012	4,555
		1,552	1,145	4,012	4,555
Current assets
Inventories		105	137	-	-
Trade and other receivables	13	266	270	16	25
Cash and cash equivalents	14	187	772	1	200
		558	1,179	17	225
Total assets		2,110	2,324	4,029	4,780
Liabilities
Current liabilities
Trade and other payables	15	1,429	1,348	35	97
Borrowings	16	2,832	-	2,832	-
Derivatives on convertible loans	17	477	-	477	-
Total liabilities		4,738	1,348	3,344	97
Net (liabilities) / assets		(2,628)	976	685	4,683
Equity
Equity attributable to equity holders of the parent company
Ordinary shares	19	4,350	3,570	4,350	3,570
Share premium		7,052	6,275	7,052	6,275
Merger reserve		15,656	15,656	15,656	15,656
Reverse acquisition reserve		(13,862)	(13,862)	-	-
Share option reserve		328	346	328	346
Other equity reserve		232	-	232	-
Foreign translation reserve		(28)	(304)	-	-
Capital contributions		1,224	1,324	-	-
Retained earnings		(17,580)	(12,029)	(26,933)	(21,164)
Total equity		(2,628)	976	685	4,683

 

These financial statements were approved by the Board of Directors on 20 May 2010 and were signed on its behalf by:

 

J Wall FCA

Director

Statements of changes in equity

 

 

	Attributable to equity holders of the Company
Group	Share Capital	Share Premium	Merger Reserve	Reverse Acquisition Reserves	Share Option Reserve	Other Equity Reserve	Translation Reserve	Capital Contribution Reserves	Retained Earnings	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2008	1,570	4,735	15,656	(13,862)	430	-	44	1,002	(9,444)	131
Share based payments debit	-	-	-	-	(84)	-	-	-	-	(84)
Proceeds from share issues	2,000	2,000	-	-	-	-	-	-	-	4,000
Share issue costs	-	(460)	-	-	-	-	-	-	-	(460)
Transactions with owners	2,000	1,540	-	-	(84)	-	-	-	-	3,456
Loss for the year	-	-	-	-	-	-	-	-	(2,798)	(2,798)
Other comprehensive income:
Currency translation differences	-	-	-	-	-	-	(348)	322	213	187
Total comprehensive income for the year	-	-	-	-	-	-	(348)	322	(2,585)	(2,611)
Balance at 31 December 2008	3,570	6,275	15,656	(13,862)	346	-	(304)	1,324	(12,029)	976
Balance at 1 January 2009	3,570	6,275	15,656	(13,862)	346	-	(304)	1,324	(12,029)	976
Share based payments debit	-	-	-	-	(18)	-	-	-	-	(18)
Proceeds from share issues	780	780	-	-	-	(500)	-	-	-	1,060
Proceeds from issues of compound financial instruments	-	-	-	-	-	732	-	-	-	732
Share issue costs		(3)	-	-	-	-	-	-	-	(3)
Transactions with owners	780	777	-	-	(18)	232	-	-	-	1,771
Loss for the year	-	-	-	-	-	-	-		(4,888)	(4,888)
Other comprehensive income:
Currency translation differences	-	-	-	-	-	-	276	(100)	(663)	(487)
Total comprehensive income for the year	-	-	-	-	-	-	276	(100)	(5,551)	(5,375)
Balance at 31 December 2009	4,350	7,052	15,656	(13,862)	328	232	(28)	1,224	(17,580)	(2,628)

 

 

 

 

 

 

 

Statements of changes in equity 

 

 

	Attributable to equity holders of the Company
Company	Share Capital	Share Premium	Merger Reserve	Share Option Reserve	Other Equity Reserve	Retained Earnings	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2008	1,570	4,735	15,656	430	-	(7,245)	15,146
Proceeds from share issues	2,000	2,000	-	-	-	-	4,000
Share issue costs	-	(460)	-	-	-	-	(460)
Share based payments debit	-	-	-	(84)	-	-	(84)
Transactions with owners	2,000	1,540	-	(84)	-	-	3,456
Loss for the year	-	-	-	-	-	(13,919)	(13,919)
Total comprehensive income for the year	-	-	-	-	-	(13,919)	(13,919)
Balance at 31 December 2008	3,570	6,275	15,656	346	-	(21,164)	4,683
Balance at 1 January 2009	3,570	6,275	15,656	346	-	(21,164)	4,683
Proceeds from share issues	780	780	-	-	(500)	-	1,060
Proceeds from issues of compound financial instruments					732		732
Share issue costs	-	(3)	-	-	-	-	(3)
Share based payments debit	-	-	-	(18)		-	(18)
Transactions with owners	780	777	-	(18)	232	-	1,771
Loss for the year	-	-	-	-	-	(5,769)	(5,769)
Total comprehensive income for the year	-	-	-	-	-	(5,769)	(5,769)
Balance at 31 December 2009	4,350	7,052	15,656	328	232	(26,933)	685

 

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 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 their 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 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 to the 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.

 

Other equity reserve

Other equity reserve represents the residual element on initial recognition of compound financial instruments measured at fair value less the debt component.

Statements of cash flows

for the year ended 31 December 2009

 

 

		Group		Company
		Year ended 31 December		Year ended 31 December
		2009	2008	2009	2008
		£'000	£'000	£'000	£'000
Cash flows from operating activities
Loss for the period		(4,888)	(2,798)	(5,769)	(13,919)
Adjustments for:
Depreciation and amortisation		434	489	5,329	13,672
Interest income including loan waivers		(5)	(26)	(1)	(21)
Interest expenses		165	60	164	42
Share based payments		(18)	(84)	(18)	(84)
Movement in inventories		32	(26)	-	-
Movement in trade and other receivables		4	661	9	74
Movement in trade payables		(410)	(53)	(66)	(34)
Movement in fair value of derivatives		(53)	-	(53)	-
Net cash used in operations		(4,739)	(1,777)	(405)	(270)
Interest paid		(1)	(65)	-	(48)
Net cash used in operating activities		(4,740)	(1,842)	(405)	(318)
Cash flows from investing activities
Capital contribution to subsidiary		-	-	(4,786)	(2,719)
Purchase of intangible assets		(202)	(643)	-	-
Purchase of property, plant and equipment		(639)	(162)	-	-
Interest received		5	28	1	23
Net cash used in investing activities		(836)	(777)	(4,785)	(2,696)
Cash flows from financing activities
Proceeds from issue of share capital		1,057	3,540	1,057	3,540
Proceeds from issue of loan instruments		3,934	-	3,934	-
Loan repayments		-	(831)	-	(831)
Net cash generated from financing activities		4,991	2,709	4,991	2,709
Net (decrease)/increase in cash and cash equivalents		(585)	90	(199)	(305)
Opening cash and cash equivalents		772	682	200	505
Closing cash and cash equivalents		187	772	1	200

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the financial statements

 

 

 

2. Summary of significant accounting policies

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied.

 

Development of the Group

Proton Power Systems plc was incorporated on 7 February 2006 and on 31 October 2006 acquired the entire share capital of Proton Motor Fuel Cell GmbH. As a result of this transaction, the shareholders in Proton Motor Fuel Cell GmbH received shares in the Company.

 

In preparing the consolidated financial statements, 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.

 

As permitted by Section 408 of the Companies Act 2006, no separate income statement is presented in respect of the parent Company. The loss for the financial period dealt within the accounts of the parent Company was £5,769,000.

 

Basis of preparation

The consolidated financial statements of Proton Power Systems plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to those companies under IFRS. The consolidated financial statements have been prepared under the historical cost convention 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 dependant on its ability to raise cash to fund its operations from existing and potential shareholders and the debt market.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 3.

 

Presentation of financial statements

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007). The Group has elected to present the 'Statement of comprehensive income' in two statements: the 'Income statement' and a 'Statement of comprehensive income'.

 

Two comparative periods are presented for the Balance Sheet when the Group:

 

§ applies an accounting policy retrospectively,

 

§ makes a retrospective restatement of items in its financial statements, or

 

§ reclassifies items in the financial statements.

 

Management considers that this is not necessary because the 2007 Balance Sheet is unchanged from the version previously published.

 

Basis of consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

 

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. 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, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Share-based payments

The Company issues equity-settled share-based payments to certain employees of the Group. A fair value for the equity settled share awards is measured at the date of grant. The Group measures the fair value using the valuation technique most appropriate to value each class of award being a Black-Scholes pricing model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

 

The value of shares issued to settle fees and finance costs has been measured by reference to the fair value of services provided.

 

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency').The consolidated financial statements are presented in the British Pound ("Sterling"), which is the Group's presentation currency. Given the Company's listing on the Alternative Investment Market of the London Stock Exchange, the Directors consider that it is more appropriate to present the financial statements in Sterling.

 

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

 

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

§ assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

§ income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

§ all resulting exchange differences are recognised as other comprehensive income.

 

 

New IFRS standards and interpretations applied

As noted above IAS 1 (revised 2007) has been applied in the period. IFRS 8 has been adopted in the period. The adoption of IFRS 8 has not changed the segments that are disclosed in these financial statements because in the previous annual report, segments were already based on the internal management reporting information that is regularly reviewed by the Chief Operating Decision Maker. IAS 23 'Borrowing Costs' has been adopted in the period. The adoption of IAS 23 has not affected the financial position or results of the Group.

 

Cost of investment

The cost of an acquisition is measured at the fair values, on the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition. At each balance sheet date, the Company reviews the carrying amount of the investment to determine whether there is any indication that the investment has suffered an impairment loss. Any impairment loss is recognised as an expense immediately.

 

Property, plant and equipment

Property, plant and equipment are stated at acquisition cost or, as the case may be, production cost, reduced by accumulated depreciation and impairment losses. Costs of acquisition / costs of production include the expenses directly attributable to the acquisition. All repairs and maintenance are reported in the income statement as expenditure in the financial year in which they were incurred. The costs of production include all directly attributable costs, as well as the appropriate proportion of the overheads relating to production.

 

Depreciation is charged on the basis of the economic life of the assets on a straight line basis as follows:

·; Office equipment, furniture & equipment 10% - 33%

·; Technical equipment & machinery 20%

·; Leasehold property improvements over the life of the lease

 

Additions in the financial year are depreciated from the time of their acquisition.

 

The residual values and the useful lives of property, plant and equipment are reviewed at each financial year-end and, if applicable, are adjusted. When the carrying amount of an asset exceeds its recoverable amount, the carrying amount is reduced to the recoverable amount. To determine the recoverable amount, the Group's management estimates expected future cash flows from each cash generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows.

 

Gains and losses arising from the disposal of assets are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in the income statement.

 

Intangible assets

Intangible assets are capitalised at acquisition cost and amortised over their estimated economic life of the assets of 3 years, on a straight-line basis.

 

A self-developed intangible asset is recognized if the following criteria are fulfilled:

§ identification of the self-developed asset is possible;

§ the technical feasibility of completing the self-developed asset so that it will be available for use or sale;

§ the availability of adequate technical, financial and other resources to complete the development and to use or sell;

§ probability that the expected future economic benefits that are attributable to the self-developed intangible asset will flow to the entity; and

§ the development costs of the asset can be measured reliably.

 

Self-developed intangible assets are amortized over the assumed economic life of the assets, on a straight-line basis. If a self-developed intangible asset is not recognized in accordance with IAS 38, the development costs are expensed in the period in which they are incurred.

 

Amortization starts at the first-time usage of the asset. The capitalized costs include all directly attributable costs, as well as reasonable parts of the overheads relating to production. If applicable, received government grants are deducted from the capitalized development costs in accordance with IAS 20.24. Amortisation is charged to administrative expenses.

 

Self-developed intangible assets are tested for impairment annually. Insofar as there are indications of an impairment for other intangible assets, the planned amortizable intangible assets shall be subjected to an impairment test and, if necessary, the carrying amount reduced to the recoverable amount within the meaning of IAS 36.

 

Impairment of non-financial assets

At each balance sheet date, the Group reviews the carrying amount of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an identifiable life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

 

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount in which case the reversal of the impairment loss is treated as a revaluation increase.

 

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

 

Customer-specific contracts

Accounting for customer-specific contracts is carried out in accordance with IAS 11. If the result of a construction contract can be reliably estimated, the revenue and expenses are reported in accordance with the percentage of completion as per the reporting date. This is usually determined from the ratio of the costs of the contract incurred up to the reporting date in comparison with the estimated overall costs of the contract, unless this would lead to a distortion in the presentation of the percentage of completion. Insofar as the result of a contract cannot be reliably estimated, the proceeds of the contract are to be recorded only in the amount of the costs of the contract incurred which are likely to be collectible.

 

Where it is probable that the total cost of the construction contract will exceed the total contract revenue the expected loss is recognised immediately as an expense in the income statement.

 

Trade receivables

Trade and other receivables are recorded at the time of their initial recognition at fair value and subsequently at amortized cost less any impairment in value that may be necessary. An impairment in value in the case of trade and other receivables is recognized if there are objective indications that the amount of the debt due cannot be collected in full. The impairment in value is recognized in the income statement. Insofar as the reasons for value adjustments made in previous periods no longer exist, corresponding write-ups shall be made.

Deposits with financial institutions

Deposits with financial institutions are measured at their fair value.

 

Share capital

Ordinary shares are classified as equity.Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Trade and other payables

Trade and other payables, payables in respect of shareholders as well as other payables, are initially valued at fair value and subsequently at amortised cost.

 

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

 

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

 

Equity

Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

 

Taxes on income and revenue

Tax expenses are the aggregate amount of current taxes and deferred taxes. Current taxes are measured in respect of the taxable profit (tax loss) for a period. Current tax is measured using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred tax liabilities are the future tax expense (tax income) on the differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.

 

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxes are recognized in the income statement, except to the extent that it relates to items previously charged or credited to equity.

 

Employee benefits

The Company makes discretionary contributions to the personal pension plans of employees. The contributions are expensed on an accruals basis.

 

Other provisions

Other provisions are made insofar as there is a constructive obligation arising from past events and it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. The valuation of the provisions is reviewed at each reporting date. Provisions for guarantees are made in relation to individual cases.

 

Recognition of revenue and expenses

Revenue comprises revenue from the sale of goods and the rendering of services. Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT, rebates and trade discounts. Recognition of revenues from interest and interest expenses is made on an accrual basis. Financing costs are recorded as expenses in the period in which they are incurred. Research costs are expensed in the period in which they are incurred in accordance with IAS 38.54. Expenses for development costs that fulfil the criteria of IAS 38.57 are capitalized (see Intangible assets above). Amortization over the assumed economic life begins when the asset is available for use in accordance with IAS 38.97.

 

Royalty income

Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreements.

 

Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants for expenses already incurred are recognized as income in the period in which the corresponding claim is created.

 

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

 

Compound financial instruments

Compound financial instruments are measured at fair value. The debt component is initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. The residual element on initial recognition is recognised as other equity.

 

Derivative financial instruments

All derivative financial instruments are accounted for at fair value through profit and loss.

 

Standards, amendments and interpretations not yet applied by Proton Power Systems plc

·; IFRS 9 Financial Instruments (effective 1 January 2013)

·; IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011)

·; IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009)

·; Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective 1 July 2009)

·; Group Cash-settled Share-based Payment Transactions - Amendment to IFRS 2 (effective 1 January 2010)

·; Improvements to IFRSs 2009 (various effective dates, earliest of which is 1 July 2009, but mostly 2010)

·; IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009)

·; IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July 2009)

·; IFRIC 18 Transfers of Assets from Customers (effective prospectively for transfers on or after 1 July 2009)

·; IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010)

·; Prepayments of a Minimum Funding Requirement - Amendments to IFRIC 14 (effective 1 January 2011)

·; Amendment to IAS 32 Classification of Rights Issues (effective 1 February 2010)

 

Based on the Group's current business model and accounting policies, management does not expect material impacts on the Group's financial statements when these standards or interpretations become effective.

 

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.

 

Estimated useful life of property, plant and equipment and impairment

The Group estimates the useful life of property, plant and equipment and reviews this estimate at each financial period end. The Group also tests for impairment whenever a trigger event occurs. See Note 11.

 

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 10.

 

Revenue recognition

The Group uses the percentage-of-completion method in accounting for its fixed-price contracts to deliver project services. Use of the percentage-of-completion method requires the Group to estimate the services performed to date as a proportion of the total services to be performed.

 

Classification and fair value of financial instruments

The 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.

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.

4. 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.

 

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.

 

Revenue from external customers

	2009	2008
	£'000	£'000
UK	-	-
Rest of Europe	193	1,093
	193	1,093

 

 

5. Loss on ordinary activities before taxation

 

	2009	2008
	£'000	£'000
Loss on ordinary activities before taxation is stated
after charging
Depreciation and other amounts written off property, plant and equipment and intangible assets:
Owned	434	489
Hire of other assets - operating leases	214	228
Pension contributions	25	30
Foreign exchange loss	35	-
after crediting
Foreign exchange gains	-	(51)
Grants from public bodies	(107)	(713)
Change in fair value of derivatives	(53)	-

 

6. Auditor's remuneration

 

	2009	2008
	£'000	£'000
Audit services
Fees payable to the Company's auditor for the audit of the parent company and consolidated accounts	17	17
Fees payable to the Company's auditor and its associates for other services:
All other services	7	7
	24	24

 

 

7. Staff numbers and costs

 

The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

	Number of employees
	Group		Company
	2009	2008	2009	2008
Development and construction	37	28	-	-
Administration and sales	13	15	5	5
	50	43	5	5

 

 

The aggregate payroll costs of these persons were as follows:

	Group		Company
	2009	2008	2009	2008
	£'000	£'000	£'000	£'000
Wages and salaries	2,188	1,742	55	115
Share based payments	3	102	43	51
Share options forfeited	(21)	(187)	-	(184)
Social security costs	363	257	6	10
Other pension costs	25	30	-	-
	2,558	1,944	104	(8)

 

Share based payments

 

The Group has incurred an expense in respect of 1,170,000 (2008: 2,700,000) share options during the year issued to employees as follows:

	Group		Company
	2009	2008	2009	2008
	£'000	£'000	£'000	£'000
Share options	3	13	-	10
Shares	-	-	-	-
	3	13	-	10

 

Details of share options granted during 2009 are disclosed in the Directors' report on page 12 and the Remuneration report on pages 15 to 17. The cost of these options to the Group is being written off over a two year period from the date of grant at which point they become exercisable.

 

At 31 December 2009 the Group operated a single share option scheme ("SOS"). The SOS allows the Company to grant options to acquire shares to eligible employees. Options granted under the SOS are unapproved by HM Revenue & Customs. The maximum number of shares over which options may be granted to an employee under the SOS may not be greater than 10 per cent of the Company's issued share capital at the date of grant when added to options or awards granted in the previous 10 years. The exercise of options can take place at any time after the second anniversary of the date of grant. Options can not, in any event, be exercised after the tenth anniversary of the date of grant.

 

All share-based employee remuneration will be settled in equity. The Group has no legal or constructive obligation to repurchase or settle options. Share options and weighted average exercise price are as follows for the reporting periods presented:

	2009		2008
	Number	Weighted average exercise price	Number	Weighted average exercise price
		£		£
Opening balance	3,160,000	0.200	1,337,500	0.787
Granted	1,170,000	0.100	2,700,000	0.100
Forfeited	(345,000)	0.373	(877,500)	0.788
Closing balance	3,985,000	0.145	3,160,000	0.200

 

At 31 December 2009 265,000 of the above options were exercisable at an exercise price of 77.5p and 79p.

 

The fair values of options granted were determined using the Black-Scholes valuation model. Significant inputs into the calculation include a weighted average share price and exercise prices as illustrated above. Furthermore, the calculation takes into account future dividends of nil and a volatility rates of between 50% and 94%, based on expected share price. Risk-free interest rate was determined between 4.160% and 5.125% for the various grants of options. It is assumed that options granted under the SOS have an average remaining life of 14 months (2008: 25 months).

 

The underlying expected volatility was determined by reference to the historical data, of the Company. No special features inherent to the options granted were incorporated into measurement of fair value.

 

Directors' remuneration

Details of Directors' remuneration are given in the Remuneration report on pages 15 to 17 of the Annual Report.

 

The remuneration of key management of the Group was as follows:

			Group
			2009	2008
			£'000	£'000
Wages and salaries including social security contributions			247	407
Share-based payment charge			46	51
			293	458

 

The Company has no key management other than Directors.

 

8. Taxation

 

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

	2009	2008
	£'000	£'000
Tax reconciliation
Loss before tax	(4,888)	(2,798)
Expected tax credit at 29.65 % (2008: 29.65%)	(1,449)	(830)
Expenses not deductible for tax purposes	(3)	(33)
Tax losses carried forward	1,452	863
Tax charge	-	-

 

 

9. 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 year.

 

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary share. 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.

 

 

	2009		2008
	Basic	Diluted	Basic	Diluted
	£'000	£'000	£'000	£'000
Loss attributable to equity holders of the Company	(4,888)	(4,888)	(2,798)	(2,798)
Weighted average number of ordinary shares in issue (thousands)	92,521	92,521	51,418	51,418
Shares issuable (weighted) - share options (thousands)	-	3,178	-	1,124
Adjusted weighted average number of ordinary shares	92,521	95,699	51,418	52,542
	Pence per share	Pence per share	Pence per share	Pence per share
Loss per share (pence per share)	(5.3)	(5.3)	(5.4)	(5.4)

 

Details of shares issued after the balance sheet date are given in Note 22.

 

 

10. Intangible assets - Group

 

	Copyrights, trademarks and other intellectual property rights	Development costs	Total
	£'000	£'000	£'000
Cost
At 1 January 2008	42	549	591
Exchange differences	14	320	334
Additions	5	638	643
At 31 December 2008	61	1,507	1,568
At 1 January 2009	61	1,507	1,568
Exchange differences	(3)	(52)	(55)
Additions	8	250	258
Disposals	-	(474)	(474)
At 31 December 2009	66	1,231	1,297
Amortisation
At 1 January 2008	33	160	193
Exchange differences	12	148	160
Charged in year	4	428	432
At 31 December 2008	49	736	785
At 1 January 2009	49	736	785
Exchange differences	(3)	4	1
Charged in year	6	220	226
Eliminated re disposals	-	(474)	(474)
At 31 December 2009	52	486	538
Net book value
At 31 December 2009	14	745	759
At 31 December 2008	12	771	783
At 1 January 2008	9	389	398

 

Self-developed intangible assets in the amount of £258,000 (2008: £643,000) are recognized in the reporting year, because the prerequisites of IAS 38 have been fulfilled.

 

The useful life of self-developed intangible assets is 3 years from completion of the asset.

 

For self-developed intangible assets brought into use no indications of impairment in value that would trigger an impairment test arose in the reporting year. Self-developed intangible assets costing £440,000 have not yet been brought into use and have been reviewed for impairment.

 

There are no individually significant intangible assets.

 

 

11. Property, plant and equipment - Group

 

	Leasehold property	Technical equipment & machinery	Office & other equipment	Self-constructed plant & machinery	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2008	58	188	533	96	875
Reclassification	-	-	(90)	90	-
Exchange differences	24	72	146	76	318
Additions	23	47	18	74	162
At 31 December 2008	105	307	607	336	1,355
At 1 January 2009	105	307	607	336	1,355
Reclassification	-	336	-	(336)	-
Exchange differences	7	(15)	(41)	1	(48)
Additions	142	433	47	12	634
At 31 December 2009	254	1,061	613	13	1,941
Depreciation
At 1 January 2008	23	175	468	33	699
Reclassification	-	-	(81)	81	-
Exchange differences	8	58	129	42	237
Charge for year	5	10	21	21	57
At 31 December 2008	36	243	537	177	993
At 1 January 2009	36	243	537	177	993
Reclassification	-	177	-	(177)	-
Exchange differences	(1)	(14)	(38)	-	(53)
Charge for year	13	165	30	-	208
At 31 December 2009	48	571	529	-	1,148
Net book value
At 31 December 2009	206	490	84	13	793
At 31 December 2008	69	64	70	159	362
At 1 January 2008	35	13	57	71	176

 

The economic life of leasehold property improvements as well as of technical equipment and machinery is 5 years.

 

 

12. Investment in subsidiary undertaking

 

			2009	2008
Company			£'000	£'000
Shares in Group undertaking
Cost
At beginning of year			23,890	21,170
Additions			4,786	2,720
At end of year			28,676	23,890
Impairment
At beginning of year			19,335	5,663
Charge for the year			5,329	13,672
At end of year			24,664	19,335
Net book value
At end of year			4,012	4,555

 

On 31 October 2006 the Company acquired the entire share capital of Proton Motor Fuel Cell GmbH, a company incorporated in Germany. The cost of investment comprises shares issued to acquire the company valued at the listing price of 80p per share, together with costs relating to the acquisition and subsequent capital contributions made to the subsidiary.

 

Following a review of the Company's assets the Board has concluded that there are sufficient grounds for its investment in the subsidiary undertaking to be subject to an impairment charge under IAS 36. In arriving at the charge in the year of £5.329m (2008: £13.672m) the Board has determined the recoverable amount by reference to the fair value of the asset demonstrated by the market price of the Group's equity on AIM.

 

13. Trade and other receivables

 

	Group		Company
	2009	2008	2009	2008
	£'000	£'000	£'000	£'000
Trade receivables	196	218	-	-
Other debtors	28	12	3	12
Prepayments and accrued income	42	40	13	13
	266	270	16	25

 

The Directors consider that the carrying amount of trade and other receivables approximates to their fair values.

 

In addition some of the unimpaired trade receivables are past due as at the reporting date. The age of financial assets past due but not impaired is as follows:

			Group
			2009	2008
			£'000	£'000
Not more than 3 months			32	53
More than 3 months but not more than 6 months			-	17
More than 12 months			-	72
			32	142

 

14. Cash and cash equivalents

 

	Group		Company
	2009	2008	2009	2008
	£'000	£'000	£'000	£'000
Cash at bank and on hand	187	447	1	7
Short term bank deposits	-	325	-	193
	187	772	1	200

 

15. Trade and other payables

 

	Group		Company
	2009	2008	2009	2008
	£'000	£'000	£'000	£'000
Trade payables	809	795	1	69
Bank overdraft	5	-	5	-
Payments on account on contracts	101	135	-	-
Social security and other taxes	1	3	1	3
Other creditors	77	48	-	1
Accruals and deferred income	436	367	28	24
	1,429	1,348	35	97

 

The Directors consider that the carrying amount of trade and other payables approximates to their fair values.

 

16. Borrowings

 

	Group		Company
	2009	2008	2009	2008
	£'000	£'000	£'000	£'000
Loan
Current and total borrowings	2,832	-	2,832	-

 

During the year the Group and Company entered into several convertible loan agreements and drew down a total of £1,500,000 and €2,700,000 under these agreements. £500,000 proceeds were received in respect of an instrument classified as equity in nature and therefore was recognised solely within equity. This balance was subsequently converted into share capital during the year.

£1,000,000 proceeds were received in respect of an instrument classified as a compound financial instrument. The debt element was fair valued using a discount rate of 20% (calculated by reference to market rate on a similar instrument) and has subsequently been accounted for at amortised cost. The residual value of the instrument has been recognised in other equity.

€2,700,000 proceeds were received in respect of instruments classified as a debt host instrument with an embedded derivative being the conversion feature. The embedded derivative has been fair valued and the residual value of the instrument has been recognised as debt. The debt has subsequently been measured at amortised cost.

17. Derivatives

 

	Group		Company
	2009	2008	2009	2008
	£'000	£'000	£'000	£'000
Derivatives on convertible loan	477	-	477	-

 

The derivatives relate to the conversion features attached to convertible loans as disclosed under note 16. The derivatives are initially recognised at fair value and fair valued at each subsequent accounting reference date.

 

18. Deferred income tax - Group

 

	2009	2008
	£'000	£'000
Accelerated capital allowances	222	230
Losses carried forward	(222)	(230)
	-	-

 

Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of £6,071,000 (2008: £4,897,000) in respect of losses amounting to £1,589,000 (2008: £1,260,000) and €21,027,000 (2008: €15,670,000).

 

19. Share capital

 

The share capital of Proton Power Systems plc consists of fully paid Ordinary shares with a par value of £0.01 (2008; £0.05) and Deferred Ordinary shares with a par value of £0.01. All Ordinary shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting of Proton Power Systems plc. Deferred Ordinary shares have no rights other than the repayment of capital in the event of a winding up. None of the parent's shares are held by any company in the Group.

 

During the year 10.6m ordinary shares of 5p each were issued at 10p per share and 25m ordinary shares of 1p each were issued at 2p per share.

 

Details of share options in issue are given in Note 7.

 

The number of shares in issue at the balance sheet date is 106,990,863 (2008: 71,390,893) Ordinary shares of 1p each (2008: 5p each) and 327,963,452 (2008: nil) Deferred Ordinary shares of 1peach

 

Proceeds received in addition to the nominal value of the shares issued during the year have been included in share premium, less registration and other regulatory fees and net of related tax benefits. Costs of new shares charged to equity amounted to £3,000 (2008: £460,000).

 

On 23 July 2009 each of the 81,990,863 Ordinary shares of 5p each in the capital of the Company in issue were sub-divided into five shares of 1p each, of which upon the occurrence of such sub-division, one share shall be a new ordinary share of 1p each and four shares shall be converted into and reclassified as four Deferred Ordinary shares of 1p each having the following rights and being subject to the following restrictions:

·; no right to participate in any dividends declared, made or paid by the Company;

·; the right on a return of assets in a winding up to the repayment of the capital paid up on such shares after the rights of all holders of Ordinary shares have been discharged in full and the sum of £10,000,000 has been paid in respect of each issued Ordinary share in the capital of the Company but no other right to participate in the assets of the Company, but so that none of the rights and restrictions attached to such Deferred Ordinary shares shall be or be deemed to be varied or abrogated in any way by the passing or coming into effect of any special resolution of the Company to reduce its share capital (including a special resolution to reduce the capital paid up on, and cancel, such Deferred Ordinary shares);

·; no right to receive notice of or to attend at any general meeting of the Company;

 

	2009				2008
	Ordinary shares		Deferred ordinary shares		Ordinary shares		Deferred ordinary shares
	No. '000	£'000	No. '000	£'000	No. '000	£'000	No. '000	£'000
Shares issued and fully paid
At the beginning of the year	71,391	3,570	-	-	31,391	1,570	-	-
Share issue	35,600	780	-	-	40,000	2,000	-	-
Reclassified under share reorganisation	-	(3,280)	327,963	3,280	-	-
	106,991	1,070	327,963	3,280	71,391	3,570	-	-

 

22. Post balance sheet events

 

On 18 January 2010 the Company converted £1m of a loan from Roundstone Properties Limited into 50,000,000 new ordinary shares of 1 pence each in the capital of the Company (the "Placing Shares") at 2 pence per Placing Share to raise £1.0 million (before expenses). 

 

On 27 January 2010 and 23 April 2010 the Company entered into further extensions of €1.62m each to the convertible loan agreement with Roundstone Properties Limited dated 29 April 2009. The net proceeds of the loan extensions will be used by the Company to provide additional working capital.

 

 

A copy of the audited annual report for the year ended 31 December 2009 together with a notice of Annual General Meeting to be held at the offices of Arbuthnot Securities, Arbuthnot House, 20 Ropemaker Street, London, EC27 9AR at 3.00 pm on 22 June 2010, will be posted to shareholders shortly and is also available from the Group' website at www.protonpowersystems.com.

 

- ENDS -