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2022 Financial Results and Current Trading

Published: 28/06/2023, 07:00

RNS Number : 1175E

Invinity Energy Systems PLC

28 June 2023

Invinity Energy Systems plc

("Invinity" or the "Company")

2022 Financial Results and Current Trading

Invinity Energy Systems plc (AIM: IES) (AQSE: IES) (OTCQX: IESVF), a leading global manufacturer of utility-grade energy storage, is pleased to announce its Full Year Results for the year ended 31 December 2022 and provide an update on current trading. The Company's 2022 Annual Report will be posted to shareholders and available for download from the Company's shareholder documents portal shortly.

The Company will hold a virtual meeting for analysts at 12 noon (UK time) today. Analysts wishing to attend are kindly asked to email IR@invinity.com.

Invinity's management team will also host a virtual results presentation and interactive Q&A for all shareholders at 4pm (UK time) on Monday 3 July 2023. Those wishing to join the session can sign up to Investor Meet Company for free via this registration link.

2022 Highlights

Financial

· £3.6m total income including sales revenue and project related grant income, a 13% increase YoY (2021: £3.2m).

· 12% YoY reduction in loss from operations - £19.0m (2021: £21.3m).

· Inventory and Pre-paid inventory increased 51% to £14.9m (2021: £9.9m).

· £15.3m current cash as at 31 May 2023. Year-end cash £5.1m.

· Post Period: Completion of an oversubscribed £23m fundraise (March 2023) including securing a £2.5m strategic investment from Taiwanese technology group Everbrite. Further discussions with a number of potential strategic partners are ongoing.

· Post Period: Repayment of the Riverfort Loan Facility (March 2023).

Commercial

· 39.2 MWh of Closed sales in 2022 (2021: £0.5 MWh).

· Secured government and agency support for key projects including the Viejas Microgrid, funded by the California Energy Commission, and the first phase of the UK Department of Energy Security and Net Zero's LODES competition (which Invinity subsequently won in April 2023).

· Independent bankability review completed by leading assurance and risk management company DNV. The associated report independently confirmed Invinity's products meet or exceed their stated specifications and validated the Company's position as a leader in the flow battery industry and as a strong challenger to lithium-ion incumbents.

· Signed commercial partnerships in the UK, EU and Asia, all of which have subsequently resulted in product sales including those with:

o Hyosung Heavy Industries in South Korea,

o Everdura Technology Company in Taiwan, and

o Bei Ying International in Taiwan.

Operational

· Delivered 4.56 MWh of products between January and December 2022 to projects in the UK, EU, U.S. and Asia.

· Manufactured 13.2 MWh of products during 2022 representing a 100% increase YoY.

· Further expanded manufacturing capabilities in line with demand:

o Completed manufacturing expansion in Asia with the move to new, larger manufacturing partner Baojia New Energy;

o Significantly expanded Invinity's Vancouver manufacturing facility (which was officially opened in June 2023).

· Gained certification as compliant with multiple ISO and UL standards in April 2022.

Current Trading

In the year to date and against a background of increasingly positive policy and regulatory developments looking to further incentivise global deployment of longer duration, high-throughput energy storage technologies, the Company has achieved significant milestones across all facets of its business. These include:

· Closing 2023 year to date sales totalling 5.38 MWh for vanadium flow batteries ("VFBs") to customers including The Wave (UK), OPALCO (U.S.) and IBEW (U.S.);

o Year to date sales also include initial and follow-on orders with new regional partners Dawsongroup plc in the UK and STS Group in the EU.

· Delivering an 8.4 MWh VFB to Elemental Energy for its Chappice Lake Solar Storage project in Alberta, Canada;

· Delivering an 8 MWh VFB to Yadlamalka Energy for its Spencer Energy project in South Australia;

· Securing £11m of matched-funding for the UK LODES project; and

· Announcing the Company's first Mistral pilot prototype project.

Revenue Backlog and Commercial Pipeline

The Company's 2023 revenue backlog (defined as both contracted orders already recognised in 2023 and contracted orders still to be delivered over the remainder of 2023) was £23.7m as at 31 May 2023.

Invinity's current commercial pipeline as at 24 May 2023, is detailed below:

Date	Closed (MWh)	Base (MWh)	Advanced (MWh)	Qualified Near Term¹ (MWh)	Qualified Further Term¹ (MWh)
25-May-22 (2021 Annual Report)	28.0	11.6	66.3	608.3	-²
22-Sept-22 (HY22 results)	28.0	22.8	63.5	405.8	-²
20 Jan-23 (Operational Update)	59.8	15.6	129.4	766.4	1,190.0
24-May-23 (FY22 Results)	64.3	42.8	73.4	957.1	1,397.4
% change (May 2022 to May 2023)	+129.6%	+269.0%	+10.7%	+57.3%	+17.4%³

¹ Near term dates in the Qualified categories are where estimated delivery is within the next 24 months. Further term reflects estimated deliveries that are beyond the next 24 months.

² Not reported at time of pipeline publication.

³ Increase given from when figure first reported.

The significant year-on-year increases across all categories of the Company's sales pipeline continues to reinforce both the Company's strengthening position in the market for non-lithium, longer duration energy storage, reinforced by the growing global demand for products within that segment. Additionally, the pipeline now includes over 1 GWh of qualified commercial interest for Invinity's next-generation product.

Next-Generation Product Development Progress

Invinity continues to make significant progress in designing and developing its next-generation vanadium flow battery. In June 2023 the Company announced its first Mistral prototype project, supported by the British Columbia Centre for Innovation and Clean Energy, at a site near the Company's recently expanded Vancouver manufacturing facility.

The ongoing achievement of developmental and engineering milestones has continued to validate the commercial and technical targets established for the programme. Invinity continues to expect more contracts for a limited number of initial pilot projects to be announced later in 2023, with publication of full product details, product certification and unrestricted sale of the product expected mid-2024.

Larry Zulch, Chief Executive Officer at Invinity said:

"We're pleased with the progress we made in 2022 along Invinity's pathway to profitability. Achieving and exceeding our expectations for signing new deals was foundational for achieving the significant increase in revenue we expect in 2023. Government support around the globe demonstrated acknowledgement of the long duration energy storage imperative. And progress on our next generation product, code-named Mistral, keeps us on target for first customer shipments next year of an offering we expect to be transformative for the prospects for non-lithium storage. Our confidence and optimism have never been higher."

Stay up to date with news from Invinity. Join the distribution list for the Company's monthly investor newsletter here.

Enquiries:

Invinity Energy Systems plc	+44 (0)20 4551 0361
Jonathan Marren, Chief Development Officer and Interim CFO Joe Worthington, Director of Communications

Canaccord Genuity (Nominated Adviser and Joint Broker)	+44 (0)20 7523 8000
Henry Fitzgerald-O'Connor / Harry Pardoe / Gordon Hamilton

VSA Capital (Financial Adviser and Joint Broker)	+44 (0)20 3005 5000
Andrew Monk / Simon Barton

Tavistock (Financial PR Advisor)	+44 (0)20 7920 3150
Simon Hudson / Charles Baister	invinity@tavistock.co.uk

Notes to Editors

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

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

Invinity was created in April 2020 through the merger of two flow battery industry leaders: redT energy plc and Avalon Battery Corporation. With over 65 MWh of systems already deployed or contracted for delivery across over 70 sites in 15 countries, Invinity is active in all major global energy storage markets and has operations in the UK, Canada, USA, China and Australia. Invinity Energy Systems plc is listed in the UK on AIM and AQSE and trades in the USA on OTCQX.

To find out more, visit invinity.com, sign up to our monthly Investor Newsletter here or contact Investor Relations on via +44 (0)20 4551 0361 or ir@invinity.com.

Audited financial results for the year ended 31 December 2022

Introduction: A Company and an Industry Race Forward

By Matt Harper, Chief Commercial Officer

Last year I talked about how Invinity was at a critical threshold where the three pillars of value, cost and proof - value to our customers, cost of delivering that value, and proof that we and our products can deliver - were the foundation for significantly growing our commercial opportunities. Since that time we were able to solidify those pillars, and I'm thrilled that doing so massively accelerated the commercial acceptance of our product.

The Three Pillars

We and our customers now have data that shows the value our pioneering projects are delivering; going above and beyond traditional lithium-ion systems to deliver multiple value streams in parallel. At the Energy Superhub Oxford, for instance, our 5 MWh battery has been operating in wholesale electricity markets and performing ancillary services since the summer of 2022, proving the range of capabilities our products provide for customers. Similarly at Scottish Water Perth, our battery is increasing the on-site use of self-generated, low carbon electricity while also saving the site operator money by decreasing the amount of electricity they purchase when electricity tariffs are at their peak.

But even the most valuable assets need to be purchased and financed - so cost matters, and Invinity made significant advancements in 2022. Product design simplifications, new supply chain partners and new, more streamlined facilities have decreased our production costs, allowing us to sell at prices that contribute to our bottom line while keeping customer business cases resoundingly positive. We have also worked to further decrease the costs our customers incur to operate and maintain our products over a service life measured in decades rather than years, truly maximizing their return on investment. And perhaps most importantly, the focus on full lifecycle cost reduction has set the stage for our next generation product, code-named "Mistral", whose fundamentally simpler, lower-cost design will allow us to compete directly with the most aggressively priced energy storage systems on the market.

Finally when we think about proof, we have made significant leaps in giving new partners - be they customers, financiers, resellers or regulators - confidence that our batteries are the right solution for solving the toughest problems on the electric grid. Not only have we implemented data analytics and reporting tools that show our existing customers how our products are befitting them both in real-time and in aggregate, but we have developed assets such as a bankability report from global assurance and risk management leader DNV to prove how Invinity's vanadium flow batteries deliver as expected.

From a Strong Foundation

And it worked. Invinity saw tremendous commercial success through the latter half of 2022 building directly on these pillars, contracting for more business in that period than in the history of the Company to date. Excitingly this included projects that are in potentially massive new segments like data centres (with Kinetic Solutions in Arizona); that present a first engagement with regional partners who plan to revamp entire national electricity grids (with Hyosung in South Korea, Everdura in Taiwan and, more recently, both Equans and STS in Europe); and that will demonstrate how at any scale our batteries, combined with renewables, can decrease costs and accelerate decarbonization for major electricity users (with Indian Energy in Southern California). With each of these projects progressing towards delivery, we are looking forward to further proving how our batteries can revolutionise energy storage applications the world over in 2023.

From One to Many

The above-stated developments are impressive, and I am energized every day by being part of a team that continues to deliver commercial success year after year. Beyond Invinity's walls, though, those same three pillars of value, cost and proof are beginning to deliver huge leaps forward for grid-connected energy storage in general. In the last year, industry associations like the Long Duration Energy Storage Council have worked to advance a consensus view of how longer duration storage, especially incorporating non-lithium technologies, can create enormous value while unlocking a renewables-fueled global path to net zero. Across the nascent long duration energy storage ("LDES") industry costs are decreasing and supply chains are normalizing; by contrast, the growing EV market is driving costs up and availability down for lithium-ion batteries, broadening the opportunity for competition.

And the proof? One only needs to look to the funding governments and regulators are putting into our industry, from the California Energy Commission (or CEC)'s US$380m for non-lithium LDES to the UK Department of Energy Security and Net Zero (DESNZ)'s £69m for Longer Duration Energy Storage (LODES) solutions for the UK grid. We are delighted to see broad support for our sector and especially thrilled that, in both cases, Invinity is at the forefront, with the CEC and DESNZ providing financial support to our Viejas Resort and Casino project in California and our Phase 2 LODES competition project in the UK, respectively. Additionally, the U.S. Department of Energy has recently published a report titled "Pathways to Commercial Liftoff: Long Duration Energy Storage", which projects that the intra-day LDES market, on which Invinity is focused, is expected to be as large as 274 GW in the U.S. alone by 2050. These and other agencies the world over are convinced long duration storage is critical to a net zero grid; their support of Invinity to date proves they see us as leaders in delivering that vision.

The Best is Yet to Come

In 2023 Invinity will build on this momentum. First, we expect to deliver a fleet of flow batteries totaling over 35 MWh across four continents, embodying almost 1000 individual flow batteries. That's not just a commercial success; it will give us operational experience, applications expertise and an unparalleled dataset from which to draw the customer, technical and data-driven insights that will accelerate our progress and advance our market-leading position.

Perhaps most exciting though are our plans to initiate on our first projects this year for our next-generation battery, Mistral. This isn't just about developing a cheaper, higher-performance battery; we expect Mistral will define a new category of high-throughput grid-connected energy storage. A major trend in renewables over the last five years has been the combination of solar photovoltaic generation with storage as the dominant paradigm for utility-scale plants. By contrast, maximising intermittent wind output with fast-responding, durable battery storage is a much more demanding service, requiring intervention by the second, by the hour and over days. The economics of delivering that level of throughput over the decades-long service life of a wind farm by lithium-ion batteries simply do not add up.

Mistral, whose development draws from deep expertise from the wind industry, will be the first product designed from the ground up to maximise the benefits storage can deliver to renewable generation. This matters because in the UK, wind dominates over solar; but even with recent increases in the cost of gas generation driven by geopolitical uncertainty, wind power's intermittency has limited its ability to substitute for gas as prices rise. Mistral will close that gap, delivering energy on demand from wind and helping to stabilize UK energy prices with low-cost, low-carbon, domestically-produced power.

No matter what proportion of the global energy storage market Invinity is able to capture - and we think we are ideally positioned to capture a large slice of the pie - it is unequivocal that this is a revolutionary opportunity of the kind that comes about only once in a generation. The last two decades have proven that renewables are an inexpensive, effective source of clean energy for the electric grid; the next two will prove that energy storage can turn that energy into on-demand, low-cost power our homes, our industry, and our institutions in a net zero future. The year ahead will see Invinity continue to accelerate our part in making that future a reality.

Chairman's Report: Breaking New Ground

I am delighted to report to shareholders that Invinity has accelerated its deployment of working assets and built up a significant order book for delivery in 2023 and 2024. We are focused on deploying and operating the units that have been shipped, winning new contracts and developing the next generation of our vanadium flow battery which we believe will play a significant role in Invinity's rapid progression through the current loss-making phase towards becoming a self-sustaining, profitable business. It is worth restating why we see Invinity winning a significant market share in the global energy storage market. Invinity has created a modular, long-duration battery with a 20+ year asset life, capable of achieving some of the lowest possible levelised cost of storage metrics. This means our technology is an ideal solution for both commercial and utility-scale customers wishing to reduce their energy costs, utilise greater amounts of renewable energy and accelerate progress towards net zero. Given the world's urgent focus across these key areas, this opens up a potentially huge addressable global market for Invinity, who are uniquely positioned with a mature, production-ready product which has already been proven in the field.

2022 saw record global deployment of energy storage, particularly in the U.S. and the UK, and I am pleased to note Invinity's own contribution to this trend. We sold a record number of vanadium flow batteries during the period to customers in both new and existing markets, making this our best commercial year to date, and underscoring my belief that the Company has reached a key milestone in terms of commercial acceptance. One of the key drivers of this success was potential customers being able to see our batteries in operation at key sites and I was proud to represent Invinity at the launch of our 5 MWh vanadium flow battery, the UK's largest operational VFB, at the Energy Superhub Oxford in July 2022. Projects such as this attract worldwide attention and have helped to place Invinity at the forefront of many developers' minds.

Delivery is an important target for Invinity. Signing contracts is the first step of the commercial process, but the follow through to delivery and handover generates revenue and ultimately long-term value for our shareholders. Having operational systems in the field is an important indicator of the significant progress the Company has made in this regard, but as a manufacturer of 'emerging' battery technology, at the core of our business will always be our ability to build and deliver our products effectively. Notably, the expansion of our manufacturing capabilities has set us on the path towards delivering even larger projects, faster and more economically than ever before.

During 2022 the team successfully deployed funds that were raised in late 2021 to support our operational and commercial growth and I'm greatly encouraged to report demonstrable progress in both areas during the period. The funds raised at the beginning of 2023 are already supporting the next steps of our growth as we progress from a revenue-generating to a profit-generating business. The work we have done means I remain confident that Invinity is now even better positioned to take advantage of this buoyant market evidenced by our well-developed commercial pipeline, which now includes a first look at the over 1 GWh of qualified commercial interest for our next-generation vanadium flow battery and confirms Invinity's place as one of the global market leaders for vanadium flow battery technology.

My Board and I have ensured Invinity continues to follow a clear and well-developed strategy, set out in detail later in this report. Invinity's core markets remain the UK, North America and Australia and we maintain our belief that these are the most appropriate areas for focus given the Company's current capabilities. However, new markets are also emerging in Europe and Asia and the formation of key partnerships that enable us to expand our reach commercially and operationally without the need for a full corporate presence and the associated overhead costs is another important strategic decision that has been made.

To this end, I am pleased to note we signed three new reseller partnerships in 2022 that enable us to access some of the fastest growing markets in the world, such as Korea and Taiwan. Encouragingly, this momentum has continued into 2023 with entry into new European markets and further important business relationships initiated in our core UK and U.S. markets. The hard work carried out by our team in establishing and supporting these strategic relationships is already bearing fruit with our largest sale of 2022 being a 15 MWh deal with our Taiwanese partner Everdura.

Looking inward, the Invinity team is operating strongly, winning new contracts, deploying our batteries and continuing to develop our leading-edge technology. I would like to take this opportunity to thank the entire team for their hard work and perseverance during 2022 and the current year to date. I would also like to thank all my Board colleagues for their support and assistance over the year, particularly to Jonathan Marren who, stepping back into an Executive role, is already making a significant impact on the strategic and financial side of the business.

In summary, 2022 can be marked as a key inflection point in Invinity's progress, with almost 40 MWh of sales signed, a £23.7m sales orderbook for delivery across 2023, our largest project to date launched and operational and a growing partnership network that is already bringing commercial benefits to the Company. An improved corporate and operational structure has set us up well for the future and 2023 is already shaping up to be another transformational year, supported by the successful March fundraise and continued commercial progress.

I remain extremely optimistic in the outlook for Invinity. I am extremely grateful for the continued support from you, our shareholders, without which we would not be in our strongest position yet to take this next step on our journey.

Neil O'Brien

Non-executive Chairman

27 June 2023

Chief Executive's Report: Progress on the Pathway to Profitability

Efforts from years past bore fruit in 2022. We closed deals for more energy storage than we had closed in our entire previous history. As expected, we reported a loss for 2022, but were able to transition from closing loss-making deals to signing ones that are anticipated to yield positive gross margins. I'm pleased to report that all but one of the contracts closed in 2022 is forecast to achieve this requirement. We manufactured more product than in any previous year, progressed our next generation product and established significant new partnerships. Perhaps most importantly, we set the stage for an even better 2023 in every critical measure.

We have set ourselves to a task that is not easy. The significant investment we are making now will ensure Invinity is better prepared commercially, operationally and financially as we take rapid and significant strides towards profitability. We are passionately committed to building a profitable, self-sustaining company that creates a net zero future where vanadium flow batteries deliver renewable power on demand. This means delivering large amounts of high-performance stationary energy storage at a price that customers find compelling and signing contracts in sufficient volume and at low enough costs that we generate corporate profit. We believe our next generation product "Mistral" will play a key role in achieving these goals.

We know what we need to do to achieve this ambition and we are doing it. Our accomplishments in 2022 were largely presented as goals in 2021. In my report for that year, I said that we wanted to achieve demonstrable progress in the fields of sales, partnerships, and delivery, recognise revenue on our existing VS3 product, and progress development of our next-generation product, code-named "Mistral". Our accomplishments in these key areas, despite (or perhaps enhanced by) the challenges we've encountered and overcome marks progress toward our goals and will help us deliver long-term value to our shareholders.

We believe our accomplishments in 2022 allow us to state that we have successfully navigated the difficult transition from a company delivering pilot projects to a commercial entity. Our work continues to require significant effort and resources as we progress, but we are moving purposefully and determinately along our pathway to profitability.

Delivery and Sales

Our success derives from delivering our proven technology to a growing list of customers. I am pleased to report that last year we delivered more than 100 individual VS3 modules and commissioned more than 200 to customers across three continents. At the time of writing, we believe we have delivered more individual flow batteries-each capable of operating independently-than all other flow battery companies combined across their histories.

Current installations of each BESS (Battery Energy Storage System; an industry-standard acronym for stationary storage) incorporating Invinity's products undergo a multi-step process. Contracted project objectives are turned into a storage system architecture and expressed in plans and documentation. Our customer prepares the battery system's foundations, grid connections and supporting infrastructure. Once site works are complete, we deliver the battery modules, ensure those modules are installed correctly and bring the system online. Demonstrating that the battery system can properly store and discharge energy allows us to declare the BESS "energised". Once the system is integrated with site-level controls and fully operating, we formally hand it over to the customer and consider it "commissioned".

During 2022, we commissioned our largest site to date, the 5 MWh system at the Energy Superhub Oxford, in addition to a number of behind-the-meter systems including a project with Scottish Water and one with a Taiwanese industrial group. We also delivered two California Energy Commission-funded projects: for the Soboba Band of Luiseño Indians and at Marine Corps Air Station Miramar near San Diego. In August, we energized our project with the European Marine Energy Centre in the Orkney islands.

Successfully closing a significant number of deals, delivering those products around the world and ensuring they meet our customers' requirements provides important proof of our commercial status. It demonstrates that the market wants our batteries and that we have built an organisation capable of converting market interest into revenue.

We and our customers continued to experience various external challenges, including ongoing supply chain disruptions, in 2022. Those disruptions caused some delays but did not impact our ability to sign nearly 40 MWh of sales contracts for our VS3 batteries. In doing so, the Company sold more batteries in the last three months of 2022 than in Invinity's entire history. These sales were based in part on our ability to demonstrate to new customers how existing projects are already delivered and operating. I am grateful to the entire Invinity team for the work they carried out to make this happen.

Importantly, I believe these recent contract wins, expected to be delivered at positive gross margin, combined with robust growth in the Company's sales pipeline, reflect an inflection point in the commercial acceptance of Invinity's products. The Company is increasingly well positioned to address the growing global demand for commercial, non-lithium and longer-duration energy storage solutions.

Partnerships

I stated in my previous report that our strategy included finding substantial partners who can represent us and our products by providing sales, installation and service support. These partnerships are valuable for two reasons.

First, they allow us to reach a wider market without incurring significant costs that would delay profitable growth for the Company, particularly outside our core markets of Europe, North America and Australia. Second, our reputation is enhanced through association with established entities that have chosen to work with us because they recognise the size of the opportunity and the advantages of our product. I am proud that Invinity has developed important relationships with Hyosung Heavy Industries in Korea, Everdura Technology Company and Bei Ying International in Taiwan, Indian Energy in the U.S., and post period, with Dawsongroup in the UK and Ideona Group and STS Group in the EU. I am delighted that we have closed sales opportunities with each of these partners and are developing further opportunities that have contributed to our growing pipeline of commercial deals.

Our partners recognise the critical need for energy storage, not just to use renewable energy effectively but to avoid relying on more expensive, higher-emissions sources of power when renewable sources-wind, solar and tidal-are not available. They believe that alternative chemistries are vital to overcome lithium-ion batteries' limitations in safety and lifetime and because the demand for lithium-ion batteries needed to support the electrification of transport is already impacting global supplies and has increased the price of lithium and other battery materials significantly.

Our ability to deliver our product has been enhanced through establishing a manufacturing relationship with long-time Invinity supporter Suzhou Baojia New Energy Technology Co. (Baojia). They have taken on the manufacturing of our balance of system from our previous manufacturing partner, BCI, who provided an important foundation for Invinity in the early years and for whose continued support we are grateful. With Baojia's larger facilities, we are already achieving greater production scale, having so far shipped more than 25 MWh of batteries directly to project sites and our facilities in both Bathgate and Vancouver. This level of output bodes well for the future, brings us greater cost efficiencies and enhances our ability to expand to meet the growing demand for our products.

Progressing Mistral

Our most important partnership is with Gamesa Electric and Siemens Gamesa Renewable Energy (SGRE) as reflected in our previously announced Joint Development and Commercialisation Agreement. Nothing on our pathway to profitability is more important than the investment we are making to progress the joint development of our next-generation product. The objectives for Mistral are simple, albeit quite challenging to realize: lower costs substantially from our current VS3 product while increasing the suitable project size addressed by our product from 10s to 100s of MWh. These objectives are captured in a single metric: Levelized Cost of Storage (LCOS). LCOS captures the total cost of operating a BESS, including purchase, operating costs and efficiency, on a throughput (in MWh) basis. Mistral is targeting the best LCOS of any BESS, bar none, and to beat years early the U.S. Department of Energy's LCOS target of $50/MWh by 2030.

We are pleased with the progress we are making on Mistral alongside our partner. We will not be making any specific announcements of Mistral's specifications until we can do so jointly and in full confidence that Mistral's capabilities are validated in field trials and large-scale internal tests. While this discipline may not be customary in our field-we often hear of the 'revolutionary' importance of what is only, in reality, a lab demonstration, or of the 'sales success' of a company that signs deals at a fraction of their production cost or has yet to prove capabilities in the field-it is what you should expect from us as an increasingly mature multinational product company.

Corporate Strength

We continue to be grateful for the support of our investors. The funds we raised in late 2021 enabled us to progress our pipeline, sign a record volume of business and invest in Mistral. The support shown by our existing and new shareholders, particularly including Everbrite, in March of this year has provided sufficient working capital to support and grow our existing operations and to advance Mistral to its next critical milestone.

We are not alone in enduring delays and having challenges to overcome that cost more than anticipated. The pandemic had a significant impact on Invinity as it did on countless companies. But we believe we are alone, and happily so, as the only provider of products for non-lithium BESS that is successfully deploying megawatt-scale projects to customers at positive gross margin, and we are doing so in multiple countries. We celebrate this major step toward corporate profitability, a step we could not have taken without our shareholders' support.

Looking to the Future

A future electric grid without renewables as its primary energy source simply will not meet global objectives for carbon emission reduction. Yet that future renewable-intensive electric grid will be unstable-unless it incorporates adequate energy storage. Grid instability is already increasing with greater renewable generation, and already significant disruption events have occurred in the UK, the U.S., Australia and elsewhere.

No single technology will meet all future needs for stationary battery energy storage, not even our vanadium flow battery technology. Instead, battery characteristics will be matched to requirements. Governmental initiatives globally seek to stimulate more energy storage generally and to support domestically produced alternatives to lithium-ion batteries able to discharge for longer durations or operate with greater safety and lower total costs. Invinity has and will continue to be a significant beneficiary of these initiatives.

The macro environment continues to strongly support the Company's business. To meet this opportunity, Invinity has determined that a four-part strategy is required: 1) deliver projects; 2) close new and larger deals; 3) progress Mistral; and 4) advance our operational excellence. Our view of the significance of each of these priorities:

1) Delivering contracted-for projects is not just an obligation incurred upon signing a contract; rather, each one is an opportunity. Every installation further demonstrates that our technology is proven and exceeds customer expectations. We gain critical field experience that further refines our product development. And we earn revenue.

2) Closing new deals enhances our position as the clear leader in large-scale, low-LCOS energy storage that can be deployed anywhere and provides for future revenue.

3) Mistral will transform our product offering from competitive to compelling for a great many applications, becoming a platform for profitable revenue growth bounded, we believe, not by demand but by supply.

4) Operational excellence is based on putting in the right processes and operations now and not waiting until the need is acute. This focus is vital to maintaining our growth trajectory and enabling us to adroitly address the inevitable challenges-whether supply chain, competition, macro events, or something else-that we encounter.

In my 2021 report, I acknowledged the challenges from supply chain disruptions that we had underestimated and sales processes that took longer than we anticipated. We continued to see challenges in 2022, but we have entered 2023 with what we believe is the best technology we've ever deployed, the largest order book we've ever had, and the most sales prospects by far. At the same time, we have made great strides toward the development of our next-generation VFB which promises both improved performance and significantly increased margins. It is hard to contain our excitement at the future which lies ahead for us. Energy storage is the key to unlocking the potential for the world to be powered by clean energy and we are well on our way to achieving a profitable position at the heart of this fundamentally important industry.

I remain highly optimistic for the future of our business and remain confident that we will realise our potential. I therefore thank you again for your support for Invinity and look forward to bringing you more success in 2023.

Larry Zulch

Chief Executive Officer

27 June 2023

Chief Financial Officer's Report: Growth and Investment - a view to the future

Financial Highlights

	2022 £'000	2021 £'000
Revenue	2,944	3,185
Project related grant income shown against cost of sales	647	-
Total revenue and grant income other than revenue	3,591	3,185

Loss from operations	(18,982)	(21,264)

Inventory on hand for battery projects	9,827	5,797

2022 Financial Performance

I am pleased to report that total income including sales revenue and project related grant income increased to £3.6 million in 2022 (2021: £3.2 million). Revenue is recognised against projects when specific performance obligations related to those projects have been satisfied. Grant funding specific to customer projects has been presented alongside the relevant project revenue and associated direct costs where that funding is project specific and represents a direct subsidy against project costs.

Another positive development during the period was that the Company was able to show a materially reduced cost of delivering its VS3 products to customers, resulting in a significant £3.2 million reduction in the provision for contract losses. This contributed to an 12% year-on-year reduction in operating loss and a material improvement in gross margin. Invinity was also able to narrow the loss before tax by 13% to £18.5 million for the year. These movements represent important progress as the Company moves along the path to achieving industry standard gross margins which are expected to be delivered with the launch of the Company's next-generation product.

Administrative costs were £19.0 million (2021: £14.4 million), an increase of £4.6 million primarily represented by investment in people with staff costs of £10.3 million in 2022 (2021: £9.0 million) and IT costs of £1.2 million in 2022 (2021: £0.6 million). Research and development costs that did not meet the threshold for capitalisation and were therefore expensed were £2.6 million (2021: £1.8 million). In addition, professional fees increased to £3.0 million in 2022 (2021: £2.0 million) as a result of predominantly non-recurring matters and costs of £1.0 million in 2022 (2021: £0.2 million) were incurred in relation to the transfer of manufacturing from BCI to Baojia at year end.

2022 Cash Performance

Year-on-year cash outflow from operations of £21.9 million (2021: £23.0 million) is largely consistent with the prior year.

All bar one of the Company's most recent sales contracts have been signed with a forecast positive margin. Delivering on this margin is a key corporate priority and will make an important contribution to the Company being able to fund its administrative costs from cash from operations in the future.

To this end, the Company continues to develop its next-generation battery, code-named "Mistral". Mistral is expected to be manufactured at significantly lower cost than the Company's existing product, the VS3, and will occupy a comparatively smaller physical footprint that will lead to lower costs for operations and maintenance. These characteristics are expected to enable the Company to sell this new product at a materially lower and more competitive price point than currently. This is anticipated to drive additional sales at a materially better gross margin thus leading to future cash generation and profitability and reducing the Company's reliance on external sources of funding.

Growth and Investment - Looking to the Future

In addition to the delivery and commissioning of contracts for battery systems with customers, 2022 has been a year of growth in the underlying business of the Company as evidenced by a significant increase in the number of new contracts for battery systems closed in the year. In total, 7 new sales contracts were signed in 2022 with a total potential revenue value of £22.0 million. Each of these new contracts (other than one entered for strategic reasons) are currently expected to be delivered at a positive gross margin as improvements are made to the Company's supply chain and manufacturing infrastructure. As a Company, we continue build on the experience gained from systems delivered to date and seek to use those learnings improve operational and financial performance related to contracts.

The expected growth in the business has required investment to be made in a number of areas including people, facilities, infrastructure and inventory. Headcount increased by 23 people to efficiently manage the backlog of orders for delivery in 2023 and beyond. Other specific operational investments made in 2022 included leasehold improvements related to our production facilities and offices of £0.4 million and an increase in prepayments and deposits of £1.3 million. Buying the equipment necessary to build our batteries in advance helps the Company to reduce the delivery timeframe for its vanadium flow battery systems and accelerates the associated construction and installation of the units, advancing revenue recognition and as a result, prepaid inventory rose £1.0 million to £5.0 million.

These investments are all focused on improving contract delivery, logistics and providing the necessary funding for further research and development as Invinity moves forward on its pathway to profitability. That next stage will come as we mature and ultimately launch our next-generation product, code-named "Mistral", currently in joint development with Siemens Gamesa.

Funding and Net Working Capital

At 31 December 2022 the Company had net working capital of £4.3 million, inclusive of cash and cash equivalents of £5.1 million. The cash balance of £5.1 million included the net cash proceeds from the initial drawdown of US$2.5 million from a US$10.0 million convertible loan instrument (the "Investment Agreement") taken out with Riverfort Global Opportunities PCC Ltd ("Riverfort") and YA II PN ("Yorkville") that was entered into on 14 December 2022 to provide additional working capital for the business.

The Company only made one drawdown under the Investment Agreement. This was due to the Company successfully raising additional equity capital of £23.0 million through a placing, subscription and open offer in March 2023. Part of these proceeds were used to redeem in full the balance then outstanding under the Investment Agreement. In doing so, the warrants that were issued alongside the Company entering the Investment Agreement were repriced to reflect the open offer price of 32p. Those repriced warrants remain in place. Notwithstanding, any proceeds from the future exercise of the warrants held by each of Riverfort and Yorkville will be distributed 97% to the Company and 3% to Riverfort and Yorkville.

Strategic Investment

Importantly, and as part of the capital raise in March 2023, Everbrite Technology Co. Ltd. (Everbrite), a leading Taiwanese manufacturer of industrial technology, subscribed for £2.5 million of shares in the Company. The investment by Everbrite followed the 1 December 2022 reseller agreement and initial 15 MWh purchase order of vanadium flow batteries with Everdura Technology Company, a joint venture between Everbrite and Taiwanese clean energy company, Pronergy Technology Co. Ltd covering Taiwan and Southeast Asia.

This strategic investment underscores the development progress of the Company since the 2020 merger transaction that formed the Group as it is today and is intended to support a closer strategic relationship for the deployment of vanadium flow batteries in Taiwan and further afield.

Invinity sees strategic partnerships and investment as an important pillar of its future corporate growth and as previously disclosed, discussions with a number of potential strategic partners remain ongoing.

Grant Funding

The participation in grant schemes is an important source of funds for the Company. Grant awards may be project specific or general in nature. Grants that are more general in nature typically help to defray ongoing costs such as research and development where projects are seen as strategically important by local or national governments.

Other grant funding is more project specific and aimed at increasing the application of new technology and its commercial uses.

In 2022, the Company received £0.6 million of grant funding related to a specific customer project under Phase One of the UK Government's Longer Duration Energy Storage (LODES) Competition that is administered by the Department for Energy Security and Net Zero (DESNZ). As this income was project specific, it has been identified in the profit and loss account alongside but separate to revenue on account of it being recognised against direct costs.

Going Concern

In assessing whether the Group has the ability to continue as a going concern the Directors have modelled cash flow forecasts for a period up to 31 December 2024. The Directors have prepared a base case scenario that assumes the 14.5m Short-Term warrants originally granted in 2021 ("Short-Term Warrants"), the terms of which are proposed to be amended as set out below are exercised before June 2024. Under this scenario the Group would expect to remain cash positive for the period up to 31 December 2024 assessed for going concern purposes. The forecast does indicate that the Group would move into negative cash shortly after the period assessed for going concern as a result of working capital investment on future sales. The Group would defer any working capital investment if it were to result in exhausting all cash. This forecast is also based on delivering existing signed sales contracts during 2023 as per forecast gross margins and existing and future sales contracts during 2024 at anticipated positive gross margins. The Directors recognise there is a risk that the Short-Term Warrants will not be exercised if they are not 'in the money' before the expiry date and given it is not at the discretion of the Group.

The Directors have also prepared an alternative 'adjusted base case' scenario which does not include the exercise of the Short-Term Warrants but also adjusts forecasted costs. The Directors have a plan to adjust costs in a scenario where it does not look like the Short-Term Warrants will be exercised. This plan includes the following:

· Non-payment or delayed payment of forecasted bonuses;

· No increase or delayed increase in salaries across the Group;

· Delayed recruitment of additional headcount;

· Reduction in planned increase in research and development expenditure.

Under the adjusted base case the Group would expect to remain cash positive for the period up to 31 December 2024 assessed for going concern purposes. Therefore the Directors believe it is appropriate to prepare the accounts on a going concern basis.

The Short-Term Warrants were initially granted in 2021 with an exercise price of 150p and an expiry date of 15 September 2022. On 31 August 2022, the holders of the Short-Term Warrants agreed at a general meeting of Short-Term Warrant holders to amend the expiry date of the Short-Term Warrants to 15 September 2023. The Company is now planning to seek the approval of Warrant holders at a general meeting, notice of which will be given shortly, to make the following amendments to both the Short and Long-Term Warrants. The Company intends to seek approval to amend the Short-Term Warrant subscription period to 16 December 2023 (the Long-Term warrant subscription period will remain unchanged at 16 December 2024) and amend the exercise prices of the Short and Long-Term warrants to 50p and 100p respectively. There can however be no certainty that such a change in the terms will be approved.

In assessing going concern the Directors have also prepared a severe but plausible downside scenario which forecasts delivery of existing and future sales being made during 2024 being delayed beyond June 2024 and forecasted margins not being achieved. Under this scenario the Group would exhaust all available cash by April 2024 and it will be necessary to raise further funding within the next 12 months in order to continue trading and deliver on the strategic objectives.

The Directors are in the process of evaluating potential additional funding options from potential strategic investors but no such funding is committed as at the date of approval of these financial statements. The Group has been, and continues in, active discussions with a number of identified strategic investors and is confident that it will be able to conclude an equity investment from one or more of such parties within the period up to 31 December 2024 assessed for going concern purposes. The Directors also note that the Company concluded an initial strategic investment from Everbrite Technology Co., Ltd. for £2.5 million in March 2023 which gives them confidence that the Company is capable of attracting further strategic investment.

Due to the uncertainty in relation to obtaining additional funding this indicates the existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern.

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

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

· operational performance of the Company's products delivered to customer sites to date;

· value of contracts signed for delivery in 2023 and 2024;

· growing sales pipeline of 2,470.3 MWh in May 2023 vs 686.2 MWh in May 2022;

· growing opportunities presented by the emergent energy storage market;

· growing levels of Government engagement and support in the three key markets; and

· positive discussions with potential strategic partners regarding making an equity investment into the Company.

Jonathan Marren

Chief Development Officer and Interim Chief Financial Officer

27 June 2023

Financial Statements

Consolidated Statement of Profit and Loss

For the year ended 31 December 2022

		2022		2021
Continuing operations	Note	£000	£000	£000	£000
Revenue	4		2,944		3,185
Direct costs		(2,927)		(6,622)
Grant income against direct costs	4	647		-
Cost of sales	5		(2,280)		(6,622)
Gross profit			664		(3,437)
Operating costs
Administrative expenses	6		(19,042)		(14,439)
Other items of operating income and expense	10		(604)		(3,388)
Loss from operations			(18,982)		(21,264)
Finance income	11		62		-
Finance costs	11		(65)		(45)
Gain/(loss) on foreign currency transactions	11		448		(63)
Net finance income/(costs)	11		445		(108)
Loss before income tax			(18,537)		(21,372)
Income tax expense	12		-		-
Loss for the year			(18,537)		(21,372)


Loss per ordinary share in pence
Basic	13		(16.0)		(24.1)
Diluted	13		(16.0)		(24.1)

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

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2022

		2022	2021
Continuing operations	Note	£000	£000
Loss for the year Other comprehensive (Expense)/income		(18,537)	(21,372)
Exchange differences on the translation of foreign operations		(137)	10
Total comprehensive loss for the year		(18,674)	(21,362)

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

Consolidated Statement of Financial Position

For the year ended 31 December 2022

		2022	2021
	Note	£000	£000
Non-current assets
Goodwill and other intangible assets	15	24,050	24,097
Property, plant and equipment	16	1,208	1,130
Right-of-use assets	17	1,845	975
Total non-current assets		27,103	26,202

Current assets
Inventory	19	9,827	5,797
Other current assets	20	8,781	6,280
Contract assets	21	500	324
Trade receivables	22	1,737	1,683
Cash and cash equivalents	23	5,137	26,355
Total current assets		25,982	40,439
Total assets		53,085	66,641

Current liabilities
Trade and other payables	24	(4,935)	(3,513)
Derivative financial instruments	25	(769)	-
Contract liabilities	21	(8,375)	(5,142)
Lease liabilities	26	(740)	(350)
Provisions	21	(2,907)	(5,976)
Total current liabilities		(17,726)	(14,981)
Net current assets		8,256	25,458

Non-current liabilities
Lease liabilities	26	(969)	(420)
Total non-current liabilities		(969)	(420)
Total liabilities		(18,695)	(15,401)
Net assets		34,390	51,240

Equity
Called up share capital	27	50,716	50,690
Share premium	27	141,579	140,445
Share-based payment reserve	27	5,957	5,293
Accumulated losses	27	(162,094)	(143,557)
Currency translation reserve	27	(1,807)	(1,670)
Other reserves	27	39	39
Total equity		34,390	51,240

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

The financial statements were authorised by the Board of Directors and authorised for issue on 27 June 2023 and were signed on its behalf by:

Jonathan Marren

Director

Consolidated Statement of Changes in Equity

For the year ended 31 December 2022

	Called up share capital	Share premium	Share-based payment reserve	Accumul-ated losses	Currency transla-tion reserve	Other reserves	Total
	£000	£000	£000	£000	£000	£000	£000
At 1 January 2022	50,690	140,445	5,293	(143,557)	(1,670)	39	51,240
Loss for the year	-	-	-	(18,537)	-	-	(18,537)
Other comprehensive income
Foreign currency translation differences	-	-	-	-	(137)	-	(137)
Total comprehensive loss for the year	-	-	-	(18,537)	(137)	-	(18,674)
Transactions with owners in their capacity as owners
Investment funding arrangement, net of transaction costs	25	1,129	(23)	-	-	-	1,131
Exercise of share options	1	5	-	-	-	-	6
Share-based payments	-	-	681	-	-	-	681
Equity settled interest on Investment funding arrangement	-	-	6	-	-	-	6
Total contributions by owners	26	1,134	664	-	-	-	1,824
At 31 December 2022	50,716	141,579	5,957	(162,094)	(1,807)	39	34,390

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

	Called up share capital	Share premium	Share-based payment reserve	Accumul-ated losses	Currency transla-tion reserve	Other reserves	Total
	£000	£000	£000	£000	£000	£000	£000
At 1 January 2021	37,870	124,545	3,762	(122,185)	(1,680)	39	42,351
Loss for the year	-	-	-	(21,372)	-	-	(21,372)
Other comprehensive income
Foreign currency translation differences	-	-	-	-	10	-	10
Total comprehensive loss for the year	-	-	-	(21,372)	10	-	(21,362)
Transactions with owners in their capacity as owners
Contribution of equity, net of transaction costs	12,286	15,148	-	-	-	-	27,434
Exercise of share options	534	752	(296)	-	-	-	990
Share-based payments	-	-	1,827	-	-	-	1,827
Total contributions by owners	12,820	15,900	1,531	-	-	-	30,251
At 31 December 2021	50,690	140,445	5,293	(143,557)	(1,670)	39	51,240

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated Statement of Cash Flows

For the year ended 31 December 2022

		2022	2021
	Note	£000	£000
Cash flows from operating activities
Cash used in operations	14	(21,934)	(22,964)
Interest received		62	-
			-
Net cash outflow from operating activities		(21,872)	(22,964)

Cash flows from investing activities
Acquisition of intangible assets	15	-	(18)
Acquisition of property, plant and equipment	16	(708)	(733)
Net cash outflows from investing activities		(708)	(751)

Cash flows from financing activities
Payment of lease liabilities	26	(591)	(320)
Interest paid		(59)
Proceeds from the issue of share capital, net of transaction costs		1,161	27,434
Proceeds from the Investment funding arrangement, net of transaction costs	25	769	-
Proceeds from the exercise of share options and warrants		6	990
Net cash inflow from financing activities		1,286	28,104

Net (decrease)/increase in cash and cash equivalents		(21,294)	4,389
Cash and cash equivalents at the beginning of the year		26,355	21,953
Effects of exchange rate changes on cash and cash equivalents		76	13
Cash and cash equivalents at the end of the year		5,137	26,355

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

Notes

1 General Information

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

The Company is listed on the AIM Market of the London Stock Exchange with the ticker symbol IES.L, on the AQSE Growth Market in the United Kingdom with the ticker symbol IES and on the OTCQX Best Market in the United States of America with the ticker symbol IESVF.

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

2 Summary of significant accounting policies

Basis of preparation

These consolidated financial statements have been prepared in accordance with International UK-adopted International Accounting Standards, the associated interpretations issued by the IFRS Interpretations Committee (together 'IFRS') and in accordance with the Companies (Jersey) Law 1991.

Separate presentation of the parent company financial statements is not required by the Companies (Jersey) Law 1991 and, accordingly, such statements have not been included in this report.

The significant accounting policies applied in preparing these consolidated financial statements are set out below. These policies have been consistently applied throughout the period and to each subsidiary within the Group.

The financial statements have been prepared under the historical cost convention except where stated.

Going concern

In assessing whether the Group has the ability to continue as a going concern the Directors have modelled a base cash flow forecast for a period up to 31 December 2024. The Directors have prepared a base case scenario that assumes the 14.5m Short-Term warrants originally granted in 2021 ("Short-Term Warrants"), the terms of which are proposed to be amended as set out below are exercised before June 2024. Under this scenario the Group would expect to remain cash positive for the period up to 31 December 2024 assessed for going concern purposes. The forecast does indicate that the Group would move into negative cash shortly after the period assessed for going concern as a result of working capital investment on future sales. The Group would defer any working capital investment if it were to result in exhausting all cash. This forecast is also based on delivering existing signed sales contracts during 2023 as per forecast gross margins and existing and future sales contracts during 2024 at anticipated positive gross margins. The Directors recognise there is a risk that the Short-Term Warrants will not be exercised if they are not 'in the money' before the expiry date and given it is not at the discretion of the Group.

· Non-payment or delayed payment of forecasted bonuses;

· No increase or delayed increase in salaries across the Group;

· Delayed recruitment of additional headcount

· Reduction in planned increase in research and development expenditure;

The Directors are in the process of evaluating potential additional funding options from potential strategic investors but no such funding is committed as at the date of approval of these financial statements. The Group has been, and continues in, active discussions with a number of potential strategic investors and is confident that it will be able to conclude an equity investment from one or more of such parties within the period up to 31 December 2024 assessed for going concern purposes. The Directors also note that the Company concluded an initial strategic investment from Everbrite Technology Co., Ltd. for £2.5 million in March 2023 which gives them confidence that the Company is capable of attracting further strategic investment.

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

· operational performance of the Company's products delivered to customer sites to date;

· value of contracts signed for delivery in 2023 and 2024;

· growing sales pipeline of 2,470.3 MWh in May 2023 vs 686.2 MWh in May 2022;

· growing opportunities presented by the emergent energy storage market;

· growing levels of Government engagement and support in the three key markets; and

· positive discussions with potential strategic partners regarding making an equity investment into the Company.

Foreign currency

Presentation currency

The consolidated financial statements are presented in Great British Pounds (GBP) rounded to the nearest thousand (£000), except where otherwise indicated.

Functional currency

Items included in the financial information of the individual companies that comprise the Group are measured using the currency of the primary economic environment in which each subsidiary operates (its functional currency).

Whilst Jersey uses the Jersey Pound as its currency, Jersey is in a currency union with the United Kingdom and so the functional currency of the parent company of the Group has been determined to be GBP.

Foreign currency transactions

Transactions in currencies other than an entity's functional currency (foreign currencies) are translated using the exchange rate on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of transactions denominated in a foreign currency are translated into GBP using the relevant exchange rate at the date of the transaction.

Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at the balance sheet date of monetary assets and liabilities denominated in foreign currencies, are recognised in the consolidated statement of comprehensive loss within gains/(losses) on foreign currency transactions.

Foreign currency gains/(losses) realised on the retranslation of subsidiaries as part of the year-end consolidation are recorded in the translation reserve that forms a part of shareholders' funds in the consolidated financial statements of the Group.

Consolidation of subsidiaries

Subsidiaries are all entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights over, variable returns from its involvement with the entity and can affect those returns through its ability to exercise control over the entity. Subsidiaries are consolidated in the Group financial statements from the date at which control is transferred to the Company.

Subsidiaries are deconsolidated from the date that control ceases. The ability to control an entity may cease because of the sale of a subsidiary or other change in the Company's shareholding in that subsidiary, voting rights or board representation.

Foreign operations

Subsidiaries of the Company that are based in countries other than the UK or Jersey may have functional currencies that are different from that of the Company. Since the Group financial statements are presented in GBP, the assets and liabilities of foreign subsidiaries consolidated into these financial statements are translated into the Group's presentational currency using exchange rates prevailing at the end of the reporting period. Income and expense items are similarly translated using the month-end rate for each month during the year. The exchange rates on the actual dates of transactions are used where exchange rates fluctuate significantly within a month. Exchange differences arising on consolidation are recognised in other comprehensive income and are accumulated as part of shareholder's equity.

Investments in associates and joint arrangements

Associates are entities where the Company can exert significant influence but is not able to exercise control.

Joint arrangements may be incorporated, where an entity exists, or may be unincorporated, where the venture or joint operation is governed by contract or other arrangement between two or more parties. The Company is not currently party to any unincorporated joint arrangements.

The Group accounts for its interests in associates and incorporated joint ventures using the equity method of accounting where the relevant investment is initially recorded at the cost to acquire the interest. After initial recognition, the Group recognises its share in the post-acquisition income and expenses of the associate in the statement of profit and loss with a corresponding increase (for income) or decrease (for losses) in the carrying value of the investment in the associate.

Dividends received by the Company from an associate are treated as a reduction in the carrying value of the associate (as its net assets have reduced by it giving the dividend) and income for the Group (as its net assets have increased by receiving the dividend).

The Group assesses the carrying value of associates for impairment at each reporting period end or at any other time where there is an indication that an impairment may exist. Where there is an indication of impairment of an investment, the Group assesses if an actual impairment loss exists by comparing the carrying value of the investment to its recoverable amount which is the lower of its fair value less cost to sell or its value in use.

Fair value less costs to sell is determined by reference to the proceeds that could be expected to be received should the interest in the associate be sold less the costs of doing so. Value-in-use is typically calculated by reference to the value of the discounted cash flows expected to be received from the associate.

Where there is a deficit of recoverable value as compared to the carrying value of the investment then an impairment loss is recognised in the consolidated statement of profit and loss in the amount of the calculated deficit. The carrying value of the investment in the associate is also reduced by a corresponding amount.

Acquisitions

The Group allocates the purchase consideration given in respect of the acquisition of a subsidiary to the assets acquired and liabilities assumed based on an assessment of their individual fair values at the date of acquisition. Any excess of the cost of the acquisition over the fair value of assets acquired and liabilities assumed in the business combination is recognised as goodwill.

The assessment of fair value is made by comparing the discounted value of the future net cash flows expected to be generated from the CGU to which the goodwill has been allocated to the net book value of the assets and liabilities of that CGU including the allocated goodwill. Where a deficit of discounted cash flows compared to the carrying value of the CGU's net assets and allocated goodwill exists, the goodwill is reduced to its recoverable amount with a corresponding amount recognised as an impairment charge in profit or loss. A corresponding reduction is made to the carrying value of goodwill and then to the net assets of the CGU if goodwill is insufficient to absorb the loss. Goodwill may also be tested for impairment under the fair value less costs to sell method where the recorded value of goodwill is compared to the market or value of the Company calculated by reference to its share price.

Any such impairment loss is recognised in profit and loss in the period in which it is identified. Impairment losses related to goodwill cannot be reversed in future years.

Transaction between entities within the Group

Transactions and balances between companies forming part of the Group together with any unrealised income and expenses arising from intra-group transactions are eliminated in the preparation of the consolidated financial statements of the Group.

Discontinued operations

A discontinued operation is a component of the Company's business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale. Classification as a discontinued operation occurs on actual disposal or earlier if the operation meets the criteria to be held for sale. When an operation is classified as a discontinued operation, the comparative consolidated statement of profit and loss is restated as if the operation had been discontinued from the start of the comparative period.

Disposal of subsidiaries

Transactions that result in the loss of control of a subsidiary are accounted for as disposals. The previously consolidated assets and liabilities and the carrying amount of any non-controlling interests in the subsidiary are derecognised. Any retained interest in the former subsidiary is recognised at its fair value at the date when control is lost. A gain or loss on disposal is recognised as the difference between the fair value of the consideration received together with the fair value adjustment made in respect of any retained interest in the subsidiary as offset by the carrying value of the assets and liabilities derecognised. Any gains or losses of the disposed entity that were previously recognised in other comprehensive income or loss and that require to be recycled to profit or loss also form part of the gain or loss on disposal.

New standards, amendments and interpretations effective and adopted by the Group in 2022

Amendments to existing standards previously issued by the IASB with effective dates during the year ended 31 December 2022 are summarised below. There was no effect on the Group's consolidated financial statements for the year ended 31 December 2022 as a result of the adoption of these amendments.

Amendment to 'IFRS 16 Leases'

On 28 May 2020, the IASB issued an amendment to the standard related to the treatment of rent concessions given by lessors in relation to COVID-19. The Group did not receive any rent concessions related to COVID-19 that would require consideration of the amendment to IFRS 16 and, accordingly, the amendment had no impact on the consolidated financial statements for the years ended 31 December 2021 or 2022.

Amendments to 'IFRS 3 Business Combinations'

On 2 July 2021, the IASB published amendments to references to the 2018 version of the Conceptual Framework for Financial Reporting. The amendment was effective on or after 1 January 2022.

Amendments to 'IAS 16 Property, Plant and Equipment - Proceeds before Intended Use'

On 2 July 2021, the IASB published an amendment to IAS 16 which prohibits deducting from the cost of an item of property, plant and equipment the proceeds from selling items produced before that asset is available for use. The Company does not deduct revenue from the cost of assets before they are available for use and therefore, there is no impact on the Group financial statements for the year ended 31 December 2022. The amendment was effective on or after 1 January 2022.

Amendment to 'IAS 37 Provisions, contingent liabilities and contingent assets'

On 2 July 2021, the IASB published an amendment which requires the provision in respect of an onerous contract to also include an assessment of the indirect costs, such as production overhead or indirect labour, that are expected to be incurred in servicing a contract considered to be onerous. The amendment was effective on or after 1 January 2022.

Annual Improvements 2018-2020

· Improvement to 'IFRS 1 First-time Adoption of IFRS' (effective for periods beginning on or after 1 January 2022)

· Improvement to 'IFRS 9 Financial Instruments' (effective for periods beginning on or after 1 January 2022)

· Improvement to illustrative examples to 'IFRS 16 Leases'

· Improvement to 'IAS 41 Agriculture' (effective for periods beginning on or after 1 January 2022)

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Company. These standards are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions and are summarized below.

· IAS 1 Classification of Liabilities as Current or Non-Current (effective for periods beginning on or after 1 January 2024)

· IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies from significant to material (effective for periods beginning on or after 1 January 2023)

· IAS 8 Amendments to Definition of Accounting Estimates (effective for periods beginning on or after 1 January 2023)

· IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective for periods beginning on or after 1 January 2023)

· IFRS 17 Insurance Contracts (effective for periods beginning on or after 1 January 2023)

Critical accounting judgments and key sources of estimation uncertainty

The preparation of the financial statements in conformity with generally accepted accounting practice (GAAP) requires management to make estimates and judgments. Those estimates and judgments can affect the reported values for assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date.

Management is also required to make estimates and judgments related to the reported amounts of revenues and expenses and related to the timing of the recognition of those revenues and expenses.

Judgments made and estimates applied are based on historical experience and other factors including management's expectations of future events that are considered relevant. Actual results may differ from these estimates. The estimates, judgments and underlying assumptions made are reviewed on an ongoing basis and specifically in the preparation of the interim and annual published financial information.

Revisions to accounting estimates are recognised in the period in which the estimate is revised and applied consistently in future periods subject to the ongoing reassessment of estimates.

Critical judgments for the year under review

Going concern

The Directors are required to assess whether it is appropriate to prepare the financial statements on a going concern basis. In making this assessment the Directors need to be satisfied that the Group can meet its obligations as they fall due and will remain cash-positive for a period of at least 12 months from the date of approval of the financial statements. Potential additional funding that is not yet committed at the date of approval of the financial statements cannot be anticipated in making the assessment of going concern.

The Directors make their assessment based on a cash flow model prepared by management and based on its expectation of cash flows for the 18-month period from the date of approval of the financial statements. The extended period in the model provides additional comfort that the 12-month solvency requirement can be met when making the assessment of going concern.

In preparing the cash flow model, assumptions have been made regarding the timing of cash collection from customers based on the expected cash receipt under contracts that require milestone payments to be made by customers. The timing of the receipt of milestone payments may not always align with or precede the costs incurred by the Company in performing its obligations under a contract.

Downside sensitivities have been applied to the cash flows primarily related to no sales being made in 2024 and insufficient Short-Term Warrants being exercised. Refer to 'Basis of preparation' for details of the going concern analysis performed and the Directors' conclusions regarding going concern.

Notwithstanding the material uncertainty articulated in relation to the basis of preparation, the Directors expect that the business will continue to be viable throughout the model period and, accordingly, the financial statements have been prepared on a going concern basis.

Revenue recognition

Sales contracts are assessed in accordance with the Group accounting policy for revenue recognition. The policy requires the identification of the performance obligations, or promises, under the contract and a determination of the conditions and implications of each performance obligation. Revenue is recognised only when a distinct and appropriate performance obligation under a contract is satisfied.

Some performance obligations are satisfied separately - examples include the delivery of equipment. Other obligations may be satisfied in conjunction with other contract promises or where a contract calls for equipment sold under the contract to be integrated into a larger project before formal acceptance is notified by the customer.

Where the ability of a customer to benefit from a product or service is dependent on the satisfaction of other performance obligations, more than one promise may need to be bundled together as a combined performance obligation that must be satisfied before the revenue related to each element can be recognised.

Identifying where equipment or, more likely, services are readily available from other providers is a key determinant as to whether a contract promise represents a separate performance obligation or if it should be bundled with other promises that, together, represent a single performance obligation.

The assessment of what constitutes a performance obligation can be complex and requires judgment. Revenue is only recognised for each performance obligation under a contract when that performance obligation, bundled or otherwise, is satisfied. The requirement to bundle combinations of goods and/or services together as a single performance obligation could delay the timing of revenue recognition where the separate promises comprising the performance obligation are delivered sequentially.

Key sources of estimation uncertainty for the year under review

Warranty provision

The Company provides time-limited standard warranties in its contracts for sale of battery systems. In addition, customers may elect to purchase separate, standalone extended warranties. Extended warranties are for periods greater than the standard warranties that are provided with the purchase of all battery systems.

Estimating the costs that may be incurred by the Company in servicing warranty agreements requires management to estimate the number of expected claims in relation to the total number of battery systems sold. In addition, an estimate of costs that the Company could expect to incur to remedy each warranty claim should also be made to determine the amount of the total provision that should be recorded for warranties.

Provisions made in respect of expected warranty obligations are reassessed and remeasured where actual experience indicates the claim rate may be higher or lower than initially expected or where costs to remedy warranty claims differ from the assumptions used in calculating the provision. The release of an over-provision of warranty costs results in other operating income being recognised in the period whereas an additional provision for warranties results in a charge being recognised.

A 10% increase in the number of warranty claims or a 10% increase in the cost to remedy warranty issues would have a corresponding effect on warranty cost in a given period.

Refer to note 21, contract related balances.

Provision for legacy products

Management has elected to provide ongoing maintenance for certain legacy contracts not otherwise covered under warranty. Management has determined that it is necessary to provide for the costs of this ongoing maintenance or to provide for outright decommissioning.

Refer to note 21, contract related balances.

Provision for onerous contracts

A contract is onerous when the unavoidable costs of meeting the Company's obligations under the contract are expected to be greater than the revenue earned under that contract. Previously, assessment of the unavoidable costs under a contract only required direct costs such as parts and labour to be considered.

An amendment to 'IAS 37 Provisions, contingent liabilities and contingent assets' was published in May 2020 and requires the provision in respect of an onerous contract to also include an assessment of the indirect costs, such as production overhead or indirect labour, that are expected to be incurred in servicing a warranty claim. The Company elected to early adopt the amendment as of 1 January 2020 and therefore has applied the provisions of the standard in the current and prior years.

The assessment of future costs is inherently subjective and requires the use of estimates in determining the appropriate amount of provision that may be required.

Refer to note 21, contract related balances.

Share based payments, warrants and employee options

The Company determines the fair value of share-based payments and employee options using a Black-Scholes methodology. Black-Scholes uses certain assumptions to determine fair value including measures of share price volatility, expected conversion or exercise rates and levels of employee retention, among others.

In estimating the value of future share price volatility, a key input of the Black-Scholes methodology, the Company uses historic data relating to its share price. As the short and long-term warrants are listed, and therefore can be publicly traded, this provides an alternative arms-length determination of fair value.

Operating segments

The Group is organised internally to report to the Executive Directors as a whole. The Executive Directors comprise the Chief Executive Officer, the Chief Commercial Officer, and the Chief Development Officer and Interim Chief Financial Officer. The Executive Directors, as a group, have been determined, collectively, to prosecute the role of chief operating decision maker of the Group.

The chief operating decision maker is ultimately responsible for entity-wide resource allocation decisions, the evaluation of the financial, operating and ESG performance of the Group.

The Group's activities have been determined to represent a single operating segment being the provision of vanadium flow batteries and ancillary services, principally comprising installation and integration services, and the provision of extended warranties for battery units sold.

3 Accounting policies

Revenue

The Group measures revenue based on the consideration specified in the contracts for sale with customers. Revenue is recognised when a performance obligation is satisfied by transferring control over a good or service to a customer. Control is usually considered to have transferred to a customer on delivery of equipment to the customer's site of operations or when title to the equipment is transferred to the customer (if stored offsite). Revenue excludes any taxes such as sales taxes, value added tax or other levies that are invoiced and collected on behalf of third parties, such as government tax authorities.

The Group generates revenue from the sale of battery storage systems and related hardware and services. The main portion of sales is derived from contractual arrangements with customers that have multiple elements (or performance obligations), those elements usually being the sale of battery systems, system related options, installation, and extended warranties. The sales contracts do not include a general right of return.

For contracts that contain multiple elements or promises, the Group accounts for individual goods and services separately if they are distinct. A product or service is distinct if it is separately identifiable from other items in the agreement and where a customer can benefit from the good or service on its own or together with other resources that are readily available.

The consideration paid for each performance obligation is typically fixed. A significant portion of the aggregate payment due under a contract for sale is normally due before delivery or completion of the service. The total consideration under the contract is allocated between the distinct performance obligations contained in the contract based on their stand-alone selling prices. The stand-alone selling price is estimated using an adjusted market assessment approach that looks to industry benchmarks or pricing surveys for certain standalone products or services.

In addition, under the terms of its contracts for sale, the Group may be responsible for delivering battery systems to its customers. When this is the case, the Group will invoice the relevant customer for, and will recognise as revenue, any charges incurred together with any associated handling costs. The related costs incurred by the Group for shipping and handling services are recognised as cost of sales concurrent with the recognition of the associated revenue.

Grant income

Government and other grants received are recognised in the consolidated statement of profit and loss in the period that the related expenditure is incurred. Grant income received in respect of costs incurred is presented net within the associated cost category. Capital grants are similarly netted against the relevant asset acquired or constructed.

Grant income received in advance of the associated expenditure is presented as deferred income within contract liabilities and released to profit and loss as the associated expenditure is incurred. Grant income receivable is presented as accrued income within contract assets until such time as it can be claimed or is received.

Finance income and costs

Finance income comprises interest on cash deposits, foreign currency gains and the unwind of discount on any assets that are carried at amortised cost. Interest income is recognised as it accrues using the effective interest rate method.

Finance costs include foreign currency losses and the unwind of the discount on any liabilities held at amortised cost, such as lease liabilities arising from lease contracts.

Employee benefits

Short-term benefits

Benefits provided to employees that are short-term in nature are recognised as expenses in the statement of profit and loss as the related service is provided. The principal short-term benefits given to employees are salaries, associated holiday pay and other periodic benefits such as healthcare and pension contributions made by the Company for the benefit of the employee. A liability is recognised for the amount expected to be paid under short-term cash bonus plans if there is either a present legal or constructive obligation to pay the amount and the amount can be reliably estimated.

Share-based payments

The Group operates equity-settled share-based compensation plans, under which it compensates employees for services rendered through the issue of equity instruments, deferred share awards or options to subscribe for ordinary shares of the Company. The fair value of the employee services received in exchange for the grant of the equity instruments, shares or options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

· including any market conditions (for example, the Company's share price);

· excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets, and the requirement to remain as an employee of the Group over a specified period);

· including the impact of any non-vesting conditions (for example, the requirement for an employee to save).

Non-market performance and service conditions are included in the assumptions regarding the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all the specified vesting conditions are to be satisfied.

In some circumstances, employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expense during the period between service commencement and the grant date.

At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated statement of profit and loss, with a corresponding adjustment to equity.

Any social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.

Taxes

The total tax charge or credit recognised in the statement of profit and loss comprises both current and deferred taxes.

Taxation is recognised in the consolidated statement of profit and loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax

The current tax charge is based on the taxable profit for the year. Taxable profit or loss is different from the profit or loss reported in the statement of profit and loss as it excludes items of income and/or expense that are taxable or deductible in other years (temporary differences) and it further excludes items that are never taxable nor deductible (permanent differences).

Deferred tax

Deferred tax is the tax that is expected to be payable or recoverable on differences between the carrying value of assets and liabilities in the financial statements and the corresponding value of those assets and liabilities used to calculate taxable profit or loss.

Deferred tax assets are recognised as deductible temporary differences only where it is probable that taxable profits will be generated against which the carrying value of the deferred tax asset can be recovered. Deductible temporary differences exist where there is a difference in the timing of the recognition of an item of income or expense between the statement of profit and loss and the calculation of taxable profit or loss (a temporary difference).

Deferred tax assets and liabilities are recognised using the liability method for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint operations. Where the timing of the reversal of temporary difference arising from such investment related assets and liabilities can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future then the Group does not recognise deferred tax liabilities on these items.

A deferred tax asset or liability is not recognised if a temporary difference arises on initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Current and deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance sheet date.

Earnings per share

The Group presents basic and diluted earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS is determined by adjusting the weighted average number of ordinary shares outstanding used in the EPS calculation to include all potentially dilutive ordinary shares, which, in the case of the Company, represents additional shares that could be issued in relation to 'in-the-money' convertible notes, warrants or share options.

The effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS. Anti-dilution is when an increase in earnings per share or a reduction in loss per share would result from the exercise of such options, warrants or convertible instruments.

Intangible assets

Goodwill

The Group allocates the fair value of the purchase consideration on the acquisition of a subsidiary to the assets acquired and liabilities assumed based on an assessment of fair value at the acquisition date. Any excess of purchase consideration is recognised as goodwill. Where goodwill is recognised, it is allocated to the cash generating units (CGUs) in a systematic manner reflective of how the Group expects to recover the value of the goodwill.

Goodwill arising is recognised as an intangible asset in the balance sheet and is subject to annual reviews for impairment. Goodwill is written off where circumstances indicate that the recoverable amount of the underlying CGU may no longer support the carrying value of the goodwill. An impairment charge is recognised in the statement of profit and loss for the period in which it is determined the goodwill is no longer recoverable. Impairment losses related to goodwill cannot be reversed in future periods.

In testing for impairment, goodwill recognised on business combinations is allocated to the Group of CGUs representing the lowest level at which it will be monitored. Because the Group has been determined to consist of a single business unit, the carrying value of goodwill is tested for impairment based on the recoverable value of the Group as a whole.

The recoverable amount of a CGU or a group of CGUs is based on the higher of its assessed fair value less costs of disposal or its value-in-use. Value-in-use is calculated by reference to the expected future cash flows from the CGU, after discounting to take account of the time value of money. Fair value less costs to sell can be based on a similar cash flow measure adjusted for disposal costs or can be estimated by reference to similar comparable reference transactions.

Because the Company is listed, fair value can also be assessed by reference to the Company's market capitalisation. Where cash flows are used, they are risk weighted to reflect an assessment of future commercial success.

The key assumptions in assessing cash flows relate to the ability of the Company to develop existing markets and applications and to establish new markets and applications for the sale and use of its battery systems. Prospective cash flows are also sensitive to the Company's ability to realise economies of scale as market penetration grows.

Internally generated intangible assets - research and development costs

Research

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Research activities are aimed at creating new knowledge or the use of existing knowledge in new or creative ways to generate new concepts. Research activity does not typically have a defined commercial objective at the outset.

Development

Where projects evolve toward commerciality or are related to a specific commercial objective they are assessed to determine whether the activity constitutes development that is associated with a commercial objective or practical application.

The associated costs represent development costs and can be capitalised if, and only if, the following conditions can be demonstrated:

· the technical feasibility of completing the intangible asset so that it can be made available for use or sale;

· the intention to complete the intangible asset for use or sale;

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

· an asset is created that can be separately identified for use or sale;

· it is probable that the asset created will generate future economic benefits; and

· the development cost of the asset can be measured reliably.

Development work undertaken by the Group typically relates to the refinement of design, materials selection, construction techniques, firmware and control systems to enhance battery system performance over successive generations. Where development costs are capitalised, they are amortised over the expected period to the introduction of the next generation of battery system.

Amortisation is recorded over that period on a straight-line basis with the corresponding amortisation charge recognised in the statement of profit and loss as a component of administrative expenses.

Four years has historically been the typical cycle time between successive generations of battery system design.

Other intangible assets

Intangible assets other than goodwill that are acquired by the Group are stated at their historical cost of acquisition less accumulated amortisation and any impairment losses.

Software and purchased domain names

Third-party software is initially capitalised at its cost of purchase. Amortisation is charged to administrative expenses over the expected useful life of the software which has been assessed as three years from the date of acquisition.

Acquired domain names are initially capitalised at cost of purchase. Amortisation is charged to administrative expenses over the expected useful life of the domain name which has been assessed as ten years from the date of acquisition.

Patents and certifications

Patent rights and certifications are initially capitalised at the cost of applying for relevant patent rights and other protections, and certifications. Amortisation is charged to administrative expenses over the expected useful life of the patents and certifications which has been assessed as five years from the date of acquisition.

Property, plant and equipment

Items of property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent expenditure is only included in the asset's carrying amount or recognised as a separate asset, as appropriate, when it is probable that future economic benefits associated with that item will flow to the Group.

Costs that do not enhance the value of an asset such as repair and maintenance costs are charged to the statement of profit and loss in the period in which they are incurred.

Depreciation is charged to write off the cost of assets over their estimated useful lives on a straight-line basis. Depreciation commences on the date the asset is brought into use. Work-in-progress assets are not depreciated until they are brought into use and transferred to the appropriate category of property, plant and equipment.

Estimated useful lives for property, plant and equipment and other intangible assets are:

Category	Period (years)	Recognition in statement of profit and loss
Computer and office equipment	3 - 5	Administrative expenses
Leasehold improvements	Shorter of lease term or useful life	Administrative expenses / Cost of sales
Vehicles	3	Administrative expenses
Manufacturing equipment and tooling	3 - 20	Cost of sales
R&D Equipment	5 - 10	Administrative expenses
Software and purchased domain names	3	Administrative expenses
Patents and certifications	10	Administrative expenses

Depreciation methods, useful lives and residual values of assets are reviewed, and adjusted prospectively as appropriate, at each reporting date.

Where an asset is disposed of, the corresponding gain or loss on disposal is determined by comparing the sales proceeds received with the carrying amount of that asset at the date of disposal. Gains or losses on disposal of fixed assets are included within other items of operating income and expense in the statement of profit and loss.

Impairment of tangible and intangible assets

The Group reviews the carrying values of its tangible and intangible assets, other than goodwill, at each balance sheet date to determine if any indicators exist that could mean those assets are impaired. Where an indicator of impairment exists the recoverable amount of the relevant asset (or CGU) is estimated to determine the amount of any potential impairment loss.

Recoverable amounts are determined using a discounted cash flow model related to each asset or CGU being assessed. The discount rate applied to the cash flows in the model is a pre-tax discount rate that reflects market assessment of the time value of money and risks specific to the Company or the groups of assets being considered.

If the recoverable value estimated in the cash flow model for a specific asset (or CGU) is lower than the carrying value, then the carrying value of the asset is reduced to its estimated recoverable value with a corresponding charge immediately recognised in the statement of profit and loss.

Where the condition that gave rise to an impairment loss reverses in a subsequent period, the impairment loss is similarly reversed and the carrying value of the asset increased to the revised estimate of its recoverable value. The carrying value of an asset immediately following the reversal of an impairment cannot exceed the carrying value that the asset would have had if the original impairment had not been made and the asset was depreciated as normal.

A reversal of an impairment loss is recognised immediately in profit or loss.

The value of any impairment (or reversal of impairment) of an asset is recorded in the same financial statement line item where depreciation or amortisation of the asset would normally be shown.

Where it is impractical to meaningfully assess recoverable amount using a discounted cash flow model, for instance where near term cash flows are low or negative, an assessment of the fair value adjusted for the costs that would be incurred in the disposal of an asset or operation is used. This is typically the case for development stage assets, operations or associated intangible assets (including goodwill) where the underlying products or technologies have not yet been commercialised.

Provisions

Provisions are established when the Group has a present legal or constructive obligation because of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount of that outflow can be reliably estimated.

Provisions are measured at the present value of the expenditures that are expected to be incurred in settling the obligation using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks related to the obligation. The initial recognition of a provision results in a corresponding charge to profit or loss.

The increase in a provision as the discount rate unwinds due to the passage of time, is recognised in the statement of profit and loss as other items of operating income and expense.

Leases

Group entities only participate in lease contracts as the lessee. Lease contracts typically relate to vehicles and facilities.

On inception of a contract, the Group assesses whether it contains a lease. A contract is a lease or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an identified asset is determined based on whether the Group has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use, and if the Group has the right to direct the use of the asset.

Obligations under a lease are recognised as a liability with a corresponding right-of-use asset, these are recognised at the commencement date of the lease.

The lease liability is initially measured at the present value of the lease payments that have not yet been paid at the inception of the lease, discounted using the interest rate implicit in the lease contract. Where the interest rate implicit in the lease contract cannot be readily determined, the Group's incremental borrowing rate is used.

Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability. The lease liability is measured at amortised cost using the effective interest rate method.

The lease liability is subsequently measured at amortised cost using the effective interest method. It is remeasured when:

· there is a change in future lease payments arising from a change in an index or rate;

· there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee; or

· the Group changes its assessment of whether it will exercise a purchase, extension or termination option.

When a lease liability is remeasured under one of these scenarios, a corresponding adjustment is made to the carrying value of the right-of-use asset or in profit and loss when the carrying amount of the asset has already been reduced to zero.

The corresponding right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, any initial direct costs incurred and an estimate of the costs required to remove or restore the underlying asset, less any lease incentives received. The right-of-use asset is amortised over the shorter of the asset's useful life and the lease term on a straight-line basis.

The Group has elected not to recognise right-of-use assets and corresponding lease liabilities for short-term leases, those existing leases with a remaining lease term of less than 12 months at 1 January 2022 and leases related to low value assets with an annual lease cost of £3,500 or less.

The Group recognises these lease payments as an expense on a straight-line basis over the lease term.

Inventory

Inventory is stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their current location and condition. Cost is calculated using the first-in, first-out method.

Net realisable value is calculated as the estimated selling price for an item of inventory less estimated costs of completion and the costs that would be incurred in the marketing, selling and distribution of an item of inventory.

Prepaid inventory

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

Financial instruments

Financial assets and liabilities are recognised by the Group and recorded in the statement of financial position when the Group is contractually bound to the terms of the financial instrument. Financial assets and liabilities are derecognised when the Group is no longer bound by the terms of the financial instrument through settlement or expiry.

Financial assets

The classification of financial assets to which the Group is a party is determined by the nature of the underlying financial instrument and the characteristics of the contractual cash flows expected to be received under the terms of instrument.

Financial assets are not reclassified after their initial recognition unless there is a contractual change in the nature of the cash flows under the instrument or the business purpose of the instrument has changed.

A financial asset is recorded at amortised cost where it is expected to be held to maturity and the objective of the Group is to collect the contractual cash flows under the financial instrument based on specified contractual terms, including the timing of receipt of cash flows.

Financial assets that the Group is party to are classified and measured as follows:

Financial asset	Measurement basis
Trade receivables and accrued income	Amortised cost
Other current assets	Amortised cost
Contract assets	Amortised cost
Cash and cash equivalents	Amortised cost

Amortised cost

On initial recognition, the Group measures amortised cost for financial assets based on the fair value of each financial asset together with any transaction costs that are directly attributable to the financial asset.

After initial recognition, amortised cost is measured for each financial asset held using the effective interest rate method less any impairment loss identified. Interest income is recognised for all financial assets, other than those that are classified as short-term, by applying the effective interest rate for the instrument. Interest income on short-term financial assets is not considered to be material. Short-term financial instruments are determined as those that have contractual terms of 12-months or less at inception.

Interest income, foreign exchange gains and losses, impairment, and any gain or loss on derecognition are recognised in profit or loss.

Impairment of financial assets

A loss allowance for financial assets is determined based on the lifetime expected credit losses for financial assets. Lifetime expected credit losses are estimated based on factors including the Group's experience of collection, the number and value of delayed payments past the average credit periods across the Group's financial assets. The Group will also consider factors such as changes in national or local economic conditions that correlate with default on receivables and financial difficulties being experienced by the counterparty.

Financial assets are impaired in full and a corresponding charge is recognised in profit or loss where there is no reasonable expectation of recovery.

Financial liabilities

The classification of financial liabilities is determined at initial recognition. Financial liabilities are classified and measured as follows:

Financial liability	Measurement basis
Trade and other payables	Amortised cost
Derivative Financial Instrument	Fair Value through Profit and Loss
Lease liabilities	Amortised cost

Amortised cost

At initial recognition, the Group measures financial liabilities at amortised cost using the fair value of the underlying instrument less transaction costs directly attributable to the acquisition of the financial liability.

Derecognition of financial liabilities

The Group derecognises financial liabilities when the Group's obligations under the relevant instrument are discharged, expired or cancelled.

Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into, and they are subsequently remeasured to their fair value at the end of each reporting period. Changes in the fair value of any derivative instrument is recognised immediately in profit or loss and are included in other gains/(losses).

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held with financial institutions that can be called on demand together with other short-term, highly liquid investments with maturities of three months or less and are readily convertible to known amounts of cash.

Equity instruments

Instruments are classified as equity instruments if the substance of the relative contract arrangements evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded as proceeds received, net of direct issue costs not charged to income.

Offsetting

A financial asset and a financial liability are offset and the net amount presented in the statement of financial position when, and only when, the Group:

· has a legally enforceable right to set off the recognised amounts; and

· intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

4 Revenue from contracts with customers and income from government grants

Segment information

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

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

All revenues in 2022 were derived from continuing operations.

	2022	2021
Revenue from contracts with customers	£000	£000
Battery systems and associated control systems	2,548	2,481
Integration and commissioning	254	701
Other services	142	3
Total revenue in the consolidated statement of profit and loss	2,944	3,185
Analysed as:
Revenue recognised at a point in time	2,936	3,182
Revenue recognised over time	8	3
Total revenue in the consolidated statement of profit and loss	2,944	3,185
Grant income shown against cost of sales	647	-
	3,591	3,185

Geographic analysis of revenue

The Group's revenue from contracts with customers was derived from the following geographic regions:

	2022	2021
Geographic analysis of revenue	£000	£000
United Kingdom	1,691	2,796
Asia	160	273
United States of America	1,093	116
Total revenue in the consolidated statement of profit and loss	2,944	3,185

The Group maintains its principal production and assembly facilities in Bathgate, Scotland and Vancouver, Canada. These facilities include office space for design, sales and administrative teams. The Group also has offices, operations and management based in London, England and San Francisco, California.

The Group does not consider that the locations of its operations constitute geographic segments as they are managed centrally by the executive management team. The location of the manufacturing plants and business development activity is a function of time-zone when servicing customers both pre-sale and during product delivery. The geographic location of offices, facilities and management is not related to distinct markets or customer characteristics at the present time.

Significant customers and concentration of revenue

Revenue from contracts with customers was derived from three (2021: two) customers who each accounted for more than 10% of total revenue as follows:

	2022	2021
Significant customers and concentration of revenue	£000	£000
Customer A	1,247	-
Customer B	466	-
Customer C	466	-
Customer D	-	2,300
Customer E	-	495

Grant income other than revenue

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

	2022	2021
Grant income received	£000	£000
Business support grants against employee costs - COVID-19	(11)	156
Grants for research and development	647	302
Total government grants	636	458

5 Cost of sales

	2022	2021
	£000	£000
Movement in inventories of finished battery systems	3,356	5,240
Production costs	2,640	826
Depreciation of production facilities, equipment and amortisation of intangibles	172	116
Movement in provisions for warranty and warranty costs	763	440
Movement in provisions for sales contracts	(4,004)	-
Total cost of sales	2,927	6,622

6 Administrative expenses

	2022	2021
	£000	£000
Staff costs	10,322	8,980
Research and development costs	2,592	1,792
Professional fees	2,983	1,950
Sales and marketing costs	399	249
Facilities and office costs	385	655
Other administrative costs	2,361	813
Total administrative expenses	19,042	14,439

No development costs were capitalised in the period (2021: £nil).

7 Auditors' Remuneration

	2022	2021
	£000	£000
Fees payable to the Company's auditors for the audit of the consolidated financial statements	271	172
Audit of financial statements of subsidiaries pursuant to legislation	33	21
Fees payable to the Company's auditor for other services:
· Tax compliance services	19	9
	323	202

The Group has a policy in place related to the commissioning of non-audit service from its auditors where all such work requires pre-approval by the Audit & Risk Committee before the commencement of any non-audit work.

Audit fees are discussed with and approved by the Audit & Risk Committee.

8 Staff costs and headcount

	2022	2021
Staff costs	£000	£000
Wages and salaries	9,280	7,617
Employer payroll taxes	840	625
Other benefits	917	508
Share-based payments	388	1,827
Total staff costs	11,425	10,577

Administrative staff costs in the year were £10,321,870 (2021: £8,979,790) and staff costs included in cost of sales were £1,103,027 (2021: £1,596,839).

	2022	2021
Average headcount	Number	Number
Canada	71	55
United Kingdom	68	60
United States of America	7	7
South Africa	1	2
Total	147	124

Increases in staff costs are due to hiring for expansion in operating activity and the delivery of key projects to customers.

Key management compensation

From 1 April 2020, the key management of the Group has been determined to comprise the members of the senior leadership team.

	2022	2021
Key management compensation	£000	£000
Short-term employee benefits	1,828	1,590
Total key management compensation	1,828	1,590

The Group made contributions to the defined contribution schemes of key management in the year of £16,078 (2021: £12,917).

9 Share based payments

Since its incorporation, the Company has operated various share-based incentive plans. The purpose of each of the schemes has been to incentivise Directors and employees related to improving Company performance and building shareholder value.

Set out below is a summary of the option awards in issue at 31 December 2022.

Standard	Grant date	Final Expiry date		Exercise price		2022	2021
redT 2015 plan	07 Dec 2015	07 Jan 2020		58.95	€c	68,803	137,602
redT 2018 plan	18 May 2018	18 May 2023		352.50	p	3,888	3,888
Invinity Energy 2018 ESOP	01 Apr 2020	12 Mar 2030		82.50	p	185,143	185,143
Invinity Energy 2018 Consultant SOP	01 Apr 2020	12 Mar 2030		82.50	P	378,000	378,000
Invinity Energy 2018 ESOP	01 Apr 2020	07 Jul 2026		4.34	p	1,342,134	1,429,812
Invinity Energy 2018 ESOP	01 Apr 2020	08 May 2029		6.84	p	658,314	661,237
Invinity Energy 2018 ESOP	26 Aug 2020	26 Aug 2030		113.00	p	2,043,334	2,505,000
Invinity Energy 2018 ESOP	28 Jan 2021	28 Jan 2031		204.00	p	372,000	480,000
Invinity Energy 2018 ESOP	04 Mar 2021	04 Mar 2031		152.00	p	194,000	222,000
Invinity Energy 2018 ESOP	15 Apr 2021	15 Apr 2031		151.00	p	108,000	126,000
Invinity Energy 2018 ESOP	03 Aug 2021	03 Aug 2031		134.50	p	375,000	455,000
Invinity Energy 2018 ESOP	29 Oct 2021	29 Oct 2031		111.50	p	297,000	359,000
Invinity Energy 2018 ESOP	20 Dec 2021	20 Dec 2031		91.00	p	135,000	135,000
Invinity Energy 2018 ESOP	03 Feb 2022	03 Feb 2032		64.50	p	186,000	-
Invinity Energy 2018 ESOP	02 Mar 2022 APR	02 Mar 2032		93.50	p	60,000	-
Invinity Energy 2018 ESOP	11 Apr 2022	11 Apr 2032		90.00	p	60,000	-
Invinity Energy 2018 ESOP	11 Jul 2022	11 Jul 2032		45.50	p	500,000	-
Invinity Energy 2018 ESOP	08 Dec 2022	08 Dec 2032		38.00	p	822,000	-
						7,788,616	7,077,682

Non-standard	Grant date		Expiry date	Exercise price		2022	2021
Long-term Incentive plan	8 Dec 2009		30 Jul 2023	50.00	€c	15,000	15,000
Camco 2006 Executive Share Plan	30 Jul 2013		30 Jul 2023	50.00	€c	68,127	68,127
redT 2018 plan	30 May 2018		30 Jul 2023	400.00	p	70,000	70,000
						153,127	153,127

Total						7,941,743	7,230,809

Weighted average remaining contractual life of options outstanding at the end of the year						7.18	8.82

A total of 87,678 options were exercised during the year with a weighted average exercise price of 4.34p per share.

The grant-date fair value of share options issued is calculated using a Black-Scholes methodology at the date of grant. Key inputs to the model include the share price at the date of grant, the option exercise price, the term of the award, share price volatility, the risk-free interest rate (by reference to government bond yields) and the expected dividend yield rate, which has historically been and continues to be zero, reflective of the development-stage nature of the Company.

The Long-term Incentive Plan, Camco 2006 Executive Share Plan and the redT 2015 Plan are now closed. No further option awards will be made under either of these plans.

The aggregate number of options granted, vested, exercised and forfeited during the year under the plans are summarised and analysed between unvested and vested awards as follows:

	Unvested		Vested
At 1 January 2022	4,369,588	113.47p	2,708,094	35.26p
Granted	1,781,000	50.39p	-	-
Forfeited	(900,589)	121.89p	(81,799)	96.31p
Vested	(1,711,308)	108.00p	1,711,308	108.00p
Exercised	-	-	(87,678)	4.34p
At 31 December 2022	3,538,691	82.73p	4,249,925	69.24p

	Unvested		Vested
At 1 January 2021	4,034,591	98.84p	1,839,032	29.09p
Granted	2,015,000	149.64p	1,301,543	87.15p
Forfeited	(378,460)	134.35p	(100,000)	317.00p
Vested	(1,301,543)	87.15p	-	-
Exercised	-	-	(332,481)	15.33p
At 31 December 2021	4,369,588	113.47p	2,708,094	35.26p

Plans with non-standard performance conditions

Long-term incentive plan (LTIP)

The LTIP for Directors and employees was approved by the Board in 2008 and entitled Directors and employees to receive equity settled payments annually based on the achievement of certain market and non-market performance conditions.

The LTIP is now closed. At the end of the year, there were 15,000 (2021: 15,000) options vested and exercisable at €0.50 per share.

CAMCO 2006 executive share plan (the plan)

The plan was established in 2017 to make awards of shares up to an aggregate of 10% of the share capital of the Company over a period of ten years.

The plan is now closed. At the end of the year there were 68,127 (2021: 68,127) options vested exercisable at €0.50 per share.

redT 2018 plan

Options with non-standard performance conditions were also issued under the 2018 plan. At the end of the year there were 70,000 (2021: 70,000) options vested and exercisable at 400p per share.

Plans with standard performance conditions

The primary share plan that remains outstanding at 31 December 2022 is the 2018 plan. The 2018 plan was adopted by the Board on 14 May 2018 and introduced HMRC scheme rules related to certain non-taxable option grants. The plan contains a provision to issue options as CSOP, EMI or unapproved awards.

In the year ended 31 December 2020 the Board approved the expansion of awards to be made under the 2018 plan with grants expected to be made more frequently going forward and to a potentially wider group of employees. The intention of the increase in frequency and quantity of employee share options granted was to incentivise and to better align employee compensation with shareholder return.

Options issued to legacy Avalon employees at the merger date

Following the merger transaction, 1,432,000 options were granted to legacy Avalon employees to replace options held by them in the former Avalon employee share plan.

Parallel options issued

In addition, certain legacy redT options were reissued as they were considered by the Board to be sufficiently 'out-of-the-money' such that they no longer provided a performance incentive to the holders of the options. As a mechanism to adjust the terms of the unfavourable options, new parallel options were issued on a one-for-one basis with the same terms as the original awards excepting that they were issued with a lower exercise price.

Both the original and parallel option schemes remain in existence. However, the exercise by an employee of a single option from either pool (original or parallel) allocated to them will cause the equivalent value in the other pool to be forfeited. Accordingly, the number of options disclosed above has been adjusted to remove the number of options that is equivalent to the number of parallel options issued.

Other options

On 10 May 2021, the Company granted an option for 8,672,273 shares to Gamesa Electric S.A. Unipersonal (GaE), a wholly-owned subsidiary of Siemens Gamesa Renewable Energy S.A. The options were granted to GaE in consideration of its entering into a joint development and commercialisation agreement with Invinity Energy Nexus Limited, a wholly-owned subsidiary of the Company.

The exercise price of the options is 175 pence and upon exercise of those options then for as long as GaE holds at least 5% of the issued share capital of the Company it shall be entitled, subject to certain conditions, to nominate one non-executive director to the Board of the Company.

Warrants issued in the period or outstanding

In December 2021, the Company issued 14,464,571 'placing units' comprised of one share, one short-term warrant and one long-term warrant.

At 31 December 2022, the Company had 14,464,317 short-term warrants and 14,464,478 long-term warrants outstanding.

Each short-term warrant gives the holder the right to subscribe for one new Ordinary Share at a price of 150 pence per Ordinary Share at any time from Second Admission until 15 September 2023. Each long-term warrant gives the holder the right to subscribe for one new Ordinary Share at a price of 225 pence per Ordinary Share at any time from Second Admission until 16 December 2024.

The warrants were admitted to trading on the Aquis Stock Exchange (AQSE) on 9 March 2022. There was no adjustment to the issue price in respect of the attached warrants and they have been deemed to have no fair value based on the price at which they are currently being quoted.

In December 2022, the Company issued 1,350,020 warrants as part of the convertible loan facility with Riverfort Global Opportunities and YA II PN Ltd ("Noteholders"). Each warrant gives the holder the right to subscribe for one new Ordinary Share at a price of 67.35 pence per Ordinary Share until 14 December 2026.

Subsequent to year-end, the Company was required to amend the exercise price of these warrants to 32 pence, being the issue price of the Placing and Open Offer on 22 February 2023. In consideration of the Noteholders undertakings, the Company has agreed to grant a further 449,980 warrants at an exercise price of 32p which will expire on 14 December 2026.

10 Other items of operating income and expense

The following items are included in comprehensive loss:

	2022	2021
	£000	£000
(Income)/expense

Provision for onerous contracts, net of amounts used	554	3,762
Impairment of property, plant and equipment	-	60
Loss on disposal of property, plant and equipment	33
Reversal of impairment of obsolete inventory and disposal of scrap inventory	-	(390)
Impairment of obsolete inventory and disposal of scrap inventory	25	-
Profit on disposal of subsidiary	-	(15)
Gain on curtailment of right-of-use asset	(8)	(29)
Total other operating expenses (net)	604	3,388

11 Net finance income and costs

	2022	2021
	£000	£000
Finance income
Interest on bank deposits and money market funds	(62)	-
Finance costs
Finance charges on convertible loan notes	6	-
Finance charges for lease liabilities held at fair value	58	45
Finance charges for liabilities held at amortised cost	1	-
(Gains)/losses on foreign currency transactions	(448)	63
Net finance (income)/costs	(445)	108

12 Income tax expense

	2022	221
	£000	£000
Current tax
Current tax on profits for the year	-	-
Total current tax expense	-	-

Reconciliation of income tax expense calculated using statutory tax rate

	2022	2021
	£000	£000
Loss before tax	(18,537)	(21,372)

Tax at the Jersey rate of nil%	-	-

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non-taxable gains and expenses not deductible for tax	181	(113)
Differences in overseas tax rates	(4,707)	(3,942)
Unrelieved tax losses carried forward	4,350	3,109
Origination and reversal of timing differences not recognised	176	946
Total income tax expense	-	-

13 Loss per share

	2022	2021
Basic loss per share	In pence	In pence
From continuing operations	(16.0)	(24.1)
From continuing and discontinued operations	(16.0)	(24.1)


	2022	2021
Diluted loss per share	In pence	In pence
From continuing operations	(16.0)	(24.1)
From continuing and discontinued operations	(16.0)	(24.1)


	2022	2021
Loss used in calculation of basic and diluted loss per share	£000	£000
From continuing operations	(18,537)	(21,372)
From continuing and discontinued operations	(18,537)	(21,372)

All operational activity in the years ended 31 December 2022 and 2021 relate to continuing operations.

	2022	2021
Weighted average number of shares used in calculation	Number	Number
Basic	116,151,378	88,768,750
Diluted	117,754,966	119,792,519

Additional potential shares used in the calculation of diluted earnings per share primarily relate to potential shares outstanding at 31 December 2022 that may be issued in satisfaction of 'in-the-money' employee share options. Potentially dilutive shares related to 'in-the-money' outstanding warrants to subscribe for ordinary shares in the Company are also included in calculating diluted earnings per share.

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

	2022	2021
Weighted average number of shares used in loss per share calculation - basic and diluted	Number	Number
In issue at 1 January	116,048,761	85,900,616
Shares issued in the year - weighted average	102,617	2,868,134
Weighted average shares in issue 31 December	116,151,378	88,768,750
Effect of employee share options and other warrants not exercised	1,603,588	31,023,769
Weighted average number of diluted shares in issue 31 December	117,754,966	119,792,519

Additional potential shares are anti-dilutive where their inclusion in the calculation of loss per share results in a lower loss per share. The weighted average number of shares not included in the diluted loss per share calculation because they had an anti-dilutive effect on the calculation was 29,170,511 (2021: 2,094,626).

14 Cash flows from operating activities

	2022	2021
	£000	£000
Loss after income tax	(18,537)	(21,372)

Adjustments for:
Depreciation and amortisation	1,350	727
Loss on disposal of property, plant and equipment	33	-
Gain on curtailment of right-of-use asset	(8)	-
Impairment of inventory	24	(390)
Share-based payments charge	681	1,827
Equity settled interest and transaction costs on Investment funding arrangement	6	-
Net foreign exchange differences	(168)	(27)
	(16,619)	(19,235)

Change in operating assets & liabilities
Increase in inventory	(3,875)	(4,487)
Increase in contract assets	(174)	(319)
Increase in trade receivables and other receivables	(88)	(1,650)
Increase in other current assets and prepaid inventory	(2,354)	(4,866)
Increase in trade and other payables	1,263	1,046
Increase in warranty provision	183	293
(Decrease)/increase in onerous contract provision	(3,252)	3,756
Increase in contract liabilities	2,982	2,498
	(5,315)	(3,729)
Cash used in operations	(21,934)	(22,964)

15 Goodwill and other intangible assets

	Goodwill	Patents and certifications	Software and domain names	Total
	£000	£000	£000	£000
Cost
At 1 January 2022	23,944	203	47	24,194
Additions	-	-	-	-
Foreign currency exchange differences	-	-	3	3
At 31 December 2022	23,944	203	50	24,197

Accumulated amortisation
At 1 January 2022	-	(71)	(26)	(97)
Amortisation charge	-	(41)	(8)	(49)
Foreign currency exchange differences	-	-	(1)	(1)
At 31 December 2022	-	(112)	(35)	(147)

Net book value
At 1 January 2022	23,944	132	21	24,097
At 31 December 2022	23,944	91	15	24,050

	Goodwill	Patents and certifications	Software and domain names	Total
	£000	£000	£000	£000
Cost
At 1 January 2021	23,944	203	29	24,176
Additions	-	-	18	18
At 31 December 2021	23,944	203	47	24,194

Accumulated amortisation
At 1 January 2021	-	(30)	(19)	(49)
Amortisation charge	-	(41)	(7)	(48)
At 31 December 2021	-	(71)	(26)	(97)

Net book value
At 1 January 2021	23,944	173	10	24,127
At 31 December 2021	23,944	132	21	24,097

Goodwill

All goodwill is tested annually for impairment. At 31 December 2022, goodwill was tested for impairment using a fair value less costs of disposal methodology by reference to the Company's quoted market capitalisation using the price of 43.0 pence per share at that date. No impairment loss was identified in relation to goodwill.

On 15 March 2023, the Company announced the results of a placing, open offer, and subscription. The fundraising was oversubscribed and together raised total proceeds of £23.0 million through placing of 72,012,592 new Ordinary Shares at 32.0 pence per share.

The closing share price on 30 May 2023 was 35.5 pence, giving a market capitalisation of £67.8 million which does not indicate impairment of goodwill or net assets.

Patents and certifications

There have been no events or circumstances that would indicate that the carrying value of patents and certifications may be impaired at 31 December 2022.

16 Property, plant and equipment

	Computer and office equipment	Leasehold improvements	Vehicles and equipment	Total
	£000	£000	£000	£000

Cost
At 1 January 2022	780	681	1,165	2,626
Additions	45	429	234	708
Disposals	(136)	(2)	(37)	(175)
Foreign currency exchange differences	10	11	40	61
At 31 December 2022	699	1,119	1,402	3,220

Accumulated Depreciation
At 1 January 2022	(653)	(427)	(416)	(1,496)
Depreciation charge	(129)	(204)	(301)	(634)
Disposals	125	1	16	142
Foreign currency exchange differences	(5)	(5)	(14)	(24)
At 31 December 2022	(662)	(635)	(715)	(2,012)

Net book value
At 1 January 2022	127	254	749	1,130
At 31 December 2022	37	484	687	1,208

	Computer and office equipment	Leasehold improvements	Vehicles and equipment	Total
	£000	£000	£000	£000

Cost
At 1 January 2021	748	513	753	2,014
Additions	158	169	406	733
Disposals	(123)	-	-	(123)
Foreign currency exchange differences	(3)	(1)	6	2
At 31 December 2021	780	681	1,165	2,626

Accumulated Depreciation
At 1 January 2021	(694)	(357)	(268)	(1,319)
Depreciation charge	(85)	(71)	(145)	(301)
Disposals	123	-	-	123
Foreign currency exchange differences	3	1	(3)	1
At 31 December 2021	(653)	(427)	(416)	(1,496)

Net book value
At 1 January 2021	54	156	485	695
At 31 December 2021	127	254	749	1,130

The Group has no assets pledged as security. No amounts of interest have been capitalised within property, plant and equipment at 31 December 2022 (2021: £nil).

17 Right-of-use assets

	Offices and facilities	Vehicles and equipment	Total
	£000	£000	£000

Cost
At 1 January 2022	1,845	28	1,873
Additions	1,512	-	1,512
Curtailments and disposals¹	(106)	-	(106)
Foreign currency exchange differences	79	3	82
At 31 December 2022	3,330	31	3,361

Accumulated Depreciation
At 1 January 2022	(879)	(19)	(898)
Depreciation charge	(661)	(6)	(667)
Curtailments and disposals	106	-	106
Foreign currency exchange differences	(55)	(2)	(57)
At 31 December 2022	(1,489)	(27)	(1,516)

Net book value
At 1 January 2022	966	9	975
At 31 December 2022	1841	4	1,845

	Offices and facilities	Vehicles and equipment	Total
	£000	£000	£000

Cost
At 1 January 2021	1,572	28	1,600
Additions	627	-	627
Curtailments²	(294)	-	(294)
Foreign currency exchange differences	(60)	-	(60)
At 31 December 2021	1,845	28	1873

Accumulated Depreciation
At 1 January 2021	(576)	(10)	(586)
Depreciation charge	(369)	(9)	(378)
Foreign currency exchange differences	66	-	66
At 31 December 2021	(879)	(19)	(898)

Net book value
At 1 January 2021	996	18	1,014
At 31 December 2021	966	9	975

1. In 2022, a lease on a right-of-use asset in South Africa was curtailed by five months. There was a corresponding decrease in the outstanding lease creditor and a gain on curtailment recognised in the consolidated statement of profit and loss in 2022.

2. In 2021, a lease on a right-of-use asset in Canada was curtailed, with the termination date changing from June 2027 to June 2023. There was a corresponding decrease in the outstanding lease creditor and a gain on curtailment recognised in the consolidated statement of profit and loss in 2021.

Right-of-use assets relate to buildings, vehicles and equipment held under leases with third-party lessors. A right-of-use asset represents the Company's right to use a leased asset over the term of the lease. The Company's rights to use specific buildings, items of equipment or specific vehicles under lease arrangements represent assets to the Group.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group:

· where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received;

· uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third party financing; and

· makes adjustments specific to the lease, e.g. term, country, currency and security.

18 Deferred tax balances

	2022	2021
	£000	£000
Timing differences and tax losses on which deferred tax is not recognised:
Accelerated capital allowances	1,003	450
Share options	595	1,576
Accrued liabilities	137	477
Reserves and other	3,008	4,161
Tax losses	91,482	70,880
Total deferred tax assets	96,225	77,544

Tax losses

The Company's subsidiaries carry on business in other tax regimes where the corporation tax rate is not zero. At 31 December 2022, the Group had the following tax losses carried forward available for use in future periods:

	2022	2021
	£000	£000
United Kingdom	46,416	40,530
Canada	27,707	16,557
United States of America	12,892	9,994
Ireland	4,467	3,799
Total potential tax benefit	91,482	70,880

Under current tax legislation tax losses in the United Kingdom and Ireland can be carried forward indefinitely and be offset against future profits arising from the same activities at the tax rate prevailing at that time. There is a portion of the tax losses in the United States of America that will begin to expire in 2035, whereas the majority can be carried forward indefinitely. The tax losses in Canada can be carried forward 20 years and will begin to expire in 2035.

Due to the uncertainty regarding the timing and extent of future profits within these subsidiaries, no deferred tax assets have been recognised in respect of these tax losses. Deferred tax is also not recognised on the timing differences between accounting and tax treatment in these subsidiaries given the offsetting tax losses on which no deferred tax has been recognised.

In March 2021, the UK Government announced that the rate of Corporation Tax will increase from 19% to 25% on profits of over £250,000, effective 1 April 2023. Profits below £50,000 will continue to be chargeable to Corporation Tax at 19% and profits between the two thresholds charged at the marginal rate of 26.5%. In computing the UK deferred tax asset, management has assumed that as neither the deferred tax assets nor the deferred tax liabilities will crystallise in the immediate future, calculations based on 19% are appropriate.

19 Inventory

	2022	2021
	£000	£000
Raw materials and consumables	1,815	1,897
Work in progress	6,370	3,900
Finished goods	1,642	-
Total inventory	9,827	5,797

Inventory recognised as an expense within cost of sales during the current year amounted to £3,356,045 (2021: £5,239,682).

Net reversal of inventory write-downs during the current year amounted to £5,154 (2021: £389,808).

20 Other current assets

	2022	2021
	£000	£000
Prepayments and deposits	1,879	533
Prepaid inventory	5,102	4,112
Tax credits - recoverable	551	247
Other receivables	1,249	1,388
Total other current assets	8,781	6,280

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

21 Contract related balances

The Group has recognised the following assets and liabilities related to revenue from contracts with customers that are in progress at the respective year-ends:

	2022	2021
	£000	£000
Amounts due from customer contracts included in trade receivables	1,737	1,683
Contract assets (accrued income for work done not yet invoiced)	500	324
Contract liabilities (deferred revenue related to advances on customer contracts)	(8,375)	(5,142)
Net position of sales contracts	(6,138)	(3,135)

The amount of revenue recognised in the year that was included in contract liabilities at the end of the prior year was £428,417 (2021: £2,231,000).

The aggregate position on customer contracts included in the statement of financial position will change according to the number and size of contracts in progress at a given year-end as well as the status of payment milestones made by customers toward servicing those contracts. The Group structures payment milestones in its customer contracts to cover upfront expenditure for parts and materials and other working capital requirements associated with the delivery of promises under customer contracts to better manage Group cash flow.

The timing of revenue recognition is based on the satisfaction of individual performance obligations within a contract and is not based on the timing of advances received. Customer advances are recognised as contract liabilities in the statement of financial position and are released to income progressively as individual performance obligations are met. The difference in timing between the receipt of contract advances and the timing of the satisfaction of performance obligations for revenue recognition can cause values to remain in deferred income. The amount of such deferrals is related to both the overall size of the underlying contract and the planned pace of delivery in the related work schedule. This is expected to occur where satisfaction of performance obligations is evidenced by customer acceptance of the good or service that is the subject of the performance obligation.

Provisions related to contracts with customers

	Warranty provision	Legacy products provision	Provision for contract losses	Total
	£000	£000	£000	£000
At 1 January 2022	257	860	4,859	5,976
Charges to profit or loss:
· Provided in the year	204	578	565	1,347
· Unused amounts reversed	(24)	(16)	(2,059)	(2,099)
Amounts used in the year	(153)	(406)	(1,758)	(2,317)
At 31 December 2022	284	1,016	1,607	2,907

	Warranty provision	Legacy products provision	Provision for contract losses	Total
	£000	£000	£000	£000
At 1 January 2021	-	824	1,103	1,927
Charges to profit or loss:
· Provided in the year	257	36	4,028	4,321
· Unused amounts reversed	-	-	(51)	(51)
Amounts used in the year	-	-	(221)	(221)
At 31 December 2021	257	860	4,859	5,976

Warranty provision

The warranty provision represents management's best estimate of the costs anticipated to be incurred related to warranty claims, both current and future, from customers in respect of goods and services sold that remain within their warranty period. The estimate of future warranty costs is updated periodically based on the Company's actual experience of warranty claims from customers.

The element of the provision related to potential future claims is based on management's experience and is judgmental in nature. As for any product warranty, there is an inherent uncertainty around the likelihood and timing of a fault occurring that would cause further work to be undertaken or the replacement of equipment parts.

A standard warranty of up to two years from the date of commissioning is provided to all customers on goods and services sold and is included in the original cost of the product. Customers are also able to purchase extended warranties that extend the warranty period for up to a total of ten years.

Provision for legacy products

Where it is considered of commercial value, management has elected to provide ongoing maintenance for certain legacy products not otherwise covered under warranty. Management has determined that it is necessary to provide for the costs of this ongoing maintenance or to provide for outright decommissioning.

Provisions in respect of legacy products are expected to unwind over the next two years when maintenance is either terminated or the products are decommissioned.

Provision for contract losses

A provision is established for contract losses when it becomes known that a customer contract has become onerous. A contract is onerous when the unavoidable costs of fulfilling the Group's obligations under a contract are greater than the revenue that will be earned from it.

The unavoidable costs of fulfilling contract obligations will include both direct and indirect costs.

The creation of an additional provision is recognised immediately in profit and loss. The provision is used to offset subsequent costs incurred as the contract moves to completion.

In determining the amount to be provided, management has evaluated the likelihood of input costs continuing to rise against a backdrop of inflation and instability due to current macro-economic factors such as the, albeit receding, impact of Covid-19, the increasing price of oil feeding through to production and shipping costs and continuing supply chain issues.

Provisions in respect of contract losses relate to contracts which are expected to be delivered in 2023 and will therefore unwind during that year.

22 Trade and other receivables

	2022	2021
	£000	£000
Total trade and other receivables	1,737	1,683

All trade and other receivables relate to receivables arising from contracts with customers.

Trade receivables are amounts due from customers for sales of vanadium flow battery systems in the ordinary course of business. Trade receivables do not bear interest and generally have 30-day payment terms and therefore are all classified as current.

The actual credit loss over 2022 was determined to be less than 1% of total sales (2021: 0%). An allowance for potential credit losses of £23,953 (2021: £nil) has been recognised.

23 Cash and cash equivalents

	2022	2021
	£000	£000
Total cash and cash equivalents	5,137	26,355

Short term investments

Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are repayable with 24 hours' notice with no loss of interest. The Company had no short-term investments at 31 December 2022 (2021: £nil).

24 Trade and other payables

	2022	2021
	£000	£000
Trade payables	3,706	1,484
Other payables	78	456
Accrued liabilities	701	1,013
Accrued employee compensation	143	505
Government remittances payable	306	55
Total trade and other payables	4,934	3,513

Trade payables are unsecured and are usually paid within 30 days.

The carrying amounts of trade and other payables are the same as their fair values due to the short-term nature of the underlying obligation representing the liability to pay.

25 Derivative financial instruments

	2022	2021
	£000	£000
Derivative value of warrants issued	449	-
Other	320	-
Total derivative financial instruments	769	-

Information about the Group's exposure to interest rate, foreign currency and liquidity risks is included in Note 29.

Investment funding arrangement

On 14 December 2022, the Company entered into an investment agreement with Riverfort Global Opportunities PCC Limited and YA II PN Ltd. ("Noteholders"). The instrument was entered by way of an initial drawdown in the amount of US$2.5 million and related subscription of 2,870,038 shares priced at nominal value of €0.01 and to be used to facilitate the conversion of amounts advanced under the investment agreement. Following the redemption of the investment agreement any proceeds from the sale of the conversion shares are to be split 97% to the company and 3% to the Noteholders.

Pursuant to the facility, the Noteholders were granted warrants exercisable at 67.35p to subscribe for 1,350,020 ordinary shares for a period of up to four years. These warrants remain outstanding and have been repriced to 32p being the price per share achieved in the capital raise.

Prepayment was at the Company's option and carried a redemption premium of 10% paid to the Noteholders at the date of prepayment.

The convertible notes balance was fully repaid by 31 March 2023 using funds from the 2023 capital raise. The warrants issued to the Noteholders were repriced to the price achieved in the 2023 capital raise of 32p per share.

See Note 32 for detailed events occurring after the report period.

26 Lease liabilities

The Group's obligations under lease contracts are presented as follows:

	2022	2021
At 31 December	£000	£000
Current - due within 12 months	740	350
Non-current - due after 12 months	969	420
Total lease liabilities	1,709	770

Payments of lease principal and interest in the period to 31 December were:

	2022	2021
At 31 December	£000	£000
Payments of lease principal	591	275
Payments of interest	58	45
Total payments under leases	649	320

The contractual undiscounted cash flows for lease obligations at each period end were:

	2022	2021
At 31 December	£000	£000
Less than one year	804	379
One to five years	1,009	448
More than five years	-	-
Total lease liabilities	1,813	827

Lease liabilities represent the present value of the minimum lease payments the Group is obliged to make to lessors under contracts for the lease of assets that are presented as right-of-use assets.

27 Issued share capital and reserves

	2022		2021
	No: 000	£000	No: 000	£000
Authorised at 31 December	121,500	-	120,000	-

Issued and fully paid
At 1 January	116,048	50,690	85,900	37,870
Issued in the year	2,959	26	30,148	12,820
At 31 December	119,007	50,716	116,048	50,690

During the year, 2,959,085 new shares were issued with a nominal value of £25,974. The total gross proceeds were £80,927 with the balance credited to the share premium account. Total costs of issuance were £82,442 and these costs were charged directly to the share premium account.

On 22 November 2022, the Company subdivided each Ordinary Share of €0.50 nominal value into one Ordinary Share of €0.01 each and one deferred A share of €0.49 each. The Deferred A Shares do not have any voting rights and are not admitted to trading on AIM or any other market. They carry only a priority right to participate in any return of capital or in any dividend to the extent of €1 in aggregate over the class. The Deferred A Shares are, for all practical purposes, valueless and it is the Board's intention, at an appropriate time, to have the Deferred A Shares cancelled in accordance with Companies Law.

In addition, the shares of the Company were admitted to trading on the AQSE Growth Market in the UK and the OTCQX Best Market in the U.S. during the year.

The holders of ordinary shares are entitled to receive dividends as may be declared from time to time and are entitled to one vote per share at meetings of the Company.

Share-based payment reserve

The share-based payment reserve comprises the equity component of the Company's share-based payments charges.

Currency translation reserve

The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations.

Other reserve

Other reserve comprises the portion of the consideration paid for redT energy Holdings (Ireland) Limited's minority interests over the fair value of the shares purchased.

28 Financial assets and liabilities

All financial assets are held at amortised cost. There were no financial assets measured at fair value through other comprehensive income nor through profit and loss in either period presented.

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial asset presented above. The carrying value of the financial assets approximate their fair values due to the short-term maturities of these instruments.

The Group does not currently use derivative instruments for managing financial risk. All financial liabilities are held at amortised cost.

Recognised fair value measurements

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading securities) is based on quoted market prices at the end of the reporting period.

The battery systems manufactured by the Company use vanadium metal as a key component in the electrolyte. Vanadium is an actively traded commodity for which quoted market prices are available.

The Company does not currently hold inventories of vanadium. Vanadium purchased from third parties is solely for the use in electrolyte and open purchase contracts are not accounted for as derivatives.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques that maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value instrument are observable, the instrument is included in Level 2.

At 31 December 2022, the Company held warrants issued to Riverfort Global Opportunities and YA II PN Ltd as part of the December 2022 financing event. The warrants are valued using Level 2 inputs as they do not represent a fixed-for-fixed equity instrument and are valued using observable market factors such as the share price at the date of the grant, the term of the award, the share price volatility and the risk-free interest rate (2021: none).

Level 3: If one or more of the significant inputs is not based on observable market data the instrument is included in Level 3.

The Group did not hold any financial assets or liabilities that were required to be valued using Level 3 inputs at 31 December 2022 (2021: none).

No other financial instruments were outstanding at the period end that required to be valued using a methodology that uses Level 1, 2 or 3 inputs.

29 Financial risk management

This note explains the Group's exposure to financial risks and how these risks could affect the Group's future financial performance. Current year profit and loss information has been included where relevant to add further context.

Risk	Exposure arising from	Measurement	Management
Market risk - foreign exchange	Future commercial transactions Recognised financial assets and liabilities not denominated in GBP	Cash flow forecasting Sensitivity analysis	Cash is held in GBP until non-GBP requirements for up to the next six-months are established, at which point the GBP is sold in favour of the required currency, which is then remitted to the relevant Group entity
Market risk - commodity price risk	Price of vanadium to be used in the battery electrolyte	Quoted market prices for vanadium	Strategic supply arrangements with multiple pre-qualified suppliers
Credit risk	Cash and cash equivalents, trade receivables and contract assets	Ageing analysis Credit ratings	Monitoring accumulation of bank balances. Credit risk assessment for customers and pre-agreed deposits and interim payments within customer contracts
Liquidity risk	Borrowings and other liabilities	Rolling cash flow forecasts	Access to capital markets for equity or debt funding

Market risk - foreign exchange risk

The Group is primarily exposed to foreign exchange risk related to bank deposits, receivables or payables balances and other monetary working capital items that are denominated in a currency other than the Company's functional currency which has been determined to be GBP.

The Group does not speculate on foreign exchange and aims to mitigate its overall foreign exchange risk by holding currency in line with forecast regional operating expenses, providing an element of natural hedge against adverse foreign exchange movement.

The Group's exposure to foreign exchange risk at the end of the reporting period, expressed in GBP, was as follows:

	Sterling	Euro	Canadian dollar	US dollar
31 December 2022	£000	£000	£000	£000
Cash and cash equivalents	1,545	354	106	2,810
Trade receivables	350	-	1,475	(88)
Other current assets	491	690	7,172	421
Trade and other payables	(1,197)	(557)	(2,867)	(313)
Derivative financial instruments	(769)	-	-	-
Lease liabilities	(279)	-	(1,347)	(83)
Net exposure	141	487	4,539	2,747

	South African rand	Australian dollar	Total
31 December 2022 (continued)	£000	£000	£000
Cash and cash equivalents	5	317	5,137
Trade receivables	-	-	1,737
Other current assets	7	-	8,781
Trade and other payables	-	-	(4,934)
Derivative financial instruments	-	-	(769)
Lease liabilities	-	-	(1,709)
Net exposure	12	317	8,243

	Sterling	Euro	Canadian dollar	US dollar
31 December 2021	£000	£000	£000	£000
Cash and cash equivalents	24,141	96	284	1,174
Trade receivables	1,288	23	223	150
Other current assets	2,985	278	2,113	345
Trade and other payables	(1,438)	(382)	(1,229)	(460)
Lease liabilities	(356)	-	(299)	(102)
Net exposure	26,620	15	1,092	1,107

	South African rand	Australian dollar	Total
31 December 2021 (continued)	£000	£000	£000
Cash and cash equivalents	28	632	26,355
Trade receivables	-	-	1,684
Other current assets	10	-	5,731
Trade and other payables	(4)	-	(3,513)
Lease liabilities	(13)	-	(770)
Net exposure	21	632	29,487

Sensitivity - exchange rates

The sensitivity of profit or loss to changes in quoted exchange rates for currencies to which the Group is exposed is as follows, based on each relevant exchange rate strengthening (or weakening) by 5%.

There is no impact on other components of equity as the Group is not party to any derivative financial instruments, such as hedging instruments, where currency gains and losses would be recognised in other comprehensive loss.

Prior year sensitivity of profit or loss was restated to consistently use monetary working capital as basis for analysis.

	2022	Restated 2021
At 31 December +/- 5%	£000	£000
Euro	24	1
Canadian dollar	227	55
US dollar	137	55
South African rand	1	1
Australian dollar	16	32
	405	144

Market risk - commodity price risk

The Group's batteries use an electrolyte incorporating vanadium. Vanadium is an elemental metal and is used primarily to strengthen steel, particularly for the construction industry.

Whilst it is not a mature market traded commodity, such that one can buy forward or derivative contracts, market prices for vanadium pentoxide (V2O5) at 98% purity are quoted in US dollars per pound.

Vanadium forms about two-thirds of the value of the electrolyte, which in turn forms about a quarter of the landed cost of a battery, and so a fluctuation in the price of vanadium will impact the profitability of battery sales. An increase or decrease in the market price of vanadium of 5% could cause the value of the electrolyte component of a battery to increase or decrease by approximately 3%.

Credit risk - cash held on deposit with banks

Credit risk arises from cash and cash equivalents and deposits with banks and other financial institutions.

Credit risk related to holdings with financial institutions is managed by only maintaining bank accounts with reputable financial institutions. The Group aims only to place funds on deposit with institutions with a minimum credit rating of B2 Moody's.

The Group's cash at bank and short-term deposits are held with institutions with credit ratings as follows:

	2022	2021
At 31 December	£000	£000
Aa1	780	-
Aa2	1,315	1,087
A1	3,037	25,240
Ba2	5	28
	5,137	26,355

Credit risk - trade and other receivables

Past due but not impaired

The Group's credit risk from receivables encompasses the default risk of its customers and other counterparties.

Its exposure to credit risk is influenced mainly by the individual characteristics of each customer or counterparty. The creditworthiness of potential and existing customers is assessed prior to entering each new transaction. A credit analysis is performed, and appropriate payment terms implemented that may include increased level of upfront deposits for the purchase of battery units.

Notwithstanding the above, the Group's standard terms of trade provide that up to 90% of the sales price of a battery unit is paid prior to delivery.

Receivables are considered for impairment on a case-by-case basis when they are past due or where there is objective evidence that the customer or counter party may be a default risk. The Group takes into consideration the customer or counter party payment history, its credit worthiness together with the prevailing economic environment in which it operates to assess the potential impairment of receivables.

On an ongoing basis, receivable balances attributable to each customer or other counterparty are monitored and appropriate action is taken when the relevant balance becomes or is considered likely to become overdue. The maximum exposure to loss arising from receivables is equal to invoiced value.

The ageing of trade receivable balances was:

	2022	2021
At 31 December	£000	£000
Current	1,582	249
Past due - less than 30 days	112	-
Past due - more than 30 days	43	1,434
Total trade and other receivables	1,737	1,683

Past due amounts at 31 December 2022, related to four customers (2021: eight customers) and £23,953 (2021: £nil) was considered to be impaired.

Liquidity risk

Liquidity risk relates to the Group's ability to meet its obligations as they fall due.

The Group generates cash from its operations that are principally related to the manufacture and installation of vanadium flow batteries. The market for reliable and flexible grid-scale storage solutions for energy generated from renewable sources is growing and the technology continues to develop.

The development of new and enhanced storage technologies can be capital intensive and the Group has historically funded development and early-stage commercial activity primarily from equity investment but also using cash from operations and loan funding.

The Group forecasts cash generation using a comprehensive company financial model and monitors the timing and amount of its payment obligations.

The following table shows the Group's financial liabilities by relevant maturity grouping based on contractual maturities. The amounts included in the analysis are contractual, undiscounted cashflows.

	Less than one year	One to two years	Two to five years	Over five years	Total contracted cash flows	Carrying amount
31 December 2022	£000	£000	£000	£000	£000	£000
Trade and other payables	4,582	352	-	-	4,934	4,934
Derivative financial instruments	769	-	-	-	769	769
Lease liabilities	740	630	339	-	1,813	1,709
Total financial liabilities	6,091	982	339	-	7,516	7,412

	Less than one year	One to two years	Two to five years	Over five years	Total contracted cash flows	Carrying amount
31 December 2021	£000	£000	£000	£000	£000	£000
Trade and other payables	3,513	-	-	-	3,513	3,513
Lease liabilities	379	331	117	-	827	770
Total financial liabilities	3,892	331	117	-	4,340	4,283

Capital management

At 31 December the Group had debt from an investment agreement entered with Riverfort Global Opportunities PCC Ltd and YA II PN Ltd. At 31 March 2023, the loan has been repaid in full using proceeds from the March 2023 equity raise. Following the loan redemption, the Company has no external debt outstanding.

The Board regularly reviews the Group's cash requirements and future projections to monitor cash usage and assess the need for additional funding. At 31 May 2023, the Group had £15 million of cash on hand.

30 Related parties

The only related parties of the Company are the key management of the Group and close members of their family. Key management has been determined as the CEO and his direct reports.

During the year, the Company employed The Headhunters Recruitment Inc. to perform recruitment services and paid a placement fee of £27,369 all of which was outstanding as at 31 December 2022. The Headhunters Recruitment Inc. did at the time employ Georgia Harper, Matt Harper's spouse.

During the year, Larry Zulch repaid £12,000 in respect of shares purchased on his behalf in relation to fundraising in 2021.

Key management compensation is disclosed in note 8, Staff costs and headcount.

31 Group entities

				Ownership %

Direct subsidiary undertakings	Country of incorporation	Registered office	Principal activity	2022	2021
Camco Holdings UK Limited	England	Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M 1NH United Kingdom	Holding company	100%	100%
Camco Services (UK) Limited	England	Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M 1NH United Kingdom	Support services	100%	100%
Camco (Mauritius) Limited	Mauritius	24 Dr Joseph Rivière Street 1st Floor, Felix House Port Lewis, Mauritius	Holding company	100%	100%
Invinity Energy Systems (U.S.) Corporation	United States of America	1201 Orange St. #600 Wilmington, DE USA 19899	Energy storage	100%	-100%
Invinity Energy Nexus Limited	England	Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M 1NH United Kingdom	Energy storage	100%	100%

Indirect subsidiary undertakings
redT Energy Holdings (UK) Limited	England	Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M 1NH United Kingdom	Research and consultancy	100%	100%
Re-Fuel Technology Limited	England	Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M 1NH United Kingdom	Energy storage	99%	99%
Invinity Energy (UK) Limited	England	Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M 1NH United Kingdom	Energy storage	99%	99%
redT Energy Holdings (Ireland) Limited	Ireland	22 Northumberland Road Ballsbridge, Dublin 4	Energy storage	99%	99%
Invinity Energy Systems (Ireland) Limited	Ireland	22 Northumberland Road Ballsbridge, Dublin 4	Energy storage	99%	99%
redT energy (Australia) (Pty) Ltd	Australia	RSK Advisory, Level 2, Suite 7 66 Victoria Crescent Narre Warren, Victoria 3805 Australia	Energy storage	99%	99%
Invinity Energy (South Africa) (Pty) Ltd	South Africa	1st Floor, Kiepersol House Stonemill Office Park 300 Acacia Road Darrenwood Randburg 2194	Business Services	100%	100%
Invinity Energy Systems (Canada) Corporation	Canada	2900-550 Burrard Street Vancouver, BC Canada V6C 0A3	Energy storage	100%	100%
Suzhou Avalon Battery Company Limited	The People's Republic of China	1809 Building 4 no.11888 East Taihu Avenue, Songling Town, Wujiang District, Suzhou City	Business Services	100%	100%

Associates

Vanadium Electrolyte Rental Limited

England

Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M 1NH

United Kingdom

Vanadium procurement

50%

32 Events occurring after the report period

On 23 February 2023, the Company announced it had raised gross proceeds of £19 million through a placing of 59,375,000 new ordinary shares of €0.01 each and £2.5 million through subscription by Everbrite Technology Co., Ltd. of 7,812,500 new ordinary shares, both at an issue price of 32 pence per new ordinary share.

The Company also offered to all qualifying shareholders the opportunity to participate in an open offer to raise up to £4 million at issue price. The open offer was made on the basis of: 2 open offer shares for every 19 ordinary shares held.

On 14 March 2023, the Company announced it had received valid acceptances from qualifying shareholders in respect of 4,825,092 open offer shares, therefore raising an additional £1.5 million of proceeds.

As part of the placing and open offer, the Directors subscribed for new ordinary shares which raised gross proceeds of approximately £60,000 in aggregate.

The Company has therefore raised, in aggregate, gross proceeds of approximately £23 million through the placing, subscription and open offer.

In addition, on 3 March 2023, the Company announced it had entered into a repayment agreement to repay the outstanding drawn amount of the convertible loan facility with Riverfort Global Opportunities PCC Ltd and YA II PN Ltd ("Noteholders"). The Company has settled the outstanding drawn amount together with the redemption premium of 10% (US$208,107.53).

Pursuant to the facility, on 14 December 2022 the Noteholders were granted warrants exercisable at 67.35p to subscribe for 1,350,020 ordinary shares for a period of up to four years. In accordance with the terms of the warrant instrument, the Company was required to amend the exercise price of these warrants to 32p, being the issue price of the recently announced placing and open offer. In consideration of the Noteholders undertakings, the Company has agreed to grant a further 449,980 warrants at an exercise price of 32p which will expire on 14 December 2026.

As part of the facility, 2,700,038 ordinary shares were issued to the Noteholders to effect initial conversions relating to the initial advance. Any shares held by Noteholders after the facility has been repaid will be sold with relevant net proceeds remitted to the Company. At 3 March 2023, 1,779,640 of the Initial Shares are remaining and held by the Noteholders.

The ongoing events in Ukraine have led to international macro-economic instability. The impact on sterling has fed through to increased input costs and these are expected to continue while the situation remains unresolved.

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Market data

2022 Financial Results and Current Trading