INVINITY ENERGY SYSTEMS PLC
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Telephone +44 (0)204 551 0361
Website
Twitter
Linkedin
www.invinity.com
@InvinityEnergy
linkedin.com/invinity-energy-systems
Jersey registered 92432
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Invinity Offices:
London, United Kingdom
Bathgate, United Kingdom
Vancouver, Canada
San Francisco, USA
Melbourne, Australia
St Helier, Jersey
www.invinity.com
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ANNUAL REPORT & FINANCIAL STATEMENTS 2022
CONTENTS
OFFICERS AND ADVISERS
INTRODUCTION
About Invinity
2022 Highlights
A Company and an Industry Race Forward
STRATEGIC REPORT
Chairman’s Report
Chief Executive Officer’s Report
Invinity’s Pathway to Profitability – Strategy
Interim Chief Financial Officer’s Report
Risk Management Report
Sustainability Report
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GOVERNANCE
The Board of Directors
Governance Report
Report of the Chairman of the Audit & Risk Committee
Report of the Chairman of the ESG Committee
Report of the Chairman of the Nomination Committee
Report of the Chair of the Remuneration Committee
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities in Respect
of the Financial Statements
FINANCIAL STATEMENTS
Independent auditors’ report to the members
of Invinity Energy Systems plc
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
OTHER INFORMATION
Officers and Advisers
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Officers
Neil O’Brien
Larry Zulch
Matt Harper
Jonathan Marren
Rajat Kohli
Michael Farrow
Kristina Peterson
Registered Address
Investor Relations
Joe Worthington
Ralph Anderson
Non-Executive Chairman
Chief Executive Officer
Chief Commercial Officer
Chief Development Officer and Interim Chief Financial Officer
Senior Independent Director
Non-Executive Director
Non-Executive Director
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Director of Communications & Investor Relations
Corporate Relations Manager
To contact Investor Relations,
email IR@invinity.com or call +44 (0)204 551 0361
Jersey Company Number
92432
Advisors
Nominated Adviser and Joint Broker
Joint Broker
Registrar
Company Secretary
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
VSA Capital Limited
Park House House
16-18 Finsbury Circus
London
EC2M 7EB
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St. Helier
Jersey
JE1 1ES
Oak Secretaries (Jersey) Limited
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
The pulp is bleached using an Elemental Chlorine Free process.
This report is printed in the UK using environmental printing
technology and vegetable based inks. Both the manufacturing
mill and the printer are registered to the Environmental
Management System ISO 14001 and are Forest Stewardship
Council® chain-of-custody certified.
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Invinity team members at the Company’s Vancouver facility – March 2023
Designed and produced by JacksonBone Limited.
Printed in England by Sterling FP.
UK / U.S. / CANADA / AUSTRALIA
Annual Report and Financial Statements 2022
93
ABOUT INVINITY
Energy storage is vital to the success of the green energy
transition.
Invinity Energy Systems is the leading global manufacturer of
vanadium flow batteries (VFBs), the most commercially proven
alternative to lithium-ion for stationary energy storage. In
response to rapidly growing demand for its products, Invinity has
now deployed or is delivering over 65 MWh of modular battery
systems at more than 70 sites across 15 countries, more than any
other company in the space.
Invinity’s VFBs provide superior safety, throughput, flexibility and
lifetime, allowing our customers to get more from their energy
storage systems. Invinity’s batteries are already playing an
important role in the low-carbon energy transition, unlocking the
power of renewable energy by filling in the “missing hours” when
the wind does not blow and the sun does not shine.
Invinity has operations in the UK, Canada, the U.S., Australia and
China. The Company is listed in the UK on AIM and AQSE and
trades in the U.S. on OTCQX.
www.invinity.com
11
Invinity Energy Systems plcAnnual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 2022 HIGHLIGHTS
FINANCIAL HIGHLIGHTS
39.2 MWh of sales closed in 2022 (2021: 0.5 MWh)
£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)
£23.7m revenue backlog* for delivery in 2023 (as at 31 May 2023) –
a 72% increase vs. 2021 Year-end (£13.8m)
£14.9m inventory and pre-paid inventory – a 51% increase YoY (2021: £9.9m)
£15.3m current cash as at 31 May 2023. Year-end cash £5.1m
Post period: £2.5m strategic investment from Taiwanese technology group Everbrite
received March 2023. Further discussions with a number of potential strategic
partners are ongoing
* Defined as both contracted orders already recognised in 2023 and
contracted orders still to be delivered over the remainder of 2023
Launching Invinity’s 5 MWh VFB at the Energy Superhub Oxford with representatives from Invinity, Pivot
Power (now EDF Renewables), Habitat Energy, accompanied by Robert Llewellyn – 5 July 2022
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Annual Report and Financial Statements 2022
UK / U.S. / CANADA / AUSTRALIA
CUSTOMER PIPELINE PROGRESSION & CURRENT STATUS
Date
25 May 2022 (2021 Annual Report)
22 September 2022 (HY22 results)
20 January 2023 (Operational Update)
Closed
MWh
28.0
28.0
59.8
Base
MWh
11.6
22.8
15.6
Advanced
MWh
66.3
63.5
129.4
Qualified
Qualified
Near-Team1 Further-Term1
MWh
MWh
608.3
405.8
766.4
— 2
— 2
1,190
24 May 2023 (FY22 Results)
% change (May 2022 to May 2023)
64.3
+129.6%
42.8
+269.0%
73.4
+10.7%
957.1
+57.3%
1,397
+17.4%3
1 NeartermdatesintheQualifiedcategoriesarewhereestimateddeliveryiswithinthenext24months.
Furthertermreflectsestimateddeliveriesthatarebeyondthenext24months.
2Notreportedattimeofpipelinepublication
3Increasegivenfromwhenfigurefirstreported(Jan2023)toMay2023
N.B.DefinitionsofpipelinecategorytermscanbefoundintheCompany’sannouncements
COMMERCIAL AND OPERATIONAL HIGHLIGHTS
39.2 MWh
13.2 MWh
Sold January 2022
to December 2022
+7,740% YoY
Manufactured January 2022
to December 2022
+100% YoY
£23.7m
Backlog* for delivery
in 2023
+72% YoY
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Annual Report and Financial Statements 2022
3
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.
OPERATION OF A GRID-CONNECTED INVINITY VS3 BATTERY DURING DECEMBER 2022
1500
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Annual Report and Financial Statements 2022Invinity Energy Systems plcUK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
“ Our batteries can
revolutionise energy
storage applications
the world over in 2023”
Matt Harper
ChiefCommercialOfficer
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.
Delivering 0.5 MWh of VS3 Invinity flow batteries to Soboba Band
of Luiseño Indians – June 2022
45 MWh CONTRACTS CLOSED IN 2022 & 2023
50
40
MWh
30
20
10
0
Dawsongroup
(UK)
Hyosung (South Korea)
IBEW
(US)
OPALCO
(U.S.)
Ideona (EU)
Dawsongroup (UK)
The Wave (UK)
Everdura
(Taiwan)
Bei Ying (Taiwan)
Viejas (U.S.)
Kinetic (U.S.) & Equans (EU)
Elemental (Canada)
2022
2023
55
Invinity Energy Systems plcAnnual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS “ We expect to deliver a fleet of flow batteries totaling
over 35 MWh across four continents, embodying almost
1000 individual flow batteries”
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.
VS3 batteries on site in South Australia – May 2023
Final Invinity VS3 being delivered to site in Alberta,
Canada – March 2023
66
First VS3 deliveries from Baojia New Energy manufacturing plant
– August 2022
Annual Report and Financial Statements 2022Invinity Energy Systems plcUK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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.
UK RENEWABLE POWER GENERATION
2022 (TWh)
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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.
CHANGING THE ECONOMICS OF ENERGY
200
Peaking
Parity
150
100
Baseload
Parity
50
0
Levelized Cost of Energy (LCOE)
Levelized Cost of Storage (LCOS)
Gas
Peaking
Gas
Baseload
Solar
+
Lithium
Solar
+
IES VS3
Wind + IES
Mistral
(Projected)
Solar + IES
Mistral
(Projected)
Lithium Data: Lazard LCOS 7.0; Wind + Solar Data: LCOE 15.0: Lazard assumes unsubsidised gas price of $3.45/MMBTU;
IES figures based on company and development partner programme projections.
77
Invinity Energy Systems plcAnnual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
BREAKING NEW GROUND
Chairman’s Report
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.
8
Neil O’Brien
Non-ExecutiveChairman
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 have 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-ExecutiveChairman
27 June 2023
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc PROGRESS ON THE PATHWAY TO PROFITABILITY
Chief Executive Officer’s Report
Larry Zulch
ChiefExecutiveOfficer
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.
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.
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.
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.
99
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc 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.
LEVELIZED COST OF STORAGE EVOLUTION THROUGH MISTRAL PROGRAMME
$500
$400
$/MWh
$300
$200
$100
0
U.S. DOE
LCOS Target
LITHIUM BATTERIES
INVINITY VS3 VFB
INVINITY MISTRAL
(Projected)
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Lithium Data: Lazard LCOS v2 – v7.0; VS3 Data: Invinity published estimates; Mistral Data: Invinity & development partner
programme targets. Calculations assume a 4 hour rated power discharge, 700 cycles per year and 6% discount rate.
10
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc “ 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”
Darren Yen, Chairman, Everdura, Johnson Chiang, Executive
Chairman, Invinity, Larry Zulch, CEO, Invinity and Brian Tseng, CEO,
Everdura – December 2022
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
ChiefExecutiveOfficer
27 June 2023
1111
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc INVINITY’S PATHWAY TO PROFITABILITY – STRATEGY
Deliver on Backlog
Scale up
delivery capabilities
n Project management
n Engage with delivery partners
n Outsource Operations & Maintenance
Scale up
manufacturing
n Expand partnerships
n Optimise supply chain
n Mature systems and
processes
Scale up supply chain
n Outsource subcomponents
n Build relationships
n Establish standards
Close New Deals
Engage with governments and regulators
n Win financial and project support n Lobby for supportive regulations
n Leverage global initiatives
Engage with
developers
n Demonstrate advantages
n Target new customers
n Support follow-on sales
Engage with the market
n Promote advantages
n Establish thought leadership
n Participate in events
12
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Deliver Mistral
Focus on economics
n Clean design
n Low maintenance
n High efficiency
4
Focus on manufacturability
n Modular
n Factory built
n Available components
MISTRAL WILL VALIDATE OUR TECHNOLOGY
AS A ROBUST ALTERNATIVE TO LITHIUM-ION
TO MEET FUTURE ENERGY STORAGE
NEEDS AND GROW OUR MARKET SHARE.
927
modules deployed
919
modules contracted
Focus on capability
n Electrochemistry n Scalability n Reliability
Operational Excellence
Improve value
to shareholders
n Grow revenue
n Progress towards profitability
n Expand market engagement
Improve margins
n Cost consciousness
n Economies of scale
n Capital efficiency
Improve systems
and processes
n Financial controls
n IT value
n Document processes
2022 Invinity - AR- Report -TEXT-pp1-32-JB-03.indd 13
2022 Invinity - AR- Report -TEXT-pp1-32-JB-03.indd 13
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
GROWTH AND INVESTMENT – A VIEW TO THE FUTURE
Interim Chief Financial Officer’s Report
FINANCIAL HIGHLIGHTS
Revenue
Project related grant income shown
against cost of sales
Total revenue and grant income
other than revenue
2022
£’000
2021
£’000
2,944
647
3,185
—
3,591
3,185
Loss from operations
Inventory on hand for battery projects
(18,982) (21,264)
9,827
5,797
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.
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.
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.
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.
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
1414
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Jonathan Marren
ChiefDevelopmentOfficer
andInterimChiefFinancialOfficer
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
Elemental Energy team visiting Invinity’s Vancouver factory and inspecting finished VS3s prior to shipping to the Chappice Lake project
site in Alberta, Canada – November 2022
1515
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Graeme Harrison, HIE, Neil Kermode, EMEC and Michael Matheson
MSP (former Cabinet Secretary Net Zero) in front of 48 Invinity VS3
modules on site in Orkney – August 2022
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.
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 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:
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:
Non-payment or delayed payment of forecasted bonuses;
No increase or delayed increase in salaries across the Group;
Delayed recruitment of additional headcount; and
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
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
ChiefDevelopmentOfficerandInterimChiefFinancialOfficer
27 June 2023
16
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
RISK MANAGEMENT REPORT
The Group’s business exposes it to a broad range of risks. Invinity’s approach to managing these risks is to create a system of internal
controls. This system looks to manage, rather than eliminate, risk and, whilst the Group has an Audit & Risk Committee (financial risk) and an
Environmental, Social & Governance Committee (non-financial risk), it is seen as the responsibility of the entire Board.
COMMERCIAL RISK
Detail
Likelihood
Impact
Risk
trend
Mitigation
Lithium battery manufacturers
The Group’s position of delivering
High
Medium
Focus on markets where the
currently dominate the stationary
a longer duration, safer and more
battery energy storage system
durable BESS could come under
(BESS) market.
threat if the incumbent providers rapidly
improve their competitive offering.
Group has the largest advantages,
including ultra-high cycle counts and
safety-critical locations, and deliver
projects to agreed specifications.
Whilst sales contracts are bilateral,
Whilst Invinity contracts directly with
High
High
Careful up-front screening of
they are usually part of multi-party
the project developer, that same
projects.
developer is contracting with a
number of other parties as part of
financial close, which may therefore
be delayed for reasons unrelated to
the Invinity contract.
Most near-to-medium term sales are
expected to require an element of
The relative market penetration of
flow batteries against lithium means
grant funding support from the local,
that grants are currently available
regional or national governments.
but likely to be phased out as flow
battery technology becomes more
established in the longer term.
project characteristics along with
a preference for developers with a
good track record.
High
High
Continue to develop expertise in
grant applications, prioritise contracts
with a high chance of qualifying and
continue to drive down costs through
value engineering, scale and supply
chain management.
Non-lithium storage projects are not
Third party finance, particularly
High
Medium
A bankability study was completed
yet considered ‘bankable’ by project
debt, is slower to engage with
finance.
developments until technologies are
considered ‘established’, which can
increase the cost of capital.
during 2022 which should enable
Invinity to ensure that the correct
criteria are met as early as possible.
Commercialisation of the VS3
With the first VS3 contracts delivered
Medium
High
Strict quality control procedures during
product is at an early stage and so
in 2021 and 2022 there is limited
may fall short of product performance
operational performance in the field
expectations.
over a prolonged period of time.
Joint Development and
Invinity may be unable to deliver
Medium
High
Commercialisation programme
on the benchmarks for commercial
with Gamesa Electric does not
achieve commercial release within
competitiveness, as assessed by
measures of performance relative to
the timescales expected.
cost, set out by Gamesa Electric.
Whilst Invinity has been awarded
The funding provided under the
Medium
High
£11m of funding from BEIS under
LODES Competition is provided on a
Phase 2 of the UK Government’s
matched basis which it is anticipated
Department for Energy Security and
will be provided by a development
Net Zero’s Longer Duration Energy
partner. Whilst Invinity has engaged
Storage Demonstration (“LODES”
with and signed an MoU with a
Competition, it needs a development
suitable partner, a binding contract
partner to access the funding.
to provide the funding has not yet
been executed and therefore may be
unable to proceed to the build and
commissioning stage.
manufacturing and acceptance tests
prior to shipping combined with real-
time performance reporting from the
field into a dedicated support team.
The Group is fully engaged with
Gamesa Electric and its parent
Siemens Gamesa Renewable Energy
(SGRE) on every element of the
development programme, with the
design itself based on well-proven
smaller scale existing products,
thereby minimising technology risk.
The Group is actively progressing
contract negotiations with its chosen
development partner but has certain
contingencies in place, should these
negotiations be unsuccessful for any
reason.
1717
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
OPERATIONAL RISK
Detail
Likelihood
Impact
Risk
trend
Mitigation
The supply chain is international
The stacks, wherein resides
High
High
and certain components are sole
the Group’s ‘know how’, are
sourced.
manufactured in-house in Canada
and Scotland with the balance-of-
system manufactured in China. Final
assembly is in Canada, Scotland
or China, depending on customer
location.
Moving away from sole sourcing
where and when possible, such
as manufacturing stacks in both
Canada and Scotland. Moving the
manufacture of the balance of system
to a supplier with higher capacity and
multiple manufacturing locations.
The supply chain is, as yet, unproven
Driving costs down to the levels
High
High
A full order book and a strong
at the scale envisaged.
envisaged will require material
production increases in each of
the coming years.
The levels of key input costs such
The disruptions caused by the
High
High
as steel, electrolyte, labour and
COVID pandemic have caused
transport, can fluctuate, particularly in
increases in the costs of transport,
the current inflationary environment.
steel and vanadium.
balance sheet will enable the Group
to build more equitable relationships
with larger suppliers. The transfer
from BCI to Baojia has also
highlighted areas of cost saving.
Strategic relationships, such as
offtake agreements with suppliers
can reduce short-term price volatility.
CORPORATE RISK
Detail
Likelihood
Impact
Risk
trend
Mitigation
The Group is international with
Whilst the VS3 and Invinity’s next
High
Medium
primary operations in the UK, U.S.,
generation product, Mistral, are
Canada & China.
single products, employees are
separated by geography and time
zone, which makes collaboration
and coordination harder.
Senior roles have been allocated
on the basis of function rather than
geography to encourage a group,
rather than regional, view.
Shareholder concentration.
Just over 50% of the register is held
High
Medium
Continued shareholder engagement,
by eight shareholders.
Failure to meet shareholder
The post-merger fundraises have
Medium
High
expectations.
increased expectations and poor
performance could deter potential
investors from buying or existing
shareholders from holding.
particularly with Institutions able to
make material investments.
Regular news flow and trading
updates, particularly where closed
sales are concerned.
Competition attracting & retaining
The sector is seeing rapid growth
Medium
Medium
The Group has a proactive
skilled personnel.
and salary inflation. Continuing
to attract and retain skilled
personnel will be required to
ensure development of the Group’s
business.
remuneration committee with access
to suitable advice.
Cyber risk
The use of internal and external
Medium
Medium
The Group has an established
systems across a global operation
is potentially vulnerable to cyber
threats.
security programme that entrenches
good practice, processes and
systems, as well as regular staff
training throughout the year.
18
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
FINANCIAL RISK
Detail
Likelihood
Impact
Risk
trend
Mitigation
The Group does not yet generate
The Group is in the early phase of
High
High
positive cash flows and therefore is
commercialisation and so is not
expected to require further funding.
yet generating the product margins
required to support all of its costs.
Having multi-jurisdictional
Whilst sales receipts are in a range
High
Medium
operations exposes the Group to
of currencies, the majority of the
foreign exchange risk, particularly
materials costs are settled in U.S.$
against the U.S.$.
and a material element of payroll is
settled in Canadian $. Post-merger
fundraisings have all been in GB £.
All contracts contain warranties and
A warranty provision for each sale is
Medium
Medium
some contain extended warranties.
provided for in the balance sheet at
the time revenue is recognised but
may prove insufficient over the life of
the warranty.
Continued sales growth and product
standardisation will allow the Group
to drive down gross costs and
improve product margin.
The Group holds up to six months
of expected U.S.$ required and
converts Australian $ receipts into
Canadian $.
Maintaining product performance
data, focus on reducing the need
for maintenance and track ongoing
operations & maintenance costs.
Having multi-jurisdictional operations
The Group has manufacturing
High
Low
The Group seeks specialist external
exposes the Group to cross-border
operations in the UK, Canada and
tax risk, particularly transfer pricing,
China, along with sales operations in
and tariffs.
the U.S. In addition to the tax issues,
the U.S. trade tariffs on Chinese
output are potentially material.
advice on tax and tariff related
matters. In the case of the U.S.
tariffs on China, sufficient content is
manufactured in Canada.
The merger with a U.S. company
Invinity Energy Systems (U.S.)
Low
Low
exposes the Group to U.S. tax
Corporation is a U.S. registered
inversion legislation.
entity and so may be deemed to
be onshore by the U.S. Internal
Revenue Service for U.S. tax
purposes.
The Group has taken specialist
advice and does not believe this
to be the case under current
legislation, though this could change
should retrospective legislation be
introduced.
Installation work at the Chappice Lake Solar + Storage
project in Alberta, Canada – April 2023
1919
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
SUSTAINABILITY – INVINITY’S APPROACH TO THE ESG AGENDA
As a Company, and as individuals, we are committed to
taking action on climate change. We also understand the
importance of a ‘Just Transition’ to a low-carbon economy,
with no one left behind. This commitment underscores
our approach to operating responsibly and sustainably in
the pursuit of our corporate goals, which themselves are
intrinsically linked to accelerating the clean energy transition
and achieving net zero.
The ESG Committee, formed in June 2022, has a mandate to
oversee, inform and guide our approach to Environmental, Social
and Governance (ESG) issues and ensure our performance
against ESG metrics generates additional value for our business,
shareholders and wider stakeholders. The Committee is also
responsible for the regular and transparent disclosure of our
performance on an ongoing basis and it is with this goal that I am
pleased to report on progress achieved to date.
GUIDING PRINCIPLES
Through considered discussion, Invinity’s Board has agreed a
defined set of ESG principles – outlined below - that play an integral
role in helping to achieve our commitment to the ESG agenda:
Accelerate, through our products and services, the global transition
to support national and international net zero targets;
Champion innovation and thought leadership in all we do;
Be a great place to work;
Work in collaboration with all of our stakeholders;
Engage with local communities to share knowledge capital and
create opportunity.
A LEADER IN THE CLEAN ENERGY AND NET ZERO SECTOR
Invinity is proud to have been one of the first recipients of
the London Stock Exchange’s Green Economy Mark, which
recognises companies that derive 50% or more of their total
annual revenues from products and services that contribute to the
global green economy. The underlying methodology incorporates
the Green Revenues data model developed by FTSE Russell,
which helps investors understand the global industrial transition
to a green and low carbon economy with consistent, transparent
data and indices.
Invinity is also pleased to have been included as part of the Active
Net Zero Clean Energy Index, a pan-European investment index
established in 2021 to assist investors wishing to gain exposure
to companies which are actively enabling the energy transition.
CASE STUDY:
Accelerating the energy transition with Invinity’s VFBs
Our vanadium flow batteries are being installed at sites across
the world to complement renewable energy generation such as
solar PV, wind turbines and tidal power, creating ‘dispatchable’,
on-demand, clean power. This already delivers significant carbon
savings annually and enables renewables to compete directly with
fossil fuel powered generation for the first time, accelerating the
phase-out of coal and gas from the global generation mix, without
having a destabilising effect on the grid.
Three significant installations of Invinity batteries will alone
contribute a reduction of more than 24,000 tonnes of annual
greenhouse gas emissions. These are the:
ESG CHAMPIONS
Further supporting the work of the ESG Committee are our
ESG Champions, appointed from amongst Invinity staff in the
Company’s primary manufacturing locations in Scotland and
Canada. Their responsibilities include reporting to the Committee
on progress of ongoing and focused ESG and CSR initiatives to be
adopted, subject to the Committee’s agreement.
Paul Docherty
VPofManufacturing
Operations
Jason Overbeck
Manufacturing
Manager
Angie Williams
DirectorofHR
20
Chappice Lake
38 VS3 batteries dispatching
8.4 MWh alongside
21 MWp PV providing
clean power for
7,000 Albertans.
South Australia battery
41 VS3 batteries dispatching
8 MWh alongside
6 MWp PV providing arbitrage
and frequency regulation
services.
Viejas microgrid battery
44 VS3 batteries dispatching
10 MWh alongside
15 MWp PV to offset peak
demand and run the facility
overnight on 100% clean
renewable power.
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
PLAYING OUR PART IN THE CIRCULAR ECONOMY
Invinity’s VFBs are a natural fit for the circular economy as the
key product components consist of easily and widely recyclable
materials. Our batteries do not contain rare earth or ‘conflict’
minerals, such as cobalt, and the vanadium electrolyte does not
degrade with use, meaning that nearly 100% of the vanadium itself
can be recovered from the electrolyte for use in other applications.
This limits the need to constantly utilise newly mined raw materials
during the life of the battery.
CASE STUDY: In further support of our goal to promote the
circular economy, in January 2023, the Company was pleased to
announce a partnership with one of the UK’s largest commercial
asset rental businesses, Dawsongroup plc, which will see Invinity
batteries rented to commercial customers in the UK. Together,
Invinity and Dawsongroup aim to roll out an energy storage rental
solution which could fundamentally change the economics of asset
ownership for energy storage and vastly reduce waste by allowing
Invinity’s batteries to be repositioned as customer needs evolve.
MANAGING OUR IMPACTS
As a fast-growing company that provides solutions which help
avoid and remove emissions, we are fully committed to taking
action to reduce our own carbon footprint. In recognition of the
United Nations Race to Zero Campaign, Invinity has been a
signatory on the SME Climate Commitment since 2021.
The Company also recognises the importance that global supply
chains play in our business and the role that manufacturers such
as itself can play in challenging our suppliers to meet the same high
levels of ESG compliance that we do. Invinity has a range of policies
which are reviewed and adopted each year at Board level which
relate to topics including a supplier code of conduct which stipulates
that our suppliers must, in addition to conducting their business in
compliance with law, deliver long-term social, environmental and
economic benefits for the communities in which they operate.
OUR CARBON FOOTPRINT
Invinity reports its carbon footprint in compliance with The
Greenhouse Gas Protocol (the world’s most widely used
greenhouse gas reporting framework) and with the SME Climate
Commitment. In line with these requirements, the Company reports
primarily on its direct emissions (Scope 1) and indirect emissions
arising from electricity, heat or steam consumption (Scope 2). For
calculating our carbon footprint, we utilise an operational control
accounting approach which involves accounting for all emissions
from operations over which the Company has control. It does not
include emissions from operations over which the Company may
have an interest, but no control.
In line with SME Climate Commitment guidelines, Invinity falls under
the category of “fast growing SMEs that provide solutions which
avoid or remove emissions as their core business”. Therefore, it
is considered appropriate for the Company to report its carbon
footprint on an ‘intensity’ basis, using the metric of grammes of
CO2 equivalent per £ of annual revenue.
Environmental Stewardship —
‘Respecting the environment
on a sustainable basis’
Efficient resource use
Circular economy
Biodiversity
Social
Impact
Social Impact —
‘Contributing socially
where we operate’
Community collaboration
Diversity & inclusion
Safety, health & well-being
Environmental
Stewardship
ESG
Responsible
Governance
Responsible Governance —
‘Creating value by exercising
principled leadership’
Integrated risk management
Ethical behaviour
Transparency and trust
The SME Climate Commitment
Recognising that climate change poses a threat to the
economy, nature and society-at-large, our Company has
committed to take action immediately in order to:
1. Halve our greenhouse gas emissions before 2030
2. Achieve net zero emissions before 2050
3. Disclose our progress on a yearly basis
Indoingso,weareproudtoberecognisedbytheUnited
NationsRacetoZerocampaign,andjoingovernments,
businesses,cities,regions,anduniversitiesaroundtheworld
thatsharethesamemission.
2022 Group Carbon Intensity:
28g CO2e
per £1 of recognised revenue
72% Reduction
in carbon intensity vs 2020
(baseyearchosenasyearofInvinity’sformation)
2121
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc SUPPORTING THE UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS (UN SDGS)
Invinity continues to recognise that the UN SDGs are the
blueprint to achieve a better and more sustainable future for all.
The Company wishes to reiterate its aim to make a meaningful
contribution to all SDGs and is proud of its ongoing contributions to
Goal 7 ‘Affordable and Clean Energy’, Goal 11 ‘Sustainable Cities
and Communities’, and Goal 13 ‘Climate Action’.
SOCIAL IMPACT
We empower our people, partners and customers to change the
world. Invinity is committed to driving forward the social value
agenda and to making a positive change through our operations
and wider activities. Our work in this area over the year took a
number of different forms:
SupportingourHard-workingTeam
We remain committed to being a great place to work and, in support
of this initiative, we provide health and wellbeing support for all our
staff, helping our people to remain safe and healthy:
Invinity offers a standard benefits package which is accessible
to all employees which, dependent on location and local labour
laws, includes healthcare and other supplementary benefits.
All Invinity employees also have access to an employee assistance
programme, providing confidential legal and financial advice, along
with access to counselling and other services at no cost to employees.
Invinity also covers the costs of any employees’ professional
subscriptions in order to maintain their skills and support their
further professional development.
PlayinganActiveRoleintheLocalCommunity
Approximately 50% of our staff live less than 10 miles from work
and we are committed to playing a role in our local communities,
sharing our knowledge and providing new opportunities to those
in the local area. Our work in this area is particularly focussed on
partnerships with the education sector, providing the opportunity for
work experience and internships and supporting national initiatives
such as the UK Government’s STEM agenda. (See box)
CASE STUDY: Invinity’s Internship / COOP programme
Commercial Internship Programme, London, UK
We have had four Energy Storage Analyst Interns who have joined
our UK-based Commercial team since 2018 and subsequently
gone on to be permanent employees. They were all involved with
early-stage discussions with clients, pulling together research and
market analysis to further the case for energy storage developments
and identifying future commercial opportunities. This internship
was designed to provide valuable, first-hand experience in a
professional setting and a chance to put their academic learning
into practice within the green economy. Our interns reported that
they gained valuable insights into the industry and learned how
to conduct techno-economic analysis of energy storage projects,
generate proposals and communicate with customers. Those who
took up full time positions with Invinity became Energy Storage
or Business Development Analysts with one being promoted
subsequently to Commercial Programme Manager. In the nearly
four years the programme has been running, it has proven to be
valuable to all parties and Invinity intends to continue and expand
the programme in the years to come.
COOP Programme, Vancouver, Canada
A third year Sustainable Energy Engineering student at
Simon Fraser University joined us as an Energy Storage Intern
for the September 2021 four-month term. They were primarily
involved in supporting early-stage commercial discussions with
clients and working on pulling together energy market research for
North America to investigate the potential for long duration energy
storage deployment in various territories. They also worked on
a number of small-scale projects carrying out techno-economic
modelling for clients to help support the development of the
client’s business case. This was their first significant experience
in dealing with electricity markets and utilities, providing a good
opportunity to learn the fundamentals of the various energy
markets we were investigating as well as gain a selective
understanding of the various mechanisms by which energy
utilities charge their customers. There was a significant amount
of data processing and analysis which provided the student with
an important opportunity to interface with many members of the
global Invinity team and work with a number of proprietary end-
to-end energy modelling tools that we had created in-house.
Second year Engineering Physics student at the University
of British Columbia joined us as a Software Co-op for the
January 2022 four-month term. The focus for the co-op term
was to develop new features within our existing software
platform. They worked in the software team and during their
term developed a tool that upgrades our Firmware in the field.
This was their first co-op experience and they gained valuable
knowledge of software, taking further what they had learned
on engineering development in their degree and applying
it in a professional setting. It was an opportunity for them to
make an impact in a team environment where their code had
an impact on others’ development and as such their focus
was on learning to build robust code that is maintainable and
secure. They also gained first-hand skills and knowledge from
experienced software engineers in the team.
22
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc HEALTH AND SAFETY STATISTICS ON ACCIDENTS AND NEAR MISSES
Our commitment to Health and Safety remains non-negotiable and we retain a zero-tolerance approach to accidents and injuries. Our
commitment is that all our people should finish their working day as healthily as they started it.
UNITED KINGDOM
CANADA
OTHER LOCATIONS
2022
2021
2020
2022
2021
2020
2022
2021
2020
Average Number of employees
61
68
49
68
65
36
Reportable lost time incidents
Minor incidents
Near miss (No injury)
First Aid
0
3
2
0
0
3
8
1
0
0
0
Not reported
in past
1
0
4
0
0
1
2
1
0
0
1
Not reported
in past
9
0
0
0
0
12
0
0
4
0
8
0
2
0
Not reported
in past
ChampioningEquality,DiversityandInclusion
Invinity continues to expand our commitment to promoting Equality,
Diversity, and Inclusion (EDI). We remain committed to maintaining
and improving a workplace where everyone can flourish and
our approach addresses all elements of our operations from
recruitment to promotion, career development and the creation of
an outstanding working environment.
CASE STUDY: Women in Technology Roundtable
In 2022, Invinity’s HR team started a Women in Technology
roundtable. The purpose was to be an open forum for the women
at Invinity and their specific challenges. All women from all
departments were invited to the monthly meetings. Topics raised
for discussion were selected by female employees, and included;
dealing with imposter syndrome, body language, increasing
Women in STEM, work and parenthood, and work-life balance.
Our intention is to continue the programme in 2023 and expand by
inviting guest speakers to provide additional insight and guidance
to our female employees. As a result, we hope to increase female
representation both internally and externally.
GOVERNANCE
Invinity’s Board of Directors believes that strong corporate governance
and risk management are key to the delivery of shareholder value. The
business is underpinned by a comprehensive framework of policies
and risk management systems and the Board has adopted the Quoted
Companies Alliance Corporate Governance Code 2018 (the QCA
Code) as its corporate governance code which it believes provides
a flexible model allowing our corporate governance to evolve as the
business grows.
Further details on the Company’s corporate governance practice and
compliance with the principles of the QCA Code are provided in the
Governance section of this Annual Report and on the website. Details
of the risk management systems are provided in the Risk Management
section of this Annual Report.
Rajat Kohli
Chairman,Environmental,SocialandGovernanceCommittee
27 June 2023
Invinity’s team manufacturing stacks at the Company’s facility in Bathgate, Scotland – April 2022
2323
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
BOARD OF DIRECTORS
Neil O’Brien Non-ExecutiveChairman 60 2C
Neil was appointed Non-Executive Chairman in April 2020, having first
joined the Board as a Non-Executive Director in September 2016.
Neil’s previous role was as CEO of AIM listed Alkane Energy, an
independent UK power generator (acquired by Infinis in 2018), which
he joined in 2008. Under his leadership, the Company achieved
rapid output increases through a combination of organic growth and
acquisition activity. Alkane expanded its UK portfolio of baseload
power generating sites and established a leading position in the UK
back-up power market covering winter peaking, National Grid “STOR”
programme and the capacity market.
Neil started his career at Coopers & Lybrand in 1985, where he
qualified as a Chartered Accountant, before joining Blue Circle in
1988, holding a number of senior financial and operational roles in the
UK and Europe. He then spent three years as a Group Management
Accountant at Aggregate Industries, before moving to Speedy Hire as
Group Finance Director.
Neil read Politics, Philosophy and Economics at Oriel College, Oxford
University. Neil is Chairman of the Nomination Committee.
Matt Harper ChiefCommercialOfficer46 4M
Matt became the CCO of Invinity in April 2020. He is an engineer
and entrepreneur with over 20 years’ experience developing and
commercialising clean energy technologies, including 14 years in
energy storage.
Matt co-founded Avalon Battery, which merged with redT energy
to form Invinity. As President of Avalon, he designed and delivered
ground-breaking vanadium flow battery-based energy storage
solutions across the world. Prior to Avalon, Matt served as VP Products
and Services at Prudent Energy spending time in both Vancouver
and Beijing. He holds a Master of Science degree in Engineering and
Management from the Massachusetts Institute of Technology and is
named as the inventor of seven granted U.S. patents.
An Executive Director, Matt joined the Board of Invinity in April 2020
and conducts his global responsibilities out of Invinity’s Vancouver
office. He is a member of the ESG Committee.
AdditionalExternalDirectorships:
None
AdditionalExternalDirectorships:
Mercia Power
South Staffordshire Community Energy
UK Hire Ltd
Larry Zulch ChiefExecutiveOfficer 65 2M
Larry became the CEO in April 2020. He has over 30 years’ experience
successfully commercialising advanced technologies and scaling the
companies that deliver those technologies to market.
Prior to Invinity, Larry held a number of senior leadership and executive
management roles including CEO of Avalon Battery Corporation,
President & CEO of Dantz Development (acquired by EMC), President
& CEO of Photometics, Chairman of PLCD, CEO of Cloud Engines,
and President & CEO of Savvius (acquired by LiveAction). He served
as VP and Officer at EMC, and as Executive Chairman of Freerange
Communications (acquired by Sprint via Handmark).
An Executive Director, Larry joined the Board of Invinity in April 2020
and conducts his global responsibilities out of Invinity’s San Francisco
office. He is a member of the Nomination Committee.
AdditionalExternalDirectorships:
3GO Security Incorporated
Proactive Diagnostic Incorporated
Jonathan Marren ChiefDevelopmentOfficerandInterimChief
FinancialOfficer48
Jonathan was appointed Chief Development Officer in July 2022,
having previously been Senior Independent Director (appointed May
2021) and a Non-Executive Director since March 2016. Prior to this,
he was Chief Financial Officer of redT energy between July 2012
and March 2016, having been an advisor to the Company since early
2006, including on its flotation in April 2006.
He has previously held positions as Deputy Head of Corporate
Finance at Singer Capital Markets, prior to which he was at Peel Hunt
between 2000 and 2010 where he was a Director in the Corporate
Department with responsibility for their new energy and clean tech
franchise where he gained considerable experience of working with
companies in this area.
Jonathan qualified as a Chartered Accountant with Arthur Andersen
in 1999 after obtaining a BSc in Mathematics from Durham University.
AdditionalExternalDirectorships:
None
24
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Rajat (Raj) Kohli SeniorIndependentDirector 59 1M 2M 3M 4C
Raj joined the Board of Invinity in June 2020 and brings over 30 years’
experience in finance and the resources, energy and infrastructure
sectors. In his City career, Raj worked as a mining and metals analyst
at BNP Paribas, subsequently joining HSBC where he became a
Managing Director in the Resources and Energy Group.
Raj then joined ArcelorMittal as Co-Head of Mergers & Acquisitions
in 2007, returning to banking in 2011 with Standard Bank as Global
Head of Metals and Mining. Since 2015, Raj has provided strategic
consulting services to the natural resources sector as Principal of
Ptolemy Resource Capital and Co-Founder of Oval Advisory.
Raj is the Chairman of the ESG Committee and is a member of the
Audit & Risk, Remuneration and Nomination Committees. Subsequent
to Jonathan Marren’s appointment as Chief Development Officer, Raj
was also appointed Senior Independent Director in July 2022.
AdditionalExternalDirectorships:
Ptolemy Resource Capital Ltd
Oval Advisory Ltd
Minas de Revuboe Ltd
Talbot Group Investments Pty Ltd
Talbot Group Holdings Pty Ltd
Midrev Mining Mauritius Ltd
Jockeys Financial Ltd
Kristina Peterson Non-ExecutiveDirector59 1M 3C
Kristina joined the Board of Invinity and was appointed Non-Executive
Director in November 2021.
Kristina brings 30 years of experience in energy and infrastructure,
having held senior executive management roles at Brookfield, EDF
Renewables, Suntech, and Greenwood Energy. She began her
career at Citibank and ABN AMRO Bank, where she arranged over
$8.5 billion of project and structured finance debt transactions in the
U.S., Asia, Middle East and Africa. She currently serves as Industrial
Advisor for private equity firm EQT Partners, and is the CEO of
Mayflower Partners, where she provides climate, cleantech and
software investment advisory services.
Kristina received an MBA from the University of Chicago Booth School
of Business and completed graduate coursework in management
at MIT’s Sloan School prior to Booth. She earned a BS, Business
Administration from Boston University School of Management.
She is Chair of the Remuneration Committee and is also a member of
the Audit & Risk Committee.
AdditionalExternalDirectorships:
Electriq Power
Augment Ventures Fund III, L.P.
Mayflower Partners LLC
Coalition for Green Capital
Blink Charging
Michael Farrow Non-ExecutiveDirector69 1C 2M 3M 4M
Michael founded and subsequently sold Consortia Partnership Ltd, a
mid-sized Jersey regulated trust, fund and corporate administration
company, the latter being the corporate secretary to the Company.
He was the former company secretary of Cater Allen Jersey, a
banking, trustee and investment management group. Having retired,
he currently sits on the boards of a number of listed and substantial
private companies and funds.
Michael has considerable financial and corporate experience
and holds an MSc in Corporate Governance. He is a Fellow of the
Chartered Institute of Secretaries & Administrators and was formerly a
regular British Army Officer.
Michael joined the Board of Invinity in March 2006. He is the Chairman
of the Audit & Risk Committee and also sits on the Nomination,
Remuneration and ESG Committees.
AdditionalExternalDirectorships:
STANLIB Funds Limited
Circle Property PLC
Melville Douglas Funds
Reuben Brothers Limited
Senior Leadership Team members Jonathan Marren, CDO, Andy
Klassen, CTO, Matt Harper, CCO and Larry Zulch, CEO – March 2023
Committee compositions
1 Audit & Risk Committee
2 Nomination Committee
3 Remuneration Committee
4 ESG Committee
C Chairman/Chair
M Member
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GOVERNANCE REPORT
INTRODUCTION ON THE GOVERNANCE REPORT
FROM THE CHAIRMAN, NEIL O’BRIEN
Invinity is listed on the Alternative Investment Market (“AIM”) of the
London Stock Exchange. The Company’s shares are also dual-listed
on the Apex segment of the Aquis Stock Exchange Growth Market
(AQSE) and the Company’s short-term and long-term warrants are
listed on the Access segment of the AQSE. During the year, the
Company’s shares also started trading on the OTCQX in the U.S.
The Company is required to apply a recognised corporate governance
code and the Board has adopted the Quoted Companies Alliance
Corporate Governance Code (the “QCA Code”), which is designed
for small to mid-sized companies and which has been adopted by
many AIM companies. The Board has concluded that the QCA Code
remains the most appropriate corporate governance code for the
Company.
The Board has considered how the Company applies the ten
principles of the QCA Code and the Governance Report includes the
required disclosures and explanations where relevant. Further details
of the Company’s corporate governance practices are provided on
the Company’s website in the Investors’ section under Corporate
Governance.
Corporate Governance Statement
The Board recognises that good governance helps to underpin
the foundations of a solid and successful business and delivery of
shareholder value. Invinity’s Board, led by the Chairman, is committed
to maintaining high standards of corporate governance for which the
Directors are accountable to shareholders and other stakeholders and
to ensuring that the Company’s values are communicated and upheld
across the Group. The Board recognises that corporate governance
practices will need to be regularly reviewed as the Company grows to
ensure that they remain appropriate and effective.
During 2021, the corporate governance framework was strengthened
with a number of initiatives including the appointment of a Senior
Independent Director and a new Non-Executive Director, the
introduction of a Board performance appraisal process and the
streamlining of Board processes including risk management.
During 2022, the Board established an ESG Committee to ensure that
the Company delivers on its objective of operating responsibly and
sustainably. The Board also established a Standing Committee of the
Board to deal with adhocmatters arising between Board meetings.
The Standing Committee is only used in exceptional circumstances
where it is not practical to convene a full Board meeting. All Directors
receive notice of any meetings and the matters to be discussed and
can attend the meeting or request that the matter under consideration
be considered at a full Board meeting.
Corporate culture
The Company is committed to ensuring that there is a healthy
corporate culture. A number of policies and procedures have been put
in place to ensure that ethical and transparent behaviour is recognised
and followed across the Group and these include:
Code of Conduct
Whistleblowing Policy
Equal Opportunities Policy
Share Dealing Code
Anti-Bribery and Corruption Policy
Health and Safety Policy
Modern Slavery Statement
Procurement Policy
Social Impact Policy
Environmental Impact Policy
Biodiversity Policy
Board composition during the year
Name
Role
Non-Executives
Neil O’Brien
Michael Farrow
Rajat Kohli
Kristina Peterson
Executives
Lawrence Zulch
Matthew Harper
Jonathan Marren†
Non-Executive Chairman
Non-Executive Director
Senior Independent Director
Non-Executive Director
Chief Executive Officer
Chief Commercial Officer
Chief Development Officer and
Interim Chief Financial Officer
Length of service as at 31 May 2023
Date of appointment
6 years, 8 months
17 years, 2 months*
2 years, 11 months
1 year, 6 months
3 years, 1 month
3 years, 1 month
11 months
9 September 2016
16 March 2006
22 June 2020
2 November 2021
2 April 2020
2 April 2020
11 July 2022
* See comment below regarding Michael Farrow’s length of tenure/independence.
† Jonathan Marren was previously a Non-Executive Director from 1 March 2016 to 10 July 2022 and previously Chief Financial Officer of redT energy (which merged with Avalon
Battery Corporation to form Invinity Energy Systems) from 9 July 2012 to 28 February 2016.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Board composition
The Board currently consists of a Non-Executive Chairman, three
Executive Directors, a Senior Independent Director and two other
Non-Executive Directors.
A clearly defined organisational structure exists across the Group,
with lines of responsibility and delegation of authority to executive
management.
During 2022, Rajat Kohli replaced Jonathan Marren as Senior
Independent Director following Jonathan Marren’s appointment as
Chief Development Officer and subsequently as Interim Chief Financial
Officer following Peter Dixon-Clarke’s resignation as Chief Financial
Officer. The role of the Senior Independent Director is to provide a
sounding board for the Chairman and to act as an intermediary for
Board members and as a point of contact for shareholders who have
concerns which have not been adequately addressed by the Chairman
or Chief Executive Officer.
Board meetings and processes
The Board has around eight scheduled meetings each year with other
meetings held as required. Informal meetings also take place between
the Chairman and the Non-Executive Directors without the Executive
Directors being present.
At each Board meeting, the Board receives an update from the CEO
on key current activities, including HSE, and considers the Commercial
and Finance Reports and any papers relating to specific matters
requiring consideration or approval.
Other than any shareholdings in the Company and the receipt of fees
for acting as Directors, the Chairman and Non-Executive Directors
have no financial interests in the Company or business relationships
that would interfere with their independent judgement.
Non-Executive Directors affirm on joining the Company that they
are able to allocate sufficient time to discharge effectively their
responsibilities and are required to keep the Board updated of any
changes in respect of their other commitments.
Independence of Directors
The Board considers that the Chairman and all the Non-Executive
Directors were independent for the whole of the 2022 financial year
notwithstanding circumstances which could indicate otherwise
specifically the length of tenure of Michael Farrow and Neil O’Brien’s
previous role as Executive Chairman. While recognising that Michael
Farrow has been a Director for 17 years, the practicalities of maintaining
corporate residency in Jersey means that it is advantageous to have
a knowledgeable and actively participative director located there.
The Board has determined that both these individuals demonstrate
independence of character and judgement and that there are no
circumstances which are likely, or could be perceived to be likely, to
affect their judgement.
Role of the Board
The Board is collectively responsible for delivery of the strategy which
is designed to promote the long-term success of the Company and to
deliver shareholder value. The Board is responsible for formulation and
approval of the Company’s long-term objectives and strategy, approval
of budgets, oversight of operations across the Group, maintenance of
internal controls and risk management systems and approval of Group
policies. The Board may delegate specific responsibilities but there is
a schedule of matters specifically reserved for decision by the Board
to ensure that it exercises control over the key matters which could
impact on delivery of the Company’s strategy.
Board skills and responsibilities
The Directors have a wide range of skills and industry experience
including technical, operational, commercial and financial both in the
UK and internationally. The Chairman and Non-Executive Directors
have held senior management, Board and advisory positions and
bring relevant experience from their current and previous roles.
The letters of appointment of the Non-Executive Directors detail the
expected time commitment which is around six Board meetings, one
General Meeting and two meetings in respect of each of the Board
Committees per annum and are required to devote to the Company’s
business such additional time as is reasonably necessary by way of
preparation for, or follow-up after, any meeting. The Non-Executive
Directors may also be asked to participate in other events such
as marketing, social and client functions with this commitment not
exceeding around six days per annum.
BOARD MEETING ATTENDANCE
Director
Board meetings attended
Neil O’Brien – Chairman
Lawrence Zulch
Matthew Harper
Michael Farrow
Rajat Kohli
Jonathan Marren
Kristina Peterson
Peter Dixon-Clarke*
Total meetings during year
*Resigned 29 September 2022
8
8
8
8
8
8
8
6
8
In addition to the scheduled Board meetings shown above, a
number of Board meetings were held to deal with the exercise of
warrants and in relation to the Riverfort financing facility which was
put in place in December 2022.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Political and charitable donations
The Group made no charitable or political donations during the
year (2021: £nil).
Communication with shareholders
The Company engages with shareholders in a variety of ways:
Meetings
Executive Directors meet regularly with major shareholders and
the investment community which allows exposure to new investors,
either online or in person. This process includes presentations,
one-to-one meetings and both buy and sell-side analyst briefings.
The Chief Executive Officer regularly briefs the Board on meetings
held and relays the views expressed. Details of analyst research
reports, press reports, share trading and register analyses are
shared with Directors which ensures that they are kept up to date
with the views of the investment community.
Website
The Company’s website is updated regularly and includes a dedicated
Investor Relations section. This includes all direct shareholder
communications, external presentations, Q&As with Directors and
other relevant documentation so that existing and potential investors
have access to up-to-date and relevant information.
Investor Relations
The Company encourages direct contact from shareholders and
potential investors by providing an email address and telephone
number for investors on the website which is monitored by
the Director of Communications & Investor Relations and the
Corporate Relations Manager. This allows investors to address ad
hoc queries to the Company.
Announcements
The Company issues announcements via the Regulatory News
Service (“RNS”) and press releases periodically to inform the
market of significant news and developments.
Webinars
The Company hosts regular interactive webinars which give
shareholders the chance to address questions to management.
Annual Report
The Company’s annual report gives a detailed overview of the
Company, its strategy, operations, financial position, risk profile
and remuneration structure and is available in hard copy and on
the website. This ensures that existing and potential investors
are provided with the information that they need to make an
assessment of the Company’s performance and prospects.
Newsletter
The Company issues regular newsletters for Investors and any
interested parties who have subscribed to receive updates on the
Company’s activities beyond what is issued through the RNS.
AGM
In addition to the formal AGM business, the executive team give
an operational and financial update and shareholders have the
opportunity to address questions to the Board.
Neil O’Brien
Non-ExecutiveChairman
27 June 2023
Senior Leadership Team members Jonathan Marren, CDO, Matt
Harper, CCO, Sean Ellickson, VP of Customer Operations and Brian
Adams, VP of Product Development – March 2023
Board performance evaluation
Since the year end, an internal performance evaluation of the
Board has been undertaken. Each Board member completed a
questionnaire which focused on strategy, risks and controls, Board
structure and development, Board processes and the work and
composition of the Board committees. The responses were collated
and summarised by an external company secretary and the key
conclusions tabled at a Board meeting.
Board induction, training and outside advice
There is no set induction process but new Directors receive a briefing
on AIM obligations from the Company’s NOMAD, Canaccord Genuity,
as well as an appropriate induction according to their requirements.
The Board supports Directors who wish to receive ongoing training
and education relating to their duties.
Independent legal advice is available to Directors at the Group’s
expense if external advice is considered necessary and appropriate.
External directorships and interests
Executive Directors are permitted to engage in other activities and
businesses outside the Group providing that there is no risk of conflict
with their duties or commitments and subject to full Board disclosure.
Non-Executive Directors are required to advise the Chairman as soon
as practicable of any proposed Board appointments which could give
rise to a conflict with their position as a Director of the Company. Details
are circulated to other Board members who are invited to advise the
Chairman if they have any concerns about the proposed appointment.
Conflicts of interest
The Board has in place a procedure for dealing with actual or potential
conflicts of interest. All Directors are obliged not to put themselves
into a situation which may give rise to a conflict of interest, however,
if such circumstances do arise then they are required to make full
disclosure to the Chairman. If requested by the Chairman, a Director
will absent themselves from any Board discussions and decisions
on matters where there is an actual or perceived conflict of interest.
Company Secretary
The Company Secretary is Oak Secretaries (Jersey) Limited which
is 100% owned by the Oak Group (Jersey) Ltd (Oak Group), a
Jersey-based limited liability company regulated by the Jersey
Financial Services Commission. Michael Farrow was a director of
the Oak Group until his retirement from that company in May 2019.
The Company has also engaged the services of a qualified company
secretary to assist with the administration of the share option
scheme, compliance and to provide corporate governance advice
and general support to the Board and its Committees.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc REPORT OF CHAIRMAN OF AUDIT & RISK COMMITTEE
INTRODUCTION BY THE AUDIT & RISK COMMITTEE
CHAIRMAN, MICHAEL FARROW
I am pleased to present the report of the Audit & Risk Committee
(the “Committee”) for the year ended 31 December 2022. The
report includes details of the Committee’s activities during the
financial year.
Committee composition
The members of the Committee are Michael Farrow who replaced
Jonathan Marren as chairman during the year, Rajat Kohli and
Kristina Peterson, who was appointed as a Committee member
during the year. The Board is satisfied that all members of the
Committee have recent and relevant financial experience.
Meetings
The Committee met five times during the year and informal
discussions were also held both with and without management
present. The external auditors had discussions with the chairman
of the Committee during the course of the year and also met the
Committee members without management present.
Only members of the Committee have the right to attend the
meetings of the Committee but the Committee can invite the
Executive Directors, members of senior management and
representatives of the external auditors to attend its meetings.
Details of the meetings attended during the financial year were as
follows:
Role
The core terms of reference of the Audit & Risk Committee include
reviewing and reporting to the Board on matters relating to:
the audit plans of the external auditors;
the Group’s overall framework for financial reporting and
internal controls;
the Group’s overall framework for risk management, focusing
on financial risk;
the accounting policies and practices of the Group;
the annual and interim financial reporting carried out by the
Group; and
the independence and performance of the external auditor.
The Committee is responsible for notifying the Board of any
significant concerns that the external auditors may have arising
from their audit work, any matters which may materially affect or
impair the independence of the external auditors, any significant
deficiencies or material weaknesses in the design or operation
of the Group’s internal controls and any serious issues of non-
compliance. No such concerns were identified during the financial
period.
Key matters considered by the Committee
During the year, the issues considered by the Committee both
during and outside formal committee meetings included:
Group financial disclosures and accounting matters relating to
the preparation of the financial statements;
Director
Audit & Risk Committee
meetings attended
Risk register;
Audit plan of the external auditors for the 2022 financial year;
Non-Executive Directors
Michael Farrow – Chairman (appointed as Chairman on 11 July 2022)
Rajat Kohli
Kristina Peterson (appointed on 27 October 2022)
Jonathan Marren (resigned as Chairman on 11 July 2022)
Directors
Neil O’Brien
Lawrence Zulch
Matthew Harper
Peter Dixon-Clarke
Total meetings during year
* 2 meetings attended as an invitee
‡
1 meeting attended as an invitee
†
Invitee
5
5
* 2
‡ 5
† 3
† 5
† 4
† 5
5
Reports of the external auditors concerning its audit and review
of the financial statements of the Group;
2021 Annual Report and Accounts and 2022 interim financial
statements; and
External auditors’ fees.
Going concern
As part of the year end reporting process, management prepares
a detailed report including detailed cashflow forecasts with a
number of potential scenarios and sensitivity assumptions. The
Committee reviews and challenges management’s assumptions
and conclusions in order that it can provide comfort to the Board
that management’s assessment has been challenged and is
supported and that it is appropriate to prepare the financial
statements on a going concern basis. Further details of the going
concern assessment process are contained in Note 2 of the Group
financial statements.
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External auditors
The Committee recommends to the Board the appointment of
the external auditors, subject to the approval of the Company’s
shareholders at a general meeting. Shareholders in a general
meeting authorise the Board to fix the remuneration of the external
auditors and the Board has delegated this responsibility to the
Committee.
The Committee is responsible for the approval of the provision of
all audit services and permitted non-audit services undertaken by
the external auditors.
The Committee actively considers the effectiveness and quality of
the external auditors.
Whistleblowing and anti-bribery
The Company is committed to conducting all of its business
dealings in a responsible, honest and ethical manner. All
employees, Directors and consultants are required to act with
integrity and to have regard to the Company’s Code of Conduct
in their day-to-day business behaviour. The Company also has in
place an Anti-Bribery and Corruption Policy and Procedures and
arranges training for selected employees following a risk analysis.
All employees are made aware of the Company’s whistleblowing
policy which includes contact details for the Company’s internal
whistleblowing officer and an independent whistleblowing charity,
Public Concern at Work.
All employees are required to undertake training on the Market
Abuse Regulation in relation to inside information and unauthorised
trading in the Company’s shares.
Michael Farrow
Chairman,Audit&RiskCommittee
27 June 2023
REPORT OF CHAIRMAN OF THE ESG COMMITTEE
INTRODUCTION BY THE ESG COMMITTEE CHAIRMAN,
RAJAT KOHLI
I am pleased to present the report of the ESG Committee for the
year ended 31 December 2022. The Committee was established
by the Board during 2022.
Role
The role of the ESG Committee is to focus on ensuring that the
Company meets its legislative requirements, assesses ESG and
non-financial risk and achieves its ESG goals.
Committee composition
The Committee is chaired by Rajat Kohli with Michael Farrow and
Matthew Harper as its members. Joe Worthington, Director of
Communications & Investor Relations, also attends Committee
meetings.
Meetings
The Committee met once during 2022.
Details of the meetings attended during the financial year were as
follows:
Key matters considered by the Committee
The issues considered by the Committee during the year included:
Approval of the Committee’s terms of reference;
Review of ESG-related policies;
Appointment of staff representatives to promote and execute
ESG initiatives at the Company’s manufacturing facilities;
Review of ESG disclosure on the Company’s website; and
Review of disclosure of the Company’s compliance with the
Quoted Companies Alliance Corporate Governance Code
on the Company’s website and recommended actions for the
Board’s consideration.
Director
Rajat Kohli – Chairman
Michael Farrow
Matthew Harper
Total meetings during year
ESG Committee
meetings attended
1
1
1
1
Rajat Kohli
Chairman,Environmental,SocialandGovernanceCommittee
27 June 2023
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
REPORT OF CHAIRMAN OF THE NOMINATION COMMITTEE
INTRODUCTION BY THE NOMINATION COMMITTEE
CHAIRMAN, NEIL O’BRIEN
I am pleased to present the report of the Nomination Committee
for the year ended 31 December 2022.
Key matters considered by the Committee
The issues considered by the Committee during the financial year
included:
Committee composition
The Committee is chaired by Neil O’Brien with Michael Farrow,
Rajat Kohli and Lawrence Zulch as its members. Jonathan Marren
stepped down as a member of the Committee on 11 July 2022
following his appointment as Chief Development Officer. The
Board considers all members of the Committee, with the exception
of Lawrence Zulch (CEO), to be independent.
Meetings
The Committee met once during 2021.
Details of the meetings attended during the financial year were as
follows:
Director
Neil O’Brien – Chairman
Michael Farrow
Rajat Kohli
Lawrence Zulch
Jonathan Marren (resigned 11 July 2022)
Total meetings during year
Nomination Committee
meetings attended
1
1
1
1
—
1
Role
The role of the Committee is to consider Board member
succession, review the structure and composition of the Board and
its Committees and identify and make recommendations for any
changes to the Board. Any decisions relating to the appointment of
Directors are made by the entire Board based on the merits of the
candidates and the relevance of their background and experience,
measured against objective criteria, with care taken to ensure that
appointees have enough time to devote to the job.
Appointment of Jonathan Marren as Chief Development
Officer;
Constitution of Board committees; and
Board composition.
Succession planning
The Company is committed to appointing, retaining and developing
an experienced team which can effectively manage the Company’s
objectives and deliver its strategy. When considering succession
planning, the Committee will evaluate the balance of skills and
experience on the Board and make recommendations to the
Board on the basis of what it considers that the Company needs in
order to support delivery of the agreed strategic objectives.
The Committee recognises the need for progressive refreshing
of the Board and the benefits of diversity and the Committee will
have regard to these when considering succession planning.
When considering new Board appointments, the Committee will
be committed to recruiting on merit measured against objective
criteria.
The management of human resources across the Group is a
matter for the Executive Directors but the Non-Executive Directors
are advised in advance of recruitment plans in respect of senior
appointments.
Neil O’Brien
Chairman,NominationCommittee
27 June 2023
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REPORT OF CHAIR OF THE REMUNERATION COMMITTEE
INTRODUCTION BY THE REMUNERATION COMMITTEE
CHAIR, KRISTINA PETERSON
I am pleased, on behalf of the Remuneration Committee, to
present the Directors’ Remuneration Report (‘Report’) for the year
ended 31 December 2022.
The Report is divided into two sections:
The Policy report which sets out the current Remuneration Policy;
The Annual Report on Remuneration which sets out details
of the operation of the Remuneration Committee and details
of the Directors’ remuneration packages for the year ended
31 December 2022. It also sets out details of the implementation
of the Remuneration Policy for Executive and Non-Executive
Directors for the year ending 31 December 2023.
Executive Director compensation had not been adjusted since
May 2010 when the company operated as redT Energy and
therefore an outside review was warranted.
The Committee is satisfied that the outcomes, in respect of the
incentives and remuneration during the financial year under review,
are appropriate. The Committee will continue to ensure that the
Company’s Remuneration Policy and practices are kept under
review to ensure that they remain appropriate for the Company
at its stage of development and that they do not encourage any
unnecessary risk taking by the Executive Directors.
We recommend our Report to shareholders although do not seek
their formal approval. I would be happy to discuss any of the above
matters with individual shareholders should they so wish.
In early 2023, the Remuneration Committee engaged Alvarez and
Marsal (“A&M”) to review Executive and Non-Executive Director
compensation and provide benchmarks and recommendations
compared to its AIM-listed peers. It was noted that certain Non-
Kristina Peterson
Chair,RemunerationCommittee
27 June 2023
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
DIRECTORS’ REMUNERATION REPORT
REMUNERATION POLICY
This part of the Report sets out the remuneration policy for the Company. The policy for the Executive Directors is determined by the
Committee and the Committee recommends to the Board any adjustments to salary and bonus awards. The Committee also makes
recommendations to the Board in respect of the remuneration packages of certain members of the senior team based on recommendations
from the Chief Executive Officer. Authority is delegated to the Executive Directors to manage the remuneration packages of all other
employees. Awards of share options to employees under the Company’s Share Option Plan are the responsibility of the Board which
considers recommendations from the Chief Executive Officer in respect of employees.
The aim of the Committee is to ensure that the remuneration packages are sufficiently competitive to attract, retain and motivate individuals
of the quality required to contribute towards the strategic objectives of the Group and thereby enhance shareholder value. The Committee
also aims to ensure that all employees receive rewards that fairly reflect their seniority, level of work and contribution to the Company.
The Company is committed to promoting equal opportunities in employment with all employees and potential employees receiving equal
treatment.
EXECUTIVE DIRECTOR POLICY
The summary of the remuneration policy for the Executive Directors is set out below. Full details of the remuneration packages are given in the
Report on Remuneration.
Salary
Purpose and link to strategy
To provide an appropriate salary level to support retention and recruitment of Executive Directors.
Operation
Executive Directors receive the same annual salary.
Base salaries are reviewed annually on 1 January with regard to the external economic environment
and salary adjustments across the Company.
The salaries of the Chief Executive Officer (CEO) and Chief Commercial Officer (CCO) are designated
in sterling but paid in local currencies. The salaries are re-based annually to allow for differentials arising
through foreign exchange.
Opportunity
Salary increases will be awarded taking into account the outcome of the review.
Salary increases will usually be in line with increases awarded to other employees but the Committee
may make additional adjustments where there has been a change in role or responsibilities or to reflect
a gap in market positioning.
Performance metrics
Not applicable for base salaries.
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Pension and Benefits
Purpose and link to strategy
To provide an appropriate range of benefits and pension contributions to assist in the attraction
and retention of the calibre of Executive Directors required for delivery of corporate and strategic
objectives.
Operation
The CEO, based in the U.S., does not receive any benefits or employer contributions to a pension
plan.
The Chief Development Officer (CDO), based in the UK, has income protection, life assurance
cover and private medical insurance. Benefits are administered internally and a review of providers
and prices is conducted annually through a broker to ensure that the level of rates and cover
remain competitive. A matching employer contribution of up to 5% of annual base salary is made to
the Group personal pension plan.
The CCO, based in Canada, has private medical and dental insurance and life assurance cover. He
does not receive any employer pension contributions to a pension plan.
Opportunity
The benefits and pension packages, which are tailored to the individual Executive Directors, are set
at a level that the Committee considers is appropriate.
Performance metrics
Not applicable for benefits and pension package.
The value of benefits will vary each year according to the cost of provision.
Annual Bonus
Purpose and link to strategy
To reward the achievement of corporate targets.
Operation
Opportunity
Objectives are set as early as possible in the financial year.
The bonuses may be paid in cash and/or shares after the end of the financial year to which they
relate.
The annual bonus award is determined as a percentage of base salary based on performance
against pre-agreed objectives. When deciding on the level of bonus awards, the Committee will
have regard to the extent to which achievement of the objectives has contributed to progress against
the Company’s strategic drivers.
The bonus is contractual but at the discretion of the Committee.
The maximum bonus potential for Executive Directors is 100% of salary.
Performance metrics
The targets for the Executive Directors comprise the corporate, strategic and financial objectives
agreed by the Board. There are no individual objectives.
The Committee uses its judgement, supported by measurable evidence, to decide the extent to
which the objectives have been achieved and exercises its discretion to decide on the level of bonus
awards to be paid.
The Committee considers whether operations have been completed to acceptable HSE standards
and considers whether there were any HSE incidents when considering the level of bonus payments.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
Share Option Plan (Option Plan)
Purpose and link to strategy
To support alignment with shareholders through the link to the creation of shareholder value.
Operation
The Option Plan was introduced in 2018 to replace historical long-term incentive arrangements.
The Committee makes awards of options at an exercise price based on the prevailing market price of
the Company’s shares as at the date of grant. The options will vest in equal tranches after one, two
and three years’ further continuous employment subject to leaver provisions.
Opportunity
Option awards are usually made for a three-year term but the Committee has discretion over the
frequency and quantum of awards.
Performance metrics
None.
FURTHER DETAILS ON THE POLICY
Performance measurement
Annual bonus – the annual bonus is based on a range of corporate objectives that the Board have agreed are key to progressing and delivering
the Company’s strategy. These can be operational, strategic and financial. Performance targets are designed to be stretching but achievable
having regard to the Company’s strategic priorities from time to time.
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Option Plan – the Option Plan ensures alignment with shareholders being focused on share price growth over the medium to long term. Vesting
of equity awards is phased with options vesting in equal tranches in years 1, 2 and 3 after the date of grant. Options granted in exchange for
options in predecessor companies at the time of the Merger vest in accordance with the terms of the original option grant. The Option Plan for
the Executive Directors is the same as that for all other employees.
Remuneration policy for other employees and consultation
The Company’s policy for all employees is to provide remuneration packages that reward them fairly for their contribution and role within the
Company.
All employees are entitled to receive the full range of Company benefits but with different qualifying periods and levels of cover depending on
seniority. The most senior employees below Board level are eligible to receive an annual bonus based on performance against corporate targets.
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All permanent employees have been granted options under the Option Plan on the same terms as the Executive Directors but proportionate
to their employment contracts and their ability to contribute towards the Company’s strategic objectives. This ensures that an element of
remuneration is deliverable through a scheme that aligns participants with shareholders.
The Company does not consult with employees on the effectiveness and appropriateness of the policy but, in considering individual salary
increases, the Committee does have regard to salary increases across the Company.
Recruitment
In the case of recruiting a new Executive Director, the Committee can use all the existing components of remuneration as set out in the policy
table.
The salary of a new appointee will be determined by reference to the experience and skills of the individual, market data, internal comparatives
and the candidate’s current remuneration. New appointees may be entitled to receive the full range of Company benefits on joining and, if the
Committee considers it appropriate, a matching employer contribution of up to 5% of annual base salary to the Group personal pension plan.
In relation to any elements of variable pay, the Committee will take the following approach:
Component
Annual Bonus
Option Plan
Approach
Maximum annual opportunity
The annual bonus would operate as
outlined in the Policy for existing Executive
Directors. The relevant maximum will be pro-rated
to reflect the period of employment over the year.
Consideration will be given to the appropriate
performance targets at the time of joining.
The Option Plan would operate as outlined
in the policy for existing Directors. An award of
options may be granted on joining subject to the
Company being in an open dealing period.
100% of base salary in respect of the
current financial year.
Committee discretion.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
Service contracts, exit payments and change of control provisions
The Executive Directors have rolling term service agreements with the Company. Details of the Directors’ service contracts and appointment
dates are as follows:
Executive Directors
Appointment date
Contract date
Employing company
Lawrence Zulch
Chief Executive Officer
Matthew Harper
Chief Commercial Officer
Jonathan Marren
Chief Development Officer and Interim Chief
Financial Officer
2 April 2020
2 April 2020
Invinity Energy Systems (U.S.) Corporation
2 April 2020
2 April 2020
Invinity Energy Systems (Canada) Corporation
11 July 2022
11 July 2022
Invinity Energy Systems plc
The Directors’ service contracts are available to view at the Company’s registered office and prior to each Annual General Meeting at the
venue for the meeting.
The notice period for the Executive Directors is six months’ notice in writing by either party. The Company has the right to make a payment
in lieu of notice of six months’ salary and, in the case of the CEO, a reimbursement of certain benefits if relevant. The Committee will
consider termination payments on a case-by-case basis. It will consider the terms of the Director’s contract and the circumstances of the
termination and might consider making an ex-gratia payment where the circumstances and/or a Director’s contribution to the Company
justifies this. If an ex-gratia payment is to be made, the Committee will ensure that it is satisfied that it is in the best interests of the
Company to make such a payment and that there is no “reward for failure”.
The Committee also has discretion to settle any other amounts which it considers are reasonably due to the Director such as where the
parties agree to enter into a settlement agreement and the individual is required to seek independent legal advice. The Committee can
approve new contractual arrangements with a departing Director covering matters such as confidentiality or restrictive covenants and/or
consultancy arrangements where it believes this is in the best interests of the Company.
Treatment of incentives for leavers and following a corporate event
a) Annual bonus
In relation to annual bonuses, a bonus payment will not usually be made if the Director is under notice at the bonus payment date or has
already left.
b) Option Plan
In relation to awards granted under the Option Plan, all unvested options will lapse on cessation of employment. In Good leaver and
Intermediate leaver circumstances (as defined in the Option Plan rules), all vested options will be retained and will be exercisable for a
period of six months after the cessation of employment or 12 months in the case of death. The Committee has discretion to further extend
the exercise period for Intermediate leavers and to allow the vesting of all or part of the unvested portion of an option for Good leavers.
In the event of change of control of the Company, all vested options will remain exercisable for a period of six months after the change
of control and the Committee has the discretion to allow the vesting of all or part of the unvested portion of an option. Subject to the
agreement of any acquiring company, option holders may be offered the opportunity to exchange their options for equivalent options over
shares in the acquiring company for a period of up to six months from the change of control taking effect.
The Option Plan rules include malus and clawback provisions whereby the Committee has discretion to reduce the number of shares
subject to an existing Option award in the event that an Option has been granted or has vested on the basis of any incorrect information
relevant to the setting of any performance condition or condition of satisfaction including a material misstatement in the published
financial results or in the event of fraud or misconduct by an Option holder including where an Option holder has been dismissed for
cause. In the case of an Option which has been exercised, the Committee can require the Option holder to repay the Company an
amount equal to the benefit by way of a transfer of shares or cash.
The Board can amend the Option Plan rules at any time provided that an option holder’s existing rights cannot be adversely affected
without the Option holder’s consent.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
Non-Executive Director Policy
The Company’s Articles of Association provide that the Board can determine the remuneration of the Directors. The policy for the
Chairman and Non-Executive Directors is as follows:
Fees
Purpose and link to strategy
To provide a competitive level of fee which will attract and retain high calibre directors with the range of
skills and experience required to support the Executive Directors and assist the Company in delivering
its objectives.
Operation
The fees for the Chairman and Non-Executive Directors are determined by the Board as a whole with
Directors absenting from discussions regarding their own remuneration.
The Board has regard to level of fees paid to the Non-Executive Directors of other similar sized
companies and the time commitment and responsibilities of the role.
Neither the Chairman nor the Non-Executive Directors participate in any of the Company’s share
schemes.
Opportunity
The current annual fees are:
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Chairman: £60,000
Non-Executive Director basic fee:
UK: £30,000
U.S.: $50,000
Senior Independent Director fee: £5,000
Committee Chair fee:
UK: £5,000
U.S.: $10,000
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No additional fees are payable for acting as Chairman of the Nomination Committee or for membership
of a committee except in the case of a/the U.S. Director who will receive $7,500 for membership of any
committees other than the Remuneration Committee.
The fee levels will be reviewed on a periodic basis with reference to the time commitment of the role
and fee levels in comparative companies.
No benefits or other remuneration are provided.
Performance metrics
Not applicable to Non-Executive Directors.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
Recruitment
The Committee will follow the Non-Executive Director remuneration policy as set out above in relation to the appointment of a new Non-
Executive Director.
Terms of appointment
The Non-Executive Directors serve under letters of appointment. Their appointments can be terminated at any time by either party giving
three months’ notice to the other. The appointments can also be terminated by the Company without notice in certain circumstances
including incapacity for three months in any 12 month period, serious or repeated breach of obligations in connection with the appointment
or unsatisfactory performance as determined by the Board.
Details of the Non-Executive Director appointments are set out below:
Director
Neil O’Brien
Appointment date
Original appointment letter
Revised appointment letter
9 September 2016
8 September 2016
14 March 2019 – in respect
of appointment as Executive
Chairman
13 March 2020 – in respect of
appointment as Non-Executive
Chairman effective 2 April 2020
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Michael Farrow
Rajat Kohli
16 March 2006
22 June 2020
16 March 2006
20 June 2020
Kristina Peterson
2 November 2021
30 October 2021
—
—
—
The Non-Executive Directors’ letters of appointment are available to view at the Company’s registered office and prior to each Annual General
Meeting at the venue for the meeting.
REPORT ON REMUNERATION
Remuneration Committee membership and meetings
As at 31 December 2022, the Committee comprised Kristina Peterson as the Committee Chair, Michael Farrow and Rajat Kohli. Kristina
Peterson replaced Michael Farrow as the Committee Chair on 11 July 2022 and Jonathan Marren stepped down as a member of the
Committee on 11 July 2022 following his appointment as Chief Development Officer and subsequently Interim Chief Financial Officer.
The Committee met twice formally during the financial period and informally throughout the year. Details of the formal meetings attended
during the financial year were as follows:
Director
Remuneration Committee meetings attended
Kristina Peterson – Chair (appointed 11 July 2022)
Michael Farrow
Rajat Kohli
Jonathan Marren (resigned on 11 July 2022)
Neil O’Brien
Total meetings during year
‡ Invitee
2
2
2
1
‡ 1
2
During the financial year, the Committee’s main areas of activity included:
Approving bonus awards in respect of the year ended 31 December 2021 for the Executive Directors;
Setting the parameters for bonus awards for the members of the senior team immediately below Board level and delegating
authority to the CEO to award bonuses within these parameters;
Approving the 2022 KPIs and weightings for the executive bonus plan;
Approving salary increases for the Executive Directors and the senior team immediately below Board level;
Approving the remuneration package for Jonathan Marren in respect of his appointment as Chief Development Officer; and
Considering the timing of awards of options to new permanent employees.
No individual is involved in determining his or her own remuneration.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
External advice
The Committee obtains external legal advice from Fox Williams in relation to employment matters.
The Committee considers that the advice it received during the financial period was objective and independent.
Total remuneration
The table below reports a single figure for total remuneration for each Executive Director:
Salary
£’000(i)
Benefits
£’000(ii)
Annual bonus
£’000(i)
Long-term incentives
£’000 (v)
Pension benefits
£’000
Total
£’000
Directors at
31 December 2021
Year
ended
Year
ended
31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21
Year
ended
Year
ended
Year
ended
Year
ended
31 Dec 22(iii) 31 Dec 21(iv) 31 Dec 22
Year
ended
Lawrence Zulch
176.9 164.0
—
—
93.7
72.6
Matt Harper
172.4 154.4
2.2
1.9
91.4
72.6
75.9
n/a
1.2
n/a
41.5
n/a
Year
ended
31 Dec 21
—
—
Year
ended
Year
ended
31 Dec 22 31 Dec 21 31 Dec 22 31 Dec 21
Year
ended
Year
ended
— — 270.6 236.5
— — 263.8 228.9
n/a
3.0
n/a 121.6
n/a
—
—
—
Jonathan Marren
(appointed 11 July 2022)
Former Executive Director
Peter Dixon-Clarke
(resigned 29 September 2022)
145.0 166.4
—
—
—
70.5
—
—
7.3
7.5 152.3 244.4
(i)
(ii)
Salaries and bonuses of L Zulch and M Harper are designated in sterling but paid in local currencies and are calculated using an average exchange rate for the year.
Represents employer contribution to private medical and dental insurance cover in the case of M Harper (calculated using an average exchange rate for the year) and private medical insurance
in the case of J Marren.
(iii) Represents amounts paid in 2023 in respect of bonus awards for the year ended 31 December 2022.
(iv) Represents amounts paid in 2022 in respect of bonus awards for the year ended 31 December 2021.
(v)
A number of options vested during the year ended 31 December 2022. The value of the vested options, calculated with reference to the mid-market price on the various vesting dates less the cost of
exercise, was £0 for M Harper (2021: £24,231) and £0 for P Dixon-Clarke (2021: £17,500). The options had not been exercised as at the date of this report in the case of M Harper and date of leaving in the
case of P Dixon-Clarke. None of J Marren’s options had vested as at the date of this report.
The table below reports a single figure for total remuneration for each Non-Executive Director:
Basic Fees £’000 (i)
Additional Fees £’000 (i)
Total Fees £’000
Year ended
31 Dec 2022
Year ended
31 Dec 2021
Year ended
31 Dec 2022
Year ended
31 Dec 2021
Year ended
31 Dec 2022
Year ended
31 Dec 2021
Directors at 31 December 2022
Neil O’Brien
Michael Farrow
Rajat Kohli *
Kristina Peterson † (appointed 2 November 2021)
60.0
30.0
30.0
40.6
60.0
30.0
30.0
6.2
Former Non-Executive Directors
Jonathan Marren‡ (appointed as Executive Director on 11 July 2022)
15.8
30.0
—
5.0
5.2
5.0
5.4
—
5.0
—
—
8.3
60.0
35.0
35.2
45.6
60.0
35.0
30.0
6.2
21.2
38.3
(i) Fees paid to Kristina Peterson are designated in sterling but paid in local currencies and are calculated using an average exchange rate for the year.
* Appointed as ESG Committee Chairman on 9 June 2022 and Senior Independent Director on 11 July 2022.
† Appointed as Remuneration Committee Chair on 11 July 2022 and as Audit & Risk Committee member on 27 October 2022
‡ Senior Independent Director from 1 May 2021 to 11 July 2022.
No fees were paid to Non-Executive Directors for membership of a committee or for attending committee meetings other than Kristina
Peterson who receives a fee for membership of the Audit & Risk Committee as per her letter of appointment. No benefits, pension
contributions or other remuneration are provided.
Additional information in respect of single figure table of remuneration for the year ended 31 December 2022
Annual bonus
In respect of the financial period, the Committee agreed that the Executive Director annual bonus opportunity would be up to 100% of
base salary. The Committee had agreed objectives with a range of weightings relating to signed sales contracts, share price performance,
achievement of milestones on the joint development program with Gamesa Electric and production cost reductions.
The Committee concluded that the final bonus calculation for 2022 was 52.95% with the bonus payable to Jonathan Marren pro-rated
for the period since his appointment as an Executive Director.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
Awards of share options during the financial year
There were no options granted to Executive Directors during the financial year.
The table below summarises the options granted to Executive Directors during the financial year in accordance with the policy.
Director
Date of grant
Number of options
Exercise price
Vesting date
Jonathan Marren
11 July 2022
500,000
£0.455
Options vest in equal instalments at the end of years
1, 2 and 3 following date of grant
Implementation of Executive Director remuneration policy for 2023
External advice
The Committee has appointed Alvarez and Marsal Tax and UK LLP (Alvarez & Marsal) as remuneration consultants to undertake a
remuneration benchmarking exercise in respect of Executive and Non-Executive Director remuneration and to review the current long-
term incentive arrangements.
Base salaries
The Committee is considering the outcome of the Alvarez & Marsal Executive Director compensation and benchmarking review and is in the
process of agreeing adjustments to the base salaries of the Executive Directors as a consequence of the review.
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Annual bonus
For 2023, the Executive Directors’ annual bonus will be determined as a percentage of base salary based on performance against pre-agreed
corporate objectives. The maximum bonus potential is 100% of base salary with on target bonuses being 50%.
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C
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P
O
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For the financial year ending 31 December 2023, the Committee has agreed objectives with a range of weightings relating to gross revenue,
closing cash, share price target and next-generation product rollout.
Option Plan
The Committee is considering the results of the Alvarez & Marsal review and will consider whether to make any changes to the incentive
arrangements of the Executive Directors as a consequence of the review.
Benefits and pension contributions
The Executive Directors will receive the benefits and pension contributions in line with the policy.
Implementation of Non-Executive Director remuneration policy for 2023
The fees for the Chairman and Non-Executive Directors have not been reviewed since the merger between redT energy PLC and
Avalon Battery Corporation in April 2020 or the date of appointment in the case of Rajat Kohli and Kristina Peterson. The Board of
Directors will consider whether to make any adjustments to the Non-Executive Directors’ fees as a result of the benchmarking exercise
to be undertaken by Alvarez and Marsal. In accordance with its terms of reference, the Committee will consider whether to make any
adjustment to the fees of the Chairman of the Board in light of the outcome of Alvarez & Marsal’s review.
Statement of Directors’ shareholdings
The table below summarises the interests of the Directors in office as at 31 December 2022 in the Company’s shares:
Ordinary shares of €0.01 each
at 31 December 2022
% of issued share capital
at 31 December 2022
Neil O’Brien
Lawrence Zulch
Matthew Harper
Michael Farrow
Rajat Kohli
Jonathan Marren
Kristina Peterson
87,500
2,258,949
1,597,845
9,224
—
199,977
—
0.07
1.90
1.34
0.01
—
0.17
—
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
In line with other investors, the Directors who participated in the Placing announced in November 2021 acquired one short-term warrant
and one long-term warrant for every two Ordinary Shares purchased. The table below summarises the interests of the Directors in office
at 31 December 2022 in warrants to subscribe for shares:
Short-term warrants
over Ordinary Shares
of €0.01 each with
an exercise price of
£1.50 exercisable
until 15 September 2023
% of total
number of short
term warrants
issued
Long-term warrants
over Ordinary Shares
of €0.01 each with
an exercise price
of 225p exercisable
until 16 December 2024
% of
total number of
long-term warrants
issued
Lawrence Zulch
6,000
0.04
6,000
0.04
Outstanding awards under the Option Plan
Director
Date of grant
Exercise
price
Options held at
31 December 2021
Lapsed/Relinquished/
exercised during year
Vested
during year
Options held
31 December 2022
Matt Harper
Matt Harper
1 April 2020*
(revised)
1 April 2020*
(revised)
£0.0434
263,034
—
—
263,034
£0.0434
73,065
—
8,524
73,065
Matt Harper
26 August 2020
£1.13
300,000
—
100,000
300,000
Jonathan Marren
11 July 2022
£0.455
500,000
—
—
500,000
Earliest
vesting date
Options fully
vested as at
15 July 2019
Options fully
vested as at
1 July 2021
26 August 2021
(options vest in equal
instalments at the end
of years 1, 2 and 3
following date of grant)
11 July 2022
(options vest in equal
instalments at the end
of years 1, 2 and 3
following date of grant)
Former Director
Peter Dixon-Clarke 26 August 2020
(resigned 29 September 2022)
£1.13
500,000
166,667
166,667
333,333†
—
* Following the merger between redT Energy PLC and Avalon Battery Corporation, the Company granted new options in substitution and cancellation of options held under the Avalon Battery Corporation
2013 Equity Incentive Plan which had original dates of grant of 21 November 2014 and 7 July 2016. The options have retained the original vesting dates.
† Since 31 December 2022, Peter Dixon-Clarke’s outstanding options have lapsed in full.
Share price movements during year ended 31 December 2022
The mid-market closing price of the Company’s shares at 31 December 2022 was 43 pence. The range of the trading price of the
Company’s shares during 2022 was between 104.5 pence and 19.64 pence per share.
Kristina Peterson
Chair of the Remuneration Committee
27 June 2023
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
DIRECTORS’ REPORT
Principal activity
The principal activity of the Group is the production and selling of
vanadium flow batteries for the energy storage market.
Results and dividends
The trading results for the year, and the Group’s financial position
at the end of the period, are shown in the attached financial
statements. The Directors have not recommended a dividend for
the year (year ended 31 December 2021: £nil).
Financial instruments
Information relating to the financial instruments relating to Group
is set out in the Notes to the Consolidated Financial Statements
in Note 3 (Accounting Policies) in Note 27 (Financial assets and
liabilities).
Political and charitable contributions
The Group made no charitable donations (year ended 31
December 2021: £nil) and no political donations (2021: £nil) during
the year.
Major shareholders
At 12 June 2023, the Company had been notified of the following
interests of three percent or more of the Company’s voting rights.
Shareholder/Fund Manager
Number
of shares
% of issued
share capital
Schroders plc
42,574,806
22.29%
Amati Global Investors Limited
9,928,823
5.20%
GSR Ventures
8,495,506
4.45%
Utilico Emerging Markets Trust PLC
7,977,336
4.18%
Herald Investment Management
7,946,850
4.16%
Everbrite Technology Co. Ltd
7,812,500
4.09%
Johnson Chiang
6,019,612
3.15%
Fidelity International Limited
5,935,225
3.11%
Directors
The present members of the Board are as listed in the Board
composition section of the Governance Report. The interests of
the Directors in office at the year-end in the share capital of the
Company are shown in the Directors’ Remuneration Report along
with details of their service contracts and terms of appointment.
Post balance sheet events
Post balance sheet events are disclosed in note 32.
Going Concern
Going concern is disclosed in the Chief Financial Officer’s report
along with note 2.
Principal risks and uncertainties
Information relating to the principal risks and uncertainties facing
the Group is set out in the Risk Management Report of the
Strategic Report.
Creditor payment policy
The Group does not follow any specific code or standard on
payment practice. However, it is the policy of the Group to ensure
that all of its suppliers of goods and services are paid promptly
and in accordance with contractual and legal obligations. Average
creditor days for the year were 49 days (year ended 31 December
2021: 12 days), on the basis of accounts payable as a percentage
of amounts invoiced during the year.
Directors’ and Officers’ insurance
The Group maintained directors’ and officers’ liability insurance
cover throughout the period. The Directors are also able to
obtain independent legal advice at the expense of the Group, as
necessary, in their capacity as Directors.
Employees
The Group had an average of 147 employees across the year,
three of whom are Executive Directors. The Group seeks to employ
people on the basis of merit and ability to perform the required
roles. The Group does not discriminate on any grounds including
race, gender, religion, age, nationality or sexual orientation.
Relations with shareholders
The Company provides shareholders and stakeholders with relevant
information in a timely and balanced manner. We understand and
respect the rights of shareholders, will convene Annual General
Meetings in full consideration of these rights and encourage full
participation of both institutional and private investors.
Auditor
A resolution for the re-appointment of PricewaterhouseCoopers
LLP as auditor of the Company will be proposed at the forthcoming
Annual General Meeting.
Related party transactions
Related party transactions are disclosed in note 30.
Jonathan Marren
Chief Development Officer and Interim Chief Financial Officer
27 June 2023
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
in Respect of the Financial Statements
Legal and regulatory framework
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law and
regulations. As a Company incorporated in Jersey and with its
ordinary shares admitted to trading on the Alternative Investment
Market (AIM) of the London Stock Exchange, the Company is
subject to the FCA’s Listing Rules and Disclosure and Transparency
Rules, as well as to all applicable laws and regulations in Jersey.
The Companies (Jersey) Law 1991 requires the Directors to
prepare financial statements for each financial year. Under that
law, the Directors have prepared these Financial Statements
under International Accounting Standards (“IAS UK”) as adopted
in the United Kingdom.
Under Jersey company law, the Directors must not approve the
financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period.
In preparing these Financial Statements, the Directors should:
select suitable accounting policies and then apply them
consistently;
state whether applicable IFRS have been followed, subject
to any material departures disclosed and explained in the
Financial Statements;
make judgements and accounting estimates that are
reasonable and prudent; and
prepare the Financial Statements on the going concern
basis unless it is inappropriate to presume that the Group will
continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the Financial Statements comply with the Companies (Jersey)
Law 1991. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for preparing the Annual Report
and financial statements, which includes a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and Corporate
Governance Statement that comply with applicable laws and
regulations.
The Directors are also responsible for the maintenance and
integrity of the corporate and financial information included on
the Company’s website. Legislation in the Jersey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility statement
Each of the Directors, whose names and functions are listed in the
Corporate Governance section – Board of Directors on pages 24-
25, confirm that to the best of their knowledge that:
the Financial Statements, which have been prepared in
accordance with IFRS, give a true and fair view of the assets,
liabilities, financial position and loss of the Company taken as
a whole;
the Strategic Report includes a fair review of the development
and performance of the business and the position of the
Company taken as a whole, together with a description of the
principal risks and uncertainties that it faces; and
the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy.
In the case of each director in office at the date the Directors’
report is approved:
so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant
audit information and to establish that the Company’s auditors
are aware of that information.
This responsibility statement was approved by the Board of
Directors and is signed on its behalf by:
Jonathan Marren
Chief Development Officer and Interim Chief Financial Officer
27 June 2023
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAInvinity Energy Systems plc
FINANCIAL STATEMENTS CONTENTS
For the year ending 31 December 2022
FINANCIAL STATEMENTS
Independent auditors’ report to the members
of Invinity Energy Systems plc
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
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51
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52
53
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
55
1 General Information
55
2 Summary of significant accounting policies
3 Accounting policies
61
4 Revenue from contracts with customers and income
from government grants
5 Cost of sales
6 Administrative expenses
7 Auditors’ remuneration
8 Staff costs and headcount
9 Share based payments
10 Other items of operating income and expense
11 Net finance income and costs
12 Income tax expense
13 Loss per share
14 Cash flows from operating activities
15 Goodwill and other intangible assets
16 Property, plant and equipment
17 Right-of-use assets
18 Deferred tax balances
19 Inventory
20 Other current assets
21 Contract related balances
22 Trade and other receivables
23 Cash and cash equivalents
24 Trade and other payables
25 Derivative financial instruments
26 Lease liabilities
27 Issued share capital and reserves
28 Financial assets and liabilities
29 Financial risk management
30 Related parties
31 Group entities
32 Events occurring after the report period
OTHER INFORMATION
Officers and Advisers
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
INDEPENDENT AUDITORS’ REPORT
to the members of Invinity Energy Systems plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion, Invinity Energy Systems PLC’s group financial statements:
give a true and fair view of the state of the group’s affairs as at 31 December 2022 and of its loss and cash flows for the year then ended;
have been properly prepared in accordance with UK-adopted international accounting standards; and
have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which
comprise: the Consolidated statement of financial position as at 31 December 2022; the Consolidated statement of profit and loss;
Consolidated statement of comprehensive income; Consolidated statement of changes in equity and Consolidated statement of cash
flows for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the Financial Reporting Council’s (“FRC”) Ethical Standard, as applicable to listed public interest
entities in accordance with the requirements of the Crown Dependencies’ Audit Rules and Guidance for market-traded companies, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in
note 2 to the financial statements concerning the Group’s ability to continue as a going concern. In assessing going concern the Directors
have prepared a severe but plausible downside scenario which forecasts that delivery of existing and future sales contracts during 2024
may not be at anticipated positive gross margins and may be delayed beyond June 2024. 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. No such funding is committed as at the date of approval of the financial statements These conditions,
along with the other matters explained in note 2 to the financial statements, indicate the existence of a material uncertainty which 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 auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included:
obtaining future cash flow forecasts, covering base case and a severe but plausible downside case, for a period of at least 12
months from the date of approval of the financial statements. We assessed the forecast assumptions used in the base and severe
but plausible downside scenarios;
review of past forecasting accuracy by the directors;
testing the mathematical accuracy of the forecasts;
corroborating the forecast budgeted revenue with confirmed sales orders or revenue pipeline of the Group;
comparing the assumptions used within the going concern model to the board approved budgets and business plans.
corroborating the starting cash position at the beginning of the going concern period;
reviewing and evaluating management’s sensitivities and performing additional sensitivity analysis over key assumptions in the
model in order to assess the potential impact of a range of possible outcomes; and
reading the disclosures in the financial statements and checking these were consistent with the Group’s plans for future fundraising
and the Group’s current funding position.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
Our audit approach
Context
Invinity Energy Systems plc is an independent, Jersey incorporated company. Its key subsidiaries are based in the UK, Canada and
United States of America. The principal activities of the company and its subsidiaries relate to the manufacture and sale of vanadium
flow battery systems plus associated installation, warranty and other services. Its manufacturing and assembly sites are located in the
UK and Canada.
Overview
Audit scope
We conducted full scope audits on four components and the audit of specified balances and classes of transactions on one
component. The scope of work at each component was determined by its contribution to the Group’s overall financial performance
and its risk profile.
We engaged our network firm in Canada to perform the audit procedures for components based in the United States of America and
Canada. The work on the other components was performed by the UK firm.
The components where audit work was performed accounted for approximately 99% of total assets.
Key audit matters
Material uncertainty related to going concern.
Accounting for the Riverfort and YA II PN Ltd arrangement.
Completeness of Onerous Contracts Provision.
Impairment of Goodwill.
Materiality
Overall materiality: £530,850 (2021: £650,000) based on 1% of Total Assets.
Performance materiality: £398,000 (2021: £487,500).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters
described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit.
Accounting for the Riverfort and YA II PN Ltd arrangement is a new key audit matter this year. Warranty provision and revenue
recognition, which were key audit matters last year, are no longer included because of the reduced risk in relation to legacy products
included within the warranty provision and the reduced risk of error in revenue recognition. Otherwise, the key audit matters below are
consistent with last year.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Key audit matter
How our audit addressed the key audit matter
Accounting for the Riverfort and YA II PN Ltd arrangement
In December 2022 the Group entered into a $10m funding
arrangement with Riverfort Global Opportunities and YA II PN
Ltd (‘the noteholders’) of which $2.5m (£1.9m) had been drawn
down by the balance sheet date. The initial drawdown included
an issuance of warrants and the terms of the financing include a
number of settlement features. 2,700,038 shares were issued to
the noteholders as part of the arrangement.
We focused on this area due to the complexity in valuing the
issued warrants and the settlement features of the contract.
There was also judgement involved in identifying any embedded
derivatives within the arrangement and anything which would
meet the definition of an equity instrument.
Refer to Notes 9, 25 and 29 for further details.
Completeness of Onerous Contracts Provision
At the balance sheet date the Group has an onerous contract
provision of £1.6m (2021: £4.9m). The onerous contract provision
relates to 4 contracts.
We have focused on the completeness of this provision as
determining the appropriate provision for contracts that are,
or are expected to become, loss making requires a significant
level of judgement. The calculation of the provision will require
identification of the costs expected to be incurred and the
benefits expected to be derived from individual contracts,
including new contracts entered into in the period.
Refer to Note 21 for further details.
In testing the accounting for the funding arrangement we
performed the following:
We obtained the signed agreement with the noteholders and
assessed the completeness of management’s assessment of
the accounting for the terms of the agreement;
Obtained management’s accounting paper detailing their
assumptions and conclusions in relation to the accounting
for the terms of the agreement. We challenged management
on their conclusions against the requirements of IAS 32 and
IFRS 9 particularly in relation to the issue of shares as part of
the arrangement;
Utilised PwC valuation experts to test management’s
assumptions used in the valuation of the warrants and the
derivatives;
Confirmed the issuance of shares and warrant; and
Evaluated the disclosures in the financial statements.
Based on work performed we identified no matters that would
suggest management’s assessment of the funding arrangement
were materially misstated.
In testing the completeness of the onerous contract provision we
performed the following:
Obtained the complete list of contracts signed with customers
to check if an onerous contract provision had been
recognised or at least considered for each one;
Obtained management’s onerous contract provision
calculation and tested the constituent parts to management’s
assumptions and corroborating evidence. Part of this test was
to assess whether or not what was recognised was sufficient
in light of the evidence obtained;
Considered losses made on contracts to date and compared
this to the calculated forecasted losses on contracts to identify
any inconsistencies between future contracts with previous
contracts and corroborating managements explanations for
any change in the expected costs;
For contracts identified where there was no provision we
obtained corroborating evidence to support the expected
costs for delivering these contracts and compared that to the
expected revenue under the contract; and
Verified the adequacy of relevant disclosures in the Group
financial statements.
Based on work performed we identified no indicators that would
suggest management’s assessment was materially misstated.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Key audit matter
How our audit addressed the key audit matter
Impairment of Goodwill
The Group holds goodwill of £23.9m. IAS 36 Impairment of
assets requires an annual impairment assessment to be carried
out for all indefinite life intangibles (goodwill) and whenever there
are any indications of impairment for all other assets.
We focused on this area due to the material nature of the goodwill
and given that the Group is currently incurring losses, there is a
risk that the value of goodwill may not be recoverable.
Management has determined the recoverable amount of the
relevant cash generating unit as at 31 December 2022 based on
fair value less costs of disposal (in line with the approach adopted
in 31 December 2021).
Refer to note 15 for further details.
In auditing the impairment assessment we performed the following:
We considered the appropriateness of using the fair value
less costs to sell approach;
We corroborated the share price at the balance sheet date
and checked the accuracy of the market capitalisation
calculation;
Assessed the inclusion of all appropriate assets and liabilities
in the cash generating unit carrying value calculation and
agreed that all relevant balances had been included; and
Verified the adequacy of relevant disclosures in the Group
financial statements.
Based on the work performed, we determined that the
assumptions used, and the approach taken, were reasonable.
The recoverability of the goodwill is interlinked with the going
concern assumption therefore the recoverability of the asset is at
risk should the group not continue as a going concern.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which it operates.
The Group has one segment and cash generating unit, the group has two manufacturing and assembly locations in the UK and Canada.
The accounting and financial reporting functions are also based in these two regions.
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Our Group scoping was based on total assets within each component. We identified four components (the company, Invinity Energy
(UK) Limited, Invinity Energy Systems (Canada) Corporation and Invinity Energy Systems (US) Corporation) which comprised a high
proportion of total Group assets which required an audit of their complete financial information. One other component was subject to
procedures over the provisions and contract liabilities financial statement line item level to obtain sufficient coverage.
The audit work was performed by the Group engagement team based in the UK and component auditors based in Canada. We
maintained regular communication and conducted formal interim and year-end conference calls with the component team, as well as
reviewing their audit work and reports to us.
Together the above scoping gave appropriate coverage of all material balances at a Group level. On a consolidated basis, these
provided coverage of 99% of total assets.
The impact of climate risk on our audit
Our audits considered the impact of climate change. As part of our audit, we made enquiries with management to understand the
process adopted to assess the extent of the potential impact of climate risk on the Group’s financial statements and to support the
disclosures made in the Sustainability section in the Strategic Report. We also read the Group’s governance process in response
to climate risk. Using our knowledge of the business, we focused our work on how the impact of climate commitments made by the
Group would impact the assumptions within the discounted cash flows prepared by management that are used in the Group’s going
concern assessment. We challenged the completeness of management’s climate impact assessment by reading the external reporting
made by management as well as internal climate plans and Board minutes. We also considered the completeness of the impact on
financial statement line items by comparing management’s assessment of the impact of climate risk, including the potential impact on
the underlying assumptions and estimates as outlined in the basis of preparation in note 2 to the Group financial statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
£530,850 (2021: £650,000).
How we determined it
1% of Total Assets
Rationale for benchmark applied
We believe that total assets is an appropriate measure for the Group given the current stage
of development of the business and products.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range
of materiality allocated across components was £224,000 to £450,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample
sizes. Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £398,000 (2021: £487,500) for the Group
financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount in the middle of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above £25,000
(2021: £32,500) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to
perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on these responsibilities.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’
Report for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we did not identify any
material misstatements in the Strategic report and Directors’ Report.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of the Directors’ responsibilities, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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G
C
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
49
49
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to employment law, and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the financial statements such as Companies
(Jersey) Law 1991 and tax legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls), and determined that the principal risks were related to manipulation of
financial results (such as revenue) and potential management bias in accounting estimates to improve the performance of the Group.
The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit
procedures in response to such risks in their work. Audit procedures performed by the Group engagement team and/or component
auditors included:
Evaluation of the design effectiveness of management’s controls designed to prevent and detect irregularities;
Inquiries with the Board of Directors and Chief Financial Officer, including consideration of known or suspected instances of non-
compliance with laws and regulations and fraud;
Review of board minutes;
Challenging assumptions made by management in its significant accounting estimates, in particular in relation to impairment of
intangible assets, provision for warranty, inventory and onerous contracts; and
Identifying and testing the validity of journal entries, in particular any journal entries posted with unusual revenue account
combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also,
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We
will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling
to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Article
113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
OTHER REQUIRED REPORTING
COMPANIES (JERSEY) LAW 1991 EXCEPTION REPORTING
Under the Companies(Jersey) Law 1991 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit; or
proper accounting records have not been kept by the company or proper returns adequate for our audit have not been received from
branches not visited by us;
the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Paul Cheshire
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
27 June 2023
50
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
For the year ended 31 December 2022
Continuing operations
Revenue
Direct costs
Grant income against direct costs
Cost of sales
Gross profit
Operating costs
Administrative expenses
Other items of operating income and expense
Loss from operations
Finance income
Finance costs
Gain/(loss) on foreign currency
Net finance income/(costs)
Loss before income tax
Income tax expense
Loss for the year
Loss per ordinary share in pence
Basic
Diluted
Note
£000
2022
(2,927)
647
4
4
5
6
10
11
11
11
11
12
13
13
£000
2,944
(2,280)
664
(19,042)
(604)
(18,982)
62
(65)
448
445
(18,537)
—
(18,537)
(16.0)
(16.0)
2021
£000
£000
3,185
(6,622)
—
(6,622)
(3,437)
(14,439)
(3,388)
(21,264)
—
(45)
(63)
(108)
(21,372)
—
(21,372)
(24.1)
(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
Continuing operations
Loss for the year
Other comprehensive (Expense) /income
Exchange differences on the translation of foreign operations
Total comprehensive loss for the year
2022
£000
2021
£000
(18,537)
(21,372)
(137)
10
(18,674)
(21,362)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
51
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2022
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Inventory
Other current assets
Contract assets
Trade receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Contract liabilities
Lease liabilities
Provisions
Total current liabilities
Net current assets
Non-current liabilities
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Share-based payment reserve
Accumulated losses
Currency translation reserve
Other reserves
Total equity
Note
15
16
17
19
20
21
22
23
24
25
21
26
21
26
27
27
27
27
27
27
2022
£000
2021
£000
24,050
1,208
1,845
27,103
9,827
8,781
500
1,737
5,137
25,982
53,085
24,097
1,130
975
26,202
5,797
6,280
324
1,683
26,355
40,439
66,641
(4,935)
(769)
(8,375)
(740)
(2,907)
(3,513)
—
(5,142)
(350)
(5,976)
(17,726)
(14,981)
8,256
25,458
(969)
(969)
(420)
(420)
(18,695)
(15,401)
34,390
51,240
50,716
141,579
5,957
(162,094)
(1,807)
39
50,690
140,445
5,293
(143,557)
(1,670)
39
34,390
51,240
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
The financial statements on pages 51 to 92 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
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Called-up
share
capital
£000
Share
premium
£000
Share-based
payment
reserve
£000
Accumulated
losses
£000
Currency
translation
reserve
£000
Other
reserves
£000
Total
£000
At 1 January 2022
50,690 140,445
5,293
(143,557)
(1,670)
39 51,240
Loss for the year
Other comprehensive income
Foreign currency translation differences
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Investment funding arrangement, net of transaction costs
Exercise of share options
Share-based payments
Equity settled interest on investment funding arrangement
Total contributions by owners
—
—
—
25
1
—
—
26
—
—
—
1,129
5
—
—
1,134
—
(18,537)
—
—
(18,537)
—
—
(23)
—
681
6
664
—
(137)
—
(137)
(18,537)
(137)
—
(18,674)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,131
6
681
6
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
£’000
Share
premium
£’000
Share-based
payment
reserve
£’000
Accumulated
losses
£’000
Currency
translation
reserve
£’000
Other
reserves
£’000
Total
£’000
At 1 January 2021
37,870 124,545
3,762
(122,185)
(1,680)
39
42,351
Loss for the year
Other comprehensive income
Foreign currency translation differences
Total comprehensive loss for the year
—
—
—
—
—
—
—
—
—
(21,372)
—
(21,372)
Transactions with owners in their capacity as owners
Contribution of equity, net of transaction costs
Exercise of share options
Share-based payments
12,286
534
-
15,148
752
-
—
(296)
1,827
Total contributions by owners
12,820
15,900
1,531
—
—
—
—
—
10
10
—
—
—
—
—
(21,372)
—
10
—
(21,362)
—
—
—
—
27,434
990
1,827
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.
53
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
Cash flows from operating activities
Cash used in operations
Interest received
Net cash outflow from operating activities
Cash flows from investing activities
Acquisition of intangible assets
Acquisition of property, plant and equipment
Net cash outflows from investing activities
Cash flows from financing activities
Payment of lease liabilities
Interest paid
Proceeds from the issue of share capital, net of transaction costs
Proceeds from the investment funding arrangement, net of transaction costs
Proceeds from the exercise of share options and warrants
Net cash inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Note
14
15
16
26
25
2022
£000
2021
£000
(21,934)
62
(22,964)
—
(21,872)
(22,964)
—
(708)
(708)
(591)
(59)
1,161
769
6
(18)
(733)
(751)
(320)
—
27,434
—
990
1,286
28,104
(21,294)
4,389
26,355
21,953
76
13
5,137
26,355
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
54
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
1 General Information
Invinity Energy Systems plc (the ‘Company’) is a public company limited by shares incorporated and domiciled in Jersey. The registered
office address is Third Floor, IFC5, Castle Street, St. Helier, JE2 3BY, Jersey.
The Company is listed on the AIM Market of the London Stock Exchange with the ticker symbol IES.L, 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.
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; and
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.
55
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc NOTES
(forming part of the consolidated historical financial information)
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.
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.
56
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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.
57
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc NOTES
(forming part of the consolidated historical financial information)
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); and
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.
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(forming part of the consolidated historical financial information)
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.
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(forming part of the consolidated historical financial information)
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.
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(forming part of the consolidated historical financial information)
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.
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(forming part of the consolidated historical financial information)
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); and
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.
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(forming part of the consolidated historical financial information)
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.
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(forming part of the consolidated historical financial information)
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
Computer and office equipment
Leasehold improvements
Vehicles
Manufacturing equipment and tooling
R&D Equipment
Software and purchased domain names
Patents and certifications
Period (years)
3-5
Shorter of lease
term or useful life
3
3-20
5-10
3
10
Recognition in
statement of
profit and loss
Administrative expenses
Administrative expenses/
Cost of sales
Administrative expenses
Cost of sales
Administrative expenses
Administrative expenses
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.
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(forming part of the consolidated historical financial information)
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.
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(forming part of the consolidated historical financial information)
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
Trade receivables and accrued income
Other current assets
Contract assets
Cash and cash equivalents
66
Measurement basis
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
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(forming part of the consolidated historical financial information)
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
Trade and other payables
Derivative Financial Instrument
Lease liabilities
Measurement basis
Amortised cost
Fair value through Profit and Loss
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.
67
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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.
Revenue from contracts with customers
Battery systems and associated control systems
Integration and commissioning
Other services
Total revenue in the consolidated statement of profit and loss
Analysed as:
Revenue recognised at a point in time
Revenue recognised over time
Total revenue in the consolidated statement of profit and loss
Grant income shown against cost of sales
Geographic analysis of revenue
The Group’s revenue from contracts with customers was derived from the following geographic regions:
Geographic analysis of revenue
United Kingdom
Asia
United States of America
Total revenue in the consolidated statement of profit and loss
2022
£000
2,548
254
142
2,944
2,936
8
2,944
647
3,591
2022
£000
1,691
160
1,093
2,944
2021
£000
2,481
701
3
3,185
3,182
3
3,185
—
3,185
2021
£000
2,796
273
116
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:
Significant customers and concentration of revenue
Customer A
Customer B
Customer C
Customer D
Customer E
68
2022
£000
1,247
466
466
—
—
2021
£000
—
—
—
2,300
495
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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:
Grant income received
Business support grants against employee costs – COVID-19
Grants for research and development
Total government grants
5 Cost of sales
Movement in inventories of finished battery systems
Production costs
Depreciation of production facilities, equipment and amortisation of intangibles
Movement in provisions for warranty and warranty costs
Movement in provisions for sales contracts
Total cost of sales
6 Administrative expenses
Staff costs
Research and development costs
Professional fees
Sales and marketing costs
Facilities and office costs
Other administrative costs
Total administrative expenses
No development costs were capitalised in the period (2021: £nil).
7 Auditors’ remuneration
Fees payable to the Company’s auditors for the audit of the consolidated financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Fees payable to the Company’s auditor for other services:
– Tax compliance services
2022
£000
(11)
647
636
2022
£000
3,356
2,640
172
763
(4,004)
2,927
2022
£000
10,322
2,592
2,983
399
385
2,361
19,042
2022
£000
271
33
19
323
2021
£000
156
302
458
2021
£000
5,240
826
116
440
—
6,622
2021
£000
8,980
1,792
1,950
249
655
813
14,439
2021
£000
172
21
9
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.
69
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
8 Staff costs and headcount
Staff costs
Wages and salaries
Employer payroll taxes
Other benefits
Share-based payments
Total staff costs
2022
£000
9,280
840
917
388
2021
£000
7,617
625
508
1,827
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).
Average headcount
Canada
United Kingdom
United States of America
South Africa
Total
2022
Number
71
68
7
1
147
2021
Number
55
60
7
2
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.
Key management compensation
Short-term employee benefits
Total key management compensation
2022
£000
1,828
1,828
2021
£000
1,590
1,590
The Group made contributions to the defined contribution schemes of key management in the year of £16,078 (2021: £12,917).
70
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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
redT 2015 plan
redT 2018 plan
Invinity Energy 2018 ESOP
Invinity Energy 2018 Consultant SOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Grant date
07 Dec 2015
18 May 2018
01 Apr 2020
01 Apr 2020
01 Apr 2020
01 Apr 2020
26 Aug 2020
28 Jan 2021
04 Mar 2021
15 Apr 2021
03 Aug 2021
29 Oct 2021
20 Dec 2021
03 Feb 2022
02 Mar 2022
11 Apr 2022
11 Jul 2022
08 Dec 2022
Final
Expiry date
07 Jan 2020
18 May 2023
12 Mar 2030
12 Mar 2030
07 Jul 2026
08 May 2029
26 Aug 2030
28 Jan 2031
04 Mar 2031
15 Apr 2031
03 Aug 2031
29 Oct 2031
20 Dec 2031
03 Feb 2032
02 Mar 2032
11 Apr 2032
11 Jul 2032
08 Dec 2032
Exercise
price
58.95 €c
352.50 p
82.50 p
82.50 p
4.34 p
6.84 p
113.00 p
204.00 p
152.00 p
151.00 p
134.50 p
111.50 p
91.00 p
64.50 p
93.50 p
90.00 p
45.50 p
38.00 p
2022
2021
68,803
3,888
185,143
378,000
1,342,134
658,314
2,043,334
372,000
194,000
108,000
375,000
297,000
135,000
186,000
60,000
60,000
500,000
822,000
137,602
3,888
185,143
378,000
1,429,812
661,237
2,505,000
480,000
222,000
126,000
455,000
359,000
135,000
—
—
—
—
—
7,788,616
7,077,682
Non-standard
Grant date
Expiry date
Price
2022
2021
Long-term incentive plan
Camco 2006 Executive Share Plan
redT 2018 plan
8 Dec 2009
30 Jul 2013
30 May 2018
30 Jul 2023
30 Jul 2023
30 Jul 2023
50.00 €c
50.00 €c
400.00 p
15,000
68,127
70,000
15,000
68,127
70,000
Total
153,127
153,127
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.
71
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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:
At 1 January 2022
Granted
Forfeited
Vested
Exercised
At 31 December 2022
At 1 January 2021
Granted
Forfeited
Vested
Exercised
At 31 December 2021
Unvested
Unvested
Vested
Vested
4,369,588
1,781,000
(900,589)
(1,711,308)
—
3,538,691
113.47p
50.39p
121.89p
108.00p
—
82.73p
2,708,094
—
(81,799)
1,711,308
(87,678)
4,249,925
35.26p
—
96.31p
108.00p
4.34p
69.24p
Unvested
Unvested
Vested
Vested
4,034,591
2,015,000
(378,460)
(1,301,543)
—
4,369,588
98.84p
149.64p
134.35p
87.15p
—
113.47p
1,839,032
1,301,543
(100,000)
—
(332,481)
2,708,094
29.09p
87.15p
317.00p
—
15.33p
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.
72
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc NOTES
(forming part of the consolidated historical financial information)
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:
(Income)/expense
Provision for onerous contracts, net of amounts used
Impairment of property, plant and equipment
Loss on disposal of property, plant and equipment
Reversal of impairment of obsolete inventory and disposal of scrap inventory
Impairment of obsolete inventory and disposal of scrap inventory
Profit on disposal of subsidiary
Gain on curtailment of right-of-use asset
Total other operating expenses (net)
11 Net finance income and costs
Finance income
Interest on bank deposits and money market funds
Finance costs
Finance charges on convertible loan notes
Finance charges for lease liabilities held at fair value
Finance charges for liabilities held at amortised cost
(Gains)/losses on foreign currency transactions
Net finance (income)/costs
2022 Invinity - AR- Report -TEXT-pp51-92-JB-02.indd 73
2022 Invinity - AR- Report -TEXT-pp51-92-JB-02.indd 73
2022
£000
554
—
33
—
25
—
(8)
604
2022
£000
(62)
6
58
1
(448)
(445)
2021
£000
3,762
60
—
(390)
—
(15)
(29)
3,388
2021
£000
—
—
45
—
63
108
73
28/06/2023 08:36
28/06/2023 08:36
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
12 Income tax expense
Current tax
Current tax on profits for the year
Total current tax expense
Reconciliation of income tax expense calculated using statutory tax rate
Loss before tax
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
Differences in overseas tax rates
Unrelieved tax losses carried forward
Origination and reversal of timing differences not recognised
Total income tax expense
13 Loss per share
Basic loss per share
From continuing operations
From continuing and discontinued operations
Diluted loss per share
From continuing operations
From continuing and discontinued operations
Loss used in calculation of basic and diluted loss per share
From continuing operations
From continuing and discontinued operations
2022
£000
—
—
2022
£000
2021
£000
—
—
2021
£000
(18,537)
(21,372)
—
—
181
(4,707)
4,350
176
—
2022
In pence
(16.0)
(16.0)
2022
In pence
(16.0)
(16.0)
2022
£000
(18,537)
(18,537)
(113)
(3,942)
3,109
946
—
2021
In pence
(24.1)
(24.1)
2021
In pence
(24.1)
(24.1)
2021
£000
(21,372)
(21,372)
All operational activity in the years ended 31 December 2022 and 2021 relate to continuing operations.
Weighted average number of shares used in calculation
Basic
Diluted
2022
Number
2021
Number
116,151,378
117,754,966
88,768,750
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.
74
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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.
Weighted average number of shares used in loss per share calculation – basic and diluted
In issue at 1 January
Shares issued in the year - weighted average
Weighted average shares in issue 31 December
Effect of employee share options and other warrants not exercised
2022
Number
2021
Number
116,048,761
102,617
116,151,378
1,603,588
85,900,616
2,868,134
88,768,750
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
Loss after income tax
Adjustments for:
Depreciation and amortisation
Loss on disposal of property, plant and equipment
Gain on curtailment of right-of-use asset
Impairment of inventory
Share-based payments charge
Equity settled interest and transaction costs on investment funding arrangement
Net foreign exchange differences
Change in operating assets & liabilities
Increase in inventory
Increase in contract assets
Increase in trade receivables and other receivables
Increase in other current assets and prepaid inventory
Increase in trade and other payables
Increase in warranty provision
(Decrease)/Increase in onerous contract provision
Increase in contract liabilities
2022
£000
2021
£000
(18,537)
(21,372)
1,350
33
(8)
24
681
6
(168)
727
—
—
(390)
1,827
—
(27)
(16,619)
(19,235)
(3,875)
(174)
(88)
(2,354)
1,263
183
(3,252)
2,982
(5,315)
(4,487)
(319)
(1,650)
(4,866)
1,046
293
3,756
2,498
(3,729)
Cash used in operations
(21,934)
(22,964)
75
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
15 Goodwill and other intangible assets
Cost
At 1 January 2022
Additions
Foreign currency exchange differences
At 31 December 2022
Accumulated amortisation
At 1 January 2022
Amortisation charge
Foreign currency exchange differences
At 31 December 2022
Net book value
At 1 January 2022
At 31 December 2022
Cost
At 1 January 2021
Additions
At 31 December 2021
Accumulated amortisation
At 1 January 2021
Amortisation charge
At 31 December 2021
Net book value
At 1 January 2021
At 31 December 2021
Goodwill
£000
Patents and
certifications
£000
Software and
domain names
£000
23,944
—
—
23,944
—
—
—
—
23,944
23,944
203
—
—
203
(71)
(41)
—
(112)
132
91
47
—
3
50
(26)
(8)
(1)
(35)
21
15
Goodwill
£000
Patents and
certifications
£000
Software and
domain names
£000
23,944
—
23,944
—
—
—
23,944
23,944
203
—
203
(30)
(41)
(71)
173
132
29
18
47
(19)
(7)
(26)
10
21
Total
£000
24,194
—
3
24,197
(97)
(49)
(1)
(147)
24,097
24,050
Total
£000
24,176
18
24,194
(49)
(48)
(97)
24,127
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.
76
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
16 Property, plant and equipment
Computer and office
equipment
£000
Leasehold
improvements
£000
Vehicles and
equipment
£000
Cost
At 1 January 2022
Additions
Disposals
Foreign currency exchange differences
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Depreciation charge
Disposals
Foreign currency exchange differences
At 31 December 2022
Net book value
At 1 January 2022
At 31 December 2022
Cost
At 1 January 2021
Additions
Disposals
Foreign currency exchange differences
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Depreciation charge
Disposals
Foreign currency exchange differences
At 31 December 2021
Net book value
At 1 January 2021
At 31 December 2021
Total
£000
2,626
708
(175)
61
(1,496)
(634)
142
(24)
(2,012)
1,130
1,208
Total
£000
2,014
733
(123)
2
780
45
(136)
10
699
(653)
(129)
125
(5)
(662)
127
37
681
429
(2)
11
1,165
234
(37)
40
1,119
1,402
3,220
(427)
(204)
1
(5)
(635)
254
484
(416)
(301)
16
(14)
(715)
749
687
Computer and office
equipment
£000
Leasehold
improvements
£000
Vehicles and
equipment
£000
748
158
(123)
(3)
780
(694)
(85)
123
3
(653)
54
127
513
169
—
(1)
681
(357)
(71)
—
1
(427)
156
254
753
406
—
6
1,165
2,626
(268)
(145)
—
(3)
(416)
485
749
(1,319)
(301)
123
1
(1,496)
695
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).
77
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
17 Right-of-use assets
Cost
At 1 January 2022
Additions
Curtailments and disposals 1
Foreign currency exchange differences
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Depreciation charge
Curtailments and disposals
Foreign currency exchange differences
At 31 December 2022
Net book value
At 1 January 2022
At 31 December 2022
Cost
At 1 January 2021
Additions
Curtailments 2
Foreign currency exchange differences
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Depreciation charge
Foreign currency exchange differences
At 31 December 2021
Net book value
At 1 January 2021
At 31 December 2021
Offices and facilities
£000
Vehicles and equipment
£000
1,845
1,512
(106)
79
3,330
(879)
(661)
106
(55)
(1,489)
966
1841
28
—
—
3
31
(19)
(6)
—
(2)
(27)
9
4
Offices and facilities
£000
Vehicles and equipment
£000
1,572
627
(294)
(60)
1,845
(576)
(369)
66
(879)
996
966
28
—
—
—
28
(10)
(9)
—
(19)
18
9
Total
£000
1,873
1,512
(106)
82
3,361
(898)
(667)
106
(57)
(1,516)
975
1,845
Total
£000
1,600
627
(294)
(60)
1873
(586)
(378)
66
(898)
1,014
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.
78
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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
Timing differences and tax losses on which deferred tax is not recognised:
Accelerated capital allowances
Share options
Accrued liabilities
Reserves and other
Tax losses
Total deferred tax assets
2022
£000
1,003
595
137
3,008
91,482
96,225
2021
£000
450
1,576
477
4,161
70,880
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:
United Kingdom
Canada
United States of America
Ireland
Total potential tax benefit
2022
£000
46,416
27,707
12,892
4,467
91,482
2021
£000
40,530
16,557
9,994
3,799
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.
79
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
19 Inventory
Raw materials and consumables
Work in progress
Finished goods
Total inventory
2022
£000
1,815
6,370
1,642
9,827
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
Prepayments and deposits
Prepaid inventory
Tax credits – recoverable
Other receivables
Total other current assets
2022
£000
1,879
5,102
551
1,249
8,781
2021
£000
1,897
3,900
—
5,797
2021
£000
533
4,112
247
1,388
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:
Amounts due from customer contracts included in trade receivables
Contract assets (accrued income for work done not yet invoiced)
Contract liabilities (deferred revenue related to advances on customer contracts)
Net position of sales contracts
2022
£000
1,737
500
(8,375)
(6,138)
2021
£000
1,683
324
(5,142)
(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.
80
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
Provisions related to contracts with customers
At 1 January 2022
Charges to profit or loss:
– Provided in the year
– Unused amounts reversed
Amounts used in the year
At 31 December 2022
At 1 January 2021
Charges to profit or loss:
– Provided in the year
– Unused amounts reversed
Amounts used in the year
At 31 December 2021
Warranty
provision
£000
Legacy products
provision
£000
Provision for
contract losses
£000
257
204
(24)
(153)
284
860
578
(16)
(406)
1,016
4,859
565
(2,059)
(1,758)
1,607
Warranty
provision
£000
Legacy products
provision
£000
Provision for
contract losses
£000
—
257
—
—
257
824
36
—
—
860
1,103
4,028
(51)
(221)
4,859
Total
£000
5,976
1,347
(2,099)
(2,317)
2,907
Total
£000
1,927
4,321
(51)
(221)
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.
81
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
22 Trade and other receivables
Total trade and other receivables
2022
£000
1,737
2021
£000
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
Total cash and cash equivalents
2022
£000
5,137
2021
£000
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
Trade payables
Other payables
Accrued liabilities
Accrued employee compensation
Government remittances payable
Total trade and other payables
2022
£000
3,706
78
701
143
306
4,934
2021
£000
1,484
456
1,013
505
55
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.
82
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
25 Derivative financial instruments
Derivative value of warrants issued
Other
Total derivative financial instruments
2022
£000
449
320
769
2021
£000
—
—
—
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:
At 31 December
Current – due within 12 months
Non-current – due after 12 months
Total lease liabilities
Payments of lease principal and interest in the period to 31 December were:
At 31 December
Payments of lease principal
Payments of interest
Total payments under leases
The contractual undiscounted cash flows for lease obligations at each period end were:
At 31 December
Less than one year
One to five years
More than five years
Total lease liabilities
2022
£000
740
969
1,709
2022
£000
591
58
649
2022
£000
804
1,009
—
1,813
2021
£000
350
420
770
2021
£000
275
45
320
2021
£000
379
448
—
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.
83
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
27 Issued share capital and reserves
Authorised at 31 December
Issued and fully paid
At 1 January
Issued in the year
At 31 December
2022
No: 000
121,500
116,048
2,959
119,007
2022
£000
—
50,690
26
50,716
2021
No: 000
120,000
85,900
30,148
116,048
2021
£000
—
37,870
12,820
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.
84
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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.
85
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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
Cash flow forecasting
Sensitivity analysis
Recognised financial assets
and liabilities not denominated
in GBP
Market risk –
commodity price risk
Purchases of vanadium to be
used in the battery electrolyte
Quoted market prices
for vanadium
Credit risk
Cash and cash equivalents,
trade receivables and
contract assets
Ageing analysis
Credit ratings
Liquidity risk
Borrowings and other liabilities
Rolling cash flow forecasts
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
Strategic supply
arrangements with
multiple pre-qualified
suppliers
Monitoring accumulation
of bank balances
Credit risk assessment for
customers and pre-agreed
deposits and interim payments
within customer contracts
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.
86
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
The Group’s exposure to foreign exchange risk at the end of the reporting period, expressed in GBP, was as follows:
31 December 2022
Cash and cash equivalents
Trade receivables
Other current assets
Trade and other payables
Derivative financial instruments
Lease liabilities
Net exposure
31 December 2021
Cash and cash equivalents
Trade receivables
Other current assets
Trade and other payables
Lease liabilities
Net exposure
Sterling
£000
1,545
350
491
(1,197)
(769)
(279)
141
Sterling
£000
24,141
1,288
2,985
(1,438)
(356)
26,620
Euro
£000
354
—
690
(557)
—
—
487
Euro
£000
96
23
278
(382)
—
15
4,539
2,747
Canadian
dollar
£000
106
1,475
7,172
(2,867)
—
(1,347)
Canadian
dollar
£000
284
223
2,113
(1,229)
(299)
1,092
US South African
rand
£000
dollar
£000
Australian
dollar
£000
2,810
(88)
421
(313)
—
(83)
5
—
7
—
—
—
12
317
—
—
—
—
—
317
US
dollar
£000
South African
rand
£000
Australian
dollar
£000
1,174
150
345
(460)
(102)
1,107
28
—
10
(4)
(13)
21
632
—
—
—
—
Total
£000
5,137
1,737
8,781
(4,934)
(769)
(1,709)
8,243
Total
£000
26,355
1,684
5,731
(3,513)
(770)
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.
At 31 December +/ –5%
Euro
Canadian dollar
US dollar
South African rand
Australian dollar
2022
£000
24
227
137
1
16
405
Restated
2021
£000
1
55
55
1
32
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%.
87
Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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:
At 31 December
Aa1
Aa2
A1
Ba2
2022
£000
780
1,315
3,037
5
5,137
2021
£000
—
1,087
25,240
28
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:
At 31 December
Current
Past due – less than 30 days
Past due – more than 30 days
Total trade and other receivables
2022
£000
1,582
112
43
1,737
2021
£000
249
—
1,434
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.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
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.
31 December 2022
Trade and other payables
Derivative financial instruments
Lease liabilities
Total financial liabilities
31 December 2021
Trade and other payables
Lease liabilities
Total financial liabilities
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Over
five years
£000
Total contracted
cash flows
£000
4,582
769
740
6,091
352
—
630
982
—
—
339
339
—
—
—
—
4,934
769
1,813
7,516
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Over
five years
£000
Total contracted
cash flows
£000
3,513
379
3,892
—
331
331
—
117
117
—
—
—
3,513
827
4,340
Carrying
amount
£000
4,934
769
1,709
7,412
Carrying
amount
£000
3,513
770
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.
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
31 Group entities
Direct subsidiary
undertakings
Country of
incorporation
Camco Holdings UK Limited
England
Camco Services (UK) Limited England
Camco (Mauritius) Limited
Mauritius
Invinity Energy Systems
(U.S.) Corporation
United States
of America
Invinity Energy Nexus
Limited
England
Registered office
Principal activity
Ownership %
2021
2022
Office 501 New Broad Street House
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
Office 501 New Broad Street House
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
24 Dr Joseph Rivière Street
1st Floor, Felix House
Port Lewis, Mauritius
1201 Orange St. #600
Wilmington, DE
USA 19899
Office 501 New Broad Street House
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
Holding company
100%
100%
Support services
100%
100%
Holding company
100%
100%
Energy storage
100%
100%
Energy storage
100%
100%
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
(forming part of the consolidated historical financial information)
Indirect subsidiary
undertakings
redT Energy Holdings (UK)
Limited
Country of
incorporation
England
Re-Fuel Technology Limited England
Invinity Energy (UK) Limited England
redT Energy Holdings
(Ireland) Limited
Invinity Energy Systems
(Ireland) Limited
Ireland
Ireland
redT energy (Australia)
(Pty) Ltd
Australia
Invinity Energy
(South Africa) (Pty) Ltd
South Africa
Invinity Energy Systems
(Canada) Corporation
Canada
Suzhou Avalon Battery
Company Limited
The People’s
Republic of China
Associates
Vanadium Electrolyte
Rental Limited
England
Registered office
Office 501 New Broad Street House
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
Office 501 New Broad Street House
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
Office 501 New Broad Street House
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
22 Northumberland Road
Ballsbridge,
Dublin 4, Ireland
22 Northumberland Road
Ballsbridge,
Dublin 4, Ireland
RSK Advisory, Level 2, Suite 7
66 Victoria Crescent
Narre Warren, Victoria 3805
Australia
1st Floor, Kiepersol House
Stonemill Office Park
300 Acacia Road
Darrenwood
Randburg 2194
2900-550 Burrard Street
Vancouver, BC
Canada V6C 0A3
1809 Building 4
no.11888 East Taihu Avenue,
Songling Town, Wujiang District,
Suzhou City
Principal activity
Research and
consultancy
Ownership %
2021
2020
100%
100%
Energy storage
consultancy
99%
99%
Energy storage
consultancy
99%
99%
Energy storage
99%
99%
Energy storage
99%
99%
Energy storage
99%
99%
Business Services
100%
100%
Energy storage
100%
100%
Business Services
100%
100%
Office 501 New Broad Street House
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
Vanadium
procurement
50%
50%
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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
NOTES
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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Annual Report and Financial Statements 2022UK / U.S. / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plcXXAt 31 December 2021 CONTENTS
OFFICERS AND ADVISERS
INTRODUCTION
About Invinity
2022 Highlights
A Company and an Industry Race Forward
STRATEGIC REPORT
Chairman’s Report
Chief Executive Officer’s Report
Invinity’s Pathway to Profitability – Strategy
Interim Chief Financial Officer’s Report
Risk Management Report
Sustainability Report
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2
4
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9
12
14
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GOVERNANCE
The Board of Directors
Governance Report
Report of the Chairman of the Audit & Risk Committee
Report of the Chairman of the ESG Committee
Report of the Chairman of the Nomination Committee
Report of the Chair of the Remuneration Committee
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities in Respect
of the Financial Statements
FINANCIAL STATEMENTS
Independent auditors’ report to the members
of Invinity Energy Systems plc
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
OTHER INFORMATION
Officers and Advisers
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Neil O’Brien
Larry Zulch
Matt Harper
Jonathan Marren
Rajat Kohli
Michael Farrow
Kristina Peterson
Registered Address
Investor Relations
Joe Worthington
Ralph Anderson
Non-Executive Chairman
Chief Executive Officer
Chief Commercial Officer
Chief Development Officer and Interim Chief Financial Officer
Senior Independent Director
Non-Executive Director
Non-Executive Director
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Director of Communications & Investor Relations
Corporate Relations Manager
To contact Investor Relations,
email IR@invinity.com or call +44 (0)204 551 0361
Jersey Company Number
92432
Advisors
Nominated Adviser and Joint Broker
Joint Broker
Registrar
Company Secretary
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
VSA Capital Limited
Park House
16-18 Finsbury Circus
London
EC2M 7EB
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St. Helier
Jersey
JE1 1ES
Oak Secretaries (Jersey) Limited
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
The pulp is bleached using an Elemental Chlorine Free process.
This report is printed in the UK using environmental printing
technology and vegetable based inks. Both the manufacturing
mill and the printer are registered to the Environmental
Management System ISO 14001 and are Forest Stewardship
Council® chain-of-custody certified.
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Printed in England by Sterling FP.
UK / U.S. / CANADA / AUSTRALIA
Annual Report and Financial Statements 2022
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INVINITY ENERGY SYSTEMS PLC
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Telephone +44 (0)204 551 0361
Website
Twitter
Linkedin
www.invinity.com
@InvinityEnergy
linkedin.com/invinity-energy-systems
Jersey registered 92432
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London, United Kingdom
Bathgate, United Kingdom
Vancouver, Canada
San Francisco, USA
Melbourne, Australia
St Helier, Jersey
www.invinity.com
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ANNUAL REPORT & FINANCIAL STATEMENTS 2022