Hydrogen Future Ind. - Final Results
31/01/2024 11:38
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RNS Number : 5444B Hydrogen Future Industries PLC 31 January 2024
31 January 2024
Hydrogen Future Industries plc
("HFI" or the "Company")
Final Results for the 12 months ended 31 July 2023
Hydrogen Future Industries plc (https://hydrogenfutureindustries.com/) (AQSE:
HFI), a developer of a proprietary wind-based green hydrogen production system
featuring an advanced aerodynamic wind turbine and a high-performance
electrolyser, presents its financial results for the 12 months ended 31 July
2023.
Highlights
· Acquisition in October 2022 of a suite of international patents
o Significantly enhanced IP around HFI's wind-based hydrogen production
system
o Potential wider commercial applications for patents beyond HFI's systems
· Prototype testing of 1 metre diameter wind turbine began in November
2022 in Montana, USA and continues to date:
o Phase I and II testing completed:
§ 20-hour live test, confirming aerodynamics align to wind direction, with no
distinguishing noise from rotor blades, and no fouling of blades with cowling
§ Successful testing in variable weather and temperature conditions in wind
speeds as high as 58 MPH
o Phase III testing of upgraded turbine to measure energy output and gather
data ongoing:
§ Data collected to date have been consistent with those collected in the
15,000 hours of computational fluid dynamics and wind tunnel testing and
suggests an increase in energy production of upwards of 270% compared to open
rotor wind turbines
· Announced in January 2023 an investment in, and collaboration with,
Tower Green Holdings Limited ("Tower"), a developer of hydrogen production and
distribution facilities that is establishing multipurpose hydrogen hubs in the
southwest of England to provide energy storage and hydrogen as a fuel
o HFI's system to be implemented as Tower's preferred green hydrogen
production technology
· Announced in May 2023 that concept testing of an electrolyser for the
hydrogen production system had commenced in California, USA, led by
quantum-physicist, Dr Nicholas Blake
o Objective to build electrolyser with cheaper and more readily available
materials that improves power efficiency and longevity
o Announced after the period-end in September 2023 exceptional efficiency of
up to 97%
· Announced in May 2023 the establishment of a facility in Birmingham,
UK, where work is ongoing to incorporate the variable hydraulic drive and/or
electro-magnetic clutch and lower the cost of energy production of the system
· Announced in May 2023 the purchase of the remaining 49% of HFI IP
Holdings Limited from Timothy Blake, who is leading HFI's development
activities, by way of a staged share issue
o As a result Mr Blake became the largest shareholder in HFI with 28.28%
· Post year-end in September 2023, appointed Neil Ritson, an energy
sector professional with a career spanning over 40 years, as Non-Executive
Chairman
o Dan Maling transitioning to the role of Executive Director to focus on
driving the commercial and business development elements of the business
strategy
o David Ormerod stepped down as a Non-Executive Director to focus on his
other commitments in Australia
Neil Ritson, Non-Executive Chairman, commented:
"HFI is making extraordinary strides both in prototype testing of the wind
turbine in Montana, with limited initial data corroborating wind tunnel
results, and the novel electrolyser in California, which has recorded
impressive efficiency from initial testing.
The performance improvement of the HFI wind turbine over existing ones is
potentially game changing on a world-scale and we look forward to moving
closer to a position whereby we can demonstrate this."
Enquiries:
Hydrogen Future Industries plc
Daniel Maling, Executive Director +44 (0)20 3475 6834
Vigo Consulting (Investor Relations)
Ben Simons +44 (0) 20 7390 0230
Peter Jacob
Cairn Financial Advisers LLP (AQSE Corporate Adviser)
Ludovico Lazzaretti +44 (0) 20 72130 880
Liam Murray
Peterhouse Capital Limited (Broker)
Duncan Vasey +44 (0) 20 7469 0930
Inside Information
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company accept responsibility
for the contents of this announcement.
About Hydrogen Future Industries
Hydrogen Future Industries was established to invest in projects and companies
focused on the Hydrogen Economy. We are developing a proprietary wind-based
hydrogen production system, featuring an advanced aerodynamic wind turbine and
a high-performance electrolyser. Through this technology, we aim to
significantly reduce the cost of hydrogen production from renewable sources
and provide on-demand energy storage in the form of hydrogen at a fraction of
the cost of lithium-ion battery storage. Click here
(https://hydrogenfutureindustries.com/wp-content/uploads/2022/07/HFI-Flyer-for-Website.pdf)
for more information about Hydrogen Future Industries.
Visit our website: www.hydrogenfutureindustries.com
(http://www.hydrogenfutureindustries.com)
Follow us on social media:
LinkedIn: @Hydrogen Future Industries
(https://www.linkedin.com/company/hydrogen-future-industries)
X (formerly Twitter): @HydrogenFI (https://twitter.com/HydrogenFI)
Caution Regarding Forward Looking Statements
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not a guarantee of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.
Chairman's Statement
Introduction
I am pleased to present the financial results for the 12 months ended 31 July
2023, my first since being appointed as chairman after the period-end, in
September 2023. The Company has made significant progress during the period in
the development of its green hydrogen production system through the testing of
key components of the system, including the wind turbine and novel
electrolyser. Crucially, we were also able to strengthen the intellectual
property around the system.
Development activities
Wind turbine development
On 1 November 2022, HFI announced the commencement of prototype testing of the
wind element of the Company's hydrogen production system 1 metre diameter
prototype in Montana, USA. A key element of the prototype is its proprietary
wind turbine, which has been designed with notably distinct features which
allow the turbines to be more efficient than current open rotor turbines due
to modified aerodynamics, with cowling directing air flow across the rotor
blades to create a multiple factor increase in wind speed. The cowling also
directs the flow of wind out and away from the rear of the turbine, reducing
the potential for still air to block the flow through the turbines. We believe
the increased efficiency of the turbine could in turn increase the efficiency
and ultimately lower the cost of hydrogen production.
The prototype is being tested in an area selected for its consistent wind
speeds and regulatory support for wind turbine development and wind farm
placement. HFI has a local development facility where the turbines are
fabricated and mounted onto towers for testing in local wind speeds. The power
output from the prototype turbines is being compared to predicted results. The
cowling and rotor blades are a product of aerodynamic development and have
been 3D printed on site.
The first stage of the outdoor test programme - a 20-hour live test - was
successfully completed in November 2022, confirming the aerodynamics align to
the wind direction as planned, there is no distinguishing noise from the rotor
blades, and there is no fouling of the blades with the cowling.
The next phase of testing - variable weather and temperature conditions - was
successfully undertaken between February and April 2023, in temperatures that
dropped below -20(o)C and in wind speeds of up to 58 MPH. The test was
undertaken to see how the wind turbine would react to extreme cold
temperatures and consistent high wind speeds. The wind turbine completed the
test without any issues.
A third and final phase of an enhanced version of the 1 metre diameter wind
turbine ultimately began after the period-end, in September 2023 following
numerous upgrades. This upgraded wind turbine is currently being used to
measure the energy output over extended periods. The performance data is being
compared to earlier wind tunnel results and will be used in the design of the
larger diameter wind turbines. Data collected to date have been consistent
with those collected in the 15,000 hours of computational fluid dynamics and
wind tunnel testing and suggests an increase in energy production of upwards
of 270% compared to open rotor wind turbines.
The test site in Montana is adjacent to a tailings facility operated by a
major mining company. The Company has agreed to collaborate on a feasibility
study, the first stage of which includes the data collection from the
prototype wind turbine testing detailed above and the sharing of mine site
processing samples. The purpose of the feasibility study is to demonstrate the
use of HFI's system to utilise wastewater from the tailings operation as a
feedstock to generate both clean energy and clean water for on-site mining
operations.
Electrolyser development
HFI announced in May 2023 that concept testing of an electrolyser for the
hydrogen production system was underway California, USA, led by
quantum-physicist, Dr Nicholas Blake, a consultant to HFI. The objective is to
build an Anion Exchange Membrane Water Electrolyser (AEMWE) without platinum
group metal catalysts, using cheaper and more readily available materials.
Dr Blake has since completed the build of two complete electrolyser test
cells. The series of tests undertaken achieved an exceptional efficiency of up
to 97%. To date, HFI has tested 30 different electrodes, including the current
catalysts to demonstrate the efficiency gains from the Company's design.
Following the completion of the initial test phase, the Company will lodge
various patent applications before proceeding with further development
including that in collaboration with the University of Bristol as commented on
in further detail below.
Smart Hydraulic Drive development
HFI announced in May 2023 the establishment of a facility in Birmingham, UK,
where work is ongoing to incorporate the variable hydraulic drive and/or
electro-magnetic clutch, which are part of the patents acquired and announced
in October 2022, to increase efficiency and lower the cost of energy
production.
Corporate activities
Patent Acquisition
On 5 October 2022, HFI announced the acquisition by our joint venture
subsidiary HFI IP Holdings Limited of a suite of international patents which
are relevant to the system being developed by the Company. This acquisition
significantly enhanced the intellectual property around HFI's wind-based
hydrogen production system. The patents cover a range of works including
ducted wind turbine rotor configurations; a dynamic telescopic tower to
optimise wind farm energy production and reduce maintenance cost; a variable
hydraulic drive and electro-magnetic clutch to increase efficiency and lower
the cost of energy production; and the conversion of stored energy to green
hydrogen.
The patents acquired were granted to HW Power Limited in respect of work
undertaken by Timothy Blake between 2015 and 2018, prior to him joining HFI as
Chief Executive Officer of HFI Energy Systems Limited, the Company's wholly
owned product development subsidiary. Given the considerable efficiency gains
we believe our turbine will offer compared to existing open rotor wind
turbines in use today, the commercial applications for our patents may not be
limited to hydrogen and could be of value in the wider wind energy generation
sector.
In May 2023, HFI announced the purchase of the remaining 49% of HFI IP
Holdings which it did not already own from Timothy Blake, who is leading HFI's
development activities, by way of a staged issue of shares in HFI at a
considerable premium to the prevailing share price, linked to progress and
other milestones (see 23 May 2023 announcement). As a result, Mr Blake became
the largest shareholder in HFI and is interested in 28.28% of the Company.
This transaction consolidated HFI's valuable intellectual property ownership
under the exclusive control of the Company and aligned all interests at the
top company level, while the 10p issue price reflects the confidence of the
parties in HFI's potential for scalable production of affordable green
hydrogen.
Investment in Tower Green Holdings Limited
On 16 January 2023, HFI announced an investment in, and collaboration with,
Tower Green Holdings Limited ("Tower"), a developer of hydrogen production and
distribution facilities which is establishing multipurpose hydrogen hubs in
the southwest of England to provide energy storage and hydrogen as a fuel.
Under the agreement, HFI's system will be implemented as Tower's preferred
green hydrogen production technology.
HFI made an initial investment of £100,000 in Tower for a 20% equity stake,
£50,000 of which was paid in cash and £50,000 was settled by the issue of
500,000 new ordinary shares in HFI at a price of 10p per share. In addition,
HFI has the right to invest a further £50,000 in Tower upon Tower signing an
agreement to collaborate with certain specific project partners for an
additional 10% equity stake in Tower.
Our system aims to produce affordable green hydrogen and so is well placed to
support companies like Tower as they develop downstream infrastructure and
partnerships to get hydrogen into vehicles and support the decarbonisation of
transport. Tower has made significant progress in building its position as the
preferred hydrogen infrastructure developer for Southwest England. Tower
attracted widespread media coverage for its Appledore project, which seeks to
develop onshore hydrogen production and refuelling infrastructure in north
Devon and supply offshore wind support vessels. Tower will continue to develop
these proposals throughout 2024 and enhance its position as the provider of
maritime hydrogen refuelling projects in support of offshore wind and other
clean maritime operations in the region.
Tower has also built a pipeline of other infrastructure projects throughout
the southwest, including a road mobility project in Devon, with real estate
and partnerships secured to supply hydrogen directly to industrial off-takers
and to the strategic road network. This project is anticipated to become
operational in 2026. Further project announcements are expected to be made
throughout the year.
Board Changes
In September 2023, after the period-end, I joined the Board as Non-Executive
Chairman. In conjunction with my appointment, David Ormerod stepped down as a
Non-Executive Director to focus on his other commitments in Australia and
Daniel Maling transitioned from Executive Chairman to the role of Executive
Director, enabling him to devote more time to driving the commercial and
business development elements of the business strategy.
I have been an energy sector professional for over 40 years, including 20
years in various technical and managerial positions with British Petroleum,
and can state that I am enormously excited by what I am seeing at HFI. Our
system could genuinely change the energy landscape as we know it.
Financial Review
Financial highlights for the Group for the 12 months ended 31 July 2023 are
stated below:
· Cash and cash equivalents at year end were approximately £262,000
· Loss before taxation for the year was approximately £1,113,000
· Net cash outflow for the year was approximately £1,123,000
· The Group held net assets at year end of approximately £809,000
The Group has invested significantly in research and development in the period
which accounts for a significant portion of the loss incurred. As prototype
and other testing progresses through the next phases, the Group will look to
capitalise this expenditure once it satisfies the necessary requirements laid
out in "IAS 38 - Intangible Assets." The remaining loss in the period relates
to general administrative expenses of running the Group and can be further
viewed at Note 4.
Post balance sheet events
University Collaboration
We were delighted to announce on 7 December 2023 that we had signed a
Memorandum of Understanding with the University of Bristol ("UoB") to
collaborate to advance respective technologies, secure funding for joint
research and development and accelerate commercial opportunities. UoB is a
leading research university with several active research and development
projects related to hydrogen. In particular, UoB has identified HFI's
technology as having synergies with its Hydrogen Depleted Uranium Storage
project involving EDF UK. UoB has also identified several pilot or
demonstrator sites suitable for locating HFI's green hydrogen production
system including potential use of university sites outside the city of
Bristol. We are excited to be working with them to accelerate the development
of HFI's system, especially the Anion Exchange Membrane Water Electrolyser.
Having access to sites in the UK to develop and demonstrate the complete green
hydrogen system, from generation to utilisation, is very important to both
parties and I look forward to communicating further on this next year.
Mining sector Feasibility Study
HFI has commenced its first mining sector feasibility study (the "FS"), which
is being undertaken in collaboration with a mining major on a working mine
site in the USA. The mine site operations involve the treatment of mine
tailings and associated water. The purpose of the FS is to demonstrate the use
of HFI's system to utilise wastewater from tailings as a feedstock to generate
both clean energy and clean water for on-site mining operations. The first
stage of the FS is underway and includes data collection from HFI's prototype
wind turbine in Montana and the sharing of mine site processing samples.
MoU signed with Australian renewable energy microgrid partner
Considering Australia's ambitions to become a global hydrogen leader, the
country has been identified by HFI as a target market for the initial
deployment of its patented green hydrogen production system. A Memorandum of
Understanding has been signed with Capricorn Clean Energy Limited to
facilitate the identification of local project and partnering opportunities,
particularly those related to the Australian Renewable Energy Agency's
("ARENA") Regional Microgrids Programme ("RMP") established in August 2023 to
support the development and deployment of renewable energy microgrids. ARENA
has committed up to A$125 million in funding toward the RMP, which is split
into two streams as follows: A) Regional Australia Microgrid Pilots; and B)
First Nations Community Microgrids.
HFI's Board believes the Company's energy system is uniquely placed to
economically provide on-demand green energy through microgrids across
Australia.
Conclusion
In closing, HFI is making extraordinary strides both in prototype testing of
the wind turbine in Montana, with limited initial data corroborating wind
tunnel results, and the novel electrolyser in California, which has recorded
impressive efficiency from initial testing.
The performance improvement of the HFI wind turbine over existing ones is
potentially game changing on a world-scale and we look forward to moving
closer to a position whereby we can demonstrate this.
Neil Ritson
Non-Executive Chairman
30 January 2024
Independent auditor's report to the members of Hydrogen Future Industries Plc
Opinion
We have audited the consolidated financial statements of Hydrogen Future
Industries Plc (the 'parent company') and its subsidiaries ('the group') for
the year ended 31 July 2023 which comprise the Consolidated Statement of
Comprehensive Income, Consolidated Statement of Financial Position, Parent
Company Statement of Financial Position, Consolidated Statement of Change in
Equity, Parent Statement of Change in Equity, Consolidated Statement of
Cashflow, Parent Statement of Cashflow and notes to the consolidated financial
statements, including significant accounting policies. The financial reporting
framework that has been applied in the preparation of the consolidated
financial statements is applicable law UK adopted international accounting
standards.
In our opinion:
· the consolidated financial statements give a true and fair view of
the state of the group's and of the parent company's affairs as at 31 July
2023 and of the group's loss for the year then ended;
· the consolidated financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
· the parent company financial statements have been properly prepared
in accordance with UK adopted international accounting standards; and
· the consolidated financial statements have been prepared in
accordance with the requirements of the Companies Act 2006; and, as regards
the consolidated financial statements, Article 4 of the IAS Regulation 5.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the consolidated financial statements section of our report. We are
independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial
statements in the UK, including the FRC's Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our approach to the audit
Our scoping of the group audit was tailored to enable us to give an opinion on
the consolidated financial statements as a whole. The group was subject to a
full scope audit.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our 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) that we identified. These matters
included 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 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.
Intangible assets
Refer to Note 10 to the consolidated financial statements
The group tested the amount of intangible assets for impairment. This
impairment test is significant to our audit because the balance of intangible
assets of approximately GBP476,000 as at 31 July 2023 is material to the
consolidated financial statements. In addition, the group's impairment test
involves application of judgement and is based on assumptions and estimates.
Our audit procedures included, among others:
• Assessing the identification of the related cash
generating units;
• Assessing the arithmetical accuracy of the
value-in-use calculations;
• Assessing the reasonableness of the key
assumptions (including revenue growth, profit margins, terminal growth rates
and discount rates);
We consider that the group's impairment test for intangible assets is
supported by the available evidence.
Our application of materiality
In planning and performing our audit we applied the concept of materiality. An
item is considered material if it could reasonably be expected to change the
economic decisions of a user of the consolidated financial statements. We used
the concept of materiality to both focus our testing and to evaluate the
impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the
consolidated financial statements and parent company financial statements as a
whole to be £19,500, based on 2% of group total assets.
We used different level of materiality ('performance materiality') to
determine the extent of our testing for the audit of the consolidated
financial statements. Performance materiality is set based on the audit
materiality as adjusted for the judgements made as to the entity risk and our
evaluation of the specific risk of each audit area having regard to the
internal control environment. This is set at £14,600 for the group and the
parent.
Where considered appropriate performance materiality may be reduced to a
lower, such as, for related party transactions and Directors' remuneration.
We agreed to report to it all identified errors in excess of £2,300. Errors
below that threshold would also be reported to it if, in our opinion as
auditor, disclosure was required on qualitative grounds.
Material uncertainty related to going concern
We draw attention to note 2.2 in the consolidated financial statements, which
indicates that whilst forecast cash inflows are in advance stages of
negotiation there is no certainty regarding the quantum or timing of these
cashflows. As stated in note 2.2, indicate that a material uncertainty exists
that may cast significant doubt on the company's ability to continue as a
going concern. Our opinion is not modified in respect of this matter.
In auditing the consolidated financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the preparation of
the consolidated financial statements is appropriate. Our evaluation of the
directors' assessment of the entity's ability to continue to adopt the going
concern basis of accounting included:
• Reviewing management's consolidated financial
statements projections which covered a period of at least 12 months from the
date of approval of the consolidated financial statements.
• Challenging management on the assumptions
underlying those projections particularly on the nature and timing of forecast
cash inflows.
• Obtaining the latest management accounts post
period end to benchmark how the group is performing toward achieving the
forecast.
• Assessing the completeness and accuracy of the
matter described in the going concern disclosure within the significant
accounting policies as set out on note 2.2.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report,
other than the consolidated financial statements and our auditor's report
thereon. The directors are responsible for the other information contained
within the annual report. Our opinion on the consolidated financial statements
does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the course of the audit or
otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the
consolidated financial statements themselves. 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 in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report
and the directors' report for the financial year for which the consolidated
financial statements are prepared is consistent with the consolidated
financial statements; and
• the strategic report and the directors' report
have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept
by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the
part of the directors' remuneration report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors' remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the consolidated financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are
responsible for assessing the group's and the parent company'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 the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's 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 consolidated financial
statements.
A further description of our responsibilities for the audit of the
consolidated financial statements is available on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Lee Lederberg FCCA (Senior Statutory Auditor)
For and on behalf of
Edwards Veeder (UK) Limited
Chartered accountants & statutory auditor
4 Broadgate Broadway Business Park
Chadderton, Oldham OL9 9XA
HYDROGEN FUTURE INDUSTRIES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2023
Audited Audited
Year ended 31 July 2023
Year ended 31 July 2022
Note £'000 £'000
Continuing Operations
Revenue from continuing operations - -
Costs associated with listing - (159)
Directors fees (108) (70)
Professional fees (208) (52)
Research and development (402) -
Share based payments (13) (31)
Depreciation & amortization (44) -
Administrative expenses 4 (328) (388)
Operating loss (1,103) (700)
Finance expenses (3) -
Share of (loss) of equity accounted associates (7) -
Loss before taxation (1,113) (700)
Taxation on loss or ordinary activities 7 - -
Loss for the year from continuing operations (1,113) (700)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations - 18 -
Total comprehensive loss for the year attributable to shareholders from (1,095) (700)
continuing operations
Basic & dilutive earnings per share - pence 8 (3.14) (3.433)
The notes form an integral part of these consolidated financial statements
HYDROGEN FUTURE INDUSTRIES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 JULY 2023
Audited Audited
As at 31 July
As at 31 July
2023
2022
Note £'000 £'000
NON-CURRENT ASSETS
Property, plant and equipment 9 25 18
Intangibles assets 10 476 -
Right-of-use assets 11 72 22
Investments in associate 12 93 -
TOTAL NON-CURRENT ASSETS 666 40
CURRENT ASSETS
Cash and cash equivalents 13 262 1,383
Trade and other receivables 14 51 210
TOTAL CURRENT ASSETS 313 1,593
TOTAL ASSETS 979 1,633
NON-CURRENT LIABILITIES
Lease liabilities 11 24 5
TOTAL NON-CURRENT LIABILITIES 24 5
CURRENT LIABILITIES
Trade and other payables 16 103 82
Lease liabilities 11 43 17
TOTAL CURRENT LIABILITIES 146 99
TOTAL LIABILITIES 170 104
NET ASSETS 809 1,529
EQUITY
Share capital 17 478 298
Share premium 17 3,482 1,900
Share based payment reserve 18 44 31
Foreign exchange reserve 18 -
Retained earnings (3,213) (700)
TOTAL EQUITY 809 1,529
The notes form an integral part of these consolidated financial statements
The consolidated financial statements were approved and authorised for issue
by the board on 30 January 2024.
Neil Ritson
Non-Executive Chairman
HYDROGEN FUTURE INDUSTRIES PLC
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 JULY 2023
Audited Audited
As at 31 July
As at 31 July
2023
2022
Note £'000 £'000
NON-CURRENT ASSETS
Right-of-use assets 11 72 22
Investments in associate 12 93 -
Intercompany receivables 15 2,791 326
TOTAL NON-CURRENT ASSETS 2,956 348
CURRENT ASSETS
Cash and cash equivalents 13 248 1,294
Trade and other receivables 14 41 210
TOTAL CURRENT ASSETS 289 1,504
TOTAL ASSETS 3,245 1,852
NON-CURRENT LIABILITIES
Lease liabilities 11 24 5
TOTAL NON-CURRENT LIABILITIES 24 5
CURRENT LIABILITIES
Trade and other payables 16 77 78
Lease liabilities 11 43 17
TOTAL CURRENT LIABILITIES 120 95
TOTAL LIABILITIES 144 100
NET ASSETS 3,101 1,752
EQUITY
Share capital 17 478 298
Share premium 17 3,482 1,900
Share based payment reserve 18 44 31
Retained earnings (903) (477)
TOTAL EQUITY 3,101 1,752
The notes form an integral part of these consolidated financial statements.
The Company has taken advantage of section 408 of the Companies Act 2006 and
consequently a profit and loss account has not been presented for the Company.
The Company's loss for the financial year was approximately £426,000.
The financial statements were approved and authorised for issue by the board
on 30 January 2024.
Neil Ritson
Non-Executive Chairman
HYDROGEN FUTURE INDUSTRIES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2023
Share capital Share premium SBP reserve Foreign exchange reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Loss for period - - - - (700) (700)
Total comprehensive income for year - - - - (700) (700)
Transactions with owners in own capacity
Ordinary Shares issued in the period 298 2,007 - - - 2,305
Broker Warrants Issued - - 31 - - 31
Share Issue Costs - (107) - - - (107)
Transactions with owners in own capacity 298 1,900 31 - - 2,229
Balance at 31 July 2022 298 1,900 31 - (700) 1,529
Loss for period - - - - (1,113) (1,113)
Other comprehensive income - - - 18 - 18
Total comprehensive income for year - - - 18 (1,113) (1,095)
Transactions with owners in own capacity
Ordinary Shares issued in the period 180 1,616 - - - 1,796
Acquisition of subsidiary - HFI IP Holdings - - - - (1,400) (1,400)
Employee options issued - - 13 - - 13
Share issue costs - (34) - - - (34)
Transactions with owners in own capacity 180 1,582 13 - (1,400) 375
Balance at 31 July 2023 478 3,482 44 18 (3,213) 809
HYDROGEN FUTURE INDUSTRIES PLC
PARENT STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2023
Share capital Share premium SBP reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Loss for period - - - (477) (477)
Total comprehensive income for year - - - (477) (477)
Transactions with owners in own capacity
Ordinary Shares issued in the period 298 2,007 - - 2,305
Broker Warrants Issued - - 31 - 31
Share Issue Costs - (107) - - (107)
Transactions with owners in own capacity 298 1,900 31 - 2,229
Balance at 31 July 2022 298 1,900 31 (477) 1,752
Loss for year - - - (426) (426)
Other comprehensive income - - - - -
Total comprehensive income for year - - - (426) (426)
Transactions with owners in own capacity
Ordinary Shares issued in the year 180 1,616 - - 1,796
Employee options issued - - 13 - 13
Share issue costs - (34) - - (34)
Transactions with owners in own capacity 180 1,582 13 - 1,775
Balance at 31 July 2023 478 3,482 44 (903) 3,101
HYDROGEN FUTURE INDUSTRIES PLC
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 31 JULY 2023
Audited Audited
Year ended 31 July 2023
Year ended 31 July 2022
Note £'000 £'000
Cash flow from operating activities
Loss for the financial year (1,113) (700)
Adjustments for:
Share of loss of equity accounted associate 7
Share based payments 13 31
Depreciation on fixed assets 8 -
Depreciation on right-of-use assets 19 -
Amortization on intangible assets 16 -
Finance expenses 3 -
Foreign exchange 19 -
Cash generated from operations (1,028) (669)
Decrease / (increase) in trade and other receivables 45 (210)
Increase in trade and other payables 20 82
Cash generated from operations (963) (797)
Interest paid (3) -
Net cashflow from operating activities (966) (797)
Cash flows from investing activities
Purchase of property, plant and equipment (16) (18)
Investment in associate (50) -
Purchase of intangible assets (33) -
Net cash flow from investing activities (99) (18)
Cash flows from financing activities
Proceeds from issue of shares - 2,305
Share issue costs (34) (107)
Lease liabilities (24) -
Net cash flow from financing activities (58) 2,198
Net increase / (decrease) in cash and cash equivalents (1,123) 1,383
Cash and cash equivalents at beginning of the year 1,383 -
Foreign exchange effect on cash balance 2 -
Cash and cash equivalents at end of the year 262 1,383
The notes form an integral part of these consolidated financial statements
HYDROGEN FUTURE INDUSTRIES PLC
PARENT COMPANY STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 31 JULY 2023
Audited Audited
Year ended 31 July 2023
Year ended 31 July 2022
Note £'000 £'000
Cash flow from operating activities
Loss for the financial year (426) (477)
Adjustments for:
Share of loss of equity accounted associate 7 -
Share based payments 13 31
Depreciation on right of use assets 19 -
Finance expenses 3 -
Cash generated from operations (384) (446)
Decrease / (increase) in trade and other receivables 495 (536)
Increase in trade and other payables (1) 78
Cash generated from operations 110 (904)
Interest paid (3) -
Net cashflow from operating activities 107 (904)
Cash flows from investing activities
Investment in associate (50) -
Net cash flow from investing activities (50) -
Cash flows from financing activities
Proceeds from issue of shares - 2,305
Share issue costs (34) (107)
Loan to subsidiaries (1,045)
Lease liabilities (24) -
Net cash flow from financing activities (1,103) 2,198
Net increase in cash and cash equivalents (1,046) 1,294
Cash and cash equivalents at beginning of the year 1,294 -
Foreign exchange effect on cash balance - -
Cash and cash equivalents at end of the year 248 1,294
The notes form an integral part of these consolidated financial statements
HYDROGEN FUTURE INDUSTRIES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2023
1. General Information
The Company was incorporated on 13 July 2021 in England and Wales with
Registered Number 13508782 under the Companies Act 2006. The principal
activity of the Group is as a developer of proprietary wind-based green
hydrogen production systems. The Group is currently in the research and
development phase with the aims to look to begin producing a commercially
viable product in the short to near future.
The address of its registered office is Eccleston Yards, 25 Eccleston Place,
London SW1W 9NF, United Kingdom.
The Group commenced trading on the Aquis Stock Exchange ("AQSE") Growth Market
on 1 December 2021.
2. Accounting policies
The principal accounting policies applied in preparation of these consolidated
financial statements ("financial statements") are set out below. These
policies have been consistently applied unless otherwise stated.
2.1 Basis of preparation
The financial statements for the year ended 31 July 2023 have been prepared by
Hydrogen Future Industries Plc in accordance with UK-adopted International
Accounting Standards ('IFRS'). The financial statements have been prepared
under the historical cost convention.
The preparation of the financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements. The
areas involving a higher degree of judgement or complexity, or areas where
assumptions or estimates are significant to the financial statements, are
disclosed in Note 2.22.
The financial statements present the results for the Group and Company for the
year ended 31 July 2023.
The principal accounting policies are set out below and have, unless otherwise
stated, been applied consistently in the financial statements. The financial
statements are prepared in Pounds Sterling, which is the Group's
presentational currency, and presented to the nearest £'000.
2.2 Going concern
The financial statements have been prepared on a going concern basis, which
assumes that the Group will continue to meet its liabilities as they fall due.
The Group has cash and cash equivalents of approximately £263k (2022:
£1.383m) at 31 July 2023 as it approaches the 24 month anniversary of its
initial fundraise. The Directors have prepared detailed forecasts and analysis
that account for their best estimate of committed expenditure and expected
cash inflows and are of the view this is sufficient to fund the Group's
expenditure over the next 12 months from the date of approval of these
financial statements.
Due to the timing in relation to the confirmation of the expected cashflows
the auditors have identified a material uncertainty which may cast doubt over
the Group's ability to continue as a going concern. The financial statements
do not include any adjustments that would result if the Group were unable to
continue as a going concern.
2.3 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, and demand
deposits with banks and other financial institutions.
2.4 Equity
Share capital is determined using the nominal value of shares that have been
issued.
The Share premium account includes any premiums received on the initial
issuing of the share capital. Any transaction costs associated with the
issuing of shares are deducted from the Share premium account, net of any
related income tax benefits.
Equity-settled share-based payments are credited to a share-based payment
reserve as a component of equity until related options or warrants are
exercised or lapse.
Retained losses includes all current and prior period results as disclosed in
the income statement.
Foreign currency differences are recognised in other comprehensive income and
accumulated in the foreign exchange reserve except to the extent that the
translation difference is allocated to non-controlling interests.
2.5 Foreign currency translation
(i) Transactions and balances in each entity's financial statements
Transactions in foreign currencies are translated into the functional currency
on initial recognition using the exchange rates prevailing on the transaction
dates. Monetary assets and liabilities in foreign currencies are translated
at the exchange rates at the end of each reporting period. Gains and losses
resulting from this translation policy are recognised in profit or loss.
Non-monetary items that are measured at fair values in foreign currencies are
translated using the exchange rates at the dates when the fair values are
determined.
When a gain or loss on a non-monetary item is recognised in other
comprehensive income, any exchange component of that gain or loss is
recognised in other comprehensive income. When a gain or loss on a
non-monetary item is recognised in profit or loss, any exchange component of
that gain or loss is recognised in profit or loss.
(ii) Translation on consolidation
The results and financial position of all the Group entities that have a
functional currency different from the Company's presentation currency are
translated into the Company's presentation currency as follows:
- Assets and liabilities for each statement of financial position presented
are translated at the closing rate at the date of that statement of financial
position;
- Income and expenses are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses
are translated at the exchange rates on the transaction dates); and
- All resulting exchange differences are recognised in the foreign currency
translation reserve.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities and of borrowings are recognised in the foreign
currency translation reserve. When a foreign operation is sold, such
exchange differences are recognised in consolidated profit or loss as part of
the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
2.6 Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 July each year. Per IFRS 10, control is achieved when the Company:
· has the power over the investee;
· is exposed, or has rights, to variable returns from its involvement
with the investee; and
· has the ability to use its power to affects its returns.
The Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above. When the Company has less than a majority
of the voting rights of an investee, it considers that it has power over the
investee when the voting rights are sufficient to give it the practical
ability to direct the relevant activities of the investee unilaterally. The
Company considers all relevant facts and circumstances in assessing whether or
not the Company's voting rights in an investee are sufficient to give it
power, including:
· the size of the Company's holding of voting rights relative to the size
and dispersion of holdings of the other vote holders;
· potential voting rights held by the Company, other vote holders or
other parties;
· rights arising from other contractual arrangements; and
· any additional facts and circumstances that indicate that the Company
has, or does not have, the current ability to direct the relevant
activities at the time that decisions need to be made, including voting
patterns at previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains control over the
subsidiary and ceases when the Company loses control of the subsidiary.
Specifically, the results of subsidiaries acquired or disposed of during the
year are included in profit or loss from the date the Company gains control
until the date when the Company ceases to control the subsidiary. Where
necessary, adjustments are made to the financial statements of subsidiaries to
bring the accounting policies used into line with the Group's accounting
policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between the members of the Group are eliminated on
consolidation.
2.7 Associates
Associates are entities over which the Group has significant influence.
Significant influence is the power to participate in the financial and
operating policy decisions of an entity but is not control or joint control
over those policies. The existence and effect of potential voting rights
that are currently exercisable or convertible, including potential voting
rights held by other entities, are considered when assessing whether the Group
has significant influence. In assessing whether a potential voting right
contributes to significant influence, the holder's intention and financial
ability to exercise or convert that right is not considered.
Investment in an associate is accounted for in the consolidated financial
statements by the equity method and is initially recognised at cost.
Identifiable assets and liabilities of the associate in an acquisition are
measured at their fair values at the acquisition date. The excess of the
cost of acquisition over the Group's share of the net fair value of the
associate's identifiable assets and liabilities is recorded as goodwill. The
goodwill is included in the carrying amount of the investment and is tested
for impairment together with the investment at the end of each reporting
period when there is objective evidence that the investment is impaired. Any
excess of the Group's share of the net fair value of the identifiable assets
and liabilities over the cost of acquisition is recognised in consolidated
profit or loss.
The Group's share of an associate's post-acquisition profits or losses is
recognised in consolidated profit or loss, and its share of the
post-acquisition movements in reserves is recognised in the consolidated
reserves. The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. When the Group's share of losses in an
associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the associate. If the
associate subsequently reports profits, the Group resumes recognising its
share of those profits only after its share of the profits equals the share of
losses not recognised.
The gain or loss on the disposal of an associate that results in a loss of
significant influence represents the difference between (i) the fair value of
the consideration of the sale plus the fair value of any investment retained
in that associate and (ii) the Group's share of the net assets of that
associate plus any remaining goodwill relating to that associate and any
related accumulated foreign currency translation reserve. If an investment
in an associate becomes an investment in a joint venture, the Group continues
to apply the equity method and does not remeasure the retained interest.
Unrealised profits on transactions between the Group and its associates are
eliminated to the extent of the Group's interests in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of associates
have been changed where necessary to ensure consistency with the policies
adopted by the Group.
2.8 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated
depreciation and any accumulated impairment losses.
When the Group acquires any plant and equipment it is stated in the accounts
at its cost of acquisition less depreciation and any impairments.
Depreciation is charged to write off the costs less estimated residual value
of plant and equipment on a straight line basis over their estimated useful
lives being:
- Plant and equipment 5 - 7 years
- Computer & IT equipment 3 years
Estimated useful lives and residual values are reviewed each year and amended
as required.
2.9 Financial instruments
IFRS 9 requires an entity to address the classification, measurement and
recognition of financial assets and liabilities.
a) Classification
The Company classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either through
OCI or through profit or loss);
· those to be measured at amortised cost; and
· those to be measured subsequently at fair value through profit or
loss.
The classification depends on the Company's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded either
in profit or loss or in OCI. For investments in equity instruments that are
not held for trading, this will depend on whether the Company has made an
irrevocable election at the time of initial recognition to account for the
equity investment at fair value through other comprehensive income (FVOCI).
b) Recognition
Purchases and sales of financial assets are recognised on trade date (that
is, the date on which the Company commits to purchase or sell the asset).
Financial assets are derecognised when the rights to receive cash flows
from the financial assets have expired or have been transferred and the
Company has transferred substantially all the risks and rewards of
ownership.
c) Measurement
At initial recognition, the Company measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through profit
or loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit
or loss.
Debt instruments
Amortised cost: Assets that are held for collection of contractual cash flows,
where those cash flows represent solely payments of principal and interest,
are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate
method. Any gain or loss arising on derecognition is recognised directly in
profit or loss and presented in other gains/(losses) together with foreign
exchange gains and losses. Impairment losses are presented as a separate line
item in the statement of profit or loss.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where
the Company's management has elected to present fair value gains and losses
on equity investments in OCI, there is no subsequent reclassification of fair
value gains and losses to profit or loss following the derecognition of the
investment.
d) Impairment
The Company assesses, on a forward-looking basis, the expected credit losses
associated with any debt instruments carried at amortised cost.
The impairment methodology applied depends on whether there has been a
significant increase in credit risk. For trade receivables, the Company
applies the simplified approach permitted by IFRS 9, which requires expected
lifetime losses to be recognised from initial recognition of the receivables.
2.10 Loss allowances for expected credit losses
The Group recognises loss allowances for expected credit losses on financial
assets at amortised cost. Expected credit losses are the weighted average of
credit losses with the respective risks of a default occurring as the weights.
At the end of each reporting period, the Group measures the loss allowance for
a financial instrument at an amount equal to the expected credit losses that
result from all possible default events over the expected life of that
financial instrument ("lifetime expected credit losses") for trade
receivables, contract assets and lease receivables, or if the credit risk on
that financial instrument has increased significantly since initial
recognition.
If, at the end of the reporting period, the credit risk on a financial
instrument (other than trade receivables, contract assets and lease
receivables) has not increased significantly since initial recognition, the
Group measures the loss allowance for that financial instrument at an amount
equal to the portion of lifetime expected credit losses that represents the
expected credit losses that result from default events on that financial
instrument that are possible within 12 months after the reporting period.
The amount of expected credit losses or reversal to adjust the loss allowance
at the end of the reporting period to the required amount is recognised in
profit or loss as an impairment gain or loss.
2.11 Trade and other payables
Trade and other payables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest method
unless the effect of discounting would be immaterial, in which case they are
stated at cost.
2.12 Leases
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.
In all instances the leases were discounted using the incremental borrowing
rate.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period. Right-of-use assets
are measured at cost which comprises the following:
- The amount of the initial measurement of the lease liability;
- Any lease payments made at or before the commencement date less any
lease incentives received;
- Any initial direct costs; and
- Restoration costs.
Right-of-use assets are depreciated over the shorter of the asset's useful
life and the lease term on a straight line basis. If the Company is reasonably
certain to exercise a purchase option, the right-of-use asset is depreciated
over the underlying asset's useful life.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
Payments associated with short-term leases (term less than 12 months) and all
leases of low-value assets (generally less than £5k) are recognised on a
straight-line basis as an expense in profit or loss. The short term lease
exemption has been utilised by the Company in relation to property leases held
in the US based subsidiary HFI Energy Systems US Inc. These leases are on a
rolling month-month basis and hence there is no long term commitment entered
into.
2.13 Intangible assets
Expenditure on internally developed products is capitalised if it can be
demonstrated that:
- it is technically feasible to develop the product for it to be sold
- adequate resources are available to complete the development
- there is an intention to complete and sell the product
- the Group is able to sell the product
- sale of the product will generate future economic benefits, and -
expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods the Group expects
to benefit from selling the products developed. The amortisation expense is
included within the administrative expenses, in the consolidated statement of
comprehensive income.
Development expenditure not satisfying the above criteria and expenditure on
the research phase of internal projects are recognised in the consolidated
statement of comprehensive income as research and development costs as
incurred.
Asset Acquisition
During the year, the Group, through its subsidiary HFI Energy Systems Ltd,
acquired the remaining 49% of the share capital of HFI IP Holdings Ltd. In
assessing the acquisition, the Group applied the concentration test under
IFRS3 and determined that the acquired set of activities and assets at the
time of acquisition did not constitute a business, hence considered it to be
an asset acquisition.
Patents
During the period the Group acquired a suite of international patents related
to the development of its wind and water-based hydrogen production systems.
Externally acquired intangible assets are initially recognised at cost and
subsequently amortised on a straight-line basis over their useful economic
lives.
Amortisation is charged to write off the cost less estimated residual value of
patents on a straight line basis over their estimated useful lives which are:
- Patents 30 years
Other intangible assets are tested for impairment whenever events or changes
in circumstances indicate that the carrying amount might not be recoverable.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or group of assets
(cash-generating units). As of the end of the period none of the intangible
assets show any indicators of impairment.
2.14 Taxation
Income tax represents the sum of the current tax and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit recognised in profit or loss because it excludes
items of income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the end of the reporting period.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences,
unused tax losses or unused tax credits can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised, based on tax
rates that have been enacted or substantively enacted by the end of the
reporting period. Deferred tax is recognised in profit or loss, except when
it relates to items recognised in other comprehensive income or directly in
equity, in which case the deferred tax is also recognised in other
comprehensive income or directly in equity.
The measurement of deferred tax assets and liabilities reflects the tax
consequences that would follow from the manner in which the Group expects, at
the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
2.15 Share based payments
The Group issues equity-settled and cash-settled share-based payments to
certain employees and advisors. Equity-settled share-based payments are
measured at the fair value (excluding the effect of non market-based vesting
conditions) of the equity instruments at the date of grant. The fair value
determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the
Group's estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions.
The Group issues equity-settled share-based payments to certain directors,
employees and consultants.
Equity-settled share-based payments to directors and employees are measured at
the fair value (excluding the effect of non market-based vesting conditions)
of the equity instruments at the date of grant. The fair value determined at
the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's estimate of
shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Equity-settled share-based payments to consultants are measured at the fair
value of the services rendered or if the fair value of the services rendered
cannot be reliably measured, at the fair value of the equity instruments
granted. The fair value is measured at the date the Group receives the
services and is recognised as an expense.
2.16 Segmental analysis
Operating segments and the amounts of each segment item reported in the
financial statements are identified from the financial information provided
regularly to the Group's most senior executive management for the purpose of
allocating resources and assessing the performance of the Group's various
lines of business.
Individually material operating segments are not aggregated for financial
reporting purposes unless the segments have similar economic characteristics
and are similar in respect of the nature of products and services, the nature
of productions processes, the type or class of customers, the methods used to
distribute the products or provide the services, and the nature of the
regulatory environment. Operating segments which are not individually
material may be aggregated if they share a majority of these criteria.
2.17 Related parties
a. A related party is a person or entity that is related to the Group.
I. A person or a close member of that person's family is related to
the Group if that person:
II. has control or joint control over the Group;
III. has significant influence over the Group; or
IV. is a member of the key management personnel of the Company or of a
parent of the Company.
b. An entity is related to the Group if any of the following conditions
applies:
I. The entity and the Company are members of the same group (which
means that each parent, subsidiary and fellow subsidiary is related to the
others).
II. One entity is an associate or joint venture of the other entity (or
an associate or joint venture of a member of a group of which the other entity
is a member).
III. Both entities are joint ventures of the same third party.
IV. One entity is a joint venture of a third entity and the other entity is
an associate of the third entity.
V. The entity is a post-employment benefit plan for the benefit of
employees of either the Group or an entity related to the Group. If the
Group is itself such a plan, the sponsoring employers are also related to the
Group.
VI. The entity is controlled or jointly controlled by a person identified in
(A).
VII. A person identified in (A)(i) has significant influence over the entity
or is a member of the key management personnel of the entity (or of a parent
of the entity).
VIII. The entity, or any member of a group of which it is a
part, provides key management personnel services to the Company or to a parent
of the Company.
2.18 Impairment of assets
At the end of each reporting period, the Group reviews the carrying amounts of
its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of any impairment loss. Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset.
If the recoverable amount of an asset or cash-generating unit is estimated to
be less than its carrying amount, the carrying amount of the asset or
cash-generating unit is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as
a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset or cash-generating unit is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined (net of amortisation or
depreciation) had no impairment loss been recognised for the asset or
cash-generating unit in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
2.19 Provision and contingent liabilities
Provisions are recognised for liabilities of uncertain timing or amount when
the Group has a present legal or constructive obligation arising as a result
of a past event, it is probable that an outflow of economic benefits will be
required to settle the obligation and a reliable estimate can be made. Where
the time value of money is material, provisions are stated at the present
value of the expenditures expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be
required, or the amount cannot be estimated reliably, the obligation is
disclosed as a contingent liability, unless the probability of outflow is
remote. Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more future events are also disclosed
as contingent liabilities unless the probability of outflow is remote.
2.20 Events after reporting period
Events after the reporting period that provide additional information about
the Group's position at the end of the reporting period or those that indicate
the going concern assumption is not appropriate are adjusting events and are
reflected in the financial statements. Events after the reporting period
that are not adjusting events are disclosed in the notes to the financial
statements when material.
2.21 New standards and interpretations not yet adopted
In the current year, the group has adopted all the new and revised UK adopted
international accounting standards that are relevant to its operations and
effective for its accounting year beginning on 1 August 2022. The adoption of
these new and revised UK adopted international accounting standards did not
result in significant changes to the group's accounting policies, presentation
of the group's financial statements and amounts reported.
2.22 Critical accounting judgements and key sources of
estimation uncertainty
The preparation of the financial statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expense. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the year in which
the estimates are revised and in any future periods affected. The areas
involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are
disclosed below:
Share based payments - Note 18
The Group issues options and warrants to its employees, directors, investors
and advisors. These are valued in accordance with IFRS 2 "Share-based
payments". In calculating the related charge on issuing shares and options
the Group will use a variety of estimates and judgements in respect of inputs
used including share price volatility, risk free rate, and expected life.
Changes to these inputs may impact the related charge.
Impairment of investments and loans to subsidiaries - Note 15 & 19
The Group and the Company assess at each reporting date whether there is any
objective evidence that investments in and loans to subsidiaries are
impaired. To determine whether there is objective evidence of impairment, a
considerable amount of estimation is required in assessing the ultimate
realisation of these investments/receivables, including valuation,
creditworthiness and future cashflows. As at the year end the Directors do not
assess there to be any impairment of these amounts.
Recoverable value of intangible assets - Note 10
Costs capitalised in respect of the Group's intangible assets are required to
be assessed for impairment. Such an estimate requires the Group to exercise
judgement in respect of the indicators of impairment and also in respect of
inputs used in the models which are used to support the carrying value of the
assets. Such inputs include estimates of production profiles, commodity
prices, capital expenditure, inflation rates, and pre-tax discount rates that
reflect current market assessments of (a) the time value of money; and (b) the
risks specific to the asset for which the future cash flow estimates have not
been adjusted. The Directors concluded that there was no impairment as at 31
July 2023.
3. Segmental analysis
The Group manages its operations in two segments, being the development of
proprietary wind and water-based green hydrogen production systems primarily
in North America and corporate functions in the United Kingdom. The results of
these segments are regularly reviewed by the board as a basis for the
allocation of resources and to assess their performance.
The Group generated no revenue during the year ended 31 July 2023 (2022: £0)
United Kingdom North America Consolidated
£'000 £'000 £'000
Revenue - - -
Directors fees (108) - (108)
Salaries and wages (48) - (48)
Professional fees (207) (1) (208)
Research and development (180) (222) (402)
Share based payments (13) - (13)
Other administrative expenses (178) (75) (253)
Foreign exchange (2) (25) (27)
Depreciation & amortization (36) (8) (44)
Operating loss (772) (331) (1,103)
Finance expenses (3) - (3)
Share of (loss) of equity accounted associates (7) - (7)
Operating loss before taxation (782) (331) (1,113)
Reportable segment assets 946 33 979
Reportable segment liabilities (170) - (170)
776 33 809
4. Administrative expenses
Administrative expense for the Group are detailed below:
Audited Audited
Year ended
Year ended
31 July 2023
31 July 2022
£'000 £'000
Salaries & wages (48) (90)
Travel & business development (78) (7)
Insurance (11) (34)
Other administrative expenses (164) (242)
Foreign exchange (27) -
Exclusivity fees - (15)
(328) (388)
5. Employees
The average number of persons employed by the Group (including Directors)
during the year ended 31 July 2023 was:
No of employees 2023 No of employees 2022
Management 5 3
5 3
The aggregate payroll costs of these persons (including Directors) were as
follows:
£'000 £'000
Management 156 160
Research and development (technical staff) 180 -
336 160
6. Auditor's Remuneration
Year ended Year ended
31 July 2023 £'000 31 July 2022 £'000
In respect of the audit of the Group accounts 22 35
Other non-audit services - 20
22 55
7. Taxation
A reconciliation of the value from the statement of comprehensive income is
detailed below:
Year ended Year ended
31 July 2023 £'000 31 July 2022 £'000
Corporation tax on the results for the year - -
A reconciliation of tax charge is provided below:
Loss before taxation per the financial statements (1,113) (700)
Tax credit at the weighted average of the standard rate of corporation tax in (211) (133)
UK of 19% (31 July 2022: 19%)
Tax effect of capital items disallowed for corporation tax purposes - 44
Current year losses for which no deferred tax asset is recognised 211 89
Income tax charge for the year - -
The Company has total carried forward losses of approximately £1,580,000. The
taxed value of the unrecognised deferred tax asset is approximately £300,000
and these losses do not expire. No deferred tax assets in respect of tax
losses have not been recognised in the accounts because there is currently
insufficient evidence of the timing of suitable future taxable profits against
which they can be recovered.
On 23 September 2022, the Chancellor announced that he has cancelled the
planned corporation tax increase and rather than rising to 25 per cent from
April 2023, the rate will remain at 19 per cent for all firms, regardless of
the amount of profit made.
8. Earnings per share
The calculation of the basic and diluted earnings per share is calculated by
dividing the profit or loss for the year by the weighted average number of
ordinary shares in issue during the year.
Audited Audited
Year ended Year ended
31 July
31 July
2023
2022
Net loss for the year attributable to ordinary equity holders for continuing (1,113) (700)
operations (£'000)
Weighted average number of ordinary shares in issue 35,463,562 20,388,381
Basic and diluted earnings per share for continuing operations (pence) (3.14) (3.433)
There is no difference between the diluted loss per share and the basic loss
per share presented. Share options and warrants could potentially dilute basic
earnings per share in the future but were not included in the calculation of
diluted earnings per share as they are anti-dilutive for the year presented.
9. Fixed assets
Group Total
PP&E Computer equipment £'000 Total
£'000 £'000
Cost
Opening balance - - -
Additions in the year 3 15 18
At 31 July 2022 3 15 18
Additions in the year 15 - 15
At 31 July 2023 18 15 33
Depreciation
Opening balance - - -
Charge for the year - - -
At 31 July 2022 - - -
Charge for the year 1 7 8
At 31 July 2023 1 7 8
Net book value 31 July 2022 3 15 18
Net book value 31 July 2023 17 8 25
10. Intangible assets
Patents Total
£'000 £'000
Cost
Opening balance - -
At 31 July 2022 - -
Additions in the year 492 492
At 31 July 2023 492 492
Amortization
Opening balance - -
At 31 July 2022 - -
Charge for the year (16) (16)
At 31 July 2023 (16) (16)
Net book value 31 July 2022 - -
Net book value 31 July 2023 476 476
On 5 October 2022 the Group successfully completed the acquisition of a suite
of international patents which are relevant to the systems being developed by
the Company. The board believes the patents may have commercial applications
within both the Group's future wind based green hydrogen production systems
and the wider wind energy generation sector.
11. Leases
Company
As at As at
31 July 2023 31 July 2022
£'000
£'000
Right-of-use assets
Motor vehicles 15 22
Property 57 -
72 22
Lease liabilities
Current 43 5
Non-current 24 17
67 22
Right of use assets
A reconciliation of the carrying amount of the right-of-use asset is as
follows:
As at As at
31 July 2023 31 July 2022
£'000
£'000
Motor vehicles
Opening balance - -
Additions 22 22
Depreciation (7) -
15 22
Property
Opening balance - -
Additions 69 22
Depreciation (12) -
57 22
Lease liabilities
A reconciliation of the carrying amount of the lease liabilities is as
follows:
As at As at
31 July 2023 31 July 2022
£'000
£'000
Opening balance 22 -
Additions 69 22
Repayments (27) -
Finance charge 3 -
67 22
12. Investment in associates
The following entities have been included in the consolidated financial
statements using the equity method:
Country of incorporation Proportion of ownership interest held as at 31 July 2023
Tower Green Holdings limited(1) United Kingdom 20%
( )
(1 )On 23 January the Group acquired a 20% interest in Tower Green Holdings
Limited ("TGH") over which the Group has determined that it holds significant
influence as:
- HFI & TGH have one mutual director
- Material shareholding of 20%
Based on this the Group considers that they have the power to exercise
significant influence.
Summarised financial information (material associates):
As at 23 January
2023
£'000
Current assets 35
Net assets total 35
Group share of net assets (20%) 7
Period from investment to 31 July 2023
Revenues -
Loss from continuing operations (34)
Group share of loss (20%) (7)
Investment in TGH 100
Investors share of net assets at acquisition 7
Implied goodwill 93
Share of net loss (7)
Carrying value of investment - 31 July 2023 93
13. Cash and cash equivalents
Company Group Company Group
31 July 2023 31 July 2023 31 July 2022 31 July 2022
£'000
£'000
£'000
£'000
Cash at bank 248 262 1,294 1,383
248 262 1,294 1,383
Majority of the cash is held with Alpha FX foreign exchange trading platform
who utilise the banking facilities of Lloyds Banking Group Plc (credit
ratings: S&P's BBB+, A3, Fitch A). Daily working capital amounts are held
through the Wise online banking platform in the UK and Rocky Mountain Online
Bank in the US. These online banking platforms do not currently have credit
ratings available.
The denomination of amounts in foreign currencies is as follows:
Company Group Company Group
31 July 2023 31 July 2023 31 July 2022 31 July 2022
£'000
£'000
£'000
£'000
USD - 10 32 71
GBP 248 252 1,262 1,312
248 262 1,294 1,383
14. Trade and other receivables
Company Group Company Group
31 July 2023 31 July 2023 31 July 2022 31 July 2022
£'000
£'000
£'000
£'000
Prepayments 10 20 140 140
Lease deposit 13 13 - -
VAT receivable 18 18 70 70
41 51 210 210
15. Intercompany receivables
Company Group Company Group
31 July 2023 31 July 2023 31 July 2022 31 July 2022
£'000
£'000
£'000
£'000
Loans to subsidiaries 2,791 - 326 -
2,791 - 326 -
16. Trade and other payables
Company Group Company Group
31 July 2023 31 July 2023 31 July 2022 31 July 2022
£'000
£'000
£'000
£'000
Trade payables 48 48 36 36
Accruals 22 22 42 46
Employer obligations 7 33 - -
77 103 78 82
17. Share capital and share premium
Ordinary shares Share capital Share premium Total
£'000 £'000 £'000 £'000
Issue of ordinary shares on incorporation(1) 50,000 1 - 1
Issue of ordinary shares 5,850,000 58 - 58
Issue of ordinary shares 1,600,000 16 - 16
Issue of ordinary shares 22,300,000 223 2,007 2,230
Share issue costs - - (107) (107)
At 31 July 2022 29,800,000 298 1,900 2,198
Issue of ordinary shares (2) 3,450,000 35 311 345
Issue of ordinary shares (3) 500,000 5 45 50
Issue of ordinary shares(4) 14,000,000 140 1,260 1,400
Share issue costs - - (34) (34)
At 31 July 2023 47,750,000 478 3,482 3,959
(1) On 5 October 2022, the Company issued 3,450,000 ordinary shares of £0.01
at their nominal value of £0.01.
(2) On 16 January 2023, the Company issued 500,000 ordinary shares of £0.01
at a price of £0.1 per share.
(3) On 23 May 2023, the Company issued 14,000,000 ordinary shares of £0.01 at
a price of £0.1 per share.
There is currently an authorised share capital limit in place for the Company
which is subject to review at the next Annual General Meeting.
18. Share based payment reserves
Company Group
£'000
£'000
At 13 July 2021 - -
Broker warrants issued 6 6
Advisor warrants 25 25
At 31 July 2022 31 31
Employee options issued (1) 13 13
At 31 July 2023 44 44
(1) On 4 November 2022, the Company issued 6 million employee options to the
directors, the CEO of HFI Energy Systems Ltd (Tim Blake) and a consultant. The
options are exercisable at the price of £0.10 per ordinary share and are
exercisable, either in whole or part, for a period of 5 years from the date of
issue. All options vest immediately apart from 1.5 million options issued to
Tim Blake which have separate performance conditions.
The estimated fair values of warrants & options which fall under IFRS 2,
and the inputs used in the Black-Scholes pricing model to calculate those fair
values are as follows:
Date of grant Number of warrants Share price Exercise price Expected volatility Expected life Risk free rate Expected dividends
5 October 2022 1,625,000 £0.065 £0.12 15% 3 4.25% 0.00%
Date of grant Number of options Share price Exercise price Expected volatility Expected life Risk free rate Expected dividends
4 November 2022 6,000,000 £0.065 £0.10 15% 5 4.25% 0.00%
Warrants
As at 31 July 2023
Weighted average exercise price Number of warrants
Brought forward at 1 August 2022 5p 8,050,000
Granted in year 12p 1,625,000
Vested in year 12p 1,625,000
Outstanding at 31 July 2023 6.25p 9,675,000
Exercisable at 31 July 2023 6.25p 9,675,000
The average weighted time to expiry of the warrants is 1.62 years
Options
As at 31 July 2023
Weighted average exercise price Number of options
Brought forward at 1 August 2022 - -
Granted in year 10p 6,000,000
Vested in year 10p 4,500,000
Outstanding at 31 July 2023 10p 6,000,000
Exercisable at 31 July 2023 10p 4,500,000
The average weighted time to expiry of the options is 4.27 years
19. Investments - Subsidiaries
Name Holding Business Activity Country of Incorporation Registered Address
HFI Energy Systems Ltd 100% Research & development England & Wales Eccleston Yards, 25 Eccleston Place, London SW1W 9NF
HFI Energy Systems US Inc 100% Research & development United States of America 16 Nugget Court, Whitehall, MT 59759
HFI IP Holdings Ltd 100% IP holding company England & Wales Eccleston Yards, 25 Eccleston Place, London SW1W 9NF
HFI Development Ltd 100% Research & development England & Wales Eccleston Yards, 25 Eccleston Place, London SW1W 9NF
HFI Consulting Ltd 100% Consulting England & Wales Eccleston Yards, 25 Eccleston Place, London SW1W 9NF
20. Financial Instruments and Risk Management
Principal financial instruments
Capital management
The Group manages its capital to ensure that entities in the Group will be
able to continue as a going concern while maximising the return to
stakeholders. The overall strategy of the Company and the Group is to minimise
costs and liquidity risk while simultaneously executing its business strategy.
The capital structure of the Group consists of equity attributable to equity
holders of the parent, comprising issued share capital, share premium, foreign
exchange reserves and retained earnings as disclosed in the Consolidated
Statement of Changes of Equity.
The Group is exposed to a number of risks through its normal operations, the
most significant of which are credit, foreign exchange and liquidity risks.
The management of these risks is vested to the Board of Directors. The
sensitivity has been prepared assuming the liability outstanding was
outstanding for the whole year. In all cases presented, a negative number in
profit and loss represents an increase in expense/decrease in income.
General objectives and policies
As alluded to in the Directors report the overall objective of the Board is to
set policies that seek to reduce risk as far as practical without unduly
affecting the Group's competitiveness and flexibility. Further details
regarding these policies are detailed below.
Principal financial instruments
The principal financial instruments used by the Group from which the financial
risk arises are as follows:
Policy on financial risk management
The Group's principal financial instruments comprise cash and cash
equivalents, other receivables, trade and other payables. The Group's
accounting policies and methods adopted, including the criteria for
recognition, the basis on which income and expenses are recognised in respect
of each class of financial asset, financial liability and equity instrument
are set out in note 2 - "Accounting Policies".
The Group does not use financial instruments for speculative purposes. The
carrying value of all financial assets and liabilities approximates to their
fair value.
Derivatives, financial instruments and risk management
The Group does not use derivative instruments or other financial instruments
to manage its exposure to fluctuations in foreign currency exchange rates,
interest rates and commodity prices.
Foreign currency risk
The Group operates in a global market with costs arising in multiple
currencies and is exposed to foreign currency risk arising from commercial
transactions, translation of assets and liabilities and net investment in
foreign subsidiaries. Exposure to commercial transactions arise from purchases
by operating companies in currencies other than the Group's functional
currency. Currency exposures are reviewed regularly.
The Group has a limited level of exposure to foreign exchange risk through its
foreign currency denominated cash balances:
31 Jul 2023
$USD $'000
Cash and cash equivalents 10
10
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of only dealing with creditworthy counterparties. The
Group's exposure and the credit ratings of its counterparties are monitored by
the Board of Directors to ensure that the aggregate value of transactions is
spread amongst approved counterparties.
The Group applies IFRS 9 to measure expected credit losses for receivables,
these are regularly monitored and assessed. Receivables are subject to an
expected credit loss provision when it is probable that amounts outstanding
are not recoverable as set out in the accounting policy.
The Group's principal financial assets are cash and cash equivalents. Cash
equivalents include amounts held on deposit with financial institutions.
The credit risk on liquid funds held in current accounts and available on
demand is limited because the Group's counterparties are banks with high
credit-ratings assigned by international credit-rating agencies.
The Group has zero trade receivables and therefore there is no risk relating
to a 3(rd) party being unable to service its obligations.
No financial assets have indicators of impairment.
Liquidity risk
During the year ended 31 July 2023, the Group was financed by cash raised
through equity funding. Funds raised surplus to immediate requirements are
held as cash deposits in Sterling except for minor working capital
requirements held in subsidiary bank accounts.
In managing liquidity risk, the main objective of the Group is to ensure that
it has the ability to pay all of its liabilities as they fall due. The Group
monitors its levels of working capital to ensure that it can meet its
liabilities as they fall due.
The table below shows the undiscounted cash flows on the Group's financial
liabilities as at 31 July 2023 on the basis of their earliest possible
contractual maturity.
Total Within 2 months Within 2-6 months
£'000 £'000 £'000
At 31 July 2023
Trade payables 48 48 -
Employer obligations 33 33 -
81 81 -
21. Financial assets and liabilities
Financial assets at amortised cost Financial liabilities at amortised cost Total
£'000 £'000 £'000
At 31 July 2023
Trade and other receivables* 31 - 31
Cash and cash equivalents 262 - 262
Trade and other payables - (103) (103)
393 (103) 190
Financial assets at amortised cost Financial liabilities at amortised cost Total
£'000 £'000 £'000
At 31 July 2022
Trade and other receivables* 70 - 70
Cash and cash equivalents 1,383 - 1,383
Trade and other payables - (82) (82)
1,453 (82) 1,371
*Trade and other receivables exclude prepayments
22. Related Party Transactions
Directors Remuneration
See the Directors Remuneration Report prior to the financial statements for
details on Director remuneration.
Related party - Consultants
Dr Nick Blake provides consulting services to the Company's US based
subsidiary "HFI Energy Systems US Inc". Dr Nick Blake is the brother of the
CEO of HFI Energy Systems Ltd and hence classified as a related party as
defined in Note 2.17.a. During the year Dr Nick Blake received consulting fees
amounting to USD$91,114 for consulting related specifically to the development
of electrolyser prototype development.
Service Agreements
Orana Corporate LLP, of which Director Daniel Maling is a partner, has a
service agreement with the Company for the provision of accounting and company
secretarial services. In the year, Orana Corporate LLP accrued £61,033 for
these services from the Company of which £6,120 was owed at year end.
23. Ultimate Controlling Party
As at 31 July 2023, Timothy Blake is a person with significant control as he
controls ownership of between 25-50% of the share capital of the Company.
24. Capital Commitments
The Company does not have any other capital or contingent liabilities at year
end.
25. Events Subsequent to period end
Directorate change - 8 September 2023
On 8 September 2023 the Company appointed Mr Neil Ritson as Non-executive
Chairman with immediate effect replacing David Ormerod.
Issue of equity - 6 October 2023
On 6 October 2023 the Company issued ,750,000 new ordinary shares at a price
of 10 pence per new ordinary share and warrants over 875,000 new ordinary
shares with an exercise price of 12 pence per new ordinary share (which can
be exercised immediately and will expire three years from the date of issue)
as the second tranche of consideration payable to the vendors of various
patents acquired by the Company as announced on 5 October 2022.
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