The company, which raised GBP29.4m through placing of ordinary shares with institutional investors in May, made a loss of GBP1.9 million for the year to the end of April, up from GBP1.2 million in the previous year and in line with budget plans which included increased capital expenditure on test equipment and expansion of its Sheffield laboratories.

Chairman, Stephen Massey, said: "Over the past two years, we have built a solid foundation as a platform to underpin the route to commercialisation.

"We remain on track to achieve the first of our new technical milestones by October, 2006, and we will continue to progress with development plans within our target markets. We also hope to announce further results on our hydrogen technologies and remain focused with increasing emphasis on the commercialisation of ITM's technology.

"I am confident that ITM is in a strong position to achieve its business objectives through strong science, people and finances." ITM specialises in developing hi-tech electrolysers, which can produce hydrogen and oxygen by passing an electric current through water and highly flexible fuel cells, powered by the hydrogen produced by the electrolysers, which generate electricity.

"During the past two years, ITM has devoted considerable effort to its electrolyser programme, because it has become apparent to the company that the absence of a low cost, durable electrolyser is a major obstacle to the implementation of a sustainable energy system," said Mr Massey.

"Electrolysers could simultaneously address the availability and cost of hydrogen fuel as well as the infrastructure that will enable the adoption of fuel cells." Earlier this year ITM built a demonstration facility at its Sheffield laboratories to convert electricity produced from renewable sources into 'carbon free' hydrogen, which is stored and reconverted into low voltage electricity capable of powering electronic equipment, such as a DVD player; mains voltage electricity using a generator, modified by ITM to run on hydrogen; heat from a commercially available gas hob and refrigeration using a commercially available gas fridge, again modified by ITM.