TIDMAFC
RNS Number : 3761A
AFC Energy Plc
24 March 2017
24 March 2017
Embargoed until 07:00
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via a Regulatory Information
Service ("RIS"), this inside information is now considered to be in
the public domain.
AFC Energy PLC
("AFC Energy" or "the Company")
Final Results and Notice of AGM
AFC Energy (AIM: AFC), the industrial fuel cell power company,
is pleased to announce its final results for the year ended 31
October 2016.
FY16 Highlights
-- Commissioning of AFC Energy's first industrial scale 240kW
fuel cell system and sale of power at Stade, Germany
-- Entry into Strategic Technology Collaboration with Industrie
De Nora S.p.A. - one of the largest manufacturers of electrolysers,
electrodes, coatings and electrochemical solutions
-- Material improvement in fuel cell longevity and availability,
and reduction of stack cost, through Generation 2 fuel cell
development programme
-- Commencement of commercial fuel cell deployment and detailed
discussions with several international power utilities, industrial
groups and Government bodies
-- Strategic Engineering Partnership Agreement with plantIng
GmbH in support of fuel cell Balance of Plant engineering and
design
-- Raised GBP3.6 million through placing and offer for subscription in January 2016
-- Appointment of Cantor Fitzgerald Europe as Nominated Adviser and Joint Broker
-- Operating loss of GBP6.3 million (2015: GBP8.6 million)
-- Cash reserves at 31 October 2016 of GBP2.9 million (31 October 2015: GBP1.8 million)
Post Period Highlights
-- Successful completion of Generation 2 fuel cell system
-- Strategic Partnership with Peel Environmental to assess the
techno-economic feasibility for fuel cell deployment in the UK's
Northern Powerhouse
-- Raised GBP8.1 million before expenses through a placing,
subscription and open offer to shareholders:
-- Schroders plc largest investor in the successful GBP6.0
million share placement and subscription
-- GBP2.1 million open offer to shareholders over-subscribed by 56.9%
-- Appointment of Chief Operating Officer
Adam Bond, CEO of AFC Energy, commented: "2016 was an important
year of consolidation for the Company with material improvements
not only in the fuel cell technology platform, but also in the
dialogue with several key commercial and strategic partners for AFC
Energy. The corporate value gained from AFC Energy's collaboration
with De Nora, and the commencement of commercial project
developments with Peel Environmental, cannot be undervalued and
positions the Company well for an accelerated programme of
activities in 2017."
Notice of AGM
AFC Energy also today gives notice that its Annual General
Meeting will be held at Chelsea Football Club, Stamford Bridge,
Fulham, London SW6 1HS at 11am on Tuesday 25 April 2017.
The Annual Report and Accounts and Notice of AGM will be sent to
shareholders in late March and will be available for download from
the Company's website, www.afcenergy.com, in accordance with AIM
Rule 20.
For further information, please contact:
AFC Energy plc
Adam Bond (Chief Executive Officer) +44 (0) 20 3697 1209
Cantor Fitzgerald Europe - Nominated Adviser and Joint Broker
Andrew Craig
Richard Salmond +44 (0) 20 7894 7000
M C Peat & Co LLP - Joint Broker
Charlie Peat +44 (0) 20 7104 2334
Lionsgate Communications - Public Relations
Jonathan Charles +44 (0) 20 3697 1209
About AFC Energy
AFC Energy plc has developed and successfully demonstrated an
alkaline fuel cell system, which converts hydrogen into "clean"
electricity. AFC Energy's key project POWER-UP demonstrated the
world's largest operational alkaline fuel cell system at Air
Products' industrial gas plant in Stade, Germany in January 2016.
The Company is now looking to build upon an already established
pipeline of commercial opportunities and drive the findings from
the development phase of the technology into a technically
optimised and commercially relevant fuel cell system. For further
information, please visit our website: www.afcenergy.com
Chairman's Statement - Staying the Course
After good technical and strategic progress in 2016, AFC Energy
is poised to move into commercialisation in 2017 with a
strengthened management team and a now strengthened balance
sheet.
Overview
In November 2016, the Paris Agreement on Climate Change came
into force. For the first time, legally binding limits to global
temperature rises have been agreed by nearly 200 countries. While
the carbon emission curbs proposed are not themselves legally
binding, the mechanism for periodically tightening those pledges
is.
Governments including the US, China, India, and from the EU, are
now collectively obliged to constrain global warming to no more
than 2(o) C above pre-industrial levels (1.4(o) C above present
levels).
While the journey to implement the required carbon emission
reductions will inevitably face challenges along the way, not least
given the recent pronouncements from the new US administration, it
is evident that the wider international community remains committed
to a lower carbon economy.
There is also support by global business leaders - one prime
example being the recent announcement of the establishment of the
Hydrogen Council, at the Davos 2017 World Economic Forum. Its
members - including Royal Dutch Shell, Alstom, Air Liquide, Daimler
and Toyota, among others - plan to invest EUR10 billion in
hydrogen-related products within the next five years.
Hydrogen is expected to play a key role in supporting this
transition to a low-carbon economy, especially within the
transport, energy and petrochemical industry sectors, and the
associated value chain.
The Board therefore continues to believe that stationary fuel
cells have an important role to play globally and that AFC Energy
has the technology and team to take a central position within this
low-carbon economy, for both industrial scale and distributed
generation applications.
Key Developments
The successful generation, in January 2016, of gross electrical
output in excess of 200kW at the Company's first industrial scale
fuel cell power plant in Germany, was a strong start to the
year.
To maintain momentum, in March 2016, the Board issued the 2016
Strategic Milestones. Underpinning these milestones was the
necessity to define, and share with our stakeholders, the
fundamental metrics which the Company is focusing on to enable the
commercialisation of the AFC Energy fuel cell system: Power,
Longevity, Availability, Cost, and Efficiency. Both the management
team and the Board remain focused on finalising the development of
a readily deployable commercial product which is attractive to our
target customer base.
Among other 2016 achievements, AFC Energy delivered the
Generation 2 ("Gen2") fuel cell system which operated for more than
1,000 continuous hours (at which point the test was concluded),
completed the basic design and engineering of the Company's new
10kW fuel cell system, and initiated and advanced dialogue for
several commercial fuel cell opportunities. This was complemented
by our success in establishing two new key strategic partnerships
with Industrie De Nora S.p.A. and plantIng GmbH - both providing
strong technical expertise and sector experience to support AFC
Energy deliver its commercialisation objectives.
The journey continues into 2017 with the Company now
prioritising its activities to enable the commercial deployment of
its fuel cell systems. The successful completion of the GBP8.1
million equity fundraise in March 2017 provides the Company with a
strong cash position to achieve this target.
While there may be challenges along the way, the Board and I
remain confident that AFC Energy has set the appropriate course to
achieve commercialisation. Our experienced leadership and
strengthened management team should enable us to continue to make
sound progress with our partners.
I would like to thank all the staff, partners and contractors
working with AFC Energy, in addition to my fellow Board members and
shareholders, for their continued support.
Operational Review
2016 was an important year of consolidation for the Company with
material improvements not only in the fuel cell technology
platform, but also in the dialogue with several key commercial and
strategic partners for AFC Energy. The corporate value gained from
AFC Energy's collaboration with De Nora, and the commencement of
commercial project developments with Peel Environmental, cannot be
undervalued and positions the Company well for an accelerated
programme of activities in 2017.
In December 2014, the Board of AFC Energy made a conscious
decision to switch its focus away from the laboratory to the
acceleration of R&D and ultimately the commercialisation of an
industrial-scale fuel cell system. In taking this decision, I
outlined a three-year window of opportunity which would see AFC
Energy progress from a company that had managed to deliver a "9
cell stack" (equivalent to less than 1kW of gross output) through
to a technology platform capable of running multi-megawatt projects
across several international jurisdictions.
It is safe to say 2015 saw significant progress not only in
upscaling the stack from 9 cells to 101 cells in a few months, but
also in delivering the world's largest alkaline fuel cell
installation in Stade, Germany with a nameplate capacity of 240kW.
The progress was tangible and outcomes were transparent insofar as
for the first time in AFC Energy's history, the Company had a
reference plant capable of demonstrating the operating capability
of its proprietary fuel cell technology. Whilst many investors saw
this as the end of the commercialisation roadmap, the process of
accelerating the installation in Stade delivered for AFC Energy
many findings which could only be identified once a fully
industrial system was up and running, and indeed, with these
findings came the need for further refinement of the system. To
this end, 2016 became the year of consolidation.
Having now done the hard yards and exhibited the technical
discipline to bring AFC Energy's fuel cell technology back to where
we believe it needs to be in order to drive commercial partnering
opportunities, I believe 2017 to be the year in which we start to
see the fruits of our collective labour as we close in on the final
phase of the three-year window.
Operating Review
Technology
Having spent much of my career in the energy sector, the
expectations of a power plant developer and owner on a generation
technology provider always come back to their ability to
demonstrate five key metrics which at AFC Energy have become known
as the "metrics of commercialisation". These metrics, being, Power,
Longevity, Availability, Cost and Efficiency, have provided AFC
Energy with its internal key performance indicators of success
throughout the year.
The commissioning and demonstration of AFC Energy's 240kW system
in Stade in January 2016 went a significant way to demonstrate the
capability of the Company's proprietary fuel cell technology
package. In particular, it demonstrated the ability of our system
to deliver power from our fuel cell at or near nameplate on a
cartridge by cartridge basis, providing empirical evidence for the
first time of the technology's longevity, availability, cost and
efficiency. In all cases, the Stade reference plant gave clear
guidance as to those areas AFC Energy needed to address before its
technology could be classed as "commercial".
Throughout 2016, AFC Energy embarked on a series of work
packages, colloquially named "Gen2" which sought to address a
number of the issues associated with our findings identified at
Stade. The endeavours made on these work packages included a more
focused discipline by which the technology development and rigorous
assessment of these findings became solutions. To the credit of AFC
Energy's team, the culmination of these work packages came in the
latter quarter of the year when two of AFC Energy's stacks,
operating at Stade and at the Company's facilities in Surrey,
delivered in excess of 1,000 hours of continuous operation at very
high levels of availability over this period. This compared with a
few tens of hours at Stade upon initial commissioning in January
2016, ahead of eventually meeting our milestones.
In addition to this achievement of longevity and availability
was AFC Energy's demonstration that its technology could accept,
without loss, hydrogen sourced at much lower qualities than had
been tested previously. The lower grade hydrogen being used in
these Gen2 trials was akin to that found at industrial gas plants
and capable of being stripped direct from, for example, a
chlor-alkali plant - one of AFC Energy's key target markets for
fuel cell deployment. This outcome alone had an enormous impact not
only on the size of market AFC Energy would now address, but also
on the economics of each project which might otherwise have
required extensive investment in hydrogen clean-up before being
capable of acceptance by AFC Energy's fuel cell.
The Gen2 design, not only of the fuel cell stack and electrodes,
but also the balance of plant, significantly built on the system
employed at AFC Energy's industrial test facility at Stade,
incorporating design changes to extend the operating life of the
fuel cell stack, while increasing stack availability, and reducing
stack cost.
In parallel to this work, we identified the significant value
that could be extracted from partnering with one of the world's
leading experts in the field of electro-chemistry, De Nora,
particularly in learning from their own experiences in the
successful provision of long life alkaline systems to the
electrolysis and chlor-alkali markets over many decades. To this
end, following months of technical due diligence and discussions,
the parties entered a Joint Development Agreement ("JDA") in August
2016 which ran in parallel to the Gen2 development programme.
We have been extremely pleased with many of the outcomes from
the JDA which are now giving renewed confidence to the delivery of
a fuel cell cartridge capable of running for at least twelve
months, and indeed, exceeding twelve months in due course. The
collaboration between our two companies is progressing very well
and we are delighted with the positive working relationship that
has formed between our organisations over a relatively short time.
We expect further announcements throughout 2017 regarding the
success of this relationship and the tangible benefits we are
starting to see from this strategic collaboration.
Additionally, through collaboration with De Nora, there is an
opportunity for AFC Energy to better address the chlor-alkali
sector, a significant producer of vented hydrogen, for which De
Nora is a strong part of the supply chain. I believe this
collaboration will deliver a technology platform that enhances the
commercialisation timeline and our future success in the alkaline
fuel cell space.
When put together, the advances achieved by AFC Energy as part
of the Gen2 programme, with the outcomes of the JDA collaboration
with De Nora, give me increasing confidence that we are nearing a
point when the AFC Energy technology platform will be in a position
to positively confirm its ability to meet the five metrics of
commercialisation and therefore, position the Company for project
collaboration and commercial deployment during the course of the
next twelve months.
Market Opportunities
At the recent World Economic Forum in Davos, the 13-member
Hydrogen Council announced its establishment, calling on
Governments to support the development of infrastructure for a
hydrogen "ecosystem". Given representation from leading global
multinationals including Royal Dutch Shell, Alstom, Air Liquide,
Daimler and Toyota, this illustrates the significant resources
being devoted to the foundations of a global hydrogen economy. AFC
Energy will centre itself firmly within that international
"ecosystem", initially across several targeted regions/countries,
to support the commercialisation of our alkaline fuel cell systems,
for industrial scale, distributed and related applications.
Addressable market opportunities identified by the Company
include large-scale stationary industrial power plants, integration
with industrial and chemical plants with surplus hydrogen, and
off-grid decentralised power generation. To this end, our business
model remains intact and robust in pushing forward with new project
collaboration opportunities.
The past twelve months have seen an aggressive push by the
Company into key target markets and industries within those
markets. As a result of this investment, we have positioned AFC
Energy well to now begin to capitalise on these opportunities,
particularly as the robustness of the technology platform improves
and we are able to extract real and empirical data from the
operating cartridges that supports the metrics of commercialisation
to our partners. It is fair to say that whilst expectations were
set through the 2016 Milestones that commercial agreements would be
reached within that year, the status of the technology at that time
provided a challenging platform in which to conclude these
transactions. However, each of the partners we have been in
dialogue over this time remains open and we are hopeful that 2017
will give rise to an improved platform from which to progress
several project deployment opportunities.
Whilst our target markets for the most part have remained
unchanged, with focus on the Middle East, and North East Asia
(Korea and Japan), we have also seen renewed interest from Europe,
principally in the UK and Germany.
It remains the building block of AFC Energy's commercialisation
model to stay focussed on delivering a viable fuel cell system
through adoption of our existing core fuel cell technology
platform. Whilst a well-known pitfall of clean tech companies has
been to diversify offerings too early and divert focus on what
might otherwise be core factors in the development roadmap, we have
identified a number of deployment opportunities that, when
integrated with other technologies, provide real and market-based
solutions to existing market-based problems.
Key within this are two new models for AFC Energy's fuel cell
deployment which we believe could generate new growth markets for
our technology platform. Firstly, in recognition of the growing
need for energy storage solutions and the role of batteries within
that mix, I have commissioned AFC Energy to develop a "Hydrogen
Battery" which, when integrated with curtailed renewable energy
sources, electrolysis and hydrogen buffers, provides an efficient,
affordable and robust alternative to "conventional" battery
technologies. This integration does not change the form or make-up
of AFC Energy's fuel cell technology, but provides a key conversion
technology solution that provides a bridge between intermittent
renewable power and flexible power demand profiling as is exhibited
in any modern-day power market.
AFC Energy is also looking to properly integrate its fuel cell
technology platform with tertiary water treatment and again,
electrolysis, as a basis for remote water treatment solutions to
reduce the cost of offsite wastewater transportation and subsequent
treatment for many extractive industries, primarily in oil and gas.
This is an early phase development but again, utilising AFC
Energy's existing fuel cell technology platform and architecture to
integrate with other technologies to provide a market-based
solution to an ever-increasing problem of contaminated water
treatment and disposal.
Post Year-End Developments
AFC Energy's objective is to be a world-class energy company
that leverages the deployment of low cost, high performance
alkaline fuel cell technology to target global industrial scale
opportunities.
In November 2016, we entered into an important agreement with
UK-based Peel Environmental ("Peel"), to assess a substantive fuel
cell development opportunity at Peel's Protos Industrial Park
located in Chester, UK. This site provides several potential
industrial hydrogen sources, some of which are currently venting
hydrogen, which in turn, opens the door to scalable fuel cell
opportunities.
As owner of the Protos site, Peel, together with its regional
contacts and permitting and consenting capability, is an ideal
partner for AFC Energy to collaborate in the UK's "Northern
Powerhouse". This project has the potential, following commencement
at the 1MW scale, to scale up to an estimated 35MW to 50MW of
installed capacity. AFC Energy has already, in conjunction with
Peel, commenced dialogue with stakeholders of such potential
projects and for the necessary study phase work. With these steps
underway we will provide an update later in 2017.
More recently, in March 2017, we announced the successful
completion of an GBP8.1 million fundraise by way of a placement,
subscription and shareholder offer, which heralded the arrival of
new financial institutions on the share register. In addition, we
considered it important to provide our existing shareholders with
an opportunity to participate, and this was rewarded with a full
take up under the open offer. The fundraise will assist the Company
to fulfil its strategy to deliver commercial contracts by 2018.
Funded Projects: Project POWER-UP and ALKAMMONIA
AFC Energy continues to pursue the requirements of the POWER-UP
and ALKAMMONIA EU-funded programmes. Much of the work required to
deliver POWER-UP was undertaken during the course of 2015 with
further work throughout 2016 contributing to the overall objectives
of the POWER-UP programme and its key stakeholders. AFC Energy
continues to hold dialogue with the Fuel Cell and Hydrogen Joint
Undertaking ("FCH JU") with regards the programme and very much
appreciates for the support the FCH JU have provided the Company in
delivering this significant project. The project is due to come to
an end on 30 June 2017 and we expect to have delivered the vast
majority of outcomes originally agreed with the EU when originally
awarded this grant back in 2013.
In addition to POWER-UP, and despite a delay as a consequence of
one of our key projects partners entering into administration back
in 2014, the ALKAMMONIA project continues with the bulk of work
required for AFC Energy's delivery of a small-scale system
completed (as announced during the course of 2016). We are now
awaiting delivery of the pilot scale ammonia cracker from a project
partner in the first half of 2017. We look forward to updating the
market on this project over the coming months.
Financial Overview
In 2016, AFC Energy's EU grant and other income was GBP1.0
million (2015: GBP2.3 million). The Company continued to be engaged
during the year, and at year-end, in three EU-funded projects,
ALKAMMONIA, LASER-CELL and POWER-UP. Overall activity on these
EU-funded projects was lower than in the previous year, in
particular due to the high level of activity associated with the
POWER-UP project in the previous year, resulting in lower
expenditure through cost of sales.
Overall expenditure on research and development qualifying for
R&D tax credits was GBP2.9 million (2015: GBP3.5 million),
demonstrating the continued high-level of commitment to develop the
Company's fuel cell system.
An operating loss to 31 October 2016 of GBP6.3 million (2015:
GBP8.6 million) has been recorded. Cash balances at 31 October
2016, excluding restricted cash, were GBP2.9 million (2015: GBP1.8
million). As mentioned in "Post year-end developments" above,
subsequent to the year-end in March 2017, the Company successfully
raised GBP8.1 million before expenses through a placement,
subscription and shareholder open offer.
Outlook
In December 2014, AFC Energy's commercialisation strategy was
updated to deliver technical and commercial progression over a
three-year window. In 2015, the primary focus was on building and
successfully commissioning the world's largest alkaline fuel cell
power plant. In 2016, our focus progressed to the delivery of a
second generation fuel cell system and initiation of a commercial
pipeline. In 2017, that journey continues, with the opportunity for
the commercial deployment of our fuel cell systems.
AFC Energy's objective is to be a world class energy company
that leverages the deployment of low cost, high performance
alkaline fuel cell technology to target global industrial scale,
distributed generation and other related opportunities. Stationary
fuel cell applications represent the largest sub-sector in a
hydrogen economy that is rapidly building global momentum.
In 2017, as we further evaluate our project opportunities, our
primary focus remains the deployment of our fuel cell systems in
commercial opportunities. As we develop this commercial pipeline,
our stakeholders will witness renewed emphasis on system and
cartridge cost reductions to ensure our technology can operate in
an increasingly competitive and efficient manner. To achieve this,
we continue to review our supply chain and the scope for recycling
our fuel cells, as well as opportunities to improve the design of
key components and system engineering.
2017 will also see further focus on delivering the Company's
commitments with its key partners, including those under the JDA
with De Nora where significant advancements in the fuel cell system
continue to be made. Our achievements to date optimally position
AFC Energy for the delivery of commercial transactions and in turn
support collaboration with our partners, for the international
deployment of our fuel cell systems.
I would like to thank all the staff, partners and contractors
working with AFC Energy, together with the EU's FCH JU, and the
Board, for their continued support.
Managing our Risks
Effective risk management underpins the delivery of our
objectives. It is essential to protect our reputation and generate
sustainable shareholder value. We aim to identify key risks at an
early stage and develop actions to eliminate them or mitigate their
impact and likelihood to an acceptable level.
Our approach to risk
There are a number of risks and uncertainties that could
adversely impact the achievement of the Company's strategy. The
Board of Directors has identified and discussed the risks that are
considered to have the highest severity and likelihood, along with
the mitigations the Company adopts to either avoid the risk
occurring or manage the impact.
Our risk management process
The Executive Directors are responsible for managing and
mitigating the risks to the Company. The Audit Committee reviews
the processes and controls for ensuring key risks are identified
and managed appropriately. The Committee is responsible for
monitoring the quality of internal controls and for ensuring that
the financial performance of the Company is properly monitored,
controlled, and reported. The AIM Rules Compliance Committee is
responsible for, among other things, monitoring the quality of
internal procedures, resources and controls to enable compliance by
the Company with the AIM Rules and the AIM Rules for Nominated
Advisers.
Risk management processes have been embedded at both Company and
project levels, and form an integral day-to-day business activity.
The processes support management and project teams to identify and
understand the risks they face in delivering Company objectives and
to develop mitigations to manage those risks.
Our Principal Risks
Risk Mitigation
---------------------------------------------------------- ----------------------------------------------------------
1 Health and Safety Robust health and safety management, and continuous
The risk of health and safety incidents or breaches. improvement and reinforcement of a safety-first
culture in all work place environments, is paramount for
the Company and enforced at all levels.
Adherence to codes and standards surrounding health and
safety provides a transparent framework
to minimise the risk of incidents, and ensures the
integrity of AFC Energy's health and safety
remains intact for the sake of our employees, partners,
contractors and shareholders.
---------------------------------------------------------- ----------------------------------------------------------
2 Technology The Company has implemented a robust control of
The risk is that we will not be able to successfully technological progress against a budgeted
develop and apply the Company's alkaline plan, adopting principles of "technology readiness
fuel cell technology to potential products at the right levels".
cost or performance. External partners have also been identified and where
The risk that technology is successfully developed but relevant, engaged to support the development
slower than anticipated. plan with transparent KPIs and road maps to develop a
The risk that technical failure at product trials could product that meets commercial product
affect ability to provide a product metrics, relating to power, longevity, availability, cost
to customers. and efficiency.
---------------------------------------------------------- ----------------------------------------------------------
3 Competition and market opportunity The Company is targeting different regional markets and
The risk that the advantages of our technology are eroded we are broadening the application
by competitors and this impacts of our product in order to minimise the risk of failure
the Company's future profitability and growth in a single market or product.
opportunities. We continuously monitor market developments, and
competitor activity.
---------------------------------------------------------- ----------------------------------------------------------
4 Intellectual Property The Company benefits from external advice provided by
The Company's competitive advantage is at risk from a qualified patent attorneys. The integrity
loss or breach of its intellectual property of the Company's IP management and the manner in which
rights. all contractual negotiations with third
parties takes place to ensure IP protection and
compliance are of critical importance to maintaining
shareholder value. IP registers are reviewed regularly
both in terms of existing patents,
and also in terms of future and unregistered protection.
---------------------------------------------------------- ----------------------------------------------------------
5 Operational The strategy for transition from technology development
There is a risk that the Company has insufficient to commercial deployment focuses on
operational capability and capacity to deliver long-term partnerships and collaboration with industry
project contracts in compliance with contractual leading companies. Our partners and
commitments. specialist external advisers are identified and developed
to complement AFC Energy's project
execution capability, both in terms of understanding
local regulatory environments, through
to construction, funding, operational and logistical
support. This strategy will continue
to be employed over the short to medium term by the
Company.
---------------------------------------------------------- ----------------------------------------------------------
6 Design and quality As the Company progresses towards product
The risk of design and quality issues with our alkaline commercialisation, design defects and poor quality
fuel cell technology. management, within the manufacturing processes, could
have a direct impact on the Company's
market reputation, with consequential loss of value. The
Company adopts a high standard of
manufacturing process and quality control to mitigate to
a large extent the risk of product
quality issues and failure.
---------------------------------------------------------- ----------------------------------------------------------
7 Access to finance The Company adopts a budgeted technology development
The risk the Company has insufficient capital to fund plan, aligned to pre-defined milestones,
technology and early project development supported by prudent budgetary controls that can be
- this may require additional equity funding to achieve measured and monitored to provide a robust
commercialisation. means of mitigating risk of insufficient working capital.
The Company is targeting meeting its financing needs from
a mix of grant funding, tax credits
and equity funding, which may be sought from
institutional, retail or strategic sources. Once
it reaches project deployment, additional sources of debt
funding, such as project finance
will also be considered.
---------------------------------------------------------- ----------------------------------------------------------
8 Regulatory and compliance The Company is publicly listed on the AIM market, which
The risk that the Company or its staff breach applicable results in significant disclosure
regulations. and reporting obligations to the regulator, investors and
other stakeholders. The Board and
management, in consultation with its Nomad and legal
advisers seek to ensure that applicable
legislation is complied with. Further, the AIM Rules
Compliance Committee actively supervises
this area to ensure compliance.
---------------------------------------------------------- ----------------------------------------------------------
9 Key personnel Key technical staff possess significant know-how
The risk that key technical personnel who possess regarding the ongoing development of the
critical design know-how, depart the Company. Company's technology. Loss of these staff members may
adversely affect the ability of the
Company to progress its research and development in a
manner which is likely to achieve commercialisation.
The Company actively monitors remuneration policy to
ensure that staff are incentivised to
remain with the Company. The Company requires current and
former employees and directors to
comply with stringent confidentiality obligations.
---------------------------------------------------------- ----------------------------------------------------------
Statement of Comprehensive Income
for the year ended 31 October 2016
Year ended Year ended
31 October 31 October
2016 2015
Note GBP GBP
----------------------------------------------------------------------------------- ----- ------------ ------------
EU Grant income 967,606 2,262,506
Cost of sales (1,883,650) (4,846,933)
----------------------------------------------------------------------------------- ----- ------------ ------------
Gross loss (916,044) (2,584,427)
Other income 146,479 51,080
Administrative expenses (5,561,096) (6,112,856)
----------------------------------------------------------------------------------- ----- ------------ ------------
Operating loss 5 (6,330,661) (8,646,203)
----------------------------------------------------------------------------------- ----- ------------ ------------
Finance (cost)/income 8 (148,233) 3,294,272
----------------------------------------------------------------------------------- ----- ------------ ------------
Loss before tax (6,478,894) (5,351,931)
----------------------------------------------------------------------------------- ----- ------------ ------------
Taxation 9 822,830 569,706
----------------------------------------------------------------------------------- ----- ------------ ------------
Loss for the financial year and total comprehensive loss attributable to owners of
the Company (5,656,064) (4,782,225)
----------------------------------------------------------------------------------- ----- ------------ ------------
Basic loss per share 10 (1.86)p (1.66)p
Diluted loss per share 10 (1.86)p (1.66)p
----------------------------------------------------------------------------------- ----- ------------ ------------
All amounts relate to continuing operations.
Statement of Financial Position
as at 31 October 2016
31 October 31 October
2016 2015
Note GBP GBP
------------------------------------------------------------ ----- ------------- -------------
Assets
Non-current assets
Intangible assets 11 344,457 338,176
Property and equipment 12 89,384 116,328
Investment 13 - -
------------------------------------------------------------ ----- ------------- -------------
433,841 454,504
------------------------------------------------------------ ----- ------------- -------------
Current assets
Inventory and work in progress 14 150,932 219,421
Derivative financial instrument 21 - 1,308,859
Trade and other receivables 15 2,595,963 3,458,340
Cash and cash equivalents 16 2,910,862 1,756,445
Restricted cash 16 112,077 91,105
-------------------------------------------------------------- ----- ------------- -------------
5,769,834 6,834,170
------------------------------------------------------------ ----- ------------- -------------
Total assets 6,203,675 7,288,674
-------------------------------------------------------------- ----- ------------- -------------
Capital and reserves attributable to owners of the Company
Share capital 17 310,014 289,904
Share premium 17 37,843,613 33,947,857
Other reserve 3,234,492 2,207,441
Retained deficit (36,486,151) (30,830,087)
-------------------------------------------------------------- ----- ------------- -------------
Total equity attributable to Shareholders 4,901,968 5,615,115
-------------------------------------------------------------- ----- ------------- -------------
Current liabilities
Trade and other payables 19 1,295,904 1,673,559
-------------------------------------------------------------- ----- ------------- -------------
1,295,904 1,673,559
------------------------------------------------------------ ----- ------------- -------------
Non-current liabilities
------------------------------------------------------------ ----- ------------- -------------
Trade and other payables 19 5,803 -
-------------------------------------------------------------- ----- ------------- -------------
5,803 -
------------------------------------------------------------ ----- ------------- -------------
Total equity and liabilities 6,203,675 7,288,674
-------------------------------------------------------------- ----- ------------- -------------
These financial statements were approved and authorised for
issue by the Board on 23 March 2017.
Tim Yeo Adam Bond
Chairman Chief Executive Officer
AFC Energy plc
Registered number: 05668788
Statement of Changes in Equity
for the year ended 31 October 2016
Share Share Other Retained Total
Capital Premium Reserve Deficit Equity
Note GBP GBP GBP GBP GBP
------------------------------------- ----- --------- ----------- ---------- ------------- ------------
Balance at 1 November 2014 285,684 33,332,478 3,032,472 (27,089,095) 9,561,539
Comprehensive loss for the year - - - (4,782,225) (4,782,225)
Issue of equity shares 4,220 615,379 - - 619,599
Equity-settled share-based payments - - (825,031) 1,041,233 216,202
-------------------------------------- ----- --------- ----------- ---------- ------------- ------------
Transactions with owners 4,220 615,379 (825,031) 1,041,233 835,801
-------------------------------------- ----- --------- ----------- ---------- ------------- ------------
Balance at 31 October 2015 289,904 33,947,857 2,207,441 (30,830,087) 5,615,115
-------------------------------------- ----- --------- ----------- ---------- ------------- ------------
Comprehensive loss for the year - - - (5,656,064) (5,656,064)
Issue of equity shares 17 20,110 3,895,756 - - 3,915,866
Equity-settled share-based payments 18 - - 1,027,051 - 1,027,051
-------------------------------------- ----- --------- ----------- ---------- ------------- ------------
Transactions with owners 20,110 3,895,756 1,027,051 - 4,942,917
-------------------------------------- ----- --------- ----------- ---------- ------------- ------------
Balance at 31 October 2016 310,014 37,843,613 3,234,492 (36,486,151) 4,901,968
-------------------------------------- ----- --------- ----------- ---------- ------------- ------------
Share capital is the amount subscribed for shares at nominal
value.
Share premium represents the excess of the amount subscribed for
share capital over the nominal value of these shares net of share
issue expenses.
Other reserve represents the charge to equity in respect of
equity-settled share-based payments.
Retained deficit represents the cumulative loss of the Company
attributable to equity Shareholders.
Cash Flow Statement
for the year ended 31 October 2016
31 October 31 October
2016 2015
Note GBP GBP
---------------------------------------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Loss before tax for the year (6,478,894) (5,351,931)
Adjustments for:
Depreciation and amortisation 11,12 172,608 278,291
Impairment of intangible asset investment - 52,500
(Profit)/Loss on disposal of tangible assets (40,750) 286,743
Equity-settled share-based payment expenses 18d 1,027,051 216,202
Payment of shares in lieu of cash 326,632 331,000
Interest received 8 (3,415) (5,775)
R&D tax credits receivable (104,291) (174,937)
Loss/(Gain) on derivative financial investment 21 149,687 (3,288,497)
---------------------------------------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities before changes in working capital and
provisions (4,951,372) (7,656,404)
R&D tax credits received 927,121 813,696
Increase in restricted cash (20,972) (91,105)
Decrease/(Increase) in Inventory and Work in Progress 68,489 (62,373)
Decrease/(Increase) in trade and other receivables 862,377 (24,500)
(Decrease)/Increase in trade and other payables (371,852) 542,271
---------------------------------------------------------------------------------- ------ ------------ ------------
Cash absorbed by operating activities (3,486,209) (6,478,415)
---------------------------------------------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Purchase of plant and equipment 12 (81,424) (36,845)
Additions to intangible assets 11 (70,287) (98,980)
Proceeds of disposal of tangible assets 40,750 4,800
Interest received 8 3,415 5,775
---------------------------------------------------------------------------------- ------ ------------ ------------
Net cash absorbed by investing activities (107,546) (125,250)
---------------------------------------------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
Proceeds from the issue of share capital 3,600,000 288,599
Costs of issue of share capital (11,000) -
Derivative financial asset 21 1,159,172 3,213,308
---------------------------------------------------------------------------------- ------ ------------ ------------
Net cash from financing activities 4,748,172 3,501,907
---------------------------------------------------------------------------------- ------ ------------ ------------
Net increase/(decrease) in cash and cash equivalents 1,154,417 (3,101,758)
Cash and cash equivalents at start of year 1,756,445 4,858,203
---------------------------------------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents at end of year 16 2,910,862 1,756,445
---------------------------------------------------------------------------------- ------ ------------ ------------
Notes Forming Part of the Financial Statements
1. CORPORATE INFORMATION
AFC Energy plc ("the Company") is a public limited company
incorporated in England & Wales and quoted on the Alternative
Investment Market of the London Stock Exchange.
The address of its registered office is Finsgate, 5-7 Cranwood
Street, London, EC1V 9EE.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial statements of AFC Energy plc have been prepared in
accordance with International Financial Reporting Standards
("IFRSs"), International Accounting Standards ("IASs") and
International Financial Reporting Interpretations Committee
("IFRIC") interpretations (collectively "IFRSs") as adopted for use
in the European Union and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS.
The Company prepares cash flow forecasts based on current
estimates of future revenues and expenditure. These are agreed by
the Board and monitored against actual expenditure to ensure the
Company's resources are sufficient for the Directors to prepare the
accounts on a going concern basis. In March 2017 the Company
successfully raised approximately GBP8.1 million before expenses
through a placing, subscription and open offer. The Directors
remain confident that they will continue to be able to raise money
to fund the Company's continuing activities as required.
The accounting policies set out below have, unless otherwise
stated, been applied consistently in these financial
statements.
Judgements made by the Directors in the application of these
accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material
adjustment in the next year are discussed in note 3.
a. Standards, Amendments and Interpretations to Published
Standards not yet effective
At the date of authorisation of these financial statements, the
IASB and IFRIC have issued the following standards and
interpretations, which are effective for annual accounting periods
beginning on or after the stated effective date. These standards
and interpretations are not effective for and have not been applied
in the preparation of these financial statements:
-- IFRS 9 Financial Instruments is effective from 1 January
2015. This standard includes requirements for recognition and
measurement, derecognition and hedge accounting.
-- IFRS 15 Revenue from contracts with customers. The new
standard will replace IAS 18 Revenue and IAS 11 Construction
contracts. It will become effective for accounting periods on or
after 1 January 2018 at the earliest.
-- IFRS 16 Leases is effective from 1 January 2019. Management
has not yet analysed the input to the financial statements upon
adoption.
The Company expects no impact from the adoption of IFRS 9. As
the Company is not currently revenue generating, there would be no
impact relating to the adoption of IFRS 15 on the current financial
position. The Company will determine the effects of the adoption of
IFRS 16 in future periods.
b. Capital Policy
The Company manages its equity as capital. Equity comprises the
items detailed within the principal accounting policy for equity
and financial details can be found in the statement of financial
position. The Company adheres to the capital maintenance
requirements as set out in the Companies Act.
c. Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received, excluding discounts, rebates, and other
sales taxes or duty. Revenue arising from the provision of services
is recognised when and to the extent that the Company obtains the
right to consideration in exchange for the performance of its
contractual obligations.
d. Grants
The Company participates in three projects, LASER-CELL,
ALKAMMONIA and POWER-UP, which receive funding from the EU. These
grants are based on periodic claims for qualifying expenditure
incurred by all the entities participating in each project
consortium. The Company acts as coordinator for all three projects
and submits claims and receives funding on behalf of the other
participants in each project consortium. Grant funds of other
participants are paid over to them as soon as they are received and
only the grant funding relating specifically to the Company's
activities is reflected in the statement of comprehensive income.
The qualifying expenditure is shown in the statement of
comprehensive income as cost of sales. Grants, including grants
from the European Union, are recognised in the statement of
comprehensive income in the same period as the expenditure to which
the grant relates.
e. Other Income
Other income represents sales by the Company of waste
materials.
f. Development Costs
Development expenditure does not meet the strict criteria for
capitalisation under IAS 38 and has been recognised as an expense.
Expenditure on and relating to the Company's alkaline fuel cell
system installed at Stade in Germany under the EU funded POWER-UP
project is considered to be development expenditure to date, as the
module is the first of its kind that has been produced and has not
yet operated at full power output for an extended period.
g. Foreign Currency
The financial statements of the Company are presented in the
currency of the primary economic environment in which it operates
(the functional currency) which is pounds sterling. In accordance
with IAS 21, transactions entered into by the Company in a currency
other than the functional currency are recorded at the rates ruling
when the transactions occur. At each balance sheet date, monetary
items denominated in foreign currencies are retranslated at the
rates prevailing at the balance sheet date.
h. Inventory and Work in Progress
Inventory is recorded at the lower of cost and net realisable
value. Work in progress is valued at cost, less the cost of work
invoiced on incomplete contracts and less foreseeable losses. Cost
comprises purchase cost plus production overheads.
i. Trade and Other Receivables
Trade and other receivables arise principally through the
provision by the Company of activities associated with grant-funded
projects. They also include other types of contractual monetary
assets. These assets are initially recognised at fair value and are
subsequently measured at amortised cost less any provision for
impairment.
j. Loans and Other Receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. After initial measurement, loans and receivables are
carried at amortised cost using the effective interest method less
any allowance for impairment. Gains and
losses are recognised in profit or loss when the loans and
receivables are derecognised or impaired, as well as through the
amortisation process.
The Company's loans and receivables include cash and cash
equivalents. These include cash in hand, and deposits held at call
with banks.
k. Property and Equipment
Property and equipment are stated at cost less any subsequent
accumulated depreciation and impairment losses.
Where parts of an item of property and equipment have different
useful lives, they are accounted for as separate items of property
and equipment.
Depreciation is charged to the statement of comprehensive income
within cost of sales and administrative expenses on a straight-line
basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives are as
follows:
-- Leasehold improvements 1 to 3 years
-- Fixtures, fittings and equipment 1 to 3 years
-- Vehicles 3 to 4 years
Expenses incurred in respect of the maintenance and repair of
property and equipment are charged against income when incurred.
Refurbishment and improvement expenditure, where the benefit is
expected to be long lasting, is capitalised as part of the
appropriate asset.
The useful economic lives of property, plant and equipment and
the carrying value of tangible fixed assets are assessed annually
and any impairment is charged to the statement of comprehensive
income.
l. Intangible Assets
Expenditure on research activities is recognised in the
statement of comprehensive income as an expense as incurred.
Expenditure in establishing a patent is capitalised and written off
over its useful life.
Other intangible assets that are acquired by the Company are
stated at cost less accumulated amortisation and impairment
losses.
Amortisation of intangible assets is charged using the
straight-line method to administrative expenses over the following
period:
-- Patents 20 years
Useful lives are based on the management's estimates of the
period that the assets will generate revenue, which are
periodically reviewed for continued appropriateness and any
impairment is charged to the statement of comprehensive income.
m. Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call
deposits with major banking institutions realisable within three
months. Restricted cash is EUR125,000 held in escrow to support a
bank guarantee in favour of Air Products GmbH relating to
contractual obligations by the Company in relation to the Stade
site in Germany.
n. Other Financial Liabilities
The Company classifies its financial liabilities as:
-- Trade and Other Payables
These are initially recognised at invoiced value. These arise
principally from the receipt of goods and services. There is no
material difference between the invoiced value and the value
calculated on an amortised cost basis or fair value.
-- Deferred Income
This is the carrying value of income received from a customer in
advance which has not been fully recognised in the statement of
comprehensive income pending delivery to the customer. The carrying
value is fair value.
o. Leases
Finance Leases
Finance leases, which transfer to the Company substantially all
the risks and benefits incidental to ownership of the leased item,
are capitalised at the inception of the lease at the fair value of
the leased property. Capitalised leased assets are depreciated over
the estimated useful life of the asset. Lease payments are
apportioned between the finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are reflected
in the statement of comprehensive income.
Operating Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
statement of comprehensive income on a straight-line basis over the
period of the lease.
p. Financial Assets
All of the Company's financial assets are loans and receivables
and investments. Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets at fair value
and comprise trade and other receivables and cash and cash
equivalents. Investments are accounted for at cost less
impairment.
q. Financial Instruments
Financial assets and liabilities are recognised on the balance
sheet when the Company becomes a party to the contractual
provisions of the instrument.
-- Cash and cash equivalents comprise cash held at bank and short-term deposits
-- Receivables are recognised initially at fair value and
subsequently held at amortised cost less an allowance for any
uncollectable amounts when the full amount is no longer considered
receivable
-- Trade payables are not interest bearing and are stated at their nominal value
-- Equity instruments issued by the Company are recorded at the
proceeds received except where those proceeds appear to be less
than the fair value of the equity instruments issued, in which case
the equity instruments are recorded at fair value. The difference
between the proceeds received and the fair value is reflected in
the share-based payments reserve.
r. Valuation of Derivative Financial Instrument
In 2014, the Company placed shares with Lanstead Capital L.P.
and at the same time entered into an equity swap agreement in
respect of the subscriptions for which consideration will be
received monthly over an 18-month period as disclosed in the notes
to these financial statements. The amount receivable each month was
dependent on the Company's share price performance and gains and
losses arising on monthly settlements are reflected in the
statement of comprehensive income in administrative expenses. The
financial instrument closed in April 2016 and, hence, as at 31
October 2016, the financial instrument had a zero value.
s. Share-Based Payment Transactions
The Company awards share options and warrants to certain
Directors and employees to acquire shares of the Company. The fair
value of options and warrants granted is recognised as an employee
expense with a corresponding increase in equity. The fair value is
measured at grant date and spread over the period during which the
Directors and employees become unconditionally entitled to the
options or warrants. The fair value of the options and warrants
granted is measured using the Black-Scholes option valuation model,
taking into account the terms and conditions upon which the options
and warrants were granted. The amount recognised as an expense is
adjusted to reflect the actual number of share options and warrants
that vest only where vesting is dependent upon the satisfaction of
service and non-market vesting conditions or where the vesting
periods themselves are amended by the introduction of new schemes
and the absorption of earlier schemes by agreement between the
Company and the relevant Directors and employees. Where options or
warrants granted are cancelled, all future charges arising in
respect of the grant are charged to the statement of comprehensive
income on the date of cancellation.
t. Provisions
Provisions are recognised when the Company has a present
obligation as a result of a past event and it is probable that the
Company will be required to settle the obligation. Provisions are
measured at the present value of management's best estimate of the
expenditure required to settle the present obligation at the
balance sheet date and are discounted to present value where the
effect is material.
u. Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the statement of comprehensive
income except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or recoverable on the
taxable income for the year, using tax rates enacted or
substantively enacted at the balance sheet date together with any
adjustment to tax payable in respect of previous years.
Deferred tax assets are not recognised due to the uncertainty of
their recovery.
v. R&D Tax Credits
The Company's research and development activities allow it to
claim R&D tax credits from HMRC in respect of qualifying
expenditure; these credits are reflected in the statement of
comprehensive income in administrative expenses or in the taxation
line depending on the nature of the credit.
w. Pension Contributions
The Company operates a defined contribution pension scheme which
is open to all employees and makes monthly employer contributions
to the scheme in respect of employees who join the scheme. These
employer contributions are currently capped at 3% of the employee's
salary and are reflected in the statement of comprehensive income
in the period for which they are made.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
AND UNCERTAINTY
In the preparation of the financial statements management makes
certain judgements and estimates that impact the financial
statements. While these judgements are continually reviewed, the
facts and circumstances underlying these judgements may change,
resulting in a change to the estimates that could impact the
results of the Company. In particular:
Useful Lives and Impairment of Intangible Assets
Intangible assets are amortised over their useful lives. Useful
lives are based on the management's estimates of the period that
the assets will generate revenue, which are periodically reviewed
for continued appropriateness. After undertaking a comprehensive
review of intangible assets, management has concluded that no
impairment has arisen with respect to intangible assets during the
year and subsequent to 31 October 2016 (2015: GBPnil).
Income Taxes and Withholding Taxes
The Company believes that its receivables for tax recoverable
are adequate for all open audit years based on its assessment of
many factors, including past experience and interpretations of tax
law. This assessment relies on estimates and assumptions and may
involve a series of complex judgements about future events. To the
extent that the final tax outcome of these matters is different
from the amounts recorded, such differences will impact income tax
expense in the period in which such determination is made.
Capitalisation of Development Expenditure
The Company uses the criteria of IAS 38 to determine whether
development expenditure should be capitalised. After assessing
these, management has concluded that, until the Company's fuel cell
system is proven to be commercially deployable, it would not be
appropriate to capitalise development expenditure. Consequently,
all development expenditure has been charged to the statement of
comprehensive income during the year ended 31 October 2016.
Share-Based Payments
Certain employees (including Directors and senior Executives) of
the Company receive remuneration in the form of share-based payment
transactions, whereby employees render services as consideration
for equity instruments ("equity-settled transactions").
The fair value is determined using an appropriate pricing
model.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award ("the vesting date"). The cumulative expense recognised
for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the Company's best estimate of the number of equity
instruments that will ultimately vest. The profit or loss charge or
credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance and/or service conditions are satisfied. Where the
terms of an equity-settled award are modified, the minimum expense
recognised is the expense as if the terms had not been modified. An
additional expense is recognised for any modification which
increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee as measured
at the date of modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award, and designated as
a replacement award on the date that it is granted, the cancelled
and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
4. SEGMENTAL ANALYSIS
Operating segments are determined by the chief operating
decision maker based on information used to allocate the Company's
resources. The information as presented to internal management is
consistent with the statement of comprehensive income. It has been
determined that there is one operating segment, the development of
fuel cells. In the year to 31 October 2016, the Company operated
mainly in the United Kingdom and in Germany. All non-current assets
are located in the United Kingdom.
5. OPERATING LOSS
This has been stated after:
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
------------------------------------------------------ ----------- -----------
R&D tax credit receivable (59,487) (174,937)
Depreciation/Impairment of property and equipment 238,414 198,769
Amortisation/Impairment of intangible assets 64,240 79,522
R&D expenditure 2,914,050 3,475,657
Write off of Waste2Tricity investment and receivable - 558,983
Equity-settled share-based payment expense 1,027,051 216,202
Foreign exchange differences (334,898) 42,975
Auditor's remuneration - audit 30,900 30,000
Auditor's remuneration - corporation tax 3,500 9,500
Auditor's remuneration - R&D tax credit services 19,500 -
----------------------------------------------------------- ----------- -----------
6. STAFF NUMBERS AND COSTS, INCLUDING DIRECTORS
The average numbers of employees in the year were:
Year ended Year ended
31 October 31 October
2016 2015
Number Number
----------------------------------- ----------- -----------
Support, operations and technical 37 39
Administration 6 5
---------------------------------------- ----------- -----------
43 44
----------------------------------- ----------- -----------
The aggregate payroll costs for these persons were:
GBP GBP
------------------------------------------------------ ---------- ----------
Wages and salaries (including Directors' emoluments) 1,983,582 2,660,709
Social security 239,738 317,242
Employer's pension contributions 37,976 35,095
Equity-settled share-based payment expense 1,027,051 216,202
----------------------------------------------------------- ---------- ----------
3,288,347 3,229,248
------------------------------------------------------ ---------- ----------
7. DIRECTORS' REMUNERATION
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
--------------------------------------------------------- ----------- -----------
Wages and salaries 379,355 978,656
Social security 65,113 131,225
Equity-settled share-based payment expense 821,002 170,001
Other compensation 295,827 48,149
Company pension contributions 2,504 1,844
-------------------------------------------------------------- ----------- -----------
1,563,801 1,329,875
--------------------------------------------------------- ----------- -----------
The emoluments of the Chairman 56,575 57,346
-------------------------------------------------------------- ----------- -----------
The emoluments of the highest-paid Director (see below) 1,334,852 661,932
-------------------------------------------------------------- ----------- -----------
Company pension contributions of highest-paid Director - -
-------------------------------------------------------------- ----------- -----------
Adam Bond's services as Chief Executive Officer and Director
during the period were initially provided under a secondment
agreement between the Company and Linc Energy Ltd. The secondment
agreement expired on 31 December 2015, at which point he became an
employee of the Company under a service agreement dated 1 January
2016. During the year ended 31 October 2016, a portion of Adam's
remuneration was paid to him by Linc Energy Ltd. and recharged to
the Company. A further portion of his salary, totalling GBP91,250,
was settled during the year through the issuance of 500,000 shares
in the Company. Included in Adam's other compensation is a
GBP100,000 bonus that has been accrued for as a result of meeting
certain performance conditions. The payment of the bonus has not
yet been claimed by Adam and is pending final Board approval.
During 2015, the Company remitted taxation to HMRC on Adam's behalf
in relation to different tax jurisdictions between the UK and
Australia. Management believes an amount of GBP187,000 to be
recoverable. As part of Adam's contract with the Company, in 2015
he was granted 6,000,000 share options with an exercise price of
GBP0.51 per share. These options have performance conditions
attached to them; 3,000,000 of the options will only vest if
specific operational targets for energy output are met, and the
remaining options will only vest if the share price achieves and
sustains targeted amounts with equal portions vesting at share
prices of GBP1.00, GBP1.50 and GBP2.00. In accordance with IFRS 2
(Share-Based Payment), the Company recognises as an employee
expense the fair value of options granted to employees. The fair
value is determined using an appropriate pricing model, and the
resulting expense is recognised over the period in which the
performance and/or service conditions are fulfilled ending on the
date on which the employee becomes fully entitled to the award.
During the year the Company recorded a non-cash expense of
GBP821,002 relating to the options granted to Adam. The vesting
conditions for the options has not been reached and hence Adam has
not received any cash benefit from the options in the year. Further
details are contained in notes 2, 3 and 18.
8. FINANCe cost
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
------------------------------------------------ ----------- -----------
(Loss)/Gain on derivative financial instrument (149,687) 3,288,497
Interest on finance lease (1,961) -
Bank interest receivable 3,415 5,775
----------------------------------------------------- ----------- -----------
Total finance (cost)/income (148,233) 3,294,272
----------------------------------------------------- ----------- -----------
9. TAXATION
Year ended Year ended
31 October 31 October
2016 2015
Recognised in the statement of comprehensive income GBP GBP
------------------------------------------------------------------------- ------------ ------------
R&D tax credit - current year (613,732) (569,706)
------------------------------------------------------------------------------ ------------ ------------
R&D tax credit - prior year (209,098) -
------------------------------------------------------------------------- ------------ ------------
Total tax credit (822,830) (569,706)
Reconciliation of effective tax rates
Loss before tax (6,478,894) (5,351,931)
------------------------------------------------------------------------------ ------------ ------------
Tax using the domestic rate of corporation tax of 20.00% (2015: 20.42%) (1,295,779) (1,092,864)
------------------------------------------------------------------------------ ------------ ------------
Effect of:
R&D tax credit - prior year (209,098) -
Expenses not deductible for tax purposes 209,151 659,518
Above the line tax credit - 185,396
R&D allowance (478,253) (450,148)
Tax credit on losses surrendered (613,452) (569,706)
Depreciation in excess of capital allowances 4,920 47,737
Losses surrendered for research and development 846,141 232,349
Unutilised losses carried forward 697,625 418,012
Fixed asset differences 15,915 -
------------------------------------------------------------------------- ------------ ------------
Total tax credit (822,830) (569,706)
------------------------------------------------------------------------------ ------------ ------------
10. LOSS PER SHARE
The calculation of the basic loss per share is based upon the
net loss after tax attributable to ordinary Shareholders of
GBP5,656,064 (2015: loss of GBP4,782,225) and a weighted average
number of shares in issue for the year.
Year ended Year ended
31 October 31 October
2016 2015
------------------------------------------ ------------ ------------
Basic loss per share (pence) (1.86)p (1.66)p
Diluted loss per share (pence) (1.86)p (1.66)p
Loss attributable to equity Shareholders (5,656,064) (4,782,225)
----------------------------------------------- ------------ ------------
Number Number
-------------------------------------------- ------------ ------------
Weighted average number of shares in issue 304,858,560 288,431,626
------------------------------------------------- ------------ ------------
Diluted earnings per share
As set out in note 18, there are share options and warrants
outstanding as at 31 October 2016 which, if exercised, would
increase the number of shares in issue. However, the diluted loss
per share is the same as the basic loss per share, as the loss for
the year has an anti-dilutive effect.
11. INTANGIBLE ASSETS
2016 2015
Patents Patents
GBP GBP
----------------------- -------- ----------
Cost
Balance at 1 November 445,927 748,113
Retirements - (401,166)
Additions 70,521 98,980
---------------------------- -------- ----------
Balance at 31 October 516,448 445,927
---------------------------- -------- ----------
Amortisation
Balance at 1 November 107,751 469,040
Retirements - (401,166)
Charge for the year 64,240 39,877
---------------------------- -------- ----------
Balance at 31 October 171,991 107,751
---------------------------- -------- ----------
Net book value 344,457 338,176
---------------------------- -------- ----------
12. PROPERTY AND EQUIPMENT
Leasehold Fixtures, fittings
improvements and equipment Motor vehicles Total
GBP GBP GBP GBP
--------------------- ------------- ------------------- --------------- ------------
Cost
At 31 October 2014 272,759 2,693,951 10,495 2,977,205
Transfers 45,852 (45,852) - -
Additions 18,851 - 17,994 36,845
Disposals - (1,326,821) (10,495) (1,337,316)
------------------------ ------------- ------------------- --------------- ------------
At 31 October 2015 337,462 1,321,278 17,994 1,676,734
Additions - 81,424 - 81,424
Disposals - (238,797) - (238,797)
------------------------ ------------- ------------------- --------------- ------------
At 31 October 2016 337,462 1,163,905 17,994 1,519,361
------------------------ ------------- ------------------- --------------- ------------
Depreciation
At 31 October 2014 240,104 2,117,457 10,203 2,367,764
Transfers 9,783 (9,783) - -
Charge for the year 39,645 194,882 3,887 238,414
Disposals - (1,035,277) (10,495) (1,045,772)
------------------------ ------------- ------------------- --------------- ------------
At 31 October 2015 289,532 1,267,279 3,595 1,560,406
Charge for the year 47,930 54,537 5,901 108,368
Disposals - (238,797) - (238,797)
------------------------ ------------- ------------------- --------------- ------------
At 31 October 2016 337,462 1,083,019 9,496 1,429,977
------------------------ ------------- ------------------- --------------- ------------
Net Book Value
At 31 October 2016 - 80,886 8,498 89,384
At 31 October 2015 47,930 53,999 14,399 116,328
------------------------ ------------- ------------------- --------------- ------------
13. INVESTMENT
As at 31 October 2016 the Company held 230,000 shares
representing 17.5% (2015: 230,000 shares representing 23%) of the
share capital of Waste2Tricity Ltd ("W2T") (a company registered in
England & Wales). In the view of the Directors this investment
has no value currently and has been recognised at cost less
impairment. No revenue was recognised in the period under the
licence agreements with Waste2Tricity Limited and Waste2Tricity
International (Thailand) Limited.
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
------------------ ----------- -----------
Investment in W2T - -
------------------ ----------- -----------
14. INVENTORY AND WORK IN PROGRESS
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
------------------ ----------- -----------
Inventory 150,932 219,421
Work in progress - -
------------------ ----------- -----------
150,932 219,421
------------------ ----------- -----------
15. TRADE AND OTHER RECEIVABLES
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
---------------------------- ----------- -----------
Current:
R&D tax credits receivable 673,219 718,023
EU grants receivable 1,409,642 2,513,395
Other receivables 513,102 226,922
--------------------------------- ----------- -----------
2,595,963 3,458,340
---------------------------- ----------- -----------
There is no significant difference between the fair value of the
receivables and the values stated above.
16. CASH AND CASH EQUIVALENTS
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
--------------- ----------- -----------
Cash at bank 1,137,819 675,603
Bank deposits 1,773,043 1,080,842
-------------------- ----------- -----------
2,910,862 1,756,445
--------------- ----------- -----------
Cash at bank and bank deposits consist of cash. There is no
material foreign exchange movement in respect of cash and cash
equivalents. Restricted cash, not included in cash and cash
equivalents, is EUR125,000 held in escrow to support a bank
guarantee in favour of Air Products GmbH relating to contractual
obligations by the Company in relation to the Stade site in
Germany.
17. ISSUED SHARE CAPITAL
Ordinary shares Share premium Total
Number GBP GBP GBP
------------------------------------ ------------ ---------------- -------------- -----------
At 31 October 2015 289,903,943 289,904 33,947,858 34,237,762
Issue of shares on 18 January 2016 18,000,000 18,000 3,571,000 3,589,000
Issue of shares on 21 January 2016 250,000 250 56,625 56,875
Issue of shares on 18 April 2016 190,000 190 28,785 28,975
Issue of shares on 19 May 2016 720,000 720 50,670 51,390
Issue of shares on 6 July 2016 250,000 250 34,125 34,375
Issue of shares on 19 August 2016 700,000 700 154,550 155,250
--------------------------------------- ------------ ---------------- -------------- -----------
At 31 October 2016 310,013,943 310,014 37,843,613 38,153,627
--------------------------------------- ------------ ---------------- -------------- -----------
All issued shares are fully paid.
The Company considers its capital and reserves attributable to
equity Shareholders to be the Company's capital. In managing its
capital, the Company's primary long-term objective is to provide a
return for its equity Shareholders through capital growth. Going
forward the Company will seek to maintain a gearing ratio that
balances risks and returns at an acceptable level and also to
maintain a sufficient funding base to enable the Company to meet
its working capital needs. The Company's commercial activities are
at an early stage and management considers that no useful target
debt to equity gearing ratio can be identified at this time.
Details of the Company's capital are disclosed in the statement
of changes in equity.
There have been no other significant changes to the Company's
management objectives, policies and processes in the year nor has
there been any change in what the Company considers to be
capital.
18a. SHARE OPTIONS
Weighted
average
remaining
Number Exercise contractual
of options price life
------------------------------- ------------ ------------ ------------
At 31 October 2014 7,980,000 3.13-35.75p 6.3 yrs
Options granted in the year 7,615,000 17-51p
Options exercised in the year (1,150,000) 3.13-24p
Options lapsed in the year (590,000) 32-41p
----------------------------------- ------------ ------------ ------------
At 31 October 2015 13,855,000 3.13-51p 7.7 yrs
Options granted in the year - -
Options exercised in the year (1,220,000) 3.13-20.75p
Options lapsed in the year (730,000) 17-34p
----------------------------------- ------------ ------------ ------------
At 31 October 2016 11,905,000 3.13-51p 7.1 yrs
----------------------------------- ------------ ------------ ------------
18b. WARRANTS
Weighted
average
remaining
Number Exercise contractual
of warrants price life
-------------------------------- ------------- --------- -------------
At 31 October 2014 7,047,800 3.13-24p 5.1 yrs
Warrants exercised in the year 100,000 3.13p
Warrants lapsed in the year - -
-------------------------------- ------------- --------- -------------
At 31 October 2015 6,947,800 3.13-24p 4.1 yrs
Warrants exercised in the year - -
Warrants lapsed in the year - -
-------------------------------- ------------- --------- -------------
At 31 October 2016 6,947,800 3.13-24p 3.1 yrs
------------------------------------ ------------- --------- -------------
18c. SAYE
During the year the Company operated a share save scheme.
Weighted
average
remaining
Number Exercise contractual
of SAYE price life
----------------------------------------------------------- ---------- --------- ------------
At 31 October 2014 1,065,259 18.6-22p 2.2 yrs
SAYE issued during the year - -
SAYE lapsed/cancelled during the year (485,503) 18.6-22p
SAYE exercised during the year (8,409) 22p
--------------------------------------------------------------- ---------- --------- ------------
At 31 October 2015 571,347 18.6-22p 1.3 yrs
SAYE issued during the year 399,537 12p
SAYE lapsed/cancelled during the previous year correction 488,714 18.6-22p
SAYE lapsed/cancelled during the year (141,516) 22p
SAYE exercised during the year - -
----------------------------------------------------------- ---------- --------- ------------
At 31 October 2016 1,318,082 18.6-22p 1.3 yrs
--------------------------------------------------------------- ---------- --------- ------------
18d. EQUITY-SETTLED SHARE-BASED PAYMENTS CHARGE
Share Options
Amount
Average Average Average Average Average Average expensed
grant date expected risk-free dividend implied fair value in the 2016
Option price share price volatility interest rate yield option life per option accounts
(p) (p) (p.a.) (p.a.) (p.a.) (years) (p) GBP
----------------------- ------------ ----------- -------------- --------- ------------ ----------- ------------
3.13 3.13 113.8% 4.4% 0% 2.0 2 -
10 10 46% 4.4% 0% 2.5 2.5 -
17 17 80% 1.5% 0% 2.5 9.48 -
17.5 18.75 188% 4.4% 0% 2.5 14.07 -
24 23.75 188% 4.4% 0% 2.5 17.80 -
20.75 20 214.8% 4.4% 0% 2.0 15 -
32 31.75 243% 4.4% 0% 2.5 24 -
34 34 80% 1.5% 0% 2.5 18.96 9,552
35.75 35.75 124.7% 1.5% 0% 2.5 21.8 -
39.25 39.25 80% 1.5% 0% 2.5 21.89 40,489
41 41 80% 1.5% 0% 2.5 22.86 49,778
51 58 75% 2.1% 0% 2.5 32.00 821,002
----------------------- ------------ ----------- -------------- --------- ------------ ----------- ------------
Total charge for the
year (2015:
GBP210,779) 920,821
----------------------- ------------ ----------- -------------- --------- ------------ ----------- ------------
18d. EQUITY-SETTLED SHARE-BASED PAYMENTS CHARGE continued
Warrants
Amount
Average Average Average Average Average Average expensed
grant date expected risk-free dividend implied fair value in the 2016
Warrant price share price volatility interest rate yield option life per option accounts
(p) (p) (p.a.) (p.a.) (p.a.) (years) (p) GBP
----------------------- ------------ ----------- -------------- --------- ------------ ----------- ------------
3.13 3.13 113.8% 4.4% 0% 2.0 2 -
24 23.75 188% 4.4% 0% 2.5 17.8 -
----------------------- ------------ ----------- -------------- --------- ------------ ----------- ------------
Total charge for the -
year (2015: GBPnil)
----------------------- ------------ ----------- -------------- --------- ------------ ----------- ------------
SAYE
Amount
Average Average Average Average Average Average expensed
grant date expected risk-free dividend implied fair in the
value 2016
SAYE price share price volatility interest yield option per accounts
rate life option
(p) (p) (p.a.) (p.a.) (p.a.) (years) (p) GBP
----------- ------------ ----------- ---------- --------- -------- -------- ----------
22 27.5 124.7% 1.5% 0% 2.5 21.69 50,511
18.6 23.25 137.5% 1.5% 0% 2.5 19.24 51,092
12 15 78.6% 0.7% 0% 2.0 8.4 4,627
----------- ------------ ----------- ---------- --------- -------- -------- ----------
Total charge for the
year (2015: GBP5,423) 106,230
------------------------- ----------- ---------- --------- -------- -------- ----------
Total equity-settled share-based payment
charge for the year (2015: GBP216,202) 1,027,051
----------------------------------------------------------------------- -------- ----------
Expected volatility has been based on the 3.5 year historical
volatility of share price. Vesting requirements are three years for
the exercise of warrants and options, except for 500,000 options
granted which vest in two years. Certain options and warrants
granted to Directors are also subject to performance
conditions.
Adam Bond received 6,000,000 options on 17 July 2015 with
vesting conditions that include market and non-market based
conditions. Under the market-based conditions vesting is contingent
on the average share price of the Company reaching certain targets.
Under non-market based conditions vesting is contingent on the
Company's fuel cell system installed at Stade in Germany reaching
certain output of wattage targets and the Company entering into
commercial contracts.
The fair value of services received in return for share options
and other share-based incentives granted is measured by reference
to the fair value of share options and incentives granted. This
estimate is based on a Black-Scholes model for non-market based
conditions and a Log-normal Monte Carlo stochastic model for market
conditions. Both are appropriate considering the effects of the
vesting conditions, expected exercise period and the dividend
policy of the Company.
19. TRADE AND OTHER PAYABLES
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
-------------------------- ----------- -----------
Current liabilities:
Trade payables 357,118 1,066,600
Deferred income 105,727 115,698
Finance lease liability 16,246 -
Other payables 677,211 319,483
Accruals 139,602 171,778
------------------------------- ----------- -----------
1,295,904 1,673,559
-------------------------- ----------- -----------
Non-current liabilities:
------------------------------- ----------- -----------
Finance lease liability 5,803 -
------------------------------- ----------- -----------
5,803 -
-------------------------- ----------- -----------
20. Operating lease commitments
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
-------------------------------------------------- ----------- -----------
Non-cancellable operating leases are as follows:
Within one year 80,836 146,496
Between one and five years 11,717 69,260
Greater than five years - -
-------------------------------------------------- ----------- -----------
92,553 215,756
-------------------------------------------------- ----------- -----------
The lease commitments relate to accommodation and three
vehicles.
21. FINANCIAL INSTRUMENTS
In common with other businesses, the Company is exposed to risks
that arise from its use of financial instruments. This note
describes the Company's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements. The accounting policies
regarding financial instruments are disclosed in note 2 and the
significant accounting estimates and judgements are set out in note
3.
Principal Financial Instruments
The principal financial instruments used by the Company, from
which financial instrument risk arises, are as follows:
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
----------------------------------------- ----------- -----------
Loans and receivables:
Cash and cash equivalents 2,910,862 1,756,445
Trade and other receivables 2,595,963 3,458,340
Fair value through profit and loss:
Level 3 derivative financial instrument - 1,308,859
Total financial assets 5,506,825 6,523,644
Trade and other payables 1,301,707 1,673,559
Total financial liabilities 1,301,707 1,673,559
---------------------------------------------- ----------- -----------
Financial instruments that are measured subsequent to initial
recognition at fair value are grouped into three levels based on
the degree to which the fair value is observable as defined by IFRS
7:
-- Level 1 fair value measurements are those derived from
unadjusted quoted prices in active markets for identical assets and
liabilities;
-- Level 2 fair value measurements are those derived from
inputs, other than quoted prices included within Level 1, that are
observable either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data.
The derivative financial instrument above, which was classified
as a Level 3 derivative financial instrument, is the fair value of
the equity swap with Lanstead Capital L.P. ("Lanstead"), entered in
October 2014. The equity swap was for an 18-month period ending in
April 2016. As at 31 October 2016, the derivative financial
instrument is closed and the value is GBPnil (2015:
GBP1,308,859).
In October 2014 the Company issued 22,000,000 new ordinary
shares of 0.1p each in the capital of the Company ("Ordinary
Shares") at a price of 10p per share to Lanstead for GBP2,200,000.
The Company simultaneously entered into an equity swap with
Lanstead for 75% of these shares with a reference price of 13.3333
per share (the "Reference Price"). All 22,000,000 Ordinary Shares
were allotted with full rights on the date of the transaction. Of
the subscription proceeds of GBP2,200,000 received from Lanstead,
GBP1,870,000 (85%) was invested by the Company in the equity swap.
Investment in the equity swap was a condition of the placing with
Lanstead.
To the extent that the Company's volume weighted average share
price was greater or lower than the Reference Price at each swap
settlement, the Company received greater or lower consideration
calculated on a pro-rata basis i.e. volume weighted average share
price/Reference Price multiplied by the monthly transfer
amount.
GBP
-------------------------------------- ------------
Value in 2015 1,308,859
Losses recognised in profit and loss (149,687)
Settlements received (1,159,172)
-------------------------------------------- ------------
Value in 2016 -
-------------------------------------------- ------------
No financial instruments have been transferred between Levels
during the year.
General Objectives, Policies and Processes
The Board has overall responsibility for the determination of
the Company's risk management objectives and policies and, while
retaining ultimate responsibility for them, it has delegated part
of the authority for designing and operating processes that ensure
the effective implementation of the objectives and policies to the
Company's finance team. The Board receives reports from the
financial team through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives
and policies it sets.
The overall objective of the Board is to set policies that seek
to reduce ongoing risk as far as possible without unduly affecting
the Company's competitiveness and flexibility. Further details
regarding these policies are set out below.
21. FINANCIAL INSTRUMENTS continued
Credit Risk
Credit risk arises principally from the Company's trade and
other receivables and cash and cash equivalents. It is the risk
that the counterparty fails
to discharge its obligation in respect of the instrument. The
maximum exposure to credit risk equals the carrying value of these
items in the financial statements as shown below:
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
----------------------------- ----------- -----------
Trade and other receivables 2,595,963 3,458,340
Cash and cash equivalents 2,910,862 1,756,445
---------------------------------- ----------- -----------
The Company's principal trade and other receivables arose from:
a) annual payments for various services held as pre-payments b) VAT
debtors receivable from UK and German tax authorities c) an R&D
tax credit d) grant funding receivable from the EU. Credit risk
with cash and cash equivalents is reduced by placing funds with a
range of banks with acceptable credit ratings and government
support where applicable and on term deposits with a range of
maturity dates. At the year end, most cash was temporarily held on
short-term deposit, following maturity of term deposits.
Liquidity Risk
Liquidity risk arises from the Company's management of working
capital and the amount of funding required for the development
programme. It is the risk that the Company will encounter
difficulty in meeting its financial obligations as they fall due.
The Company's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due.
The principal liabilities of the Company are trade and other
payables in respect of the ongoing product development programme.
Trade and other payables are all payable within two months. The
Board receives cash flow projections on a regular basis as well as
information on cash balances.
Interest Rate Risk
The Company is exposed to interest rate risk in respect of
surplus funds held on deposit and uses fixed interest term deposits
to mitigate this risk.
Fair Value of Financial Liabilities
Year ended Year ended
31 October 31 October
2016 2015
GBP GBP
-------------------------- ----------- -----------
Trade and other payables 1,301,707 1,673,559
------------------------------- ----------- -----------
There is no difference between the fair value and book value of
trade and other payables.
The Company does not enter into forward exchange contracts or
otherwise hedge its potential foreign exchange exposure. The Board
monitors and reviews its policies in respect of currency risk on a
regular basis. At 31 October 2016 the Company held no monetary
assets or liabilities in currencies other than the functional
currency of the operating units involved (2015: GBPnil).
22. CAPITAL COMMITMENTS
The Company had no capital commitments outstanding at 31 October
2016 (2015: GBPnil).
23. BOARD CHANGES AND POST-BALANCE SHEET EVENTS
Board changes are reported under "Directors and their
Interests". In March 2017, the Company undertook a placing,
subscription and open offer, raising approximately GBP8.1 million
before expenses.
24. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party.
25. RELATED PARTY TRANSACTIONS
During the year ended 31 October 2016:
GBPnil was invoiced by Richards and Appleby Ltd (a company
registered in England & Wales) for the services of Mitchell
Field as a Director of AFC Energy plc (2015: GBP2,280). Mr. Field
is also a Director and Shareholder of Richards and Appleby Ltd. At
31 October 2016, the sum owing to Richards and Appleby Ltd was
GBPnil (2015: GBP4,780).
GBP65,392 was invoiced by Linc Energy Ltd (a company registered
in Australia) for the services of Adam Bond as Director of AFC
Energy plc (2015: GBP212,438). Linc Energy Ltd was, until 30
September 2015, a major Shareholder in the Company. At 31 October
2016 the amount owing to Linc Energy Ltd was GBPnil (2015:
GBP42,761).
GBP40,200 (plus VAT) was invoiced by Locana Corporation (London)
Ltd (a company registered in England & Wales) for consultancy
services (2015: GBP37,640). Mr. Yeo is also a Director and
Shareholder of Locana Corporation (London) Ltd. At 31 October 2016,
the sum owing to Locana was GBP3,350 (2015: GBP3,350).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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