AFC Energy PLC

ANNUAL REPORT 2014

TRANSFORMING POWER

AFC Energy plc

T: 01483 276726 | F: 01483 266839 | www.afcenergy.com

Unit 71.4 Dunsfold Park | Stovolds Hill | Cranleigh | Surrey | GU6 8TB

Financial Highlights

•  Announced strategic partnership with Air 
Products PLC (“Air Products”) at Stade, 
Germany, within the POWER-UP programme

• 

Invested in semi-automated manufacturing 
capability at Dunsfold facilities in advance of 
commercialisation

•  Signed MoU with Allied New Technologies 

Inc to evaluate feasibility of fuel cells in the US 
chlor-alkali market

•  Foster Wheeler AG successfully completed 

HAZOP review of KORE system

•  Saw initial commercial traction in South Korea 

with discussions ongoing

•  Appointed Christopher Tawney as Finance 

Director and Company Secretary

•  Revenue increased to £796k (2013: £768k) 

Contents

Overview

Highlights 

Chairman’s Statement 

Our Business 

Strategic Reports and 
Operational Review 

01

02

04

06

Governance

Board of Directors 

Directors’ Report 

Financial Statements

08

10

Statement of 
Comprehensive Income 

Statement of Directors’ Responsibilities  16

Independent Auditor’s Report 

17

Statement of Financial Position 

Statement of Changes in Equity 

Cash Flow Statement  

Notes forming part of  
the Financial Statements 

Company Information 

18

19

20

21

22

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AFC ENERGY PLC Report & Accounts for the year ended 31 October 201401

AFC Energy is the leading  
developer of low-cost alkaline  
fuel-cell systems using hydrogen  
to produce clean electricity.

•  Net research and development expenditure 
decreased to £1.28m due to increased grant 
funding levels (2013: £1.48m)

Post Period Highlights
•  Appointment of Adam Bond as Chief 

Executive Officer

•  Diluted loss per share of 2.42p (2013: 1.88p)

•  Net cash amounted to £4.9m as at  
31 October 2014 (2013: £6.9m)

•  Raised £6.1 million through placing and  

Open Offer

•  Successful trials of 25 and 51 cell stacks and 
on-track for successful demonstration of 101 
cell stack in Q1 2015

•  Announced series of milestones to accelerate 
POWER-UP programme and delivery of KORE 
system by 18 months

“2015 will be all about driving  
our KORE programme forward…
Alongside that, we expect to make further progress in developing 
and monetising commercial partnerships in our target markets.  
We have always said that AFC Energy has world-leading 
technology with strong commercial appeal and the Board remains 
very confident that this will be proven in the coming months.”

Tim Yeo, Chairman

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201402

Chairman’s Statement

the United Nations Framework Convention 
on Climate Change, will focus global 
attention on the need for the wider use of 
fiscal tools and emission reduction policy 
measures such as carbon pricing and 
carbon emissions trading.

An alkaline fuel cell of the sort which  
the Company is developing has the 
potential to contribute substantially to 
averting the climate change threat. Our 
aim is to produce low carbon energy  
at a competitive price without  
depending on subsidy from either 
taxpayers or consumers. 

In the short term however early stage 
technologies benefit from favourable 
treatment, as successive governments 
have acknowledged through the help 
they have given other types of low 
carbon electricity generation. We hope 
therefore that Britain will soon follow 
the example of countries like the United 
States and South Korea in recognising 
the important role which alkaline fuel 
cells can make towards the achievement 
of low carbon driven economic growth.

Key developments
The Company’s strategic target remains 
to develop and deliver efficient, 
commercially viable low-cost alkaline fuel 
cell systems to the industrial marketplace 
within the shortest possible time-frame. 
In order to achieve that, continued  
fuel cell performance improvements, 
scaling-up of production and investment 
are all required. I am pleased to be able 
to report very positive developments in 
all three areas. 

Firstly, we have now made sufficient 
technical progress both in relation to 
power output and operating temperature 
that we are able to freeze the electrode 
design and chemistry ahead of the 
commissioning of our larger alkaline fuel 
cell system (KORE) planned for mid-2015. 

Furthermore, during the year, we took 
receipt of our automated extruder, which 
will be integral to the production of 101 
cells in each stack and our assembly robot 
was delivered from its manufacturer, 
GB Innomech. Our ‘semi-automated’ 
production line therefore began operating 
in the fourth quarter of 2014. Finally, in 
October 2014, we concluded a placing 
that raised £6.1 million, which significantly 
strengthens our ability to deliver our 
milestone POWER-UP programme in 2015. 

All of these represent huge strides 
towards the validation of the KORE 
system technology as a prelude to 
commercialisation.

POWER-UP programme
This EU-funded programme represents 
our key strategic focus and, when 
successfully deployed, will demonstrate 
the world’s largest alkaline fuel cell 
system at Air Products’ industrial gas 
plant in Stade, Germany. POWER-UP  
is the final phase of AFC Energy’s  
pre-commercialisation technical 
development programme and the first 
power generation is now expected in  
July 2015 ahead of full testing in 
December 2015.

During the year, we announced our  
first order (for the Beta+ fuel cell test 
system) from Powerhouse Energy, the 
waste-to-energy systems company, which 
will be delivered when PHE’s facility comes 
onstream. AFC Energy will receive £150,000 
from PHE for the supply of its Beta+ fuel cell 
test system with a deposit of £50,000 paid 
in the form of PHE shares and the balance 
becoming payable after delivery.

Two Memoranda of Understanding were 
signed with companies in AFC’s target 
markets of the US and South Korea. The 
first with Allied New Technologies in the 
US to undertake a feasibility study for a 
fuel cell system to generate clean energy 

Due to the fund-raising carried out by 
the Company in October 2014 and the 
subsequent management and Board 
changes, it is deemed appropriate 
that comments in this statement and 
in subsequent sections relate to the 
14-month period to 31 December 2014.

Overview
Last year the Company operated against 
a background of change throughout the 
energy industry at home and abroad. 
Conditions in the fossil fuel sector were 
particularly challenging with a sharp fall in 
the oil price, weakness in gas prices and 
mounting pressure on the coal industry to 
curb its greenhouse gas emissions. 

In Britain low carbon technologies mostly 
fared better, although the planned revival 
of civil nuclear power encountered delays. 
The implementation of the Government’s 
electricity market reforms established 
new support mechanisms for wind, solar 
and some other renewable forms of 
power generation.

If the threat of climate change is to be 
successfully averted then the switch to 
more low carbon energy now has to 
accelerate worldwide. The Paris Conference 
of Parties, to be held at the end of 2015 as 
the next stage in the process organised by 

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201403

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Sales

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Loss

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power and federal and local government 
adoptions continue to increase. The 
opportunities for AFC Energy clearly 
remain very substantial.

Going forward, 2015 will be all about 
driving our KORE programme forward, 
where we have announced a series of 
technical milestones that we expect to 
achieve and this is covered later. Alongside 
that, we expect to make further progress 
in developing and monetising commercial 
partnerships in our target markets.

As usual, my thanks go to all Board 
members for their efforts while special 
thanks go to the forever hard-working 
employees who remain the lifeblood of 
the Company.

We have always said that AFC Energy has 
world-leading technology with strong 
commercial appeal and the Board remains 
very confident that this will be proven in 
the coming months.

Tim Yeo
Chairman
27 February 2015

“The board remains very confident  
of the company’s future success.”
Tim Yeo, Chairman

from hydrogen produced at Allied’s 
bleach production plant in Florida. The 
second was with Chang Shin Chemical, a 
leading South Korean hydrogen supplier, 
for multiple fuel cell systems with a total 
potential generating capacity of up to 
5MW. AFC then followed this with a 
Heads of Agreement with Daniel Inc., a 
fuel cell focused power plant owner and 
development company in South Korea, for 
an initial 1MW fuel cell system.

Partners
AFC added more companies to its 
sterling list of partners. The most recent 
additions to the list were Artelia, a leading 
European engineering, consulting and 
project management firm and their sub-
contractors, PlantIng, a leading German 
process engineering consultancy. 
Together they will undertake all the 
engineering and design work associated 
with delivering POWER-UP to Stade. In 
terms of the POWER-UP “team”, they 
join Air Products and Foster Wheeler 
(now Amec Foster Wheeler), the latter 
completing the HAZOP review for the 
KORE system in June 2014.

Management and Board
There were three changes at Board 
level during the year and three after the 
financial year-end.

In June, Jane Dumeresque our Finance 
Director and Company Secretary 

decided to leave the Company to  
pursue other interests and was replaced 
in September 2014 by Christopher 
Tawney, who has extensive experience of 
the cleantech and technology sectors. 

In November, Ian Williamson stepped 
down after three years as Chief Executive 
and was replaced by Adam Bond, who 
has been a non-executive Director since 
May 2012. At the same time, our technical 
director Gene Lewis stepped down 
from the Board in order to focus fully on 
delivery of the development programme. 

I should like to record the Board’s thanks 
for Ian’s insight and invaluable contribution 
during his time at the Company.

In addition, Sir John Sunderland, who 
has been a director since March 2012, 
is retiring at this year’s Annual General 
Meeting. I am extremely grateful to 
Sir John for his wise advice and help 
throughout his time on our board. His 
contribution has been immensely valuable 
and very widely appreciated.

Summary
Fuel cell penetration continues to grow 
globally driven by increasing awareness of 
their inherent advantages relative to other 
forms of power generation. If one just 
considers the US market alone, dozens of 
Fortune 500 companies are now utilising 
fuel cells for both stationary and back-up 

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201404

Our Business

AFC is focused on markets where:
Hydrogen is readily available and offers low feedstock costs as a byproduct from manufacturing processes…

CHLOR-ALKALI 
Hydrogen is a byproduct of chlorine manufacture. Around 
15% is wasted and the remainder typically has low value. 
Alkaline fuel cells powered from this hydrogen are chemically 
compatible with chlorine manufacture. Using AFC Energy’s 
alkaline fuel cell systems both electrical costs and carbon 
emissions can be reduced by up to 20%.

ENERGY FROM WASTE (EFW)
Hydrogen can be generated economically from domestic 
and commercial waste – due to its high hydrocarbon content. 
AFC Energy’s alkaline fuel cell systems have the potential to 
generate c. 40% more electrical power from the same waste, 
lowering carbon emissions by the same amount.

NATURAL AND BIO-GAS 
Natural gas and bio-gas are predominantly methane which 
is hydrogen-rich. Hydrogen is released using a standard 
industrial process known as reforming (SMR). Developments in 
this field are leading to improving economics for the reforming 
process at smaller-scale steam methane.

COAL GASIFICATION
Coal can be gasified either underground or at the surface  
to produce hydrogen and carbon dioxide (which is captured, 
ready for storage if available). AFC Energy’s alkaline fuel cell 
systems enable the cleaner, more efficient use of coal for 
electricity generation as well as providing water required  
for the gasification process.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014625MW of waste hydrogen in Europe1%of world electricity consumption140£/MW revenue from  a double ROC** qualified plant1.3billion t/Yr amount of MSW* worldwide130number of bio-gas plants in the UK70%efficiency of SMR process for H2 production76manufacturing  sites in Europe40%more power  than a turbine48%of H2 today produced by  SMR globally50%expected power efficiency with  fuel cells85%of energy content of coal recovered1.5trillion tonnes estimated  coal reserves  if accessed05

The production of low-cost electricity that is 
competitive against mainstream forms of electricity 
generation has enormous market potential for a wide 
range of industrial settings, sectors and regions.

…and regions that offer attractive subsidies for electricity that is generated from fuel cells.

SOUTH KOREA 
Financial incentives paid for electricity generated from fuel  
cells makes South Korea a particularly attractive target market 
for AFC Energy fuel cell systems.

SOUTH EAST ASIA 
In Asia, Thailand is leading a push towards more efficient  
EFW solutions. Strong electrical and population growth  
together with government incentives and support makes  
EFW in Thailand attractive.

USA
Despite 2014 forecast being below 2013 actuals the US remains 
the largest potential for stationary fuel cells after Korea. With 
an estimated 52 MW installed in 2014, US legislature continues 
to support fuel cells via a number of Federal and state incentive 
plans, some of which extend out to 2020.

MW INSTALLED

EU – 6%

USA – 30%

Asia – 63%

Rest of the World – 1%

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201410%portion of renewable energy to be supplied by 2022 250$/MW market  value of power  from a fuel cell29million tonnes  of MSW available  by 20255.6%annual electrical growth over the  next 15 years600mile long hydrogen pipeline, the longest in the world2ndlargest user of  power in the world (second only to China)11.2MW installation of the worlds largest fuel cell power plant4.9%growth in MSW  per year over the next 10 years#1largest chlor- alkali producer  in the world06

Strategic Report and 
Operational review

issue over the next 12 months with a 
growing pipeline of opportunities that our 
team is continuing to develop both in our 
target markets, and elsewhere.

The significant improvements in the 
technical performance of the fuel cells 
in 2014 has positioned the company to 
accelerate the date for a commercial fuel 
cell demonstration of the KORE at its full 
design specification to the end of 2015, 
an improvement in the timeline of some 
eighteen months. Since taking over as 
Chief Executive, our technical teams have 
really began to demonstrate focus and 
clarity of objectives in pushing forward 
with this accelerated outcome, and I 
remain confident that we are now on the 
cusp of great success in 2015.

Operating Review
Technology
In last year’s operating review, we 
reported that we had extended the 
electrode life in the laboratory but more 
importantly had made good progress in 
increasing the power and the longevity 
of the cells and in the field, achieving 
outputs between 20% and 30% higher 
than before.

These results were achieved using the 
standard testing deck at Dunsfold – 
comprising 25 fuel cells – and during 
2014, three different stacks with the same 
electrode configuration were trialled, 
with a focus on achieving an operating 
temperature solely from the heat produced 
from cell reactions without a loss in cell 
performance. The power-to-heat ratio 
is a key operating parameter and is very 
important for extending the lifetime of any 
fuel cell. In addition, in a large system this 
will remove capital from the cost equation 
and improve overall system efficiency.

Pleasingly, the performance of the third 
stack trial saw an increase of 11.09% in 
electrical output relative to the first stack, 
producing the highest voltage output of 

any Beta-based fuel cell cartridge tested at 
AFC. The third stack was also started with a 
self-heating strategy and the very positive 
result from this trial allows AFC to freeze 
the electrode design and chemistry for the 
KORE system commissioning in mid-2015.

In early 2015, we look forward 
to commencing an operational 
performance monitoring of a 51 cell 
stack in an industrial environment before 
increasing this to 101 cells – the standard 
KORE size.

The progress made in 2013 in terms of 
preparation for higher production levels 
continued throughout 2014. We took 
delivery of an automated extruder early 
in the year and, in the fourth quarter, 
finally took delivery of our assembly robot 
from our partners GB Innomech and our 
production line is now “semi-automated”. 

The development of our patent portfolio 
has continued and is a vital part of 
securing our technology development 
and delivering value to our shareholders.

Funded projects
POWER-UP
This €6.1 million EU-part funded 
programme will be the world’s first 
demonstration of an alkaline fuel cell 
system on a large scale and will prove 
AFC’s ability to deliver the technical 
performance and economic viability  
that commercial end-users demand.

The Company has now set nine 
milestones it intends to achieve over 
the course of 2015 in relation to its 
programme with the key highlights being:

1 

2 

3 

 First power generation (up to 15kW)  
in July 2015

 Produce commercial revenue from 
KORE in Q4 2015 by connecting  
to the German grid

 Demonstrating 240kW power 
generation in December 2015

Chief Executive’s overview
I took over as Chief Executive on 
1 December 2014, having been a member 
of the Board as a non-executive director 
for just over two years. That experience 
has given me a strong insight into what 
I believe needs to be done at AFC 
Energy to capitalise on the tremendous 
opportunities available to us.

What my time at the Company has taught 
me is that AFC Energy is blessed with a 
tremendous technical team with a desire 
to succeed and most importantly, a 
technology that is unique and compelling. 
My primary objective from this point is 
to drive a renewed and intense focus on 
commercialisation, for which a successful 
POWER-UP programme is key. AFC 
must increasingly transition from a focus 
on technical development to a focus 
on commercial deployment in order to 
deliver value to shareholders. 

I am acutely aware that many shareholders 
have felt disappointed at the Company’s 
inability to secure material orders for its 
fuel cells or to take these orders forward 
to completion following an initial signing 
of MoUs – this is despite the genuine 
interest and desire for the product in a 
number of industrial and geographical 
markets. I hope to start rectifying this 

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201407

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Number of patents filed

“ I remain confident that we are now  
on the cusp of great success in 2015”
Adam Bond

Partners
With POWER-UP being our prime area of 
focus in 2015, our key partnerships revolve 
around that project. Air Products is a key 
partner, given it is their gas processing 
plant in Stade that is the location for our 
first operational KORE system.

However, new to our list of partners are 
Artelia and PlantIng, both in Germany, 
who are undertaking all engineering and 
design work associated with delivering the 
POWER-UP programme on site in Stade.

In the UK we continue to work closely 
with GB Innomech which has developed 
the robotic automated stack assembly/
disassembly system which enables 
the 101 fuel cell stack to be accurately 
assembled and aligned. The first round 
of 101 fuel cell stacks assembled utilising 
the automation process are expected to 
be transferred to Germany for initial trial 
in the first quarter of 2015.

Our ongoing partners continue to 
include Akzo Nobel, Waste2Tricity  
and Lancaster University.

Financial Overview
In 2014 AFC’s revenue again increased  
to £796,000 (2013: £768,000). 

Revenue for the year arose from a 
combination of licence fee and EU grant 
income. AFC continued to receive support 
from the EU by way of grants which 
strongly underpin the AFC research and 
development programme. Throughout 
the year and at the year end the company 
was actively engaged in three EU funded 
projects, Alkammonia, Laser-Cell and 
POWER-UP, with the focus increasingly on 
POWER-UP which entails the construction 
and delivery of the first KORE system to 
an operational site in Germany. These 
grants continue to allow the company to 
strengthen its technical and production 
teams in preparation for commercial 
production. R&D spend actually decreased 
slightly to £1.28 million (2013: £1.48 million) 

as more cost relating to the grant funded 
activity was included in cost of sales.

With commercial production imminent, 
the company continued to invest in plant, 
people and the premises at Dunsfold to 
facilitate the automation of production; 
a robot which will assemble fuel cell 
cartridges has been ordered and was 
delivered to the Dunsfold site and 
commissioned shortly after the year end.

Overall post tax losses to 31 October 
2014 were £5.8 million (2013: £4.1 million).

In October 2014 the Company raised 
funds through a placing and open offer 
to shareholders amounting to £6.1 million 
before expenses; the general meeting 
to approve the allotment of the new 
shares took place on 30 October so that 
£1.5 million of the funds raised were not 
received until after the balance sheet 
date. Cash balances at 31 October were 
£4.9 million (2013: £6.9 million).

AFC continues to focus significant efforts 
on its IP protection and registered a 
number of new patents this year. Each 
year the registered patents are reviewed 
and, where appropriate, written down to a 
realistic carrying value.

Financial risk management objectives
These are detailed in note 21 to  
the accounts.

Principal risks and uncertainties
The major risk faced by the business 
relates to the technical progress in 
development of the commercial fuel  
cell system. Financial risks include 
the risk of additional development 
expenditure being required to produce  
a commercial product.

Key Performance Indicators
AFC sets internal technical targets and 
milestones that are regularly reviewed. 
The Company closely monitors spending 
on its EU grant projects where costs are 
agreed ahead of the grant and measured 

against actual expenditure. The Company 
also maintains a cost model and monitors 
actual cost of production against expected 
costs and the Directors constantly review 
overall expenditure compared to budget 
and the Company’s cash position. At 
31 October 2014, the Company’s cash 
balance was in line with the target set.

Cash and cash equivalents at the year 
end were £4,858,203 (31 October 2013: 
£6,961,338).

Outlook
The fast-tracking of the delivery of the 
KORE and POWER-UP is a significant 
step forward for the Company and 2015 
is likely to be a pivotal year. Our future 
is in our own hands and I have great 
confidence in the ability of our technical 
team to deliver what we need and for 
the company as a whole to make the 
transition to an organisation focused  
on commercialisation. 

Our targets are ambitious, but in my view 
they must be and this makes it an exciting 
time to be a shareholder in AFC Energy. In 
order to ensure that my interests are fully 
aligned with the wider shareholder base, 
as well as underlining my confidence in 
the Company, I have agreed that a large 
percentage of my salary will be payable in 
shares and not cash. I strongly believe that 
AFC Energy will become a huge success and 
my intention is to create significantly greater 
value for all shareholders in the years ahead.

This report was approved by the board  
on 27 February 2015 and signed on its 
behalf by

Adam Bond
Chief Executive Officer
27 February 2015

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201408

Board of Directors

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AFC ENERGY PLC Report & Accounts for the year ended 31 October 201409

“Our aim is to become one of the  
lowest cost generators of electricity  
on an industrial scale”

1. Tim Yeo
Non-Executive Chairman
Tim Yeo has been MP for South Suffolk 
since 1983. He held various Ministerial 
posts under Margaret Thatcher and 
John Major, including Minister of State 
at the Department of the Environment. 
Between 1998 and 2005, he was a 
member of the Shadow Cabinet, 
shadowing a record seven different 
departments. Between 2005 and 2010, 
he was Chair of the Environmental Audit 
Committee and, since 2010, he has 
been the chairman of the ECC Select 
Committee. Tim holds a number of  
non-executive directorships in the 
energy and transport sectors, including 
Groupe Eurotunnel SA. He was appointed 
chairman of AFC Energy in 2007.

2. Adam Bond
Chief Executive Officer
Adam has over 15 years’ experience 
operating within the international energy 
sector both in executive management 
positions for listed energy companies, 
and in advisory capacities to both 
Governments and the private sector. 
Adam is well networked internationally 
across the conventional and 
unconventional energy sectors and has a 
strong understanding of energy markets 
and deal making within that sector.  
Adam’s mandate is focussed on driving 
AFC Energy’s transition to an industry 
leading alkaline fuel cell company, 
whose focus is on project execution in 
defined key global markets. Adam has 
been a Non-Executive Director of AFC 
Energy since 2012, is currently a Director 
of Waste2Tricity Ltd and is a member of 
the Supervisory Board of JS Yerostigaz 
(Uzbekistan). He is qualified with 
Bachelor degrees in commerce and law 
and a Master in Laws (Taxation). 

3. Christopher Tawney
Finance Director
Christopher Tawney brings over 25 years 
senior level experience in public and 
private businesses, and has extensive 
expertise in the cleantech and technology 
sectors. Most recently, Christopher was 
FD for three years at Algaecytes Limited, 
a biotechnology company. In addition, 
he also served as FD for Dettingen Ltd, 
a financial consultancy where he fulfilled 
similar boardroom roles for a number 
of early-stage cleantech companies 
including the solar power company, 
Sonnedix Solar LP, clean energy business, 
Coomtech Ltd, and a forestry carbon 
start-up, Global Oxygen.

4. Mitchell Field
Non-Executive Director
Mitchell, who lives in Wales, owns 
Richards and Appleby Ltd, which is 
engaged in the manufacture, sales and 
distribution of branded toiletries and 
cosmetics. Among these are Leighton 
Denny, and several well-known heritage 
brands, including ‘Cyclax’ which formerly 
held the Royal Warrant from Her Majesty 
the Queen. His principal role is sales 
and marketing, dealing with blue-chip 
companies in the UK and exporting 
to over 60 companies internationally. 
Mitchell has other investments and 
manages interests in fashion, property, 
import/export and general trading. 

5. Sir John Sunderland
Non-Executive Director
Sir John has a distinguished career 
spanning more than 40 years in 
leadership roles, including as the former 
chief executive and later as chairman 
of Cadbury Schweppes plc, where he 
steered the confectionery and beverage 
company through a period of major 
change and growth. He retired as 
chairman of Cadbury in 2008 after 40 
years with the company. He is currently 

a non-executive director of Barclays 
Bank plc, chairman of Cambridge 
Entertainment Group, an adviser to CVC 
Capital Partners and chairman of Merlin 
Entertainments plc. From 2004 to 2006,  
he served as President of the 
Confederation of British Industry. He is  
a Fellow of the Royal Society of Arts and 
was knighted in the Queen’s Birthday 
Honours 2006, for services to business.  
He is the Chancellor of Aston University.

6. Eugene Tenenbaum
Non-Executive Director
Eugene served as head of corporate 
finance for OAO Sibneft in Moscow from 
1998 through 2001. In 1994, he joined 
Salomon Brothers where he worked until 
1998. Prior to that, he spent five years in 
corporate finance with KPMG in Toronto, 
Moscow and London. He was an auditor 
at PriceWaterhouse in Toronto from 
1987 until 1989. Eugene is a chartered 
accountant and holds a bachelors degree 
in commerce and finance from the 
University of Toronto. He has numerous 
other directorships; notably, he is a 
member of the boards of Chelsea FC plc, 
Evraz plc (a FTSE 100-listed company) 
and Highland Gold Mining Ltd (an AIM-
quoted company).

7. Eugene Shvidler 
Non-Executive Director
Eugene worked at Russian oil major OAO 
Sibneft from 1996 through 2005, initially 
as senior vice president and, from 1998, 
as president of the company. Eugene is 
a graduate of the I. M. Gubkin Moscow 
Institute of Oil and Gas with a Masters 
in applied mathematics and he received 
an MBA and Masters in International 
Taxation from Fordham University in 
New York. He is currently non-executive 
Chairman of Highland Gold Mining 
Ltd, an AIM-quoted company, and is 
a member of the Board of Evraz plc, a 
FTSE 100-listed company.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201410

Directors’ Report

The Directors present their report together with the audited financial statements for the year ended 31 October 2014. The comparative 
period was from 1 November 2012 to 31 October 2013. Information required under the Companies Act 2006 (Strategic Report and 
Directors’ Report) Regulations 2013 has been included within the Directors report and accounts.

Principal activity and review of business developments
The principal activity of AFC Energy plc (or “the Company”) is the development of fuel cells.

Reviews of operations, business developments and current projects are included in the Chairman’s Statement and the Strategic 
Report and Operational Review.

Results and dividend
The results for the year are set out in the Statement of Comprehensive Income on page 18.

No dividends were paid in the year. The Directors do not intend to declare a dividend in respect of the year.

Directors and their interests
The Directors who served during the year were:

Tim Yeo

Ian Balchin

Ian Williamson

Non-Executive Chairman

Deputy Chairman and Chief Strategy Officer (resigned 18 November 2013)

Chief Executive Officer (resigned 30 November 2014)

Christopher Tawney

Finance Director (appointed 16 September 2014)

Jane Dumeresque

Finance Director (resigned 3 June 2014)

Dr Gene Lewis

Adam Bond

Mitchell Field

Sir John Sunderland

Eugene Shvidler

Eugene Tenenbaum

Technical Director (resigned 27 November 2014)

Non-Executive (appointed Chief Executive Officer on 1 December 2014)

Non-Executive

Non-Executive 

Non-Executive 

Non-Executive 

A Director appointed during or after the year must stand for re-appointment at the first Annual General Meeting after such 
appointment. Accordingly Christopher Tawney offers himself for re-election. In addition, Tim Yeo is required to retire by rotation  
in accordance with the Company’s Articles of Association and, being eligible, offers himself for re-election.

On 31 October 2014 the beneficial interests of Directors and their families in the equity share capital of the Company were:

Tim Yeo

Dr Gene Lewis

Mitchell Field

Sir John Sunderland

Eugene Shvidler

Ian Williamson

Christopher Tawney

Number of Ordinary 
shares of 0.1p 
2014

Number of Ordinary 
shares of 0.1p 
2013

877,272

45,000

2,644,810

420,270

777,272

10,000

2,144,810

370,270

13,853,633

12,043,633

50,000

50,000

–

–

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201411

On 31 October 2014 the Directors’ interests over share capital of the Company were:

Tim Yeo

1 November 
2013

1,100,000

1,000,000

Dr Gene Lewis

1,954,000

Options/ 
Warrants 
granted in 
year

Options/ 
Warrants 
exercise/
lapsed in 
year

31 October 
2014

Exercise  
price

Date from 
which 
exercisable1

Expiry  
date 

Type

–

–

–

–

–

–

1,100,000

1,000,000

1,954,000

£0.031

18/04/2012

17/04/2019

Warrant

£0.240

14/04/2013

13/04/2020

Warrant

£0.240

14/04/2013

13/04/2020

Warrant

Mitchell Field

Ian Williamson

40,909

–

38,709

40,909

38,709

350,000

750,000

500,000

500,000

40,909

–

–

–

–

–

–

48,387

–

–

–

–

–

–

–

–

350,000

750,000

500,000

500,000

40,909

48,387

£0.220

01/06/2016

01/12/2016

£0.186

01/09/2017

01/03/2018

SAYE

SAYE

£0.031

18/04/2012

17/04/2019

Warrant

£0.240

14/04/2013

13/04/2020

Warrant

£0.320

08/11/2013

07/11/2021

EMI option

£0.320

08/11/2014

07/11/2021

EMI option

£0.220

01/06/2016

01/12/2016

£0.186

01/09/2017

01/03/2018

SAYE

SAYE

Note:
1  Warrants/Options exercisable from/after 14 April 2013 are subject to achievement of performance conditions.

Adam Bond and Eugene Tenenbaum had no direct interest over share capital during the reporting period.

Directors’ remuneration

Name

Tim Yeo (see note 25)

Ian Williamson

Ian Balchin

Jane Dumeresque

Dr Gene Lewis

Adam Bond (see note 25)

Mitchell Field (see note 25)

Sir John Sunderland (see note 25)

Eugene Tenenbaum

Eugene Shvidler

Christopher Tawney

Salary 
 £

19,800

260,606

138,660

51,000

147,413

–

13,600

13,600

11,200

11,200

23,833

Share-based 
payment 
expense  
£

Other 
compensation1 
£

Company 
pension 
contributions 
£

Total  
2014  

£

–

77,136

–

–

6,693

–

–

–

–

–

–

38,525

16,871

3,469

486

1,401

25,567

11,400

8,000

6,000

6,000

–

Total 
 2013  

£

81,942

378,114

–

58,325

8,000

370,613

–

–

183,400

183,400

51,486

8500

4,569

160,076

183,318

–

–

–

–

–

–

25,567

25,000

21,600

17,200

17,200

23,833

17,916

41,385

27,409

16,222

16,222

–

Note:
1  Other compensation includes private medical insurance, company car, benefits and consultancy fees.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201412

Directors’ Report

Directors’ service contracts
Tim Yeo’s services as a Chairman and Non-Executive Director are provided under a service agreement with the Company dated 
1 January 2012 for an indefinite term, subject to a minimum of six months’ notice. Additional consultancy services are provided 
under an agreement between the Company and Locana Corporation (London) Ltd dated 1 January 2012.

Ian Williamson’s services are provided under a service agreement with the Company dated 7 November 2011 for an indefinite term, 
subject to six months’ notice by either party.

Dr Gene Lewis’s services are provided under a service agreement with the Company dated 3 June 2011 for an indefinite term, 
subject to twelve months’ notice by either party.

Adam Bond’s services as a Non-Executive Director are provided under an agreement between the Company and Linc Energy Ltd 
dated 23 May 2012, subject to a minimum of six months’ notice (see also note 25).

Mitchell Field’s services as a Non-Executive Director are provided under the terms of a Non-Executive letter dated 17 October 2013 
for an indefinite term, subject to a minimum of six months’ notice (see also note 25). Additional consultancy services are provided 
under an agreement between the Company and Richards & Appleby Ltd dated 17 October 2013.

Sir John Sunderland’s services as a Non-Executive Director are provided under an agreement between the Company and  
John Sunderland Associates Ltd dated 8 March 2012, subject to a minimum of six months’ notice (see also note 25).

Eugene Shvidler’s services as a Non-Executive Director are provided under the terms of a letter of appointment, dated 
17 October 2013, for an indefinite term, subject to a minimum of six months’ notice. Additional consultancy services are provided 
under an agreement between the Company and Eugene Shvidler dated 17 October 2013.

Eugene Tenenbaum’s services as a Non-Executive Director are provided under the terms of a letter of appointment, dated 
17 October 2013, for an indefinite term, subject to a minimum of six months’ notice. Additional consultancy services are provided 
under an agreement between the Company and Eugene Tenenbaum dated 17 October 2013.

Christopher Tawney’s services are provided under a service agreement with the Company dated 18 August 2014 for an indefinite 
term, subject to six months’ notice by either party.

Board changes
Details of changes to the membership of the Board are disclosed within the ‘Directors and their interests’ section on page 10.

Capital structure
Details of the Company’s share capital are disclosed in notes 17 and 18 the financial statements.

Shareholder funds have been used for the development and testing of industrial scale fuel cell systems than can compete with 
conventional electricity generation technologies.

On 27 February 2015, the Company was aware of the following holdings of 3% or more in the Company’s issued share capital:

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014continued13

Number  
of shares

38,021,149

23,100,000

22,602,420

22,000,705

15,534,222

14,565,040

13,853,633

10,034,886

Approximate 
percentage of the 
Company’s issued 
share capital

13.26%

8.05%

7.88%

7.67%

5.42%

5.08%

4.83%

3.50%

Ervington Investments Limited

Lanstead Capital

Age of Reason Foundation

Linc Energy Limited

TD Direct Investing Nominees

Barclayshare Nominees Limited

Eugene Shvidler

Hargreaves Lansdown (Nominees) Limited

Financial Instruments
Financial instruments are disclosed in note 21.

Political and charitable donations
Charitable donations in the year amounted to £Nil (2013: £Nil).

Corporate governance
The Directors seek, as far as is considered appropriate having regard to the size and nature of activities of the Company, to comply 
with the Combined Code on Corporate Governance applicable to listed companies. The Board is assisted in this regard by a number 
of committees with delegated authority.

The Company’s organisational structure has clearly documented and communicated levels of responsibility, delegated authority and 
reporting procedures. The professionalism and competence of employees is maintained through recruitment, performance appraisal, 
written job descriptions, personal training and development plans. The Board supports the highest levels of commitment and integrity 
from employees. Expected standards of behaviour are set out in the Staff Handbook, a copy of which is given to all employees.

Audit Committee
The Company’s Audit Committee members during the financial year were Mitchell Field (chairman), Sir John Sunderland, Adam 
Bond and Eugene Tenenbaum. The Committee meets at least twice a year, on dates linked to the Company’s financial calendar, and 
at any other time when it is appropriate to discuss audit, accounting or control issues.

The Committee’s principal responsibilities are:

• 

• 

• 

• 

• 

• 

to monitor the integrity of the financial statements of the Company, reviewing the annual and interim financial statements to 
ensure that they present a balanced assessment of the Company’s position;

to review accounting policies;

to review with the management and the Company’s external Auditor the effectiveness of internal controls;

to oversee the publication of reserve and resource statements to ensure compliance with best practice under AIM rules;

to review with the Company’s external Auditor the scope and results of their audit; and

to oversee the relationship with the Auditor.

The Auditor attends meetings of the Committee except when their appointment or performance is being reviewed. Executive 
Directors attend as and when appropriate.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201414

Directors’ Report

Remuneration Committee
The Remuneration Committee’s members during the financial year were Sir John Sunderland (Chairman), Tim Yeo, and Mitchell 
Field. The Committee reviews the performance of the Executive Directors and sets the scale and structure of their remuneration 
and the basis of their service agreements. In determining remuneration, the Committee seeks to enable the Company to attract and 
retain Executives of the highest calibre. In doing so, the Committee takes advice as appropriate from external advisers on executive 
remuneration. The Committee also makes recommendations to the Board concerning allocation of share options to employees.

No Directors participate in discussions or decisions concerning their own remuneration. This Committee is also responsible for 
nominating candidates, for the approval of the Board, to fill either Executive or Non-Executive vacancies or additional appointments 
to the Board. The Committee retained independent search consultants in respect of the appointment of the Chief Executive and 
Finance Director.

Details of the Directors’ remuneration, service agreements and their interests in the share capital of the Company are disclosed in 
the Directors’ Report.

Employees
AFC is an equal opportunities employer and it is our policy to ensure that all job applicants and employees are treated fairly and 
on merit, regardless of their race, gender, marital status, age, disability, religious belief or sexual orientation. In common with 
many organisations we operate a performance appraisal system, the aim of which is to support employees to contribute fully 
to the organisation and to assist them to fulfil their potential. The Company encourages the involvement of its employees in its 
performance through both its Save As You Earn Scheme and its Share Option plan. 

AIM Rules Compliance Committee
The AIM Rules Compliance Committee comprises Tim Yeo, Mitchell Field and Sir John Sunderland and meets as appropriate.  
The Committee monitors internal procedures, resources and controls to enable the Company to comply with AIM rules.

Information disclosed in the Strategic Report and Operational Review
The following matters required to be disclosed in this Report under the Large and Medium-sized Companies and Groups (Accounts 
and Reports) Regulations 2008 are covered in the Strategic Report on pages 6 to 7: the principal risks and uncertainties and key 
performance indicators.

Payments to creditors
The Company’s policy is to settle the terms of payment with its suppliers when agreeing the terms of each transaction, either by 
accepting the suppliers’ terms or by making the suppliers aware of alternative terms, and to abide by the agreed terms. Trade 
creditors of the Company at 31 October 2014 represented 128 days (2013: 97 days) of annual purchases.

Liability insurance for Company officers
The Company maintains Directors’ and Officers’ liability insurance cover for its Directors and officers to the extent permitted under 
the Companies Act 2006.

Research and development
The Company invests substantially in research and development and makes claims under the Government’s R&D tax credit scheme. 
In the year to 31 October 2014, relevant expenditure totalled £1,284,044 (2013: £1,478,542).

Going concern
The Company has cash of £4,858,203 at 31 October 2014 and the Directors are satisfied that the Company has sufficient resources  
to continue its operations and to meet its commitments for the foreseeable future.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014continued15

Post-balance sheet events
Details of post-balance sheet events are provided in note 23 to the financial statements.

Relations with Shareholders
The Board attaches great importance to maintaining good relationships with Shareholders. The Board regards the Annual General 
Meeting as an opportunity to communicate directly with investors, who are encouraged to attend and participate.

Auditor
A resolution to reappoint the Auditor of the Company, Jeffreys Henry LLP, will be proposed at the forthcoming Annual General 
Meeting. Jeffreys Henry LLP have expressed their willingness to continue as Auditor of the Company.

This report was approved by the board on 27 February 2015 and signed on its behalf by

Christopher Tawney
Finance Director and Company Secretary

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201416

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report 
and financial statements in accordance with applicable law and 
International Financial Reporting Standards.

Company law requires the Directors to prepare financial 
statements for each financial period. Under that law the 
Directors have elected to prepare the financial statements in 
accordance with International Financial Reporting Standards as 
adopted for use in the European Union. The financial statements 
are required by law to give a true and fair view of the state of 
affairs of the Company and of the profit or loss of the Company 
for that period. In preparing those financial statements, the 
Directors are required to:

• 

select suitable accounting policies and then apply  
them consistently;

•  make judgements and estimates that are reasonable  

and prudent;

• 

state whether applicable accounting standards have been 
followed, subject to any material departures disclosed and 
explained in the financial statements; and

•  prepare the financial statements on the going concern basis 

unless it is inappropriate to presume that the Company will 
continue in business.

The Directors confirm that they have complied with the above  
in preparing the financial statements.

The Directors are responsible for keeping adequate accounting 
records which disclose with reasonable accuracy at any time the 
financial position of the Company and enable them to ensure 
that the financial statements comply with the Companies Act 
2006. They are also responsible for safeguarding the assets 
of the Company and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity 
of the Company’s website (www.afcenergy.com) and legislation 
in the United Kingdom governing the preparation and 
dissemination of financial statements may differ from legislation 
in other jurisdictions.

Statement of disclosure to Auditor
So far as the Directors are aware, there is no relevant audit 
information (as defined by section 418 of the Companies Act 
2006) of which the Company’s Auditor is unaware, and each 
Director has taken all the steps that he ought to have taken as 
a Director in order to make himself aware of any relevant audit 
information and to establish that the Company’s Auditor is aware 
of that information. This confirmation is given and should be 
interpreted in accordance with section 418 of the Companies 
Act 2006.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201417

Independent Auditor’s Report

to the Shareholders of AFC Energy plc

We have audited the financial statements of AFC Energy plc for 
the year ended 31 October 2014 which comprise the Statement 
of Comprehensive Income, the Statement of Financial Position, 
the Cash Flow Statement, the Statement of Changes in Equity 
and the related notes. The financial reporting framework that 
has been applied in their preparation is applicable law and 
International Financial Reporting Standards (IFRSs) as adopted 
by the European Union.

This report is made solely to the Company’s members, as a 
body, in accordance with Chapter 3 of Part 16 of the Companies 
Act 2006. Our audit work has been undertaken so that we might 
state to the Company’s members those matters we are required 
to state to them in an auditor’s report and for no other purpose. 
To the fullest extent permitted by law, we do not accept or 
assume responsibility to anyone other than the Company and 
the Company’s members as a body, for our audit work, for this 
report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors 
As explained more fully in the Statement of Directors’ 
Responsibilities set out on page 16, the Directors are 
responsible for the preparation of the financial statements 
and for being satisfied that they give a true and fair view. Our 
responsibility is to audit and express an opinion on the financial 
statements in accordance with applicable law and International 
Standards on Auditing (UK and Ireland). Those standards 
require us to comply with the Auditing Practices Board’s (APB’s) 
Ethical Standards for Auditors.

Scope of the audit of the financial statements 
An audit involves obtaining evidence about the amounts 
and disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free  
from material misstatement, whether caused by fraud or error. 
This includes an assessment of: whether the accounting policies 
are appropriate to the Company’s circumstances and have  
been consistently applied and adequately disclosed;  
the reasonableness of significant accounting estimates  
made by the Directors; and the overall presentation of the 
financial statements.

In addition, we read all financial and non-financial information in 
the Chairman’s Statement, the Strategic Report and Operational 
Review and the Directors’ Report to identify material 
inconsistencies with the audited financial statements and to 
identify any information that is apparently materially incorrect 
based on, or materially inconsistent with, the knowledge 
acquired by us in the course of performing the audit. If we 
become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report.

Opinion on financial statements
In our opinion the financial statements:

•  give a true and fair view of the state of the Company’s affairs 
at 31 October 2014 and of its loss for the year then ended;

• 

• 

 have been properly prepared in accordance with IFRSs as 
adopted by the European Union; and

 have been prepared in accordance with the requirements of 
the Companies Act 2006.

Opinion on other matters prescribed by the 
Companies Act 2006
In our opinion:

• 

the information given in the Strategic Report and  
Directors’ Report for the financial year for which the  
financial statements are prepared is consistent with the 
financial statements.

Matters on which we are required to  
report by exception
We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you 
if, in our opinion:

•  adequate accounting records have not been kept; or

• 

the financial statements are not in agreement with the 
accounting records and returns; or

•  certain disclosures of Directors’ remuneration specified by 

law are not made; or

•  we have not received all the information and explanations we 

require for our audit.

Jonathan Isaacs 
(Senior statutory Auditor) 
for and on behalf of
Jeffreys Henry LLP
Statutory Auditor
Chartered Accountants & Registered Auditors
Finsgate
5–7 Cranwood Street
London
EC1V 9EE

27 February 2015

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201418

Statement of Comprehensive Income

for the year ended 31 October 2014

Revenue

Cost of sales

Gross (loss)/profit

Other income

Administrative expenses

Analysed as:

Administrative expenses

Equity-settled share-based payments

Operating loss

Financial income

Loss before tax

Taxation

Loss for the financial year and total comprehensive 
loss attributable to owners of the Company

Basic loss per share

Diluted loss per share

All amounts relate to continuing operations.

The notes on pages 22 to 39 form part of these financial statements.

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

Note

782,236

(1,029,460)

759,441

(542,924)

(247,224)

216,517

13,899

8,990

(5,673,639)

(4,842,468)

(5,433,671)

(239,968)

(5,906,964)

(4,459,053)

(383,415)

(4,616,961)

48,667

114,374

(5,858,297)

(4,502,587)

421,280

365,939

(5,437,017)

(4,136,648)

(2.42)p

(2.42)p

(1.88)p

(1.88)p

18d

5

8

9

10

10

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Statement of Financial Position

as at 31 October 2014

19

Assets

Non-current assets

Intangible assets

Property and equipment

Investment

Trade and other receivables

Current assets

Inventory and work in progress

Trade and other receivables

Cash and cash equivalents

Total assets

Capital and reserves attributable to owners of the Company

Share capital

Share premium

Other reserve

Retained deficit

Total equity attributable to Shareholders

Current liabilities

Trade and other payables

Total equity and liabilities

Note

31 October 2014 
£

31 October 2013 
£

11

12

13

15

14

15

16

17

17

19

279,073

609,441

52,500

479,761

180,733

858,806

52,500

–

1,420,775

1,092,039

157,048

4,256,801

4,858,203

9,272,052

174,469

1,717,808

6,961,338

8,853,615

10,692,827

9,945,654

285,684

33,332,478

3,032,472

223,325

27,566,408

2,792,504

(27,089,095)

(21,652,078)

9,561,539

8,930,159

1,131,288

1,131,288

1,015,495

1,015,495

10,692,827

9,945,654

The notes on pages 22 to 39 form part of these financial statements.

These financial statements were approved and authorised for issue by the Board on 27 February 2014.

Tim Yeo 
Chairman 

Christopher Tawney
Finance Director and Company Secretary

AFC Energy plc 
Registered number: 05668788

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201420

Statement of Changes in Equity

for the year ended 31 October 2014

Share  
Capital 
£

Share  
Premium 
£

Other  
Reserve 
£

Retained  
Loss 
£

Total  
Equity 
£

Balance at 1 November 2012

217,299

27,221,606

2,409,089

(17,515,430)

12,332,564

Loss after tax for the year

Total recognised in income and expense for the year

Issue of equity shares

Share issue expenses

Equity-settled share-based payments

–

–

–

–

6,026

344,802

–

–

–

–

–

–

–

–

383,415

(4,136,648)

(4,136,648)

(4,136,648)

(4,136,648)

–

–

–

350,828

–

383,415

Balance at 31 October 2013

223,325

27,566,408

2,792,504

(21,652,078)

8,930,159

Loss after tax for the year

Total recognised in income and expense for the year

–

–

–

–

Issue of equity shares

62,359

5,766,070

–

–

–

Equity-settled share-based payments

–

–

239,968

(5,437,017)

(5,437,017)

(5,437,017)

(5,437,017)

–

–

5,828,429

239,968

Balance at 31 October 2014

285,684

33,332,478

3,032,472

(27,089,095)

9,561,539

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 credit to equity in respect of equity-settled share-based payments.

Retained earnings represent the cumulative loss of the Company attributable to equity Shareholders.

The notes on pages 22 to 39 form part of these financial statements.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Cash Flow Statement

for the year ended 31 October 2014

21

Note

31 October 2014 
£

31 October 2013 
£

Cash flows from operating activities

Loss before tax for the year

Adjustments for:

Depreciation and amortisation

Impairment of intangible assets

Equity-settled share-based payment expenses

18d

Finance income

Cash flows from operating activities before  
changes in working capital and provisions

Corporation tax received

(Increase)/Decrease in Inventory and Work in Progress

(Increase)/Decrease in trade and other receivables

Increase/(Decrease) in trade and other payables

Cash absorbed by operating activities

Cash flows from investing activities

Purchase of plant and equipment

Acquisitions of patents

Increase in investment

Interest received

Net cash absorbed by investing activities

Cash flows from financing activities

Proceeds from the issue of share capital

Costs of issue of share capital

Derivative financial asset

Net cash from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at start of year

Cash and cash equivalents at 31 October 2014

The notes on pages 22 to 39 form part of these financial statements.

12

11

8

15

16

(5,858,297)

(4,502,587)

312,487

–

239,968

(48,667)

464,432

118,314

383,415

(114,374)

(5,354,509)

(3,650,800)

361,174

17,421

(1,724,978)

115,793

–

(47,450)

(674,421)

577,786

(6,585,099)

(3,794,885)

(51,247)

(110,215)

–

48,667

(112,795)

6,232,428

(403,999)

(1,233,670)

4,594,759

(2,103,135)

6,961,338

4,858,203

(471,292)

(123,136)

(50,000)

114,374

(530,054)

350,828

–

–

350,828

(3,974,111)

10,935,449

6,961,338

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201422

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 as issued by the 
International Accounting Standards Board and with those  
parts of the Companies Act 2006 applicable to companies 
reporting under IFRS.

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. New and Revised standards adopted by the Company
• 

IFRS 10 Consolidated Financial Statements is effective from 
1 January 2013. This requires a parent to present consolidated 
financial statements as those of a single economic entity, 
replacing the requirements previously contained in IAS 27 
Consolidated and Separate Financial Statements and SIC-12 
Consolidation – Special Purpose Entities. 

• 

• 

• 

IFRS 11 Joint Arrangements is effective from 1 January 2013. 
The core principle of the standard is that a party to a joint 
arrangement determines type of joint arrangements in which 
it is involved by assessing the rights and obligations and 
accounts for those rights and obligations in accordance with 
the type of joint arrangement. Joint ventures now must be 
accounted for using the equity method. Joint operator which 
is a newly defined term recognises its assets, liabilities, 
revenues and expenses and relative shares thereof.

IFRS 12 Disclosures of Interests with Other Entities is 
effective from 1 January 2013. It requires increased 
disclosure about the nature, risks and financial effects of 
an entity’s relationship with other entities along with its 
involvement with other entities. 

IFRS 13 Fair Value Measurement is effective from 
1 January 2013. It defines fair value, sets out in a single  
IFRS a framework for measuring fair value and requires 
disclosures about fair value measurements. It includes a 
three-level fair value hierarchy which prioritises the inputs 
in a fair value measurement.

• 

• 

• 

IAS 19 ‘Employee benefits’ is effective for annual periods 
beginning on or after 1 January 2013. It changes a number of 
disclosure requirements for post-employment arrangements 
and restricts the options available on how to account for 
defined benefit pension plans. 

IAS 27 Separate Financial Statements. Requires that when an 
entity prepares separate financial statements, investments 
in subsidiaries, associates, and jointly controlled entities 
are accounted for either at cost, or in accordance with 
IFRS 9 Financial Instruments/IAS39 Financial Instruments: 
Recognition and Measurement.

IAS 28 Investments in Associates and Joint Ventures. This 
standard supersedes IAS 28 Investments in Associates and 
prescribes the accounting for investments in associates and 
sets out the requirements for the application of the equity 
method when accounting for investments in associates and 
joint ventures.

•  The IASB issued improvement to IFRSs (2011), an omnibus  
of amendments to its IFRS standards. The amendments  
have been adopted as they become effective for annual 
periods on or after 1 January 2011. They include:

– 

– 

– 

– 

 Amendments to IAS 12 – Deferred tax; recovery of 
underlying assets

 Amendments to IAS 1 – Presentation of items of  
other comprehensive Income

 Amendments to IFRS 7 – Disclosures; offsetting  
financial assets and financial liabilities

 Amendment to IAS 32 – Offsetting financial assets  
and financial liabilities 

–  Amendments to IFRS 1 – Government Loans

There is no impact from the adoption of the above amendments 
on the Company’s financial position or performance.

b. Standards, amendments and interpretations to  
published standards not yet effective
At the date of authorisation of these consolidated 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 
consolidated financial statements:

• 

IAS 32 Financial Instruments: Presentation is effective 
from 1 January 2014. The standard outlines the accounting 
requirements for the presentation of financial instruments, 
particularly as to the classification of such instruments into 
financial assets, financial liabilities and equity instruments. 
The standard also provides guidance on the classification 
of related interest, dividends and gains/losses, and when 
financial assets and financial liabilities can be offset.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014 
 
 
 
 
23

• 

• 

• 

IAS 36 Impairment of Assets is effective from 1 January 
2014. The standard seeks to ensure that an entity’s assets are 
not carried at more than their recoverable amount (i.e. the 
higher of fair value less costs of disposal and value in use).

IAS 39 Financial Instruments: Recognition and Measurement 
is effective from 19 November 2013. It outlines the 
requirements for the recognition and measurement of 
financial assets, financial liabilities, and some contracts to 
buy or sell non-financial items.

IFRS 9 Financial Instruments is effective from 1 January 2015. 
This standard includes requirements for recognition and 
measurement, derecognition and hedge accounting.

g. 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.

h. Trade and other receivables
Trade and other receivables arise principally through the 
provision by the Company of goods and services to customers 
(trade debtors). 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.

The Company expects no impact from the adoption of the 
above amendments on its financial position or performance.

c. 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.

d. 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. Licence income is 
recognised in accordance with the substance of the agreement. 
When a licensee has the right to use certain technology for 
a specified period of time, this is usually on a straight-line 
basis over the life of the agreement in accordance with IAS 18. 
Revenue based grants , including grants from the European 
Union, are recognised in the profit and loss account in the 
same period as the expenditure to which the grant relates.

e. Development costs
Development expenditure does not meet the strict criteria  
for capitalisation under IAS 38 and has been recognised as  
an expense.

f. 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.

i. 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.

j. 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.

Leases in which the Company assumes substantially all the risks 
and rewards of ownership of the leased asset are classified as 
finance leases. Leased assets acquired by way of finance lease 
are stated at an amount equal to the lower of their fair value and 
the present value of the minimum lease payments at inception of 
the lease, less accumulated depreciation and impairment losses.

Depreciation is charged to the income statement 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

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201424

2. Basis of preparation and accounting 
policies continued
j. Property and equipment continued
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 income statement.

k. Intangible assets
Expenditure on research activities is recognised in the income 
statement 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 income statement.

l. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call 
deposits with major banking institutions realisable within 
12 months.

m. 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 Income Statement pending delivery to the customer. 
The carrying value is fair value.

n. 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 or, if lower, at the present value of the minimum 
lease payments. 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 profit or loss. Capitalised leased 
assets are depreciated over the shorter of the estimated useful life 
of the asset and the lease term, if there is no reasonable certainty 
that the Company will obtain ownership by the end of the lease term.

Operating leases
Operating lease rentals are charged to the Income Statement  
on a straight-line basis over the lease term.

o. 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.

p. Financial instruments 
Financial assets and liabilities are recognised on the balance 
sheet when the Group becomes a party to the contractual 
provisions of the instrument. 

–  Cash and cash equivalents comprise cash held at bank and 

short term deposits 

–  Trade payables are not interest bearing and are stated at their 

nominal value 

–  Equity instruments issued by the Group 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.

q. Valuation of derivative financial asset 
The Company has placed shares with Lanstead Capital L.P. 
and at the same time entered into equity swap and interest 
rate swap agreements 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 is dependent on the 
Company’s share price performance. At each period end the 
amount receivable is restated based on the share price of the 
Company at that date. Any change in the value of the receivable 
is reflected in the income statement.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Notes forming part of the Financial Statementscontinued 
 
25

r. 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 a binomial 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 
income statement on the date of cancellation.

s. Provisions
Provisions are recognised when the Group has a present 
obligation as a result of a past event and it is probable that the 
Group 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.

t. Taxation
Tax on the profit or loss for the year comprises current and 
deferred tax. Tax is recognised in the income statement 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.

3. Significant accounting estimates and judgements
Carrying values of property and equipment
The Company monitors internal and external indicators 
of impairment relating to its property and equipment. 
Management has considered whether any indicators of 
impairment have arisen over certain assets relating to these 
assets. After assessing these, management has concluded that 
no impairment has arisen during the year and subsequent to  
31 October 2014 (2013: £Nil). 

Useful lives and impairment of intangible assets, and 
property and equipment
Intangible assets, and property and equipment are amortised 
or depreciated 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 with its patent 
attorneys, management has concluded that no impairment has 
arisen with respect to intangible assets during the year and 
subsequent to 31 October 2014 (2013: £118,314).

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 it would not be appropriate 
to capitalise development expenditure incurred during the year 
ended 31 October 2014.

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.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201426

3. Significant accounting estimates and judgements continued
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.

Licence fees
Licence fees are recognised on a straight line basis over the life of the licence, with payments being received in staggered 
instalments. Fees which are contingent on an event are recognised when the Company believes that it is probable that the event  
will occur.

Going Concern 
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.

4. Segmental analysis
A segment is a distinguishable component of the Company that is engaged in providing products or services in a particular business 
sector (business segment) or in providing products or services in a particular economic environment (geographic segment), which is 
subject to risks and rewards that are different in those other segments. The Company operated in the year in one business segment, 
the development of fuel cells, and in one principal geographic segment the United Kingdom.

5. Operating loss
This has been stated after: 

Government grants received and receivable

Loss on derivative financial asset

Depreciation/Impairment of property and equipment

Research and Development expenditure

Amortisation/Impairment of intangible assets

Equity-settled share-based payment expense

Foreign exchange differences

Auditor’s remuneration – audit

Auditor’s remuneration – tax

Auditor’s remuneration – other services

Year ended 
31 October 2014 
£

Year ended 
31 October 2013
 £

(591,269)

636,330

300,612

1,284,044

11,875

239,968

44,211

20,000

2,500

14,360

(341,651)

–

432,831

1,478,542

149,915

383,415

15,881

15,000

2,500

2,000

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Notes forming part of the Financial Statementscontinued27

Year ended  
31 October 2014
Number

Year ended  
31 October 2013 
Number

37

12

49

£

2,214,039

247,339

239,968

2,701,346

33

5

38

£

2,140,744

248,876

383,415

2,773,035

Year ended  
31 October 2014 
£

Year ended  
31 October 2013
 £

667,078

80,535

83,829

82,923

12,569

926,934

58,325

370,613

8,000

589,174

112,026

247,777

174,554

–

1,123,531

81,942

378,114

–

6. Staff numbers and costs, including Directors
The average numbers of employees in the year were:

Support, operations and technical

Administration

The aggregate payroll costs for these persons were:

Wages and salaries (including Directors’ emoluments)

Social security

Equity-settled share-based payment expense

7. Directors’ remuneration

Wages and salaries

Social security

Equity-settled share-based payment expense

Other compensation (see note 25)

Company pension contributions

The emoluments of the Chairman

The emoluments of the highest-paid Director

Company pension contributions of highest paid director

The remuneration, details of share options and interests in the Company’s shares of each Director are shown in the Directors’ Report 
on pages 10 to 15.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201428

8. Financial income

Bank interest receivable

Total interest receivable

9. Taxation 

Recognised in the income statement

Research and development tax credit – current year

Total tax credit

Reconciliation of effective tax rates

Loss before tax

Tax using the domestic rate of corporation tax of 21.67% (2013: 23.42%)

Effect of:

Expenses not deductible for tax purposes

Above the line tax credit

Research and development allowance

Research and development tax credit

Depreciation in excess of capital allowances

Losses surrendered for research and development

Unutilised losses carried forward

Total tax credit for the year

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

48,667

48,667

114,374

114,374

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

421,280

421,280

365,939

365,939

(5,858,297)

1,269,298

(4,502,587)

1,054,507

151,115

19,643

(347,762)

421,280

65,133

625,971

755,198

421,280

126,098

–

(432,843)

365,939

3,642

779,117

578,491

365,939

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Notes forming part of the Financial Statementscontinued29

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 £5,437,017 
(2013: loss of £4,136,648) and a weighted average number of shares in issue for the year.

Basic loss per share (pence)

Diluted loss per share (pence)

Loss attributable to equity Shareholders

Weighted average number of shares in issue

Year ended 
31 October 2014

Year ended 
31 October 2013 

(2.42)p

(2.42)p

(1.88)p

(1.88)p

(5,437,017)

(4,136,648)

Number

Number

224,533,287

220,570,011

Diluted earnings per share
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

Cost

Balance at 1 November

Additions (developed internally)

Balance at 31 October

Amortisation

Balance at 1 November

Charge for the year

Impairment

Balance at 31 October

Net book value

2014  
Patents 
£

637,898

110,215

748,113

457,165

11,875

–

469,040

279,073

2013  
Patents 
£

514,762

123,136

637,898

307,250

31,601

118,314

457,165

180,733

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201430

12. Property and equipment

Leasehold 
improvements
 £

Fixtures, fittings 
 and equipment 
£

Motor Vehicles 
£

Total 
£

Cost

At 31 October 2012

Additions

At 31 October 2013

Additions

At 31 October 2014

Depreciation

At 31 October 2012

Charge for the year

At 31 October 2013

Charge for the year

At 31 October 2014

Net Book Value

At 31 October 2014

At 31 October 2013

216,197

5,315

221,512

51,247

272,759

196,578

16,479

213,057

27,047

240,104

32,655

8,455

2,238,469

455,482

2,693,951

–

2,693,951

1,437,743

409,647

1,847,390

270,067

2,117,457

576,494

846,561

–

10,495

10,495

–

10,495

–

6,705

6,705

3,498

10,203

292

3,790

2,454,666

471,292

2,925,958

51,247

2,977,205

1,634,321

432,831

2,067,152

300,612

2,367,764

609,441

858,806

There are no assets held under finance leases.

13. Investment
The Company holds 23% in Waste2Tricity Ltd (W2T) (a company registered in England & Wales). As at 31 October 2014 the Company 
held 230,000 shares representing 23% (2013: 230,000 representing 23%) of the share capital of W2T.

Investment in W2T

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

52,500

52,500

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Notes forming part of the Financial Statementscontinued31

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

88,304

68,744

157,048

105,724

68,745

174,469

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

787,075

753,909

2,715,817

4,256,801

479,761

4,736,562

726,969

–

990,839

1,717,808

–

1,717,808

14. Inventory and work in progress

Inventory

Work in progress

15. Trade and other receivables

Current:

Corporation tax receivable

Derivative financial asset

Other receivables

Non-current:

Derivative financial asset

Aggregate amounts

The trade and other receivables balances are categorised as loans and other receivables. There is no significant difference between 
the fair value of the trade and other receivables and the values stated above.

Included above is an amount of £1,233,670 due from Lanstead Capital L.P. (‘Lanstead’). In October 2014, as part of a placing and 
general offer to raise, in aggregate, £6,120,863 (before expenses) from new and existing shareholders, the Company initially 
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 £2,200,000. The Company simultaneously entered into an equity swap with Lanstead for 75 per cent of these shares 
with a reference price of 13.3333p per share (the “Reference Price”). The equity swap is for an 18 month period. All 22,000,000 
Ordinary Shares were allotted with full rights on the date of the transaction.

Of the subscription proceeds of £2,200,000 received from Lanstead, £1,870,000 (85 per cent) were invested by the Company in  
the equity swap with the remaining £330,000 (15 per cent) available for general working capital purposes.

To the extent that the Company’s volume weighted average share price is greater or lower than the Reference Price at each swap 
settlement, the Company will receive 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. As the amount of the effective consideration receivable by 
the Company from Lanstead under the swap agreements will vary subject to the movement in the Company’s share price and will be 
settled in the future, the receivable is treated for accounting purposes as a derivative financial asset and has been designated at fair 
value through profit or loss.

The Company also issued, in aggregate, a further 1,100,000 Ordinary Shares to Lanstead as a value payment in connection with the 
equity swap agreements.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201432

16. Cash and cash equivalents

Cash at bank

Bank deposits

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

2,956,871

1,901,332

4,858,203

961,108

6,000,230

6,961,338

Cash at bank and bank deposits consist of cash. There is no material foreign exchange movement in respect of cash  
and cash equivalents.

17. Issued share capital

At 31 October 2013

Issue of shares on 28 April 2014

Issue of shares on 13 October 2014

Issue of shares on 13 October 2014

Issue of shares on 30 October 2014

Number

223,324,907

50,000

22,000,000

1,100,000

39,208,627

Ordinary shares 
£

Share premium 
£

Total 
£

223,325

27,566,408

27,789,733

50

22,000

1,100

39,209

1,515

2,178,000

108,900

3,477,655

1,565

2,200,000

110,000

3,516,864

At 31 October 2014

285,683,534

285,684

33,332,478

33,618,162

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 Company 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.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Notes forming part of the Financial Statementscontinued33

Weighted  
average remaining 
contractual life

6.58 yrs

Number of options

Exercise price

10,240,000

810,000

(3,975,000)

3.13–32p

35.75p

3.13-24p

(210,000)

32–35.75p

6,865,000

1,375,000

(50,000)

(210,000)

3.13–35.75p

6.27 yrs

35.75p

3.13–24p

32–35.75p

7,980,000

3.13–35.75p

6.08 yrs

Number of warrants

Exercise price

Weighted  
average remaining 
contractual life

11,546,000

(2,050,000)

(488,100)

9,007,900

–

(1,960,100)

7,047,800

3.13–24p

6.75 yrs

3.13p

24p

3.13–24p

6.25 yrs

–

24p

3.13–24p

5.13 yrs

18a. Share options

At 31 October 2012

Options granted in the year

Options exercised in the year

Options lapsed in the year

At 31 October 2013

Options granted in the year

Options exercised in the year

Options lapsed in the year

At 31 October 2014

18b. Warrants

At 31 October 2012

Warrants exercised in the year

Warrants lapsed in the year

At 31 October 2013

Warrants exercised in the year

Warrants lapsed in the year

At 31 October 2014

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201434

18c. SAYE
During the year the company launched a share save scheme.

At 31 October 2012

SAYE issued during the year

SAYE exercised during the year

SAYE lapsed/cancelled during the year

At 31 October 2013

SAYE issued during the year

SAYE lapsed/cancelled during the year

At 31 October 2014

18d. Equity-settled share-based payments charge
Share options 

Number of SAYE

Exercise price

–

610,354

(1,363)

(55,909)

553,082

655,928

(143,751)

1,065,259

–

22p

22p

22p

22p

18.6p

18.6–22p

18.6–22p

Option price
(p)

Average  
grant date 
share price 
(p)

Average 
expected 
volatility 
(p.a.)

Average  
risk-free 
interest rate 
(p.a.)

Average 
dividend  
yield 
(p.a.)

Average 
implied option 
life 
(years)

Average  
fair value  
per option
 (p)

10

22

23

23

3.13

17.5

24

20.75

32

34

35.75

9

20

21

14

3.13

18.75

23.75

20

31.75

34p

35.75

46%

46%

46%

46%

113.8%

188%

188%

214.8%

243%

137.5%

124.7%

4.4%

4.4%

4.4%

4.4%

4.4%

4.4%

4.4%

4.4%

4.4%

1.5%

1.5%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

3.5

3.5

3.5

3.5

3.0

3.5

3.5

3.0

3.5

3.5

3.5

2.5

6

6

2

2

14.07

17.80

15

24

21.94

21.8

Adjustments for leavers

Total charge for the year (2013: £310,357)

Weighted  
average remaining 
contractual life

–

3.1 yrs

2.2 yrs

Amount 
expensed 
in the 2014 
accounts
 £

–

–

–

–

– 

– 

–

–

(87,236) 

(92,025)

(54,535) 

8,994

224,802

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Notes forming part of the Financial StatementscontinuedWarrants

Warrant price 
(p)

Average  
grant date 
share price
 (p)

Average 
expected 
volatility
 (p.a.)

Average 
 risk-free 
interest rate
 (p.a.)

Average 
dividend  
yield 
(p.a.)

Average 
implied  
option life 
(years)

Average  
fair value  
per option 
(p)

10

22

3.13

24

30

20

20

3.13

23.75

23.75

46%

46%

113.8%

188%

188%

4.4%

4.4%

4.4%

4.4%

4.4%

0%

0%

0%

0%

0%

3.5

3.5

3.0

3.5

3.5

10

6

2

17.8

17.64

Adjustments for leavers

Total charge for the year (2013:£70,493)

35

Amount 
expensed 
in the 2014 
accounts
 £

–

–

–

–

– 

–

–

SAYE

SAYE price 
(p)

24

Average  
grant date 
share price
 (p)

Average 
expected 
volatility
 (p.a.)

Average  
risk-free 
interest rate
 (p.a.)

Average 
dividend  
yield 
(p.a.)

Average 
implied option 
life 
(years)

Average  
fair value  
per option 
(p)

Amount 
expensed 
in the 2014 
accounts 
£

29.25

124.7%

1.5%

0%

3.5

17.35

15,166

Total charge for the year (2013: £2,565)

Total equity-settled share-based payment charge (2013: £383,415)

15,166

239,968

Expected volatility has been based on the 3 year historical volatility of share price. Vesting requirements are three years for the 
exercise of warrants and options, except for 500,000 options granted to Ian Williamson which vest in two years. Certain options and 
warrants granted to directors are also subject to performance conditions.

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, adjusted for non-vesting 
market-related conditions, which is considered most appropriate considering the effects of the vesting conditions, expected 
exercise period and the dividend policy of the Company.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201436

19. Trade and other payables

Trade payables

Deferred income

Other payables

Accruals

20. Operating lease commitments

Non-cancellable operating leases are as follows:

Within one year

Between one and five years

Greater than five years

Year ended  
31 October 2014
 £

Year ended  
31 October 2013 
£

543,878

68,744

311,378

207,288

569,227

68,744

116,248

261,276

1,131,288

1,015,495

Year ended  
31 October 2014 
£

Year ended  
31 October 2013 
£

49,190

61,954

–

111,144

127,114

44,697

–

171,811

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 significant 
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:

Trade and other receivables

Derivative financial asset

Cash and cash equivalents

Trade and other payables

Year ended  
31 October 2014 
£

Year ended  
31 October 2013
 £

3,502,892

 1,233,670

4,858,203

1,131,288

1,717,808

–

6,961,338

1,015,495

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014Notes forming part of the Financial Statementscontinued37

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 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 overleaf.

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:

Trade and other receivables

Cash and cash equivalents

Year ended 
31 October 2014 
£

Year ended  
31 October 2013
 £

4,736,562

4,858,203

1,717,808

6,961,338

The Company’s principal trade and other receivables arose from: a) annual payments for various services held as pre-payments b) 
a VAT debtor c) an R&D tax credit d) a derivative financial asset and e) funds receivable from shareholders in respect of the placing 
and open offer. 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 
Company raised £6.1 million before costs in October 2014 to provide additional financial resources.

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.

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201438

Notes forming part of the Financial Statements

continued

21. Financial instruments continued
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

Trade and other payables

Year ended 
 31 October 2014
 £

Year ended  
31 October 2013 
£

£1,131,288

1,015,495

There is no difference between the fair value and book value of trade and other payables.

Currency risk
The Company does not enter into forward exchange contracts or otherwise hedge its potential foreign exchange exposure. The 
Board considers that this exposure is not currently material. The Board monitors and reviews its policies in respect of currency risk 
on a regular basis. At 31 October 2014 the Company held no monetary assets or liabilities in currencies other than the functional 
currency of the operating units involved (2013: nil).

22. Capital commitments
The Company had capital commitments of £51,780 for automated production equipment outstanding at 31 October 2014  
(2013: £62,136).

23. Board changes and post-balance sheet events
Board changes during the year are reported under ‘Directors and their interests’. Adam Bond was appointed as Chief Executive 
Officer on 1 December 2014. Gene Lewis and Ian Williamson resigned from the Board on 27 and 30 November 2014 respectively.

24. Ultimate controlling party
There is no ultimate controlling party.

25. Related party transactions
During the year ended 31 October 2014:

£129,000 (plus VAT) was invoiced by Cranwood Management Ltd (a company registered in England & Wales) for consultancy 
services. The company is owned by Adam White (2013: £144,000). Members of Mr White’s family are nominated beneficiaries of the 
Age of Reason Foundation, which is a major Shareholder in the Company. At 31 October 2014, the sum owing to Cranwood Ltd was 
nil (2013: nil).

£11,400 (plus VAT) 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 (2013: £16,883). Mr Field is also a Director and Shareholder of Richards and Appleby Ltd. At 
31 October 2014, the sum owing to Richards and Appleby Ltd was nil (2013: nil).

£25,567 was invoiced by Linc Energy Ltd (a company registered in Australia) for the services of Adam Bond as Director of AFC Energy 
plc (2013: £18,190). Linc Energy Ltd is a major shareholder in the Company. At 31 October 2014 the amount owing to Linc Energy Ltd 
was £1,667 (2013: £1,667).

£38,525 (plus VAT) was invoiced by Locana Corporation (London) Ltd (a company registered in England & Wales) for consultancy 
services (2013: £40,050). Mr Yeo is also a Director and Shareholder of Locana Corporation (London) Ltd. At 31 October 2014, the  
sum owing to Locana was £1,675 (2013: £3,350).

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014

39

£8,000 was invoiced by John Sunderland Associates Ltd (a company registered in England & Wales) for the services of Sir John 
Sunderland as a Director of AFC Energy plc (2013: £19,566). Sir John Sunderland is also a Director and Shareholder of John 
Sunderland Associates Ltd. At 31 October 2014, the sum owing to John Sunderland Associates Ltd was nil (2013: nil).

£7,289 (plus VAT) was invoiced by Stellar Accountants Ltd (a company registered in England & Wales) for accountancy and 
bookkeeping services (2013:£14,244). Mrs Pauline Williamson is a Director and Shareholder of Stellar Accountants Ltd.  
At 31 October 2014, the sum owing to Stellar Accountants Ltd was nil (2013: £1,241).

£6,454 (plus VAT) was invoiced by Waste2Tricity Ltd (a company registered in England & Wales) for contributions towards trade 
shows (2013: nil). The total sum received from W2T in the year ended 31 October 2014 was £150,000 (2013: £50,000). The sum owing 
to W2T at 31 October 2014 was nil (2013: nil). The Shareholders in W2T include Age of Reason Foundation, Adam White, Eturab 
Trade Corporation and Ervington Investments. Members of the White family are nominated beneficiaries of the Age of Reason 
Foundation. The Age of Reason Foundation, Eturab Trade Corporation and Ervington Investments are substantial Shareholders in 
AFC Energy. Ian Balchin’s shareholding in W2T was granted in lieu of payment for work done for W2T before he was employed by 
AFC Energy.

£1,298 (plus VAT) was invoiced by Chelsea Football Club for the provision of facilities for the Company’s AGM (2013: £639). Eugene 
Tenenbaum is also a Director of Chelsea Football Club. At 31 October 2014, the sum owing to Chelsea Football Club was nil (2013: nil).

£6,000 was invoiced by Eugene Tenenbaum for his services as a Director of AFC Energy plc (2013: £9,555). At 31 October 2014, the sum 
owing to Eugene Tenenbaum was nil (2013: nil).

£6,000 was invoiced by Eugene Shvidler for his services as a Director of AFC Energy plc (2013: £9,555). At 31 October 2014, the sum 
owing to Eugene Shvidler was nil (2013: nil).

AFC ENERGY PLC Report & Accounts for the year ended 31 October 201440

Company Information

Directors
Tim Yeo 
Adam Bond 
Christopher Tawney (Company Secretary) 
Mitchell Field 
Eugene Shvidler  
Sir John Sunderland 
Eugene Tenenbaum

Registered office
Finsgate 
5–7 Cranwood Street 
London 
EC1V 9EE 
Registered in England: 05668788

Joint Broker
Peat & Co 
118 Piccadilly 
London 
W1J 7NW

AIM Nominated Adviser and Joint Broker
Zeus Capital 
23 Berkeley Square 
London  
W1J 6HE

Bankers
Barclays Bank PLC 
40/41 High Street 
Chelmsford 
Essex 
CM1 1BE

Principal place of business
Unit 71.4 Dunsfold Park 
Stovolds Hill 
Cranleigh 
Surrey 
GU6 8TB

Tel: 01483 276726 
Fax: 01483 266839

Auditor
Jeffreys Henry LLP 
Finsgate 
5–7 Cranwood Street 
London 
EC1V 9EE

Solicitors
Eversheds LLP 
1 Wood Street 
London 
EC2V 7WS

Registrars
Computershare Investor Services PLC 
The Pavilions 
Bridgwater Road 
Bristol 
BS13 8AE

AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014AFC ENERGY PLC Report & Accounts for the year ended 31 October 2014

ANNUAL REPORT 2014

TRANSFORMING POWER

AFC Energy plc

T: 01483 276726 | F: 01483 266839 | www.afcenergy.com

Unit 71.4 Dunsfold Park | Stovolds Hill | Cranleigh | Surrey | GU6 8TB