AFC Energy Regulatory News (AFC)

28 February 2020

AFC Energy plc

("AFC Energy" or "the Company")

Final results for year ended 31 October 2019

AFC Energy (AIM: AFC), a leading provider of hydrogen power generation technologies, is pleased to announce its results for the year ended 31 October 2019.

Highlights:

·; Investment of £ 0.35 million in EV charger demonstration unit to test commercial and technical feasibility of the product.

·; Continued reduction in electrode running cost through support from Industrie De Nora resulting in electrode pairing demonstration achieving milestone 10,000 hours of continuous operation.

·; First batch of mass manufactured flow plates received from Advanced Plastics, strengthening supply chain and reducing production costs.

·; High power density alkaline fuel cell demonstration successfully achieves power density output comparable with leading existing technologies with prospect to open new commercial applications.

·; Agreement signed with an international Original Engineering Manufacturer ("OEM") to assess "Ammonia to Power" off-grid platform.

·; Segmented commercial strategy launched with appointment of commercial sales coverage with relevant sector experience.

·; Operating losses reduced from £ 5.0 million to £ 3.6 million (after £ 0.8 million reduction in share-based payments accrual).

·; Strengthened financial position by focussing on immediate opportunities completing the year with no drawdown of equity financing facility.

·; Appointment of former Rolls Royce Fuel Cell Systems and LG Fuel Cell Systems Chief Technical Officer, Dr. Gerry Agnew, as Non-Executive Director.

Adam Bond, CEO of AFC Energy, commented: "The past twelve months has seen a clear and ever-growing momentum behind the role of hydrogen as a means of decarbonising the UK's current and future energy mix. With the successes and achievements delivered by AFC Energy over these same twelve months, we are well positioned to capitalise on this growth market, particularly in support of the transition away from diesel engines in both motive and stationary applications towards clean hydrogen-based alternatives.

The premium priced power achievable in both off-grid and convenience based rapid EV charging present market deployment opportunities as recently validated through feedback received following the Company's EV charger demonstration roadshow throughout the UK earlier this month.

The next twelve months will see a concerted effort focussed on the sale and deployment of fuel cell systems into these key markets alongside growth in resources to deliver scaled up manufacturing capacity and also sales and commercial coverage of our key targets. We have the opportunity for clear first mover advantage in the EV charging market in particular and through the much-appreciated efforts of our employees and partners, look forwards to delivering on our commitments to support the UK's and international efforts towards a net zero society"

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About AFC Energy

AFC Energy plc is commercialising a scalable alkaline fuel cell system, to provide clean electricity for on and off grid applications. The technology is now being deployed in electric vehicle chargers, off-grid decentralised power systems and industrial gas plants as part of a portfolio approach to the decarbonisation of local electricity needs.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 ("MAR").

CHAIRMAN'S REPORT

I am pleased to report that we have concluded the period ended 31st October 2019 with technical advances, market readiness, a reduction in operating loss culminating in a successful demonstration of our EV charger solution and strong commercial interest. All of which has been achieved without making any drawdown from our £ 4 million equity financing facility. Our strategic focus and key performance measures are in the short term to conclude the design and rollout of commercial versions of a liquid fuel cell system commencing delivery to customers in 2020. In the longer term, we will continue our innovation in the field of solid membranes for future use in fuel cell and related opportunities complementing our existing product range.

Hydrogen fuelled EV charger

Approximately 20% of all energy consumption is used in transport applications and is at the forefront and a central component of the decarbonisation agenda. Against this background both Government and industry are supporting the early adoption of electric vehicles. To facilitate this change, the simple solution would be to upgrade the Grid but unfortunately this will take both time, financial investment and manpower wherein lies the problem. Our focus is to seize this opportunity by integrating our innovative hydrogen fuelled EV Charger alongside available grid capacity and battery storage to provide a low risk complementary emissions free solution which can grow as EV adoption rates increase. Our flexible modularized solution provides our target customers with an immediate economically viable solution to the twin problems of investing in grid upgrades when faced with uncertain levels of future demand. The Government's recent announcement to shorten the deadline for banning the sale of petrol and diesel vehicles by five years exacerbates the issues and we believe will strengthen the demand for our solutions.

Manufacturing partners

The heart of the charging solution remains our fuel cell which incorporates our latest developments in flow plate design and electrode chemistry. De Nora continue to support our research and have the manufacturing capacity to meet expected future customer demand. Innomech continue to work with us and we have invested in tooling and assembly facilities to ensure that our flow plate manufacturing and integration capability is aligned with our new generation of fuel cell components.

Advanced Plastics' prototype aluminium moulding tools are producing the flow plates and providing feedback for the design of the hardened steel tools to consolidate further mass manufacturing capacity. The initial results have verified our designs and we expect the definitive tool to meet our cost and production time objectives.

We have been working with a leading ultra-sonic welding solutions provider to reduce the time taken to incorporate our electrodes into the flow plates from minutes to seconds and improving product quality.

MSP Technologies and our control systems supplier have both invested in non-recurring engineering expenditure to ensure that their products are seamlessly connected with our fuel cell. Furthermore, their staff integrated with our engineering team and provided invaluable support during commissioning.

I would like to take this opportunity to thank our supply chain partners for their continuing support and commitment to meet an aggressive rollout timeline. Without their commitment we would not have been able to demonstrate the full range of our integrated product before Christmas.

Fuel supply partners

One of our key competitive advantages compared to other fuel cells is our ability to accept low purity hydrogen. This year we have begun to develop relationships with various parties to develop distributed hydrogen production. This began earlier in the year sharing information about ammonia to power with an international OEM and culminated in our entering into a joint development agreement with HiiROC to use their plasma technology in EV charging. These initiatives coupled with traditional hydrogen sources give us confidence in the predictions made by McKinsey in a report prepared for the Hydrogen Council that Hydrogen prices are set to dramatically fall in the coming years.

Technological roadmap

In our quest to provide cost effective innovative solutions for our customers earlier this year we announced the initial results of our investigation and development of the solid membrane technology. We continue to work on this initiative, and we have been approached by various bodies to test the technology in electrodialysis and electrolysis applications. We are excited by this breakthrough as it not only represents a significant reduction in the fuel cell footprint but also provides an entrée into the hydrogen production market through electrolysis. Being able to participate both in the hydrogen production and consumption markets reduces our exposure to hydrogen pricing.

Commercial and distribution

I have left until last my comments on the commercial market not because it is unimportant but rather to lay out the firm foundations upon which we are setting out our market stall. This year has seen a significant step forward as the demonstration day in December 2019 showed that we have a product that works, meets a real need, in a premium priced market where there is no established competitor. Following the demonstration, we have signed several non-disclosure agreements with both public and private entities where we are sharing information and developing tailored solutions built around our flexible modularised design. These applications range from charging hubs for taxis, powering trains, en route charging on motorways, urban destination charging and fleet charging. Current end user demand can be satisfied by our current product offering but all our prospective customers recognise that they will need to continue to invest in more infrastructure in the coming years as the number of electric vehicles grows. Our strategy is to develop long term relationships and work alongside our customers to minimise their investment risk and as such grow together. The uncertainty over future demand, the elevated cost of grid reinforcement and the timeline to deliver those upgrades for our customers has slowed their decision making but on the other hand highlights the unique selling points of our product, namely, flexible, low risk, modularised, re-deployable emissions free electricity generation. As reported last year we have been re-evaluating our distribution partners and we are working with several companies in the electric vehicle space to identify and develop opportunities.

Management

We were pleased that Dr Gerry Agnew has joined as a non-executive director and is regarded as one of the world's leading experts in the field of fuel cell technology and systems following a long and successful career at both Rolls-Royce and LG Fuel Cell Systems Inc. We are also pleased to confirm that Graeme Lewis, our Chief Financial Officer, has agreed to join our Board.

We have bid farewell this year to Percy Hayball and Lisa Jordan, representatives of Ervington Investments Limited, from the Board and I would like to thank them personally for the contributions they have made over the past few years.

Funding

Through prudent management of our expenditure we have been able to meet our daily financing requirements without resort to the equity financing facility announced in early 2019. However, we consume cash resources and will continue to do so until such time as sales revenues are sufficient to cover our expenditure and as such, we are dependent on the support of our shareholders. We thank our shareholders for their current and continuing support.

Outlook

Last year I thanked the staff for their commitment and dedication in challenging circumstances. This year I would like to congratulate them on their determination, innovation and creativity, as well, which has enabled them to deliver the EV Charging demonstration unit which is tangible evidence of their professionalism.

I believe these same attributes will now support our commercial actions and look forward to seeing the fruits of their labours.

John Rennocks

Chairman

CHIEF EXECUTIVE OFFICER'S REPORT

AFC Energy's commercial success is predicated on clearly defining the right product, at the right price, for the right markets and I am delighted to report that 2019 has ratified the strategic decisions taken in prior years in this context.

We can now see a clear path for AFC Energy to capitalise on the multi-facetted challenge facing today's energy sector which include:

·; the need for immediate and aggressive decarbonisation of the energy market to meet clearly defined international policy targets;

·; a focus on transportation and the exponential growth in Electric Vehicles ("EVs") - bringing with it opportunities and challenges; and

·; the clear transitionary drive away from fossil fuel based off-grid and distributed power generation to cleaner hybrid and standalone clean energy technologies.

This year was therefore focused on delivering products to the market that clearly addressed the needs of these three criteria and challenges.

This commenced with the early demonstration of a prototype EV charger unit at AFC Energy's headquarters in January 2019, which in turn led to a strong degree of interest from the market to validate investment in the Company's first commercially deployable unit launched later that year in December 2019.

Our interactions with potential customers have identified common challenges such as predicting future EV charging demand, investment required to upgrade existing infrastructure and lead time to deliver grid reinforcement. This highlights the opportunity that exists in this market to support the wider decarbonisation of the EV market. Our own internal due diligence in this area comes directly from discussions with EV charge point operators, car park owners, fleet operators, and local governments, who all consistently arrive at the same conclusion - there is a strong market opportunity in being able to meet short to medium term demand for off grid, rapid EV charging in support of or instead of local electrical networks and grids.

For this reason, having achieved multiple milestones in our technology development throughout the course of 2019, including with our partners Industrie De Nora, the majority of our financial and human resources throughout the year have focused on accelerating a product that addresses these short term needs into the EV rapid charging market.

At the time of writing this review, I'm pleased to say we succeeded in demonstrating our first 20kW fuel cell system and we are completing a national roadshow of the system to several hundreds of prospective customers and partners.

2020 is now expected to be the year in which several of these commercial enquiries are transitioned into contracts for delivery of fuel cell systems into the market and whilst we continue to maintain an interest and capability in deploying systems into the larger petrochemical and industrial markets where hydrogen is a by-product, our ability to achieve short term successful deployment into the distributed power and EV charging markets, together with a first mover advantage, makes for an exciting and opportunistic year ahead.

The Market Landscape

It was a pleasure in January 2020 to represent AFC Energy in Versailles, at the Hydrogen Council's annual meeting of over 80 CEOs and senior executives. Coined "the Decade of Hydrogen" and having such a high calibre of executives and decision makers around the table made it clear to me and all who attended that today is the seminal moment in the future of Hydrogen within the global energy industry.

Public knowledge and acceptance of hydrogen technologies is growing year on year, particularly in the growth markets of China and Europe, and with cost projections of hydrogen based solutions expected to halve over the next decade through scale up in production, distribution and manufacturing, the commercial opportunities for fuel cells has never been greater.

At home in the United Kingdom, AFC Energy's key markets, EV Charging and Distributed Off Grid Power Generation, are also growing at a rapid rate with several Government policy developments aligned and supportive of our deployment strategy. In February 2020, the Prime Minister announced an acceleration of the date for the displacement of all new petrol and diesel cars to 2035; based on our enquiries to date, we know this is going to create new and accelerated interest in our off grid EV charging solution, particularly across Local Councils, fleets and car park operators.

The transition of AFC Energy's target market focus over the past twelve to twenty-four months towards premium priced power solutions continues to be validated and we remain optimistic that short term deployment potential will remain the focus of our Company into 2020.

Electric Vehicle Charging - A Growth Market

We are often asked whether AFC Energy is for or against the introduction of hydrogen fuel cell vehicles due to its own focus on battery electric vehicles. We believe both technologies have a role to play in the aspiration of decarbonising transport, however, it is clear based on the growth in EVs in the UK and elsewhere that we see in the market today, that EVs are not simply a transitionary technology, but will be part of the longer term transportation network for many decades to come. This does however create challenges.

In the UK Government's recent Electric Vehicles Energy Taskforce (January 2020), the Taskforce stressed the likely challenges EVs will place on the electricity distribution network and confirmed that substantial investment will be required into the grid over a relatively short space in time to meet market needs. Local Councils approaching AFC Energy have identified that Distribution Network Operators ("DNOs") in the UK are quoting periods of 5-10 years before sufficient local grid capacity can be installed to support a rapid charging network of the scale required for the influx of EVs over the coming decade. In another case, AFC Energy has been advised that one industrial customer has been quoted that only a third of the capacity sought from the DNOs will be available which means insufficient power will be available to meet EV demand. Further, cost estimates, being passed onto developers, site owners, councils, and eventually end users, are all creating uncertainty in the timing and scale of investment required to meet EV demand growth over the next few years.

The AFC Energy H-PowerTM EV Charger addresses several of these matters, whether that be the timing or scale of investment to meet an uncertain growth profile in EVs, through to the need to install rapid charging facilities in locations where the grid simply does not exist. The premium priced power commanded by convenience based rapid EV charging presents a number of opportunities for AFC Energy which, when complemented with low cost Hydrogen in the form of Ammonia, creates a model which is capable of deployment now and which can grow with the demand in EV charging.

Engineering progress

The engineering of AFC Energy's H-PowerTM fuel cell system has undergone several iterations over the past year to reach a point where we demonstrated the system, its balance of plant, electronics and control system, and the manner in which it can integrate with battery storage systems, in the latter half of 2019 as part of the EV charger launch.

Over the course of the year, the team has worked tirelessly to deliver a product that not only meets all technical requirements for the system, but also satisfies all health and safety regulations and guidelines for a commercially available system in today's market.

We are now working towards delivery of a 160kW fuel cell system which will be capable of producing up to 3.8MWh of clean power per day when completed.

The role of value engineering is now also of key importance in continuing to drive down systems costs, improve overall system efficiency and fast track system delivery from key supply chain partners. This work is ongoing, and we are starting to see the benefits of our modular and replicable system in the mass manufactured market.

De Nora

De Nora continue to provide invaluable support to AFC Energy under our Joint Development Agreement which was extended for a further two years during the course of 2019. We have seen, and continue to see, substantial improvements in cathode and anode performance which, during the course of 2019, confirmed that based on empirical testing there are no apparent reasons why the predicted electrodes' longevity could not extend to a full commercial life. We and De Nora remain committed and confident of delivering a 4-year lifespan. However, this was a target based upon grid electricity pricing which is not a pre-requisite of either temporary or EV power markets. In these markets pricing is based upon lost revenue or customer service giving rise to multiples of grid pricing being enjoyed and our product breakeven life is much lower than grid applications.

We continue to thank De Nora for their support of AFC Energy and their investment into the Joint Development Agreement over the past 4 years.

New Technology - AlkaMemTM

Paramount within our research activities over the past 24 months has been the development of AFC Energy's proprietary Anion Exchange Membrane ("AEM") branded AlkaMemTM.

The AlkaMemTM technology has the potential to be designed and engineered into the alkaline fuel cell in a way which removes the need for our current liquid electrolyte. Importantly, the AEM also has delivered, in laboratory-based operation on full scale electrode testing, power density equal to or better than Proton Exchange Membrane ("PEM") fuel cell systems in the market today. PEMs are a well-known technology currently used in automotive, shipping, rail and other mobile applications due to their high-power density. However, their challenges reside in the high purity (and therefore cost) of Hydrogen required to fuel the PEM cells and the quantum of precious metals contained within their electrodes.

AFC Energy believe with continued development and scaling of the AEM, it is possible that over the next few years, we will have a fuel cell systems that not only reflects the key selling points of the alkaline system, be they high electrical efficiency, low cost and ability to accept low grade hydrogen, but could do so with all the upside of the PEM fuel cell, primarily energy density. This therefore has the potential to open up a substantial market for AFC Energy to participate in again, with premium priced power demand.

Importantly, the AEM developed will have multiple applications outside of the fuel cell and we have been approached by several third parties seeking access to the technology in trials to formulate a strategy and investment plan which could see the licensing of our technology to bring to market in applications such as Alkaline Water Electrolysis and Electro-dialysis. De Nora, our partner on electrode development, has already independently validated the performance of our AEM in a water electrolysis application and we remain in discussions with them over future testing and validation activities in Japan.

Supply chain

Our commercial strategy is built around the concept of portfolio energy solutions. Our philosophy is that we complement other technologies rather than compete with them head-on. What that means in practice is that by integrating or using a combination of technologies our customers can enjoy the benefits of the low cost provided by the grid, emissions reduction from the fuel cell and balancing from the battery storage, for example. Our EV Charger is a practical example of this strategy and we have developed relationships with Multi Source Power (power conditioning), Rolec (chargepoints) and Helford (control systems). The integrated solution is stronger than the sum of the parts and we believe makes our EV solution standout from single technology solutions.

On the manufacturing front we have been working closely with Advanced Plastics who have substantially demonstrated in the run up to the EV Charger launch the aluminium moulding tool used in the manufacture of the flow plates. Similarly, Innomech one of our longest relationships, successfully updated the tooling developed during Power Up to support the assembly of the new Gen 3 stacks in Dunsfold.

Hydrogen, when measured per unit mass, is one of the most energy dense fuels available perfect, for example, for getting the Apollo rockets in the air, but hydrogen is less energy dense than other conventional fuels by volume, even if liquified or compressed. Since most fuels are transported volumetrically, and as there is a cost and energy penalty in liquification, logistic costs are the main reason why hydrogen as a fuel is perceived to be expensive. There are two solutions, create a hydrogen grid or manufacture hydrogen on site. The former is an issue that requires the hand of Government to accelerate progress, but the latter is within our control. In this respect, we have concluded the Alkammonia project confirming the technical feasibility and cost effectiveness of ammonia crackers with our fuel cells and have begun to share these results with an industrial partner. On a similar note we have entered into a joint development agreement with HiiROC to integrate their plasma technology to produce hydrogen from natural gas with no emissions with our EV Charging solution.

Marketing activities

To engage with customers our marketing campaign has been focused on building brand awareness especially in the EV market. The year started with press and television coverage of the EV Charging prototype. In late summer we were invited to appear alongside Multi Source Power at the annual Solar and Storage Live show at the NEC, Birmingham, attended by over 4,000 participants from across the solar, EV and storage industry. To mark the launch of our EV solution the product range was re-branded and the web site updated for the demonstration launch and roadshow. Marketing activities for the coming year already planned include participating in the British Motor Show 2020 as the event's Official EV Charging Partner. These activities together with both trade and national press coverage has raised awareness and several prospects have been developed and are being managed. These discussions are complex and time consuming as the electricity market is sophisticated, and the pricing of grid connections is, at best, opaque. Our belief is that a mixture of technologies is the right solution and the long-term solution will, eventually in most occasions, be the grid. As such, our unique selling proposition is to provide, like diesel generators before, a solution to

bridge the gap until a grid solution is available,

create sufficient demand data available to reduce the investment or sizing risk, or

find a business partner to share the upgrade cost (shared energy centre).

The flexible modular design of our EV Charger and its ability to be redeployed can compete in this market where electricity is priced at a premium.

Financial overview

Overall expenditure on research and development qualifying for R & D tax credits was £ 1.8 million (2018: £1.5 million), demonstrating our continued commitment to develop the fuel cell system. A reduction in operating loss to 31 October 2019 of £ 1.4 million to £ 3.6 million (2018: £ 5.0 million) has been recorded of which £ 0.8 million relates to a reduction in share-based payments expense from the prior year.

Cash balances at 31 October 2019, excluding restricted cash, were £ 1.3 million (2018: £ 2.6 million). Continued tight control on spend has reduced cash outlays on operating activities to £ 2.4 million from £ 4.0 million with the main savings being invested in construction of the demonstration unit including build costs, supplier non-recurring design expenditure and prototype tooling. Cashflow also benefited from the collection of £ 1.3 million R & D tax credits. which enabled the demonstration unit to be funded from internal resources. Other expenditure on fixed assets includes £ 50 k spent to protect our intellectual property.

Funding

Since the last annual report, we have undertaken two small equity raises in the financial year totalling £ 1.8 million and post year end a further three raises totalling £ 2.5 million which have enabled us to avoid drawing down on the Thalion financing facility concluded last year. These fundraises have enabled us to deliver the demonstration unit and ensure we have adequate funds for the coming year.

Outlook

The outlook for the coming year is probably at its most favourable level in recent years with both Government policies and public sentiment creating a situation where the market is willing to change. Our goal is to continue pursuing our target markets, especially the EV Charging market, where there is no established competition and the end user is prepared to pay a premium to enter the market timeously minimizing risk.

Adam Bond

Chief Executive Officer

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 October 2019

All amounts relate to continuing operations.

STATEMENT OF FINANCIAL POSITION

As at 31 October 2019

These financial statements were approved and authorised for issue by the Board on 27 February 2020.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 October 2019

Share capital is the amount subscribed for shares at nominal value.

Share premium represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.

Other reserve represents the charge to equity in respect of unexercised equity-settled share-based payments.

Retained deficit represents the cumulative loss of the Company attributable to equity Shareholders.

CASH FLOW STATEMENT

For the year ended 31 October 2019

NOTES TO 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 Unit 71.4 Dunsfold Park, Stovolds Hill, Cranleigh, Surrey GU6 8TB.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The financial statements of AFC Energy plc have been prepared in accordance with International Financial Reporting Standards ("IFRSs"), International Accounting Standards ("IASs") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations (collectively "IFRSs") as adopted for use in the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

These results are audited, however the financial information does not constitute statutory accounts as defined under section 434 of the Companies Act 2006. The financial information for the year ended 31 October has been derived from the Company's statutory accounts for that year. The auditors' report on the statutory accounts for the year ended 31 January 2019 was unqualified and did not contain statements under section 498 of the Companies Act 2006.

The accounting policies used in completing this financial information have been consistently applied in all periods shown. These accounting policies are detailed in the Company's financial statements for the year ended 31 October 2019 which can be found on the Company's website.

The financial statements have been prepared on a going concern basis notwithstanding the trading losses being carried forward and the expectation that the trading losses will continue for the near future as the Company transitions from research and development to commercial operations.

The Company currently consumes cash resources and will continue to do so until sales revenues are sufficiently high to generate net cash inflows. Management have engaged external consultants to evaluate the price competitiveness of their technology compared to existing solutions and identify the resources required and the routes to market to commercialise their fuel cells. Based upon these recommendations' management have prepared and reviewed five-year financial projections aligned with ongoing technological, operational and commercial strategies. During the initial period of commercialisation there will be negative cash flows dependent upon the speed at which revenue grows. Therefore, the Company continues to be dependent upon securing additional funding, either through the injection of capital from share issues, the sale of licenses to commercially exploit the intellectual property in defined markets, appointment of well-funded channel partners to finance commissioning, project finance for build and operate plants, and trade finance. During the current year day to day financing requirements have been met through issue of equity and the cash reserves brought forward from the previous period.

At 31 October 2019 unrestricted cash resources were £ 1.3 million , a £ 4 million equity financing facility with an institutional investor is available to fund working capital and a further £ 2.5 million has been raised by issue of 14,364706 shares which are described in more detail in note 25 Post Statement of Financial Position events. In addition, the Directors anticipate receiving commitments for further funding from new and existing shareholders. The Directors have reasonable expectation that sufficient funding exists to meet payment obligations as and when they fall due although there can be no certainty that shareholders approve sufficient non pre-emptive share allotment authority to the Directors nor that certain stock market conditions are maintained.

The directors' expect that taking into account current cash resources and financial forecasts including measures that can be taken to continue to reduce expenditure and the funds raised from the equity financing facility, the Company has adequate resources to continue in operational existence for the foreseeable future (being a period of at least twelve months from the date of this report). Thus, the Directors believe that it is reasonable to continue to adopt the going concern basis in preparing the annual report and financial statements. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

The accounting policies set out below have, unless otherwise stated, been applied consistently in these financial statements.

Judgements made by the Directors in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3.

a. Standards, Amendments and Interpretations to Published Standards not yet Effective

At the date of authorisation of these financial statements, all the IASB and IFRIC standards and interpretations, which are effective for annual accounting periods beginning on or after the stated effective date have been adopted

New and revised relevant standards that are effective for annual periods commencing on or after 1 November 2018:

IFRS 9 Financial Instruments (effective for years beginning on or after 1 January 2018)

IFRS 9 represents the completion of its project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. The new standard introduces extensive changes to IAS 39's guidance on the classification and measurement of financial assets and introduces a new 'expected credit loss' model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting.

IFRS 15 Revenue from contracts with customers (effective for years beginning on or after 1 January 2018)

The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts.

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards.

The adoption of these Standards and Interpretations has had no material impact on the financial statements of the Group

IFRS 16 'Leases'

IFRS 16 'Leases' replaces IAS 17 'Leases' along with three Interpretations (IFRIC 4 'Determining whether an Arrangement contains a Lease', SIC 15 'Operating Leases-Incentives' and SIC 27 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease').

The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability in connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.

The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated.

For contracts in place at the date of initial application, the Group has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4.

The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019. At this date, the Group has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.

Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.

On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of low-value assets the Group has applied the optional exemptions to not recognise right-of-use assets but to account for the lease expense on a straightline basis over the remaining lease term.

For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application.

On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 3.5%.

b. Capital Policy

The Company manages its equity as capital. Equity comprises the items detailed within the principal accounting policy for equity and financial details can be found in the statement of financial position. The Company adheres to the capital maintenance requirements as set out in the Companies Act.

c. Grants

The Company participated in two projects, ALKAMMONIA and POWER-UP, which receive funding from the European Union ("EU"). These grants were based on periodic claims for qualifying expenditure incurred by all the entities participating in each project consortium. The Company acted as coordinator for the projects and submitted claims and received funding on behalf of the other participants in each project consortium. Grant funds of other participants were paid over to them as soon as they were received and only the grant funding relating specifically to the Company's activities is reflected in the statement of comprehensive income. The qualifying expenditure was shown in the statement of comprehensive income as cost of sales. Grants, including grants from the EU, were recognised in the statement of comprehensive income in the same period as the expenditure to which the grant relates.

d. Other Income

Other income represents sales by the Company of waste materials.

e. Development Costs

Identifiable non-recurring engineering and design costs and other prototype costs incurred to develop a technically and commercially feasible product are capitalised.

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 Statement of Financial Position date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the Statement of Financial Position date.

g. Inventory

Inventory is recorded at the lower of cost and net realisable value.

h. Other Receivables

Other receivables arise principally through the provision by the Company of activities associated with grant-funded projects. They also include other types of contractual monetary assets. These assets are initially recognised at fair value and are subsequently measured at amortised cost less any provision for impairment.

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. Tangible fixed assets

Property and equipment are stated at cost less any subsequent accumulated depreciation and impairment losses.

Right-of-use assets are measured at either:

- Their carrying amount as if IFRS 16 has been applied since commencement, discounted using the lessee's incremental borrowing rate at the date of initial application

- An amount equal to the lease liability, adjusted for any prepaid or accrued lease payments

Where parts of an item of property and equipment have different useful lives, they are accounted for as separate items of property and equipment.

Depreciation is charged to the statement of comprehensive income within cost of sales and administrative expenses on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

• Right of use asset - building life of the lease

• Leasehold improvements 1 to 3 years

• Decommissioning asset life of the lease

• Fixtures, fittings and equipment 1 to 3 years

• Motor vehicles 3 to 4 years

• Demonstration equipment 5 years

Expenses incurred in respect of the maintenance and repair of property and equipment are charged against income when incurred. Refurbishment and improvement expenditure, where the benefit is expected to be long lasting, is capitalised as part of the appropriate asset.

The useful economic lives of property, plant and equipment and the carrying value of tangible fixed assets are assessed annually and any impairment is charged to the statement of comprehensive income.

k. Intangible Assets

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:

• Development costs 5 years

• Patents 20 years

Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness and any impairment is charged to the statement of comprehensive income.

l. Impairment testing of intangible assets and property, plant and equipment

At each statement of financial position date, the Group reviews the carrying amounts of the assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). In assessing whether an impairment is required, the carrying value of the asset is compared with its recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal (FVLCD) and value in use (VIU).

 m. Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call deposits with major banking institutions realisable within three months. Restricted cash is €300,000 held in escrow to support a bank guarantee in favour of Air Products GmbH relating to contractual obligations by the Company in relation to the Stade site in Germany.

n. Other Financial Liabilities

The Company classifies its financial liabilities as:

Trade and Other Payables

A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past event and the obligation can be estimated reliably. These are initially recognised at invoiced value. These arise principally from the receipt of goods and services. There is no material difference between the invoiced value and the value calculated on an amortised cost basis or fair value.

Deferred Income

This is the carrying value of income received from a customer in advance which has not been fully recognised in the statement of comprehensive income pending delivery to the customer. The carrying value is fair value.

o. Lease liabilities

Transitional arrangements

IFRS 16 Leases became mandatorily effective on 1 January 2019 and has been applied for the first time in this accounting period which resulted in changes to the accounting policies. The company transitioned to IFRS 16 using the modified retrospective approach and as a result the cumulative effect of initial application is recognised in retained earnings at 1 November 2018. The prior period figures were not adjusted. On adoption of IFRS 16, the company elected to apply relief provisions available and has not reviewed contracts under the definition of a lease per IFRS16, which had previously not been classified as lease under the principles of IAS17. Therefore, only contracts entered into, or modified, on or after 1 November 2018 have the definition of a lease per IFRS 16 applied. In addition, the company decided to apply recognition exemptions to leases with a term not exceeding 12 months and leases where the underlying assets are of low value. For leases classified as operation leases under IAS 17, these lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 November 2018. The company has used the following practical expedients permitted by IFRS 16 when applying this for the first time to leases previously classified as operating leases:

- Applied a single discount rate to a portfolio of leases with similar characteristics

- Applied the exemption not to recognise liabilities for leases with less than 12 months of lease term remaining

- Excluded initial direct costs for the measurement of right-to-use assets as the date of the initial application

- Used hindsight in determining the lease term where the contract contains options to extent or terminate the lease

Right-of-use assets are measured at either:

- Their carrying amount as if IFRS 16 has been applied since commencement, discounted using the lessee's incremental borrowing rate at the date of initial application

- An amount equal to the lease liability, adjusted for any prepaid or accrued lease payments

No adjustments are required on transition to IFRS 16 for leases where the company acts as a lessor, except for a sub-lease. A reassessment of the classification of a sub-lease is required under IFRS 16. The company recognised lease liabilities in relation to leases that were classified as 'operating lease' under the principles of IAS 17 - Leases. On transition, no additional right-to-use assets and lease liabilities were recognised with the difference allocated to retained earnings.

Measurement and recognition of leases as lessee

At lease commencement date, a right of use and lease liability are recognised on the Statement of Financial Position. The right of use asset is measured at cost, which comprises the initial measurement of the lease liability, any initial direct costs incurred, an estimate of costs to dismantle and remove the asset at the end of the lease term and any lease payments made in advance of the lease commencement date.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance payments.

When the lease liability is remeasured, the corresponding adjustment is reflected in the right of use asset, or profit and loss if the right of use asset is already reduced to zero.

Short term leases and low value assets have been accounted for using the practical expedients set out in IFRS 16 and the payments are recognised as an expense in profit or loss on a straight-line basis over the lease term.

p. Financial Assets

All of the Company's financial assets are loans and receivables and investments. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets at fair value and comprise trade and other receivables and cash and cash equivalents. Investments are accounted for at cost less impairment.

q. Financial Instruments

Financial assets and liabilities are recognised on the Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument.

• Cash and cash equivalents comprise cash held at bank and short-term deposits

• Receivables are recognised initially at fair value and subsequently held at amortised cost less an allowance for any uncollectable amounts when the full amount is no longer considered receivable

• Trade payables are not interest bearing and are stated at their nominal value

• Equity instruments issued by the Company are recorded at the proceeds received except where those proceeds appear to be less than the fair value of the equity instruments issued, in which case the equity instruments are recorded at fair value. The difference between the proceeds received and the fair value is reflected in the share-based payments reserve.

r. Share-Based Payment Transactions

The fair value of options and warrants granted is recognised as an employee expense with a corresponding increase in Other Reserve. The fair value of the expense is estimated at grant date using the Black-Scholes option valuation model considering the terms and conditions upon which they were granted and a Log normal Monte Carlo stochastic model for market conditions. The expense accrues from the grant date until the options and warrants have unconditionally vested. Where vesting is dependent upon market or non-market performance criteria the vesting period is estimated at the grant date and, in the case of non-market performance criteria, is revised annually. When an option or warrant is exercised the balance is transferred to share capital with excess value going to the premium account whereas those that lapse are transferred to retained earnings. Where options or warrants are amended by the introduction of new schemes and the absorption of earlier schemes by agreement between the Company and the beneficiary the net difference in valuation is charged to earnings in the appropriate period.

s. Provisions

Provisions are recognised when the Company has a present obligation as a result of a past event and it is probable that the Company will be required to settle the obligation. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the Statement of Financial Position 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 statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or recoverable on the taxable income for the year, using tax rates enacted or substantively enacted at the Statement of Financial Position 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.

u. R&D Tax Credits

The Company's research and development activities allow it to claim R&D tax credits from HMRC in respect of qualifying expenditure; these credits are reflected in the statement of comprehensive income in administrative expenses or in the taxation line depending on the nature of the credit.

v. Pension Contributions

The Company operates a defined contribution pension scheme which is open to all employees and makes monthly employer contributions to the scheme in respect of employees who join the scheme. These employer contributions are currently capped at 3% of the employee's salary and are reflected in the statement of comprehensive income in the period for which they are made.

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

In the preparation of the financial statements, management makes certain judgements and estimates that impact the financial statements. While these judgements are continually reviewed, the facts and circumstances underlying these judgements may change, resulting in a change to the estimates that could impact the results of the Company. In particular:

Significant management judgements:

The following are the judgements made by management in applying the accounting policies of the Company that have the most significant effect on the financial statements:

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 experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.

Capitalisation of Development Expenditure

The Company uses the criteria of IAS 38 to determine whether development expenditure should be capitalised. After assessing these, management has concluded that, until the Company's fuel cell system is proven to be commercially deployable, it would not be appropriate to capitalise development expenditure. Consequently, all development expenditure has been charged to the statement of comprehensive income during the year ended 31 October 2018.

Estimates uncertainty:

Information about estimates and assumptions that may have the most significant effect on recognition and measurement on assets, liabilities and expenses is provided below.

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 the Black-Scholes valuation model and a Log-normal Monte Carlo stochastic model for market conditions. Both are appropriate considering the effects of the vesting conditions, expected exercise period and the dividend policy of the Company.

The cost of equity-settled transactions is accrued, together with a corresponding increase in equity over the period the directors expect the performance criteria will be fulfilled. For market performance criteria this estimate is made at the time of grant considering historic share price performance and volatility. For non-market performance criteria an estimate is made at the time of grant and reviewed annually thereafter considering progress on the operational objectives set, plans and budgets.

Expected volatility has been based on the 3.5-year historical volatility of share price. Vesting requirements are three years for the exercise of warrants and options, except for 500,000 options granted which vest in two years. Certain options granted to Directors are also subject to performance conditions described in note 18.

Decommissioning Provision

The Company has set-up a decommissioning provision for the removal of the plant and equipment installed at the Stade site in Germany, the cost of which is based on estimates. Various scenarios have been considered which estimate the range of costs to be from £ 35,000 to £ 301,000 dependent upon agreements reached with lessor.

4. SEGMENTAL ANALYSIS

Operating segments are determined by the chief operating decision maker based on information used to allocate the Company's resources. The information as presented to internal management is consistent with the statement of comprehensive income. It has been determined that there is one operating segment, the development of fuel cells. In the year to 31 October 2018, the Company operated mainly in the United Kingdom and in Germany. All non-current assets are located in the United Kingdom.

5. OPERATING LOSS

This has been stated after:

6. STAFF NUMBERS AND COSTS, INCLUDING DIRECTORS

The average numbers of employees in the year were:

The aggregate payroll costs for these persons were:

7. DIRECTORS' REMUNERATION

The remuneration, details of share options and interests in the Company's shares of each Director are shown in the Directors' Report.

8. FINANCE COST

9. TAXATION

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 £2,850,840 (2018: loss of £4,325,017) and a weighted average number of shares in issue for the year.

Diluted earnings per share

As set out in note 18, there are share options and warrants outstanding as at 31 October 2018 which, if exercised, would increase the number of shares in issue. However, the diluted loss per share is the same as the basic loss per share, as the loss for the year has an anti-dilutive effect.

11. INTANGIBLE ASSETS

12. RIGHT OF USE ASSETS

13. TANGIBLE FIXED ASSETS

The Company has set-up a decommissioning asset for the removal of the plant and equipment installed at the Stade site in Germany and for dilapidations associated with the leasehold premises at Dunsfold in the UK, the cost of which is based on estimates.

14. INVESTMENT

On 12 March 2019 the Company sold its investment for £20,000 (2018: 340,500 shares representing 24.0%) in the unlisted share capital of Waste2Tricity Ltd (a company registered in England & Wales). The Company had no representation on the Board of Directors nor was involved in the day to day operation of Waste2Tricity Ltd and so did not exercise significant influence over their activities. Simultaneously, the licence agreements with Waste2Tricity Limited and Waste2Tricity International (Thailand) Limited were terminated and AFC Energy will receive compensation of £ 80,000 on 12 March 2020 which will be accounted for when received.

The Directors have adopted IFRS 9 with effect from November 1, 2019 and have estimated the fair value using hierarchy level 3. The estimated fair value of the investment in Waste2Tricity remains de minimis as reported last year, due to the uncertainty at the time of disposal of future cash flows and the lack of marketability of the shares.

15. INVENTORY

16. OTHER RECEIVABLES

There is no significant difference between the fair value of the receivables and the values stated above.

17. CASH AND CASH EQUIVALENTS

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

Restricted cash, not included in cash and cash equivalents, is €300,000 held in escrow to support a bank guarantee in favour of Air Products GmbH relating to contractual obligations by the Company in relation to the Stade site in Germany.

18. ISSUED SHARE CAPITAL

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 to maintain a sufficient funding base to enable the Company to meet its working capital needs. The Company's commercial activities are at an early stage and management considers that no useful target debt to equity gearing ratio can be identified at this time.

Details of the Company's capital are disclosed in the statement of changes in equity.

There have been no other significant changes to the Company's management objectives, policies and processes in the year nor has there been any change in what the Company considers to be capital.

19. SHARE OPTIONS, WARRANTS AND SAYE

19a. SHARE OPTIONS

19b. WARRANTS

19c. SAYE

During the year the Company operated a share save scheme.

19d. EQUITY-SETTLED SHARE-BASED PAYMENTS CHARGE

Share Options

Warrants

SAYE

20. TRADE AND OTHER PAYABLES

21. LEASE LIABILITIES

IFRS 16 Leases became mandatorily effective on 1 January 2019 and has been applied for the first time in this accounting period which resulted in changes to the accounting policies. The company transitioned to IFRS 16 using the modified retrospective approach and as a result the cumulative effect of initial application is recognised in retained earnings at 1 November 2018. The prior period figures were not adjusted. On adoption of IFRS 16, the company elected to apply relief provisions available and has not reviewed contracts under the definition of a lease per IFRS16, which had previously not been classified as lease under the principles of IAS17. Therefore, only contracts entered into, or modified, on or after 1 November 2018 have the definition of a lease per IFRS 16 applied. In addition, the company decided to apply recognition exemptions to leases with a term not exceeding 12 months and leases where the underlying assets are of low value. For leases classified as operation leases under IAS 17, these lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 November 2018. The company has used the following practical expedients permitted by IFRS 16 when applying this for the first time to leases previously classified as operating leases:

- Applied a single discount rate to a portfolio of leases with similar characteristics

- Applied the exemption not to recognise liabilities for leases with less than 12 months of lease term remaining

- Excluded initial direct costs for the measurement of right-to-use assets as the date of the initial application

- Used hindsight in determining the lease term where the contract contains options to extent or terminate the lease

Other lease commitments are not included as leases under the transition arrangements of IFRS 16 because the term does not exceed twelve months or the underlying asset is of low value.

22. PROVISIONS

The Company has set-up a decommissioning provision associated with a commitment to remove the plant and equipment installed at the Stade site in Germany at a future date.

23. 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.

Principal Financial Instruments

The principal financial instruments used by the Company, from which financial instrument risk arises, are as follows:

Financial instruments that are measured subsequent to initial recognition at fair value are grouped into three levels based on the degree to which the fair value is observable as defined by IFRS 7:

• Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets and liabilities.

• Level 2 fair value measurements are those derived from inputs, other than quoted prices included within Level 1, that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

All financial instruments are Level 1 and none have been transferred between Levels during the year.

General Objectives, Policies and Processes

The Board has overall responsibility for the determination of the Company's risk management objectives and policies and, while retaining ultimate responsibility for them, it has delegated part of the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company's finance team. The Board receives reports from the financial team through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set policies that seek to reduce ongoing risk as far as possible without unduly affecting the Company's competitiveness and flexibility. Further details regarding these policies are set out below.

Credit Risk

Credit risk arises principally from the Company's 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:

The Company's principal other receivables arose from: a) VAT receivable from UK and German tax authorities b) an R&D tax credit c) grant funding receivable from the EU. Credit risk with cash and cash equivalents is reduced by placing funds with 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 were temporarily held on short-term deposit.

Liquidity Risk

Liquidity risk arises from the Company's management of working capital and the amount of funding required for the development programme. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Company's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.

The principal liabilities of the Company are trade and other payables in respect of the ongoing product development programme. Trade payables are all payable within two months. The Board receives cash flow projections on a regular basis as well as information on cash balances.

Interest Rate Risk

The Company is exposed to interest rate risk in respect of surplus funds held on deposit and, where appropriate, uses fixed interest term deposits to mitigate this risk.

Fair Value of Financial Liabilities

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

The Company does not enter into forward exchange contracts or otherwise hedge its potential foreign exchange exposure. The Board monitors and reviews its policies in respect of currency risk on a regular basis.

24. CAPITAL COMMITMENTS

The Company had no capital commitments outstanding at 31 October 2019 (2018: £nil).

25. FINANCING FACILITIES

On 11 April 2019, a £4 million equity financing facility was signed for a period of 36 months from the signing date with a further six-month period, post the expiry date of the facility, to repay any outstanding amounts. The facility can be drawn down in £25,000 principal increments at the Company's discretion provided that,

1. the total amount drawn down in any one 60-day period does not exceed £500,000,

2. the total amount repayable does not exceed £4 million,

3. the volume weighted average price of the three previous trading days is greater than 2 pence, and

4. the headroom to allot non pre-emptive shares is 125% of the number of shares that would be required to convert at the time of the drawdown.

The draw down will be 90% of the principal amount and outside these parameters draw down will be by mutual consent.

The principal amount is convertible at the lender's discretion at the lower of market price at draw down and the volume weighted average price of the three previous trading days at the time of conversion.

Early redemption can be made at the request of the Company at 105% of the principal amount. In the case of a change in control or default then the draw down amounts are redeemed at 105% and 120% of the principal amount respectively.

An acceptance fee of £200,000 was settled by issue of shares and a further fee of 5% is payable on draw downs.

No drawdowns from the facility have been made.

26. EVENTS AFTER THE REPORTING PERIOD

After the REPORTING date, the Company has raised the following funds (before expenses)

On December 31, 2019 the Remuneration Committee approved and the Board ratified on January 6, 2020 the grant of options over 2,750,000 ordinary shares of 0.1 pence. The options are exercisable at a price of 16 pence, the market price on December 31, 2019.

27. ULTIMATE CONTROLLING PARTY

There is no ultimate controlling party.

28. RELATED PARTY TRANSACTIONS

During the year ended 31 October 2019 £ nil was invoiced by iProcess Engineering & Consulting Ltd (a company registered in England & Wales) for consultancy services in respect of the services of Jim Gibson as a Director of AFC Energy plc (2018: £293,750). Mr. Gibson is also a Director and Shareholder of iProcess Engineering & Consulting Ltd. At 31 October 2019, the sum owing to iProcess Engineering & Consulting Ltd was £nil (2018: £ nil) and an amount payable of £ nil (2018: £ 972).

At 31 October 2018, the amount receivable from Adam Bond was £ nil (2018: £ nil) and an amount payable of £ nil (2018: £ 2,268).