Final Results
28 June 2013
PowerHouse Energy Group Plc
("PowerHouse" or "the Company")
Final results for the year ended 31 December 2012
Chairman's Report
2012 has been a challenging and difficult year for the Group, for the directors
and for the shareholders of PowerHouse. However, as we close the books on the
2012 financial year we also can see several positive outcomes and encouraging
signs emerging.
On 10 October 2012 AIM agreed to a lifting of the suspension in the trading of
our shares. Re-establishing ourselves as a viably listed company on the AIM was
a significant accomplishment. However, it was only a single step toward our
longer-term goals. Our intention is to establish PowerHouse as a pre-eminent
provider of commercial, community-scale, Waste to Energy solutions globally.
A rapidly growing market opportunity exists to recover energy, in a fully
sustainable manner, from the existing commercial and residential waste stream.
Projects are continuing to be developed, worldwide, on a massive scale to
leverage this renewable source of energy. We have committed ourselves to the
development of a best-of-breed commercial platform on which to base projects of
both small and large magnitude.
To that end, working in conjunction with industry experts, we have engaged in a
broad evaluation of both existing and emerging technologies and products that
would serve as the cornerstone to a commercial platform. We have evaluated and
conducted due diligence on a number of companies. While we have decided against
pursuing relationships with most of our targets, our explorations have
underscored that there is still potential value in our 30% ownership stake in
Pyromex Holdings, A.G. ("Pyromex") and that its patented Ultra-High Temperature
(UHT) gasification process may hold a unique opportunity for us to work in
parallel with their efforts and develop a fully executed, and commercially
viable, suite of offerings. PowerHouse has a license in place with Pyromex and
has the rights to manufacture the UHT reactor and integrate it into our
commercial offerings. Having recently worked very closely with the Pyromex
team, it has become clear where the stumbling blocks of the past lay, and we
are now prepared to work around those.
Significant, recent, advances in engineering, by a number of resources,
including the Powerhouse Energy team, have resulted in an extremely promising
near-term prospect for a commercial system that can deliver syngas which can
readily, efficiently, and economically be converted into electricity. We're
confident that based upon the added process engineering, project management,
and commercial expertise that we are building into Powerhouse, we finally will
be able to drive forward and move the "science experiment" aggressively into
the commercial realm. Renewable energy is the future. Even as additional stores
of fossil fuels are discovered, the mandate of mankind is clear: Energy must
become cleaner and it must be sustainable. The UHT reactor can become a key
component in this process. Generating only Syngas and a minute amount of
non-leachable, non-toxic "sand", the effectively emission free (no smoke, no
NOx, no odour, no noxious waste at all) unit represents a key building-block to
delivering low cost, clean electricity; ultra-pure synthetic fuels; pure
hydrogen streams for the use in Hydrogen Fuel Cell applications. Syngas is
created efficiently, in a cost-effective manner and in abundance - all from
waste. By diverting and gasifying only 5% of the plastic material that goes to
landfill after recycle sorting, thousands of homes can be provided with clean
electricity. The opportunity is growing. Awareness is growing. The market is
growing. And we, and our partners, are poised to take advantage of it.
To get there still requires tremendous effort. However, measures have been
taken to ensure that we are on our way.
During the latter half of the year we have managed to settle a number of
outstanding liabilities that had previously put the Company at risk. We have
subsequently progressed additional settlement negotiations and are confident in
reaching reasonable outcomes for the Company and its shareholders - in fact
turning once adversarial relationships into productive partnerships.
In line with our annual accounts of 2011, the annual accounts for the year
ended 31 December 2012 show separate statements for both the Company and the
Group. The Company financial statements have been presented prior to the Group
financial statements as the Board of Directors believes the Company accounts
more accurately represent the on-going position of the Group.
The Company accounts reflect a decrease in net liabilities of £625,579, mainly
as a result of a waiver of the loan with its subsidiary to £nil. Administrative
costs have been reduced from £2,045,178 in 2011 to £354,571 as a result of
focused management and only incurring absolutely necessary costs. The Group
accounts show the expiry of the Pyromex option (see 2012 interim Chairman
report for further details) and the result of Pyromex no longer being
consolidated. Additionally, the Group accounts show the settlement agreements
with former employees.
The financial support received from Hillgrove Investments Pty Limited
("Hillgrove") has been a vital lifeline to the Company that has afforded us the
opportunity to emerge from our trading suspension and continue to develop our
business, which we have been doing pro-actively. Hillgrove continues to provide
financial support for the Company under the terms of the Convertible Loan
Agreement dated 8 October 2012. On 28 June 2013, Hillgrove agreed to amend the
repayment date of the previous Convertible Loan note, provided to the Company
on 19 June 2012, to 8 October 2014. Details of the loan are included in note 6
to the Company accounts. This additional support from Hillgrove is sufficient
for the Company to meets its minimal operational obligations for the next 12
months.
The most pressing challenges facing the Company include resolution to the
existing licensing agreement with RenewMe (see note 5 to the Company accounts),
resolution to the Aspermont loan (see note 6 to the Company accounts.) and
final resolution to any issues outstanding regarding Powerhouse Energy, Inc.
Active and productive negotiations are underway to resolve any issues these
challenges may represent.
Having regard for the uncertainties to the above challenges, the Directors have
a reasonable expectation that the Company and the Group will have adequate
resources to continue as a going concern for the foreseeable future (refer to
note 2 to the Company accounts). Thus we continue to adopt the going concern
basis of accounting for the preparation of the annual financial statements.
However, there remain risks to which shareholders should be aware and we have
highlighted them in the Company accounts.
The outlook for the Waste to Energy industry is a glowing one. Seven European
countries no longer allow landfill of municipal solid waste. In addition to the
EU Landfill Directive requires an additional reduction of 35% of the current
biodegradable municipal waste sent to landfill by 2016, 18 countries are
implementing stringent landfill taxes immediately, driving tremendous demand
for realistic, commercially viable solutions to recover the energy value
represented in the waste stream. We believe that we are building one such
solution.
As we continue to build our new team and our commercial platform continues to
develop we are confident that PowerHouse Energy Group will turn the corner to
replicable success. We appreciate that this has been a difficult year for all
stakeholders of the Company and thank you for continuing to support the Company
while it prepares for the next phase of its growth.
Keith Allaun
Chairman
28 June 2013
Further enquiries:
PowerHouse Energy Group Plc T: +44 (0) 753 513 8974
Keith Allaun, Director
SanlamSecuritiesUKLimited (Nomad/Broker) T: +44 (0) 20 7628 2200
David Worlidge / Simon Clements
Company Statement of Comprehensive Income
For the year ended 31 December 2012
31 December 31 December
2012 2011
£ £
Note
Revenue 45,000 25,000
Administrative expenses (354,571) (2,045,178)
Operating loss (309,571) (2,020,178)
Finance income 2 77
Finance costs (124,972) (3,231)
Impairment of investment (119,999) (47,830,451)
Loan waivers 1,109,068 -
Profit/(Loss) before taxation 554,528 (49,853,783)
Income tax expense - -
Total comprehensive expense 554,528 (49,853,783)
Earnings/(Loss) per share (pence) 3 0.19 (33.39)
Diluted profit/(loss) per share (pence) 3 <0.01 (33.39)
Company Statement of Changes in Equity
for the year ended 31 December 2012
Share Share Deferred Deferred Retained Total
capital premium shares shares earnings
£
£ £ (4.0p) (4.5p) £
£ £
Balance at 1 January 486,868 714,948 781,808 - (1,892,636) 90,988
2011
Transactions with
equity participants:
Consolidation and (389,494) - - 389,494 - -
subdivision
Equity issued for 2,737,665 45,171,464 - - - 47,909,129
acquisition
Shares issued for 1,666 28,333 - - - 29,999
services received
Shares issued to 6,000 66,737 - - - 72,737
settle subsidiary's
liability
Conversion of 7 115 - - - 122
warrants
Total comprehensive - - - - (49,853,783) (49,853,783)
expense
Balance at 31 2,842,712 45,981,597 781,808 389,494 (51,746,419) (1,750,808)
December 2011
Transactions with
equity participants:
* Shares issued to 20,200 7,070 - - - 27,270
settle
liabilities
* Conversion of 2,432 41,349 - - - 43,781
warrants
* Total - - - - 554,528 554,528
comprehensive
income
Balance at 31 2,865,344 46,030,016 781,808 389,494 (51,191,891) (1,125,229)
December 2012
Company Statement of Financial Position
for the year ended 31 December 2012
Note 2012 2011
£ £
ASSETS
Non-current assets
Property, plant and equipment 343 2,843
Other non-current assets 4 1 120,000
Total non-current assets 344 122,843
Current Assets
Trade and other receivables 2,310 116,820
Cash and cash equivalents 7,125 74,522
Total current assets 9,435 191,342
Total assets 9,779 314,185
LIABILITIES
Non-current liabilities
Loans (194,308) -
Current liabilities
Trade and other payables 5 (728,978) (202,510)
Loans 6 (211,722) (1,862,483)
Total current liabilities (940,700) (2,064,993)
Net liabilities (1,125,229) (1,750,808)
EQUITY
Share capital 2,865,344 2,842,712
Share premium 46,030,016 45,981,597
Deferred shares 1,171,302 1,171,302
Accumulated losses (51,191,891) (51,746,419)
Total deficit (1,125,229) (1,750,808)
Company Statement of Cash Flows
for the year ended 31 December 2012
2012 2011
£ £
Cash flows from operating activities
Profit/ (Loss) after taxation 554,528 (49,853,783)
Adjustments for:
Shares issued for services - 29,999
Depreciation and amortisation 729 359
Finance costs 124,972 (77)
Finance income (2) 3,231
Waiver of loan by PowerHouse Energy, Inc. (1,109,068)
Impairment of non-current assets 119,999 47,830,451
Changes in working capital:
Decrease in trade and other receivables 114,510 191,530
(Decrease)/Increase in trade and other payables (100,188) 159,338
Movement in loans - intercompany (99,519) 1,598,936
Net cash used in operations (394,039) (40,016)
Cash flows from investing activities
(Disposal)/Purchase of tangible assets 1,771 (3,202)
Net cash flows generated in/(used in) investing 1,771 (3,202)
activities
Cash flows from financing activities
Share issue 43,791 122
Finance income 2 77
Finance costs (124,972) (3,231)
Loans 406,030 -
Net cash flows from/(used in) financing 324,841 (3,032)
activities
Net decrease in cash and cash equivalents (67,427) (98,546)
Cash and cash equivalents at beginning of 74,552 120,772
period
Cash and cash equivalents at end of period 7,125 74,522
Notes to the financial statements
1. Basis of preparation
This financial information is for the year ended 31 December 2012 and has been
prepared in accordance with International Financial Reporting Standards
("IFRS") adopted for use by the European Union and the Companies Act 2006.
These accounting policies and methods of computation are consistent with the
prior year.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements. The
areas involving a higher degree of judgements or complexity, or areas where
assumptions or estimates are significant to the financial statements such as
the impairment of investments and going concern are disclosed within the
relevant notes.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2011 or the year ended 31
December 2012, but is derived from those accounts. Statutory accounts for 2011
have been delivered to the Registrar of Companies and those for 2012 will be
delivered shortly. The Auditors have reported on those accounts; their reports
were unqualified and did not contain statements under the Companies Act 2006,
sections 498(2) or (3).
2. Going concern
The Directors have considered all available information about the future events
when considering going concern. The Directors have reviewed cash flow forecasts
for twelve months following the date of these accounts. The cash flow forecast
assumes no further funding of PowerHouse Energy, Inc. and Pyromex by the
Company and a favourable settlement outcome to RenewMe liability and the
Aspermont loan.
The convertible loan obtained from Hillgrove Investments Pty Limited is
considered sufficient to settle outstanding creditors, maintain the Company's
reduced overhead and other planned events for at least the next 12 months. In
addition, the Company is in receipt of a letter of intention of financial
support from Hillgrove Investments Pty Limited to ensure the Company continues
to meet its obligations as they fall due and to ensure it operates as a going
concern for a period of at least 12 months. Based on this, the Directors
continue to adopt the going concern basis of accounting for the preparation of
the annual financial statements.
3. Earnings/(loss) per share
2012 2011
Total comprehensive profit/ 554,528 (49,853,783)
(loss) (£)
Weighted average number of 285,085,115 149,285,334
shares
Weighted average number of 139,500,000 -
dilutive shares
Earnings/(loss) per share 0.19 (33.39)
(pence)
Diluted profit/(loss) per <0.01 (33.39)
share (pence)
4. Other non-current assets
Other non-current asset consists solely of the investment in PowerHouse Energy,
Inc. PowerHouse Energy, Inc. ("the subsidiary") is incorporated in California
in the United States of America and the Company holds 100% of the common stock
and voting rights of the subsidiary.
2012 2011
£ £
Investment - Cost 47,909,129 47,909,129
Accumulated impairment (47,909,128) (47,789,129)
1 120,000
The cost of the subsidiary was determined using an issue price of 17.5 pence
(the price of the Company's shares on re-listing after the reverse takeover)
for the 273,766,456 shares issued to acquire PowerHouse Energy, Inc.
The impairment of the subsidiary was determined by taking into account the fair
value of all known assets (including a 30% investment in Pyromex Holdings AG
("Pyromex"), and liabilities of the subsidiary. The impairment test assumed no
cash flows from the sale of the Pyromex systems by the subsidiary. An
impairment of £119,999 was recognised during the year.
5. Trade and other payables
2012 2011
£ £
Trade payables 38,792 62,841
Salary and wages accrual - 57,855
RenewMe 653,896 -
Other accruals 36,290 81,814
728,978 202,510
RenewMe Limited had been granted exclusive rights by Pyromex to use, own,
assemble and install and operate Pyromex systems in territories also licensed
to the Company's subsidiary PowerHouse Energy, Inc. The Company entered into a
settlement agreement with RenewMe whereby the parties agreed to change the
respective exclusive rights pertaining to the Pyromex technology. Under the
original settlement agreement Powerhouse Energy, Inc. had the obligation to pay
five instalments of Euro 200,000 annually beginning 30 June 2011. The Company
guaranteed the obligations under the agreement of PowerHouse Energy, Inc. As
PowerHouse Energy, Inc is unable to meets its obligations, all remaining
amounts (Euro 800,000) due under the original settlement agreement have been
recognised as a liability. The Directors are currently in negotiations with
RenewMe to enter into a new settlement agreement, which they anticipate will
reduce the financial burden to the Company.
6. Loans
2012 2011
£ £
PowerHouse Energy, Inc. - 1,862,483
Aspermont loan (Shown as 211,722 -
current)
Hillgrove Investments Pty 194,308 -
Limited (Shown as current)
406,030
The loan from PowerHouse Energy, Inc. was extinguighed by the Company
recognising the RenewMe liability, settling the dispute with the US employees
and other liabilities with the balance of £1,109,068 being waived.
The Aspermont loan consists of Aspermont Ltd, Dilato Holdings Pty Ltd and Tesla
Nominees Pty Ltd. These parties collectively provided a facility of £100,000 to
the Company repayable by 18 May 2012, which incurs interest at a default rate
of 7 per cent. per month. The Company is currently in productive negotiations
to revise the terms of the loan.
Hillgrove Investments Pty Limited ("Hillgrove") has provided the Company with a
convertible loan agreement amounting to £465,000 - which can be increased at
Hillgrove's option. The loan is unsecured, repayable on 8 October 2014 and
carries interest of 15 per cent. per annum. Hillgrove has the option at any
time to convert the loan in part or whole at a conversion price of 1p per
share. Hillgrove have provided a letter of support indicating they are willing
to increase the loan amount pending any unforeseeable or material changes to
the Company's current circumstances.
7. Post balance sheet events and contingent liabilities
On 28 June 2013 Hillgrove Investments Pty Limited, provided a letter of intent
indicating that pursuant to the terms of the convertible loan agreement which
allows for an increase of the amount loaned at Hillgrove's sole discretion, to
continue to provide adequate financial support to the Company to ensure the
Company may meet its obligations as they fall due and to ensure it operates as
a going concern for a period of at least twelve months from the date of the
letter pending any unforeseeable or material changes to the Company's current
circumstances.
Additionally, Hillgrove extended the repayment date of the note from its
originally scheduled repayment date of 17 June 2014 to 8 October 2014.
8. Related Parties
Hillgrove Investments Pty Limited is a related party.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2012
Note Year ended Year ended
31 December
2012 31 December
US$ 2011
US$
Revenue 19,756 62,379
Cost of sales - (73,416)
Gross profit/ (loss) 19,756 (11,037)
Administrative expenses (594,520) (7,790,179)
Operating loss (574,764) (7,801,216)
Finance income 4 848
Loan Waivers 352,322
(Loss of control) / Fair value gain on step (1,309,296) 6,209,876
acquisition
Equity accounted loss (475,646) -
Finance expenses (210,272) (310,231)
Impairment of non-current assets - (33,387,720)
Loss before taxation (2,217,652) (35,288,443)
Income tax credit 10,942 3,028,883
Loss after taxation (2,206,710) (32,259,560)
Foreign exchange arising on consolidation (36,462) (3,621,791)
Foreign exchange included in profit and loss 1,095,440 -
arising from loss of control
Total comprehensive expense (1,147,732) (35,881,351)
Total comprehensive expense attributable to:
Owners of the Company (592,078) (13,588,143)
Non-controlling interests (555,654) (22,293,208)
Loss per share (US$) 4 <(0.01) (0.05)
Consolidated Statement of Changes in Equity
For the year ended 31 December 2012
Shares and Accumulated Other Non-control-ling Total
stock losses interests
reserves US$
US$ US$ US$
US$
Balance at 31 January 6,218,365 (5,516,668) - - 701,697
2011
Transactions with
equity participants:
* Issue of common 10,199,941 - - - 10,199,941
stock
* Costs related to (1,521,802) - - - (1,521,802)
issue of common
stock
* Common stock 206,250 - - - 206,250
issued for
services received
* Equity issued for - - 2,019,736 - 2,019,736
acquisition
* Equity 64,780,459 (64,780,459) - -
reclassification
arising from
reverse takeover
* Shares issued for 167,492 - - - 167,492
services received
* Acquisition of - - - 23,951,661 23,951,661
Pyromex
* Exercise of 188 - - - 188
warrants
Total comprehensive
income:
* Loss after - (12,574,238) (19,685,322) (32,259,560)
taxation
* Foreign exchange - (1,020,946) (2,600,845) (3,621,791)
arising on
consolidation
Balance at 31 December 80,050,893 (18,090,906) (63,781,669) 1,665,494 (156,188)
2011
Transactions with
equity participants:
* Shares issued to 43,850 - - - 43,850
settle liabilities
* Exercise of 67,876 - - - 67,876
warrants
* Pyromex, loss of - - - (1,109,840) (1,109,840)
control
Total comprehensive
income:
* Loss after - (1,606,239) - (600,471) (2,206,710)
taxation
* Foreign exchange - - 1,095,440 - 1,095,440
included in profit
and loss arising
from loss of
control
* Foreign exchange - - (81,279) 44,817 (36,462)
arising on
consolidation
Balance at 31 December 80,162,619 (19,697,145) (62,767,508) - (2,302,034)
2012
Consolidated Statement of Financial Position
For the year ended 31 December 2012
Note 31 December 31
2012 December
2011
US$
US$
ASSETS
Non-current assets
Intangible assets 5 - 2,062,838
Property, plant and equipment 6 957 1,825,636
Total non-current assets 957 3,888,474
Current Assets
Inventories - 637,601
Trade and other receivables 3,790 278,384
Cash and cash equivalents 11,492 382,455
Total current assets 15,282 1,298,440
Total assets 16,239 5,186,914
LIABILITIES
Non-current liabilities
Deferred taxation - (372,277)
Loans 7 (313,399) (376,973)
Trade and other payables - (777,000)
Total non-current liabilities (313,399) (1,526,250)
Current liabilities
Loans 7 (401,400) (57,996)
Trade and other payables 8 (1,603,474) (3,758,856)
Total current liabilities (2,004,874) (3,816,852)
Total liabilities (2,318,273) (5,343,102)
Net liabilities (2,302,034) (156,188)
EQUITY
Shares and stocks 80,162,619 80,050,893
Other Reserves (62,767,508) (63,781,669)
Accumulated losses (19,697,145) (18,090,906)
Non-controlling interests - 1,665,494
Total deficit (2,302,034) (156,188)
Consolidated Statement of Cash Flows
For the year ended 31 December 2012
Note Year ended Year ended
31 December
2012 31 December
US$ 2011
US$
Cash flows from operating activities
Loss before taxation (2,217,652) (35,288,443)
Adjustments for:
* Finance income (4) (11,761)
* Finance costs 210,272 138,028
* (Loss of control) / Fair value gain on step 1,309,296 (6,209,876)
acquisition
* Equity accounted loss 475,646 -
* Loan waivers (352,322) -
* Impairment of non-current assets - 33,387,720
* Depreciation and amortisation 124,049 1,824,241
* Common stock and shares issued for - 373,742
services
* Foreign exchange revaluations (99,327) 140,581
Changes in working capital:
* Decrease/ (Increase) in trade and other 226,580 (178,542)
receivables
* (Decrease)/ Increase in trade and other (569,617) 1,588,261
payables
* Taxation paid (800) (800)
Net cash used in operations (893,876) (4,053,733)
Cash flows from investing activities
Purchase of other non-current assets - (85,000)
Disposal (purchase) of tangible and intangible 2,846 (494,429)
assets
Loss of control / reverse acquisition (11,010) (949,660)
Net cash flows used in investing activities (8,164) (1,529,089)
Cash flows from financing activities
Common stock issue (net of issue costs) 111,726 8,678,326
Finance income 4 848
Finance costs (210,272) (310,231)
Loans received/(repaid) 627,197 (2,596,592)
Net cash flows from financing activities 528,655 5,772,351
Net (decrease)/increase in cash and cash equivalents (373,385) 210,950
Cash and cash equivalents at beginning of 382,445 197,170
period
Foreign exchange on cash balances 2,432 (4,244)
Cash and cash equivalents at end of period 11,492 382,455
1. Basis of preparation
This consolidated financial information is for the year ended 31 December 2012
and has been prepared in accordance with International Financial Reporting
Standards ("IFRS") adopted for use by the European Union and the Companies Act
2006. These accounting policies and methods of computation are consistent with
those used in prior years.
The financial information set out above does not constitute the Group's
statutory accounts for the year ended 31 December 2011 and the year ended 31
December 2012, but is derived from those accounts. Statutory accounts for 2011
have been delivered to the Registrar of Companies and the statutory Group
accounts for 2012 will be delivered shortly. The auditors have reported on both
those accounts: their report for both accounts were qualified and in the
accounts for the year ended 31 December 2012 contained a disclaimer of opinion
and contained statements under section 498(2) or (3) of the Companies Act 2006
as follows:
"Basis for disclaimer of opinion on financial statements
The audit evidence available to us was limited because we were unable to obtain
accounting records in respect of PowerHouse Energy, Inc. and Pyromex Holding
AG. As a result of this we have been unable to obtain sufficient appropriate
audit evidence concerning the state of the Group's affairs as at 31 December
2012 and of its loss of the year then ended.
Disclaimer of opinion on financial statements
Because of the significance of the matter described in the basis for disclaimer
of opinion on financial statements paragraph, we have not been able to obtain
sufficient appropriate audit evidence to provide a basis for an audit opinion.
Accordingly we do not express an opinion on the financial statements.
Opinion on other matter prescribed by the Companies Act 2006
Notwithstanding our disclaimer of an opinion on the financial statements, in
our opinion the information given in the Directors' Report for the financial
year for which the Group financial statements are prepared is consistent with
the Group financial statements.
Matters on which we are required to report by exception
Arising from the limitation of our work referred to above:
• we have not obtained all the information and explanations that we considered
necessary for the purpose of our audit; and
• we were unable to determine whether adequate accounting records have been
kept.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
• certain disclosures of Directors' remuneration specified by law are not made.
Other matters
We have reported separately on the parent Company financial statements of
PowerHouse Energy Group plc for the year ended 31 December 2012. The opinion in
that report is unqualified."
2. Consolidation and goodwill
Reverse takeover
On 29 June 2012, PowerHouse Energy Group plc acquired 100 per cent of the
common stock holding of PowerHouse Energy, Inc. by issuing 273,766,453
PowerHouse Energy Group plc shares to the common stockholders of PowerHouse
Energy, Inc. ("the Reverse Takeover").
The Reverse Takeover has been treated as a reverse acquisition under IFRS3
(2008) "Business combinations" whereby PowerHouse Energy, Inc. has been treated
as the acquirer PowerHouse Energy Group plc.
A reverse takeover reserve (included with other reserves) has been created to
account for the fair value of the consideration for the reverse acquisition and
to account for the change in the equity structure from that of PowerHouse
Energy, Inc. to that of the legal holding Company, PowerHouse Energy Group plc.
Pyromex loss of control
On 8 May 2012, the Company the option to acquire the remaining 70% interest in
Pyromex lapsed. Due to the expiry of the option, Pyromex is no longer accounted
for as a subsidiary of the Group. These results show the impact of the "loss of
control" of Pyromex.
US$
Intangible assets 2,005,446
Property, plant and equipment 1,869,044
Inventory 656,418
Trade and other receivables 55,642
Cash 11,010
Trade and other payables (2,424,114)
Intercompany payables (216,524)
Deferred taxation (371,437)
Net assets disposed 1,585,485
Attributable to:
* Non-controlling interests - 70% 1,109,839
* Owners of the Company - 30%, recognised as 475,646
investment in associate
Investment in associate consists of:
* Initial amount recognised after loss of control 475,646
* Equity accounted losses (475,646)
-
3. Going concern
The Directors have considered all available information about the future events
when considering going concern. The Directors have reviewed cash flow forecasts
for twelve months following the date of these accounts. The cash flow forecast
assumes no further funding of PowerHouse Energy, Inc. and Pyromex by the
Company and a favourable settlement outcome to RenewMe liability and the
Aspermont loan.
The convertible loan obtained from Hillgrove Investments Pty Limited is
considered sufficient to settle outstanding creditors, maintain the Company's
reduced overhead and other planned events for at least the next 12 months. In
addition, the Company is in receipt of a letter of intention of financial
support from Hillgrove Investments Pty Limited to ensure the Company continues
to meet its obligations as they fall due and to ensure it operates as a going
concern for a period of at least 12 months. Based on this, the Directors
continue to adopt the going concern basis of accounting for the preparation of
the annual financial statements.
4. Loss per share
2012 2011
Loss after (592,078) (12,581,950)
taxation-attributable to
owners of the Company
(US$)
Weighted average number of 285,085,135 245,331,092
shares
Loss per share (US$) <(0.01) (0.05)
As the Group incurred a loss, potential ordinary shares are anti-dilutive and
accordingly no diluted earnings per share has been presented.
5. Intangible assets
Goodwill Pyromex Licence Total
technology agreements
At 1 January
2011
Cost - - 500,000 500,000
Accumulated - - (45,833) (45,833)
amortisation
Opening carrying - 454,167 454,167
value
* Pyromex - 30,389,655 - 30,389,655
acquisition
* Reverse 4,035,356 - - 4,035,356
acquisition
* Purchases - 1,961 490,840 492,801
* Amortisation (1,448,642) (344,652) (1,793,294)
* Impairments (4,035,356) (23,537,175) (600,355) (28,172,886)
* Foreign (3,342,961) (3,342,961)
exchange
fluctuations
* Closing - 2,062,838 - 2,062,838
carrying
value
At 31 December
2011
Cost 4,035,356 27,931,414 990,840 32,957,610
Accumulated (4,035,356) (25,868,576) (990,840) (30,894,772)
amortisation and
impairment
Net carrying - 2,062,838 - 2,062,838
value
Amortisation - (117,421) - (117,421)
Pyromex loss of - (2,005,446) - (2,005,446)
control
Foreign exchange - 60,029 - 60,029
fluctuations
- - - -
Closing carrying
value
At 31 December
2011
Cost 4,035,356 - 990,840 5,026,196
Accumulated (4,035,356) - (990,840) (5,026,196)
amortisation and
impairment
Goodwill was recognised as the excess of the fair value of the consideration
determined in accordance with IFRS 3 accounting for reverse acquisitions over
the fair value of the net liabilities acquired.
Due to the impairment of the Group's primary intangible asset, the Pyromex
technology, the entire amount of goodwill recognised from the reverse
acquisition has been impaired.
Licence agreements represent the capitalised licence fees paid by PowerHouse
Energy, Inc. to Pyromex and RenewMe for rights associated with the Pyromex
technology.
6. Property, plant and equipment
Energy Office
Pyromex equipment service equipment Total
equipment
At 1 January 2011
Cost - 531,257 2,721 533,979
Accumulated amortisation - (489,998) (1,227) (491,225)
Opening carrying value - 41,259 1,494 42,753
Pyromex acquisition 7,840,150 - 43,156 7,883,306
Reverse acquisition - - 3,453 3,453
Purchases - - 1,629 1,629
Disposals - (19,249) - (19,249)
Depreciation - (22,010) (8,937) (30,947)
Impairments (5,160,586) (5,160,586)
Foreign exchange ( 890,288) - (4,435) (894,723)
fluctuations
Closing carrying value 1,789,276 - 36,360 1,825,636
At 31 December 2012
Cost 6,949,862 - 45,926 6,995,788
Accumulated amortisation (5,160,586) - (9,566) (5,170,152)
Net carrying value 1,789,276 - 36,360 1,825,636
Depreciation - - (6,628) (6,628)
Pyromex loss of control (1,842,079) - (26,965) (1,869,044)
Disposals - - (2,767) (2,767)
Foreign exchange fluctuations 52,803 - 957 53,761
- - 957 957
7. Loans
2012 2011
Notes
US$ US$
Accrued dividends on preferred 7a 33,000 33,000
stock
Management loans 7b - 349,885
Citibank business loan 7c0 26,913 52,084
Aspermont loan 7d 341,487
Hillgrove Investments Pty Limited 7e 313,399
Total loans 714,799 434,969
Classified as:
* Current 401,400 57,996
* Non-current 313,399 376,973
7a Preferred stock
The accrued dividends on the preferred stock became due on 31 March 2012. The
preferred stock holders exchanged their stock holding in PowerHouse Energy,
Inc. for shares in PowerHouse Energy Group plc.
7b Management loans
Loans from management were waived as part of the settlement agreement entered
into with employees.
7c Citibank business loan
Loan from Citibank incurs interest at the prime rate as published by The Wall
Street Journal plus 3% and is repayable in equal monthly installments on
$2,083.
7d Aspermont loan
The Aspermont loans consist of Aspermont Ltd, Dilato Holdings Pty Ltd and Tesla
Nominees Pty Ltd. These parties collectively provided a facility of £100,000 to
the Group repayable by 18 May 2012, which incurs interest at a default rate of
7 per cent. per month. The Group is currently in productive negotiations to
revise the terms of the loan.
7e Hillgrove Loan
Hillgrove Investments Pty Limited ("Hillgrove") has provided PowerHouse Energy
Group plc with a convertible loan agreement amounting to $707,000 - which can
be increased at Hillgrove's option. The loan is unsecured, repayable on 8
October 2014 and carries interest of 15 per cent. per annum. Hillgrove has the
option at any time to convert the loan in part or whole at a conversion price
of 1p per share. Hillgrove have provided a letter of support indicating they
are willing to increase the loan amount pending any unforeseeable or material
changes to the Group's current circumstances.
8. Trade and other payables
2012 2011
US$ US$
Trade creditors 227,104 856,924
Salary and wage accruals - 1,445,926
RenewMe (note 8a) 1,036,000 1,036,000
Customer deposits 150,000 939,236
Other accruals 190,370 257,770
Total trade and other payables 1,603,474 4,535,856
Classified as:
* Current 1,603,474 3,758,856
* Non-current - 777,000
8a RenewMe
RenewMe Limited had been granted exclusive rights by Pyromex to use, own,
assemble and install and operate Pyromex systems in territories also licensed
to the Company's subsidiary PowerHouse Energy, Inc. The Company entered into a
settlement agreement with RenewMe whereby the parties agreed to change the
respective exclusive rights pertaining to the Pyromex technology. Under the
original settlement agreement Powerhouse Energy, Inc. had the obligation to pay
five instalments of Euro 200,000 annually beginning 30 June 2011. The Company
guaranteed the obligations under the agreement of PowerHouse Energy, Inc. As
PowerHouse Energy, Inc is unable to meets its obligations, all remaining
amounts (Euro 800,000) due under the original settlement agreement have been
recognised as a liability. The Directors are currently in negotiations with
RenewMe to enter into a new settlement agreement, which they anticipate will
reduce the financial burden to the Company.
9. Post balance sheet events and contingent liabilities
On 28 June 2013 Hillgrove Investments Pty Limited, provided a letter of intent
indicating that pursuant to the terms of the convertible loan agreement which
allows for an increase of the amount loaned at Hillgrove's sole discretion, to
continue to provide adequate financial support to the Company to ensure the
Company may meet its obligations as they fall due and to ensure it operates as
a going concern for a period of at least twelve months from the date of the
letter pending any unforeseeable or material changes to the Company's current
circumstances.
Additionally, Hillgrove extended the repayment date of the note from its
originally scheduled repayment date of 17 June 2014 to 8 October 2014.
10. Availability of Report & Accounts
Copies of the report and accounts will be posted to shareholders shortly and
will be available for the Company's registered office at 16 Great Queen Street,
London, WC2 5DG and from the Company's website www.powerhouseenergy.net.
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