Audited results for the year ended 31 December ...
PowerHouse Energy Group plc
("PowerHouse" or the "Company")
Audited results for the year ended 31 December 2017
PowerHouse Energy Group plc (AIM: PHE), the UK technology company pioneering hydrogen production from waste plastic and end-of-life tyres, announces its audited results for the year ended 31 December 2017.
Highlights
For Year ended 31 December 2017
Operational
- DMG® process demonstrator re-sited and re-commissioned at Thornton Science Park and initial testing phase successfully completed.
- Capture and utilisation of the data from our on-going testing programme to support the initiation of the commercial design.
- EngSolve Ltd appointed as principal engineering partner to PowerHouse.
- Board and management team strengthened and Advisory Panel established to underpin the capability of the proprietary DMG® technology and to drive its commercial exploitation.
Commercial
- Project development agreement signed with Waste2tricity.
- First operational DMG® site identified at Ellesmere Port with Peel Environmental Ltd.
- Funding commitment from a party involved in the development of energy and waste projects to cover cost of planning and environmental permits for first five DMG® systems.
Financial
- £4.6m raised during the year to repay Hillgrove Convertible Loan Note for a combination of cash and shares and to fund engineering design and company operations.
- Net cash balance at end of December 2017 of £750K.
Post year end
- Final engineering design followed by independent verification of DMG® on track for completion.
- International distribution agreement reached with Tresoil Biofuels SRL to provide a solution for hydrogen bus projects in Bulgaria and Romania.
- MOU signed with Wrightbus, a leading manufacturer of hydrogen powered buses, to offer a turnkey solution for hydrogen powered buses to local authorities and public transport providers.
- Elimination of Hillgrove Convertible Loan Note by way of a placing.
- £576K raised in oversubscribed placing in April 2018 to support the commercial development of PowerHouse's proprietary DMG® technology platform.
Commenting on these results and the outlook for the Company, Keith Allaun, Chief Executive Officer of PowerHouse, said: “2017 was transformative for PowerHouse as we re-sited our demonstration system for creating clean energy from waste, successfully carried out a significant amount of critical testing and, importantly, signed a number of initial strategic partnerships.
“Our enabling technology platform is now ideally positioned to become embedded within the future energy infrastructure - one in which high efficiency, clean energy, impeccable environmental credentials and economic viability will be at a social, political and commercial premium.
“We are now shifting the balance of our efforts onto the commercialisation path, which we are already actively engaged in and making positive progress, to ensure our technology becomes a profitable and sustainable reality.â€
The annual report and accounts for the year ended 31 December 2017 will be sent to shareholders shortly and will be available to view on the Company’s website: www.powerhouseenergy.net
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
For more information, contact:
PowerHouse Energy Group plc Tel: +44 (0) 203 368 6399
Keith Allaun, Executive Chairman
WH Ireland Limited (Nominated Adviser) Tel: +44 (0) 207 220 1666
James Joyce / James Bavister
Turner Pope Investments Ltd (Joint Broker) Tel: +44 (0) 203 621 4120
Ben Turner / James Pope
Ikon Associates(Media enquiries) Tel: +44 (0) 1483 271291
Adrian Shaw Mob: +44 (0) 7979 900733
About PowerHouse Energy
PowerHouse Energy has developed a proprietary process technology called DMG® which can use waste plastic end-of-life-tyres and other waste streams to convert them into cost efficient energy in the form of electricity and ultra clean hydrogen gas fuel for use in cars and commercial vehicles (FCEV: Fuel Cell Electric Vehicles) and other industrial uses. The PowerHouse technology is the world’s first proven, modular hydrogen from waste (HfW) process.
The PowerHouse DMG® process can convert 25 tonnes of waste plastic into 1 tonne H2 per day and 28 MWh per day of electricity.
The PHE process produces low levels of safe residues and requires a small operating footprint, making it suitable for deployment at enterprise and community level.
PowerHouse is quoted on the London Stock Exchange's AIM Market. The Company is incorporated in the United Kingdom.
For more information see www.powerhouseenergy.net
Chairman’s Report
I am pleased to report to shareholders in respect of the year ended 31 December 2017.
During the year under review PowerHouse Energy Group PLC (“PowerHouse†or the ‘Company’) saw a transformation in its technical capabilities and an increase in activity in terms of partnership establishment, organisational development and financial restructuring. For the two years prior to January 2017, the Company had been exclusively focused on the development and initial testing of the G3-UHt Unit, our process demonstrator, from first principles in conjunction with OrePro engineering in Australia. The end of 2016 saw the recommitment to the building of the Company’s commercial operations headquartered in the UK.
The delivery of the Company’s process demonstrator to the UK in early 2017 and its re-siting and re-commissioning at the Thornton Science Park Energy Centre successfully concluded the initial testing phase of our proprietary technology.
The confirmation of the demonstrator’s ability to operate within target temperature envelopes and its re-commissioning were completed in accordance with stringent UK Health, Safety, and Environmental regulations and standards. A regular programme of demonstration, testing, enhancement, and consistent operation has been underway at the Thornton Science Park Energy Centre. Recent developments including the expansion of testing of mixed plastics as a feedstock, the independent verification of our gas by third-party laboratories, and positive validation by external hydrogen purification equipment vendors that our gas can be purified to a 99.9995% (road-fuel quality) hydrogen stream.
Of greatest importance for the year was the capture and utilisation of the data from our on-going testing programme to support the initiation of the commercial design, completion of the Pre-FEED (front-end design and engineering,) the identification of our first commercial site, the start of the planning and permitting process for that site, and the establishment of a robust technical and management team for the intended delivery of our first DMG® (Distributed Modular Gasification) System by the end of 2018.
The Board maintains its belief that the DMG® System and the hydrogen-from-waste process that we have created is well on its way to becoming a significant part of the hydrogen economy and the distributed electrical grid.
I would like to take this opportunity to thank our talented team who work tirelessly to drive forward our exciting technology as well as the shareholders whose ongoing support is greatly appreciated.
We are confident in our ability to continue to increase both our capabilities and shareholder value.
Dr Cameron Davies
Non-Executive Chairman
Chief Executive Officer’s Statement
A number of the items that follow were initially discussed in our interim Accounts on 27 September 2017. What the team has accomplished this year is worthy of note. However, the retrospective is far more understandable in the context of the key drivers for the Company’s future success:
- The global requirement for energy is growing every day and together with having to address the monumental environmental issues created by traditional forms of energy production, delivering such a quantum of clean energy is both challenging and disruptive. The result is that a number of new and pioneering modalities for energy generation and distribution will be embraced and established. PHE’s DMG® technology is one such platform which is suited to both enable, and deliver, such solutions.
- Waste elimination – particularly for unrecyclable plastics and end of life tyres (two of the biggest challenges faced by the waste management sector) - is also a major global challenge that PHE’s technology platform is ideally positioned to address. The DMG® technology platform efficiently converts such waste into an environmentally friendly and commercially viable source of clean energy thus making it a highly attractive energy feedstock. Consequently, waste then becomes our friend rather than an enemy.
- Our objective is to harness the true power of waste by having our enabling technology platform embedded within the future energy infrastructure - one in which high efficiency, clean energy, environmental credentials and economically viable operation will be at a social, political and commercial premium. Putting it simply, we believe that PHE meets all four of these demanding criteria and we have now embarked on the commercialisation path to ensure our technology becomes a reality.
- Our core DMG® technology is in its final stages of engineering validation in advance of scheduled independent third party verification and testing by a leading global player in the field. This work is due to be completed by the end of the third quarter.
- We are now shifting the balance of our efforts onto the commercialisation phase, in which we are already actively engaged, and through which we are making positive progress by taking a customer-led approach, involving a combination of strategic alliances, commercial partnering and working directly with potential customers. Our flexibility combined with the modular design of our DMG® system allows us to tailor our technology to meet the most specific of partner and customer requirements.
It is within the above context that I am delighted to report on an exciting year that has seen the Company delivering against its strategic objectives. Developing its technology, securing funding, eliminating the Hillgrove Investments Pty. Ltd (“Hillgroveâ€) note and debenture and identifying early-stage, commercially viable, opportunities for the sale of our DMG® System.
Our technology
The focus for PowerHouse in recent years has concentrated on the efficient generation of energy from waste, but increasingly we see exciting prospects for the ability to convert waste, particularly waste plastics and end-of-life tyres, into hydrogen. Our small footprint, our thermal conversion process, and our ability to generate a concentrated volume of hydrogen on a distributed basis sets us apart from others. This process, DMG®, has led to one of the world’s first distributed hydrogen from waste (HfW) system designs.
DMG® enables the molecular conversion of waste into an energy-rich syngas. The syngas can be used immediately to generate low emission electrical energy that can be used locally, thereby leveraging private line or micro-grid connections on-site. If appropriate, it can be sold directly into the National Grid. There is growing awareness of, and demand for, a “distributed grid†which ensures reduced transmission losses and enhanced availability where and when electricity is needed. Additionally, DMG® has been designed to produce road-fuel quality hydrogen as and when necessary.
Our process is not dependent upon the sun shining, or the wind blowing, but rather on the engagement of wastes that are poorly managed, over-produced, and ubiquitous in our society. End-of-life plastics and tyres represent extremely valuable energy sources, if managed properly. The unfortunate combustion and incineration of these extremely valuable resources is the least effective mechanism for deriving energy from them. DMG® represents a more environmentally responsible and profitable vehicle for the extraction of energy from these, and other, materials. Our hydrogen-from-waste process allows us to extract well over double the energy from these materials compared to conventional processes. We do this with a dramatically reduced greenhouse gas footprint, and when the hydrogen we produce displaces fossil fuels, we help eliminate over 21,000 kg of CO2 per tonne of hydrogen used.
We believe that DMG® is a quantum shift in technology that can fundamentally enhance the waste-to-energy market. DMG® is a mechanism for the appropriate destruction of waste streams, the generation of distributed electricity, and, most importantly, the production of distributed hydrogen - which we believe will help unleash the hydrogen economy by providing hydrogen as a road-fuel as the demand for Fuel Cell Vehicles (FCVs) ramps up – particularly in industrial and public transportation.
The adoption of hydrogen powered FCV technology in industrial transport is accelerating with the announcement of major fleets adopting the fuel cell as its motive power of choice. Marine ferries, the Alstom hydrogen train, and major initiatives by the EU for the decarbonisation of public transport – leading to the adoption of hydrogen powered buses, are clear evidence that hydrogen in transport, particularly industrial transport, is beginning to gain momentum. Our DMG® process can allow for the efficient processing of non-recyclable waste plastics, the conversion of end-of-life tyres, and the diversion of these and other materials from land-fill; all while producing distributed hydrogen at a cost at, or below, that of petrol and diesel.
2017 was the year that Sir David Attenborough launched Blue Planet 2 on BBC TV. Perhaps more than any event of the past decade, this series highlighted the blight of plastics, the degradation of marine ecosystems, and the pollution of our oceans and beaches that our planet is facing. Subsequent to the airing of the series, most major newspapers in the UK have followed up with on-going coverage of the crisis of plastic in our Oceans. Additionally, Sky TV produced a multi-part documentary regarding the state of plastic recycling, and the significant failings therein. The UK, Australia, the EU and the United States have all been negatively impacted by the recent ban of waste and recycling imports by China.
More virgin plastics will be produced next year than the combined weight of every man, woman, and child on our planet. Plastics have revolutionised our lives in many ways. In healthcare, in food safety, in automobile manufacturing, and mobile devices to name a few. We needn’t declare war on plastics. We need to declare war on the mis-management of end-of-life, non-recyclable, or waste plastics. What was once our enemy can now become our friend. Plastics are a tremendous store of clean energy potential.
PowerHouse has the ability to figuratively squeeze every hydrogen molecule from the stream of plastics while reducing waste plastic from our planet. Less than 50 per cent of recyclable plastic is actually able to be recycled economically, or in an environmentally sound manner. Our DMG® System, can, however, recover the energy value contained within the plastics and convert it into an ultra clean road fuel - hydrogen. Emissions from an FCV contain zero CO2 (Carbon Dioxide), zero NOx (Nitrogen Oxides), and zero Sox (Sulfur Oxides). The only emission from a fuel cell vehicle is water vapour.
Operations
The arrival of our process demonstrator, the G3-UHt Unit in the UK in March 2017 saw the start of a programme of engineering activity to ensure that the unit would safely and securely operate in accordance with UK Health, Safety, and Environmental guidelines. The work followed a comprehensive knowledge transfer from the Ore-Pro team (our prior external engineering partners) to our UK based engineering staff and included extensive upgrading of components, the installation of advanced automation, and the integration of appropriate safety controls for the system. The unit was completely deconstructed, examined, tested, and reconstructed to ensure its optimal operational condition.
During this period the system was moved from its initial commissioning site in Runcorn to its current location at Unit 99 of the Energy Centre at the Thornton Science Park, operated by the University of Chester. Unit 99 had been purpose-built as an emissions test facility for Shell Research and is an ideal location for the continuous operation, demonstration, and improvement of the DMG® System design. The Company has established an active engineering programme at the Centre and has taken a two year lease on its facilities there.
In April 2017 the Company announced that the first phase of the re-commissioning of the G3-UHt process demonstrator had been completed, with the successful production of syngas from the system. The PHE unit has consistently operated at temperatures of over 1000 degrees Celsius, demonstrating its capacity to successfully gasify many historically difficult waste materials and generate an extremely useful synthesis gas.
The second phase of re-commissioning saw additional improvements and modifications made to the system, ahead of the scaling up design necessary for commercial deployment. These included the enhancement of the gas-handling systems, refurbishment of the feed and oxidant systems and the complete redesign and introduction of programmable safety and control systems. During testing, the Company has regularly recorded a maximum peak flow rate of over 50 cubic metres per hour of syngas.
Following a robust programme of testing and technical data collection, the Company announced the completion of its first extended technical trial of the DMG® gasification process at the Energy Centre at Thornton Science Park on 31 July 2017.
Operating on a feedstock of tyre crumb, PowerHouse engineers were able to demonstrate control of the process within defined temperature envelopes that generated a syngas that, according to onsite, in-line, analytical instrumentation, was greater than 50 per cent hydrogen by volume. The remaining, measurable, constituent elements of the syngas were CO (carbon monoxide) and CH4 (methane.) Importantly, the in-line gas analysis equipment detected absolutely no CO2 in the gas stream generated by the demonstration unit.
Subsequently, a substantially more rigorous analysis of syngas samples produced in the process demonstrator has been conducted by off-site, third-party, independent laboratories. These tests have validated our initial findings, including minimal CO2, and continue to reinforce our ability to create target syngas constituent ratios for both electricity production and hydrogen extraction.
Strategic alliances and Relationships
The accomplishments achieved in 2017 were underpinned by a number of strategic alliances with influential partners.
In January 2017 PowerHouse entered into a 24 month project development relationship with Waste2tricity Ltd (“Waste2tricityâ€). The initial results of that relationship have led to a substantive expansion of our UK capabilities, relationships with other industrial partners, and a pipeline of commercial opportunities, in the UK and elsewhere, under consideration.
Among the introductions made by Waste2tricity on behalf of PowerHouse was to Peel Environmental Limited (“Peelâ€). Our relationship with Peel continues to grow and develop and has led to the siting of our G3-UHt demonstration unit at the Energy Centre at the Thornton Science Park. This base is the hub of our continuing R&D activities in co-operation with the University of Chester, including the sponsorship of a PhD program to further the science behind the PowerHouse process and the expansion of DMG®. Additionally, Peel has identified the site of our first intended commercial operation in the North West near Ellesmere Port.
Of tremendous importance, the appointment of EngSolve Ltd (“EngSolveâ€) as our principal engineering partner, announced in March 2017, to assist in the re-commissioning of the process demonstrator, has proven to be extremely productive and valuable. Their experience with novel waste to energy technologies has helped us accelerate our Commercial Design for which they are ideally suited. We look forward to a long-standing and successful relationship with their multi-talented engineering team.
The test data acquired through our robust programme at Thornton Science Park has been key to the effective engagement of the EngSolve team for the commercial design efforts. That testing program continues to inform design and procurement decisions we are making today.
In June 2017, the Company announced a collaboration agreement with a significant UK partner involved in the development of energy and waste projects. The partner has committed two tranches of funding of up to £500,000 in aggregate to meet the cost of preparing and funding applications for planning permission and environmental permits of the first five PowerHouse DMG® systems.
The agreement will require PowerHouse to supply five systems at locations of the partners' choosing on a prioritised basis. £100,000 of this commitment was released in July 2017 to fund the planning development of the Company’s first commercial sites.
Risk Reduction and Funding
Hillgrove Convertible Loan Note
The Board made the strategic decision to negotiate the retirement of the Hillgrove Convertible Loan note (Note) with a combination of cash and shares. The retirement of the Note was a significant milestone, and a major accomplishment, for the Company as there is no longer a financial impediment to its growth and operation.
The Note was accruing interest at a rate of 15 per cent per annum and had reached a value of £3.4M. The coupon on the Note would have added approximately a half-million pounds of fully secured debt to the Company each year.
In February 2017 the decision was taken to raise £2.5 million in a private placement and to repay the Note with £2 million in cash, and issue £1.4 million worth of shares at the conversion price of 0.5p per share. Hillgrove agreed to release its debenture over the Company’s assets and IP upon the final settlement of the share issuance. This settlement has now occurred and the debenture has been released and all IP assigned to the Company per our agreement with Hillgrove.
Other funding
In January 2017, Yady Worldwide SA made an investment of £250,000 into the Company, showing an early commitment to the Company and the continued development and roll-out of DMG®. Yady further contributed £500,000 as the cornerstone investor to the £2.5 million placing in February 2017.
In August 2017 the Company raised a further £1.6 million through a placing of new ordinary shares at 1.0p to fund the acceleration of our on-going commercial engineering design and Company operations.
The PowerHouse Team
The Company has made a number of significant appointments to strengthen the board and management team.
David Ryan was appointed as a Non-Executive Director in late February 2017, and on 20 March 2017, began acting in the role of Executive Director of Programme Development, overseeing the technical operations of the Company. Introduced to PowerHouse by Waste2tricity, David was the former CEO and Managing Director of Thyssenkrupp Industrial Solutions’ Oil & Gas Business Unit for the UK.
With over 35 years of complex engineering, business development, and project management experience in the energy sector, David is an expert in sophisticated design engineering and brings a breadth of project delivery, international business management, and general engineering acumen to the management team. David was instrumental in the successful siting and re-commissioning of the G3-UHt process demonstrator at Thornton Science Park and continues to lead the engineering work on the design and development of the Company’s commercial platform, DMG®. Additionally, David has plays a key role in the defining of the Company’s Commercial and Operational Strategies.
The Company was delighted to announce the appointment of Dr. Cameron Davies as Non-Executive Chairman of the Board of Directors. Dr. Davies’ many accomplishments, his extensive experience, and his steady hand have been serving the Company well since his Chairmanship took effect on 3 October of 2017.
Keith Allaun relinquished his role as Executive Chairman at the time of Dr Davies’ appointment and has assumed the role of Chief Executive Officer for PowerHouse. In early 2018, Keith and his wife relocated to the UK for the foreseeable future.
Clive Carver stepped down from his role as Non-Executive Director of the Company in May 2017.
Chris Vanezis joined the PowerHouse management team as Chief Financial Officer, bringing an extensive background in financial accounting and waste-to-energy finance management.
In 2017, the first site personnel in the UK were hired, based at Thornton Science Park. Additionally, the Company has embarked upon the sponsorship of a Ph.D. program in advanced thermal conversion technology in conjunction with the University of Chester. That program has led to the seconding of two graduate students to PowerHouse.
2017 also saw the creation of an experienced, knowledgeable, and well-connected Advisory Panel consisting of Peter Jones OBE, Keith Riley, Myles Kitcher, Roudi Baroudi and Howard White. The Advisory Panel has been very influential in terms of our commercial planning and development activities.
Post period events
Elimination of Hillgrove loan note
Since the year end the Company has successfully placed shares issued to settle the Hillgrove outstanding loan balance (280,430,920 shares) in two tranches, the second being in conjunction with an additional private placement which also raised approximately £580,000 for Company operations.
The Hillgrove Debenture has been fully released and removed.
Commercial developments
The Company announced a partnership Memorandum of Understanding (“MOUâ€) with Wrightbus Ltd (“Wrightbusâ€), a leading bus manufacturer whose products include innovative hydrogen powered buses, in February 2018. This MOU, negotiated in collaboration with Waste2tricity, is non binding and although there can be no certainty a binding agreement will be entered into, the Board of PowerHouse expects this to lead to a definitive agreement which is currently under review by both Companies. This agreement will allow Wrightbus to supply hydrogen fuel powered buses while PowerHouse provide its DMG® system for the low cost and environmentally responsible production of hydrogen- in a turn-key solution to the Decarbonisation of Public Transport; a major EU Directive.
It is expected that this first-of-its-kind turnkey solution will be marketed to local authorities and public transport providers in the UK and internationally with a particular focus on city centres, where the lack of emissions generated by hydrogen fuel cell buses bring important environmental and quality-of-life benefits. PowerHouse’s DMG® system has the capacity to process a nominal 25 tonnes of plastic per day, and has the potential to provide hydrogen to fuel buses while also providing electricity for sale to either the national grid or private clients.
In April 2018, PowerHouse announced its first international distribution agreement for its proprietary DMG® hydrogen from waste process targeting the supply into hydrogen bus projects in Bulgaria and Romania with Tresoil Biofuels SRL (“Tresoilâ€) and Waste2tricity, PowerHouse’s projects development partner. The three-way agreement between PowerHouse, Tresoil and PowerHouse’s partner, Wrightbus, provides a cost-effective turnkey solution to bus operators in Romania and Bulgaria who are actively seeking to replace aging fleets of highly polluting public transport buses, with the region encouraged by the EU to deploy low carbon alternatives. Tresoil is a well established company in Bucharest and has been actively, and successfully, involved in seeking grants for alternative energy.
PowerHouse team
The PowerHouse management team was strengthened by the addition of Bruce Nicholson as Commercial Operations Manager in April 2018. Bruce has a proven track record of delivering complex energy projects built over 30 years of project management, asset management and business development. Bruce’s role is to drive and accelerate progress of the Company’s commercial operations, business development, and partner identification.
Current trading and Outlook
The year under review saw the Company make encouraging progress to its longer-term objective of being a leading provider of distributed electricity and distributed hydrogen produced from waste.
2017 was focused on acquiring the empirical data necessary to effect the commercial design of the DMG® System. It was clear that the G3-UHt unit was an excellent process demonstrator, in that it performed as designed, as planned, and as needed. It was, however, only a process demonstrator and has required significant, and sophisticated, engineering enhancement to execute the design for the Commercial PowerHouse DMG® System.
We have created what we believe to be a distinct and evolutionary philosophy with DMG®: distributed waste destruction; distributed electrical generation; distributed hydrogen production. We have taken a contrarian approach to the megaliths of the past and believe in bringing the solution to where the problem lies.
We are positioned to do something powerful for communities across the UK and throughout the world. We believe that DMG® today is but a ripple in the pond but that in time it will help redefine how our environment is managed and play a key role in the evolution of transport - as the ripple turns into a wave of opportunity for positive change in our world.
The Company is gaining traction in developing commercial interest in the DMG® System with inquiries arriving on a weekly basis. We believe, and have substantial evidence to this effect, that the completion of our first commercial system will lead to significant demand for our systems.
PowerHouse Energy Group plc no longer sees itself solely in the Waste to Energy category of companies, but now as a player in the hydrogen from waste (HfW) sector. We are convinced that DMG® will help fuel our future, cleanly and profitably.
We look forward to an even more exciting 2018. The year when the power of DMG® is finally unleashed.
As always, we appreciate your continued support.
Keith Allaun
Chief Executive Officer
Statement of Comprehensive Income
for the year ended 31 december 2017
31 December |
31 December |
||
| Note | 2017 £ |
2016 £ |
|
| Revenue | - | - | |
| Administrative expenses | 3 | (1,804,829) | (851,903) |
| Operating loss | (1,804,829) | (851,903) | |
| Finance costs | 4 | (69,863) | (482,106) |
| Loss before taxation | (1,874,692) | (1,334,009) | |
| Income tax expense | 5 | - | - |
| Total comprehensive loss | (1,874,692) | (1,334,009) | |
| Loss per share from continuing operations (pence) | 6 | (0.19) | (0.24) |
| Diluted loss per share from continuing operations (pence) | 6 | (0.19) | (0.24) |
The notes numbered 1 to 22 are an integral part of the financial information.
Statement of Financial Position
As at 31 December 2017
| Note | 2017 £ |
2016 £ |
|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 7 | 2,601 | 2,424 |
| Investments | 8 | 1 | 1 |
| Total non-current assets | 2,602 | 2,425 | |
| Current Assets | |||
| Trade and other receivables | 9 | 88,495 | 6,336 |
| Cash and cash equivalents | 10 | 750,226 | 148,151 |
| Total current assets | 838,721 | 154,487 | |
| Total assets | 841,323 | 156,912 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 11 | (240,856) | (51,184) |
| Loans | 12 | (1,402,155) | (3,332,292) |
| Total current liabilities | (1,643,011) | (3,383,476) | |
| Net liabilities | (801,688) | (3,226,564) | |
| EQUITY | |||
| Share capital | 14 | 8,798,142 | 6,153,455 |
| Share premium | 14 | 48,681,792 | 47,031,989 |
| Accumulated deficit | 15 | (58,281,622) | (56,412,008) |
| Total deficit | (801,688) | (3,226,564) | |
The financial statements of PowerHouse Energy Group Plc, Company number 03934451, were approved by the Board of Directors and authorised for issue on 28 June 2018 and signed on its behalf by:
Keith Allaun
Director
The notes numbered 1 to 22 are an integral part of the financial information.
Statement of Cash Flows
For the year ended 31 December 2017
| 2017 £ |
2016 £ |
|||
| Cash flows from operating activities | ||||
| Operating Loss | (1,804,829) | (851,903) | ||
| Adjustments for: | ||||
| Share based payment | 5,078 | 68,000 | ||
| Expenses settled by shares | 190,000 | - | ||
| Renewme settlement | - | 299,152 | ||
| Depreciation | 808 | - | ||
| Changes in working capital: | ||||
| (Increase)/Decrease in trade and other receivables | (82,159) | (4,885) | ||
| (Decrease)/Increase in trade and other payables | 189,672 | (147,601) | ||
| Net cash used in operations | (1,501,430) | (637,237) | ||
| Cash flows from investing activities | ||||
| - Purchase of fixed assets | (985) | (2,424) | ||
| Net Cash flows from investing activities | (985) | (2,424) | ||
| Cash flows from financing activities | ||||
| Proceeds on issue of shares | 4,294,490 | 700,512 | ||
| Expenses settled by shares | (190,000) | - | ||
| Finance costs | (69,863) | (482,106) | ||
| New loans raised Loans repaid |
69,863 (2,000,000) |
577,567 (183,911) |
||
| Net cash flows from financing activities | 2,104,490 | 612,062 | ||
| Net (decrease)/increase in cash and cash equivalents | 602,075 | (27,599) | ||
| Cash and cash equivalents at beginning of year | 148,151 | 175,750 | ||
| Cash and cash equivalents at end of year | 750,226 | 148,151 | ||
The notes numbered 1 to 22 are an integral part of the financial information.
Statement of Changes in Equity
For the year ended 31 december 2017
| Ordinary Share capital £ |
Share premium £ |
Deferred shares (0.5p) £ |
Deferred shares (4.5p) £ |
Deferred shares (4.0p) £ |
Accumulated deficit £ |
Total £ |
|
| Balance at 1 January 2016 | 2,150,815 | 46,921,180 | 1,942,483 | 781,808 | 389,494 | (55,145,999) | (2,960,219) |
| Transactions with equity participants: | |||||||
| - Share issue | 45,455 | 4,545 | - | - | - | - | 50,000 |
| - Share issue | 178,571 | 56,429 | - | - | - | - | 235,000 |
| - Share issue | 17,857 | 7,143 | - | - | - | - | 25,000 |
| - Share issue | 192,308 | 42,692 | - | - | - | - | 235,000 |
| - Share issue | 454,664 | - | - | - | - | - | 454,664 |
| - Share based payment | - | - | - | - | - | 68,000 | 68,000 |
| - Total comprehensive loss | - | - | - | - | - | (1,334,009) | (1,334,009) |
| Balance at 31 December 2016 | 3,039,670 | 47,031,989 | 1,942,483 | 781,808 | 389,494 | (56,412,008) | (3,226,564) |
| Transactions with equity participants: | |||||||
| - Share issue | 178,571 | 71,429 | - | - | - | - | 250,000 |
| - Share issue | 1,562,500 | 937,500 | - | - | - | - | 2,500,000 |
| - Share issue in lieu of services | 37,300 | 32,700 | - | - | - | - | 70,000 |
| - Share issue | 800,000 | 800,000 | - | - | - | - | 1,600,000 |
| - Share issue in lieu of services | 40,000 | 40,000 | - | - | - | - | 80,000 |
| - Share issue in lieu of services | 26,316 | 13,684 | - | - | - | - | 40,000 |
| - Share issue fees | - | (245,510) | - | - | - | - | (245,510) |
| - Share based payment | - | - | - | - | - | 5,078 | 5,078 |
| - Total comprehensive loss | - | - | - | - | - | (1,874,692) | (1,874,692) |
| Balance at 31 December 2017 | 5,684,357 | 48,681,792 | 1,942,483 | 781,808 | 389,494 | (58,281,622) | (801,688) |
The notes 1 to 22 are an integral part of the financial information.
Notes to the Accounts for the year ended 31 December 2017
1. accounting policies
PowerHouse Energy Group PLC is a Company incorporated in England and Wales. The Company is a public limited company quoted on the AIM market of the London Stock Exchange. The address of the registered office is 10b Russell Court, Woolgate, Cottingley Business Park, Bingley BD16 1PE. The principal activity of the Company is to continue the development of the newly developed PHE G3-UHt Waste-to-Energy System in order to achieve its full commercial roll-out. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial information.
1.1. Basis of preparation
This financial information is for the year ended 31 December 2017 and has been prepared in accordance with International Financial Reporting Standards (“IFRSâ€) 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 Company’s only UK subsidiary is non-trading and not material. There are also long-term restrictions on the operations of the Company’s subsidiaries in the US and Switzerland. As such the Company has claimed exemptions applicable to it under Companies Act section 405 (2) and 405 (3b) to not present any Consolidated financial statements for the year ended 31 December 2017.
1.2. Judgements and estimates
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 component parts of compound instruments (convertible bonds) have a high degree of complexity. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument, the residual equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. These are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. In classifying the instruments it has been assessed that there is no equity element in relation to the convertible loan notes.
Other 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
1.3. Going concern
The financial statements have been prepared on a going concern basis, notwithstanding the Company having net liabilities at 31 December 2017 of £802k (2016: £3,227k). Those liabilities include the Hillgrove loan of £1.4m which has been converted to equity since the year end (please refer to Note 21). The Directors believe the going concern basis to be appropriate for the following reasons:
The Company has been provided with a letter of support from one of its shareholders, who has indicated to the Directors that he intends, for at least 12 months from the date of the approval of these financial statements, to make available a maximum sum of £650,000. In addition, the Directors are also of the opinion that they can raise further funds as and when required. Furthermore, the Directors have also agreed to waive any salaries for themselves or fees in the future if necessary so as for the Company to repay debts as and when they fall due for the foreseeable future.
The Directors consider that these should enable the Company to continue in operational existence for the foreseeable future by meeting its liabilities as they fall due for payment.
If the support of shareholders ceased or the Company was unable to raise further funds it would need to seek alternative finance in order to be able to remain as a going concern. The financial statements do not include the adjustments that would result if the Company is unable to continue as a going concern.
1.4. Foreign currency translation
The financial information is presented in sterling which is the Company’s functional currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are revalued to the exchange rate at date of settlement or at reporting dates (as appropriate). Exchange gains and losses resulting from such revaluations are recognised in the Statement of Comprehensive Income.
Foreign exchange gains and losses are presented in the Statement of Comprehensive Income within administrative expenses.
1.5. Revenue
Revenue represents the amounts derived from the supply of goods and services in the normal course of business, net of discounts, value added tax and other sales related taxes.
1.6. Operating Leases
Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term.
1.7. Finance expenses
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
1.8. Income tax expense
The tax expense for the period comprises current and deferred tax.
UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Temporary differences are differences between the Company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.
1.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Cost represents the cost of acquisition or construction, including the direct cost of financing the acquisition or construction until the asset comes into use.
Depreciation on property, plant and equipment is provided to allocate the cost less the residual value by equal instalments over their estimated useful economic lives of 3 years, once the asset is complete.
The expected useful lives and residual values of property, plant and equipment are reviewed on an annual basis and, if necessary, changes in useful life or residual value are accounted for prospectively.
1.10. Other non-current assets
Other non-current assets represent investments in subsidiaries. The investments are carried at cost less accumulated impairment. Cost was determined using the fair value of shares issued to acquire the investment.
1.11. Financial assets
The Company classifies financial assets as loans and receivables within current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as noncurrent assets. Assets are initially recognised at fair value plus transaction costs. Loans and receivables are subsequently carried at amortised cost using the effective interest rate method.
1.12. Trade and other receivables
Trade receivables are initially recognised at fair value. Subsequently they are carried at amortised cost less any provision for impairment.
1.13. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits and are recognised and subsequently carried at fair value.
1.14. Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
1.15. Financial liabilities
Loans are financial obligations arising from funding received and used to support the operational costs of the Company. These are initially recognised at fair value. Loans are subsequently carried at amortised cost using the effective interest method.
1.16. Adoption of new and revised standards
New and revised standards adopted during the year and those standards and interpretations in issue but not yet effective:
IFRS 2 Share based payment
IFRS 9 Financial instruments
IFRS 15 Revenue from contracts with customers
IFRS 16 Leases
IAS 19 Employee benefits (amendment)
IFRIC 22 Foreign Currency Transactions and advance consideration
IFRIC 23 Uncertainty over income tax treatments
Improvements to IFRSs. Annual improvements 2014-2016 cycle: Amendments to IFRS1 and IAS 28
Improvements to IFRSs. Annual improvements 2015-2017 cycle: Amendments to 4 IFRSs
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.
1.17. Impairment
(i) Impairment review
At each balance sheet date, the carrying amounts of assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. A cash generating unit is the group of assets identified on acquisition that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of assets or cash generating units is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
(ii) Reversals of impairments
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
1.18. Share-based payments
The Company grants options to Directors and employees through approved and unapproved option plans. The fair value of options is determined at the date of grant and is recognised as an expense in the Income Statement. The fair value at the grant date is determined using a Black and Scholes valuation model. At each reporting date the Company revises its estimates of the number of options that are likely to be exercised with any adjustment recognised in the income statement.
Where share-based payments give rise to the issue of new share capital, the proceeds received by the Company are credited to share capital and share premium when the share entitlements are exercised.
1.19. Segmental reporting
An operating segment is a component of the Company:
• that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Company);
• whose operating results are reviewed regularly by the Company’s chief decision maker to make decisions about resources to be allocated to the segment and assess its performance; and
• for which discrete financial information is available.
1.20. Research and development
An internally generated intangible asset arising from development is only recognised where all of the following have been demonstrated: (i) the technical feasibility of completing the asset; (ii) the intention to complete the asset and the ability to use or sell it; (iii) the availability of resources to complete the asset; and (iv) the ability to reliably measure the cost attributable to the asset during its development.
In all other instances research and development expenditure is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
2. Staff costs
| 2017 £ |
2016 £ |
|||
| Directors’ fees | 207,772 | 194,602 | ||
| Wages and salaries | 11,474 | - | ||
| Pensions | 230 | - | ||
| 219,476 | 194,602 |
Including Directors, the Company had on average 5 employees during the year (2016: 4) and 6 at year end (2016: 4).
No social security costs were incurred during the year or in the prior year.
3. Administrative expenses
Included in administrative expenses are:
| 2017 £ |
2016 £ |
|||
| Property rentals | 10,399 | - | ||
| Depreciation | 808 | - | ||
| Auditor’s remuneration for audit services: | ||||
| Fees payable to the Company’s auditor for the audit of the Company’s annual financial statements | 20,000 | 12,000 | ||
| Fees payable to the Company’s auditor and their associates for other services: | 1,000 | - | ||
There are no other fees paid to the Company’s auditor other than those disclosed above.
4. Finance costs
| 2017 £ |
2016 £ |
||
| Shareholder loan interest | 69,863 | 482,106 | |
| 69,863 | 482,106 |
5. Income tax and deferred tax
As the Company incurred a loss, no current tax is payable (2016: £nil). In addition, there is no certainty about future profits from which accumulated tax losses could be utilised and accordingly no deferred tax asset has been recognised. Accumulated tax losses amount to £9,168,835 (2016: £7,294,143) and reflect tax losses submitted in tax returns and arising during the period. The tax credit is lower (2016: lower) than the standard rate of tax. Differences are explained below.
| 2017 £ |
2016 £ |
|
| Current tax | ||
| Loss before taxation | 1,874,692 | 1,334,009 |
| Tax credit at standard UK corporation tax rate of 19.25% (2016: 20%) | 360,878 | 266,802 |
| Effects of: | ||
| Expenses not deductible for tax purposes | - | (73,430) |
| Deferred tax not recognised | (360,878) | (193,372) |
| Income tax expense | - | - |
6. Loss per share
| 2017 | 2016 | ||
| Total comprehensive loss (£) | (1,874,692) | (1,334,009) | |
| Weighted average number of shares | 975,055,119 | 551,433,936 | |
| Loss per share in pence | (0.19) | (0.24) | |
| Diluted loss per share in pence | (0.19) | (0.24) |
The following instruments were excluded from the diluted loss per share calculation due to being anti-dilutive but could be dilutive in the future and are therefore disclosed in accordance with IAS 33.
| warrants – exercisable at 1p per warrant Hillgrove Loans convertible at 0.5p |
5,000,000 £1,402,155 |
11,000,000 15,000,000 £3,332,292 |
Shares issued since the year end are disclosed in note 21.
7. Property, plant and equipment
| Property, plant and equipment | |||
| £ | |||
| Cost | |||
| At 1 January 2017 | 5,626 | ||
| Additions | 985 | ||
| Other adjustments | - | ||
| At 31 December 2017 | 6,611 | ||
| Accumulated depreciation | |||
| At 1 January 2017 | 3,202 | ||
| Charge for the year | 808 | ||
| Other adjustments | - | ||
| At 31 December 2017 | 4,010 | ||
| Carrying amount | |||
| At 31 December 2017 | 2,601 | ||
| At 31 December 2016 | 2,424 |
8. Investments
Investments relate to costs of investments in subsidiary undertakings, namely in PowerHouse Energy, Inc, Pyromex AG and PowerHouse Energy UK Limited. PowerHouse Energy, Inc. is incorporated in California in the United States of America and the Company holds 100 per cent of the common stock and voting rights of the subsidiary. Pyromex AG is based in Zug, Switzerland and the Company holds 100 per cent of the shares and voting rights of the subsidiary. PowerHouse Energy UK Limited is a wholly owned UK based dormant company.
| 2017 £ |
2016 £ |
||
| Investment - Cost | 48,947,155 | 48,947,155 | |
| Accumulated impairment | (48,947,154) | (48,947,154) | |
| 1 | 1 |
The registered address of PowerHouse Energy Inc is 145 N Sierra Madre Blvd Pasadena, CA 91107, USA.
The registered address of Pyromex AG is Chollerstrasse 3, CH-6300, Zug, Switzerland.
The registered address of PowerHouse Energy UK Limited is 10b Russell Court, Cottingley Business Park, Bingley, UK BD16 1PE
9. Trade and other receivables
| 2017 £ |
2016 £ |
||
| Other receivables | 77,287 | 6,336 | |
| Prepayments and accrued income | 11,208 | - | |
| 88,495 | 6,336 |
10. Cash and cash equivalents
| 2017 £ |
2016 £ |
||
| Cash balances | 750,226 | 148,151 | |
| 750,226 | 148,151 |
11. Trade and other payables
| 2017 £ |
2016 £ |
||
| Trade payables | 125,141 | 34,183 | |
| Other creditors and accruals | 115,715 | 17,001 | |
| 240,856 | 51,184 |
Capital commitments not accrued for at the year end amounted to £nil (2016: £Nil).
12. Operating leases
Future minimum rentals payable under non-cancellable operating leases are as follows:
| 2017 £ |
2016 £ |
||
| Amounts payable: | |||
| Within one year | 5,419 | - | |
| 5,419 | - |
13. Loans
| 2017 £ |
2016 £ |
||
| At 1 January | 3,332,292 | 2,938,636 | |
| New loans raised | 69,863 | 577,567 | |
| Loans repaid | (2,000,000) | (183,911) | |
| Interest expense | 69,863 | 482,106 | |
| Interest paid | (69,863) | (482,106) | |
| 1,402,155 | 3,332,292 |
| 2017 £ |
2016 £ |
|||||
Loans classified as: |
||||||
| - Current | 1,402,155 | 3,332,292 | ||||
| - Non-current | - | - | ||||
Hillgrove Investments Pty Limited (“Hillgroveâ€) has provided the Company with a convertible loan agreement, the amount of which has increased from time to time at Hillgrove’s option and based upon Company needs. The loan is secured by a debenture over the assets of the Company 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 0.5p per share.
In February 2017 Hillgrove accepted a settlement of this loan for a £2 million cash pay-out, which was paid during the year, and the conversion of the residual balance of £1,402,155 into newly issued share capital of the Company at the previously agreed 0.5p conversion price, amounting to 280,430,920 shares. The shares have been issued since the year end and Hillgrove has released the debenture it held over the assets of the Company.
14. Share capital & share premium
| 0.5 p Ordinary shares |
0.5 p Deferred shares | 4.5 p Deferred shares | 4.0 p Deferred shares | |||
| Shares at 1 January 2016 | 430,163,261 | 388,496,747 | 17,373,523 | 9,737,353 | ||
| Issue of shares | 177,771,275 | - | - | - | ||
| Shares at 31 December 2016 | 607,934,536 | 388,496,747 | 17,373,523 | 9,737,353 | ||
| Issue of shares | 528,937,478 | - | - | - | ||
| Shares at 31 December 2017 | 1,136,872,014 | 388,496,747 | 17,373,523 | 9,737,353 |
| 0.5 p Ordinary shares | 0.5 p Deferred shares | 4.5 p Deferred shares | 4.0 p Deferred shares | Share Capital | Share Premium | ||
| £ | £ | £ | £ | £ | £ | ||
| At 1 January 2016 | 2,150,815 | 1,942,483 | 781,808 | 389,494 | 5,264,600 | 46,921,180 | |
| Issue of shares | 888,855 | - | - | - | 888,855 | 110,809 | |
| At 31 December 2016 | 3,039,670 | 1,942,483 | 781,808 | 389,494 | 6,153,455 | 47,031,989 | |
| Issue of shares | 2,644,687 | - | - | - | 2,644,687 | 1,895,313 | |
| Share issue costs | - | - | - | - | - | (245,510) | |
| At 31 December 2017 | 5,684,357 | 1,942,483 | 781,808 | 389,494 | 8,798,142 | 48,681,792 | |
All types of deferred shares carry no voting right nor any entitlement to attend general meetings of the Company. They carry only a right to participate in any return of capital once an amount of £100 has been paid in respect of each ordinary share.
On 26 January 2016 the Company issued 9,090,909 ordinary shares of 0.5p each at a price of 0.55p each, totalling £50,000.
On 23 February 2016 the Company issued 35,714,285 ordinary shares of 0.5p each at a price of 0.7p each, totalling £250,000, before issue costs.
On 3 March 2016 the Company issued 3,571,419 ordinary shares of 0.5p each at a price of 0.7p each, totalling £25,000.
On 15 July 2016 the Company issued 38,461,538 ordinary shares of 0.5p each at a price of 0.65p each, totalling £250,000, before issue costs.
On 29 April 2016 the Company announced that a full and final settlement had been reached with Renewme to settle the remaining balance in exchange for the issue of 90,932,961 new Ordinary shares.
On 19 January 2017 the Company issued 35,714,285 ordinary shares of 0.5p each at a price of 0.7p each, totaling £250,000, before issue costs.
On 15 February 2017 & 15 March 2017 the Company issued 250,000,000 and 62,500,000 ordinary shares of 0.5p each respectively at a price of 0.8p each, totaling £2,500,000, before issue costs.
On 27 June 2017 the Company issued 7,460,035 ordinary shares of 0.5p each at a price of 0.9p each, totaling £70,000, before issue costs.
On 24 August 2017 the Company issued 160,000,000 ordinary shares of 0.5p each at a price of 1.0p each, totaling £1,600,000, before issue costs.
On 31 August 2017 the Company issued 8,000,000 ordinary shares of 0.5p each at a price of 1.0p each, totaling £80,000, before issue costs.
On 31 August 2017 the Company issued 5,263,158 ordinary shares of 0.5p each at a price of 0.8p each, totaling £40,000, before issue costs.
15. Accumulated deficit
| 2017 £ |
2016 £ |
||
| As at 1 January | (56,412,008) | (55,145,999) | |
| Loss for the year | (1,874,692) | (1,334,009) | |
| Share based payment | 5,078 | 68,000 | |
| At 31 December | (58,281,622) | (56,412,008) |
16. Convertible Instruments
16.1 Warrants
On 4 July 2017, the Company granted 5,000,000 warrants to a consultant (2016: nil). The options may be exercised between the Grant date and the third anniversary of the Grant date and will lapse if not exercised during that period. At the date of grant the shares price was 0.85p and the warrants have an exercise price of 1p per share. There were no other warrants outstanding at year end. The valuation of the warrants followed the same methodology as for share options as disclosed in note 16.3 below. These warrants have incurred a charge of £5,078 during the year (2016: £nil).
16.2 Hillgrove
In February 2017 Hillgrove exercised the right to convert part of its loan to shares, further details are detailed in note 13.
16.3 Share Options
On 8 December 2014, the Company granted 11,000,000 options over ordinary shares to the Board, under the PowerHouse Energy Group plc Unapproved Share Option Plan 2011. The options may be exercised between the Grant date and the tenth anniversary of the Grant date and will lapse if not exercised during that period. The options have an exercise price of 2.5p per share.
On 7 March 2016, the Company granted 11,000,000 options over ordinary shares to the Board, under the PowerHouse Energy Group plc Unapproved Share Option Plan 2011. The options may be exercised between the Grant date and the fifth anniversary of the Grant date and will lapse if not exercised during that period. The options have an exercise price of 0.75p per share.
No further options were issued in 2017.
The number of options outstanding at 31 December 2017:
| Date of grant | Granted | Share price on grant | Exercised | Forfeits | At 31 December 2017 | Exercise price | Exercise period | |
| 8 December 2014 | 11,000,000 | 1.875p | - | - | 11,000,000 | 2.5p | 9 December 2014 until 8 December 2024 | |
| 7 March 2016 | 15,000,000 | 0.55p | - | - | 15,000,000 | 0.75p | 8 March 2016 until 7 March 2021 | |
| Total | 26,000,000 | - | - | 26,000,000 | ||||
The estimated fair value of the options issued during the year was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:
| 8 December 2014 | 7 March 2016 | |
| Options in issue 31 December 2017 | 11,000,000 | 15,000,000 |
| Exercise price | 2.5p | 0.55p |
| Expected volatility | 127.56% | 127.56% |
| Contractual life | 10 years | 5 years |
| Risk free rate | 2% | 2% |
| Estimated fair value of each option | 1.79p | 0.45p |
These options have incurred a charge of £nil (2016: £68,000) in the current year.
17. Material risks
The Company is subject to various risks relating to political, economic, legal, social, industry, business and financial conditions. Risk assessment and evaluation is an essential part of the Company’s planning and an important aspect of the Company’s internal control system. The Company’s approach to these risks is detailed in the Strategic Report.
Requirement for further funds
In assessing the going concern, the Directors have reviewed cash flow forecasts for 12 months following the date of these accounts. The cash flow forecasts assumed no further funding of PowerHouse Energy, Inc. and Pyromex AG. The current cash reserves and funding plans forward are considered sufficient to enable the Company to meet its liabilities as they fall due.
18. Directors’ remuneration and share interests
The Directors who held office at 31 December 2017 had the following interests, including any interests of a connected person in the ordinary shares of the Company:
| Number of ordinary shares of 0.5p each | Percentage of voting rights | |
| Nigel Brent Fitzpatrick | 103,459 | <0.1 |
The remuneration of the Directors of the Company paid for the year or since date of appointment, if later, to 31 December 2017 is:
| 2017 £ Salary/Fee |
2017 £ Pension |
2017 £ Benefits |
2017 £ Total |
2016 £ Total |
|
| William Cameron Davies | 12,500 | - | - | 12,500 | - |
| Robert Keith Allaun | 163,772 | - | - | 163,772 | 93,527 |
| Nigel Brent Fitzpatrick | 15,000 | - | - | 15,000 | 37,942 |
| James John Pryn Greenstreet | 9,000 | - | - | 9,000 | 27,133 |
| David Ryan | - | - | - | - | - |
| Clive Carver | 7,500 | - | - | 7,500 | 36,000 |
Share options held by the Directors are detailed in note 16.3. No options have been exercised during the year. Total remuneration includes share based payments arising from the issue of options amounting to £nil (2016: £68,000). There have been no awards of shares to Directors under long term incentive plans.
William Cameron Davies, Nigel Brent Fitzpatrick and James John Pryn Greenstreet have service contracts which can be terminated by providing three months’ written notice. Robert Keith Allaun has a service contract which can be terminated by providing six months’ written notice.
Robert Keith Allaun’s services amounting to £163,772 were provided via Critical Point Solutions Limited and relate wholly to his services as a Director of the Company.
Nigel Brent Fitzpatrick’s services amounting to £15,000 were provided via Ocean Park Developments Limited and relate wholly to his services as a Director of the Company.
David Ryan’s services were provided via Nayr Consultants Limited, an engineering consultancy. Details of amounts paid are provided in Note 19. Related Parties. This does not include any amount for services as a Director of the Company.
Clive Carver’s services amounting to £7,500 were provided via Elk Associates LLP and relate wholly to his services as a Director of the Company.
19. Related parties
Hillgrove Investments Pty Limited is a related party by virtue of its shareholding in the Company. During the year Hillgrove Investments Pty Limited loans decreased by a net £1,930,137 and £69,863 of loan interest was settled by way of further loans. The balance outstanding at the year-end was £1,402,155 (2016: £3,332,292).
Waste2tricity Limited is a related party due to common directorships. During the year, Waste2tricity provided business development services to the Company amounting to £230,000.
Nayr Consultants Limited, an engineering consultancy services company, wholly owned by David Ryan and his associates, provided engineering services to the Company during the year amounting to £50,375.
Transactions with other related parties were conducted on an arms’ length basis and totalled £nil (2016: £nil).
20. Segmental reporting
The Company comprises a single operating segment being a development Company operating solely within the United Kingdom. As such the statement of comprehensive income and the statement of financial position may be used as a report on the segment. No revenue is currently being generated as the equipment is currently being developed and tested.
21. Post balance sheet events
On 1 February and 23 April 2018, the Company issued 215,686,275 and 64,744,645 ordinary shares of 0.5p respectively at the agreed price of 0.5p in final settlement of the outstanding loan balance due to Hillgrove of £1,402,155.
On 23 April 2018 the Company issued a further 115,255,355 ordinary shares of 0.5p at a price of 0.5p raising gross proceeds of £576,277.
Additionally, in May 2018, the Company has issued a further 10,000,000 and 7,894,737 ordinary shares of 0.5p at a price of 0.5p and 0.76p respectively in settlement of services provided.
Since the year end, Mr Allaun and Mr Greenstreet acquired 2,000,000 and 1,000,000 ordinary shares of 0.5p in the Company respectively from the market
On 6 March 2018, the Company granted share options to Directors under the Company’s Share Option Schemes at an exercise price of 0.6p per share as follows:
Mr Robert Keith Allaun 30,000,000
Mr David Ryan 21,000,000
Mr William Cameron Davies 15,000,000
Mr Nigel Brent Fitzpatrick 12,000,000
Mr James John Pryn Greenstreet 12,000,000
22. Ultimate controlling party
There is no controlling party of the Company.
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