TIDMPHE
RNS Number : 5755D
Powerhouse Energy Group PLC
27 June 2019
PowerHouse Energy Group plc
("PowerHouse" or the "Company")
Final results for the year ended 31 December 2018
PowerHouse Energy Group plc (AIM: PHE), the UK technology
company pioneering hydrogen production from waste plastic and used
tyres, is pleased to announce its audited results for the year
ended 31 December 2018.
2018 Highlights
Engineering and Research
-- Engineering design of Distributed Modular Generation (DMG)
for commercial application completed;
- Completion of all air quality modelling & compliance modelling;
- Extensive testing/trials program to align our engineering
models resulting in target output increase;
- Outputs tested and commercialisation demonstrated;
-- Upgrade of research demonstrator and acquisition of
laboratory equipment to enable paid trials to commence;
-- Production of electricity started and exported to the University of Chester microgrid;
-- Technical assurance activities leading to an Independent
validation of the DMG process by DNV GL;
Business Development
-- Engaged waste recycling sector companies and attracted significant attention;
-- Developed proposals for UK sites and engaged in customer clarification processes;
Financial
-- Three successful equity raises with total gross proceeds in year of GBP3.6m;
-- Funds raised were used for Engineering, Research and Business development activities;
-- Settled the Hillgrove convertible loan note;
-- Secured acceptance by HMRC for EIS investment status;
Post Year end
-- Appointment of David Ryan as CEO;
-- Undertook operational review to reduce monthly overhead by
over 25% and focus on development programme;
-- Announced the future development of the first site by Peel
Environmental ("Peel") and Waste2Tricity ("W2T") at the Peel
Environmental Protos Energy Park in Cheshire;
-- Received first revenue contract for supply of engineering services;
-- Initiated first paid field trials for customer;
Dr. Cameron Davies, Chairman of Powerhouse Energy PLC, said
"2018 was a breakthrough year for the development of Powerhouse
Energy and our Distributed Modular Technology application, our
research and engineering design efforts resulted in the
finalisation of the commercial design for the DMG process. This
design was then independently validated from a safety, technical
and operational perspective by internationally recognized risk
management company DNV GL.
The interest from potential customers has been overwhelming,
culminating in the recent announcement that a customer will install
the first DMG process plant at the Protos Energy Park in the coming
months. The operation of the DMG on our first sites will be the
enabler to allow us to convert our strong proposal pipeline into
actual sales for future revenues and ultimate profitability".
The annual report and accounts for the year ended 31 December
2018 will be sent to shareholders shortly and will be available to
view on the Company's website: www.powerhouseenergy.net
For more information, contact:
PowerHouse Energy Group plc Tel: +44 (0) 203
368 6399
David Ryan, Chief Executive
Officer
WH Ireland Limited (Nominated Tel: +44 (0) 207
Adviser) 220 1666
James Joyce / Chris Savidge
Turner Pope Investments Ltd Tel: +44 (0) 203
(Joint Broker) 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 Group plc
PowerHouse has developed a proprietary process technology -
DMG(R) - which can utilise waste plastic, end-of-life-tyres, and
other waste streams to efficiently and economically convert them
into syngas from which valuable products such as chemical
precursors, hydrogen, electricity and other industrial products may
be derived. The PowerHouse technology is one of the world's first
proven, modular, hydrogen from waste (HfW) process.
The PowerHouse DMG(R) process can generate in excess of 1 tonne
of road-fuel quality H2, and more than 58MW/h of exportable
electricity per day.
The PowerHouse 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
under the ticker: PHE, and is incorporated in the United
Kingdom.
For more information see www.powerhouseenergy.net
Chairman's Statement
2018 was a successful breakthrough year for Powerhouse Energy
and our DMG technology. The Company has matured the design of the
DMG product, firming up manufactured component selection and with
the process design complete we successfully achieved validation of
the process design by DNV GL.
During the year we improved the performance of the research
demonstrator's and purchased purpose built laboratory equipment
that will allow the team at Thornton Science Park at the University
of Chester to contract with customers to provide tailored
programmes using various plastic and other feedstocks.
Powerhouse Energy will be a technology provider, with paid
services for engineering, licensing and operational support. In
addition to sales and licensing, our revenues will be augmented by
the delivery of specific technical services, pre-sale and in
operation - based on this strategy we have successfully applied for
EIS status.
With the design complete, we are now able to offer proposals for
the application of DMG at a number of waste management customer
sites. We are also signing co-operation agreements with potential
partners for the application engineering at sites being developed
through 2019.
The DMG platform of using unrecyclable waste plastic to both
hydrogen and electrical power has generated significant interest
and opportunities have arisen for this application from
international industrial partners, waste companies and project
developers.
Board changes
In February 2019, the Group's Chief Executive Officer, Keith
Allaun, stepped down from his role for personal reasons. I would
like to thank Keith for his contribution to the Company and his
considerable achievements during his tenure.
We recognised that the Company had entered a new phase and that
the market demanded technical engagement as part of the sales and
delivery process, David Ryan, the Group's technical director, was
appointed as the new Chief Executive Officer. With over 38 years of
energy industry experience, David was the natural choice to succeed
Keith in the role. His international technical project delivery
experience and commercial acumen is aligned to the current
operations as the Company focusses on the next stage of its
development into a sales led, revenue generating and ultimately
profitable organisation.
Outlook
As part of our reorganization, and to allow the Company focus on
the DMG development programme, we have streamlined our non-core
activities and commitments, reduced expenditure and enabled
existing capital funds to support the pre-project stage. The
financial position will be aided by the revenue generation
activities arising from the sale of the first DMG plant and paid
trials and laboratory tests to be undertaken for third parties at
Thornton.
Our customer engagement programme has advanced significantly
with a firm order announced for the first DMG plant. There is
strong customer interest with a healthy pipeline of potential
orders developed by the sales and application engineering
teams.
The Company moved into 2019 funded for the pre-project stage and
now, with initial revenue generation, product sales and trialing
programmes under way, the indicators are good for a strong sales
performance for our waste plastics to hydrogen process for power
and hydrogen generation in the coming years.
I am excited that we have completed of our programme of plastic
and tyre feedstock testing using the demonstrator at Thornton at a
time when worldwide media and government attention is being
increasingly focused on solving the problem of waste plastic
polluting the oceans and the countryside. It also coincides with
huge interest in the use of hydrogen as a replacement
environmentally friendly fuel for trucks, ships and trains.
Dr Cameron Davies
Non-Executive Chairman
26 June 2019
Strategic Report
Business Strategy
PowerHouse Energy (PHE) designs, delivers and licenses plastic
regeneration processes to generate clean energy. The company
product that allows for the regeneration of plastic to power and
hydrogen is the Distributed Modular Generation (DMG(R)). A
commercial DMG unit is typically sized for processing a nominal 25
tonnes per day of waste plastics to export typically 2.4MW of
electricity and produce up to 2 tonnes of hydrogen. DMG takes waste
plastics that cannot be recycled and regenerates them into clean
energy that can be separate into hydrogen for delivery either as
clean fuel for transport or as a feedstock in other applications in
the chemicals and plastics industries.
PHE will sell the product platforms, with associated paid
services for engineering, licensing and operational support. In
addition to DMG sales and licensing, revenues will be generated by
the delivery of technical services, through consulting, pre-sales
and in operation. The addition of laboratory equipment and
improvement in the performance of the research demonstrator
throughout 2018 now allows the Company to offer paid customer
feedstock trials and test programmes at Thornton Energy Centre.
Summary of Progress
Throughout 2018 the Company continued its progress to
commerciality, with completion of the engineering programme, then
validation of the technology by independent consultants DNV GL and
subsequently engaging customers. This has put in place the final
pieces required to take orders for its products and services.
The first application of the DMG product has now been contracted
by Waste2tricity Ltd for a site in North West England. The site has
been leased by W2T from Peel Environmental on the Protos Energy
Park.
The Company is in further negotiations for contracts for DMG
applications at a number of other UK sites.
The strategy following the first commercial site in the UK is to
target multiple applications across the UK and also overseas to
monetise plastic waste streams in regions where waste problems
exist and favourable market conditions prevail. These areas include
South East Asia, Japan, Australia and Europe.
Commercialisation
Testing and Modelling
Throughout 2018, customer feedstock tests continued with
potential host recyclers offering many different forms of plastic
feedstocks for testing in the research demonstrator. These
feedstocks included shredded tyres, mixed automotive plastic, cable
insulation, shredded labels and mixed plastics, shredded beach
waste, SRF and biomass. Through these testing runs we secured the
chemical engineering parameters for our 25 tonnes per day
commercial plant and detailed design parameters were defined for
the control systems for this commercial operation.
Design
The design of the DMG generic process was completed in 2018. The
design minimises on-site installation activities, reducing any
execution risks as installation consists of engineered,
pre-fabricated components, off the shelf skids, pre-assembled
piping and structures thus facilitating speedy site
installation.
Customer Field Trials
At Thornton we upgraded the day research demonstrator and added
a laboratory test unit, designed and manufactured to PHE
specification. The Company has now commenced offering the equipment
and analytical services to potential customers and also paid trials
of plastic and other feedstocks. The laboratory equipment will
allow speedy testing responses for specific feedstock modelling.
The assets allow validation of the company's chemical engineering
assessments and modelling against customers' feedstocks and
extending the testing for a broader range of waste feedstocks.
Partnerships
A key success factor for the DMG technology will be our
partnerships with waste recyclers, vendors and suppliers and we are
seeking to conclude agreements with both local and international
partners in 2019.
Our partnership with W2T initiated in 2017 for business
development has matured through to W2T signing contracts to act as
a project developer for the first DMG process application at
Protos.
Sales
From mid 2018 the Company has been engaging with customers. In
May 2019, Peel and W2T announced the development of the first
commercial operation at the Peel Environmental Protos Energy Park
development. This site has immediate potential for supplying power
to and taking plastic from local users and this factor has driven
W2T and Peel to give precedence in developing this site.
The initial contract for PHE is to commence design, planning and
permitting activities and, subject to financial close, the design,
supply and licence of the first operational DMG process. The site
is at the heart of the North West Hydrogen Hub and Peel have
visions for a number of developments with W2T to roll out the
technology in the region with a collective desire to work quickly
through a programme of delivery of an additional five sites.
The Ellesmere Port site that PHE agreed directly with Peel will
be maintained as one of the potential locations. The planning and
permitting application material for this site is completed, however
our customer considers the Protos site offers immediate significant
commercial benefits.
Business Development
During 2018 we progressed the application engineering necessary
to assess the feasibility for DMG installation at a number of host
sites, where developers co-locate the DMG installation alongside
existing independent waste recyclers and sources of non-recyclable
plastics. These sites will be worked to development stage for
implementation subsequent to successful completion of the first
operational site at Protos.
The funding dialogue with developers is intended to support a
pipeline of DMG applications on multiple sites and successful
conclusion of these negotiations will result in the funding of many
sites through 2020 and beyond.
Pipeline of UK Prospects
During the year the advantages of the technology have been
demonstrated to a number of internationally recognised waste
companies, the technical sales message emphasising the use of
proven components and the assurance of the DNV GL Validation has
resulted in potential customers accelerating their planning to
employ DMG technology.
In the coming year our team will be carrying out further work
with the major waste companies to share the technology execution
and operational innovations, reduce risk perception within our
customer base and enable their investment decisions to be made.
Overseas Pipeline of Prospects
Our engagement in international operations will rely on
experienced local partner organisations either as project
developers and asset owners or alternatively through industrial
partners engaging with us in the design, delivery and operating of
the DMG technology.
Our customer engagement and opportunity identification in South
East Asia is to attract partners looking to monetise plastic waste
streams in regions where waste problems and favourable market
conditions exist. In Japan and Korea, for example, where
significant market opportunities arise from their rapidly
progressing hydrogen economies, the partnership model extends into
a multiple roll out of operations to regenerate plastic and create
hydrogen.
Within Europe our target is to secure development partners and
we aim to develop the current alliances to partnerships through
2019.
Engineering Services, Trialing and Development Sales
The Company is now in a position to provide paid studies for
third party applications and will offer proposals for consulting
and use of the research demonstrator and laboratory equipment at
the Energy Centre, University of Chester as a source of revenues,
with the intention that the company can become cash positive at an
operational level through 2020.
Market Context
Waste Plastic
The awareness of plastic waste management challenges has never
been greater, the market demand for a plastics regeneration
solution is strong and it is driving customers, investors in
projects and blue chip waste companies to the Powerhouse Energy DMG
process. In developed regions, regulations are driving plastic
wastes away from landfill and towards alternative routes such as
the DMG process. In the developing world where waste management
infrastructure is less developed DMG offers a local solution to
waste management and to electricity supply.
Hydrogen
The Company strategy is committed to supporting the development
of hydrogen economy, primarily within the adoption of fuel cell
heavy goods transportation, and in the longer term, flexing of the
grid gas specifications to enable DMG produced gasses as well as
bio-gas to be added.
During 2018 the Department for Business, Energy & Industrial
Strategy set up an initiative for the "Hydrogen Economy" and
several trade bodies have been set up or further expanded within
the period. Powerhouse has actively engaged with these
organisations to achieve be part of the infrastructure plans at the
leading edge of the hydrogen market. PHE are active members of the
North West hydrogen Hub and the UK Hydrogen and Fuel Cell
association.
Intellectual Property
The research and technology development IP is protected within
the chemical engineering models and control systems of the process
and the Company has been particularly focused on retaining this
unique knowledge within the teams. In project development these
algorithms will be retained with control equipment that remains
under the ownership of the Company.
Notwithstanding this specific knowledge retention, the Company
has chosen to protect the IP within a family of generic and
specific patent applications. These will mature in parallel with
the development programme ensuring that the know-how developed
through the engineering, commissioning and operation of the early
DMG sites is captured to provide a greater depth of IP and patent
protection.
Resources
During 2018 the Company strengthened its commercial and
engineering teams, bringing in experienced new staff to aid
commercial development and customer engagement.
It intends to continue recruitment in the business development
and engineering teams to accelerate engagement with customers and
roll out the DMG product to local international customers.
As Technical Director since February 2017 and throughout 2018,
the Company benefited from David Ryan's international engineering
project delivery experience and commercial acumen to lead its
technical development. David's appointment to the CEO role in
February 2019 is aligned with the Company's current operations as
it focusses on the next stage of corporate development into a
revenue generating and ultimately profitable organization. David
will recruit the staff and set up the systems to deliver sales and
generate licensing and operations revenues.
Finances
Settlement of Hillgrove Convertible Loan Note
The Company was able to complete the settlement of the Hillgrove
Convertible Loan Note (the "Note") in 2018 through the issuance and
vendor placement of the shares. This enabled PowerHouse to increase
its shareholder base whilst freeing the Company to engage further
in the Commercialisation programme for its DMG technology.
Equity Raises
The Company had three successful significant equity raises in
2018 :-
-- In April 2018 the Company raised GBP576,000 by way of an equity placing.
-- In July 2018 the Company raised GBP494,000 by way of an
equity placing and a further GBP100,000 via a private subscription
for shares.
-- In December 2018 the Company raised GBP650,000 by way of an equity placing.
The funds raised were used to develop the design of the DMG to
maturity, initiate the validation of the design and to commence the
partnership which will lead to the delivery of the first DMG
process platform.
In November 2018 the Company's application for EIS accreditation
was approved by HMRC.
Operations Cost Reduction
For 2019 we undertook an operational streamline which
encompassed the revision of budgets and a reduction in service
providers to bring about a circa 25% decrease in base costs
compared to 2018.The managed reduction of company overheads has
allowed the business resources to be focused on the first
commercial site.
The Company is now seeking to contract engineering services to
customers and to build revenue streams via its engineering team and
the test rigs at Thornton.
Corporate Social Responsibility
The Company remains committed to Corporate Social
Responsibility. The DMG technology has been developed so that it
can be operated with minimal detrimental effect and with the
positive environmental impact from reducing landfill of
unrecyclable plastics.
The Company has also engaged with the academic community through
the University of Chester, including the sponsorship of a PhD
student to undertake research of gasification.
The Company is committed to local engagement by hiring and
training local employees as a commitment within any location. Over
the past year, the Company has engaged with the local community, in
particular local primary schools, through waste workshops.
Principal Risks and Uncertainties
The Company is subject to various operational risks and the
following issues are particularly relevant to the Company's
business activities:
Technology Risk
The Company is running a detailed Technology Risk Management
Programme derived from its own test and design activities and
informed by the DNV GL Technical Assurance process. The selection
of components proven in similar service has significantly reduced
the risk profile.
Subsequent to the completion of Design activities and selection
of key components, we have continued our risk management activities
- working with DNV GL to address the items they raised and to put
in place specific controls to remove risks associated with
production and scale-up. Each item has a detailed work programme
and timeline and will be budgeted into the development programme
with Technology Risk Management Programme Assurance being provided
through DNV GL engagement.
The development of the early adopter sites will remove these
technology risk aspects.
Research and Development Activity Risks
Our Research and Development laboratory and testing programme
demands the highest level of safety risk management. The design of
these systems and their operation have been subject to formal
design and functional safety reviews with all activities being
subject to risk assessments in accordance with the Company Health
& Safety Management processes. The activities completed in 2018
were incident free and this has continued in the year to date.
Financial Risks
- Cashflow risk
The Company's delivery model intends that customers will fund
the developments of the DMG process, including the first project.
The Company has sufficient existing funds for the pre-project stage
and the Company's operational team is intended to become cash
generating in 2019 through delivery of engineering and consulting
support to customers for feasibility and development services.
When appropriate, the Company will consider the introduction of
new equity capital or other sources of funding. The Company manages
its cash to ensure creditors are paid in a timely way and in
avoiding, where possible, long term spend commitments. Cashflow
forecasts are produced regularly to monitor forward spend and to
assess funding needs in the short, mid and long term.
During 2018 the Company settled the Hillgrove outstanding
convertible loan balance (GBP1.4m) via the issue of shares and the
Hillgrove Debenture has accordingly been removed.
Other financial risks are considered as follows:
- Foreign Currency Risk
The Company does not hold any cash balances in foreign
currencies and its only exposure to foreign exchange risk is in the
settlement of invoices from overseas suppliers which has been
immaterial during 2018. There are no significant international
procurement activities planned for the project, however currency
fluctuation issues for any international purchases will be
considered and mitigated at the time of any purchase order.
- Interest Rate Risk
The Company has no variable rate borrowings that expose it to
interest rate risk and as such any movements in interest rates are
immaterial to the business.
- Other Financial Risks
The Company does not consider price risk, credit risk or
liquidity risk to be material for the assessment of the financial
position and performance of the Company.
Manufacturing
PHE undertook a worldwide sourcing of established component
manufacturers who can offer proven design, manufacturing and
operating experience and these manufacturers will provide design
guarantees for the component operation in the DMG process
platform.
Execution Risk
Through 2018 the company has engaged with a number of interested
parties to deliver Engineering Procurement, Installation and
Commissioning services for the DMG process. A number of alternative
strategies is now open to customers for the delivery of future
plants. The Company will engage with these international execution
contractors to deliver the process worldwide with projects
delivered on a repeat engineered basis minimizing risk by the use
of skidded components with limited hook up demands.
Regulatory Risks
Through the latter part of 2018 and into 2019 the Company has
developed the planning and permit for the two sites in Ellesmere
Port. In the UK, the application of the DMG on a dedicated site
does not require an Environment Agency permit, but a permit granted
by the relevant Local Authority. In undertaking the various air
quality assessments necessary for permit application, the
international independent consultancy Fichtner have demonstrated
that the DMG process is fully compliant with the legislative
emission levels for operation in UK and throughout the European
Union.
Competition
There are a number of waste gasification companies at large
commercial scale, however few are active in plastics or are
targeting the market of smaller throughput, distributed, multiple
sites that PHE is active in. There are also a number of active
plastics to liquid companies, many using specific feedstocks, and
the application of these processes is currently seen as
complementary to the DMG process that can accept the waste plastics
rejected by these plants, incinerators or plastics recyclers.
Market Adoption
The development of this market is partly dependent on the
restrictions that regulatory authorities are placing upon landfill
- in some instances the regulators are applying taxes and charges
to landfill, and this allows our customers to charge a gate fee. In
other instances, regulators are choosing to enhance feed-in tariff
payments allowing our customers additional electricity
revenues.
The hydrogen economy take-up varies internationally, and whilst
current UK engagement is nascent, the Company is engaging in
international environments such as Korea and Japan where the market
is established. The Company intends to become actively engaged in
these current markets through industrial regional partnerships.
IP Protection
The Company has undertaken the necessary checks to ensure
freedom to operate within the process areas addressed by the DMG
technology. The research and technology development is protected
within the chemical engineering models and these are not released
beyond the Company's engineering teams.
The Company has initiated a patent application regime to protect
the IP within a series of generic and specific patent applications
to mature in hand with the development programme and to allow the
full value of engineering and operation to provide a greater depth
of IP and patent protection.
The design, control systems and specific modelling of the
process chamber is not released beyond the Company's technical
teams. The operating control algorithms and the operating control
algorithms and schemes will be embedded in the non-accessible black
box control maintained under strict access rights with
defence-in-depth measures built in.
Staffing Risks
The Company has put in place staff retention measures including
training, employee share option schemes and other measures. The
management has extensive links into the UK and international energy
professional community and will use these links to secure staff
through coming growth period.
External Risks
The Company is subject to various risks originating from
external events including political, economic, legal, business and
financial conditions. The assessment of these risks, their
evaluation and mitigation are essential parts of the Company's
planning and internal control system.
The following risk factors, which are not exhaustive, are
particularly relevant to our current business activities:
Political Risk - Brexit
The Company is subject to the current political risk of Brexit
and we note that the issue is becoming a driver for plastics
solutions. The Company is investigating various options for a
long-term permanent base, including international locations for its
operations, and any final selection will be made to accommodate the
Brexit outcome.
Regulatory Risk
The regulatory landscape may be subject to change with a new
government and in differing geographies. Powerhouse actively
monitors and keeps up to date with the regulatory schemes of all
geographies in which it anticipates developing projects, allowing
the Company to be in a position to adapt to any, and all, emerging
regulations as required.
On behalf of the Board
David Ryan
Chief Executive and Director
26 June 2019
Statement of Comprehensive Income
for the year ended 31 December 2018
31 December 31 December
Note 2018 2017
GBP GBP
Revenue 2 - -
Administrative expenses 4 (2,495,256) (1,804,829)
Operating loss (2,495,256) (1,804,829)
Finance costs 5 (178) (69,863)
Loss before taxation (2,495,434) (1,874,692)
Income tax credit 6 144,796 -
Total comprehensive loss (2,350,638) (1,874,692)
------------------ -------------
Loss per share from continuing
operations (pence) 7 (0.15) (0.19)
Diluted loss per share from
continuing operations (pence) 7 not applicable (0.19)
The notes numbered 1 to 25 are an integral part of the financial
information.
Statement of Financial Position
As at 31 December 2018
Note 2018 2017
GBP GBP
ASSETS
Non-current assets
Property, plant and equipment 8 1,679 2,601
Investments 9 1 1
Total non-current assets 1,680 2,602
Current Assets
Trade and other receivables 10 63,996 88,495
Corporation tax recoverable 6 144,796 -
Cash and cash equivalents 11 840,692 750,226
-------------- ------------
Total current assets 1,049,484 838,721
Total assets 1,051,164 841,323
-------------- ------------
LIABILITIES
Current liabilities
Trade and other payables 12 (247,062) (240,856)
Loans 15 - (1,402,155)
Total current liabilities (247,062) (1,643,011)
Net assets/(liabilities) 804,102 (801,688)
-------------- ------------
EQUITY
Share capital 16 12,395,943 8,798,142
Share premium 16 48,773,510 48,681,792
Accumulated deficit 17 (60,365,351) (58,281,622)
Total surplus/(deficit) 804,102 (801,688)
-------------- ------------
The financial statements of PowerHouse Energy Group Plc, Company
number 03934451, were approved by the Board of Directors and
authorised for issue on 26 June 2019 and signed on its behalf
by:
David Ryan
Director
The notes numbered 1 to 25 are an integral part of the financial
information.
Statement of Cash Flows
For the year ended 31 December 2018
2018 2017
GBP GBP
Cash flows from operating activities
Operating Loss (2,495,256) (1,804,829)
Adjustments for:
Share based payments 553,959 195,078
Depreciation 1,179 808
Changes in working capital:
Decrease/(Increase) in trade and other
receivables 24,499 (82,159)
Increase/(Decrease) in trade and other
payables 6,206 189,672
Net cash used in operations (1,909,413) (1,501,430)
------------ ------------
Cash flows from investing activities
Purchase of fixed assets (257) (985)
------------ ------------
Net Cash flows from investing activities (257) (985)
------------ ------------
Cash flows from financing activities
Proceeds from issue of shares 3,402,469 4,104,490
Finance costs (178) (69,863)
New loans raised - 69,863
Loans repaid (1,402,155) (2,000,000)
Net cash flows from financing activities 2,000,136 2,104,490
------------ ------------
Net increase/(decrease) in cash and cash equivalents 90,466 602,075
Cash and cash equivalents at beginning
of year 750,226 148,151
Cash and cash equivalents at end of year 840,692 750,226
------------ ------------
The notes numbered 1 to 25 are an integral part of the financial
information.
Statement of Changes in Equity
For the year ended 31 December 2018
Ordinary Deferred Deferred Deferred
Share shares shares shares Accumulated
capital Share premium (0.5p) (4.5p) (4.0p) deficit Total
GBP GBP GBP GBP GBP GBP GBP
Balance at 1 January
2017 3,039,670 47,031,989 1,942,483 781,808 389,494 (56,412,008) (3,226,564)
Transactions with equity
parties:
- 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)
Transactions with equity parties:
- Share issue 1,078,432 - - - - - 1,078,432
- Share issue 323,723 - - - - - 323,723
- Share issue 576,277 - - - - - 576,277
- Share issue in lieu
of services 89,474 20,526 - - - - 110,000
- Share issue 494,035 - - - - - 494,035
- Share issue 100,000 - - - - - 100,000
- Share issue in lieu
of services 62,525 1,475 - - - - 64,000
- Share issue 30,000 - - - - - 30,000
- Share issue in lieu
of services 60,000 - - - - - 60,000
- Share issue - exercise
options 83,333 69,717 - - - - 153,050
- Share issue 650,000 - - - - - 650,000
- Share issue 50,000 - - - - - 50,000
Roundings 2 - - - - - 2
Share based payments - - - - - 266,909 266,909
Total comprehensive
loss - - - - - (2,350,638) (2,350,638)
Balance at 31 December
2018 9,282,158 48,773,510 1,942,483 781,808 389,494 (60,365,351) 804,102
========= ============= ========= ======== ======== ============ ===========
The following describes the nature and purpose of each reserve
within equity:
Share premium Amount subscribed for share capital in excess
of nominal value
Accumulated deficit Accumulated deficit represents the cumulative
losses of the company and all other net gains
and losses and transactions with shareholders
not recognised elsewhere
The notes 1 to 25 are an integral part of the financial
information.
Notes to the Accounts
for the year ended 31 December 2018
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
2018 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, unless otherwise stated.
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. With these
restrictions in place, the Company is also unable to exert control
over the subsidiaries. As such the Company has claimed exemptions
applicable to it under Companies Act section 405 (2) and 405 (3b)
and IFRS 10 to not present any Consolidated financial statements
for the year ended 31 December 2018.
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 loans)
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,
share based payments (share options and warrants) 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 a total comprehensive
loss of GBP2.35m (2017: GBP1.87m) and net operating cash outflows
of GBP1.9m (2017:1.5m). However, the Directors believe the going
concern basis to be appropriate for the following reasons:
The Directors have prepared working capital projections which
show that, along with cash balances in hand at 31 December 2018,
the signed agreements for all Directors and certain contractors to
waive any future remuneration or fees for themselves, and support
from one of its shareholders (who is also a Director of the
Company), the Company will have sufficient funding to be able to
continue as a going concern.
In relation to the support of one of its shareholders, the
Directors have been provided with a letter of support, where the
said shareholder 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
GBP300,000. In addition, the Directors are also of the opinion that
they can raise further funds as and when required.
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
The Company provides engineering services for the application of
the DMG Technology, the intellectual property which the Company
owns. Revenue from providing services is recognised in the
accounting period in which services are rendered. For fixed-price
contracts, revenue is recognised based on the actual service
provided to the end of the reporting period as a proportion of the
total services to be provided to the extent to which the customer
receives the benefits. This is determined based on the actual
labour hours spent relative to the total expected labour hours.
Where contracts include multiple performance obligations as
specified by the work scope, the transaction price will be
allocated to each performance obligation based on estimated
expected cost plus margin.
Estimates of revenues, costs or extent of progress toward
completion of services are revised if circumstances change. Any
resulting increases or decreases in estimated revenues or costs are
reflected in profit or loss in the period in which the
circumstances that give rise to the revision become known by
management.
In case of fixed-price contracts, the customer pays the fixed
amount based on a payment schedule. If the services rendered by the
Company exceed the payment, a contract asset is recognised. If the
payments exceed the services rendered, a contract liability is
recognised.
If a contract includes an hourly fee, revenue is recognised in
the amount to which the Company has a right to invoice.
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
(i) New and amended standards adopted by the Company
New and amended standards for the current period and effective
from 1 January 2018 have been applied by the Company,
including:
IFRS 9 Financial instruments
IFRS 15 Revenue from contracts with customers
IFRS 2 (amendments) Share based payment
IFRS 1 and IAS Annual Improvements to IFRS Standards 2014-2016
28 Cycle Amendments
IAS 40 Transfers of Investment Property (Amendments
to IAS 40)
IFRIC 22 Foreign Currency Transactions and Advance Consideration
There are no transition adjustments relating to the adoption of
these standards.
(ii) Standards issued but not yet effective
There were a number of standards and interpretations which were
in issue at 31 December 2018 but were not effective at 31 December
2018 and have not been adopted for these Financial Statements. The
Directors have assessed the full impact of these accounting changes
on the Company. To the extent that they may be applicable, the
Directors have concluded that none of these pronouncements will
cause material adjustments to the Company's financial statements.
They may result in consequential changes to the accounting policies
and other note disclosures. The new standards will not be early
adopted by the Company and will be incorporated in the preparation
of the Company financial statements from the effective dates noted
below.
Effective from 1 January 2019:
-- Annual Improvements to IFRS Standards 2015-2017 Cycle
-- Prepayment Features with Negative Compensation (Amendments to IFRS 9)
-- Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
-- Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
-- IFRS 16 'Leases'
Effective from 1 January 2020:
-- Definition of a Business (Amendments to IFRS 3)
-- Definition of Material (Amendments to IAS 1 and IAS 8)
-- Amendments to References to the Conceptual Framework in IFRS Standards
Effective from 1 January 2021:
-- IFRS 17 'Insurance Contracts'
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
Share based payments are made to employees and third parties and
all are equity settled.
(i) Third party provision of services
a) Via issue of shares
Contractors receive remuneration in the form of share-based
payments, whereby services are provided and settled by the issue of
shares. The cost of equity settled transactions is determined at
the fair value of the services provided, based upon invoiced
amounts or formal agreements in place with suppliers.
b) Via issues of share warrants
The Company also issues share warrants to third parties in
relation to services provided by suppliers. The cost of equity
settled transactions is determined at the fair value of the
services provided, based upon invoiced amounts or formal agreements
in place with suppliers. Where no fair value of services can be
directly obtained, the fair value at the grant date is determined
using the 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.
(ii) Directors and employees
c) Via issues of share options
The Company has issued share options to Directors and employees
through approved and unapproved option plans. The fair value of
options issued 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 the 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. Revenue
The Company has not entered into any contracts as at the year
end which would give rise to revenue. As such, the Company has
nothing additional to disclose in relation to any contract
balances, transaction price allocated to the remaining performance
obligations arising from contracts or assets recognised from the
costs to obtain or fulfil a contract with a customer as required by
IFRS 15.
3. Staff costs
2018 2017
GBP GBP
Directors' fees 289,711 207,772
Wages and salaries 26,207 11,474
Social security costs 29,987 -
Pensions 1,026 230
Other staff costs 7,081 -
------- -------
354,012 219,476
======= =======
The number of average monthly employees (including Directors not
paid via payroll) are as follows:
2018 2017
GBP GBP
Management 5 5
Research and development 1 -
---- ----
Total 6 5
---- ----
The total number of employees as at 31 December 2018 (including
Directors not paid via payroll) was 5 (2017: 6).
4. Administrative expenses
Included in administrative expenses are: 2018 2017
GBP GBP
Operating lease charges 16,889 10,399
Research and Development Costs 673,299 527,547
Depreciation 1,179 808
Share issue fees 116,218 -
Share based payments 553,959 195,078
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 20,000
Fees payable to the Company's auditor and
their associates for other services: 1,000 1,000
Non-audit fees paid to auditors
Taxation advisory and compliance services 14,480 -
There are no other fees paid to the Company's auditor other than
those disclosed above.
5. Finance costs
2018 2017
GBP GBP
Bank interest 178 -
Shareholder loan interest - 69,863
---- -------
178 69,863
==== =======
6. Income tax and deferred tax
As the Company incurred a loss, no current tax is payable (2017:
GBPnil). In addition, as there is no certainty about future profits
from which accumulated tax losses could be utilised, accordingly no
deferred tax asset has been recognised. The Company has submitted a
claim for research and development tax credits relating to the 2017
tax year and amounting to GBP144,796 (2017: GBPnil) which has been
recognised in the accounts. Accumulated tax losses amount to an
estimated GBP9.5 million (2017: GBP8 million) and reflect tax
losses submitted in tax returns and arising during the period less
any relief take for research and development credits. The tax
credit rate is lower (2017: lower) than the standard rate of tax.
Differences are explained below.
2018 2017
GBP GBP
Current tax
Loss before taxation 2,495,434 1,874,692
Tax credit at standard UK corporation tax rate
of 19% (2017: 19.25%) 474,132 360,878
Effects of:
Expenses not deductible for tax purposes - -
Research and development tax credits claimed 144,796 -
Deferred tax asset not recognised (474,132) (360,878)
Income tax credit 144,796 -
7. Loss per share
2018 2017
Total comprehensive loss (GBP) (2,350,638) (1,874,692)
Weighted average number of shares 1,541,719,887 975,055,119
Loss per share in pence (0.15) (0.19)
Diluted loss per share in pence not applicable (0.19)
As at 31 December 2018, the share options and warrants in issue
are not considered to have any dilutive effect in accordance with
IAS 33.
For the year ended 2017, 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.
2018 2017
Directors' share options - exercisable - 11,000,000
at 2.5p per option
Directors' share options - exercisable - 15,000,000
at 0.75p per option
Share warrants - exercisable at 0.5p (2017: - 5,000,000
1p) per warrant
Hillgrove Loans convertible at 0.5p - GBP1,402,155
Shares issued since the year end are disclosed in note 24.
8. Property, plant and equipment
Property,
plant and
equipment
GBP
Cost
At 1 January 2018 6,611
Additions 257
Other adjustments -
----------------
At 31 December 2018 6,868
----------------
Accumulated depreciation
At 1 January 2018 4,010
Charge for the year 1,179
Other adjustments -
----------------
At 31 December 2018 5,189
Carrying amount
At 31 December 2018 1,679
----------------
At 31 December 2017 2,601
----------------
9. 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.
2018 2017
GBP GBP
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.
10. Trade and other receivables
2018 2017
GBP GBP
Other receivables 31,288 77,287
Prepayments and accrued income 32,708 11,208
63,996 88,495
------ ------
11. Cash and cash equivalents
2018 2017
GBP GBP
Cash balances 840,692 750,226
840,692 750,226
------- -------
12. Trade and other payables
2018 2017
GBP GBP
Trade payables 74,053 125,141
Other creditors and accruals 157,907 115,715
Other taxes 15,102 -
247,062 240,856
------- -------
Capital commitments not accrued for at the year end amounted to
GBPnil (2017: GBPNil).
13. Financial assets and financial liabilities
Financial assets 2018 2017
GBP GBP
Financial assets at amortised cost:
- Other financial assets at amortised cost 208,792 88,495
- Cash and cash equivalents 840,692 750,226
1,049,484 838,721
--------- -------
Financial liabilities 2018 2017
GBP GBP
Liabilities at amortised cost
- Trade and other payables 247,062 240,856
- Borrowings - 1,402,155
247,062 1,643,011
------- ---------
14. Operating leases
Future minimum rentals payable under non-cancellable operating
leases are as follows:
2018 2017
GBP GBP
Amounts payable:
Within one year 1,429 5,419
1,429 5,419
----- -----
15. Loans
2018 2017
GBP GBP
At 1 January 1,402,155 3,332,292
New loans raised - 69,863
Loans repaid (1,402,155) (2,000,000)
Interest expense - 69,863
Interest paid - (69,863)
----------- -------------
- 1,402,155
Loans classified as:
- Current - 1,402,155
- Non-current - -
Hillgrove Investments Pty Limited ("Hillgrove") provided the
Company with a convertible loan agreement, the amount of which
increased from time to time at Hillgrove's option and based upon
Company needs. The loan was secured by a debenture over the assets
of the Company and carried interest of 15 per cent per annum.
Hillgrove had 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 GBP2 million cash pay-out, which was paid during 2017, and
the conversion of the residual balance of GBP1,402,155 into newly
issued share capital of the Company at the previously agreed 0.5p
conversion price, amounting to 280,430,920 shares. 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 loan balance of GBP1,402,155. As a result,
Hillgrove released the debenture it held over the assets of the
Company.
16. Share capital & share premium
(i) Number of shares
0.5 p Ordinary 0.5 p Deferred 4.5 p Deferred 4.0 p Deferred
shares shares shares shares
Shares at 1 January
2017 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
-------------- -------------- -------------- --------------
Issue of shares 719,559,607 - - -
Shares at 31 December
2018 1,856,431,621 388,496,747 17,373,523 9,737,353
-------------- -------------- -------------- --------------
(ii) Value in GBP
0.5 p Ordinary 0.5 p Deferred 4.5 p Deferred 4.0 p Deferred Share Capital Share Premium
shares shares shares shares
GBP GBP GBP GBP GBP GBP
At 1 January 2017 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
-------------- -------------- -------------- -------------- ------------- -------------
Issue of shares 3,597,801 - - - 3,597,801 91,718
At 31 December
2018 9,282,158 1,942,483 781,808 389,494 12,395,943 48,773,510
-------------- -------------- -------------- -------------- ------------- -------------
All ordinary shares of the Company rank pari-passu in all
respects.
None of the deferred shares carry any voting rights or 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 GBP100 has been paid in respect of each ordinary share.
On 19 January 2017 the Company issued 35,714,285 ordinary shares
of 0.5p each at a price of 0.7p each amounting to GBP250,000 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 amounting to GBP2,500,000
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 amounting to GBP70,000 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 amounting to GBP1,600,000
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 amounting to GBP80,000 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 amounting to GBP40,000 before
issue costs.
On 5 February and 25 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 GBP1,402,155.
On 25 April 2018 the Company issued 115,255,355 ordinary shares
of 0.5p each at a price of 0.5p amounting to GBP576,277 before
issue costs.
On 23 May 2018 and 14 June 2018, the Company issued 10,000,000
and 7,894,737 ordinary shares of 0.5p each at a price of 0.5p and
0.76p respectively in settlement of services provided.
On 13 July 2018 the Company issued 98,907,004 ordinary shares of
0.5p each at a price of 0.5p each amounting to GBP494,035 before
issue costs.
On 3 August 2018 the Company issued 20,000,000 ordinary shares
of 0.5p each at a price of 0.5p each amounting to GBP100,000 before
issue costs.
On 14 August 2018 the Company issued 797,607 and 11,707,317
ordinary shares of 0.5p each at a price of 0.5015p and 0.5125p each
respectively in settlement of services provided.
On 17 August 2018 the Company issued 6,000,000 ordinary shares
of 0.5p each at a price of 0.5p each amounting to GBP30,000 before
issue costs.
On 22 October 2018 the Company issued 12,000,000 ordinary shares
of 0.5p each at a price of 0.5p each in settlement of services
provided.
On 26 October 2018 the Company issued 16,666,667 ordinary shares
of 0.5p each at a price of 0.6p each amounting to GBP100,000 before
issue costs.
On 10 December 2018 the Company issued 130,000,000 ordinary
shares of 0.5p each at a price of 0.5p each amounting to GBP650,000
before issue costs.
On 14 December 2018 the Company issued 10,000,000 ordinary
shares of 0.5p each at a price of 0.5p each amounting to GBP50,000
before issue costs.
17. Accumulated deficit
2018 2017
GBP GBP
As at 1 January (58,281,622) (56,412,008)
Loss for the year (2,350,638) (1,874,692)
Share based payments 266,909 5,078
At 31 December (60,365,351) (58,281,622)
------------ ------------
18. Convertible Instruments
18.1 Hillgrove
In February 2017 Hillgrove exercised the right to convert part
of its loan to shares, further details are detailed in note 15.
19. Share based payments
The expense recognized for share based payments during the year
is shown in the following table:
2018 2017
GBP GBP
Share based payment charge recognised in Profit
or Loss
Expense arising from equity-settled share-based
payment transactions:
- Share options for Directors and employees 168,399 -
- Warrants for third party services 33,885 5,078
- Shares issue for third party services 351,675 190,000
Total share based payment charge in Income
Statement 553,959 195,078
Other share based payment movement
Exercise of share options for Directors and
employees (53,050) -
Shares issued for third party services (234,000) (190,000)
--------- ---------
Total share based payment 266,909 5,078
--------- ---------
The was one modification made in 2018 for an award of warrants
as disclosed in note 19.2 for the warrants awarded for third party
services on 4 July 2017.
The were no liabilities recognised in relation to share based
payment transactions.
19.1 Share options for Directors and employees
The Company has put in place various options schemes for
Directors and employees as follows:
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.
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.
On 6 March 2018, the Company granted 32,100,000 options over
ordinary shares to employees, including a Board member, under the
PowerHouse Energy Group PLC 2018 EMI Option Scheme. The options
vest to the employees over a period of 24 months and are
exercisable between the relevant vesting dates and the tenth
anniversary of the grant date and will lapse if not exercised
during that period.
On 6 March 2018, the Company granted 60,000,000 options over
ordinary shares to Board members (apart from Robert Keith Allaun
who was awarded share options under the PowerHouse Energy Group PLC
2018 EMI Option Scheme as explained above), under the PowerHouse
Energy Group PLC 2018 non-employee Share Option Plan. The options
vest to the Board members over a period of 24 months and are
exercisable between the relevant vesting dates and the tenth
anniversary of the grant date and will lapse if not exercised
during that period.
The movement of share options in the year are as follows:
2018 2018 2017 2017
Number WAEP(pence) Number WAEP (pence)
Outstanding at 1 January 26,000,000 1.49 26,000,000 1.49
Granted during the year 92,100,000 0.6 - -
Forfeited during the year (2,100,000) 0.6 - -
Exercised during the year (16,666,667)* 0.6 - -
-------------- ------------ ----------- -------------
Outstanding at 31 December 99,333,333 0.83 26,000,000 1.49
-------------- ------------ ----------- -------------
Exercisable at 31 December 60,583,329 0.98 26,000,000 1.49
*The weighted average share price at the date of exercise of
these options was 0.44p.
The weighted average remaining contractual life for the share
options outstanding as at 31 December 2018 was 7.8 years (2017: 4.8
years)
The weighted average fair value of share options granted in the
year was 0.32p (2017: not applicable).
The range of exercise prices for options outstanding at the year
end was 0.6p to 2.5p (2017: 0.75p to 2.5p).
The number of options outstanding at 31 December 2018 are as
follows:
Date of Granted Share Exercised Forfeited At 31 December Exercise Exercise period
grant price 2018 price
on grant
9 Dec 2014
until 8 Dec
8 Dec 2014 11,000,000 1.875p - - 11,000,000 2.5p 2024
8 March 2016
7 March until
2016 15,000,000 0.55p - - 15,000,000 0.75p 7 March 2021
7 March 2018
6 March until
2018 32,100,000 0.57p (16,666,667) (2,100,000) 13,333,333 0.6p 6 March 2028
7 March 2018
6 March until
2018 60,000,000 0.57p - - 60,000,000 0.6p 6 March 2028
Total 118,100,000 (16,666,667) (2,100,000) 99,333,333
Since the year end 24,333,333 options have been forfeited.
No share options expired in the year.
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 6 March 2018
Options in issue 31
December 2018 11,000,000 15,000,000 73,333,333
Exercise price 2.5p 0.55p 0.6p
Expected volatility 127.56% 127.56% 70.00%**
Contractual life 10 years 5 years 10 years
Risk free rate 2% 2% 1.49%
Estimated fair value
of each option 1.79p 0.45p 0.32p*
* the calculation applies a 25% discount for small companies
** expected future volatility of 70% based on historic
volatility and the volatilities of similar sized companies.
19.2 Warrants for third party services
The Company has issued warrants in respect of services provided
by consultants as part of their service arrangements. It has also
issued warrants to participating shareholders in respect of certain
fund raises. No share based payment charge is recognised for
warrants issued to participating shareholders as they are outside
of the scope of IFRS 2.
Details of warrants which have been issued are as follows:
On 4 July 2017, the Company granted 5,000,000 warrants to a
consultant. 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 share price
was 0.85p and the warrants have an exercise price of 1p per share.
During 2018, the Board approved a reduction in the exercise price
to 0.5p. The impact of the modification of the exercise price has
been recognised in the share based payment charge for the year. The
incremental fair value resulting from this was GBP14,268 as
measured using the Black-Scholes model. They adjusted inputs are as
disclosed below.
On 13 July 2018 and 3 August 2018, the Company granted one
warrant for every two shares subscribed for to subscribers in fund
raises confirmed on those dates. The July grant also included
warrants granted to the Company's broker as part of its service
arrangement in relation to the fund raise. Warrants of 54,343,852
(of which 4,940,350 were granted to the company's broker) and
10,000,000 respectively were granted. The options may be exercised
between the grant date and the second anniversary of the grant date
and will lapse if not exercised during that period. At the date of
grant the share price was 0.44p and 0.31p respectively, and the
warrants have an exercise price of 0.5p per share.
On 10 December 2018, the Company granted 7,800,000 to the
Company's broker as part of its service arrangement in relation to
the fund raise arising on that date. The options may be exercised
between the grant date and the second anniversary of the grant date
and will lapse if not exercised during that period. At the date of
grant the share price was 0.57p and the warrants have an exercise
price of 0.5p per share.
Warrants in respect of services provided:
The movement of warrants issued for share based payments in the
year are as follows:
2018 2018 2017 2017
Number WAEP (pence) Number WAEP (pence)
Outstanding at 1 January 5,000,000* 1* - -
Granted during the year 12,740,350 0.5 5,000,000 1
Forfeited during the year - - - -
Exercised during the year - - - -
----------- ------------- ---------- -------------
Outstanding at 31 December 17,740,350 0.5 5,000,000 1
----------- ------------- ---------- -------------
Exercisable at 31 December 17,740,350 0.5 5,000,000 1
* The exercise price of all the outstanding warrants outstanding
at 1 January 2018 was modified in the year as explained above.
The weighted average remaining contractual life for the share
warrants outstanding as at 31 December 2018 was 1.7 years (2017:
2.5 years)
The weighted average fair value of share warrants granted in the
year was 0.15p (2017: 0.61).
The exercise price for warrants outstanding at the year end was
0.5p (2017: 1p).
The number of warrants, which have been included for share based
payment purposes, outstanding at 31 December 2018 are as
follows:
Date of Granted Share Exercised Forfeited At 31 December Exercise Exercise
grant price 2018 price period
on grant
5 July 2017
4 July until
2017 5,000,000 0.85p - - 5,000,000 0.5p 4 July 2020
14 July 2018
13 July until
2018 4,940,350 0.44p - - 4,940,350 0.5p 13 July 2020
11 Dec 2018
10 Dec until 10
2018 7,800,000 0.57p - - 7,800,000 0.5p Dec 2020
Total 17,740,350 - - 17,740,350
The Company is required to assess the fair value of instruments
issued in respect of services received, with such value charged to
the Income Statement. The estimated fair value of the warrants
issued during the year was calculated by applying the Black-Scholes
option pricing model. The assumptions used in the calculation were
as follows:
Warrants issued for 4 July 2017 13 July 2018 10 Dec 2018
services
In issue 31 December
2018 5,000,000 4,940,350 7,800,000
Exercise price 0.5p** 0.5p 0.5p
Expected volatility*** 70.00% 70.00% 70.00%
Contractual life 3 years 2 years 2 years
Risk free rate 1.31% 1.27% 1.27%
Estimated fair value
of each option* 0.39p** 0.11p 0.18p
* the calculation applies a 25% reduction for small
companies
** after modification of exercise price as explained above
*** expected future volatility of 70% based on historic
volatility and the volatilities of similar sized companies
Warrants issued to participating shareholders
Warrants issued to participating shareholders are outside the
scope of IFRS 2 and no share based payment charges have been
recognised on them. On initial recognition the warrants' cost was
deducted from equity as it represents the cost of shares issued to
investors. As the agreements had a fixed-for-fixed requirement,
they are also recognised as equity at the same time. As such, there
is nil net impact on equity and has not been included in the
statement of changes in equity.
The number of warrants issued to participating shareholders,
which have not been included for share based payment purposes,
outstanding at 31 December 2018 are as follows:
Date of Granted Share Exercised Forfeited At 31 December Exercise Exercise
grant price 2018 price period
on grant
14 July 2018
13 July until
2018 49,403,502 0.44p - - 49,403,502 0.5p 13 July 2020
3 August
2018 10,000,000 0.31p (10,000,000) - - 0.5p -
Total 59,403,502 (10,000,000) - 49,403,502
The estimated fair value of the warrants issued during the year
was calculated by applying the Black-Scholes option pricing model.
The assumptions used in the calculation were as follows:
Warrants issued to participating 13 July 2018 3 August 2018
shareholders
In issue 31 December
2018 49,403,502 10,000,000
Exercise price 0.5p 0.5p
Expected volatility** 70.00% 70.00%
Contractual life 2 years 2 years
Risk free rate 1.27% 1.33%
Estimated fair value
of each option* 0.11p 0.06p
* the calculation applies a 25% reduction for small
companies
** expected future volatility of 70% based on historic
volatility and the volatilities of similar sized companies
All warrants
The number of all warrants outstanding at 31 December 2018 are
as follows:
Date of Granted Share Exercised Forfeited At 31 December Exercise Exercise
Grant price 2018 price period
on grant
5 July 2017
until
4 July 2017 5,000,000 0.85p - - 5,000,000 0.5p 4 July 2020
14 July
2018 until
13 July 13 July
2018 54,343,852 0.44p - - 54,343,852 0.5p 2020
3 August
2018 10,000,000 0.31p (10,000,000) - - 0.5p -
11 Dec 2018
until 10
10 Dec 2018 7,800,000 0.57p - - 7,800,000 0.5p Dec 2020
Total 77,143,852 (10,000,000) - 67,143,852
19.3 Share issue third party services
The Company issued shares to settle services to some of its
service providers. The fair value of the share based payments
charge were based on invoiced amounts or amounts agreed to be paid
under a formal agreement of the Company.
20. 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 current cash reserves and funding plans forward are considered
sufficient to enable the Company to meet its liabilities as they
fall due. Please refer to note 1.3 for further information
regarding going concern.
21. Directors' remuneration and share interests
The Directors who held office at 31 December 2018 had the
following interests, including any interests of a connected person
in the ordinary shares of the Company:
Number of ordinary Percentage of
shares of 0.5p each voting rights
---------------------------- ---------------------- --------------
Robert Keith Allaun 18,666,667 1.0
David Ryan 6,000,000 0.3
James John Pryn Greenstreet 1,000,000 <0.1
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 2018
is:
2018 2018 2018 2018 2018 2017
GBP GBP GBP GBP GBP GBP
Salary/Fee Pension Share based Other Total Total
payments Benefits
---------------------------- ----------- -------- ------------ --------- ------- -------
William Cameron Davies 50,000 - 30,945 - 80,945 12,500
Robert Keith Allaun 179,712 - 53,049 7,081 239,842 163,772
Nigel Brent Fitzpatrick 30,000 - 29,708 - 59,708 15,000
James John Pryn Greenstreet 30,000 - 29,708 - 59,708 9,000
David Ryan - - 51,988 - 51,988 -
Clive Carver - - - - - 7,500
Total remuneration includes share based payments arising from
the issue of options amounting to GBP195,398 (2017: GBPNil). 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. Prior to his resignation,
Robert Keith Allaun held a service contract which could be
terminated by providing six months' written notice.
Robert Keith Allaun's services amounting to GBP11,250 (2017:
GBP163,772) were provided via Critical Point Solutions Limited and
relate wholly to his services as a Director of the Company. He was
employed directly by the Company for the remainder of his 2018
services. Mr Allaun resigned from the Company on 1 February
2019.
In 2017 Nigel Brent Fitzpatrick's services amounting to
GBP15,000 were provided via Ocean Park Developments Limited and
relate wholly to his services as a Director of the Company. In 2018
he was employed directly by the Company.
David Ryan's services were provided via Nayr Consultants
Limited, an engineering consultancy. Details of amounts paid are
provided in Note 22. Related Parties. This does not include any
amount for services as a Director of the Company.
Clive Carver's services amounting to GBPNil (2017: GBP7,500)
were provided via Elk Associates LLP and relate wholly to his
services as a Director of the Company.
Share options held by the Directors who served during the year
are as follows:
Options Granted Exercised Options at Exercise Earliest and
at 31/12/18 price latest date
1/1/18 of exercise
---------------------------- --------- ---------- ------------ ---------- -------- -----------------
Options granted 8
Dec 2014
William Cameron Davies - - - - - -
Robert Keith Allaun 5,000,000 - - 5,000,000 2.5p 9/12/14 - 8/12/24
Nigel Brent Fitzpatrick 3,000,000 - - 3,000,000 2.5p 9/12/14 - 8/12/24
James John Pryn Greenstreet 3,000,000 - - 3,000,000 2.5p 9/12/14 - 8/12/24
David Ryan - - - - - -
Options Granted Exercised Options at Exercise Earliest and
at 31/12/18 price latest date
1/1/18 of exercise
---------------------------- --------- ---------- ------------ ---------- -------- -----------------
Options granted 7
March 2016
William Cameron Davies - - - - - -
Robert Keith Allaun 6,000,000 - - 6,000,000 0.75p 8/3/16 - 7/3/21
Nigel Brent Fitzpatrick 5,000,000 - - 5,000,000 0.75p 8/3/16 - 7/3/21
James John Pryn Greenstreet 4,000,000 - - 4,000,000 0.75p 8/3/16 - 7/3/21
David Ryan - - - - - -
Options Granted Exercised Options at Exercise Earliest and
at 31/12/18 price latest date
1/1/18 of exercise
---------------------------- --------- ---------- ------------ ---------- -------- -----------------
Options granted 6
March 2018
William Cameron Davies - 15,000,000 - 15,000,000 0.6p 1/10/18 - 6/3/28
Robert Keith Allaun - 30,000,000 (16,666,667) 13,333,333 0.6p 7/3/18 - 6/3/28
Nigel Brent Fitzpatrick - 12,000,000 - 12,000,000 0.6p 7/3/18 - 6/3/28
James John Pryn Greenstreet - 12,000,000 - 12,000,000 0.6p 7/3/18 - 6/3/28
David Ryan - 21,000,000 - 21,000,000 0.6p 7/3/18 - 6/3/28
Highest Paid Director
Robert Keith Allaun was the highest paid Director in the year.
There were no shares received or receivable by him in respect of
qualifying services under long term incentive schemes apart from as
disclosed above with regards to exercised share options. Mr Allaun
exercised 16,666,667 options at 0.6p in October 2018.
22. 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 was repaid in full. The balance
outstanding at the year end was GBPnil (2017: GBP1,402,155).
Waste2tricity Limited is a related party due to common
directorships. Since the year end the common directorships have
ceased. During the year, Waste2tricity provided business
development services to the Company amounting to GBP240,000 (2017:
GBP230,000). Amounts outstanding at year end for services provided
and due to be settled in shares were GBP60,000 (2017: GBP40,000).
The agreement with Waste2tricity, which commenced in 2017, entitles
the Company, subject to certain conditions, a reimbursement of the
cost of these services out of any profits earned by Waste2tricity
from project development. Services to date amount to GBP470,000,
any future recovery of which has not recognised in these
accounts.
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
GBP154,133 (2017: GBP50,375). Amounts outstanding at year end for
services provided and included in creditors and accruals amounted
to GBP31,000 (2017: GBP22,008).
Engsolve Limited, an engineering solutions company, is a related
party due to a Director's family member being part of its key
management personnel. Engsolve provided engineering services to the
Company during the year amounting to GBP361,187 (2017: GBP224,503).
Amounts outstanding at year end for services provided and included
in creditors and accruals amounted to GBP6,614 (2017:
GBP16,200).
Transactions with other related parties were conducted on an
arms' length basis and amounted to GBPnil (2017: GBPnil).
23. 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 has been generated up to the reporting date of these
accounts as the equipment was being developed and tested.
24. Post balance sheet events
On 1 February 2019, Robert Keith Allaun resigned from the
Company and his unexercised share options amounting 24,333,333 were
forfeited. He was replaced by David Ryan as Chief Executive
Officer.
On 1 April 2019 the Company issued 24,146,802 ordinary shares of
0.5p each in the Company ("Ordinary Shares") to various service
providers for the settlement of fees. Of these new Ordinary Shares,
19,840,000 were issued at 0.5p and 4,306,802 were issued at 0.5015p
in accordance with the terms of the relevant service
agreements.
In addition, the Company issued 1,808,333 Ordinary Shares in
lieu of fees to its Chief Executive Officer, David Ryan, at a price
of 0.6p per share and 3,183,750 Ordinary Shares to its Chief
Financial Officer, Christopher Vanezis, at 0.5p per share.
Following this issue of Ordinary Shares, David Ryan will hold
7,808,333 Ordinary Shares and Christopher Vanezis will hold
3,183,750 Ordinary Shares in the Company, which represents 0.41%
and 0.17% respectively of the Company's enlarged issued ordinary
share capital and voting rights.
25. Ultimate controlling party
There is no controlling party of the Company.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SEUEEMFUSEDM
(END) Dow Jones Newswires
June 27, 2019 02:01 ET (06:01 GMT)
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