Final Results
30 June 2014
PowerHouse Energy Group plc
("PowerHouse" or the "Company")
Final Results
PowerHouse announces its audited results for the year ended 31 December 2013.
A copy of the annual report and accounts and notice of the Company's annual
general meeting, to be held on 28 August 2014 at 10.00 am will be posted to
shareholders today and will be available shortly from the Company's website,
www.powerhouseenergy.net.
CHAIRMAN'S REPORT
Another year of building a solid foundation for PowerHouse Energy Group, plc
(PHEG).
Fiscal year 2013, brought a number of challenges and opportunities. By and
large, each was met head-on, and a positive outcome was achieved on behalf of
the company. We were able to convert a number of previously unsettled debts
into equity in the company, and several long-held disputes were resolved
amicably and in the shareholders' best interests. Much of the year was spent
working with the team at Pyromex, the creators of the Ultra High Temperature
Gasification Reactor.
By August 2013, the company had achieved its most significant milestone since
the IPO- that of the completion of the acquisition of the 70 per cent interest
in Pyromex Holding, AG, Pyromex AG, and Pyromex GmbH not already owned by the
company. The acquisition of the Pyromex group of companies has positioned us to
integrate the companies into a workable whole, with each member of the team
moving in concert with the others. This acquisition has brought the technology
completely under the control of PHEG and has allowed us to begin taking the
necessary steps to deliver a viable commercial platform.
By December, 2013, the successful testing and commissioning of the company's
first nominal 5 tonne per day unit had been completed in Switzerland and
Pyromex was awarded the EU Certification verifying its compliance with all
regulatory, safety, and environmental standards necessary for sales and
operation throughout the European Union. As part of the commissioning process
the machine was run through the entire thermal cycle dozens of times- more
often than would be required in an entire year's operation- with very good
results.
A number of projects are being developed around the use of the nominal 5 tonne
per day machine and we are confident that these projects will result in sales
for the company. We have hosted over 50 individuals and companies who have
expressed interest in our system, and we continue to support these potential
customers in their permitting and pre-project development efforts.
One of the very attractive features of our Pyromex process is our ability to
"tune" the gas composition and create a very high volume stream of hydrogen
gas. Due to this ability we made the decision to acquire a beta version of the
AFC Fuel Cell- a technology that appears to be ideally suited to operate in
conjunction with our gasification reaction. We are planning a robust testing
program with the AFC Fuel Cell when the unit is delivered in Q1 of next year.
We are confident that the two technologies, working in concert, will deliver
energy from waste with an efficiency not yet seen in the market.
A major benefit of the successful commissioning of the 5 tonne per day unit has
been that we have developed a number of new modifications and innovations that
we will be integrating into our 25 tonne per day plant in Eitting, Germany.
These innovations have dramatically improved the operational efficiency and
maintenance ability of the plant. We look forward to implementing these
enhancements in our Eitting facility this next year.
Our current focus is to build out the commercial capabilities of the company
and begin rolling out sales and revenues based on our core technology. There
are over 130 companies operating in the Waste to Energy space, each with its
own claims. However, we believe that we have created the most environmentally
friendly, economically efficient, modular system available on the market today.
We are enjoying inquiries from Asia, India, the United States, South America
and, of course, from across Europe. We are confident that this next year will
allow us to gain the traction necessary to begin driving the company forward.
PHEG operations, including the completion of the acquisition of Pyromex, was
funded through a continuation of the Hillgrove Investments Pty Ltd, (Hillgrove)
Convertible Loan Agreement dated June 19 2012 which allows Hillgrove, at its
discretion, to further fund company operations as it has been doing to date.
Furthermore, Hillgrove has provided a Letter of Support to ensure that the
company's debts are paid as and when they are due and within the normal course
of business. Finally, Hillgrove has extended the maturity date of the note from
8 October 2014, to 7 October 2015.
Due to the increase in operational expenses PHEG was required to assume in the
wake of the acquisition of the Pyromex companies, Hillgrove requested, and was
granted, a fixed and floating charge (debenture) over the assets of PHEG,
including all shares of Pyromex Holding, AG, on 24 February 2014.
The company has continued to operate with a very lean approach to the business
as we better understand our customers' needs and how our technology and
platform solve the significant challenges inherent in carbon-neutral waste
destruction and green-energy generation - all the while operating safely and
generating only a minor amount of completely non-toxic, non-leaching, residue
which can be perfectly utilized in the construction industry.
As these are our accounts up to 31 December 2013, they do not reflect the
settlement of the large debt due to Aspermont and other parties post year end.
However, that loan was settled at a price of less than face-value, and
eliminated a significant distraction to management. It was announced earlier
this year that a settlement had been reached with Renewme to release its
claimed geographical licenses to use our technology under a disputed royalty
agreement with Pyromex and other claims against the company in return for €
211,000 and the issue of 18,331,996 new Ordinary Shares in the Company. While
the equity portion of that settlement has been satisfied, the cash payment has
not been settled and the agreement has not been completed. We remain in active
discussion with Renewme to finalize an amicable agreement.
The annual accounts for the year ended 31 December 2013 show separate accounts
for both the Company and the Group. The Company accounts have been presented
prior to the Group accounts as the Board of Directors believes that this more
accurately represents the ongoing position of PHEG.
The Group accounts include the results of the Pyromex group as PHEG has
acquired Pyromex in totality. However, as can been seen in the Auditor's
Report, the Pyromex accounts have not been finalized and may be subject to
revision. Previously, due to challenges with the Pyromex technology, but
subsequently resolved, the asset value of our 30% holding of the company was
impaired, however with the completion of the nominal 5 tonne per day unit, and
several innovations in the development of the unit, applicable to our 25 TPD
unit (and the clear path to building a 50TPD unit) further investments made
during the year have not been impaired.
The principal risks of the company are included in note 13 of the annual
report. A key risk for the Company, which of maintaining the cash resources
necessary to operate as a going concern, has been mitigated through the
provision of the convertible loan agreement and letter confirming its current
intention to continue to provide financial support for the next 12 months
provided by Hillgrove Investments Pty. Ltd.
The Directors have a reasonable expectation that the Company will have adequate
resources to continue as a going concern for the foreseeable future. Thus we
continue to adopt the going concern basis of accounting for the preparation of
the annual financial statements.
The Waste to Energy market continues to grow dramatically. We're now wholly a
part of that through our acquisition of the Pyromex technology. The challenges
of the future are now those of execution. We have all of the parts. We have
created a solid foundation on which a robust company can be built. It is our
intention to create a showplace of our Eitting facility (next to the Munich
Airport), and to leverage the tremendous demand for non-toxic, waste to energy
solutions. Ours is one of the few- no tar, no smoke, no ash, and no toxins.
Clean synthesis gas, and green, renewable energy from waste is the result of
our process. We're now positioned to begin our commercial roll-out of our
technology and I look forward to reporting progress in the coming year.
Sincerely,
Keith Allaun
Chairman
For additional information please contact:
PowerHouse Energy Group plc
Keith Allaun - Executive Chairman
Phone: +44 (0)20 7079 4407
Email: inquire@powerhousegroup.co.uk
Sanlam Securities UK Limited (NOMAD and Broker)
David Worlidge/Simon Clements
+44 (0) 20 7628 2200
Company Statement of Comprehensive Income
31 December 31 December
Note 2013 2012
£ £
Revenue - 45,000
Administrative expenses (404,309) (354,571)
Operating loss (403,935) (309,571)
Finance income - 2
Finance costs 3 (274,153) (124,972)
Impairment of investment - (119,999)
Loan waivers - 1,109,068
(Loss)/profit before taxation (678,462) 554,528
Income tax expense - -
Total comprehensive (expense)/income (678,462) 554,528
(Loss)/earnings per share (pence) 4 (0.22) 0.19
Diluted (loss) / earnings per share (pence) 4 (0.22) <0.01
Company Statement of Changes in Equity
Deferred Deferred
Share Share shares shares Retained
capital premium (4.0p) (4.5p) earnings Total
£ £ £ £ £ £
Balance at 1 2,842,712 45,981,597 781,808 389,494 (51,746,419) (1,750,808)
January 2012
Transactions with
equity
participants:
Shares issued to 20,200 7,070 - - - 27,270
settle liabilities
Conversion of 2,432 41,349 - - - 43,781
warrants
Total comprehensive - - - - 554,528 554,528
income
Balance at 31 2,865,344 46,030,016 781,808 389,494 (51,191,891) (1,125,229)
December 2012
Transactions with
equity
participants:
Shares issued as 601,725 601,725
consideration
Shares issues to 15,999 15,999
settle liabilities
Conversion of 11 187 198
warrants
- Credit to opening 56,000 56,000
reserves
Total comprehensive (678,462) (678,088)
loss
Balance at 31 3,483,079 46,030,203 781,808 389,494 (51,814,353) (1,129,769)
December 2013
Company Statement of Financial Position
Note 2013 2012
£ £
ASSETS
Non-current assets
Property, plant and equipment 114 343
Investments 5 1,038,026 1
Total non-current assets 1,038,140 344
Current Assets
Trade and other receivables 169,086 2,310
Cash and cash equivalents 41,417 7,125
Total current assets 210,503 9,435
Total assets 1,248,643 9,779
LIABILITIES
Non-current liabilities
Loans 7 - (194,308)
Current liabilities
Trade and other payables 6 (847,063) (728,978)
Loans 7 (1,531,349) (211,722)
Total current liabilities (2,378,412) (940,700)
Net liabilities (1,129,769) (1,125,229)
EQUITY
Share capital 3,483,079 2,865,344
Share premium 46,030,203 46,030,016
Deferred shares 1,171,302 1,171,302
Accumulated losses (51,814,353) (51,191,891)
Total deficit (1,129,769) (1,125,229)
Company Statement of Cash Flows
2013 2012
£ £
Cash flows from operating activities
(Loss) /Profit after taxation (678,462) 554,528
Adjustments for:
Depreciation and amortisation 229 729
Finance costs 274,153 124,972
Finance income - (2)
Waiver of loan by PowerHouse Energy, Inc. - (1,109,068)
Impairment of non-current assets - 119,999
Changes in working capital:
(Increase)/Decrease in trade and other (166,776) 114,510
receivables
Increase/(Decrease) in trade and other payables 118,085 (100,188)
Movement in loans - intercompany - (99,519)
Net cash used in operations (452,772) (394,039)
Cash flows from investing activities
Disposal/ (purchase) of tangible assets - 1,771
Net cash flows generated from investing - 1,771
activities
Cash flows from financing activities
Share (purchase)/ issue (455,975) 43,791
Finance income - 2
Finance costs (274,153) (124,972)
Loans 1,148,609 406,030
Net cash flows from financing activities 418,294 324,841
Net decrease in cash and cash equivalents 34,290 (67,427)
Cash and cash equivalents at beginning of 7,125 74,552
period
Cash and cash equivalents at end of period 41,415 7,125
Notes to the Company Accounts
1. Basis of preparation
This financial information is for the year ended 31 December 2013 and has been
prepared in accordance with International Financial Reporting Standards
("IFRS") adopted for use by the European Union and the Companies Act 2006.
These accounting policies and methods of computation are consistent with the
prior year.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements. The
areas involving a higher degree of judgements or complexity, or areas where
assumptions or estimates are significant to the financial statements such as
the impairment of investments and going concern are disclosed within the
relevant notes.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2012 or the year ended 31
December 2013, but is derived from those accounts. Statutory accounts for 2012
have been delivered to the Registrar of Companies and those for 2013 will be
delivered shortly. The Auditors have reported on those accounts; their reports
were unqualified and did not contain statements under the Companies Act 2006,
sections 498(2) or (3).
2. Going concern
The Directors have considered all available information about the future events
when considering going concern. The Directors have reviewed cash flow forecasts
for 12 months following the date of these accounts. The cash flow forecast
assumes no further funding of PowerHouse Energy, Inc. and Pyromex by the
Company and a favourable settlement outcome to RenewMe liability (see note 6)
and the settlement post year end of the Aspermont loan (see note 7).
The convertible loan obtained from Hillgrove Investments Pty Limited (see note
6) is considered sufficient to settle outstanding creditors, maintain the
Company's reduced overhead and other planned events for at least the next 12
months from the signing date of these accounts. In addition, the Company is in
receipt of a letter of intention of financial support from Hillgrove
Investments Pty Limited to ensure the Company continues to meet its obligations
as they fall due and to ensure it operates as a going concern for a period of
at least 12 months. Based on this, the Directors continue to adopt the going
concern basis of accounting for the preparation of the annual financial
statements.
3. Finance costs
2013 2012
£ £
Aspermont loan 67,000 118,442
Hillgrove Investments Pty Limited 207,153 6,530
274,153 124,972
4. (Loss)/Earnings per share
2013 2012
Total comprehensive (loss)/profit (£) (678,275) 554,528
Weighted average number of shares 312,273,426 285,085,115
Weighted average number of dilutive shares 1,816,072 139,500,000
(Loss)/Earnings per share in pence (0.22) 0.19
Diluted (loss)/profit per share in pence (0.22) <0.01
5. Investments
Other non-current asset consists of the investment in PowerHouse Energy, Inc
and Pyromex AG. 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.
The original investment of 30 per cent in Pyromex AG was held in Powerhouse
Energy Inc. During the year to 31 December 2012 this was transferred to
Powerhouse Energy Plc at a value of £1.
During the year the company purchased the remaining 70 per cent of Pyromex AG
and the Company holds 100 per cent of the common stock and voting rights of the
subsidiary. Cost of the investments are stated at purchase price. The 70 per
cent is held at cost as the first unit is now functional and no impairment is
deemed necessary.
2013 2012
£ £
Investment - Cost 48,947,154 47,909,129
Accumulated impairment (47,909,128) (47,909,129)
1,038,026 1
The cost of the Powerhouse Energy Inc investment was determined using an issue
price of 17.5 pence (the price of the Company's shares on re-listing after the
reverse takeover) for the 273,766,456 shares issued to acquire PowerHouse
Energy, Inc.
6. Trade and other payables
2013 2012
£ £
Trade payables 90,877 38,792
RenewMe 720,225 653,896
Other accruals 35,961 36,290
847,063 728,978
RenewMe Limited had been granted exclusive rights by Pyromex to use, own,
assemble and install and operate Pyromex systems in territories also licensed
to the Company's subsidiary PowerHouse Energy, Inc. The Company entered into a
settlement agreement with RenewMe whereby the parties agreed to change the
respective exclusive rights pertaining to the Pyromex technology. Under the
original settlement agreement Powerhouse Energy, Inc. had the obligation to pay
five instalments of EUR 200,000 annually beginning 30 June 2011. The Company
guaranteed the obligations under the agreement of PowerHouse Energy, Inc. As
PowerHouse Energy, Inc is unable to meets its obligations, all remaining
amounts (EUR 800,000) due under the original settlement agreement have been
recognised as a liability. It was announced post year end that a settlement had
been reached with Renewme to release its claimed geographical licenses to use
our technology under a disputed royalty agreement with Pyromex and other claims
against the company in return for €211,000 and the issue of 18,331,996 new
Ordinary Shares in the Company. While the equity portion of that settlement has
been satisfied, the cash payment has not been settled and the agreement has not
been completed. The Company is in active discussion with Renewme to finalize an
agreement.
7. Loans
2013 2012
£ £
Aspermont loan (shown as 328,739 211,722
current)
Hillgrove Investments Pty
Limited (shown as current/prior 1,202,609 194,308
year non-current)
1,531,348 406,030
The Aspermont loan consists of Aspermont Ltd, Dilato Holdings Pty Ltd and Tesla
Nominees Pty Ltd. These parties collectively provided a facility of £100,000 to
the Company repayable by 18 May 2012, which incurs interest at a default rate
of 7 per cent per month. Since the balance sheet date the Company has
negotiated for the loan to be converted to equity. On 2 April 2014 the Company
negotiated a settlement to repay the loan in full by way of issue and allotment
for 11,500,000 1 pence shares in the Company.
The loan from PowerHouse Energy, Inc. was waived during the prior year.
Hillgrove Investments Pty Limited ("Hillgrove") has provided the Company with a
convertible loan agreement amounting to £1,202,609 - which can be increased at
Hillgrove's option. The loan is secured by a debenture over the assets of the
Company, repayable on 8 October 2014 and carries interest of 15 per cent per
annum. Hillgrove has the option at any time to convert the loan in part or
whole at a conversion price of 1p per share. Hillgrove have provided a letter
of support indicating they are willing to increase the loan amount pending any
unforeseeable or material changes to the Company's current circumstances.
8. Material risks
a. 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. The
financial support provided by Hillgrove Investments Pty Limited is considered
sufficient to maintain the Company's reduced overhead and other planned events.
The Company is dependent on this continued support to cover it operational
costs.
In the event the Company requires other equity financing, or the conversion
option in the Hillgrove loan is exercised, remaining shareholders will be
diluted.
b. Reliance on the Pyromex technology
As a result of technical issues identified since the Group's investment in
Pyromex technology, there has been material reductions to the carrying values
of assets previously recognised. This highlights the Company's dependency on
its exploitation of the Pyromex technology. In the event the Pyromex technology
continues to be unproven competing technologies may capture the market targeted
by the Pyromex technology resulting in reduced returns for shareholders.
c. Resolution to Aspermont and RenewMe obligations
In assessing the going concern, the Directors have assumed that the obligation
to RenewMe (see note 6) is resolved with minimal impact on cash flows.
Discussions are on-going and RenewMe seem willing to support the Company.
However, there is no absolute certainty that these liabilities will be settled
as anticipated. Aspermont has, since the balance sheet date agreed to convert
the loan balance to equity (see note 7)
9. Related Parties
Hillgrove Investments Pty Limited is a related party.
During the year Hillgrove Investments Pty Limited loaned the company a further
£801,148 and charged £207,513 interest. The balance outstanding at the year end
was £1,202,609 (2012: £194,308)
Consolidated Statement of Comprehensive Income
Note Year ended Year ended
31 December 31 December
2013 2012
US$ US$
Revenue 3,330 19,756
Cost of sales (46,825) -
Gross (loss) /profit (43,495) 19,756
Administrative expenses (614,132) (594,520)
Operating loss (657,627) (574,764)
Finance income 1 4
Loan waivers - 352,322
Loss of control - (1,309,296)
Equity accounted loss - (475,646)
Finance expenses 4 (386,556) (210,272)
Loss before taxation (1,044,182) (2,217,652)
Income tax credit - 10,942
Loss after taxation (1,044,182) (2,206,710)
Foreign exchange arising on consolidation (160,183) (36,462)
Foreign exchange included in profit and loss
arising from loss of control - 1,095,440
Total comprehensive expense (1,204,365) (1,147,732)
Total comprehensive expense attributable to:
Owners of the Company (1,204,365) (592,078)
Non-controlling interests - (555,654)
Loss per share (US$) 5 <(0.01) <(0.01)
Consolidated Statement of Changes in Equity
Shares Non-
and Accumulated Other controlling
stock losses reserves interests Total
US$ US$ US$ US$ US$
Balance at 31 80,050,893 (18,090,906) (63,781,669) 1,665,494 (156,188)
January 2012
Transactions with
equity participants:
Shares issued to 43,850 - - - 43,850
settle warrants
Exercise of warrants 67,876 - - - 67,876
- Pryomex, loss of - - - (1,109,840) (1,109,840)
control
Total comprehensive
income:
Loss after taxation - (1,606,239) - (600,471) (2,206,710)
Foreign exchange - - 1,095,440 - 1,095,440
included in profit
and loss arising
from loss of control
Foreign exchange - (81,729) 44,817 (36,462)
arising on
consolidation
Balance at 31 80,162,619 (19,697,145) (62,767,508) - (2,302,034)
December 2012
Transactions with
equity participants:
Shares issued to 998,864 - - - 998,864
settle liabilities
Shares issues to 26,558 26,558
settle liabilities
Conversion of 18 310 328
warrants
Total comprehensive
income:
Loss after taxation - (1,204,365) - - (1,204,365)
Foreign exchange - - (160,183) - (160,183)
arising on
consolidation
Balance at 31 81,188,059 (20,901,510) (62,927,691) - (2,640,832)
December 2013
Consolidated Statement of Financial Position
Note 31 31
December December
2013 2012
US$ US$
ASSETS
Non-current assets
Intangible assets 6 2,087,081 -
Property, plant and equipment 7 665,160 957
Total non-current assets 2,752,241 957
Current Assets
Trade and other receivables 54,311 3,790
Cash and cash equivalents 69,617 11,492
Total current assets 123,928 15,282
Total assets 2,876,169 16,239
LIABILITIES
Non-current liabilities
Loans 8 - (313,399)
Total non-current liabilities - (313,399)
Current liabilities
Loans 8 (2,542,038) (401,400)
Trade and other payables 9 (2,974,963) (1,603,474)
Total current liabilities (5,517,001) (2,004,874)
Total liabilities (5,517,001) (2,318,273)
Net liabilities (2,640,832) (2,302,034)
EQUITY
Shares and stocks 81,188,059 80,162,619
Other reserves (62,927,691) (62,767,508)
Accumulated losses (20,901,510) (19,697,145)
Non-controlling interests - -
Total deficit (2,640,832) (2,302,034)
Consolidated Statement of Cash Flows
Note Year Year
ended ended
31 December 31 December
2013 2012
US$ US$
Cash flows from operating activities
Loss before taxation (1,204,365) (2,217,652)
Adjustments for:
Finance income (1) (4)
Finance costs 386,556 210,272
(Loss of control) / Fair value gain on step - 1,309,296
acquisition
Equity accounted loss - 475,646
Loan waivers - (352,322)
Impairment of non-current assets - -
Depreciation and amortisation 322 124,049
Common stock and shares issued for services - -
Foreign exchange revaluations (160,183) (99,327)
Changes in working capital:
Decrease/ (Increase) in trade and other (50,251) 226,580
receivables
(Decrease)/ Increase in trade and other 1,371,489 (569,617)
payables
Taxation paid - (800)
Net cash used in operations 343,567 (893,876)
Cash flows from investing activities
Disposal (purchase) of tangible and intangible - 2,846
assets
Loss of control / reverse acquisition - (11,010)
Net cash flows used in investing activities - (8,164)
Cash flows from financing activities
Common stock issue (net of issue costs) (756,919) 111,276
Finance income 1 4
Finance costs (386,556) (210,272)
Loans received/(repaid) 864,202 627,197
Net cash flows from financing activities (282,272) 528,655
Net increase / (decrease) in cash and cash equivalents 61,295 (373,385)
Cash and cash equivalents at beginning of 11,492 382,445
period
Foreign exchange on cash balances (3,170) 2,432
Cash and cash equivalents at end of period 69,617 11,492
Notes to the Consolidated Accounts
1. Basis of preparation
This consolidated financial information is for the year ended 31 December 2013
and has been prepared in accordance with International Financial Reporting
Standards ("IFRS") adopted for use by the European Union and the Companies Act
2006. These accounting policies and methods of computation are consistent with
those used in prior years.
The financial information set out above does not constitute the Group's
statutory accounts for the year ended 31 December 2012 and the year ended 31
December 2013, but is derived from those accounts. Statutory accounts for 2012
have been delivered to the Registrar of Companies and the statutory Group
accounts for 2013 will be delivered shortly. The auditors have reported on both
those accounts: their report for both accounts were qualified and in the
accounts for the year ended 31 December 2013 contained a disclaimer of opinion
and contained statements under section 498(2) or (3) of the Companies Act 2006
as follows:
"Basis for disclaimer of opinion on financial statements
The audit evidence available to us was limited because we were unable to obtain
accounting records in respect of PowerHouse Energy, Inc. and Pyromex Holding
AG. As a result of this we have been unable to obtain sufficient appropriate
audit evidence concerning the state of the Group's affairs as at 31 December
2013 and of its loss of the year then ended.
Disclaimer of opinion on financial statements
Because of the significance of the matter described in the basis for disclaimer
of opinion on financial statements paragraph, we have not been able to obtain
sufficient appropriate audit evidence to provide a basis for an audit opinion.
Accordingly we do not express an opinion on the financial statements.
Opinion on other matter prescribed by the Companies Act 2006
Notwithstanding our disclaimer of an opinion on the financial statements, in
our opinion the information given in the Directors' Report for the financial
year for which the Group financial statements are prepared is consistent with
the Group financial statements.
Matters on which we are required to report by exception
Arising from the limitation of our work referred to above:
• we have not obtained all the information and explanations that we considered
necessary for the purpose of our audit; and
• we were unable to determine whether adequate accounting records have been
kept.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
• certain disclosures of Directors' remuneration specified by law are not made.
Other matters
We have reported separately on the parent Company financial statements of
PowerHouse Energy Group plc for the year ended 31 December 2013. The opinion in
that report is unqualified."
2. Consolidation and goodwill
Reverse takeover
On 29 June 2012, PowerHouse Energy Group plc acquired 100 per cent of the
common stock holding of PowerHouse Energy, Inc. by issuing 273,766,453
PowerHouse Energy Group plc shares to the common stockholders of PowerHouse
Energy, Inc. ("the Reverse Takeover").
The Reverse Takeover has been treated as a reverse acquisition under IFRS3
(2008) "Business combinations" whereby PowerHouse Energy, Inc. has been treated
as the acquirer PowerHouse Energy Group plc.
A reverse takeover reserve (included with other reserves) has been created to
account for the fair value of the consideration for the reverse acquisition and
to account for the change in the equity structure from that of PowerHouse
Energy, Inc. to that of the legal holding Company, PowerHouse Energy Group plc.
Pyromex acquisition
On 8 August 2013, the Company acquired the remaining 70% interest in Pyromex.
Pyromex is accounted as a wholly owned subsidiary of the Group. The original 30
per cent was held as an investment which had been impaired to nil due to the
uncertainties surrounding the technology. These results show the impact of the
acquisition of Pyromex.
US$
Intangible assets 1,057,963
Tangible assets 665,160
Net assets acquired 1,723,123
Attributable to:
Owners of the Company - 100%, recognised as investment 1,723,123
in subsidiary
3. Going concern
The Directors have considered all available information about the future events
when considering going concern. The Directors have reviewed cash flow forecasts
for 12 months following the date of these accounts. The cash flow forecast
assumes no further funding of PowerHouse Energy, Inc. and Pyromex by the
Company and a favourable settlement outcome to RenewMe liability (see note 9)
and the settlement post year end of the Aspermont loan (see note 8).
The convertible loan obtained from Hillgrove Investments Pty Limited (see note
8) is considered sufficient to settle outstanding creditors, maintain the
Company's reduced overhead and other planned events for at least the next 12
months from the signing date of these accounts.. In addition, the Company is in
receipt of a letter of intention of financial support from Hillgrove
Investments Pty Limited to ensure the Company continues to meet its obligations
as they fall due and to ensure it operates as a going concern for a period of
at least 12 months from the signing date of these accounts. Based on this, the
Directors continue to adopt the going concern basis of accounting for the
preparation of the annual financial statements.
Included in employee expenses for the year ended 31 December 2012 are the
release of the obligation to pay accrued wages as part of the agreements
reached with various employees. At 31 December 2013, the Group had no
employees.
4. Finance expenses
2013 2012
US$ US$
Citi bank business loan - 2,476
Management loans - 2,437
Other - 3,841
Hillgrove Investments Pty Limited 292,086 10,842
Aspermont 94,470 191,036
Total finance expenses 386,556 210,272
5. Loss per share
2013 2012
Loss after (1,204,365) (12,581,950)
taxation-attributable to owners
of the Company (US$)
Weighted average number of 285,425,948 245,331,092
shares
Loss per share (US$) <(0.01) (0.05)
As the Group incurred a loss, potential ordinary shares are anti-dilutive and
accordingly no diluted earnings per share has been presented.
6. Intangible assets
Pyromex Licence
Goodwill technology agreements Total
At 1 January
2012
Cost 4,035,356 27,931,414 990,840 32,957,610
Accumulated (4,035,356) (25,868,576) (990,840) (30,894,772)
amortisation
and
impairment
Net carrying - 2,062,838 - 2,062,838
value
Amortisation - (117,421) - (117,421)
Pyromex loss - (2,005,446) - (2,005,446)
of control
Foreign - 60,029 - 60,029
exchange
fluctuations
- - - -
Closing
carrying
value
At 31
December
2012
Cost 4,035,356 - 990,840 5,026,196
Accumulated (4,035,356) - (990,840) (5,026,196)
amortisation
and
impairment
At 1 January - - - -
2012
Net carrying - - - -
value
Amortisation - 2,087,081 - 2,087,081
Pyromex - - - -
acquisition
Foreign - - - -
exchange
fluctuations
- - - -
Closing
carrying
value
At 31
December
2012
Cost 4,035,356 2,087,081 990,840 5,026,196
Accumulated (4,035,356) - (990,840) (5,026,196)
amortisation
and
impairment
- 2,087,081 - 2,087,081
Goodwill was recognised as the excess of the fair value of the consideration
determined in accordance with IFRS 3 accounting for reverse acquisitions over
the fair value of the net liabilities acquired.
Due to the impairment of the Group's primary intangible asset, the Pyromex
technology, the entire amount of goodwill recognised from the reverse
acquisition has been impaired.
Licence agreements represent the capitalised licence fees paid by PowerHouse
Energy, Inc. to Pyromex and RenewMe for rights associated with the Pyromex
technology.
7. Property, plant and equipment
Pyromex Office
equipment equipment Total
At 1 January 2011
Cost 6,949,862 45,926 6,995,788
Accumulated depreciation (5,160,586) (9,566) (5,170,152)
Opening carrying value 1,789,276 36,360 1,825,636
Depreciation - (6,628) (6,628)
Pyromex loss of control (1,842,079) (26,965) (1,869,044)
Foreign exchange fluctuations 52,803 (2,767) (50,036)
Closing carrying value - 957 (1,925,708)
At 31 December 2012
Cost - 957 957
Accumulated depreciation - - -
Net carrying value - 957 957
Depreciation - (322) (322)
Pyromex acquisition 662,272 2,699 2,699
Disposals - - -
Foreign exchange fluctuations - (446) (446)
662,272 2,888 665,160
8. Loans
Notes 2013 2012
US$ US$
Accrued dividends on preferred stock 8.1 - 33,000
Management loans 8.2 - -
Citibank business loan 8.3 - 26,913
Aspermont loan 8.4 550,036 341,487
Hillgrove Investments Pty Limited 8.5 1,992,002 313,399
Total loans 2,542,038 714,799
Classified as:
Current 2,542,038 341,487
Non-current - 313,399
8.1. Preferred stock
The accrued dividends on the preferred stock became due on 31 March 2012. The
preferred stock holders exchanged their stock holding in PowerHouse Energy,
Inc. for shares in PowerHouse Energy Group plc.
8.2. Management loans
Loans from management were waived as part of the settlement agreement entered
into with employees.
8.3. Citibank business loan
Loan from Citibank incurs interest at the prime rate as published by The Wall
Street Journal plus 3% and is repayable in equal monthly installments on
$2,083.
8.4. Aspermont loan
The Aspermont loans consist of Aspermont Ltd, Dilato Holdings Pty Ltd and Tesla
Nominees Pty Ltd. These parties collectively provided a facility of £100,000 to
the Group repayable by 18 May 2012, which incurs interest at a default rate of
7 per cent per month.
Since the balance sheet date the Company has negotiated for the loan to be
converted to equity. On 2 April 2014 the Company negotiated a settlement to
repay the loan in full by way of issue and allotment for 11,500,000 1 pence
shares in the Company.
8.5. Hillgrove Loan
Hillgrove Investments Pty Limited ("Hillgrove") has provided the PowerHouse
Energy Group plc with a convertible loan agreement amounting to $1,992,002 -
which can be increased at Hillgrove's option. The loan is unsecured, repayable
on 8 October 2014 and carries interest of 15 per cent per annum. Hillgrove has
the option at any time to convert the loan in part or whole at a conversion
price of 1p per share. Hillgrove have provided a letter of support indicating
they are willing to increase the loan amount pending any unforeseeable or
material changes to the Group's current circumstances.
9 Trade and other payables
2013 2012
US$ US$
Trade creditors 1,445,921 227,104
RenewMe 1,155,966 1,036,000
Customer deposits - 150,000
Other accruals 373,076 190,370
Total trade and other payables 2,974,963 1,603,474
Classified as:
Current 2,974,963 1,603,474
Non-current - -
9.1. RenewMe
RenewMe Limited had been granted exclusive rights by Pyromex to use, own,
assemble and install and operate Pyromex systems in territories also licensed
to the Company's subsidiary PowerHouse Energy, Inc. The Company entered into a
settlement agreement with RenewMe whereby the parties agreed to change the
respective exclusive rights pertaining to the Pyromex technology. Under the
original settlement agreement Powerhouse Energy, Inc. had the obligation to pay
five instalments of EUR 200,000 annually beginning 30 June 2011. The Company
guaranteed the obligations under the agreement of PowerHouse Energy, Inc. As
PowerHouse Energy, Inc is unable to meets its obligations, all remaining
amounts (EUR 800,000) due under the original settlement agreement have been
recognised as a liability. It was announced post year end that a settlement had
been reached with Renewme to release its claimed geographical licenses to use
our technology under a disputed royalty agreement with Pyromex and other claims
against the company in return for €211,000 and the issue of 18,331,996 new
Ordinary Shares in the Company. While the equity portion of that settlement has
been satisfied, the cash payment has not been settled and the agreement has not
been completed. The Company is in active discussion with Renewme to finalize an
agreement.
10. Post balance sheet events and contingent liabilities
On 28 June 2014 Hillgrove Investments Pty Limited, provided a letter of intent
indicating that pursuant to the terms of the convertible loan agreement (see
note 8) which allows for an increase of the amount loaned at Hillgrove's sole
discretion, to continue to provide adequate financial support to the Company to
ensure the Company may meet its obligations as they fall due and to ensure it
operates as a going concern for a period of at least twelve months from the
date of the letter pending any unforeseeable or material changes to the
Company's current circumstances.
Additionally, Hillgrove extended the repayment date of the note from its
originally scheduled repayment date of 8 October 2014 to 7 October 2015.
The Aspermont loan consists of Aspermont Ltd, Dilato Holdings Pty Ltd and Tesla
Nominees Pty Ltd. These parties collectively provided a facility of $165,640 to
the Company repayable by 18 May 2012, which incurs interest at a default rate
of 7 per cent per month. Since the balance sheet date the Company has
negotiated for the loan to be converted to equity. On 2 April 2014 the Company
negotiated a settlement to repay the loan in full by way of issue and allotment
for 11,500,000 1 pence shares in the Company.
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