PowerHouse Energy Group Plc Annual Report 2017

FY2017 Annual Report · PowerHouse Energy Group Plc

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POWERHOUSE ENERGY GROUP PLC

COMPANY NUMBER 03934451

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE
YEAR ENDED 31 DECEMBER 2017

CONTENTS

Contents ......................................................................................................................................... 2

Company Information ...................................................................................................................... 3

Chairman’s Report .......................................................................................................................... 4

Chief Executive Officer’s Statement ................................................................................................ 5

Directors’ Responsibilities Statement ............................................................................................ 12

Directors’ Report ........................................................................................................................... 13

Strategic Report ............................................................................................................................ 16

Corporate Governance Report ...................................................................................................... 19

Independent Auditor’s Report to the Members of PowerHouse Energy Group PLC ...................... 21

Statement of Comprehensive Income ........................................................................................... 25

Statement of Financial Position ..................................................................................................... 26

Statement of Cash Flows .............................................................................................................. 27

Statement of Changes in Equity .................................................................................................... 28

Notes to the Accounts ................................................................................................................... 29

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COMPANY INFORMATION

Directors

William Cameron Davies (Chairman)
Robert Keith Allaun (Chief Executive Officer)
Nigel Brent Fitzpatrick (Director)
James John Pryn Greenstreet (Director)
David Ryan (Director)

Company secretary

Nigel Brent Fitzpatrick

Company number

03934451

Registered office

Website

Bankers

Nominated Adviser and
Broker

Registrar

Auditor

10b Russell Court
Woolgate
Cottingley Business Park
Bingley
BD16 1PE
United Kingdom

www.powerhouseenergy.net

HSBC
79 Piccadilly
London
W1J 8EU
United Kingdom

WH Ireland
24 Martin Lane
London
EC4R 0DR
United Kingdom

Neville Registrars Limited
Neville House, 18 Laurel Lane
Halesowen
B63 3DA
United Kingdom

Jeffreys Henry LLP
Finsgate 5-7
Cranwood Street
London
EC1V 9EE
United Kingdom

Forward-looking statements
This report includes forward-looking statements. Whilst these forward-looking statements are made in good
faith, they are based upon the information available to PowerHouse Energy Group PLC at the date of this
report and upon current expectations, projections, market conditions and assumptions about future events.
These forward-looking statements are subject to risks, uncertainties and assumptions about the Company and
should be treated with an appropriate degree of caution.

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CHAIRMAN’S REPORT

I am pleased to report to shareholders in respect of the year ended 31 December 2017.

During the year under review PowerHouse Energy Group PLC (“PowerHouse” or the ‘Company’) saw a
transformation in its technical capabilities and an increase in activity in terms of partnership establishment,
organisational development and financial restructuring. For the two years prior to January 2017, the Company
had been exclusively focused on the development and initial testing of the G3-UHt Unit, our process demonstrator,
from first principles in conjunction with OrePro engineering in Australia. The end of 2016 saw the recommitment
to the building of the Company’s commercial operations headquartered in the UK.

The delivery of the Company’s process demonstrator to the UK in early 2017 and its re-siting and re-
commissioning at the Thornton Science Park Energy Centre successfully concluded the initial testing phase of our
proprietary technology.

The confirmation of the demonstrator’s ability to operate within target temperature envelopes and its re-
commissioning were completed in accordance with stringent UK Health, Safety, and Environmental regulations
and standards. A regular programme of demonstration, testing, enhancement, and consistent operation has been
underway at the Thornton Science Park Energy Centre. Recent developments including the expansion of testing
of mixed plastics as a feedstock, the independent verification of our gas by third-party laboratories, and positive
validation by external hydrogen purification equipment vendors that our gas can be purified to a 99.9995% (road-
fuel quality) hydrogen stream.

Of greatest importance for the year was the capture and utilisation of the data from our on-going testing
programme to support the initiation of the commercial design, completion of the Pre-FEED (front-end design and
engineering,) the identification of our first commercial site, the start of the planning and permitting process for
that site, and the establishment of a robust technical and management team for the intended delivery of our first
DMG® (Distributed Modular Gasification) System by the end of 2018.

The Board maintains its belief that the DMG® System and the hydrogen-from-waste process that we have created
is well on its way to becoming a significant part of the hydrogen economy and the distributed electrical grid.

I would like to take this opportunity to thank our talented team who work tirelessly to drive forward our exciting
technology as well as the shareholders whose ongoing support is greatly appreciated.

We are confident in our ability to continue to increase both our capabilities and shareholder value.

Dr Cameron Davies
Non-Executive Chairman
28 June 2018

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CHIEF EXECUTIVE OFFICER’S STATEMENT

A number of the items that follow were initially discussed in our interim Accounts on 27 September 2017. What
the team has accomplished this year is worthy of note. However, the retrospective is far more understandable in
the context of the key drivers for the Company’s future success:

The global requirement for energy is growing every day and together with having to address the
monumental environmental issues created by traditional forms of energy production, delivering such
a quantum of clean energy is both challenging and disruptive. The result is that a number of new and
pioneering modalities for energy generation and distribution will be embraced and established. PHE’s
DMG® technology is one such platform which is suited to both enable, and deliver, such solutions.

- Waste elimination – particularly for unrecyclable plastics and end of life tyres (two of the biggest
challenges faced by the waste management sector) - is also a major global challenge that PHE’s
technology platform is ideally positioned to address. The DMG® technology platform efficiently
converts such waste into an environmentally friendly and commercially viable source of clean energy
thus making it a highly attractive energy feedstock. Consequently, waste then becomes our friend
rather than an enemy.

- Our objective is to harness the true power of waste by having our enabling technology platform
embedded within the future energy infrastructure - one in which high efficiency, clean energy,
environmental credentials and economically viable operation will be at a social, political and
commercial premium. Putting it simply, we believe that PHE meets all four of these demanding criteria
and we have now embarked on the commercialisation path to ensure our technology becomes a
reality.

- Our core DMG® technology is in its final stages of engineering validation in advance of scheduled
independent third party verification and testing by a leading global player in the field. This work is due
to be completed by the end of the third quarter.

- We are now shifting the balance of our efforts onto the commercialisation phase, in which we are
already actively engaged, and through which we are making positive progress by taking a customer-
led approach, involving a combination of strategic alliances, commercial partnering and working
directly with potential customers. Our flexibility combined with the modular design of our DMG®
system allows us to tailor our technology to meet the most specific of partner and customer
requirements.

It is within the above context that I am delighted to report on an exciting year that has seen the Company
delivering against its strategic objectives. Developing its technology, securing funding, eliminating the Hillgrove
Investments Pty. Ltd (“Hillgrove”) note and debenture and identifying early-stage, commercially viable,
opportunities for the sale of our DMG® System.

Our technology
The focus for PowerHouse in recent years has concentrated on the efficient generation of energy from waste, but
increasingly we see exciting prospects for the ability to convert waste, particularly waste plastics and end-of-life
tyres, into hydrogen. Our small footprint, our thermal conversion process, and our ability to generate a
concentrated volume of hydrogen on a distributed basis sets us apart from others. This process, DMG®, has led
to one of the world’s first distributed hydrogen from waste (HfW) system designs.

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CHIEF EXECUTIVE OFFICER’S STATEMENT (CONTINUED)

DMG® enables the molecular conversion of waste into an energy-rich syngas. The syngas can be used
immediately to generate low emission electrical energy that can be used locally, thereby leveraging private line
or micro-grid connections on-site. If appropriate, it can be sold directly into the National Grid. There is growing
awareness of, and demand for, a “distributed grid” which ensures reduced transmission losses and enhanced
availability where and when electricity is needed. Additionally, DMG® has been designed to produce road-fuel
quality hydrogen as and when necessary.

Our process is not dependent upon the sun shining, or the wind blowing, but rather on the engagement of wastes
that are poorly managed, over-produced, and ubiquitous in our society. End-of-life plastics and tyres represent
extremely valuable energy sources, if managed properly. The unfortunate combustion and incineration of these
extremely valuable resources is the least effective mechanism for deriving energy from them. DMG® represents
a more environmentally responsible and profitable vehicle for the extraction of energy from these, and other,
materials. Our hydrogen-from-waste process allows us to extract well over double the energy from these
materials compared to conventional processes. We do this with a dramatically reduced greenhouse gas footprint,
and when the hydrogen we produce displaces fossil fuels, we help eliminate over 21,000 kg of CO2 per tonne of
hydrogen used.

We believe that DMG® is a quantum shift in technology that can fundamentally enhance the waste-to-energy
market. DMG® is a mechanism for the appropriate destruction of waste streams, the generation of distributed
electricity, and, most importantly, the production of distributed hydrogen - which we believe will help unleash the
hydrogen economy by providing hydrogen as a road-fuel as the demand for Fuel Cell Vehicles (FCVs) ramps up
– particularly in industrial and public transportation.

The adoption of hydrogen powered FCV technology in industrial transport is accelerating with the announcement
of major fleets adopting the fuel cell as its motive power of choice. Marine ferries, the Alstom hydrogen train, and
major initiatives by the EU for the decarbonisation of public transport – leading to the adoption of hydrogen
powered buses, are clear evidence that hydrogen in transport, particularly industrial transport, is beginning to
gain momentum. Our DMG® process can allow for the efficient processing of non-recyclable waste plastics, the
conversion of end-of-life tyres, and the diversion of these and other materials from land-fill; all while producing
distributed hydrogen at a cost at, or below, that of petrol and diesel.

2017 was the year that Sir David Attenborough launched Blue Planet 2 on BBC TV. Perhaps more than any event
of the past decade, this series highlighted the blight of plastics, the degradation of marine ecosystems, and the
pollution of our oceans and beaches that our planet is facing. Subsequent to the airing of the series, most major
newspapers in the UK have followed up with on-going coverage of the crisis of plastic in our Oceans. Additionally,
Sky TV produced a multi-part documentary regarding the state of plastic recycling, and the significant failings
therein. The UK, Australia, the EU and the United States have all been negatively impacted by the recent ban of
waste and recycling imports by China.

More virgin plastics will be produced next year than the combined weight of every man, woman, and child on our
planet. Plastics have revolutionised our lives in many ways. In healthcare, in food safety, in automobile
manufacturing, and mobile devices to name a few. We needn’t declare war on plastics. We need to declare war
on the mis-management of end-of-life, non-recyclable, or waste plastics. What was once our enemy can now
become our friend. Plastics are a tremendous store of clean energy potential.

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CHIEF EXECUTIVE OFFICER’S STATEMENT (CONTINUED)

PowerHouse has the ability to figuratively squeeze every hydrogen molecule from the stream of plastics while
reducing waste plastic from our planet. Less than 50 per cent of recyclable plastic is actually able to be recycled
economically, or in an environmentally sound manner. Our DMG® System, can, however, recover the energy
value contained within the plastics and convert it into an ultra clean road fuel - hydrogen. Emissions from an FCV
contain zero CO2 (Carbon Dioxide), zero NOx (Nitrogen Oxides), and zero Sox (Sulfur Oxides). The only emission
from a fuel cell vehicle is water vapour.

Operations
The arrival of our process demonstrator, the G3-UHt Unit in the UK in March 2017 saw the start of a programme
of engineering activity to ensure that the unit would safely and securely operate in accordance with UK Health,
Safety, and Environmental guidelines. The work followed a comprehensive knowledge transfer from the Ore-Pro
team (our prior external engineering partners) to our UK based engineering staff and included extensive upgrading
of components, the installation of advanced automation, and the integration of appropriate safety controls for the
system. The unit was completely deconstructed, examined, tested, and reconstructed to ensure its optimal
operational condition.

During this period the system was moved from its initial commissioning site in Runcorn to its current location at
Unit 99 of the Energy Centre at the Thornton Science Park, operated by the University of Chester. Unit 99 had
been purpose-built as an emissions test facility for Shell Research and is an ideal location for the continuous
operation, demonstration, and improvement of the DMG® System design. The Company has established an active
engineering programme at the Centre and has taken a two year lease on its facilities there.

In April 2017 the Company announced that the first phase of the re-commissioning of the G3-UHt process
demonstrator had been completed, with the successful production of syngas from the system. The PHE unit has
consistently operated at temperatures of over 1000 degrees Celsius, demonstrating its capacity to successfully
gasify many historically difficult waste materials and generate an extremely useful synthesis gas.

The second phase of re-commissioning saw additional improvements and modifications made to the system,
ahead of the scaling up design necessary for commercial deployment. These included the enhancement of the
gas-handling systems, refurbishment of the feed and oxidant systems and the complete redesign and introduction
of programmable safety and control systems. During testing, the Company has regularly recorded a maximum
peak flow rate of over 50 cubic metres per hour of syngas.

Following a robust programme of testing and technical data collection, the Company announced the completion
of its first extended technical trial of the DMG® gasification process at the Energy Centre at Thornton Science
Park on 31 July 2017.

Operating on a feedstock of tyre crumb, PowerHouse engineers were able to demonstrate control of the process
within defined temperature envelopes that generated a syngas that, according to onsite, in-line, analytical
instrumentation, was greater than 50 per cent hydrogen by volume. The remaining, measurable, constituent
elements of the syngas were CO (carbon monoxide) and CH4 (methane.) Importantly, the in-line gas analysis
equipment detected absolutely no CO2 in the gas stream generated by the demonstration unit.

Subsequently, a substantially more rigorous analysis of syngas samples produced in the process demonstrator
has been conducted by off-site, third-party, independent laboratories. These tests have validated our initial
findings, including minimal CO2, and continue to reinforce our ability to create target syngas constituent ratios
for both electricity production and hydrogen extraction.

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CHIEF EXECUTIVE OFFICER’S STATEMENT (CONTINUED)

Strategic alliances and Relationships
The accomplishments achieved in 2017 were underpinned by a number of strategic alliances with influential
partners.

In January 2017 PowerHouse entered into a 24 month project development relationship with Waste2tricity Ltd
(“Waste2tricity”). The initial results of that relationship have led to a substantive expansion of our UK capabilities,
relationships with other industrial partners, and a pipeline of commercial opportunities, in the UK and elsewhere,
under consideration.

Among the introductions made by Waste2tricity on behalf of PowerHouse was to Peel Environmental Limited
(“Peel”). Our relationship with Peel continues to grow and develop and has led to the siting of our G3-UHt
demonstration unit at the Energy Centre at the Thornton Science Park. This base is the hub of our continuing
R&D activities in co-operation with the University of Chester, including the sponsorship of a PhD program to
further the science behind the PowerHouse process and the expansion of DMG®. Additionally, Peel has identified
the site of our first intended commercial operation in the North West near Ellesmere Port.

Of tremendous importance, the appointment of EngSolve Ltd (“EngSolve”) as our principal engineering partner,
announced in March 2017, to assist in the re-commissioning of the process demonstrator, has proven to be
extremely productive and valuable. Their experience with novel waste to energy technologies has helped us
accelerate our Commercial Design for which they are ideally suited. We look forward to a long-standing and
successful relationship with their multi-talented engineering team.

The test data acquired through our robust programme at Thornton Science Park has been key to the effective
engagement of the EngSolve team for the commercial design efforts. That testing program continues to inform
design and procurement decisions we are making today.

In June 2017, the Company announced a collaboration agreement with a significant UK partner involved in the
development of energy and waste projects. The partner has committed two tranches of funding of up to £500,000
in aggregate to meet the cost of preparing and funding applications for planning permission and environmental
permits of the first five PowerHouse DMG® systems.

The agreement will require PowerHouse to supply five systems at locations of the partners' choosing on a
prioritised basis. £100,000 of this commitment was released in July 2017 to fund the planning development of
the Company’s first commercial sites.

Risk Reduction and Funding

Hillgrove Convertible Loan Note
The Board made the strategic decision to negotiate the retirement of the Hillgrove Convertible Loan note (Note)
with a combination of cash and shares. The retirement of the Note was a significant milestone, and a major
accomplishment, for the Company as there is no longer a financial impediment to its growth and operation.

The Note was accruing interest at a rate of 15 per cent per annum and had reached a value of £3.4M. The coupon
on the Note would have added approximately a half-million pounds of fully secured debt to the Company each
year.

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CHIEF EXECUTIVE OFFICER’S STATEMENT (CONTINUED)

In February 2017 the decision was taken to raise £2.5 million in a private placement and to repay the Note with
£2 million in cash, and issue £1.4 million worth of shares at the conversion price of 0.5p per share. Hillgrove
agreed to release its debenture over the Company’s assets and IP upon the final settlement of the share issuance.
This settlement has now occurred and the debenture has been released and all IP assigned to the Company per
our agreement with Hillgrove.

Other funding
In January 2017, Yady Worldwide SA made an investment of £250,000 into the Company, showing an early
commitment to the Company and the continued development and roll-out of DMG®. Yady further contributed
£500,000 as the cornerstone investor to the £2.5 million placing in February 2017.

In August 2017 the Company raised a further £1.6 million through a placing of new ordinary shares at 1.0p to
fund the acceleration of our on-going commercial engineering design and Company operations.

The PowerHouse Team
The Company has made a number of significant appointments to strengthen the board and management team.

David Ryan was appointed as a Non-Executive Director in late February 2017, and on 20 March 2017, began
acting in the role of Executive Director of Programme Development, overseeing the technical operations of the
Company. Introduced to PowerHouse by Waste2tricity, David was the former CEO and Managing Director of
Thyssenkrupp Industrial Solutions’ Oil & Gas Business Unit for the UK.

With over 35 years of complex engineering, business development, and project management experience in the
energy sector, David is an expert in sophisticated design engineering and brings a breadth of project delivery,
international business management, and general engineering acumen to the management team. David was
instrumental in the successful siting and re-commissioning of the G3-UHt process demonstrator at Thornton
Science Park and continues to lead the engineering work on the design and development of the Company’s
commercial platform, DMG®. Additionally, David has plays a key role in the defining of the Company’s Commercial
and Operational Strategies.

The Company was delighted to announce the appointment of Dr. Cameron Davies as Non-Executive Chairman of
the Board of Directors. Dr. Davies’ many accomplishments, his extensive experience, and his steady hand have
been serving the Company well since his Chairmanship took effect on 3 October of 2017.

Keith Allaun relinquished his role as Executive Chairman at the time of Dr Davies’ appointment and has assumed
the role of Chief Executive Officer for PowerHouse. In early 2018, Keith and his wife relocated to the UK for the
foreseeable future.

Clive Carver stepped down from his role as Non-Executive Director of the Company in May 2017.

Chris Vanezis joined the PowerHouse management team as Chief Financial Officer, bringing an extensive
background in financial accounting and waste-to-energy finance management.

In 2017, the first site personnel in the UK were hired, based at Thornton Science Park. Additionally, the Company
has embarked upon the sponsorship of a Ph.D. program in advanced thermal conversion technology in conjunction
with the University of Chester. That program has led to the seconding of two graduate students to PowerHouse.

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CHIEF EXECUTIVE OFFICER’S STATEMENT (CONTINUED)

2017 also saw the creation of an experienced, knowledgeable, and well-connected Advisory Panel consisting of
Peter Jones OBE, Keith Riley, Myles Kitcher, Roudi Baroudi and Howard White. The Advisory Panel has been very
influential in terms of our commercial planning and development activities.

Post period events

Elimination of Hillgrove loan note
Since the year end the Company has successfully placed shares issued to settle the Hillgrove outstanding loan
balance (280,430,920 shares) in two tranches, the second being in conjunction with an additional private
placement which also raised approximately £580,000 for Company operations.

The Hillgrove Debenture has been fully released and removed.

Commercial developments
The Company announced a partnership Memorandum of Understanding (“MOU”) with Wrightbus Ltd
(“Wrightbus”), a leading bus manufacturer whose products include innovative hydrogen powered buses, in
February 2018. This MOU, negotiated in collaboration with Waste2tricity, is non binding and although there can
be no certainty a binding agreement will be entered into, the Board of PowerHouse expects this to lead to a
definitive agreement which is currently under review by both Companies. This agreement will allow Wrightbus to
supply hydrogen fuel powered buses while PowerHouse provide its DMG® system for the low cost and
environmentally responsible production of hydrogen- in a turn-key solution to the Decarbonisation of Public
Transport; a major EU Directive.

It is expected that this first-of-its-kind turnkey solution will be marketed to local authorities and public transport
providers in the UK and internationally with a particular focus on city centres, where the lack of emissions
generated by hydrogen fuel cell buses bring important environmental and quality-of-life benefits. PowerHouse’s
DMG® system has the capacity to process a nominal 25 tonnes of plastic per day, and has the potential to provide
hydrogen to fuel buses while also providing electricity for sale to either the national grid or private clients.

In April 2018, PowerHouse announced its first international distribution agreement for its proprietary DMG®
hydrogen from waste process targeting the supply into hydrogen bus projects in Bulgaria and Romania with
Tresoil Biofuels SRL (“Tresoil”) and Waste2tricity, PowerHouse’s projects development partner. The three-way
agreement between PowerHouse, Tresoil and PowerHouse’s partner, Wrightbus, provides a cost-effective turnkey
solution to bus operators in Romania and Bulgaria who are actively seeking to replace aging fleets of highly
polluting public transport buses, with the region encouraged by the EU to deploy low carbon alternatives. Tresoil
is a well established company in Bucharest and has been actively, and successfully, involved in seeking grants for
alternative energy.

PowerHouse team
The PowerHouse management team was strengthened by the addition of Bruce Nicholson as Commercial
Operations Manager in April 2018. Bruce has a proven track record of delivering complex energy projects built
over 30 years of project management, asset management and business development. Bruce’s role is to drive and
accelerate progress of the Company’s commercial operations, business development, and partner identification.

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CHIEF EXECUTIVE OFFICER’S STATEMENT (CONTINUED)

Current trading and Outlook
The year under review saw the Company make encouraging progress to its longer-term objective of being a
leading provider of distributed electricity and distributed hydrogen produced from waste.

2017 was focused on acquiring the empirical data necessary to effect the commercial design of the DMG® System.
It was clear that the G3-UHt unit was an excellent process demonstrator, in that it performed as designed, as
planned, and as needed. It was, however, only a process demonstrator and has required significant, and
sophisticated, engineering enhancement to execute the design for the Commercial PowerHouse DMG® System.

We have created what we believe to be a distinct and evolutionary philosophy with DMG®: distributed waste
destruction; distributed electrical generation; distributed hydrogen production. We have taken a contrarian
approach to the megaliths of the past and believe in bringing the solution to where the problem lies.

We are positioned to do something powerful for communities across the UK and throughout the world. We believe
that DMG® today is but a ripple in the pond but that in time it will help redefine how our environment is managed
and play a key role in the evolution of transport - as the ripple turns into a wave of opportunity for positive change
in our world.

The Company is gaining traction in developing commercial interest in the DMG® System with inquiries arriving
on a weekly basis. We believe, and have substantial evidence to this effect, that the completion of our first
commercial system will lead to significant demand for our systems.

PowerHouse Energy Group plc no longer sees itself solely in the Waste to Energy category of companies, but now
as a player in the hydrogen from waste (HfW) sector. We are convinced that DMG® will help fuel our future,
cleanly and profitably.

We look forward to an even more exciting 2018. The year when the power of DMG® is finally unleashed.

As always, we appreciate your continued support.

Keith Allaun
Chief Executive Officer
28 June 2018

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DIRECTORS’ RESPONSIBILITIES STATEMENT

The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law
the directors are required to prepare group financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union (EU) and have also chosen to prepare the
Company financial statements under IFRSs as adopted by the EU. Under company law the directors must not
approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing these financial statements,
International Accounting Standard 1 requires that directors:

select suitable accounting policies and then apply them consistently;

•
• make judgements and estimates that are reasonable and prudent;
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that

•

the company will continue in business;
state whether applicable IFRSs as adopted by the European Union have been followed, subject to any
material departures disclosed and explained in the financial statements.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the company’s website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement
We confirm that to the best of our knowledge:
•

•

the financial statements, prepared in accordance with International Financial Reporting Standards, give
a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
the strategic report includes a fair review of the development and performance of the business and the
position of the Company together with a description of the principal risks and uncertainties that it faces;
and
the annual report and financial statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess the Company’s performance, business
model and strategy.

BY ORDER OF THE BOARD

Keith Allaun
Director
28 June 2018

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DIRECTORS’ REPORT

The Directors present their annual report along with the Company’s financial statements for the year ended
31 December 2017. The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and will be laid before the shareholders of the
Company at the Annual General Meeting.

The Company’s only UK subsidiary is non-trading and not material. There are also long-term restrictions on
the operations of the Company’s subsidiaries in the US and Switzerland. As such the Company has claimed
exemptions applicable to it under Companies Act section 405 (2) and 405 (3b) to not present any Consolidated
financial statements for the year ended 31 December 2017.

Principal activities
PowerHouse Energy Group PLC is a company incorporated in England and Wales. The Company is a public
limited company which trades 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 commercial exploitation of the newly developed PHE
Waste-to-Energy System, DMG®, in order to achieve its full commercial roll-out. The system’s thermal
conversion chamber converts waste materials such as non-recyclable plastic, biomass, and other waste
streams into a high-quality, clean, synthesis gas composed primarily of hydrogen and carbon monoxide. The
newly engineered, designed, and constructed, PHE G3-UHt demonstration system is completed and operational
in Thornton.

Future Development
Demand for our technology is increasing, with Europe, the UK, and Japan considered ideal markets given the
focus on reducing waste to landfill and the growing interest in hydrogen as a source of motive power.
Additionally, Australia has a growing need for solutions dealing with plastic waste and demand which exceeds
supply for electricity.

The Company’s project development relationship with Waste2tricity has led to the signing of non-binding MOU
with Wrightbus in February 2018, for the collective progression of hydrogen bus projects. This has in turn led
to a collaboration with Tresoil Biofuels SRL for potential projects in Romania and Bulgaria. Other international
market opportunities are also being explored.

A more thorough review of the development of the business together with an indication of future proposed
developments is included in the Chairman’s Report and Chief Executive Officer’s Statement.

Management of Capital
The Company manages its capital with the aim of ensuring it can continue as a going concern. Capital sources
include debt and equity balances. Board members review cash balances available for ongoing spend on a
weekly basis in assessing needs forward and timing for future equity raises.

Results and dividends for the year
The Company financial statements for the year ended 31 December 2017 are set out on pages 25 to 40. The
Company loss for the year after taxation amounted to £1,874,692 (2016: Loss of £1,334,009). The net liabilities
of the Company are £801,688 (2016: £3,226,564) with the movement in the year set out in the Statement of
Changes in Equity.

The Directors do not recommend the payment of a dividend (2016: £nil).

Research and development
Research and development related costs incurred during the year, relating to the newly developed PHE G3-
UHt Waste-to-Energy System, amounted to £528,000 (2016: £nil).

Post balance sheet events
There have been no significant events since the balance sheet date other than those discussed in this Directors’
Report, the Strategic Report and note 21 to the Company financial statements.

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DIRECTORS’ REPORT (CONTINUED)

Directors’ interests
Please refer to Notes 18 and 21.

Substantial shareholdings
The Company is aware of shareholders holding 3 per cent or more of the issued share capital of the Company
as at 6 June 2018 as follows:

Hargreaves Landsdown (Nominees) Limited (A/C VRA)
Paul Warwick
JIM Nominees (A/C Jarvis)
Hargreaves Landsdown (Nominees) Limited (A/C 15942)
Yady Worldwide S.A.
RenewMe Limited
Hargreaves Landsdown (Nominees) Limited (A/C HLNOM)
Hargreaves Landsdown (Nominees) Limited (A/C VRADDOWN)
Interactive Investor Services Nominees Limited (A/C SMKTISAS)
Barclays Direct Investing Nominees Limited (A/C Client1)
Interactive Investor Services Nominees Limited (A/C SMKTNOMS)

Number of
ordinary
shares of 0.5p
each
124,219,298
118,107,893
116,534,553
105,562,123
98,814,285
90,932,961
90,856,287
71,303,847
70,798,394
59,031,142
47,647,212

Percentage of
voting rights
8.0
7.6
7.5
6.8
6.4
5.9
5.9
4.6
4.6
3.8
3.1

Directors
The Directors, who served during the year, and subsequently, were as follows:

William Cameron Davies
Robert Keith Allaun
Nigel Brent Fitzpatrick
James John Pryn Greenstreet
Clive Nathan Carver
David Ryan

Chairman (appointed 3 October 2017)
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (resigned 22 May 2017)
Executive Director (appointed 21 February 2017)

Corporate governance
The Company complies with the AIM Rules for Companies, including AIM Rule 26, concerning the disclosure
of information. More details are provided in the Corporate Governance Report and on the Company website.

Payment to suppliers
The Company does not have a standard or code which deals specifically with the payment of suppliers. Total
creditor days for the Company for the year ended 31 December 2017 were 29 days (2016: 19 days).

Risk management and principal risks
The principal risks to the Company and how they are managed is explained in detail in the Strategic Report
on page 16 and in note 17 to the financial statements.

Going concern basis
The Directors have considered all available information about the future events when considering going
concern including their review of cash flow forecasts for 12 months following the date of these financial
statements.

The 2017 financial statements have been prepared on the going concern basis, notwithstanding the Company
making a loss. The Directors believe the going concern basis to be appropriate for the following reasons:

14 | Page

DIRECTORS’ REPORT (CONTINUED)

The Company has been provided with a letter of support from one of its shareholders, who has indicated to
the Directors that he intends, for at least 12 months from the date of the approval of these financial statements,
to make available a maximum sum of £650,000. In addition, the Directors are also of the opinion that they
can raise further funds as and when required having been assured of such by a number of external parties.
Furthermore, the Directors have agreed to waive any future salaries or fees for themselves, if necessary, to
allow the Company to repay its debts as and when they fall due.

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.

Political and charitable donations
The Company has not made any political or charitable donations during the year.

Auditor
Jeffreys Henry LLP were appointed as Auditors during the year following a tender process. A resolution
proposing that they will be reappointed will be put to the AGM.

Each of the persons being a Director at the date of approval of this report confirms that:

So far as the Director is aware there is no relevant audit information of which the Company’s auditor
is unaware; and

- The Director has taken all the steps that he ought to have taken as a Director in order to make himself
aware of any relevant audit information and to establish that the Company’s auditor is aware of that
information.

This confirmation is given, and should be interpreted, in accordance with the provisions of s.418 of the
Companies Act 2006.

Approved by the Board of Directors and signed on behalf of the Board on 28 June 2018.

Keith Allaun
Director

15 | Page

STRATEGIC REPORT

The Directors present their strategic report on the Company for the year ended 31 December 2017.

This strategic report comprises: the Company's objectives; the Company's strategy; the Company's business
model; and a review of the Company's business using key performance indicators.

The Chairman's Report and the Chief Executive Officer’s Statement, which also form the main part of the
strategic review, contain a review of the development and performance of the Company’s business during the
financial year, and the position of the Company's business at the end of that year.

Additionally, a summary of the principal risks and uncertainties facing the business is set out in note 17 to the
Company’s financial statements.

Objectives
The Company's primary objective is to create shareholder value from the development, construction, and sale
of its proprietary thermal conversion technology and processes in projects that will convert waste to energy
(Syngas, Hydrogen and Electricity.) Income will be derived from the sale, royalties, and the licence of our
technology to third parties.

The Company has a number of secondary objectives, including promoting the highest level of health and safety
standards, developing our staff to their highest potential and being a good corporate citizen in our chosen
countries of operations.

Strategy
The Company's long-term strategy is to contribute to building an attractive portfolio of profitable waste
eradication, energy recovery, and distributed electrical and hydrogen production operations utilising the
Company’s proprietary thermal conversion technology in conjunction with a variety of industry partners,
including Material Recovery Facilities, landfill operators, additional technology providers, and other project
development partners.

Additionally, the Company will seek to exploit associated opportunities where the board believes it can add
significant value and contribute towards the success of the Company as a whole.

At present the Company’s principal assets are its G3-UHt process demonstrator, currently located at the
University of Chester Thornton Science Park, the test data derived, and the Commercial Design materials
developed during the on-going Engineering process.

Business Model
The Company intends to further develop the Company’s DMG® process into a fully operational commercial
unit capable of processing a nominal 25 tonnes per day of waste. It is expected that activities will commence
in the UK in partnership with Waste2tricity, Ltd, an experienced Waste-to-Energy project development
organization. The Company has entered into an MOU with Peel Environmental to negotiate for the siting of its
first commercial facility at Ellesmere Port near Chester and the Thornton Science Park. The Company is
currently evaluating a number of other potential sites for the roll-out of future DMG® Systems.

Over the longer term the Company will look to exploit its proprietary know-how, technology developments and
other processes to develop economical, environmentally sound, and efficient solutions to capture even more
energy from the growing waste-steam generated by humanity. Operations will be rolled-out beyond the UK as
opportunities present themselves.

16 | Page

STRATEGIC REPORT (CONTINUED)

Key performance indicators
Review of the Company's business using key performance indicators

The Directors consider the following to be the key performance indicators:

• Operational

o Full commissioning of the G3-UHt demonstration unit at the Thornton Science Park with the

ability to operate the unit on an on-going basis.

o Pre-Feasibility study developed regarding the roll-out and construction of the DMG® Systems
with a minimum nominal capacity of 25 tonnes per day throughput, coupled with the
generation of electricity through any mechanism: steam boiler/turbine, reciprocal gas engines,
gas turbine, or fuel cell.

o Completion of Basic Engineering of a generic DMG® System.
o Achievement of planning and permitting permissions for the operation of DMG®
o
Initiation of procurement of key elements of the DMG® System for commercial operation.
o Demonstration of the ability to sequester adequately pure hydrogen for use in either road fuel

or other fuel cell applications.

•

Financial

o Acquisition of adequate working capital for the Company’s foreseeable needs.
o Achievement of cash-flow to meet Company operational needs
o Profitability when successfully and fully commercialized
o Growing return on capital
o Growing market capitalisation

The principal and other risks and uncertainties facing the business
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 following risk factors, which are not
exhaustive, are particularly relevant to the Company’s business activities:

Financing and financial instruments risks
The Company continually monitors its financial position to ensure the continuation of the operational activities
and expects to fund the costs of its planned development programme over the next 12 months from existing
funds in addition to, when appropriate, the introduction of new equity capital or the assumption of alternative
debt or other sources of financing. The Company follows a financial management policy in the use of such
financial instruments that aims to limit undue counterparty exposure and expense.

Environmental and other regulatory risks
While there is always the possibility of a changing regulatory landscape, the Company is confident that it will
achieve both regulatory and environmental certification for the operation of the DMG® System in power
generation and hydrogen modes. To date, the Company has received permission for the operation of the
process demonstrator in the Thornton Science Park, and there have been no adverse environmental incidents,
or any adverse regulatory action taken against the Company.

Operational risks
The thermal conversion technology employed by PowerHouse utilises high temperature processes and
hazardous gas generation. The G3 process demonstrator has been subjected to robust HSE assessment
including Hazard and Operability study, Hazard Identification study, Safety integrity review and a hazard
classification, all of which have been included in the development of the Company’s Health & Safety protocols.
To date, there have been no adverse Health or Safety incidents involving the G3 platform.

Political 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 to be in a position to adapt to any, and all, emerging regulations as required.

17 | Page

STRATEGIC REPORT (CONTINUED)

Competitive risk
There are a number of thermal conversion and waste management technology operators world-wide. Another
company may launch a less costly or more efficient analogue to PowerHouse’s technology. At present the
Company is not aware of any such technology currently under development, however, the Company is
protected by years of specialised know-how, processes, and intellectual property developed during the years
of research and development. Additionally, the Company’s intended business model of the sale of DMG® into
multiple development projects in multiple locations, each generating revenue, will provide a greater level of
protection than if the Company was relying on the sale of individual units into a single market.

Take-Over Risk
The Company may become the target of a take-over bid by any number of larger entities in the waste
management, energy recovery, or energy production industries. It is expected that any take-over bid or
attempted acquisition would be to the benefit of shareholders and the Board would work diligently to ensure
that would be the case. The Board believes that this risk will be mitigated by successfully growing our
commercial operations and increasing the market capitalisation.

Other Risks
The Company may be subject to other risks of which it is not currently aware. The Board and Management
operate to ensure that the Company is able to react to any unforeseen risks rapidly and appropriately.
Through regular communication with industry bodies, peers, attending conferences and other industry events,
the Board and Management work to maintain awareness of any potential threats or risks the Company might
encounter and take appropriate action in a timely manner.

Approved by the Board of Directors and signed on behalf of the Board on 28 June 2018.

Keith Allaun
Director

18 | Page

CORPORATE GOVERNANCE REPORT

The Board is committed to the maintenance of high standards of corporate governance and seeks to implement
best practice as appropriate for smaller listed companies by reference to the provisions of the Quoted Companies
Alliance’s Corporate Governance Code for Small and Mid-Size Quoted Companies.

The Board of Directors and Committees

The Board is responsible for setting the overall strategy of the business, reviewing management performance and
ensuring the Company has sufficient financial and human resources to meet its objectives. It directs the
Company’s activities in an effective manner through general Board meetings and monitors performance through
timely and relevant reporting procedures. Where it deems necessary, the Board requests reports on specific areas
outside the normal reporting regime.

The Chairman is responsible for the leadership of the Board and ensuring its effectiveness.

The Board at present comprises two Executives (the CEO and an Executive Director) and three Non-Executive
Directors. The size of the Board is considered to be appropriate to the current size and character of the Company.
Cameron Davies, James Greenstreet and Brent Fitzpatrick are independent of management and any business or
other relationships which would interfere with the exercise of their independent judgment.

Board meeting attendance during 2017

Meetings held in 2017
Dr Cameron Davies*
Keith Allaun
Clive Carver”
David Ryan**
James Greenstreet
Brent Fitzpatrick

Meetings attended
12
3/12
12/12
4/12
9/12
10/12
12/12

* Dr Davies was appointed to the board on 3 October 2017
“ Clive Carver resigned from the board on 22 May 2017
** David Ryan was appointed to the board on 21 February 2017

Authority for the execution of the business plan and the daily running of the business is delegated to the Executive
Directors and the senior management team, who meet regularly to review current business performance,
operational projects and other day to day activities.

Formal agendas and reports are provided to the Board on a timely basis in advance of Board and Committee
meetings and the Chairman ensures that all Directors are properly briefed on issues to be discussed at Board
meetings. Directors are able to obtain further advice or seek clarity on issues raised at the meetings from within
the Company or from external sources.

All Directors are subject to appraisal by the Board and election by the shareholders. The Non-Executive Directors
are responsible for the evaluation of the Chairman.

The Company has established an Audit Committee, an AIM Compliance Committee and a Remuneration
Committee with formally delegated duties and responsibilities.

19 | Page

CORPORATE GOVERNANCE REPORT (CONTINUED)

Audit Committee
The duties of the Audit Committee include reviewing, in draft form, the Company’s annual and half-yearly report
and accounts and providing advice to the board. Members of the Audit Committee are also responsible for
reviewing and supervising the financial reporting process and internal control systems of PowerHouse. The Audit
Committee is comprised of the Non-Executive Directors of the Board.

Remuneration Committee
The Remuneration Committee is responsible for reviewing the scale and structure of the executive Directors’
remuneration and the terms of their service contracts with the Company, including share option schemes and any
bonus arrangements. The terms and conditions of the arrangements, including remuneration, with non-executive
Directors are set by the entire Board of PowerHouse.

AIM Compliance Committee
The AIM Compliance Committee has the primary responsibility for ensuring procedures, resources and controls
are in place to enable compliance with the AIM Rules for Companies, in particular concerning the disclosure of
information. The AIM Compliance Committee works closely with the Board to ensure that it consults with the
Company’s Nominated Adviser on an ongoing basis. The entire Board is appointed to the AIM Compliance
Committee.

Investor Relations
PowerHouse is committed to open communication with all i. ts shareholders. The Company believes it is important
to explain business development and financial results to its shareholders and to ensure that suitable arrangements
are in place so that the issues and concerns of major shareholders are heard and understood.

Copies of the Annual Report and Accounts are issued to all shareholders who have requested them and copies
are available on the Company’s investor website www.powerhouseenergy.net. The Company makes full use of its
investor website to provide information to shareholders and other interested parties.

Shareholders are given the opportunity to raise questions at the Annual General Meeting and the Directors are
available both before and after the meeting for further discussion with shareholders.

Dr Cameron Davies
Non-Executive Chairman
28 June 2018

20 | Page

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
POWERHOUSE ENERGY GROUP PLC

Opinion
We have audited the financial statements of Powerhouse Energy Group Plc (the ‘Company’) for the year ended
31 December 2017 which comprise the statement of comprehensive income, the statements of financial
position, the statements of cash flows, the statements of changes in equity and notes to the financial
statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union
and, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:

•

the financial statement give a true and fair view of the state of the company’s affairs as at 31 December
2017 and of the company’s loss for the year then ended;
the financial statement have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the financial statement have been prepared in accordance with the requirements of the Companies
Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are independent of the company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to Going Concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:

•

the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.

21 | Page

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

that

Going concern assumption
In continuing to apply the going concern basis for
the Annual Report and accounts for the period
ended 31 December 2017, the Directors should
they have a reasonable
be satisfied
expectation that the Company will continue in
operational existence for the foreseeable future,
being at least twelve months from the date of
this
issue of
conclusion, the future prospects of the Company
must be considered.

the accounts.

reaching

At 31 December 2017 the Company’s cash
balance is £750k. A future fundraising and
substantial operating costs cutting will be
essential for the Company to be viable beyond
mid-2019.

Our audit procedures:
We obtained and
the Directors’
assessment and forecasts, including challenging
the liquidity position.

reviewed

We reviewed the basis and reasonableness of
the key assumptions and assessed
the
sensitivities of
the underlying assumptions,
specifically focusing on the assumptions of
operating costs reduction and impact of future
fund raise.

in respect of
We reviewed documentation
potential liability waivers and assessed the
impacts on the Company’s liquidity.

We also reviewed the letter of support and
discussed with the management about their
future fund raising plan.

Overall we were satisfied that the Company
remained able to meet its obligations as they fell
due for at least twelve months from the date of
approval of the financial statements.

Our application of materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Based on our professional judgment, we determined materiality for the financial statements as a whole as
follows:

Overall materiality
How we determined it

Rationale for
benchmark applied

Company financial statements
£104,000 (first year audit)
The average of 10% of loss before tax
and 2.5% of gross assets
We believe that loss before tax is the
primary measure used by
the
the
assessing
shareholders
performance of the Company, and is a
generally
auditing
accepted
benchmark.

We agreed with the management that we would report to them misstatements identified during our audit above
£5,200 as well as misstatements below those amounts that, in our view, warranted reporting for qualitative
reasons.

An overview of the scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in
the financial statements. In particular, we looked at where the directors made subjective judgments, for
example in respect of significant accounting estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.

22 | Page

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the structure of the Company, the accounting
processes and controls, and the industry in which they operate.

The Group financial statements are not prepared because the management’s assessment to take exemption
as per s405 CA2006 is deemed appropriate. No consolidation is prepared to include the dormant subsidiary
as it is inactive and immaterial.

We performed audits of the complete financial information Powerhouse Energy Group PLC. Our engagement
team performed all audit procedures

Other information

The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•

the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the company, or returns adequate for our audit

have not been received from branches not visited by us; or
the company financial statements are not in agreement with the accounting records and returns; or
•
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement [set out on page 12], the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

23 | Page

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2017

Revenue
Administrative expenses

Operating loss

Finance costs

Loss before taxation

Income tax expense

Total comprehensive loss

Loss per share from continuing operations (pence)

Diluted loss per share from continuing operations (pence)

Note

31 December
2017
£

31 December
2016
£

-
(1,804,829)

-
(851,903)

(1,804,829)

(851,903)

(69,863)

(482,106)

(1,874,692)

(1,334,009)

(1,874,692)

(1,334,009)

(0.19)

(0.24)

The notes numbered 1 to 22 are an integral part of the financial information.

25 | Page

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

ASSETS
Non-current assets
Property, plant and equipment
Investments

Total non-current assets

Current Assets
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

LIABILITIES
Current liabilities
Trade and other payables
Loans

Total current liabilities

Net liabilities

EQUITY
Share capital
Share premium
Accumulated deficit

Total deficit

Note

7
8

9
10

2017
£

2,601
1

2,602

2016
£

2,424
1

2,425

88,495
750,226

838,721

6,336
148,151

154,487

841,323

156,912

11
12

(240,856)
(1,402,155)

(51,184)
(3,332,292)

(1,643,011)

(3,383,476)

(801,688)

(3,226,564)

14
14
15

6,153,455
8,798,142
47,031,989
48,681,792
(58,281,622) (56,412,008)

(801,688)

(3,226,564)

The financial statements of PowerHouse Energy Group Plc, Company number 03934451, were approved by
the Board of Directors and authorised for issue on 28 June 2018 and signed on its behalf by:

Keith Allaun
Director

The notes numbered 1 to 22 are an integral part of the financial information.

26 | Page

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2017

Cash flows from operating activities
Operating Loss
Adjustments for:
- Share based payment
- Expenses settled by shares
- Renewme settlement
- Depreciation
Changes in working capital:
-
-

(Increase)/Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables

2017
£

2016
£

(1,804,829)

(851,903)

5,078
190,000
-
808

68,000
-
299,152
-

(82,159)
189,672

(4,885)
(147,601)

Net cash used in operations

(1,501,430)

(637,237)

Cash flows from investing activities

- Purchase of fixed assets

Net Cash flows from investing activities

Cash flows from financing activities
Proceeds on issue of shares
Expenses settled by shares
Finance costs
New loans raised
Loans repaid

(985)

(2,424)

4,294,490
(190,000)
(69,863)
69,863
(2,000,000)

700,512
-
(482,106)
577,567
(183,911)

Net cash flows from financing activities

2,104,490

612,062

Net (decrease)/increase in cash and cash equivalents

602,075

(27,599)

Cash and cash equivalents at beginning of year

148,151

175,750

Cash and cash equivalents at end of year

750,226

148,151

The notes numbered 1 to 22 are an integral part of the financial information.

27 | Page

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2017

Ordinary
Share
capital
£

Share
premium
£

Deferred
shares
(0.5p)
£

Deferred
shares
(4.5p)
£

Deferred
shares
(4.0p)
£

Accumulated
deficit
£

Total
£

2,150,815

46,921,180

1,942,483

781,808

389,494

(55,145,999)

(2,960,219)

45,455
178,571
17,857
192,308
454,664
-
-

4,545
56,429
7,143
42,692
-
-
-

-
-
-
-
-
-
-

-
-
-
-
-
68,000
(1,334,009)

50,000
235,000
25,000
235,000
454,664
68,000
(1,334,009)

3,039,670 47,031,989

1,942,483

781,808

389,494

(56,412,008)

(3,226,564)

178,571
1,562,500
37,300
800,000
40,000
26,316
-
-
-

71,429
937,500
32,700
800,000
40,000
13,684
(245,510)
-
-

-
-
-
-
-
-
-
-
-

-
-
-
-
-
-
-
5,078
(1,874,692)

250,000
2,500,000
70,000
1,600,000
80,000
40,000
(245,510)
5,078
(1,874,692)

5,684,357 48,681,792

1,942,483

781,808

389,494

(58,281,622)

(801,688)

Balance at 1 January 2016
Transactions with equity participants:

- - Share issue
- - Share issue
- - Share issue
- - Share issue
- - Share issue
- - Share based payment

- Total comprehensive loss
Balance at 31 December 2016
Transactions with equity participants:

- - Share issue
- - Share issue
- - Share issue in lieu of services
- - Share issue
- - Share issue in lieu of services
- - Share issue in lieu of services

- Share issue fees
- Share based payment
- Total comprehensive loss
Balance at 31 December 2017

The notes 1 to 22 are an integral part of the financial information.

28 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

1. ACCOUNTING POLICIES

PowerHouse Energy Group PLC is a Company incorporated in England and Wales. The Company is a public
limited company quoted on the AIM market of the London Stock Exchange. The address of the registered
office is 10b Russell Court, Woolgate, Cottingley Business Park, Bingley BD16 1PE. The principal activity of the
Company is to continue the development of the newly developed PHE G3-UHt Waste-to-Energy System in
order to achieve its full commercial roll-out. The following accounting policies have been applied consistently
in dealing with items which are considered material in relation to the financial information.

Basis of preparation

1.1.
This financial information is for the year ended 31 December 2017 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.

Judgements and estimates

1.2.
The preparation of financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts in the financial
statements.

The component parts of compound instruments (convertible bonds) have a high degree of complexity. At the
date of issue, the fair value of the liability component is estimated using the prevailing market interest rate
for a similar non-convertible instrument, the residual equity component is determined by deducting the amount
of the liability component from the fair value of the compound instrument as a whole. These are classified
separately as financial liabilities and equity in accordance with the substance of the contractual arrangement.
In classifying the instruments it has been assessed that there is no equity element in relation to the convertible
loan notes.

Other areas involving a higher degree of judgements or complexity, or areas where assumptions or estimates
are significant to the financial statements such as the impairment of investments and going concern are
disclosed within the relevant notes

1.3. Going concern
The financial statements have been prepared on a going concern basis, notwithstanding the Company having
net liabilities at 31 December 2017 of £802k (2016: £3,227k). Those liabilities include the Hillgrove loan of
£1.4m which has been converted to equity since the year end (please refer to Note 21). The Directors believe
the going concern basis to be appropriate for the following reasons:

The Company has been provided with a letter of support from one of its shareholders, who has indicated to
the Directors that he intends, for at least 12 months from the date of the approval of these financial statements,
to make available a maximum sum of £650,000. In addition, the Directors are also of the opinion that they
can raise further funds as and when required. Furthermore, the Directors have agreed to waive any future
salaries or fees for themselves, if necessary, to allow the Company to repay its debts as and when they fall
due.

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.

29 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

Foreign currency translation

1.4.
The financial information is presented in sterling which is the Company’s functional currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are revalued
to the exchange rate at date of settlement or at reporting dates (as appropriate). Exchange gains and losses
resulting from such revaluations are recognised in the Statement of Comprehensive Income.
Foreign exchange gains and losses are presented in the Statement of Comprehensive Income within
administrative expenses.

1.5. Revenue
Revenue represents the amounts derived from the supply of goods and services in the normal course of
business, net of discounts, value added tax and other sales related taxes.

1.6. Operating Leases
Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over
the lease term.

1.7. Finance expenses
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial liability, or, where appropriate, a
shorter period, to the net carrying amount on initial recognition.

1.8. Income tax expense
The tax expense for the period comprises current and deferred tax.

UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws
that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the
balance sheet date where transactions or events that result in an obligation to pay more tax in the future or
a right to pay less tax in the future have occurred at the balance sheet date. Temporary differences are
differences between the Company's taxable profits and its results as stated in the financial statements that
arise from the inclusion of gains and losses in tax assessments in periods different from those in which they
are recognised in the financial statements.

A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the
basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying temporary differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the
temporary differences are expected to reverse, based on tax rates and laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

1.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Cost represents the cost of
acquisition or construction, including the direct cost of financing the acquisition or construction until the asset
comes into use.

Depreciation on property, plant and equipment is provided to allocate the cost less the residual value by equal
instalments over their estimated useful economic lives of 3 years, once the asset is complete.

The expected useful lives and residual values of property, plant and equipment are reviewed on an annual
basis and, if necessary, changes in useful life or residual value are accounted for prospectively.

30 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

1.10. Other non-current assets
Other non-current assets represent investments in subsidiaries. The investments are carried at cost less
accumulated impairment. Cost was determined using the fair value of shares issued to acquire the investment.

1.11. Financial assets
The Company classifies financial assets as loans and receivables within current assets, except for maturities
greater than 12 months after the balance sheet date. These are classified as noncurrent assets. Assets are
initially recognised at fair value plus transaction costs. Loans and receivables are subsequently carried at
amortised cost using the effective interest rate method.

1.12. Trade and other receivables
Trade receivables are initially recognised at fair value. Subsequently they are carried at amortised cost less
any provision for impairment.

1.13. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits and are recognised and subsequently
carried at fair value.

1.14. Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade and other payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.

1.15. Financial liabilities
Loans are financial obligations arising from funding received and used to support the operational costs of the
Company. These are initially recognised at fair value. Loans are subsequently carried at amortised cost using
the effective interest method.

1.16. Adoption of new and revised standards
New and revised standards adopted during the year and those standards and interpretations in issue but not
yet effective:

Share based payment
Financial instruments
Revenue from contracts with customers
Leases
Employee benefits (amendment)
Foreign Currency Transactions and advance consideration
Uncertainty over income tax treatments

IFRS 2
IFRS 9
IFRS 15
IFRS 16
IAS 19
IFRIC 22
IFRIC 23
Improvements to IFRSs. Annual improvements 2014-2016 cycle: Amendments to IFRS1 and IAS 28
Improvements to IFRSs. Annual improvements 2015-2017 cycle: Amendments to 4 IFRSs

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a
material impact on the Company.

1.17. Impairment
(i) Impairment review
At each balance sheet date, the carrying amounts of assets are reviewed to determine whether there is any
indication that those assets have suffered an impairment loss. An impairment loss is recognised whenever the
carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses
recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit on
a pro-rata basis. A cash generating unit is the group of assets identified on acquisition that generate cash
inflows that are largely independent of the cash inflows from other assets or groups of assets.

31 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

The recoverable amount of assets or cash generating units is the greater of their fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit to which the asset belongs.

(ii) Reversals of impairments
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.

1.18. Share-based payments
The Company grants options to Directors and employees through approved and unapproved option plans. The
fair value of options is determined at the date of grant and is recognised as an expense in the Income
Statement. The fair value at the grant date is determined using a Black and Scholes valuation model. At each
reporting date the Company revises its estimates of the number of options that are likely to be exercised with
any adjustment recognised in the income statement.

Where share-based payments give rise to the issue of new share capital, the proceeds received by the
Company are credited to share capital and share premium when the share entitlements are exercised.

1.19. Segmental reporting
An operating segment is a component of the Company:

• that engages in business activities from which it may earn revenues and incur expenses (including revenues

and expenses relating to transactions with other components of the Company);

• whose operating results are reviewed regularly by the Company’s chief decision maker to make decisions

about resources to be allocated to the segment and assess its performance; and

• for which discrete financial information is available.

1.20. Research and development
An internally generated intangible asset arising from development is only recognised where all of the following
have been demonstrated: (i) the technical feasibility of completing the asset; (ii) the intention to complete the
asset and the ability to use or sell it; (iii) the availability of resources to complete the asset; and (iv) the ability
to reliably measure the cost attributable to the asset during its development.

In all other instances research and development expenditure is recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

2. Staff costs

Directors’ fees
Wages and salaries
Pensions

2017
£

207,772
11,474
230
219,476

2016
£

194,602
-
-
194,602

Including Directors, the Company had on average 5 employees during the year (2016: 4) and 6 at year end
(2016: 4).

No social security costs were incurred during the year or in the prior year.

32 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

3. Administrative expenses

Included in administrative expenses are:

Property rentals
Depreciation
Auditor’s remuneration for audit services:

Fees payable to the Company’s auditor for the audit of the
Company’s annual financial statements
Fees payable to the Company’s auditor and their associates for
other services:

2017
£

10,399
808

2016
£

-
-

20,000

12,000

1,000

There are no other fees paid to the Company’s auditor other than those disclosed above.

4. Finance costs

Shareholder loan interest

2017
£

69,863

2016
£

482,106

5. Income tax and deferred tax

As the Company incurred a loss, no current tax is payable (2016: £nil). In addition, there is no certainty about
future profits from which accumulated tax losses could be utilised and accordingly no deferred tax asset has
been recognised. Accumulated tax losses amount to £9,168,835 (2016: £7,294,143) and reflect tax losses
submitted in tax returns and arising during the period. The tax credit is lower (2016: lower) than the standard
rate of tax. Differences are explained below.

Current tax
Loss before taxation

Tax credit at standard UK corporation tax rate of 19.25% (2016: 20%)
Effects of:
Expenses not deductible for tax purposes
Deferred tax not recognised

Income tax expense

6. Loss per share

Total comprehensive loss (£)

2017
£

2016
£

1,874,692

1,334,009

360,878

266,802

-
(360,878)

(73,430)
(193,372)

2017

2016

(1,874,692)

(1,334,009)

Weighted average number of shares

975,055,119

551,433,936

Loss per share in pence
Diluted loss per share in pence

(0.19)
(0.19)

(0.24)
(0.24)

33 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 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.

Directors’ share options – exercisable at 2.5p per option
Directors’ share options – exercisable at 0.75p per option
Share warrants – exercisable at 1p per warrant
Hillgrove Loans convertible at 0.5p

Shares issued since the year end are disclosed in note 21.

7. Property, plant and equipment

11,000,000
15,000,000
5,000,000
£1,402,155

11,000,000
15,000,000
-
£3,332,292

Cost
At 1 January 2017
Additions
Other adjustments
At 31 December 2017

Accumulated depreciation
At 1 January 2017
Charge for the year
Other adjustments
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 December 2016

8. Investments

Property, plant
and equipment
£

5,626
985
-
6,611

3,202
808
-
4,010

2,601
2,424

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.

Investment - Cost
Accumulated impairment

2017
£

2016
£

48,947,155
(48,947,154)

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

34 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

9. Trade and other receivables

Other receivables
Prepayments and accrued income

10. Cash and cash equivalents

Cash balances

11. Trade and other payables

Trade payables
Other creditors and accruals

2017
£

77,287
11,208

88,495

2016
£

6,336
-

6,336

2017
£

2016
£

750,226

148,151

750,226

148,151

2017
£

125,141
115,715

240,856

2016
£

34,183
17,001

51,184

Capital commitments not accrued for at the year end amounted to £nil (2016: £Nil).

12. Operating leases

Future minimum rentals payable under non-cancellable operating leases are as follows:

Amounts payable:
Within one year

13. Loans

At 1 January
New loans raised
Loans repaid
Interest expense
Interest paid

2017
£

5,419

2016
£

2017
£

2016
£

3,332,292
69,863
(2,000,000)
69,863
(69,863)
1,402,155

2,938,636
577,567
(183,911)
482,106
(482,106)
3,332,292

35 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

Loans classified as:
- Current
- Non-current

2017
£

2016
£

1,402,155
-

3,332,292
-

Hillgrove Investments Pty Limited (“Hillgrove”) has provided the Company with a convertible loan agreement,
the amount of which has increased from time to time at Hillgrove’s option and based upon Company needs.
The loan is secured by a debenture over the assets of the Company and carries interest of 15 per cent per
annum. Hillgrove has the option at any time to convert the loan in part or whole at a conversion price of 0.5p
per share.

In February 2017 Hillgrove accepted a settlement of this loan for a £2 million cash pay-out, which was paid
during the year, and the conversion of the residual balance of £1,402,155 into newly issued share capital of
the Company at the previously agreed 0.5p conversion price, amounting to 280,430,920 shares. The shares
have been issued since the year end and Hillgrove has released the debenture it held over the assets of the
Company.

14. Share capital & share premium

0.5 p
Ordinary
shares

0.5 p Deferred
shares

4.5 p Deferred
shares

4.0 p Deferred
shares

Shares at 1 January 2016

430,163,261

388,496,747

17,373,523

9,737,353

Issue of shares

177,771,275

Shares at 31 December 2016

607,934,536

388,496,747

17,373,523

9,737,353

Issue of shares

528,937,478

Shares at 31 December 2017

1,136,872,014

388,496,747

17,373,523

9,737,353

0.5 p Ordinary
shares

0.5 p Deferred
shares

4.5 p Deferred
shares

4.0 p Deferred
shares

Share Capital Share Premium

At 1 January 2016

2,150,815

1,942,483

781,808

389,494

5,264,600

46,921,180

Issue of shares

888,855

110,809

At 31 December 2016

3,039,670

1,942,483

781,808

389,494

6,153,455

47,031,989

Issue of shares
Share issue costs

2,644,687
-

-
-

2,644,687
-

1,895,313
(245,510)

At 31 December 2017

5,684,357

1,942,483

781,808

389,494

8,798,142

48,681,792

All types of deferred shares carry no voting right nor any entitlement to attend general meetings of the
Company. They carry only a right to participate in any return of capital once an amount of £100 has been
paid in respect of each ordinary share.

36 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

14. Share capital (continued)

On 26 January 2016 the Company issued 9,090,909 ordinary shares of 0.5p each at a price of 0.55p each,
totalling £50,000.

On 23 February 2016 the Company issued 35,714,285 ordinary shares of 0.5p each at a price of 0.7p each,
totalling £250,000, before issue costs.

On 3 March 2016 the Company issued 3,571,419 ordinary shares of 0.5p each at a price of 0.7p each, totalling
£25,000.

On 15 July 2016 the Company issued 38,461,538 ordinary shares of 0.5p each at a price of 0.65p each,
totalling £250,000, before issue costs.

On 29 April 2016 the Company announced that a full and final settlement had been reached with Renewme
to settle the remaining balance in exchange for the issue of 90,932,961 new Ordinary shares.

On 19 January 2017 the Company issued 35,714,285 ordinary shares of 0.5p each at a price of 0.7p each,
totaling £250,000, before issue costs.

On 15 February 2017 & 15 March 2017 the Company issued 250,000,000 and 62,500,000 ordinary shares of
0.5p each respectively at a price of 0.8p each, totaling £2,500,000, before issue costs.

On 27 June 2017 the Company issued 7,460,035 ordinary shares of 0.5p each at a price of 0.9p each, totaling
£70,000, before issue costs.

On 24 August 2017 the Company issued 160,000,000 ordinary shares of 0.5p each at a price of 1.0p each,
totaling £1,600,000, before issue costs.

On 31 August 2017 the Company issued 8,000,000 ordinary shares of 0.5p each at a price of 1.0p each,
totaling £80,000, before issue costs.

On 31 August 2017 the Company issued 5,263,158 ordinary shares of 0.5p each at a price of 0.8p each,
totaling £40,000, before issue costs.

15. Accumulated deficit

As at 1 January
Loss for the year
Share based payment

At 31 December

16. Convertible Instruments

2017
£

2016
£

(56,412,008)
(1,874,692)
5,078

(55,145,999)
(1,334,009)
68,000

(58,281,622)

(56,412,008)

16.1 Warrants
On 4 July 2017, the Company granted 5,000,000 warrants to a consultant (2016: nil). The options may be
exercised between the Grant date and the third anniversary of the Grant date and will lapse if not exercised
during that period. At the date of grant the shares price was 0.85p and the warrants have an exercise price
of 1p per share. There were no other warrants outstanding at year end. The valuation of the warrants followed
the same methodology as for share options as disclosed in note 16.3 below. These warrants have incurred a
charge of £5,078 during the year (2016: £nil).

37 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

16.2 Hillgrove
In February 2017 Hillgrove exercised the right to convert part of its loan to shares, further details are detailed
in note 13.

16.3 Share Options

On 8 December 2014, the Company granted 11,000,000 options over ordinary shares to the Board, under the
PowerHouse Energy Group plc Unapproved Share Option Plan 2011. The options may be exercised between
the Grant date and the tenth anniversary of the Grant date and will lapse if not exercised during that period.
The options have an exercise price of 2.5p per share.

On 7 March 2016, the Company granted 11,000,000 options over ordinary shares to the Board, under the
PowerHouse Energy Group plc Unapproved Share Option Plan 2011. The options may be exercised between
the Grant date and the fifth anniversary of the Grant date and will lapse if not exercised during that period.
The options have an exercise price of 0.75p per share.

No further options were issued in 2017.

The number of options outstanding at 31 December 2017:

Date of grant

Granted

Share price on
grant

Exercised

Forfeits

At 31 December
2017

Exercise
price

Exercise period

8 December 2014

11,000,000

1.875p

7 March 2016

15,000,000

0.55p

Total

26,000,000

11,000,000

2.5p

15,000,000

0.75p

26,000,000

9 December 2014 until
8 December 2024

8 March 2016 until 7
March 2021

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:

Options in issue 31 December 2017
Exercise price
Expected volatility
Contractual life
Risk free rate
Estimated fair value of each option

8 December 2014

7 March 2016

11,000,000
2.5p
127.56%
10 years
2%
1.79p

15,000,000
0.55p
127.56%
5 years
2%
0.45p

These options have incurred a charge of £nil (2016: £68,000) in the current year.

17. Material risks

The Company is subject to various risks relating to political, economic, legal, social, industry, business and
financial conditions. Risk assessment and evaluation is an essential part of the Company’s planning and an
important aspect of the Company’s internal control system. The Company’s approach to these risks is detailed
in the Strategic Report.

Requirement for further funds
In assessing the going concern, the Directors have reviewed cash flow forecasts for 12 months following the
date of these accounts. The cash flow forecasts assumed no further funding of PowerHouse Energy, Inc. and
Pyromex AG. The current cash reserves and funding plans forward are considered sufficient to enable the
Company to meet its liabilities as they fall due.

38 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

18. Directors’ remuneration and share interests

The Directors who held office at 31 December 2017 had the following interests, including any interests of a
connected person in the ordinary shares of the Company:

Number of ordinary
shares of 0.5p each

Percentage of
voting rights

Nigel Brent Fitzpatrick

103,459

<0.1

The remuneration of the Directors of the Company paid for the year or since date of appointment, if later, to
31 December 2017 is:

2017
£
Salary/Fee

2017
£
Pension

2017
£
Benefits

2017
£
Total

William Cameron Davies
Robert Keith Allaun
Nigel Brent Fitzpatrick
James John Pryn Greenstreet
David Ryan
Clive Carver

12,500
163,772
15,000
9,000
-
7,500

-
-
-
-
-
-

12,500
163,772
15,000
9,000
-
7,500

2016
£
Total

-
93,527
37,942
27,133
-
36,000

Share options held by the Directors are detailed in note 16.3. No options have been exercised during the year.
Total remuneration includes share based payments arising from the issue of options amounting to £nil (2016:
£68,000). There have been no awards of shares to Directors under long term incentive plans.

William Cameron Davies, Nigel Brent Fitzpatrick and James John Pryn Greenstreet have service contracts which
can be terminated by providing three months’ written notice. Robert Keith Allaun has a service contract which
can be terminated by providing six months’ written notice.

Robert Keith Allaun’s services amounting to £163,772 were provided via Critical Point Solutions Limited and
relate wholly to his services as a Director of the Company.

Nigel Brent Fitzpatrick’s services amounting to £15,000 were provided via Ocean Park Developments Limited
and relate wholly to his services as a Director of the Company.

David Ryan’s services were provided via Nayr Consultants Limited, an engineering consultancy. Details of
amounts paid are provided in Note 19. Related Parties. This does not include any amount for services as a
Director of the Company.

Clive Carver’s services amounting to £7,500 were provided via Elk Associates LLP and relate wholly to his
services as a Director of the Company.

19. Related parties

Hillgrove Investments Pty Limited is a related party by virtue of its shareholding in the Company. During the
year Hillgrove Investments Pty Limited loans decreased by a net £1,930,137 and £69,863 of loan interest was
settled by way of further loans. The balance outstanding at the year-end was £1,402,155 (2016: £3,332,292).

Waste2tricity Limited is a related party due to common directorships. During the year, Waste2tricity provided
business development services to the Company amounting to £230,000.

Nayr Consultants Limited, an engineering consultancy services company, wholly owned by David Ryan and his
associates, provided engineering services to the Company during the year amounting to £50,375.

39 | Page

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31
DECEMBER 2017

Transactions with other related parties were conducted on an arms’ length basis and totalled £nil (2016: £nil).

20. Segmental reporting

The Company comprises a single operating segment being a development Company operating solely within
the United Kingdom. As such the statement of comprehensive income and the statement of financial position
may be used as a report on the segment. No revenue is currently being generated as the equipment is
currently being developed and tested.

21. Post balance sheet events

On 1 February and 23 April 2018, the Company issued 215,686,275 and 64,744,645 ordinary shares of 0.5p
respectively at the agreed price of 0.5p in final settlement of the outstanding loan balance due to Hillgrove of
£1,402,155.

On 23 April 2018 the Company issued a further 115,255,355 ordinary shares of 0.5p at a price of 0.5p raising
gross proceeds of £576,277.

Additionally, in May 2018, the Company has issued a further 10,000,000 and 7,894,737 ordinary shares of
0.5p at a price of 0.5p and 0.76p respectively in settlement of services provided.

Since the year end, Mr Allaun and Mr Greenstreet acquired 2,000,000 and 1,000,000 ordinary shares of 0.5p
in the Company respectively from the market

On 6 March 2018, the Company granted share options to Directors under the Company’s Share Option
Schemes at an exercise price of 0.6p per share as follows:

Mr Robert Keith Allaun
Mr David Ryan
Mr William Cameron Davies
Mr Nigel Brent Fitzpatrick
Mr James John Pryn Greenstreet

30,000,000
21,000,000
15,000,000
12,000,000
12,000,000

22. Ultimate controlling party

There is no controlling party of the Company.

40 | Page