Half-yearly Report

30 September 2014 PowerHouse Energy Group plc ("PowerHouse", the "Group" or the "Company") Interim results for the six months ended 30 June 2014 PowerHouse Energy Group plc, (AIM: PHE) announces its unaudited results for thesix months ended 30 June 2014. Chairman's Statement The first six months of FY2014 have allowed us to engage in a number ofcommercial, technical and organizational advancements for the Company. In the six months ended 30 June 2014, the Group incurred an unaudited lossbefore and after taxation of $547,567 (2013: $403,707). The integration of the Pyromex companies, the purchase of which was completedin August 2013, into PowerHouse has continued in the period under review. Theteam we have created through the acquisition has achieved new technicalmilestones with the testing, thermal cycling and commissioning of our nominal 5tonne per day (tpd) unit in Schwartzenbach Switzerland. This facility hascontinued to generate significant commercial interest; the team has hostedseveral dozen interested parties in utilizing the technology for the creationof syngas and the conversion of that syngas into electricity. We havedemonstrated the Ultra High Temperature Gasification process of convertingmultiple waste streams into clean synthesis gas on multiple occasions. We have continued to operate "under the radar" as we have begun the front-endengineering and design of various feed systems to integrate with our reactorand identifying the ideal mechanisms for the conversion of our gas into bothelectricity and synthetic natural gas - through a catalytic process. Given thechallenges facing the Continental natural gas supplies and some of thegeopolitical problems we are beginning to see in eastern Europe, we realizethat the inexpensive conversion of our synthesis gas into artificial naturalgas (through a straight-forward Nickel catalyst conversion) - which can bedelivered directly to the main natural gas infrastructure in any country - inmany cases, may provide greater economic advantages for our customers than thesimple generation of electricity. The first six months of 2014 have allowed us to work more closely withpotential customers. During this process we have been broadening ourunderstanding of our customers' needs and the entire commercial ecosystem whichneeds be developed to deliver a successful outcome and expanding our networkfor the identification of mechanisms to finance the acquisition of our units.We continue to work with a Polish Group in the design and development of thecomplex hospital waste system it envisages in Warsaw but no firm order has beenmade yet. The Directors expect this system would begin with a nominal 5 tpdsystem and grow with the addition of a 25 tpd system as the customer acquiresadditional hazardous waste streams for its enterprise. To date we have beenadvised that it has identified four medical waste streams for processing aswell as another abundant stream of hazardous waste. Concurrent with our potential customer activities in Poland, we have beenengaged in active discussions with groups from the UK, Switzerland, Germany,Slovakia, Thailand, Singapore, Malaysia, Oman, Brazil and the United States. Additionally, the first six months of 2014 have allowed us to have our team inEiting Germany (Munich) begin to integrate the newly engineered heatingmechanism, feed system, gas handling system and electrical generation into theearly design documents for the re-commissioned 25 tpd system. Our SeniorProject Manager for the re- commissioning of the Eiting facility as acommercial enterprise is currently in Munich to begin the process of bringingthe system back on-line. By early 2015, the Directors anticipate having acommercially operational facility operating in Munich which is capable ofdemonstrating the economic viability of the technology. In talking to prospective customers from around the world, and those here inthe UK, it is clear that the Group's Ultra High Temperature Gasification systemis an ideal solution for enterprises, communities and local councils. With asmall physical foot-print, the fact that our system creates no smoke or ash,and the fact that we can create clean electricity - efficiently, economically,and in an environmentally sustainable manner, exactly where the energy isneeded - positions us well in the Waste-to-Energy space. The Directors believe that while there are over 130 companies that operate inthe Waste to Energy field, we believe that none possess the value propositionthat we bring to the table. Our team continues to expand our knowledge-base with enhancements to the systemon a regular basis. The Directors believe that the efficiency of our reactor,the ability to create a synthesis gas that is tuned to provide the idealconstituent make-up for either electrical generation or catalytic methanation,and the successful re-commissioning of our commercial facility in Munich willmove us forward as a competitive enterprise. During FY2014, we have continued to rely exclusively on the financial supportof Hillgrove Investments Pty Limited ("Hillgrove") and during the period theCompany was advanced a further £104,352 under the convertible loan facilitydated 19 June 2012 which allows Hillgrove, at its discretion, to further fundcompany operations as it has been doing to date. Furthermore, on 27 June 2014Hillgrove provided a Letter of Support to ensure that the Company's debts arepaid as and when they are due and within the normal course of business.Finally, on the 27 June 2014 Hillgrove extended the maturity date of theconvertible loan note from 8 October 2014 to 7 October 2015. At 30 June 2014,the amount owing to Hillgrove under the convertible loan note was $2,185,899million. The entire team and I will continue to make our best efforts to see thatShareholders' faith in the Company is rewarded. Keith AllaunChairman30 September 2014 For additional information please contact: PowerHouse Energy Group plcKeith Allaun - Executive ChairmanPhone: +44 (0)20 7079 4407Email: [email protected] Sanlam Securities UK Limited (Nomad and Joint Broker)David WorlidgePhone: +44 (0)20 7628 2200 Allenby Capital Limited (Joint Broker)Nick Harriss/Nick NaylorPhone:+44 (0) 20 3328 5656 Statement of Comprehensive Income (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 30 June 30 June 31 December Note 2014 2013 2013 US$ US$ US$ Revenue - - 3,330 Cost of sales - - (46,825) Gross Loss - - (43,495) Administrative expenses (437,587) (208,626) (614,132) Operating loss (437,587) (208,626) (657,627) Finance income - - 1 Finance costs (109,980) (195,081) (386,556) Loss before and after taxation (547,567) (403,707) (1,044,182) Foreign exchange arising on (99,539) 73,310 (160,183)consolidation Total comprehensive expense (647,106) (330,397) (1,204,365) Total comprehensive expenseattributable to: Owners of the Company (647,106) (330,397) (1,204,365) Non-controlling interests - - - Loss per share (US$) 3 (0.01) (0.01) less than(0.01) The notes numbered 1 to 6 are an integral part of the interim financial information. Statement of Changes in Equity Shares and Accumulated Other Total stock losses reserves US$ US$ US$ US$ Balance at 1 January 2013 80,162,619 (19,697,145) (62,767,508) (2,302,034)(audited) Total comprehensiveincome: * Loss after taxation - (403,707) - (403,707) * Foreign exchange - - 73,310 73,310 arising on consolidation Balance at 30 June 2013 80,162,619 ( 20,100,852) (62,694,198) (2,632,431)(unaudited) Transactions with equityparticipants: * Shares issued to 998,864 - - 998,864 settle liabilities * - Shares issued to 26,558 - - 26,558 settle liabilities * - Conversion of 18 - 310 328 warrants Total comprehensiveincome: * Loss after taxation - (800,658) - (800,658) * Foreign exchange - - (233,493) (233,493) arising on consolidation Balance at 31 December 81,188,059 (20,901,510) (62,927,381) (2,640,832)2013 (audited) Transactions with equityparticipants: * Shares issued to 311,642 - 668,772 980,414 settle liabilities * - Shares issued to 195,500 - 344,655 540,155 settle liabilities Total comprehensiveexpense: * Loss after taxation - (547,567) - (547,567) * Foreign exchange - - (99,539) (99,539) arising on consolidation Balance at 30 June 2014 81,695,201 (21,449,077) (62,013,493) (1,767,369)(unaudited) The notes numbered 1 to 6 are an integral part of the interim financial information. Statement of Financial Position (Unaudited) (Unaudited) (Audited) As at As at As at 30 June 30 June 31 December Note 2014 2013 2013 US$ US$ US$ ASSETS Non-current assets Intangible assets 2,086,154 2,087,081 Property, plant and equipment 664,675 486 665,160 Investment in associate - - - Total non-current assets 2,750,829 486 2,752,241 Current Assets Trade and other receivables 50,238 6,690 54,311 Cash and cash equivalents 55,573 31,867 69,617 Total current assets 105,811 38,557 123,928 Total assets 2,856,640 39,043 2,876,169 LIABILITIES Non-current liabilities Loans 4 - (549,463) - Total non-current liabilities - (549,463) - Current liabilities Loans 4 (2,185,899) (551,231) (2,542,038) Trade and other payables 5 (2,438,110) (1,570,780) (2,974,963) Total current liabilities (4,624,009) (2,122,011) (5,517,001) Total liabilities (4,624,009) (2,671,474) (5,517,001) Net liabilities (1,767,369) (2,632,431) (2,640,832) EQUITY Shares and stock 2 81,695,201 80,162,619 81,188,059 Other reserves (62,013,493) (62,694,198) (62,927,381) Accumulated losses (21,449,077) (20,100,852) (20,901,510) Total deficit (1,767,369) (2,632,431) (2,640,832) The notes numbered 1 to 6 are an integral part of the interim financialinformation. Statement of Cash Flows (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 31 Note 30 June 30 June December 2014 2013 2013 US$ US$ US$ Cash flows from operating activities Loss before taxation (547,567) (403,707) (1,204,365) Adjustments for: * Finance income - - (1) * Finance costs 109,980 195,081 386,556 * Depreciation and amortisation 1,412 448 322 * Foreign exchange revaluations (99,539) - (160,183) Changes in working capital: * (Increase) / Decrease in trade 4,073 (3,033) (50,251) and other receivables * Increase / (Decrease) in trade 619,113 15,044 1,371,489 and other payables * Taxation paid - - - Net cash used in operations 87,472 (196,197) 343,567 Cash flows from financing activities Share/stock issues (net of issue - - (756,919)costs) Finance income - - 1 Finance costs (109,980) (195,081) (386,556) Loans received 185,085 412,651 861,212 Net cash flows from financing 75,105 217,570 (282,262)activities Net increase in cash and cash equivalents 12,367 21,403 61,295 Cash and cash equivalents at 69,617 11,492 11,492beginning of period Foreign exchange on cash balances 1,677 (1,028) (3,170) Cash and cash equivalents at end of 55,573 31,867 69,617period The notes numbered 1 to 6 are an integral part of the interim financialinformation. Notes (forming part of the interim financial information) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealingwith items which are considered material in relation to the financialinformation. 1.1. Basis of preparation This interim consolidated financial information is for the six months ended 30June 2014 and has been prepared in accordance with International AccountingStandard 34 "Interim Financial Statements". The accounting policies applied areconsistent with International Financial Reporting Standards ("IFRS") adoptedfor use by the European Union. The accounting policies and methods ofcomputation used in the interim consolidated financial information areconsistent with those expected to be applied for the year ending 31 December2014. The financial information set out above does not constitute the Company'sstatutory accounts for the year ended 31 December 2013, but is derived fromthose accounts. Statutory accounts for 2013 have been delivered to theRegistrar of Companies. The auditors have reported on those accounts: theirreport was qualified and contained a disclaimer of opinion and containedstatements under section 498(2) or (3) of the Companies Act 2006. 1.2. Going concern The Directors have considered all available information about the future eventswhen considering going concern. The Directors have reviewed cash flowforecasts. The convertible loan obtained from Hillgrove Investments Pty Limited isconsidered sufficient to settle outstanding creditors, maintain the Group'soverhead and other planned events. In addition, the Company is in receipt of aletter of intention of financial support from Hillgrove Investments Pty Limitedto ensure the Company continues to meet its obligations as they fall due and toensure it operates as a going concern until at least 27 June 2015. Based onthis, the Directors continue to adopt the going concern basis of accounting forthe preparation of the annual financial statements. 1.3. Functional and presentational currency This interim financial information is presented in US dollars which is theGroup's functional currency. The principal rates used for translation are: 30 June 30 June 2014 2014 Closing Average British Pounds $1.7 $1.68 2. SHARE CAPITAL 1.0 p Ordinary 4.5 p 4.0 p shares Deferred Deferred shares shares Balance at 1 January 348,307,920 17,373,523 9,737,3532014 * Issue of shares for - - consideration * Issue of shares to 40,188,674 settle liabilities * Conversion of warrants Balance at 30 June 2014 388,496,594 17,373,523 9,737,353 The deferred shares have no voting rights and do not carry any entitlement toattend general meetings of the Company. They will carry only a right toparticipate in any return of capital once an amount of £100 has been paid inrespect of each ordinary share. The Company will be authorised at any time toaffect a transfer of the deferred shares without reference to the holdersthereof and for no consideration. 3. LOSS PER SHARE (Unaudited) (Unaudited) (Audited) As at As at As at 30 June 30 June 31 December 2014 2013 2013 Total comprehensive expense (US$) (403,707) (403,707) (1,204,365) Weighted average number of shares 286,534,426 286,534,426 285,425,948 Loss per share (US$) (0.01) (0.01) less than(0.01) 4. LOANS (Unaudited) (Unaudited) (Audited) As at As at As at 30 June 30 June 31 December Notes 2014 2013 2013 US$ US$ US$ Accrued dividends on preferred 4.1 - 33,000 -stock Citi bank business loan 4.2 - 26,913 - Aspermont loan 4.3 - 491,318 550,036 Hillgrove Investments Pty 4.4 2,185,899 549,463 1,992,002Limited Total loans 2,185,899 1,100,694 2,542,038 Classified as: * Current 2,185,899 551,231 2,542,038 * Non-current - 549,463 - The Aspermont loan consists of Aspermont Ltd, Dilato Holdings Pty Ltd and TeslaNominees Pty Ltd. These parties collectively provided a facility of $165,640 tothe Company repayable by 18 May 2012, which incurs interest at a default rateof 7 per cent per month. On 2 April 2014 the Company negotiated a settlement torepay the loan in full by way of issue and allotment for 11,500,000 1 penceshares in the Company. 4.1. Accrued dividends on preferred stock The accrued dividends were fully settled during the year to 31 December 2013. 4.2. Citi bank business loan The loan from Citi Bank was fully settled during the year to 31 December 2013. 4.3. Aspermont loan The Aspermont loans consist of Aspermont Ltd, Dilato Holdings Pty Ltd and TeslaNominees Pty Ltd. These parties collectively provided a facility of £100,000 tothe Group repayable by 18 May 2012, which incurs interest at a default rate of7 per cent per month. On 2 April 2014 the Company has negotiated for the loan to repaid in full byway of issue and allotment for 11,500,000 1 pence shares in the Company. 4.4. Hillgrove Loan Hillgrove Investments Pty Limited ("Hillgrove") has provided the PowerHouseEnergy Group plc with a convertible loan agreement amounting to $2,185,899 -which can be increased at Hillgrove's option. The loan is secured by adebenture over the assets of the company and carries interest of 15 per centper annum. Hillgrove have provided a letter of support indicating they are willing toincrease the loan amount pending any unforeseeable or material changes to theGroup's current circumstances until at least 27 June 2015. 5. Trade and other payables (Unaudited) (Unaudited) (Audited) As at As at As at 30 June 30 June 31 December 2014 2013 2013 US$ US$ US$ Trade creditors 1,913,640 240,369 1,445,921 Salary and wage - -accruals RenewMe 275,039 1,011,120 1,155,966 Customer deposits - 150,000 - Other accruals 249,431 169,291 373,076 Total trade and other 2,438,110 1,570,780 2,974,963payables Classified as: * Current 2,438,110 1,570,780 2,974,963 * Non-current - - - 5.1. RenewMe RenewMe Limited had been granted exclusive rights by Pyromex to use, own,assemble and install and operate Pyromex systems in territories also licensedto the Company's subsidiary PowerHouse Energy, Inc. The Company entered into asettlement agreement with RenewMe whereby the parties agreed to change therespective exclusive rights pertaining to the Pyromex technology. Under theoriginal settlement agreement Powerhouse Energy, Inc. had the obligation to payfive instalments of EUR 200,000 annually beginning 30 June 2011. The Companyguaranteed the obligations under the agreement of PowerHouse Energy, Inc. AsPowerHouse Energy, Inc is unable to meets its obligations, all remainingamounts (EUR 800,000) due under the original settlement agreement have beenrecognised as a liability. On 3 March 2014 the Company announced that a settlement had been reached withRenewme to release its claimed geographical licenses to use our technologyunder a disputed royalty agreement with Pyromex and other claims against theCompany in return for EUR 211,000 and the issue of 18,331,996 new Ordinary Sharesin the Company. While the equity portion of that settlement has been satisfied,the cash payment has not been settled and the agreement has not been completed.The Company is in active discussion with Renewme to finalize an agreement. 6. AVAILABILITY OF THE INTERIM RESULTS A copy of this announcement will be available at the Company's registeredoffice (16 Great Queen Street, London WC2B 5DG) and on its website -www.powerhouseenergy.net. A copy of the interim results will not be sent toshareholders.