NOTES TO THE ACCOUNTS  

For The Year Ended 31 December 2022

 

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 15 Victoria Mews, Mill Field Road, Cottingley Business Park, Bingley BD16 1PY. The principal activity of the Company is to continue the development of its technology and to support its customers in order to achieve its full commercial roll-out. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial information.

 

1.1.  Basis of preparation

This financial information is for the year ended 31 December 2022 and has been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board (IASB), as adopted for use in the United Kingdom (UK) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS (except as otherwise stated). These accounting policies and methods of computation are consistent with the prior year, unless otherwise stated.

 

The Company's only UK subsidiaries are non-trading and not material. There are also long-term restrictions on the operations of the Company's subsidiaries in the US and Switzerland. With these restrictions in place, the Company is also unable to exert control over the subsidiaries. As such the Company has claimed exemptions applicable to it under Companies Act section 405 (2) and 405 (3b) and IFRS 10 to not present any Consolidated financial statements for the year ended 31 December 2022. Investments in subsidiaries that are not consolidated are carried at cost less any provision for impairment.

 

The acquisition of Waste2Tricity Limited during 2020 was transacted by way of a share for share exchange and qualifies for merger relief, meaning that no share premium is recorded on the issue of the consideration shares. The excess of the fair value of consideration shares over their nominal value has been recorded in a merger relief reserve.

 

Associates are entities which the Company has significant influence but not control or joint control as defined under IAS 28. This is generally the case where the Company holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting.

 

Under the equity method of accounting, investments are initially recognised at cost and adjusted thereafter to recognise the Company's share of the post-acquisition profits or losses of the investee in the Income statement. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying value of the investment.

 

When the Company's share of losses in an equity-accounted investment exceeds or equals its interest in the equity, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Company and its associates and joint ventures are eliminated to the extent of the Company's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment in the asset transferred.

 

Accounting policies of the equity accounted investees are changed where necessary to ensure consistency with the policies adopted by the Company. The carrying value of equity accounted investments is tested for impairment in accordance with the policy described in Note 1.18 (ii).

 

As of 31^st December 2022 the Company has one associate, Engsolve Limited, the interest in which was acquired during  2021.

 

Other investments, which are not publicly traded, are initially measured at cost and subsequently measured at cost less accumulated losses.

 

1.2.  Judgements and estimates

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

 

Areas involving a higher degree of judgements or complexity, or areas where assumptions or estimates are significant to the financial statements such as the exercise to assess the fair value of goodwill, share based payments (share options and warrants) and going concern are disclosed within the relevant notes.

1.3.  Going concern

The financial statements have been prepared on a Going Concern basis. The Directors' views are based upon working capital projections which take into account the intended use of the funds in hand over the next 12 months.

 

At 31st December 2022 the company was still pursuing a business strategy of selling licences for use of its technology to Peel Group on a series of projects to be constructed on sites within Peel's ownership and Peel's control. In prior years, Goodwill had been calculated using a discounted cash flow calculation od licence fees arising from 10 prospective projects to be developed by Peel over a ten-year period. As at 31st December 2022, Peel had two projects under development - Protos in Cheshire and Rothsay Dock in Clydebank -  with others still in prospect, but it had become evident that due to availability of resources and limitations in the supply chain, no more than five projects would be constructed within a 10 year view. The Goodwill valuation is, therefore calculated on this basis, resulting in a reduction of Goodwill from 42.69m in 2021 to 2.3m at the end of this reporting period, and it is the view of the directors that this is a fair valuation at this time .

 

Towards the end of 2022, thinking on the licencing business strategy was changing and discussions were underway with Peel with view to the Company acquiring a 50% ownership of Protos Plastics to Hydrogen No1, the special purpose vehicle (SPV) set up by Peel to finance and develop the project at Protos. This change in business strategy is described in the Strategic Report section of this Annual Report and crystallised post-reporting period in May 2023, when the company acquired 100% of the SPV shareholding. It also entered into a 50/50 joint venture with Hydrogen Utopia International for a project to be developed at Longford, Republic of Ireland and is developing a further prospect for a wholly owned project in Ballymena, Northern Ireland.

 

In looking forward to determine the Going Concern status, the business planning of the Company post the current reporting period, is based on the following:

 

·      The acquisition of Engsolve Ltd (announced June 2023) giving the Company the ability to earn revenues from engineering services. Engsolve had an existing client base, a history of providing such services and was integrated into the Company Group with an existing bank balance.  This provides an immediate and ongoing revenue stream to the Company, extending its positive cash position;

·      The development of a series of capital projects addressing contamination, pollution and climate change mitigation and deploying where possible, but not exclusively, the Company's proprietary technology. These projects will be developed to a point where the construction and future operation of the project can be financed using combinations of equity and debt.

 

Adopting this approach:

 

·      The Company will have an ongoing revenue stream;

·      Investment in the development of the capital projects will be via shareholder loans to the SPV, repayable at financial close;

·      In the event development of the project does not look viable (for example, failing to obtain the necessary permissions), expenditure will be curtailed and a replacement project identified;

·      As the project approaches financial close and viability is established, equity partners will be sought to take shareholder equity in the SPV and the project financed by a mix of equity and debt to be determined or the Company's entire shareholding in the SPV sold.

 

The directors consider therefore that other than fixed costs, the cash spend looking forward can be managed. Within the 13-month cashflow projection (June 2023 - June 2024) £740k  is discretionary and can be adjusted or even stopped. Large capital expenditure can also be avoided until the Company is in a position make to such investments. The Cashflow also includes the net costs of acquisition of Engsolve of £107k and annual spend of £475k. It is anticipated that Engsolve revenues over the period will exceed these values.

 

A cash inflow of £1.2m is also anticipated following asset financing of the Feedstock Testing Unit and associated equipment to be installed in the Powerhouse Technology Centre at Bridgend later in 2023, offsetting this capital purchase. The Company has received two initial offers of asset finance for the New Test Unit. In the unlikely event the Company does not receive the asset finance it will need to reduce expenditure on capital projects, offset by income from Engsolve activities.

 

It is of note that the loan made to the Protos SPV of £2.16m was expended on engineering and project management, the value of which has been preserved in the SPV and now under control of the Company. This loan will be recovered along with the £1.18m Protos debt at financial close of the Protos project. In consequence, this balances of £3.34m is not included in the Going Concern evaluation, and in the directors' opinion does not materially impact their opinion regarding Going Concern. The loan and debtor will be provided for at the end of Dec 22 and will be fully impaired. Should the Protos project proceed the provision for the loan and debtor will be reversed and then fully recovered from the Protos SPV.

 

 

1.4.  Foreign currency translation

The financial information is presented in sterling which is the Company's functional currency.

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are revalued to the exchange rate at date of settlement or at reporting dates (as appropriate). Exchange gains and losses resulting from such revaluations are recognised in the Statement of Comprehensive Income.

 

Foreign exchange gains and losses are presented in the Statement of Comprehensive Income within administrative expenses.

 

1.5.  Revenue

(i)   Engineering services

The Company has provided engineering services for the application of its technology, the intellectual property which the Company owns. Revenue from providing services is recognised in the accounting period in which services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided to the extent to which the customer receives the benefits. This is determined based on the actual labour hours spent relative to the total expected labour hours.

 

Where contracts include multiple performance obligations as specified by the work scope, the transaction price will be allocated to each performance obligation based on estimated expected cost-plus margin.

 

Estimates of revenues, costs or extent of progress toward completion of services are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

 

In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Company exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

 

If a contract includes an hourly fee, revenue is recognised in the amount to which the Company has a right to invoice.

 

(ii)  Exclusivity fees

Where the Company grants a developer exclusive rights to utilise its technology in a particular territory for an exclusivity fee, the fee is recognised in the income statement over the agreed exclusivity period.

 

1.6.  Leases

For any new contracts entered into, the Company considers whether a contract is, or contains, a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration'. To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:

 

(i)   the contract contains an identified asset which is either explicitly defined in the contract or implicitly specified by being identified at the time the asset is made available to the Company;

 

(ii)  the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use, considering its rights within the defined scope of the contract;

 

(iii) the Company has the right to direct the use of the identified asset throughout the period of use.

 

Where the above evaluations are met, at lease commencement date, the Company recognizes a right of use asset and a lease liability on the balance sheet. The right of use asset is measured at cost, which is made up of the measurement of the initial lease liability, any direct initial costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date.

 

The Company depreciates right of use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right of use asset or the end of the lease term. The Company assesses the right of use asset for impairment when such indicators exist.

 

At the commencement date the Company measured the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company's incremental borrowing rate. For the assessment of the lease entered into in 2020 the Company applied a rate of 7.5%.

Subsequent to initial measurement the liability will be reduced for payments and increased for interest. It is remeasured to reflect any reassessment or modification or is there are any changes to the repayment schedule.

 

1.7.  Finance income and expenses

(i)   Income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit impaired. For credit impaired financial assets, the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).

 

(ii)  Expense

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

 

1.8.  Income tax expense

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

 

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

 

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

 

A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

 

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the temporary differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

 

1.9.  Property, plant and equipment

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

 

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

 

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

 

1.10.   Intangible assets

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment losses. Refer to note 1.18 for impairment testing procedures. Goodwill impairment losses are not reversible as explained in note 1.18 (iii).

 

Exclusivity rights acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair value and subsequently assessed for impairment loss.

 

Costs associated with patent applications are capitalised in the year of spend and amortised over their estimated useful lives of 20 years on a straight-line basis commencing from the date of patent application. Any cost associated with the upkeep of a patent is amortised over the remaining useful life of that patent.

 

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.

 

 

Research and 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.

 

1.11.   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.

 

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.   Contract costs

The Company recognises costs incurred in fulfilling contracts with customers that are directly associated with the contract as an asset if those costs are expected to be recoverable. Contract costs are amortised on a basis consistent with the transfer of goods and services to which the asset relates.

 

1.13.   Trade and other receivables

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

 

1.14.   Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits and are recognised and subsequently carried at fair value. For the purpose of presentation in the statement of cashflows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

 

1.15.   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.

 

1.16.   Financial assets and liabilities

i)    Financial assets

Loans receivable, where forward receivables comprise solely of payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method.

 

ii)   Financial liabilities

Loans payable 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.

 

1.17.   Adoption of new and revised standards

i)    New and amended standards adopted by the Company

New and amended standards for the current period and effective from 1 January 2022 have been applied by the Company, including:

 

Covid-19 Related Rent Concessions (Amendment to IFRS 16)

Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39 and IFRS 7)

Business Combinations (Amendments to IFRS 3

Onerous Contracts - cost of fulfilling a contract (Amendment to IAS 37)

Annual Improvement to IFRS Standards (Amends 4 IFRS standards)

Property Plant & Equipment - Proceeds before intended use Amendment to IAS 16

 

There are no transition adjustments relating to the adoption of these standards.

 

ii)   Standards issued but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been adopted early by the Company. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

1.18.   Impairment

(i)   Goodwill

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

 

(ii)  Other assets

At each balance sheet date, the carrying amounts of assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. A cash generating unit is the group of assets identified on acquisition that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of assets or cash generating units is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

 

(iii) 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.

 

1.19.   Share based payments

Share based payments are made to employees and third parties and all are equity settled.

 

(i) Third party provision of services

a)              Via issue of shares

Contractors receive remuneration in the form of share-based payments, whereby services are provided and settled by the issue of shares. The cost of equity settled transactions is determined at the fair value of the services provided, based upon invoiced amounts or formal agreements in place with suppliers.

 

b)      Via issues of share warrants

The Company also issues share warrants to third parties in relation to services provided by suppliers. The cost of equity settled transactions is determined at the fair value of the services provided, based upon invoiced amounts or formal agreements in place with suppliers. Where no fair value of services can be directly obtained, the fair value at the grant date is determined using the Black and Scholes valuation model. At each reporting date the Company revises its estimates of the number of options that are likely to be exercised with any adjustment recognised in the income statement.

 

(ii) Directors and employees

c)       Via issues of share options

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

 

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

 

1.20.   Employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are included within creditors in the balance sheet.

 

For defined contribution pension plans, the company pays contributions to publicly or private administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

 

The Company does not contribute to any defined benefit pension plans.

 

1.21.   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.

 

The Company considers it has one business segment, being a UK based development company intending to license its technology to projects in the UK and internationally.

 

2.      Revenue

			2022 £	2021 £
Engineering and related services			341,293	628,859
Exclusivity fees			38,984	71,829
Other			-	747
			380,277	701,435

 

During the year, the Company billed for engineering work carried out on projects. All revenue generated has arisen in the UK.

 

3.      Employee costs

			2022 £	2021 £
Directors' fees			581,072	274,575
Wages and salaries			174,769	178,710
Social security costs			75,609	48,835
Pensions			16,817	3,960
			848,267	506,080

 

Highest Paid Director - refer to note 27

 

The number of average monthly employees (including Directors) are as follows:

			2022	2021
Management			6	7
Operations			3	3
Total			9	10

The total number of employees as at 31 December 2022 (including Directors) was 4 (2021: 9) comprising 3 in management and 1 in operations (2020: 5 in management, 4 in operations). All Directors are classed as management.

 

4.      Administrative expenses

 

Included in administrative expenses are:				2022 £			2021 £
Research and development costs				431,185			585,195
Amortisation				10,263			5,049
Depreciation				5,397			4,199
Depreciation - right of use asset				22,573			24,625
Share based payments				(18,629)			34,829
Foreign exchange (gains)/losses				162			(429)
Auditor's remuneration for audit services:
Fees payable to the Company's auditor for the audit of the Company's annual financial statements					31,000	25,000
Fees payable to the Company's auditor and their associates for other services:					1,500	1,000
Non-audit fees paid to auditors
R & D Taxation advisory and compliance services					12,000	10,000

 

5.      Share of associate

			2022 £	2020 £
Share of profits			60,326	50,062
			60,326	50,062

 

The Company acquired a 48.39% stake in Engsolve on 12 August 2021 as explained in note 13. The above result represents the Company's share of the associate's profits arising since acquisition. The Company's share of the associate's tax is included in the tax charge (see note 9).

 

 

6.      Goodwill & Exclusivity impairment

			2022 £	2021 £
Goodwill Impairment			40,660,000	-
Exclusivity impairment			500,000	-
			41,160,000	-

 

In 2020, Goodwill of £57,152,699 was recognised on the acquisition and hive up of Waste2tricity Limited. An independent fair value assessment is commissioned by the Directors on the carrying value at each balance sheet date as explained in note 11. Impairments are made based upon the results of those assessments plus input from the Board. Refer to CEO Report

 

 

7.     Loan & Revenue impairment

			2022 £	2021 £
Loan Impairment			2,159,274
Revenue impairment			986,392	-
			3,145,666	-

 

Further description on the impairment of the Loan impairment ("loan debtor") and Revenue impairment ("trade debtor") is disclosed in Note 14.

 

 

In 2020, Exclusivity of £500,000 was recognised on the acquisition and hive up of Waste2tricity Limited. An independent fair value assessment is commissioned by the Directors on the carrying value at each balance sheet date as explained in note 11. Impairments are made based upon the results of those assessments.

 

8.      Net finance income/(cost)

		2022 £	2021 £
Loan interest receivable		66,388	15,286
Other interest receivable		251	47
Bank and other interest payable		(1,191)	(4,346)
		65,448	(10,987)

 

9.      Income tax and deferred tax

As the Company incurred a loss, no current tax is payable (2021: £nil). In addition, as there is no certainty about future profits from which accumulated tax losses could be utilised, accordingly no deferred tax asset has been recognised. The Company submitted a claim for research and development tax credits during the year amounting to £166,318 (2021: £135,657) which has been recognised in the accounts. Accumulated tax losses amount to an estimated £22.0 million (2021: £17.0 million) and reflect tax losses submitted in tax returns and arising during the period less any relief taken for research and development credits. The tax credit rate is lower (2021: lower) than the standard rate of tax. Differences are explained below.

 

Current tax	2022 £	2021 £
Loss before taxation	46,353,704	1,996,641
Tax credit at standard UK corporation tax rate of 19% (2019: 19%)	8,807,204	379,362
Effects of:
Goodwill impairment not deductible for tax purposes	(7,820,400)	-
Expenses not deductible for tax purposes	2,429	(9,837)
Allowable deduction on exercise of share options	-	445,750
Research and development tax credits claimed	166,318	135,657
Deferred tax asset not recognised	(1,000,526)	(824,787)
Income tax credit	155,025	126,145

 

10.    Loss per share

	2022	2021
Total comprehensive loss (£)	(46,198,679)	(1,870,496)
Weighted average number of shares	3,957,414,135	3,918,497
Loss per share in pence	(1.17)	(0.05)
Diluted loss per share in pence	(1.17)	(0.05)

 

For the year ended 31 December 2022, 3,581,355 of the options in issue and 381,100,979 of the warrants in issue were excluded from the diluted loss per share calculation due to being anti-dilutive.

 

For the year ended 31 December 2021, 1,062,692 of the options in issue and 9,090,910 of the warrants in issue were excluded from the diluted loss per share calculation due to being anti-dilutive.

 

There have been no shares issued in the financial year or since the year end.

 

11.    Intangible fixed assets

	Goodwill	Exclusivity rights	Patent costs	Total
	£	£	£	£
Cost
At 1 January 2021	57,152,699	500,000	61,752	57,714,451
Additions - hive up of W2T	-	-	-	-
Additions	-	-	39,965	39,965
At 31 December 2021	57,152,699	500,000	101,717	57,754,416
Accumulated amortisation & impairment
At 1 January 2021	14,192,699	-	2,170	14,194,869
Amortisation charge for the year	-	-	5,049	5,049
At 31 December 2021	14,192,699	-	7,219	14,199,918
Carrying amount
At 31 December 2021	42,960,000	500,000	94,498	43,554,498
Cost
At 1 January 2022	57,152,699	500,000	101,717	57,754,416
Additions	-	-	117,838	117,838
At 31 December 2022	57,152,699	500,000	219,555	57,872,254
Accumulated amortisation & impairment
At 1 January 2022	14,192,699	-	7,219	14,199,918
Amortisation charge for the year Impairment charge for the year	40,660,000	- 500,000	10,263 -	10,263 41,160,000
At 31 December 2022	54,852,699	500,000	17,482	55,370,181
Carrying amount
At 31 December 2022	2,300,000	-	202,073	2,502,073

 

 

Goodwill acquired in 2020 arose on the acquisition and hive up of Waste2Tricity Limited. It was considered attributable to the Company's DMG™ technology, which is intended to be licensed on a project-by-project basis to generate income to the Company over the lifetime of each project.

 

The recoverable amount of goodwill at the balance sheet date was assessed as a directors' valuation (2021: via independent third-party valuation). The directors (2021: Valuer) assessed impairment of £40.66m to goodwill (2021: the valuer assessed goodwill above its carrying value resulting in no impairment). The directors (2021: valuer) took note of the ICAEW Corporate Finance Faculty Best Practice Guideline April 2008 and applied a discounted cashflow approach, supported by the International Private Equity and Venture Capital Guidelines of December 2018.

 

The key assumptions made by the directors (2021: valuer) were:

 

the expected roll out of the technology over 5 years following the delivery of the Protos project (2021: roll out over 5 years based on probability adjusted scenarios);

 

that the roll out will not be significantly impacted by competing technologies (2021: same assumption);

 

that the Company and roll out developer construct 5 projects (2021: have the capability to scale up where necessary to deliver the assumed roll out pipeline);

 

the expected operating life of projects from which the Company will earn licence revenues (2021: same assumption);

 

the expected licence fees arising per project based upon agreements with Peel NRE (2021: same assumption);

 

the expected cost of services to support annual licence fee income estimated by the Company based upon current draft project agreements (2021: same assumption);

 

applying a discount rate to cashflow of 35% (2021: 10%) assessed by review of market survey reports of discount rates for projects within similar and competing sectors which was considered to provide a reasonable estimate of a weighted average cost of capital for a company benefiting from the assumed roll out.

 

Changes to the above assumptions would impact the valuation assessment.

 

The Directors believe that key sensitivities in the valuation are as follows:

 

(i)       In 2022, the directors have assumed a fixed number of 5 projects and 6 systems to be rolled out. Sensitivity workings with the roll out of 3 projects and 3 systems would decrease the valuation by c£0.8m to £1.5m.  (2021: the valuer assumed a probability adjusted roll out scenario). The valuer attributed probabilities to different roll out scenarios based upon a review of information provided by the Company and Peel NRE. This takes account of expected timelines and the average number of systems expected to be deployed at each site. The rollout assumptions made by the valuer averages out at 17.85 systems. Based upon the valuer's assumptions, an incremental system would increase or decrease the valuation by c £2.3m).

 

(ii)      The discount rate applied to the cashflows. Sensitivity workings with a discount rate 5% higher at 40% would decrease the valuation by c£0.5m to £1.8m. (2021: an increase in the discount rate of 1% to 11% would impact the Valuer's valuation assessment by £4.4m).

 

(iii)     Inflation - an increase in the inflation assumption above that assumed in the directors (2021: valuer's) model would result in adjustment to the licence fees and result in an increase the director's (2021: valuer's) valuation.

 

The Directors have not accounted for the possibility of any onerous obligations arising within the service contracts from which licence fees will be earnt as there is no reason to expect that these will arise at this stage in the business life cycle.

 

Exclusivity rights arose on the acquisition and hive up of Waste2Tricity Limited. They are subject to an Option Agreement between the Company and Peel NRE. The directors have provided for a full impairment of £500,000 for exclusivity rights (2021: no impairment is considered to have arisen).

 

As explained in note 28, the Company acquired the full ownership of Protos Plastics to Hydrogen No. 1 Ltd (also known as "Protos SPV") from Peel NRE Ltd for a nominal payment of £1 on 28  April 2023. During the year to 31 December 2022, the company had been in discussions with Peel NRE to enter into a 50/50 Joint Venture arrangement with Peel NRE. However, this did not materialise and Peel NRE continued to own 100% of Protos SPV until the Company finally purchased 100% of the share capital of Protos SPV on 28 April 2023. The purchase agreement by the Company secures full control of Protos SPV with an option to lease on the site at Protos Chester, CH2 4RB. This post balance sheet event, is a material change in business approach for the Company, allowing the Company to take full responsibility for funding, construction and operation of a waste to energy site utilising the DMG™ technology. The directors have opted not to pursue a licencing business model that was previously part of the reason for the hive up of Waste2Tricity Limited into the Company in 2020. This has therefore resulted in a non-adjusting post balance sheet event under IAS 28.

 

Refer to the CEO section of the Annual Report  

 

 

 

12.    Tangible fixed assets

	Right of use asset Land and buildings		Property, plant and equipment		Fixtures and fittings		Total
	£		£		£		£
Cost
At 1 January 2021	49,250		12,720		-		61,970
Additions	-		7,693		1,203		8,896
At 31 December 2021	49,250		20,413		1,203		70,866
Accumulated depreciation
At 1 January 2021	2,052		6,898		-		8,950
Charge for the year	24,625		3,807		392		28,824
At 31 December 2021	26,677		10,705		392		37,774
Carrying amount
At 31 December 2021	22,573		9,708		811		33,092
Cost
At 1 January 2022	49,250		20,413		1,203		70,866
Additions	-		-		673		673
At 31 December 2022	49,250		20,413		1,876		71,539
Accumulated depreciation
At 1 January 2022	26,677		10,705		392		37,774
Charge for the year	22,573		4,865		532		27,970
At 31 December 2022	49,250		15,570		924		65,744
Carrying amount
At 31 December 2022	-		4,843		952		5,795

13.    Investments

	2022 £	2022 £	2022 £	2021 £	2021 £	2021 £
	Subsidiaries	Associates	Other	Subsidiaries	Associates	Other
Cost or carrying value at 1 January	48,947,155	140,540	-	48,947,156	49	-
Additions	-	-	-	-	99,990	-
Goodwill recognised	-	-	-	-	-	-
Dividends	-	(1,935)	-	-	-	-
Share of associate's net result	-	49,033	-	-	40,550	-
Transfers	-	-	-	-	(49)	49
Disposals	-	-	-	(1)	-	-
Cost or carrying value 31 December	48,947,155	187,638	-	48,947,155	140,540	49
Provision at 1 January	(48,947,154)	-	-	(48,947,154)	-	-
Additions	-	-	-	-	-	(49)
Disposals	-	-	-	-	-	-
Accumulated impairment	(48,947,154)	-		(48,947,154)	-	(49)
Carrying value	1	187,638	-	1	140,540	-

 

(i)   Subsidiaries

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.

 

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 15 Victoria Mews, Mill Field Road, Cottingley Business Park, Bingley BD16 1PY.

 

Waste2Tricity Limited, which was acquired in 2020, was incorporated in the UK and on 1 January 2021 the Company owned 100 per cent of its common stock and voting rights. It was dissolved on 1 June 2021.

 

(ii)  Acquisition of interest in Engsolve Limited

On 12 August 2021, the Company acquired 48.39% of the share capital of Engsolve Limited for cash consideration of £99,990. Engsolve Limited is incorporated and operates in the UK. Summary financial information of Engsolve Limited at acquisition and balance sheet dates is provided below:

 

		31 Dec 2022 £		31 Dec 2021 £
Summarised balance sheet
Fixed assets		6,221		7,848
Cash and cash equivalents		400,073		317,423
Other current assets		86,632		99,845
Current liabilities		(109,457)		(138,981)
Net assets		383,469		286,135
Company share		48.39%		48.39%
Share of net assets		185,550		138,452

 

Summarised Income statement - post acquisition
Revenue		976,182		402,122
Profit from continuing operations		101,334		83,804
Profit from discontinued operations		-		-
Other comprehensive income		-		-
Total comprehensive income		101,334		83,804
Company Share of pre-tax profit		60,326		50,062
Company share of tax		(11,293)		(9,512)
Dividends received		1,935		£nil

The Company incurred advisory costs associated with the acquisition which were expensed in 2021.

 

(iii) Other investments

During 2021, the Company's investment in Waste2Tricity International (Thailand) Limited was transferred into a new Thailand based entity, Altec Energy Limited ("Altec"). The Company has not taken part in fund raises investment made by Altec subsequent to its formation. In the previous year's accounts the interest was identified as being reduced to 33.8% as at 31 December 2021 and to 30.4% since December 2021. We have been recently informed that the audit of Altec accounts picked up an error in these calculations. The share holding was in fact 33.5% as at December 2021 and 30.1% since December 2021 (a 0.3% error in the calculation). PHE Due to the passive nature of the Company's involvement, the interest is held in other investments.

 

14.    Loans receivable

		2022 £	2021 £
Loans advanced		2,077,600	1,150,000
Accrued interest		81,674	15,286
Loan provision		(2,159,274)	-
		-	1,165,286

 

On 12 May 2021, the Company agreed to provide a loan facility for up to £3.8m to Protos Plastics to Hydrogen No 1 Limited, the Peel NRE special purpose vehicle and owner of the development of the Protos plant. The loan was to provide support to the plant construction and to secure long lead time items and project design services. The loan facility was made available for an initial 6-month period, accruing interest daily at the Bank of England base rate plus 2%. The availability period for the facility was subsequently extended until 28 April 2023 at which point Powerhouse Energy Group Plc acquired 100% of the share capital of Protos Plastics to Hydrogen No1 Limited for £1. From October 2022 to the year end, the directors were seeking a 50/50 JV with Peel NRE and there had been other indicators of a change in the risk profile. The directors in note 11 have assumed a discount rate of 35% for the project with Peel NRE, due to the change in the risk profile. Accordingly, the Directors have impaired the loan in full.  The Directors have also applied the same approach to the trade debtor balance of £986,392 which existed between Powerhouse Energy Group Plc and Protos Plastics to Hydrogen No 1 Limited and have subsequently impaired the trade debtor balance also to £Nil value at the year end.

 

 

15.    Trade and other receivables

			2022 £	2021 £
Trade receivables			-	447,967
Other receivables			342,021	177,513
Prepayments and accrued income			61,226	338,168
			403,247	963,648

 

16.    Corporation tax

			2022 £	2021 £
Corporation tax recoverable			166,318	155,227
			166,318	155,227

 

17.    Cash and cash equivalents

			2022 £	2021 £
Cash balances			5,882,897	9,637,460
			5,882,897	9,637,460

 

18.    Trade and other payables: amounts falling due within one year

			2022 £	2021 £
Trade payables			116,560	144,105
Lease liability			0	23,455
Other creditors and accruals			148,563	238,955
Other taxes			10,677	156,642
Pensions payable			3,506	624
			279,306	563,781

 

19.    Financial assets and financial liabilities

 

Financial assets			2022 £	2021 £
Financial assets at amortised cost:
- Trade receivables			-	447,967
- Other financial assets at amortised cost			-	1,165,286
- Cash and cash equivalents			5,882,897	9,637,460
			5,882,897	11,250,713

 

 

Financial liabilities			2022 £	2021 £
Liabilities at amortised cost
- Trade payables			116,560	144,105
- Other creditors			148,563	238,955
- Taxes - VAT & payroll			10,677	156,642
- Pensions payable			3,506	624
- Lease liabilities			0	23,455
			279,306	563,781

 

 

20.    Leases

The Company has leased offices at the location of its research facility for a duration less than one year. The lease is reflected in the accounts as an expense on the income statement.

 

20.1 Amounts recognised in the balance sheet

 

Right of use assets relate to leased properties that do not meet the definition of investment property and are presented within tangible fixed assets per Note 11.

			2022 £	2021 £
Right of use assets
Balance at 1 January			22,573	47,198
Additions to right of use assets			-	-
Depreciation charge for the year			(22,573)	(24,625)
Balance at 31 December			-	22,573

 

Future minimum rentals payable are as follows:			2022 £	2021 £
Amounts payable:
Within one year			-	24,310
Later than one year and not later than five years			-	-
Total gross payments			-	24,310
Impact of finance expenses			-	(855)
Carrying value of liability			-	23,455

20.2 Amounts recognised in income statement

			2022 £	2021 £
Depreciation charge			22,573	24,625
Interest on lease liabilities			855	2,638
Expenses relating to short term leases			120	-
			23,548	27,263

20.3 Amounts recognised in statement of cashflows

			2022 £	2021 £
Interest on lease liabilities			855	2,638
Repayment of lease principal			23,455	23,882
Total cash outflow for leases			24,310	26,520

 

21.    Share capital

 

(i) Number of shares

		0.5 p Ordinary shares	0.5 p Deferred shares	4.5 p Deferred shares		4.0 p Deferred shares
Shares at 1 January 2021		3,715,100,693	388,496,747	17,373,523		9,737,353
Issue of shares		242,313,442	-	-		-
Shares at 31 December 2021		3,957,414,135	388,496,747	17,373,523		9,737,353
Issue of shares		-	-		-	-
Shares at 31 December 2022		3,957,414,135	388,496,747		17,373,523	9,737,353

 

 

 

(ii) Value in £

		0.5 p Ordinary shares	0.5 p Deferred shares	4.5 p Deferred shares	4.0 p Deferred shares	Share Capital
		£	£	£	£	£
At 1 January 2021		18,575,503	1,942,483	781,808	389,494	21,689,288
Issue of shares		1,211,568	-	-	-	1,211,568
At 31 December 2021		19,787,071	1,942,483	781,808	389,494	22,900,856
Issue of shares		-	-	-	-	-
At 31 December 2022		19,787,071	1,942,483	781,808	389,494	22,900,856

 

 

All ordinary shares of the Company rank pari-passu in all respects.

 

The deferred shares do not carry any voting rights or any entitlement to attend general meetings of the Company. They carry only a right to participate in any return of capital once an amount of £100 has been paid in respect of each ordinary share.

 

On 21 January 2021, the Company issued 181,818,182 ordinary shares of 0.5p each ("Ordinary shares") in the Company at a price of 5.5p each amounting to £10,000,000 before issue costs. The Company also granted 9,090,910 warrants to subscribe for Ordinary Shares at the issue price of 5.5p to its broker.

 

On 26 January 2021, the Company issued 4,895,260 ordinary shares of 0.5p each in the Company further to the exercise of warrants for proceeds amounting to £122,382.

 

On 9 February 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £36,000.

 

On 24 February 2021, the Company issued 1,600,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £12,000.

 

On 4 March 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £45,000.

 

On 17 March 2021, the Company issued 500,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £3,000.

 

On 19 April 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £36,000.

 

On 22 July 2021, the Company issued 8,000,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £48,000.

 

On 19 August 2021, the Company issued 13,500,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £81,000.

 

On 7 October 2021, the Company issued 7,000,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £42,000.

 

On 9 December 2021, the Company issued 7,000,000 ordinary shares of 0.5p each in the Company further to the exercise of options for proceeds amounting to £42,000.

 

22.    Other reserves

	Merger relief reserve £	Share premium account £
As at 1 January 2021	36,117,711	52,592,934
Issue of shares	-	9,519,495
Share issue costs	-	(822,719)
Reserve transfer - goodwill impairment	-	-
At 31 December 2021	36,117,711	61,291,710
Issue of shares	-	-
Share issue costs	-	-
Reserve transfer - goodwill impairment	(36,117,711)	-
At 31 December 2022	-	61,291,710

 

23.    Accumulated deficit

	2022 £	2021 £
As at 1 January	(65,224,306)	(63,544,097)
Loss for the year	(46,198,679)	(1,870,496)
Share based payments	(18,629)	190,287
Reserve transfer - goodwill impairment	36,117,711	-
At 31 December	(75,323,903)	(65,224,306)

 

24.    Share based payments

The expense recognized for share-based payments during the year is shown in the following table:

 

	2022 £	2021 £
Share based payment charge recognised in Income Statement
Expense arising from equity-settled share-based payment transactions:
- Share options for Directors and employees	-	34,829
- Shares issued for third party services	-	-
Total share-based payment charge in Income Statement	-	34,829
Share based payment charge recognised in Share Premium Account
Warrants for third party services	-	419,138
Total share-based payment charge in Share Premium Account	-	419,138
Total share-based payment charges recognised	-	453,967
Other share-based payment movement
Exercise of share options by Directors and employees	-	(186,982)
Exercise of warrants for third party services	-	(76,698)
Shares option lapsed in Jan 22	(18,629)	-
Total share-based payment	(18,629)	(190,287)

 

There were no liabilities recognised in relation to share based payment transactions.

 

25.1 Share options for Directors and employees

 

The Company has put in place various options schemes for Directors and employees as follows:

 

On 8 December 2014, the Company granted 11,000,000 options over ordinary shares to the Board. The options may be exercised between the grant date and the tenth anniversary of the grant date and will lapse if not exercised during that period.

 

On 7 March 2016, the Company granted 15,000,000 options over ordinary shares to the Board. The options may be exercised between the grant date and the fifth anniversary of the grant date and will lapse if not exercised during that period.

 

On 6 March 2018, the Company granted 32,100,000 options over ordinary shares to employees, including a Board member, under the Powerhouse Energy Group PLC 2018 EMI Option Scheme. The options vest to the employees over a period of 24 months and are exercisable between the relevant vesting dates and the tenth anniversary of the grant date and will lapse if not exercised during that period. These options had all been exercised or forfeited by 31 December 2019.

 

On 6 March 2018, the Company granted 60,000,000 options over ordinary shares to Board members under the Powerhouse Energy Group PLC 2018 non-employee Share Option Plan. The options vest to the Board members over a period of 24 months and are exercisable between the relevant vesting dates and the tenth anniversary of the grant date and will lapse if not exercised during that period.

 

On 23 April 2021, the Company granted 1,773,239 share options in ordinary shares of 0.5p each in the Company to two Directors of the Company in lieu of part or all of their fees to which they are entitled. The options have an exercise price of 6.3p each and lapse 3 years from the date of grant.

 

The movement of share options in the year are as follows:

 

	2022	2022	2021	2021
	Number	WAEP (pence)	Number	WAEP (pence)
Outstanding at 1 January	16,062,692	1.33	75,000,000	0.77
Granted during the year	-	-	1,773,239	6.3
Forfeited during the year	(481,337)	6.3	(5,100,547)	2.55
Exercised during the year	-	-	(55,600,000)	0.62
Outstanding at 31 December	15,581,355	1.13	16,062,692	1.33
Exercisable at 31 December	15,581,355	1.13	16,062,692	1.33

 

The weighted average remaining contractual life for the share options outstanding as at 31 December 2022 was 4.4 years (2021: 5.3 years)

 

No share options were granted during the year (2021: 1,773,239).

 

The range of exercise prices for options outstanding at the year-end was 0.6p to 6.3p (2021: 0.6p to 6.3p).

 

 

The number of options outstanding at 31 December 2022 and the movements in the year are as follows:

 

 

Date of grant	Granted	Share price on grant	Exercised	Forfeited	At 31 Dec 2022	Exercise price	Exercise period
8 Dec 2014	6,000,000	1.875p	-	(3,000,000)	3,000,000	2.5p	9 Dec 2014 until 8 Dec 2024
7 Mar 2016	9,000,000	0.55p	(7,600,000)	(1,400,000)	-	0.75p	8 Mar 2016 until 7 Mar 2021
6 Mar 2018	60,000,000	0.57p	(48,000,000)	-	12,000,000	0.6p	7 Mar 2018 until 8 Dec 24*
22 Apr 2021	1,773,239	5.58p	-	(1,191,884)	581,355	6.3p	23 Apr 2021 until 22 Apr 2024
Total	76,773,729	(55,600,00)	(5,591,884)		15,581,355

 

 

\* The expiry date of the option granted on 6 March 2018 was adjusted by the board due to a director leaving the Company in June 2022. The expiry date was adjusted from 6 Mar 2028 to the 8 Dec 2024. Refer to note 27 in the financial statements.

 

The estimated fair value of the options issued was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

 

	8 December 2014	6 March 2018	22 April 2021
Options in issue 31 December 2022	3,000,000	12,000,000	581,355
Exercise price	2.5p	0.6p	6.3p
Expected volatility	127.56%	70.00%**	214.8%**
Contractual life	10 years	10 years	3 years
Risk free rate	2%	1.49%	0.15%
Estimated fair value of each option	1.79p	0.32p*	3.87p*

 

* the calculation applies a 25% discount for small companies

** expected volatility based on historic volatility at the point of grant.

 

25.2 Warrants for third party services

The Company has issued warrants in respect of services provided by consultants as part of their service arrangements. It has also issued warrants to participating shareholders in respect of certain fund raises. No share-based payment charge is recognised for warrants issued to participating shareholders as they are outside of the scope of IFRS 2.

 

Details of warrants which have been issued during the year are as follows:

 

On 15 September 2020, the Company granted 5,395,260 warrants to the Company's broker as part of its service arrangement in relation to the fund raise arising on that date. The options may be exercised between the grant date and the third anniversary of the grant date and will lapse of not exercised during that period. At the date of grant the share price was 3.3p and the warrants have an exercise price of 2.5p per share.

 

On 21 January 2021, the Company granted 9,090,910 warrants to the Company's broker as part of its service arrangement in relation to the fund raise arising on that date. The options may be exercised between the grant date and the third anniversary of the grant date and will lapse of not exercised during that period. At the date of grant the share price was 8.6p and the warrants have an exercise price of 5.5p per share.

 

Warrants in respect of services provided:

 

 

The movement of warrants issued for share-based payments in the year are as follows:

 

	2022	2022	2021	2021
	Number	WAEP (pence)	Number	WAEP (pence)
Outstanding at 1 January	9,590,910	5.3	5,395,260	2.5
Granted during the year	-	-	9,090,910	5.5
Forfeited during the year	-	-	-	-
Exercised during the year	-	-	(4,895,260)	2.5
Outstanding at 31 December	9,590,910	5.3	9,590,910	5.3
Exercisable at 31 December	9,590,910	5.3	9,590,910	5.3

 

The weighted average remaining contractual life for the share warrants outstanding as at 31 December 2022 was 1.0 years (2021: 2.1 years)

 

The range of exercise prices for warrants outstanding at the year-end was 2.5p to 5.5p (2021: 2.5p to 5.5p).

 

The number of warrants, which have been included for share-based payment purposes, outstanding at 31 December 2022 and the movements in the year are as follows:

 

Date of grant	Granted	Share price on grant	Exercised	Forfeited	At 31 Dec 2022	Exercise Price	Exercise period
15 Sep 2020	5,395,260	3.3p	-	-	500,000	2.5p	16 Sep 2020 until 15 Sep 2023
21 Jan 2021	9,090,910	8.6p	-	-	9,090,910	5.5p	22 Jan 2021 until 21 Jan 2024
Total	14,486,170		-	-	9,590,910

 

The Company is required to assess the fair value of instruments issued in respect of services received, with such value charged to the Income Statement. The estimated fair value of the warrants issued during the year was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

 

Warrants issued for services	15 Sep 2020	21 Jan 2021
In issue 31 December 2022	500,000	9,090,910
Exercise price	2.5p	5.5p
Expected volatility*	92.10%	161.6%
Contractual life	3 years	3 years
Risk free rate	0.07%	(0.07%)
Estimated fair value of each option	1.57p	4.6p

 

* expected volatility based on historic volatility at the point of grant.

 

Warrants issued to participating shareholders

 

Warrants issued to participating shareholders are outside the scope of IFRS 2 and no share-based payment charges have been recognised on them. On initial recognition the warrants' cost was deducted from equity as it represents the cost of shares issued to investors. As the agreements had a fixed-for-fixed requirement, they are also recognised as equity at the same time. As such, there is £nil net impact on equity and has not been included in the statement of changes in equity.

 

The number of warrants issued to participating shareholders, which have not been included for share-based payment purposes, outstanding at 31 December 2022 and the movements in the year are as follows:

 

Date of grant	Granted	Share price on grant	Exercised	Forfeited	At 31 Dec 2022	Exercise price	Exercise period
15 Sep 2020	371,510,069	3.3p	-	-	371,510,069	2.75p	16 Sep 2020 until 15 Sep 2022
Total	371,510,069		-	-	371,510,069

 

 

The estimated fair value of the warrants issued was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

 

 

Warrants issued to participating shareholders	15 Sep 2020
In issue 31 December 2022	371,510,069
Exercise price	2.75p
Expected volatility*	106.20%
Contractual life	2 years
Risk free rate	0.04%
Estimated fair value of each option	1.46p

 

* expected volatility based on historic volatility at the point of grant.

 

All warrants

 

The number of all warrants outstanding at 31 December 2022 and the movements in the year are as follows:

 

Date of grant	Granted	Share price on grant	As at 1 Jan 2022	Exercised	Forfeited	At 31 Dec 2021	Exercise price	Exercise period
15 Sep 2020	5,395,260	3.3p	500,000	-	-	500,000	2.5p	16 Sep 2020 until 15 Sep 2023
15 Sep 2020	371,510,069*	3.3p	371,510,06	-	-	371,510,069	2.75p	16 Sep 2020 until29 Apr 2023
21 Jan 2021	9,090,910	8.6p	9,090,910	-	-	9,090,910	5.5p	22 Jan 2021 until 21 Jan 2024
Total	385,996,239		381,100,979	-	-	381,100,979

 

*Please see the Post Balance Sheet Event note on Peel warrants

 

26.    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.

 

27.    Directors' remuneration and share interests

The Directors who held office at 31 December 2022 had the following interests, including any interests of a connected party in the ordinary shares of the Company:

 

	Number of ordinary shares of 0.5p each	Percentage of voting rights
Keith Riley	12,128,986	<0.5

 

 

 

The remuneration of the Directors of the Company paid or payable for the year or since date of appointment, if later, to 31 December 2022 is: 

 

	2022 £ Salary/Fee	2022 £ Pension	2022 £ Share based payments	2022 £ Other	2022 £ Total	2021 £  Total
Tim Yeo	54,000	-	-	5,500	59,500	127,944
David Ryan	-	-	-	-	-	97,996
William Cameron Davies	-	-	-	-	-	7,500
Paul Emmitt	64,906	2,000	-	-	66,906	-
James John Pryn Greenstreet	15,000	-	-	-	15,000	30,000
Hugh Mcallister	27,232	-	-	-	27,232	-
Paul Drennan-Durose	251,026	8,714	-	-	259,740	-
Gillian Weeks	24,296	-	-	-	24,296	-
Russell Ward	18,899	-	-	-	18,899	-
Myles Howard Kitcher	25,667	-	-	-	25,667	-
Allan Vlah	7,500	-	-	-	7,500	37,500
Kirsten Gogan	-	-	-	-	-	23,468
Keith Riley	92,546	-	-	-	92,546	8,167
Mark Berry	-	-	-	-	-	17,500
Total	581,072	10,714	-	5,500	597,286	350,075

 

Total remuneration includes share-based payments arising from the issue of options amounting to nil in 2022 (2021: £40,000). There have been no awards of shares to Directors under long term incentive plans during the year.

 

The Directors' social security costs for the year amounted to £54,026 (2021: £29,965) resulting in a total remuneration expense of £651,312 (2020: £380,040).

 

Prior to their resignations from the Board, Tim Yeo, William Cameron Davies, James John Pryn Greenstreet, Allan Vlah, Kirsten Gogan and Mark Berry had service contracts that could be terminated by the provision of three months' notice. David Ryan had a service contract that could be terminated by the provision of six months' notice.

 

Keith Riley has a service contract which can be terminated by providing three months' written notice.

 

Rivermill Partners Limited, a company wholly owned by Tim Yeo and his associates, provided executive corporate management services during the year the value of which is included in the above remuneration. These services are contracted for on an annual basis as required.

 

Share options held by the Directors who served during the year are as follows:

 

	Options at 1/1/22	Forfeited	Exercised	Options at 31/12/22	Exercise price	Earliest and latest date of exercise
Options granted 8 Dec 2014
James John Pryn Greenstreet	3,000,000	-	-	3,000,000	2.5p	9/12/14 - 8/12/24
	Options at 1/1/22	Forfeited	Exercised	Options at 31/12/22	Exercise price	Earliest and latest date of exercise
Options granted 6 March 2018
James John Pryn Greenstreet	12,000,000	-	-	12,000,000	0.6p	7/3/18 - 8/12/24*
	Options granted /1/22	Forfeited or not vested	Exercised	Options at 31/12/22	Exercise price	Earliest and latest date of exercise
Options granted 22 April 2021
Allan Vlah	581,355	-	-	581,355	6.3p	23/4/21 - 22/4/24

 

*On the 29^th September 2022 the board agreed to align the termination/expiry dates for both sets of options for James Greenstreet to 8^th Dec 2024

Highest Paid Director

Paul Drennan-Durose was the highest paid Director in the year. There were no shares received or receivable by him in respect of qualifying services under long term incentive schemes.

 

28.    Related parties

 

Rivermill Partners Limited, a corporate management services company, wholly owned by Tim Yeo and his associates, was a related party for the 12 month period after which Tim Yeo was a Director of the Company. During that period, Rivermill provided executive corporate management services amounting to £54,000 (2021: £48,000) and the Company agreed a termination settlement of £5,500.

 

Engsolve Limited, an engineering solutions company, was a related party until 30 June 2021 due to a Director's family member being part of its key management personnel, and from 12 August 2021 when the Company acquired 48.39% of its share capital. Engsolve provided engineering services to the Company during the year amounting to £596,172 (2021: £621,968). Amounts outstanding at year end for services provided and included in these accounts amounted to £31,778 (2021: £41,058).

 

During 2021 Hydrogen Utopia International entered into an exclusivity agreement with Powerhouse Energy Group Plc. This exclusivity agreement covered Hungry, Greece & Poland. During 2022 Hydrogen Utopia International paid £38,983 for this Exclusivity Agreement (2021 £71,829). This exclusivity agreement covering Hungary, Greece and Poland ended in March 2022.

  

Keith Riley was a Non-Executive Director, Interim Chairman and acting Chief Executive Officer of the Company during 2022. Keith was also an active director in Engsolve Ltd in 2022. Keith joined Hydrogen Utopia PLC as Technical Director on 6th January 2022 and resigned on 26th May 2023. Keith was also a director of HU2021 International UK Ltd from 18th January 2022 until 31st May 23.

 

Howard White is a shareholder in the Company and also a strategic Consultant to the Company, having received £60,000.00 for his services in 2022. Howard White is also an active Board Member and shareholder of Hydrogen Utopia International.

 

Hugh McAlister was a Non-Executive Director of the Company during 2022 and also owned shares in Hydrogen Utopia International.

 

29.    Events after the reporting period

 

On 16 March 2023 the Company entered into a lease agreement for a building to house the forthcoming Powerhouse Technology Centre. The lease term is 10 years with a break option at 5 years, at a rental of £46,000 per annum.

 

On 21 March 2023, the Company announced it had entered into a Joint Venture agreement with Hydrogen Utopia International Plc for the proposed joint development of a non-recyclable plastic waste-to-hydrogen facility site at Longford, County Longford in the Republic of Ireland. The joint venture is entered into with equal shareholding by each party  and development costs being contributed on a 50:50 basis. PHE has agreed to pay HUI a non-returnable payment of up to £400,000 in cash in recognition of HUI's contribution to identifying the Longford Project, securing the option to lease and progressing the project. This cash payment comprises an initial payment of £100,000 on signing the heads of terms and a further payment of £100,000 upon finalisation of the project documentation between HUI and PHE - principally comprising a development agreement and a shareholder agreement. PHE has agreed to make a further payment of £200,000 in cash to HUI once planning permission has been granted for the Longford Project on the Longford Site.

 

The Company announced that it had acquired full ownership of Protos Plastics to Hydrogen No.1 Ltd on 28 April 2023 from Peel NRE Ltd for a nominal payment of £1. The Protos Plastics to Hydrogen Peel NRE is a special purpose vehicle and owner of the development of the Protos plant, the first proposed commercial application of the Company's DMG™ technology. Powerhouse Energy Group Plc had previously provided a loan facility of £3.8m to support the Protos plant development and construction. Loans made under the facility at Dec 22 amounted to £2.159m (incl. Loan interest)  and trade debtors amounted to £1.18m. Due to the acquisition of the Protos SPV by the company the loan balance of £2.159m and the debtors balance of £1.18m were impaired as at December 2022.

 

On 2 May 2023 the Company announced that the subscription and warrant agreement dated September 2020 made between Peel holdings (IOM) Ltd and the Company had expired on 29 April 2023. This warrant agreement included 371,510,069 options exercisable at 2.75p.

 

On 30 May 2023, the Company announced that it had entered into an agreement with Noage Energy Ltd to act as representative of PHE in Northern Ireland.  PHE paid Noage a fee of £50,000 on entering the agreement. Noage will also receive a number of success related fees, payable on completion of specified milestones, giving it the possibility of receiving total fees of £1.725 million for a fully implemented project (including the initial fee).The Agreement has an initial term of five years, but can be extended for a further two years on the request of Noage. Under the arrangement, however, all contractual commitments with third parties will be with PHE directly and Noage will not be able to give commitments on PHE's behalf.

 

On 12 August 2021, the Company acquired a 48.39% interest in Engsolve Limited, an engineering consultancy company incorporated and operating in the UK. On 21 June 2023, the Company completed the acquisition of the entire outstanding shareholding of Engsolve for a cash consideration of £572,896. The Company considers this a strategic acquisition as it brings Engineering expertise in house and enables it to generate a regular income stream through the providing and development of Engineering Services into the UK market.

 

30.    Ultimate controlling party

 

There is no controlling party of the Company.