Failed fracking tech company LWP has R&D claims rejected; looks to reverse takeover
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Oil and gas industry supplier LWP Technologies has received just a tiny fraction of the more than $1.7 million in R&D grants it was expecting, and had applications for another $2.7 million rejected.
LWP’s main business had been the manufacture of proppants — sand-like materials used to “prop” open tiny fractures used to access oil and gas via hydraulic fracturing (or fraccing) techniques.
But the company is now looking for new business opportunities, including selling the company into a backdoor listing and shelving its technology as it faces investigations by ASIC and the ATO, and a horde of angry shareholders.
LWP’s R&D rebates claims have been the subject of an ATO investigation, according to documents seen by Stockhead from the Inspector-General of Taxation.
The company (ASX:LWP) received a total of $253,000 for 2014 and part of the 2015 financial year.
It had applied for $1.7 million for itself and a subsidiary called Ecopropp, a figure that by September last year the ATO had forced them to round down to $600,000.
Claims for the rest of 2015 and for 2016 — the latter originally totalling a whopping $2.7 million — were rejected.
It’s been a trying four years
LWP came to market in 2015 via a backdoor listing with a novel fracking technology.
It promised that its fly-ash proppant — tiny ceramic balls in a liquid that’s flushed down a well to keep cracks open and let oil and gas escape — would change the industry.
But after a failed foray into a Russian rechargeable battery tech — a joint venture which featured an alleged Hell’s Angels member — and a technology that is yet to be commercialised five years after it was first proposed to investors, LWP’s shareholders are angry.
With complaints lodged with ASIC, the ATO, the Queensland police, and the ASX, a group led by Brad Chapman and other LWP investors, says shareholders have lost $44 million in value.
An ASIC investigation is still continuing into the company’s past practices.
They say the company has wasted $2.7 million in cash on high risk speculative investments, the Russian Graphenera battery joint venture, and on a proppant manufacturing plant in Pune, India.
The Russian factor
LWP’s court case against VVV Technologies over the Graphenera joint venture was settled last year and costs of $95,000 awarded to VVV.
That venture started in 2016 with Russian named Viktor Volkov who claimed he’d invented an “Al-Graphene-Oxygen Battery”, and four months later was terminated. LWP tried to recover costs via legal means, but the courts found against them.
Mr Volkov’s son, Vadim, is listed on the Australia patent application for the technology, was alleged in 2015 to be a Hell’s Angels member after being arrested on drugs, weapons and fraud charges.
Looking for new tech
As at the end of March, LWP had $68,000 in cash left.
They will have an opportunity to voice those concerns directly to the board on June 28, when the company holds its delayed 2017 AGM in Brisbane.
Chairman Dan Lanskey says they’re putting the proppant technology “in the bottom drawer”, and might licence it out rather than try to make it themselves.
“The tech patented does not has a viable business model right now,” he told Stockhead, because the market for ceramic proppants has disappeared.
He told Stockhead the R&D claims were knocked back because they didn’t fall under Aus Industry guideline and the tech wasn’t commercialised.
He wanted to make clear that the current board is trying to turn the company around after a tumultuous two years from 2015.
“I’ve had no previous involvement with this company at the end of July 2017 and as an independent director a review of the corporate governance revealed departure from normal practices on a number of occasions,” Mr Lanskey said.
“As a result, an independent legal review was undertaken by Dentons lawyers which has been referred to by both the ASX and ASIC. As previously announced, ASIC is conducting an investigation into certain business activities by the company prior to June 30, 2017.”