TIDMQFI
RNS Number : 4534B
Quadrise Fuels International PLC
03 October 2022
3 October 2022
Quadrise Fuels International plc
("Quadrise", "QFI", the "Company" and together with its
subsidiaries the "Group")
Final Results, Notice of AGM and Investor Presentation
Quadrise (AIM:QFI) , the supplier of MSAR(R) and bioMSAR(TM)
emulsion technology and fuels, providing innovative lower cost and
lower carbon alternatives to fuel oil and biofuels , is pleased to
announce its audited final results for the year ended 30 June
2022.
The Company also gives notice that the Company's Annual General
Meeting ("AGM") will be held at 12 noon on 25 November 2022 at the
Park Plaza County Hall Hotel, 1 Addington Street, London, SE1
7RY.
Throughout FY2022, Quadrise has seen material progress across a
range of international projects and expects to deliver commercial
revenues in the current financial year.
Operational Highlights:
-- MSC - In July 2022, Quadrise signed a Framework Agreement
with MSC to carry out trials of bioMSAR(TM) and MSAR(R) fuels with
a view to the commercial supply of one or both of the fuels to
MSC's global fleet. Proof-of-concept tests are planned for Q1 2023,
following which MSC will run the LONO trials. With positive trial
progression, Quadrise, MSC and other key stakeholders expect to
commence discussions for commercial supply to MSC's global
fleet.
-- Morocco - In June 2022, Quadrise signed a new Material
Transfer & Cooperation Agreement with the client, under which
an industrial demonstration test using MSAR(R) and bioMSAR(TM) will
be carried out at a client site. The MSAR(R) fuel for this test has
now been manufactured and is being delivered to Morocco, with
bioMSAR(TM) following imminently. The site test is now scheduled
for early Q4. Upon successful completion, the parties will enter
into discussions for potential commercial supply before
year-end.
-- Utah - In April 2022, Quadrise entered into a Commercial
Development Agreement with Valkor Technologies LLC ("Valkor") to
commercialise both MSAR(R) and bioMSAR(TM) at their projects in
Utah. The parties are working together to conclude a commercial
agreement during Q4 2022.
-- Americas - Quadrise and its local agents are progressing
discussions with candidate sites in Panama and Honduras to trial
MSAR(R) and bioMSAR(TM) at power plants as a precursor to potential
commercial supply in 2023. Joint discussions are also underway with
a large refinery in the Caribbean with an interest in potential
MSAR(R) supply, and the Company continues to progress activities in
Mexico.
-- bioMSAR(TM) - In September 2022, Quadrise signed a Joint
Development Agreement ("JDA") with Vertoro to investigate the use
of their crude sugar oils (CSO(TM) ) as an alternative biofuel
feedstock for bioMSAR(TM).
Financial Summary:
-- Loss after tax of GBP2.6m (2021: GBP4.3m), of which of
GBP1.5m (2021: GBP1.4m) is attributable to production and
development costs and GBP1.4m (2021: GBP1.5m) relates to
administrative and corporate expenses.
-- Total assets of GBP8.0m as at 30 June 2022 (2021: GBP10.7m).
-- Cash balances as at 30 June 2022 of GBP4.4m (2021: GBP7.0m).
-- Cumulative tax losses of GBP60.0m (2020: GBP58.4m)
potentially available for set-off against future profits.
Jason Miles, Chief Executive Officer of Quadrise, commented:
"During 2022 Quadrise has positioned itself as one of the key
decarbonisation solution providers in a rapidly changing global
energy market.
2022 has seen the Company sign key agreements with MSC
Shipmanagement for marine fuel, Valkor for upstream applications,
and with our client in Morocco to trial our bioMSAR(TM) and MSAR(R)
fuels as a precursor to commercial supply. Project activities are
ongoing to deliver positive outcomes for Quadrise, and we continue
to invest and collaborate in RDI to enhance our IP portfolio and
future.
The pace of decarbonisation continues to accelerate, and the
energy industry that we serve is having to adapt quickly to this
and other world events that have impacted supply and demand, and
escalated energy costs. Our innovative fuel and biofuel solutions
offer clients key opportunities to reduce energy costs and
greenhouse gas emissions today to effect an early transition to net
zero carbon.
I look forward to an exciting period ahead for Quadrise and our
loyal shareholders, we have never been better positioned to deliver
our innovative fuel technology and ultimately a cleaner
planet."
Investor Presentation
Jason Miles (CEO) and Andy Morrison (Chairman) will provide a
live investor presentation in relation to the Final Results via the
Investor Meet Company ("IMC") platform at 10.00am on 4 October
2022.
The presentation is open to all existing and potential
shareholders and questions can be submitted pre-event or at any
time during the presentation via the "Ask a Question" function.
Responses to the Q&A from the presentation will be published at
the earliest opportunity on IMC.
Investors can sign up to Investor Meet Company for free and add
Quadrise via:
www.investormeetcompany.com/quadrise-fuels-international-plc/register-investor
For further information please contact:
Quadrise Fuels International Plc +44 (0)20 7031 7321
Andy Morrison, Chairman
Jason Miles, Chief Executive Officer
Nominated Adviser
Cenkos Securities plc +44 (0)20 7397 8900
Ben Jeynes
Katy Birkin
Broker
Shore Capital Stockbrokers Limited +44 (0)20 7408 4090
Toby Gibbs
Fiona Conroy
Public & Investor Relations
Vigo Consulting
Patrick D'Ancona
Charlie Neish +44 (0)20 7390 0230
About Quadrise
Quadrise is the supplier of MSAR(R) and bioMSAR(TM) emulsion
technology and fuels, providing innovative lower cost and lower
carbon alternatives to fuel oil and biofuels in the global power
generation, shipping, industrial and refining industries.
Learn more: www.quadrisefuels.com
Certain of the information contained within this announcement is
deemed by the Company to constitute inside information as
stipulated under The Market Abuse Regulation (EU 596/2014) pursuant
to the Market Abuse (Amendment) (EU Exit) Regulations 2018. Upon
the publication of this announcement via a Regulatory Information
Service ("RIS"), this inside information is now considered to be in
the public domain.
Chairman's Statement
After joining Quadrise as Chairman in February 2022, I expressed
my belief that this was a pivotal time for the Company. Almost
no-one could have foreseen how much change and volatility has been
witnessed in energy markets since then. The war in Ukraine and
record global temperatures pushing the cost, security and carbon
intensity of energy supply to the top of the political and business
agenda. With the need to find greener, more cost-effective energy
solutions becoming more urgent by the month, Quadrise now finds
itself very well positioned to capture new business by offering
practical, economic and greener solutions to real world problems
through its MSAR(R) and lower carbon bioMSAR(TM) fuels.
In February, I also stated that our immediate priorities were to
determine which of our projects would be able to achieve revenue
generation and positive cashflows in the timeliest manner and
within our available resources, and to position Quadrise squarely
amongst the growing cohort of Green Economy companies.
On the first of these priorities, it has been pleasing to note
that the progress achieved to date should enable Quadrise to become
revenue generating within the current financial year. Our flagship
project with MSC has reached the milestone of a signed Framework
Agreement and trials are expected to commence in early 2023. In
Morocco, with preparatory work now complete, we expect completion
of the trial early next quarter. In Utah, the commencement of
drilling by Valkor and their partners will provide the oil samples
needed to progress trials and commercial agreements. The agreements
in place provide a clear line of sight from trials to commercial
revenues.
The Company's immediate future will be to a large extent
determined by our ability to deliver on the projects in hand, but
it is pleasing to note the increasing enquiries from potential
customers and partners who are interested to work with Quadrise and
our real-world decarbonisation solutions. Once we secure our first
commercial agreements, we should be confident of further
growth.
On positioning Quadrise squarely in the Green Economy ecosystem,
work is underway to enhance our ESG messaging, with our maiden
sustainability report currently being researched and drafted.
Shareholders will note our streamlined Annual Report this year as
we migrate our sustainability messaging to this report, expected to
be published before the end of the calendar year. In September, we
were delighted to appoint Vicky Boiten-Lee as an ESG adviser to the
board, in order to assist us in our efforts to make Quadrise a
market leader in sustainability and to bring her industrial
marketing experience and international perspectives to the board
table.
Looking further ahead, we continue to develop the next
generation of bioMSAR(TM) fuel and energy delivery technologies,
with the goal of producing a fully net-zero product by 2030. These
efforts have been bolstered by our recent JDA with Vertoro. We also
remain open to M&A transactions that could de-risk and/or
facilitate the expansion of the core emulsion fuels business. Our
ambitions for the business are limited more by our available
financial resources than by the scale of the opportunities that we
can address.
We have come a long way during the financial year, and
especially since the end of the Covid-19 pandemic restrictions.
External factors and management's successful efforts on project
definition and decarbonisation initiatives have combined to
convince the board that now is the time to double down on their
delivery, rather than to seek a change of direction.
I remain firm in my belief that Quadrise's time has come and am
delighted to lead an experienced and determined board. Together
with management, the board looks forward to driving the Company
towards commercial revenues and generating value for our
shareholders, whom I thank for their support and engagement
throughout the year.
Results for the Year
The consolidated after-tax loss for the year to 30 June 2022 was
GBP2.6m (2021: GBP4.3m), with the loss per share for the year
reducing to 0.18p from 0.36p in 2021. Production and development
costs of GBP1.5m (2021: GBP1.4m) comprise the costs of the Group's
R&D facility ('QRF' in Essex), its operational staff and
consultants, and ongoing bioMSAR(TM) and MSAR(R) development costs.
These costs are consistent with the previous year, as they largely
relate to fixed costs.
Administration expenses of GBP1.4m (2021: GBP1.5m), comprise the
Group's corporate staff and directors' costs, professional advisor
fees, PR/IR costs and head office costs. These have decreased as a
result of reduced professional fees and lower office costs due to
the move from our previous office in February 2021.
At 30 June 2022, the Group had total assets of GBP8.0m (2021:
GBP10.7m). The most significant balances were cash of GBP4.4m (2021
GBP7.0m), intangible assets of GBP2.9m (2021: GBP2.9m), and
property, plant and equipment of GBP0.4m (2021: GBP0.5m). The Group
has tax losses arising in the UK of approximately GBP60.0m (2020:
GBP58.4m) that are potentially available to be carried forward
against future profits.
Andy Morrison
Non-executive Chairman
30 September 2022
Chief Executive's Statement
Our Energy Decarbonization Solutions
As a result of our collective efforts during the year, Quadrise
has positioned itself as one of the key decarbonisation solutions
providers in a rapidly changing global energy market. The world has
until 2030 to cut human-caused CO(2) emissions by half, in addition
to other greenhouse gas ("GHG") emissions such as methane. These
steps are required to have a 50% chance of avoiding the worst
effects of climate change by 2050, according to the
Intergovernmental Panel for Climate Change. Our unique technology
can play a significant role in helping the world achieve this goal
economically, today.
Our patented MSAR(R) technology enhances the combustion of
residual fuels and fuel oils, reducing harmful emissions. MSAR(R)
use lowers fuel consumption in diesel engines by up to 10% and
reduces greenhouse gas emissions by the same amount. Our innovative
low carbon bioMSAR(TM) fuel takes advantage of this proven fuel
technology platform and incorporates renewable glycerine, currently
a by-product of biodiesel manufacture, as a clean fuel component to
reduce greenhouse gas emissions by over 25%.
Since presenting bioMSAR(TM) at the International Maritime
Organisation (" IMO") in London during their International Shipping
Week in September 2021 there has been a steady flow of enquiries
from the maritime sector. According to UK Research and Innovation,
the shipping industry is responsible for over 900 million tonnes of
carbon dioxide emissions annually, roughly 2.5% of the world's
total emissions. While a number of lower-carbon and potentially
net-zero solutions are in development, they are not ready to be
utilised at scale and will require significant investment in either
retrofitting existing fleets or building new vessels. Quadrise's
solutions are available immediately, and can be deployed at low
cost to achieve immediate benefits during the transition to a Net
Zero GHG future.
Just as we continue to promote our current technology and
products, we also recognise that Net Zero fuel solutions will be
mandatory in the future, potentially as early as 2030. We have an
RDI strategy in place to take advantage of this opportunity using
our innovative and adaptable technology as well as collaborations
with others in the field. During the period we have completed a
joint study with University of Greenwich to explore the production
of glycerine and other products from algae and commenced testing of
various biofuel components that are soluble in oil or water.
A Joint Development Agreement ("JDA") was signed with Vertoro of
the Netherlands to investigate the use of concentrated sugars
extracted from biomass as lignocellulose as an alternative
water-based lower cost and abundant biofuel feedstock for
bioMSAR(TM). Initial testing at Quadrise Research Facility ("QRF")
in Essex has been positive - incorporating their crude sugar oils
(CSO(TM)) into bioMSAR(TM) formulations. A joint patent application
has been filed with Vertoro as a result and diesel engine testing
is planned under the JDA during the next 12 months. Additionally, a
new patent was filed by Quadrise and Nouryon to cover
"blend-on-board" solutions for the production of MSAR(R) and
bioMSAR(TM) in situ for diesel engines using conventional fuels and
biofuels to strengthen our IP portfolio, and we are generating data
using our Cummins engine at Aquafuel to support this.
Key Project Delivery
Our lead projects are in the marine, upstream and industrial
sectors, with further projects progressing for downstream and
powerplant applications. Our current focus is on demonstrating
MSAR(R) and bioMSAR(TM) technology at commercial scale and
progressing each of the opportunities into commercial supply
agreements. During the period agreements have been signed to
progress these projects accordingly:
MSC - In July 2022, we were delighted to finally sign a
framework agreement with MSC Shipmanagement ('MSC') to test and
trial both of our economical, cleaner marine fuel and biofuel
alternatives on their vessels. Having built a good relationship
with MSC over a number of years, Quadrise is excited to be
collaborating with them to decarbonise the largest container ship
fleet in the world as they lead the way in helping the marine
sector transition towards a net-zero carbon future.
The agreement with MSC is a multi-stage process, with
pilot-scale marine testing shortly to be completed in Italy in
early Q4, managed by Wärtsilä. The MSC Leandra, which is to be used
for testing is a 54,000-deadweight tonne container ship in active
commercial service. The Wärtsilä Flex-powered vessel, formerly
known as the Seago Istanbul, is familiar to us from previous
successful tests of MSAR(R) , which simplifies and de-risks the
planned testing and extended operational use of bioMSAR(TM). The
project team have inspected the MSAR(R) systems previously
installed for the Maersk tests to ensure the unit is ready for fuel
testing, and commissioning tests are scheduled to be completed
during the coming weeks. Planning is ongoing with MSC and Lloyd's
Register to complete a safety review to obtain Flag State approval
for the trials as before.
Proof-of-concept ("POC") tests aboard the Leandra are planned
for Q1 2023, after the vessel returns from drydock for its
scheduled maintenance and regulatory class inspection. Confirmation
of the vessel route and the MSAR(R) / bioMSAR(TM) bunker supply
point and partner will be made in Q4 2022, with discussions
underway with potential fuel supply partners. Following the POC
tests, MSC will run operational trials for which approximately
25,000 tonnes of each fuel will be supplied. Each trial encompasses
4,000 hours of testing on board the vessel, with a view to
obtaining a letter of no objection ("LONO") from Wärtsilä upon
completion. The first operational LONO trial on bioMSAR(TM) is
expected to be completed by the second half of next year. As the
trials progress positively Quadrise, MSC and other key stakeholders
expect to commence discussions for the commercial supply of
bioMSAR(TM) and MSAR(R) to MSC's global fleet. Successful trial
results will also facilitate negotiations for the supply of our
technology to other shipping companies and advance our
collaboration to help decarbonise shipping globally.
Morocco - Our project in Morocco is with a key client interested
in using MSAR(R) and potentially bioMSAR(TM). In June 2022,
Quadrise signed a new Material Transfer & Cooperation Agreement
("MTCA") with the client, superseding the original agreement
announced late 2019. Under the MTCA Quadrise is contracted to
manufacture trial quantities of MSAR(R) and bioMSAR(TM) for the
purpose of an industrial demonstration test at one of the client's
sites, and to complete a technical and economic feasibility study
for a potential additional industrial demonstration test at a
second site. The draft feasibility study for the second site was
submitted to the client in June 2022 as planned.
Preparations for the industrial demonstration test are well
advanced, the trial equipment is on site and the client is ready to
receive the MSAR(R) and bioMSAR(TM) fuel following several visits
by Quadrise personnel to site. Preparation of the MSAR(R) fuel was
delayed by several weeks due to hold ups with the commissioning of
our new five tonne-per-hour MSAR(R) unit in Denmark. This was
caused by the late supply of key electronic components for the
control system, and limited availability of personnel at our
third-party contractor over summer. With these issues now resolved,
the MSAR(R) is now manufactured and is being delivered to Morocco,
with bioMSAR(TM) manufacture and shipment to follow imminently. The
site test is now scheduled for early Q4. On completion of the trial
Quadrise will provide the Client with a written report on the
efficacy of using MSAR(R) and bioMSAR(TM). Provided the
Client-specified deliverables regarding performance and product
quality are met, the parties will enter into discussions for a
potential commercial supply of MSAR(R) before year-end. The
additional industrial demonstration test will be subject to a
future agreement following positive results from the first
test.
Utah - Our project in Utah involves using MSAR(R) technology to
emulsify low-sulphur 10-13deg API heavy oil that can be recovered
from the billions of barrels of oil-sand and conventional oil
deposits at Asphalt Ridge. MSAR(R) technology reduces the viscosity
of the heavy oil, saving the use of diluents or excessive heat in
the supply chain. The resulting MSAR(R) or bioMSAR(TM) produced is
an alternative to very low sulphur (<0.5%) fuel oil ("VLSFO") or
FAME-based biofuel for the industrial, power and marine fuel
sectors.
In August 2021, our RDI team at QRF successfully converted Utah
oil samples provided by Greenfield Energy LLC ("Greenfield", a
subsidy of AIM-listed TOMCO Energy plc) to both MSAR(R) and
bioMSAR(TM). In April 2022, Quadrise entered into a Commercial
Development Agreement ("CDA") with Valkor Technologies LLC
("Valkor") to commercialise Quadrise's MSAR(R) and bioMSAR(TM)
technologies at its projects in Utah. Valkor has equity interests
in the majority of heavy oil projects in Utah, including those of
Greenfield, Petroteq Energy Inc, Heavy Sweet Oil LLC and Big Sky
Resources LLC. During the period up to the end of August 2022,
Valkor managed an extended and expansive core sampling programme in
the oil-producing region to accurately define recoverable reserves
from surface oil sands and sub-surface heavy oil. In parallel,
further work was undertaken by Valkor and partners on selecting and
optimising the solvent process used for extraction of oil from the
sand, so as to enable finished products of each. Valkor was also
involved with presentations to the Utah authorities to obtain
drilling permits for 4 pilot wells, Valkor expect to obtain these
drilling permits imminently and first oil is anticipated later in
Q4 2022.
The result of these activities has secured heavy oil
availability by end 2022, but delayed the assay information and
potential samples that Quadrise and Valkor need to market MSAR(R)
and bioMSAR(TM) in the region. Despite these minor delays the
parties are working together to finalise the commercial terms for
Phase 1 (the "Primary Project") to conclude an agreement during Q4
2022. The future use of sequestered CO(2) for enhanced oil recovery
in Utah could result in a low carbon MSAR(R) or bioMSAR(TM) VLSFO
alternative that would have compelling competitive advantages,
especially for the marine sector.
Americas - Through our regional agent network we are progressing
projects in Panama and Honduras with thermal power generators, and
in Mexico and the Caribbean with national oil companies and
utilities respectively. Quadrise and its local agents, E&PC,
are progressing discussions with several candidate sites in Panama
and Honduras to trial MSAR(R) and bioMSAR(TM) at power plants
equipped with medium speed 4 stroke diesel engines (many of which
are Wärtsilä), as a precursor to potential commercial supply in
2023. Joint discussions have also recently commenced with a large
refinery in the Caribbean with an interest in potential MSAR(R)
supply for internal consumption or sale to regional power plants.
In Mexico, the Company submitted a multi-site study in Q3 2022 to
the National Oil Company supporting the implementation of MSAR(R)
technology at a number of their refineries, together with
documentation for one of the sites to carry out a demonstration of
MSAR(R) refinery refuelling on a fuel oil boiler and/or fired
heater in 2023.
Outlook
During the reporting period the downstream oil sector has had to
react to a combination of increased product demand for refined
transportation fuels as the world emerged from the global pandemic,
and then a rapid supply-demand shift resulting from the partial
embargo on Russian oil and products due to the invasion of Ukraine.
These events elevated oil prices and the relative value of refined
products globally. This has been positive for refinery margins in
general and has elevated the fuel oil - distillate spread,
enhancing the economic value of refinery residuals as an energy
source for MSAR(R) and bioMSAR(TM) in our key markets. The refining
sector is adapting to changes in renewable fuel demand, with many
refineries in the developed world investing in biofuel production.
Major energy companies are also heavily investing in
decarbonisation initiatives, an example being the recent $2.75bn
acquisition of the Renewable Energy Group by Chevron in June
2022.
Russia's invasion of Ukraine has also had a material impact on
the availability and price of natural gas and LNG, with European
shortages and embargoes impacting global demand. Higher energy
prices, coupled with increased scrutiny of the role of methane slip
in the supply of natural gas are causing a new uncertainty over
decisions on future energy supply. Methane is a potent greenhouse
gas that has a global warming potential approximately 80 times
greater than CO(2) over 20 years (IPCC), hence a small gas leak can
materially negate any benefits in CO(2) reductions over fuel oil or
biofuel-based products such as MSAR(R) and bioMSAR(TM). Many
commentators are now questioning the longer-term use and full
environmental impact of LNG when the world needs to
decarbonise.
New legislation and regulations to advance decarbonisation
efforts are coming thick and fast, initiated by the EU but now
spreading globally by other regions and the IMO. The shipping
sector is one of the hardest sectors to decarbonise but there is
increased consumer pressure for operators to address this
challenge. The IMO and the Maritime Environment Protection
Committee (MEPC) policy goal is to cut annual greenhouse gas
emissions in shipping by at least 40% by 2030, pursuing a 70%
reduction by 2050. The forthcoming Energy Existing Ship Index
(EEXI) and Carbon Intensity Indicator (CII) regulations have
resulted from this policy goal. The former's purpose is to regulate
the overall energy efficiency of a vessel's design, whilst the
latter regulates the operational carbon intensity of a vessel by
measuring how efficiently it transports goods or passengers. In
addition to the environmental, economic and operational benefits,
our fuels represent an effective and swift solution to meet these
regulations.
During the period Philip Hill joined us in January 2022 to
replace Mark Whittle as COO, and Andy Morrison joined us in
February 2022 as Non-executive Chairman to replace Mike Kirk. Both
Philip and Andy have settled in well and have hit the ground
running. In addition, we have recently welcomed two new staff at
QRF in Essex to strengthen the RDI team there, working under
Bernard Johnston to advance our projects and decarbonisation
initiatives. Vicky Boiten-Lee has recently joined us in an ESG
Advisory role to assist David Scott and myself in enhancing our
sustainability programmes and reporting during the coming
months.
I am pleased to say that Quadrise is entering an exciting period
of growth and I look forward to generating value for our loyal
shareholders, whilst delivering innovative solutions for a cleaner
planet.
Jason Miles
Chief Executive Officer
30 September 2022
Strategic Report
For the year ended 30 June 2022
Principal Activity
The principal activity of the Company is to develop markets for
its proprietary emulsion fuels, MSAR(R) and bioMSAR(TM) as
low-cost, more environmentally friendly substitutes for
conventional heavy fuel oil ("HFO") and biofuels for use in power
generation plants, industrial and upstream oil applications, and
marine diesel engines.
Business Review and Future Developments
A full review of the Group's activities during the year, recent
events and future developments is contained in the Chairman and CEO
Statements.
Key Performance Indicators
The Group's key performance indicators are:
-- Development and commercial performance against the Group's
business model and project timetables established with partners and
clients, and
-- Financial performance and position against the approved budgets and cashflow forecasts.
The Board regularly reviews the Group's business model, with a
progress review held at least monthly with Non-Executive Directors.
The commercial performance of the Company and each of the Company's
key projects and business development opportunities is discussed at
length in the Chairman and CEO Statements.
Each year, a detailed two-year budget and cash forecast is
prepared by the Executive Directors and the Head of Finance, and
following an extensive review process, is then approved by the
Board. Performance against budget and updated cash projections are
included within the monthly management accounts issued to and
reviewed by the Board.
For the year ended 30 June 2022, progress against the Group's
business model and was slower than anticipated, with delays to key
projects as discussed in the CEO statement. The financial
performance of the Group was ahead of budget due to lower than
forecast expenditure on bioMSAR(TM) testing, staff costs and
up-front project expenditure as a result of delays to project
timetables.
Going Concern
The Group had a cash balance of GBP4.4m as of 30 June 2022,
expected to be sufficient to reach forecast commercial revenues in
H1 2023 and to cover project expenditure and fixed costs up to
early H2 2023. Additional funding will be required beyond this
point to bridge the gap between exhaustion of existing funds and
the generation of sustainable positive cashflows, expected to
commence in H2 2024. The Directors have determined that the
continuation of the Group as a going concern will be dependent upon
successfully raising sufficient funds to bridge this gap. The
Directors have a reasonable expectation that such funds will be
raised, although no binding funding agreements are in place at the
date of this report, and have therefore determined that it is
appropriate to prepare the financial statements on a going concern
basis. However, in the absence of additional funding being in place
at the date of this report, these conditions indicate the existence
of a material uncertainty which may cast significant doubt over the
Company's ability to continue as a going concern and,
therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of business. For
further details behind the judgments and estimations used by the
Directors in reaching this determination, refer to note 2.
Longer term viability statement
In reaching its conclusion on the going concern assessment and
longer term viability of the Group, the Board reviewed the Group's
three year cash flow forecasts which cover the period to revenue
generation and the generation of positive cashflow. This period is
applicable because it extends to the point during which the Group
is forecast to be generating sustainable positive cashflows. The
Board reviewed the underlying assumptions in this cashflow,
together with sensitivity analysis performed on these projections.
The Board believes these forecasts are based on a prudent
assessment of the Group's prospects, target markets and past
experience, taking account of reasonably possible scenarios given
current market and economic conditions. The risks outlined below
have been considered by the Board in their determination of
longer-term viability, most significantly 'Delay in
commercialisation of MSAR(R) and funding risks' and ' No profit to
date'
The Board have reviewed sensitivity analysis which cover these
risks, modelling delays in project timelines as well as the removal
of certain projects and have determined that the effect of these
risks on the Company's longer term viability is that the timing and
amount of funds required to take the Group to the point of
sustainable positive cashflows is affected. However, the Board
consider that the Group remains viable in the longer term under the
sensitivities modelled.
The Board therefore has a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as
they fall due over the period of their assessment, provided it is
able to raise the funding required as outlined in the Going Concern
note above.
Climate Change
As discussed in both the Chairman's and CEO's statements ,
Quadrise's bioMSAR(TM) technology offers an alternative to HFO with
over 25% lower CO(2) emissions. The Directors believe that the
growing global emphasis on the COP 26 Goals, specifically the goal
of transition to global net-zero carbon by 2050, present Quadrise
with increasing opportunities to assist marine, power and
industrial clients in obtaining a cost-effective solution to
lowering their carbon emissions. Government actions to reduce
climate change therefore provide opportunities to Quadrise, but the
Board acknowledges that the Company may also be presented with
additional risks due to these actions.
Risks, including those introduced by climate change and
governmental actions to reduce climate change, are discussed in the
next section.
Principal Business Risks
Each year in the second quarter, the Audit Committee assists the
Executive Team in a structured zero-based re-assessment of the
Company's emerging and principal risks. This is conducted for each
operational sector and organisational level including the Company's
research and development facility, QRF, and then aggregated for the
Company as a whole. The risk level is determined by its
probability, impact on the Company, and whether the risk has
increased or decreased over the last 12 months. A summary of
"Principal Risks and Uncertainties" is reviewed at a Board meeting.
Subsequently a Risk Mitigation Strategy and Action Plan is
incorporated into the annual Business Planning exercise conducted
in June.
The principal risks identified during this exercise, ranked in
order of the likelihood of occurrence, are set out below. These may
not include all the risk factors that could affect future results.
Actual results could differ materially from those anticipated
because of these and various other factors, and those set forth in
the Group's other periodic and current reports filed with the
authorities from time to time.
Environmental constraints, climate change and
decarbonisation
The increasingly hostile public attitude towards fossil fuels is
a significant challenge resulting in a rapid move away from
hydrocarbons towards fully renewable fuels. Whilst MSAR(R) provides
considerable environmental advantages, and bioMSAR(TM) offers the
added benefits of carbon reduction, neither offer a net-zero carbon
solution. The Group mitigates this risk by continuing to invest in
research and development to pursue 'net-zero' carbon fuel solutions
as part of its aim to be at net zero by 2030 and pursue business
opportunities that will assist in the achievement of this goal. The
Company's provides progressive decarbonisation solutions for
applications such as shipping, where the existing legacy fleet will
be in service for many years to come.
Market scope and risk
Aligned with the constraints above, and faced with the move away
from hydrocarbons, the Group must still progress its MSAR (R) and
bioMSAR(TM) endeavours into a volume business. The Group mitigates
this challenge by continuing to promote the environmental
contribution of MSAR (R) and bioMSAR(TM) and explaining the assured
ongoing contribution of hydrocarbons to the global energy mix. The
Group further mitigates this risk by increasing the potential
applicability of Quadrise technology to various sectors, as
evidenced by the opportunities in the upstream and industrial
sectors discussed in the CEO's Statement. Nevertheless, the
marketability of our fuels is affected by numerous factors beyond
the control of the Group, for example the variability of price
spreads between light and heavy oils, the relative cost of biofuel
components, and the relative competitiveness of oil, gas, biofuel
and coal prices both for prompt and future delivery.
Commercial return
The Group has made considerable progress in its rapid
development and enhancement of bioMSAR(TM) whilst continuing to
advance commercial opportunities for MSAR (R) and reduce its treat
costs in the face of changes to fuel oil-gasoil spreads. During the
product development of bioMSAR(TM) there remain the considerable
challenges of testing, feedstock availability (see below),
glycerine treatment options, formulation costs and commercial
feasibility still to overcome. There is a risk the Group will not
achieve a commercial return due to major unanticipated change in a
key variable or, more likely, the aggregate impact of changes to
several variables which results in sustained depressed margins.
The competitive position could be affected by government
regulations concerning taxation, duties, specifications,
importation and exportation of hydrocarbon fuels and environmental
aspects. Freight costs contribute substantially to the final cost
of supplied products and a major change in the cost of bulk liquid
freight markets could have an adverse effect on the economics of
the fuels business. The Group would mitigate this risk through
establishing appropriate flexibilities in the contractual
framework, offtake arrangements and price risk management through
hedging.
Feedstock sourcing - MSAR (R)
IMO2020 has impacted high sulphur residue supply, and MSAR (R)
economics are vulnerable to changes in fuel oil-gasoil spreads.
Securing low-cost residue looks increasingly challenging. There is
a risk in respect of appropriately located residues and ongoing
price competitive availability of such feedstock as oil refiners
seek to extract more transportation fuels from each barrel of crude
using residue conversion processes. The Group mitigates this risk
where possible by utilising its deep understanding of the global
refining industry, targeting qualifying suppliers matched to
prospective major consumers. An MSAR (R) commercial contract would
motivate candidate feedstock suppliers to expedite feedstock
supply.
Feedstock sourcing - bioMSAR(TM)
Whilst sufficient quantities have been identified for immediate
trial purposes, the volumes and quality of renewable glycerine
required for a substantial commercial marine or industrial
bioMSAR(TM) contract are beyond those readily accessible. To
mitigate this the Company is rapidly increasing its knowledge of
current and potential glycerine sources and engaging with
suppliers. Clearly a commercial contract would again stimulate this
market and thus expedite feedstock supply. The Company is also
investigating the feasibility of algal production of glycerine with
the University of Greenwich, as well as researching other renewable
feedstocks that could be utilised together with, or instead of
glycerine, such as Vertoro's CSO(TM) biofuel feedstock.
Delay in commercialisation of MSAR(R) and funding risks
There is a risk that the commercialisation of MSAR (R) and
bioMSAR(TM) could be delayed further, or unforeseen technical
and/or commercial challenges arise. This could mean that the Group
may ultimately need to raise further equity funds to remain
operational. Depending on market conditions and investor sentiment,
there is a risk that the Group may be unable to raise the required
funds when necessary. The Group mitigates this risk by maintaining
strong control over its pre-revenue expenditure, keeping up the
momentum on its key projects and maintaining regular contact with
the financial markets and investor community.
Technological risk
There is a risk firstly that the markets for MSAR(R) and
bioMSAR(TM) fuels adopt alternative fuels making these technologies
redundant or secondly that the technology used for their production
may not be adequately robust for all applications. This is in
respect of the character and nature of the feedstock and the
parameters of transportation and storage pertaining to a specific
project. This risk may jeopardise the early commercialisation of
the technology and subsequent implementation of projects; or give
rise to significant liabilities arising from defective fuel during
plant operations. The Group mitigates this risk by ensuring that
its highly experienced key personnel are closely involved with all
areas of MSAR(R) and bioMSAR(TM) formulation and manufacture, and
that the fuel is thoroughly tested before being put into
operational use.
Competition risks
There is a risk that new competition could emerge with similar
technologies sufficiently differentiated to challenge Quadrise's
process. Were such competition to emerge, this could result, over
time, in further price competition and pressure on margins beyond
that assumed in the Group's business planning. This risk is
mitigated by the limited global pool of expertise in the emulsion
fuel market combined with an enhanced R&D programme aimed at
optimising cost and performance and protection of intellectual
property. The Group also makes best use of scarce expertise by
developing close relationships with strategic counterparties such
as Nouryon while ensuring that key employees are suitably
incentivised.
Environment, Social and Governance risks (ESG)
Quadrise is committed to providing safer, cleaner and more
affordable energy. By leveraging our extensive RDI capabilities,
and through continuous improvement processes, Quadrise aims to be
carbon-neutral by 2030. Furthermore, the highest standards of
corporate governance have always been a strength and this places
the Company in the top tier of AIM companies. We maintain this
commitment by adopting the highest disclosure standards of the UK
Corporate Governance Code, through the experience and commitment of
our Non-executive Directors and by following stringent Board
policies and procedures. The Company works to exceptional health,
safety, environmental protection and quality standards, with strong
risk management processes in place, all of which are supported by a
first-class team of professional advisors.
Other Business Risks
Dependence on key personnel
The Group's business is dependent on obtaining and retaining the
services of key personnel of the appropriate calibre as the
business develops. The success of the Group will continue to be
dependent on the expertise and experience of the Directors and the
management team, and the loss of personnel could still have an
adverse effect on the Group. The Group mitigates this risk by
ensuring that key personnel are suitably incentivised and
contractually bound.
Environmental risks
The Group's operations are subject to environmental risks
inherent in the oil processing and distribution industry. The Group
is subject to environmental laws and regulations in connection with
all its operations. Although the Group ensures compliance with all
applicable environmental laws and regulations, there are certain
risks inherent to its activities, such as accidental spills,
leakages or other circumstances that could expose the Group to
potential liability.
Further, the Group may require approval from the relevant
authorities before it can undertake activities which are likely to
impact the environment. Failure to obtain such approvals may
prevent or delay such activities. The Group is unable to predict
definitively the effect of additional environmental laws and
regulations, which may be adopted in the future, including whether
any such laws or regulations would materially increase the Group's
cost of doing business, or affect its operations in any area of its
business. The Group mitigates this risk by ensuring compliance with
environmental legislation in the jurisdictions in which it
operates, and closely monitoring any pending regulation or
legislation to ensure compliance.
No profit to date
The Group has incurred aggregate losses since its inception, and
it is therefore not possible to evaluate its prospects based on
past performance. There can be no certainty that the Group will
achieve or sustain profitability or achieve or sustain positive
cash flow from its activities.
Corporate and regulatory formalities
The conduct of petroleum processing and distribution requires
compliance by the Group with numerous procedures and formalities in
many different national jurisdictions. It may not in all cases be
possible to comply with or obtain waivers of all such formalities.
Additionally, functioning as a publicly listed Company requires
compliance with the stock market regulations. The Group mitigates
this risk through commitment to a high standard of corporate
governance and 'fit for purpose' procedures, and by maintaining and
applying effective policies.
Economic, political, judicial, administrative, taxation or other
regulatory factors
The Group may be adversely affected by changes in economic,
political, judicial, administrative, taxation or other regulatory
factors, in the areas in which the Group operates and conducts its
principal activities. The Group has no direct exposure to the
Ukraine/Russia conflict.
Andy Morrison
Non-executive Chairman
30 September 2022
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
Notes Year ended Year ended
30 June 30 June 2021
2022 GBP'000s
GBP'000s
Continuing operations
Revenue 75 17
Production and development costs (1,447) (1,377)
Other administration expenses (1,419) (1,527)
Fair value adjustments arising
on Convertible Securities - (1,257)
Share option credit/(charge) 10 44 (303)
Warrant charge 11 (18) -
Foreign exchange loss 5 (9)
---------------------------------- ------ ----------- --------------
Operating loss 4 (2,760) (4,456)
Finance costs (3) (4)
Finance income 1 50
---------------------------------- ------ ----------- --------------
Loss before tax (2,762) (4,410)
Taxation 5 164 150
---------------------------------- ------ ----------- --------------
Loss and total comprehensive loss
for the year
from continuing operations to owners
of the parent (2,598) (4,260)
------------------------------------------ ----------- --------------
Loss per share - pence
Basic 6 (0.18)p (0.36)p
Diluted 6 (0.18)p (0.36)p
---------------------------------- ------ ----------- --------------
Consolidated Statement of Financial Position
As at 30 June 2022
Notes As at As at
30 June 30 June 2021
2022 GBP'000s
GBP'000s
Assets
Non-current assets
Property, plant and equipment 7 398 460
Intangible assets 8 2,924 2,924
Non-current assets 3,322 3,384
------------------------------- ------ ---------- --------------
Current assets
Cash and cash equivalents 4.423 7,006
Trade and other receivables 103 117
Prepayments 177 95
Stock - 61
------------------------------- ------ ---------- --------------
Current assets 4,703 7,279
------------------------------- ------ ---------- --------------
TOTAL ASSETS 8,025 10,663
------------------------------- ------ ---------- --------------
Equity and liabilities
Current liabilities
Trade and other payables 262 276
Current liabilities 262 276
-------------------------------- --------- ---------
Equity attributable to owners
of the parent
Issued share capital 14,069 14,069
Share premium 77,189 77,189
Merger reserve 3,777 3,777
Share option reserve 1,151 3,344
Warrant reserve 970 1,017
Reverse acquisition reserve 522 522
Accumulated losses (89,915) (89,531)
-------------------------------- --------- ---------
Total shareholders' equity 7,763 10,387
-------------------------------- --------- ---------
TOTAL EQUITY AND LIABILITIES 8,025 10,663
-------------------------------- --------- ---------
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
Share Reverse
Issued Share Merger option Warrant acquisition Accumulated
capital premium reserve reserve reserve reserve losses Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
1 July 2020 10,351 75,431 - 3,927 1,122 522 (87,324) 4,029
Loss and total
comprehensive
loss
for the year - - - - - - (4,260) (4,260)
Fair value
adjustments
arising on
Convertible
Securities - - - - - - 1,564 1,564
Share option
charge - - - 303 - - - 303
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Transfer of
balances
relating to
expired
share options - - - (886) - - 886 -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Transfer of
balances
relating to
expired
warrants - - - - (105) - 105 -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
New shares
issued 2,599 639 3,777 - - - - 7,015
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Share issue
costs - - - - - (502) (502)
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Shares issued
upon
exercise of
Convertible
Security 1,119 1,119 - - - - - 2,238
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
30 June 2021 14,069 77,189 3,777 3,344 1,017 522 (89,531) 10,387
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
1 July 2021 14,069 77,189 3,777 3,344 1,017 522 (89,531) 10,387
Loss and total
comprehensive
loss
for the year - - - - - - (2,598) (2,598)
Share option
charge - - - (44) - - - (44)
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Transfer of
balances
relating to
expired
share options - - - (2,149) - - 2,149 -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Warrant charge - - - - 18 - - 18
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Transfer of
balances
relating to
expired
warrants - - - - (65) - 65 -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
30 June 2022 14,069 77,189 3,777 1,151 970 522 (89,915) 7,763
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Consolidated Statement of Cash Flows
For the year ended 30 June 2022
Notes Year ended Year ended
30 June 30 June 2021
2022 GBP'000s
GBP'000s
Operating activities
Loss before tax from continuing
operations (2,762) (4,410)
Fair value adjustments
arising on Convertible
Securities - 1,257
Depreciation 7 120 135
Loss on disposal of fixed
assets - 16
Finance costs paid 3 4
Finance income received (1) (50)
Share option (credit)/charge 10 (44) 303
Warrant charge 18 -
Working capital adjustments
Decrease in trade and other
receivables 14 96
(Increase)/decrease in
prepayments (82) 17
(Decrease)/increase in
trade and other payables (14) 78
Decrease in stock 61 -
Cash utilised in operations (2,687) (2,554)
--------------------------------- --------- ----------- --------------
Finance costs paid (3) (4)
Taxation received 5 164 150
Net cash outflow from
operating activities (2,526) (2,408)
--------------------------------- --------- ----------- --------------
Investing activities
Finance income received 1 50
Purchase of property, plant
and equipment 7 (58) (29)
Net cash outflow from
investing activities (57) 21
--------------------------------- --------- ----------- --------------
Financing activities
Issue of ordinary share
capital - 7,015
Issue costs - (502)
Increase in Convertible
Securities - 500
Net cash inflow from financing
activities - 7,013
Net (decrease)/increase
in cash and cash equivalents (2,583) 4,626
Cash and cash equivalents
at the beginning of the
year 7,006 2,380
--------------------------------- --------- ----------- --------------
Cash and cash equivalents
at the end of the year 4,423 7,006
--------------------------------- --------- ----------- --------------
Notes to the Financial Information
1. Basis of Preparation and Significant Accounting Policies
The financial information for the year ended 30 June 2022 has
been prepared in accordance UK adopted international accounting
standards in conformity with the requirements of the Companies Act
2006 and effective, or issued and early adopted, as at the date of
those statements.
The financial information contained in this announcement does
not constitute the Company's statutory financial statements for the
year ended 30 June 2022 but has been extracted from them. These
financial statements will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The
auditors have reported on these financial statements, and their
report was unqualified and did not contain any statement under
section 498(2) or (3) Companies Act 2006.
The financial information has been prepared on the historical
cost basis, except for the revaluation of certain financial
instruments. Details of the accounting policies applied are set out
in the financial statements for the year ended 30 June 2022.
The financial information is prepared in Pounds Sterling and all
values are rounded to the nearest thousand Pounds (GBP'000) except
where otherwise indicated.
Statutory financial statements for the year ended 30 June 2021
have been delivered to the Registrar of Companies. The auditor's
report on these financial statements was unqualified and did not
contain any statement under section 498(2) or (3) Companies Act
2006.
The Directors do not propose a dividend in respect of the year
ended 30 June 2022 (2021: nil).
This announcement was approved by the Board on 30 September
2022.
2. Going Concern
The Group had a cash balance of GBP4.42m as of 30 June 2022,
expected to be sufficient to cover project expenditure and fixed
costs up to H2 2023. Additional funding will be required to bridge
the gap to the generation of sustainable positive cashflows, with
these now forecast to commence in H2 2024.
The basis for these expectations is the Group business model,
budget and business plan, and sensitivity analysis, which have been
reviewed and approved by the Board. The model comprises the
financial forecasts associated with each project opportunity deemed
to have a realistic chance of progressing, with assumptions based
on the latest market information, agreements with counterparties
and the status of discussions.
The Directors carry out a detailed risk assessment process each
year, with key risks and mitigating actions identified. Despite the
ongoing global disruption caused by COVID-19 and Russia's invasion
of Ukraine, the Directors note the positive and sustained levels of
engagement with partners, prospective clients and project
stakeholders worldwide during the year, with three major agreements
signed during the year with MSC, Valkor and the client in Morocco.
Existing and prospective commercial partners make decisions based
on long-term considerations, and the Directors believe that the
economic and environmental advantages offered by MSAR(R) and
bioMSAR(TM) are increasingly attractive in periods of global
uncertainty as counterparties look to both generate savings and
further improve their environmental performance.
The Group's ability to reach commercial revenues in H1 2023 will
be determined by the successful outcome of the forthcoming trials.
The Board are confident that the trials will be successful based
upon the following:
-- Morocco: The trial in Morocco involves the combustion of
MSAR(R) for power generation. This is a similar application to that
successfully trialled by Quadrise at the Orlen Lietuva plant in
Lithuania in 2011, where MSAR(R) was consumed in a power plant
boiler to generate electricity.
-- MSC: The MSC trials will take place on the same vessel used
for the Maersk LONO trial (the MSC Leandra, formerly the Seago
Istanbul). In addition, the engine manufacturer (Wartsila) and MSC
are happy to proceed directly to on-vessel trials, rather than
commencing with an initial stationary engine test, given their
assessment of the low-risk nature of the trial.
-- Utah: The Utah application is in the upstream sector, where
similar technology has been successfully demonstrated previously by
Quadrise Canada.
In addition, the positive results generated by the Aquafuel
testing on bioMSAR(TM) and the similar properties of MSAR(R) and
bioMSAR(TM) mean that trials involving bioMSAR(TM) do not have a
significantly higher risk of failure than the MSAR(R)
equivalents.
The Directors have reviewed the Group's ability to operate as a
going concern up to the 31 December 2023, and have determined that
the continuation of the Group as a going concern will be dependent
upon successfully raising sufficient funds within 12 months of the
financial statements sign off date to bridge the gap between the
exhaustion of existing funds and the generation of sustainable
positive cashflows. The Directors have a reasonable expectation
that with positive trial results and ongoing progress to commercial
revenues, such funds will be raised, although no binding funding
agreements are in place at the date of this report, furthermore,
notwithstanding the Board's confidence, there are currently no
binding agreements in place in respect of commercial revenues.
The Directors have therefore concluded that it is appropriate to
prepare the Group's financial statements on a going concern basis;
however, in the absence of additional funding being in place at the
date of this report, these conditions indicate the existence of a
material uncertainty which may cast significant doubt over the
Group's ability to continue as a going concern and, therefore, that
it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
The financial information does not include the adjustments that
would result if the Group was unable to continue as a going
concern.
3. Segmental Information
For the purpose of segmental information, the reportable
operating segment is determined to be the business segment. The
Group principally has one business segment, the results of which
are regularly reviewed by the Board. This business segment is a
business to produce emulsion fuel (or supply the associated
technology to third parties) as a low-cost substitute for
conventional heavy fuel oil ("HFO") for use in power generation
plants and industrial and marine diesel engines.
Geographical Segments
The Group's only geographical segment during the year was the
UK.
4. Operating Loss
Operating loss is stated after charging: Year ended Year ended
30 June 30 June 2021
2022 GBP'000s
GBP'000s
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts.
Fees payable to the Company's auditor
and its associates for other services
: 41 43
Audit of accounts of subsidiaries 41 35
Tax compliance services - -
Consultants and other professional
fees (including legal) 211 273
Depreciation of property, plant and
equipment 120 135
Research and development costs 326 300
5. Taxation
Year ended Year ended
30 June 30 June 2021
2022 GBP'000s
GBP'000s
UK corporation tax credit (164) (150)
Total (164) (150)
--------------------------- ----------- --------------
No liability in respect of corporation tax arises as a result of
trading losses.
Tax Reconciliation Year ended Year ended
30 June 30 June 2021
2022 GBP'000s
GBP'000s
Loss on continuing operations before
taxation (2,762) (4,410)
Loss on continuing operations before
taxation multiplied by
the UK corporation tax rate of 19%
(2021: 19%) (525) (838)
Effects of:
Non-deductible expenditure 4 58
R&D tax credit (164) (150)
Temporary differences (6) 24
Tax losses carried forward 527 756
Total taxation credit on loss from
continuing operations (164) (150)
-------------------------------------- --------------- -------------------
The Group has tax losses arising in the UK of approximately
GBP59.97m (2021: GBP58.46m ) that are available, under current
legislation, to be carried forward against future profits. However
the ability to utilise the losses is restricted, being dependant on
the type of loss and when it arose. The use of losses under the UK
corporation tax regime was reformed from 1 April 2017 such that
different rules on the use of losses apply to losses arising
pre-April 2017 and post-April 2017. Pre-2017 trading losses can
only be deducted against profits of the same trade within the
company in which they arose, whereas the post-2017 trading losses
can be used more widely and are deductible against total profits of
the group.
Reconciliation of tax losses Year ended Year ended
30 June 30 June 2021
2022 GBP'000s
GBP'000s
Trading losses 33,215 30,692
Non-trade deficits arising in Intangible
Assets within Quadrise International
Limited 25,758 25,758
Pre-trading losses incurred by subsidiaries - 200
Management expenses incurred by Quadrise
International Limited 817 817
Non-trade loan relationships 89 899
Capital losses 89 89
Total 59,968 58,455
--------------------------------------------- -------------------- --------------------
A deferred tax asset representing these losses and other
temporary differences at the statement of financial position date
of approximately GBP14.99m (2021: GBP11.1m) has not been recognised
as a result of existing uncertainties in relation to its
realisation.
6. Loss Per Share
The calculation of loss per share is based on the following loss
and number of shares:
Year ended Year ended
30 June 2022 30 June 2021
Loss for the year (GBP'000s) (2,598) (4,260)
Weighted average number of shares:
Basic 1,406,904,000 1,175,406,844
Diluted 1,406,904,000 1,175,406,844
Loss per share - pence:
-------------------------------------- -------------- --------------
Basic (0.18)p (0.36)p
-------------------------------------- -------------- --------------
Diluted (0.18)p (0.36)p
-------------------------------------- -------------- --------------
Basic loss per share is calculated by dividing the loss for the
year from continuing operations of the Group by the weighted
average number of ordinary shares in issue during the year.
For diluted loss per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potential dilutive options over ordinary shares. Potential ordinary
shares resulting from the exercise of share options have an
anti-dilutive effect due to the Group being in a loss position. As
a result, diluted loss per share is disclosed as the same value as
basic loss per share. The 18.3m dilutive share options and the
40.2m dilutive warrants issued by the Company and which are
outstanding at year-end could potentially dilute earnings per share
in the future if exercised when the Group is in a profit making
position.
7. Property, plant and equipment
Consolidated
Leasehold Computer Software Office Plant Total
Improvements Equipment Equipment and machinery
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2021 74 98 43 16 1,397 1,628
Additions 15 - - - 43 58
Disposals - (4) - - - (4)
Closing balance
- 30 June 2022 89 94 43 16 1,440 1,682
------------------ -------------- ------------------ --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2021 (74) (92) (43) (16) (943) (1,168)
Depreciation
charge for the
year (2) (2) - - (116) (120)
Disposals 4 - - - 4
------------------ -------------- ------------------ --------- ----------- --------------- ---------
Closing balance
- 30 June 2022 (76) (90) (43) (16) (1,059) (1,284)
------------------ -------------- ------------------ --------- ----------- --------------- ---------
Net book value
at 30 June 2022 13 4 - - 381 398
------------------ -------------- ------------------ --------- ----------- --------------- ---------
Consolidated
Leasehold Computer Software Office Plant Total
Improvements Equipment Equipment and machinery
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2020 181 95 43 16 1,410 1,745
Additions - 3 - - 26 29
Disposals (107) - - - (39) (146)
Closing balance
- 30 June 2021 74 98 43 16 1,397 1,628
------------------ -------------- ------------------ --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2020 (181) (89) (43) (16) (834) (1,163)
Depreciation
charge for the
year - (3) - - (132) (135)
Disposals 107 - - - 23 130
------------------ -------------- ------------------ --------- ----------- --------------- ---------
Closing balance
- 30 June 2021 (74) (92) (43) (16) (943) (1,168)
------------------ -------------- ------------------ --------- ----------- --------------- ---------
Net book value
at 30 June 2021 - 6 - - 454 460
------------------ -------------- ------------------ --------- ----------- --------------- ---------
8. Intangible Assets
Consolidated
QCC royalty MSAR(R) Technology Total
payments trade name and know-how
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Balance as at 1 July
2021 and 30 June 2022 7,686 3,100 25,901 36,687
Amortisation and
Impairment
Balance as at 1 July
2021 and 30 June 2022 (7,686) (176) (25,901) (33,763)
Net book value as
at 30 June 2022 - 2,924 - 2,924
------------------------ ------------ ------------ -------------- ---------
Cost
Balance as at 1 July
2020 and 30 June 2021 7,686 3,100 25,901 36,687
Amortisation and
Impairment
Balance as at 1 July
2020 and 30 June 2021 (7,686) (176) (25,901) (33,763)
Net book value as
at 30 June 2021 - 2,924 - 2,924
------------------------ -------- -------- ------------ -----------
Intangible assets comprise intellectual property with a cost of
GBP36.7m, including assets of finite and indefinite life. Quadrise
Canada Corporation's ("QCC's) royalty payments of GBP7.7m and the
MSAR(R) trade name of GBP3.1m are termed as assets having
indefinite life as it is assessed that there is no foreseeable
limit to the period over which the assets would be expected to
generate net cash inflows for the Group, as they arise from
cashflows resulting from Quadrise and QCC gaining a permanent
market share. The assets with indefinite life are not amortised,
but the QCC royalty payments intangible asset became fully impaired
in 2012.
The remaining intangibles amounting to GBP25.9m, primarily made
up of technology and know-how, are considered as finite assets and
were amortised over 93 months, being fully amortised in 2012. The
Group does not have any internally generated intangibles.
MSAR(R) trade name intangible asset
In accordance with IAS 36 "impairment of assets" and IAS 38
"intangible assets", a review of impairment for indefinite life
intangible assets is undertaken annually or at any time an
indicator of impairment is considered to exist. The discount rate
applied to calculate the present value is for the cash generating
unit ("CGU"). A CGU is the smallest identifiable group of assets
that generates cash inflows that are largely independent of the
cash inflows from other assets or groups of assets. The recoverable
amount of the CGU is assessed by reference to the value in use
("VIU"), being the net present value ("NPV") of future cash flow
expected to be generated by the asset, and fair value less costs to
sell ("FVLCS").
The recoverable amount of the MSAR(R) trade name intangible
asset has been determined using a VIU model. The expected future
cash flows utilised in the VIU model are derived by quantifying the
royalties that would result if the asset was licensed from a third
party in order to determine the income stream directly attributable
to the asset in isolation. The royalties are based on a percentage
of projected future revenues up to 30 June 2032 with an assumed
growth rate being used beyond that date.
The key assumptions used in this calculation are as follows:
2022 2021
Royalty rate (% of
projected revenue)
(1) 0.5% 0.5%
------------- -------------
Discount rate (2) 20% 20%
------------- -------------
Revenues forecast 30 June 2032 30 June 2031
up to (3)
------------- -------------
Growth rate beyond
forecast period (4) 0% 0%
------------- -------------
1) The royalty rate used upon initial recognition of this
intangible asset was 0.33% of revenues determined as part of a
third-party intangible asset valuation exercise. This was increased
to 0.5% of revenues from 2011 onwards to reflect the wider
awareness of the MSAR(R) trademark in the market.
2) The discount rate of 20% has been determined by management as
conservative estimate based on the uncertainty inherent in the
revenue forecasts. Management estimates the discount rates using
pre-tax rates that reflect current market assessments of the time
value of money and risks specific to expected future projects.
3) The 2022 revenue forecast extends to 30 June 2032 which
ensures that each project included within the forecast reaches full
maturity.
4) No growth has been forecast beyond the forecast period due to
the uncertainty inherent in the revenue projections beyond the
stage of project maturity.
The revenue forecast is based on the latest Company business
model, which is regularly reviewed by management. The basis for the
inclusion of projects and the estimation of growth rates, margins
and project lifespans within the business model is based on the
latest agreements with counterparties, commodity and chemical
prices and the most recent discussions with customers, suppliers
and other business partners.
The 'base-case' impairment assessment based on the above inputs
shows a recoverable amount for the asset that is in excess of the
net book value of asset and therefore no impairment has been
identified, with the VIU exceeding the carrying value by GBP1.48m
(the 'headroom').
Management have performed sensitivity analyses whereby certain
parameters were flexed downwards by reasonable amounts and certain
scenarios were modelled for the CGU to assess whether the
recoverable value would result in an impairment charge. In
isolation, none of these scenarios would result in an impairment to
the MSAR(R) Trade Name intangible asset. However, a combination of
two or more of these scenarios could result in an impairment
charge, but management do not consider this likely.
The following sensitivities were applied:
Results of sensitivity analysis
Scenario Resulting headroom Scenario which
(GBP'm) would reduce headroom
to nil
Delayed revenues 0.74 A 3-year delay to
(1 year) forecast revenues.
------------------- ------------------------
Delayed revenues 0.13 A 3-year delay to
(2 years) forecast revenues.
------------------- ------------------------
Increase in discount 0.01 Increase in discount
rate to 25% rate to 25.03%.
------------------- ------------------------
Removal of projects 0.38 Removal of projects
which generate 25% which generate 33.6%
of forecast revenues of revenues.
------------------- ------------------------
Finite company lifespan 0.23 Finite company lifespan
(to 30 June 2034). (to 30 June 2032).
------------------- ------------------------
Amortisation of Intangible Assets
The Board has reviewed the accounting policy for intangible
assets and has amortised those assets which have a finite life. All
intangible assets with a finite life were fully amortised as at 30
June 2022.
9. Investments
At the statement of financial position date, the Group held a
20.44% share in the ordinary issued capital of Quadrise Canada
Corporation ("QCC"), a 3.75% share in the ordinary issued capital
of Paxton Corporation ("Paxton"), a 9.54% share in the ordinary
issued capital of Optimal Resources Inc. ("ORI") and a 16.86% share
in the ordinary issued capital of Porient Fuels Corporation
("Porient"), all of which are incorporated in Canada.
QCC is independent of the Group and is responsible for its own
policy-making decisions. There have been no material transactions
between QCC and the Group during the period or any interchange of
managerial personnel. As a result, the Directors do not consider
that they have significant influence over QCC and as such this
investment is not accounted for as an associate.
The Group has no immediate intention to dispose of its
investments unless a beneficial opportunity to realise these
investments arises.
Given that there is no active market in the shares of any of
above companies, the Directors have determined the fair value of
the unquoted securities at 30 June 2022. The shares in each of
these companies were valued at CAD $nil on 1 July 2021 due to their
business models being highly uncertain, with minimal possibility of
any material value being recovered from their asset base. During
the year there has been no indication that this situation has
changed, therefore the Directors have determined that the
investments should continue to remain valued at CAD $nil at 30 June
2022.
10. Share Options
Movement in the year:
The following table illustrates the number and weighted average
exercise prices ("WAEP") of, and movements in, share options during
the year:
WAEP WAEP
Number (pence) Number (pence)
30 June 30 June 30 June 30 June
2022 2022 2021 2021
Outstanding as at 1
July 42,750,000 14.69 39,250,000 17.95
Granted during the year 14,515,722 5.70 10,000,000 7.50
Expired during the year (35,880,379) 14.44 (6,500,000) 23.36
Exercised during the - - - -
year
Options outstanding
as at 30 June 21,385,343 9.00 42,750,000 14.69
------------------------- ------------- ---------- ------------ ---------
Exercisable as at 30
June 18,250,000 10.37 28,312,500 18.36
------------------------- ------------- ---------- ------------ ---------
The weighted average remaining contractual life of the 21.4
million options outstanding at the statement of financial position
date is 4.64 years (2021: 5.17 years). The weighted average share
price during the year was 2.66p (2021: 2.98p) per share.
The expected volatility of the options reflects the assumption
that historical volatility is indicative of future trends, which
may not necessarily be the actual outcome. The expected life of the
options is based on historical data available at the time of the
option issue and is not necessarily indicative of future trends,
which may not necessarily be the actual outcome.
The Share Option Schemes are equity settled plans, and fair
value is measured at the grant date of the option. Options issued
under the Schemes vest over a one to three year period provided the
recipient remains an employee of the Group. Options also may be
exercised within an agreed period of an employee leaving the Group
at the discretion of the Board.
The Company issued 14.5 million share options to directors and
employees during the year (2021: 10 million).
The fair value was calculated using the Black Scholes option
pricing model. The weighted average inputs were as follows
2022 2021
Stock price: 4.10p 3.08p
Exercise Price 5.70p 7.50p
Interest Rate 0.1% 0.1%
Volatility 124.12% 126.91%
Expected term (years) 4.0 4.0
11. Warrants
Movement in the year:
The following table illustrates the number and weighted average
exercise prices ("WAEP") of, and movements in, warrants during the
year:
WAEP WAEP
Number (pence) Number (pence)
30 June 30 June 30 June 30 June
2022 2022 2021 2021
Outstanding as at 1
July 40,228,026 6.98 45,228,026 6.56
Granted during the year 3,000,000 1.80 - -
Exercised during the - - - -
year
Expired during the year (3,000,000) 3.53 (5,000,000) 3.16
Warrants outstanding
as at 30 June 40,228,026 6.85 40,228,026 6.98
------------------------- ------------ ---------- ------------ ---------
Exercisable as at 30
June 40,228,026 6.85 40,228,026 6.98
------------------------- ------------ ---------- ------------ ---------
The warrants are equity settled warrants which vest immediately
on grant date. Fair value is measured at the grant date of the
option using the Black Scholes pricing model. The inputs into this
model are: Stock price at the date of grant, exercise price,
interest rate, expected term and expected volatility. The expected
volatility of the warrants reflects the assumption that historical
volatility is indicative of future trends, which may not
necessarily be the actual outcome. The expected life of the
warrants is based on historical data available at the time of the
option issue and is not necessarily indicative of future trends,
which may not necessarily be the actual outcome.
The weighted average inputs into the Black Scholes option
pricing model were as follows:
2022 2021
Stock price: 1.87p -
Exercise Price 1.80p -
Interest Rate 1.25% -
Volatility 91.94% -
Expected term (years) 0.72 -
======= =====
The weighted average remaining contractual life of the 40.2
million warrants outstanding at the statement of financial position
date is 0.23 years (2021: 1.15 years). The weighted average share
price during the year was 2.66p (2021: 2.98p) per share.
11. Related Party Transactions
Non-executive Director Laurence Mutch is also a Director of
Laurie Mutch & Associates Limited, which has provided
consulting services to the Group. The total fees charged for the
year amounted to GBP5k (2021: GBP45k). The balance payable at the
statement of financial position date was GBPnil (2021: GBPnil).
QFI defines key management personnel as the Directors of the
Company. Other than as above, there are no transactions with
Directors, other than their remuneration as disclosed in the Report
of Directors' Remuneration.
12. Events After the end of the Reporting Period
On 4 August 2022, the Company granted a total of 12,500,000
options (the "Performance Options") over new ordinary shares of 1p
each in the Company to employees and management of the Company in
accordance with the provisions of the Company's Unapproved Share
Option Plan 2016 ("2016 Plan") a nd Enterprise Management Incentive
Share Option Plan ("EMI Plan"), as appropriate . 7,500,000
Performance Options were issued to Jason Miles following the
lapsing in full of the 7,500,000 options issued by the Company on 3
September 2021 due to the specific performance condition of
reaching certain project milestones prior to the option vesting
date not having been met.
Director Number of Performance Plan Exercise
Options price
Jason Miles 7,500,000 2016 Plan 3.0p
---------------------- ---------- ---------
These Performance Options will vest as to 50% on the first
anniversary of grant and the remaining 50% shall vest on the second
anniversary of the date of grant. All vestings are subject to the
satisfaction of specific performance conditions, being the
achievement of certain project milestones and remaining in
employment with the Company, prior to the first anniversary of
grant. The Performance Options will be exercisable from vesting
until the eighth anniversary of the date of grant.
On 4 August 2022 Quadrise also granted 14,000,000 options over
new ordinary shares of 1p each in the Company to the Company's
non-executive directors in accordance with the provisions of 2016
Plan (the "Additional Options").
Director Number of Options Plan Exercise
price
Andrew Morrison 4,000,000 2016 Plan 3.0p
------------------ ---------- ---------
Laurie Mutch 4,000,000 2016 Plan 3.0p
------------------ ---------- ---------
Philip Snaith 4,000,000 2016 Plan 3.0p
------------------ ---------- ---------
Dilip Shah 2,000,000 2016 Plan 3.0p
------------------ ---------- ---------
Total 14,000,000 - -
------------------ ---------- ---------
The Additional Options will vest as to 50% on the first
anniversary of grant and the remaining 50% shall vest on the second
anniversary of the date of grant and have no performance conditions
to vesting attached. The Additional Options will be exercisable
from vesting until the eighth anniversary of the date of grant. The
vestings are not subject to the satisfaction of specific
performance conditions.
On 4 August 2022, the Company granted 6,382,979 NVOs over new
ordinary shares of 1p each in the Company to the Company's
employees in lieu of cash bonuses for the year ended 30 June 2022.
These NVOs were issued under the Company's Enterprise Management
Incentive Plan and w ill vest after 12 months from the date of
grant, have no performance conditions and will be exercisable from
vesting until the tenth anniversary of the date of grant.
13. Copies of the Annual Report and Notice of Annual General
Meeting
Copies of the annual report and of the notice convening the
Company's 2022 annual general meeting will be available shortly
from the Company's website at www.quadrisefuels.com and from the
Company's registered office, Eastcastle House, 27-28 Eastcastle
Street, London, W1W 8DH.
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