TIDMQFI
RNS Number : 8219N
Quadrise Fuels International PLC
04 October 2021
4 October 2021
Quadrise Fuels International plc
("Quadrise", "QFI", the "Company" and together with its
subsidiaries the "Group")
Final Results, Directorate Change, Investor Presentation and
Notice of AGM
Quadrise Fuels International plc (AIM: QFI) announces its
audited final results for the year ended 30 June 2021 and gives
notice that the Company's Annual General Meeting ("AGM") will be
held at 12 noon on 26 November 2021.
Highlights
-- Substantial progress across Quadrise's project portfolio and
accelerated development of low-carbon bioMS AR(TM) both during and
post period end despite the significant challenges posed by the
COVID-19 pandemic.
-- Completion of significantly oversubscribed placing and open
offer in March 2021 to raise net proceeds of GBP6.5m, ensuring that
on the delivery of successful trials and entry of appropriate
commercial supply agreements, the Company has the resources in
place to reach sustainable commercial revenues in Q1 2023.
-- bioMSAR(TM) (-) Quadrise's innovative low-carbon bioMSAR(TM)
fuel takes advantage of our proven emulsion fuel technology
platform and utilises renewable glycerine as a clean fuel
component. The glycerine content of bioMSAR(TM) can be adjusted to
meet the client's required price/CO(2) reduction goals, providing a
cost-effective transition fuel solution to meet increasingly
stringent decarbonisation requirements. Testing of bioMSAR(TM) at
Aquafuel Research Ltd demonstrated over 20% CO(2) and NOx emissions
savings, as well as higher engine efficiency results. This was
followed by a larger trial using 5 tons of bioMSAR(TM) at the VTT
facility in Finland. The VTT testing demonstrated a 26% average
reduction in CO(2) emissions compared to marine diesel. Plans are
underway to accelerate testing for bioMSAR(TM) use in a range of
sectors that are demanding "drop in" transition fuels to advance
decarbonisation.
-- MSC - Following the signature of the Joint Development
Agreement with MSC Shipmanagement to carry out LONO ('Letter Of No
Objection') fuel trials on board their commercial container
vessels, Quadrise is now working to finalise the preparatory work
to enable these trials. As a result of positive results from
bioMSAR(TM) testing on 4-stroke diesel engines, MSC expressed an
interest in advancing the option of bioMSAR(TM) testing on their
modern 2-stroke engines alongside MSAR(R) and this is our main
focus, with a view to commencing commercial-scale 4,000-hour LONO
trials in H1 2022.
-- Utah - Our project in Utah involves using MSAR(R) technology
to emulsify low-sulphur heavy oil from oil-sand deposits located at
the Petroteq Oil Sands Plant ('POSP') at Asphalt Ridge in Utah,
USA, which is operated by Greenfield Energy LLC ("Greenfield"). Due
to both COVID-19 and adverse weather conditions, the POSP start-up
and commissioning process experienced delays, resulting in the
required oil samples from site not being received at QRF until
August 2021. During August our Research, Development and Innovation
('RDI') team at QRF successfully converted these samples to both
MSAR(R) and bioMSAR(TM), and in September a report was issued to
Greenfield in accordance with our Commercial Trial Agreement.
Quadrise is now working with Greenfield to review the requirements
for future commercial implementation.
-- Morocco - The Company's industrial client in Morocco is a
major consumer of HFO. Since the successful pilot plant trial in
October 2020, plans have been impacted by COVID related travel
restrictions causing delays to the trial programme. Following the
easing of these restrictions, the Company was able to visit the
site ("Site B") in August 2021 in order to prepare for the next
stage of the programme; the combustion of 60mt of MSAR(R) . Site B
consumes around one third of the client's annual HFO consumption,
and the trial is now expected to occur in Q4 2021. Testing of
bitumen samples for the MSAR(R) fuel production has now been
completed and production is scheduled to commence in Q4 with
shipment of the trial equipment set for October 2021. The trial
results and a feasibility study for MSAR(R) use at a second client
site ('Site A') are expected to be delivered to the client in Q4
2021, with Quadrise receiving GBP0.1m. A subsequent commercial
trial will then take place at Site A later in Q4 2021 or early Q1
2022 with shared trial costs reimbursed to Quadrise under a
separate agreement. Assuming the successful conclusion of these
trials, the intention would then be to conclude a commercial supply
agreement covering one or more of the client's sites in Morocco
during Q1 2022.
-- Americas - Using the Group's regional agent network we are
seeking to progress projects in Panama with power generators, in
Mexico and Ecuador with the state oil companies and utilities
respectively, and look forward to providing updates as these
projects progress.
Financial Summary
-- Loss after tax of GBP4.3m (2020: GBP4.8m), of which of
GBP1.4m (2020: GBP1.4m) is attributable to production and
development costs and GBP1.5m (2020: GBP1.8m) relates to
administrative and corporate expenses. Non-cash charges of GBP1.6m
(2020: GBP1.6m) comprise GBP1.3m (2020: GBP1.1m) of fair value
adjustments to the Convertible Securities balance due and GBP0.3m
relating to share option and warrant expenses (2020: GBP0.5m).
-- Total assets of GBP10.7m as at 30 June 2021 (2020: GBP6.3m).
-- Cash balances as at 30 June 2021 of GBP7.0m (2020: GBP2.4m).
-- Cumulative tax losses of GBP58.4m (2020: GBP53.7m) available
for set-off against future profits.
Mike Kirk, Chairman of QFI, said:
"The Company has made great progress during the year, with the
launch of low-carbon bioMSAR(TM), progression of key projects and a
hugely successful fundraise. As such, Quadrise is now strongly
positioned to deliver on its promise and, having undertaken a
progression in my role as Chairman since January 2020 when Jason
Miles was appointed as Chief Executive Officer to ensure a seamless
migration in executive duties, I believe that now is the right time
for me to be handing over to a new Non-Executive Chairman. As such,
I intend to step down as a director of the Company following the
AGM in November. Laurie Mutch will take over as Interim Chairman
from that time until a new Chairman is in place.
I am proud of what Quadrise has achieved and I have no doubt
that the team, under Jason's leadership, will deliver the migration
to sustainable commercial revenues. I would like to thank all of my
colleagues within Quadrise, with whom it has been a pleasure to
work with over the last 6 years."
Jason Miles, Chief Executive of QFI, said:
"This has been a year of substantial progress for Quadrise,
notwithstanding the many challenges faced during the pandemic. For
much of the period we, along with our clients, were subject to
significant restrictions relating to travel and site access on our
active projects.
We are immensely proud of the rapid progress made in taking
bioMSAR(TM) from a concept tested in the laboratory, to a proven
renewable transition fuel delivering leading reductions in CO(2)
emissions. This would not have been possible without the hard work
and dedication of everyone within Quadrise and at our partners,
including Aquafuel and Nouryon. There is no doubt that bioMSAR(TM)
has been instrumental in increasing interest in the Company and,
following the successful fundraisings earlier in the year, the
Company has a path to sustainable commercial revenues by Q1
2023.
On behalf of the Company, I would like to express our sincere
thanks to Mike Kirk for his valuable experience and input during
his time as Chairman of Quadrise, he leaves the company in great
shape to deliver the commercialisation of MSAR(R) and
bioMSAR(TM)."
Live Investor Presentation
The Company is also pleased to announce that Mike Kirk,
Chairman, and Jason Miles, CEO, will provide a live investor
presentation relating to the Business Update via the Investor Meet
Company ("IMC") platform on Wednesday 6 October at 14.00 BST.
The Company is committed to ensuring that there are appropriate
communication structures for all of its shareholders so that its
strategy, business model and performance are clearly
understood:
-- The online presentation is open to all existing and potential shareholders
-- Questions can be submitted pre-event via your IMC dashboard
or at any time during the live presentation via the "Ask a
Question" function. Although the Company may not be in a position
to answer every question it receives, it will address the most
prominent within the confines of information already disclosed to
the market. Responses to the Q&A from the live presentation
will be published at the earliest opportunity on the Investor Meet
Company platform
Investor feedback can also be submitted directly to management
post-event to ensure the Company can gather the views of its
shareholder base
Investors can sign up to Investor Meet Company for free and add
Quadrise Fuels International plc via
https://www.investormeetcompany.com/quadrise-fuels-international-plc/register-investor
Investors who have already registered and added to meet the
Company, will be invited automatically.
Notice of Annual General Meeting
The Company's Annual General Meeting ("AGM") will be held at
12:00 noon on 26 November 2021 at the Park Plaza County Hall Hotel,
1 Addington Street, London, SE1 7RY.
For additional information, please contact:
Quadrise Fuels International plc +44 (0)20 7031 7321
Mike Kirk, Chairman
Jason Miles, Chief Executive Officer
Cenkos Securities plc +44 (0)20 7397 8900
Nominated Adviser
Ben Jeynes
Katy Birkin
Peel Hunt LLP +44 (0)20 7418 8900
Joint Broker
Richard Crichton
David McKeown
Shore Capital Stockbrokers Limited +44 (0)20 7408 4090
Joint Broker
Toby Gibbs
Fiona Conroy
FTI Consulting +44 (0)20 3727 1000
Public and Investor Relations
Ben Brewerton
Ntobeko Chidavaenzi
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 (as amended), which forms
part of domestic UK law pursuant to the European Union (Withdrawal)
Act 2018. Upon publication of this announcement via a Regulatory
Information Service, this inside information is now considered to
be in the public domain.
Chairman's Statement
I am immensely proud of the progress that Quadrise has made
during the 2021 financial year. Despite the significant challenges
posed by the COVID-19 pandemic, the Company has made substantial
progress across our project portfolio, accelerated the developm ent
of low-carbon bioMS AR(TM) and secured the funding to take the
Company through to commercial sustainability. These developments
have only been possible because of the dedication of the entire
Quadrise team and the support of our loyal shareholders.
Our new low-carbon bioMSAR(TM) fuel incorporates renewable
glycerine to reduce CO(2) emissions, whilst maintaining MSAR(R) 's
lower NOx and lower particulate emissions. Initial development work
on bioMSAR(TM) commenced in Spring 2020, with the fuel being
formally launched in December 2020 . This rapid progress was
instrumental in our ability to finalise the Joint Development
Agreement with MSC in January 2021 and was followed by the
successful placing and open offer in March 2021. This raised gross
proceeds of GBP7.0m, was significantly oversubscribed and included
two new major institutional investors. The funds raised ensure
that, pending the positive conclusion of the current trial
programmes and the agreement of appropriate commercial agreements,
Quadrise now has the resources in place to reach forecast
sustainable commercial revenues in Q1 2023.
Quadrise has always had strong Environmental, Social and
Governance credentials, and we have worked hard during the year to
promote these. Emphasis has been placed on Quadrise's environmental
credentials, in particular, via the development and launch of
bioMSAR (TM) . This stood Quadrise in good stead as the global
response to delivering Net Zero in CO(2) emissions accelerated at a
pace that took most by surprise. As a result, bioMSAR (TM) caught
the imagination of our current and prospective customers, as
evidenced by MSC's decision to shift the basis for the forthcoming
LONO trials and advance the use of bioMSAR (TM) alongside MSAR(R)
.
The work with MSC in the marine sector sits alongside our other
active projects in the industrial sector in Morocco and the
upstream sector in Utah with Greenfield. All of these projects have
progressed positively during the period, though not always at the
pace we would have preferred. This has required the RDI (Research,
Development and Innovation) team at our QRF research facility, to
provide both testing and operational support. In addition, this
team has been key to the continued development and testing of
bioMSAR(TM) and in producing the fuel for testing at Aquafuel
Research Ltd ('Aquafuel') and the VTT facility in Finland .
Quadrise's established network of in-country partners played a
crucial role during the financial year, as they maintained direct
contact with our customers when travel restrictions meant this was
not possible for Quadrise. But as restrictions ease, the Company
looks forward to re-establishing direct contact with our customers.
As Quadrise progresses the delivery of its key projects through
2022 and beyond, it will be building on strong foundations. The
focus will be on the successful delivery of our current active
projects, though there will also be opportunities to advance other
projects that are currently at an earlier stage of development. The
year ahead promises to be an exciting one for Quadrise as it
progresses its trial programmes, further develops its sustainable
and net-zero fuel solutions, and transitions to commercial revenues
and positive cashflows.
The small, tightly knit team at Quadrise will be fundamental to
delivering this and I know that they will rise to the challenge.
The forthcoming executive appointment of a new COO to replace Mark
Whittle completes the Company's senior executive team led by Jason
Miles, CEO, with the new COO, working alongside David Scott, Head
of Finance, Bernard Johnston, Head of Operations, and Patrick
Brunelle, Head of RDI.
With the Company now well positioned to deliver on the next
phase of its development, it is, therefore, appropriate for me to
hand over to a new Non-Executive Chair to lead the next stage of
development of Quadrise following a period of transition to ensure
a seamless hand-over of executive duties. A search for a new
Independent Non-Executive Chair will start imminently and I will
formally leave the business on 26 November 2021 following the
Company's Annual General Meeting. Laurie Mutch, will take over as
Interim Chairman from that time until a until a new Chairman is in
place. I would like to thank all of my colleagues at QFI, our
excellent advisers and our loyal shareholders with whom it has been
a pleasure to work with over the last 6 years or so.
Results for the Year
The consolidated after-tax loss for the year to 30 June 2021 was
GBP4.3m (2020: GBP4.8m), with the loss per share for the year
reducing to 0.36p from 0.49p in 2020. Production and development
costs of GBP1.4m (2020: GBP1.4m) comprise the costs of the Group's
operational staff and consultants, and QRF running costs
(equipment, consumables etc.). These costs are consistent with the
previous year, as they largely relate to fixed costs.
Administration expenses of GBP1.5m (2020: GBP1.8m), 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, no directors' cash bonuses
being awarded and lower office costs due to the move from our
previous office in February 2021.
The loss for the year includes GBP1.6m of non-cash expenses
(2020: GBP1.6m), relating to fair value adjustment charges to the
Convertible Securities of GBP1.3m (2020: GBP1.1m) (see note 17) and
share option charges of GBP0.3m (2020: GBP0.5m) arising due to the
award of share options, which are expensed over the vesting period
(see note 18).
At 30 June 2021, the Group had total assets of GBP10.7m (2020:
GBP6.3m). The most significant balances were cash of GBP7.0m (2020
GBP2.4m), intangible assets of GBP2.9m (2020: GBP2.9m), and
property, plant and equipment of GBP0.5m (2020: GBP0.6m). The Group
has tax losses arising in the UK of approximately GBP58.4m (2019:
GBP53.7m) that are available to be carried forward against future
profits.
The Group raised GBP6.5m (net of costs) in March 2021 via a
successful cash box placing and open offer. A further GBP0.5m (net)
was raised via the issuance of the second and final tranche of
Convertible Securities to Bergen. GBP2.6m was utilised in operating
activities during the year (2020: GBP3.1m).
Mike Kirk
Chairman
1 October 2021
Chief Executive's Statement
Our global opportunity
During the past year, Quadrise has positioned itself to take
advantage of a rapidly changing global energy landscape. This
increasingly prioritises sustainable and economic pathways to a Net
Zero future, presenting significant opportunities for Quadrise. Our
2020-21 Strategic Review resulted in the decision to accelerate the
commercialisation of our bioMSAR(TM) technology, and in parallel
develop a Net Zero fuel solution to offer to our global clients. We
are well on our way towards commercialising bioMSAR(TM), which is a
remarkable achievement for the Quadrise team during challenging
times, and work has commenced on the development of a Net Zero
carbon fuel. According to the Intergovernmental Panel for Climate
Change (IPCC), 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, to have a 50% chance of avoiding the
worst effects of climate change by 2050. We believe that Quadrise's
unique MSAR(R) and bioMSAR(TM) technology can play a significant
role in helping the world achieve this goal.
bioMSAR(TM) and our transition to Net Zero
Our innovative low carbon bioMSAR(TM) fuel takes advantage of
our proven emulsion fuel technology platform and utilises renewable
glycerine, currently a by-product of biodiesel manufacture, as a
clean fuel component. The glycerine content of bioMSAR(TM) can be
adjusted to meet the client's required CO(2) savings, providing a
cost-effective transition fuel solution to meet increasingly
stringent decarbonisation requirements. An international patent
application for bioMSAR(TM) has been submitted jointly with Nouryon
and complements our existing MSAR(R) IP.
Following successful laboratory and pilot testing of bioMSAR(TM)
at QRF, an engine testing programme was initiated at Aquafuel to
demonstrate potential application in our Cummins diesel generator.
The NOx emissions savings and higher engine efficiency results
surpassed our expectations. This successful proof of concept test
was followed by a larger trial using 5 tons of bioMSAR(TM) at the
VTT facility in Finland on a 4-stroke medium speed Wärtsilä engine
of the type that is typically used in diesel power plants, cruise
ships and ferries. Results on the Wärtsilä engine demonstrated a
26% average reduction in equivalent CO(2) emissions, which was due
to the renewable energy content and the higher engine efficiency.
Further engine optimisation tests are planned for bioMSAR(TM) at
Aquafuel, with plans underway to accelerate testing for bioMSAR(TM)
use in a range of sectors that are demanding "drop in" transition
fuels to advance decarbonisation.
During the year we joined the UK Chamber of Shipping and are
delighted to be a part of their "Making Waves: The Future of
Shipping" programme, to chart the role of Quadrise in driving
efforts across the sector to tackle climate change and reduce
shipping's footprint on the environment with bioMSAR(TM). The
launch ahead of COP26 at London International Shipping Week in
September 2021 was excellent timing. The marine sector has reduced
CO(2) emissions by 30% from 2008 to 2020, but still contributes 940
million tons or 2.5% of global emissions of CO(2) . Based on recent
results from VTT testing, bioMSAR(TM) could reduce emissions of
CO(2) by over 25% from a large vessel consuming 25,000 tons of HFO
annually, equating to 23,000 tons of CO(2) , which is equivalent to
the annual emissions from 11,000 average petrol cars.
We strongly believe that both MSAR(R) and bioMSAR(TM) will have
an important role to play in the transition to a sustainable future
for energy. However, we also recognise that Net Zero fuel solutions
will be mandatory in the future, potentially as early as 2030, and
we have an RDI strategy in place to take advantage of this
opportunity using our innovative and adaptable technology. Our RDI
team are now in the early stages of investigating the use of other
renewable fuels such as lignin (a renewable, wood-derived fuel
source) to produce a fuel with a Net-Zero carbon contribution. We
are also working with a team led by Professor Pat Harvey at the
University of Greenwich to explore the production of glycerine and
other products from algae. Algae could provide new supply
opportunities for renewable fuels, as well as potentially further
reducing the CO(2) emissions of bioMSAR(TM) to net-zero in
future.
Key projects
Currently, our key projects are in the marine, upstream and
industrial sectors, with further projects in development involving
significant downstream and powerplant applications. Our short-term
focus is on demonstrating MSAR(R) and bioMSAR(TM) technology at
commercial scale and progressing each of the opportunities into
commercial supply agreements.
MSC - In January 2021 we were delighted to announce the
signature of a Joint Development Agreement with MSC Shipmanagement
to carry out LONO ('Letter Of No Objection') fuel trials on board
their commercial container vessels. We are now working to finalise
the preparatory work to enable these trials. This work has taken
longer than anticipated, as the availability of engine manufacturer
and Class Society resources has been limited at times and the
marine sector is stretched due to COVID logistics challenges, and
various evaluations and tests of future fuel options. As a result
of positive results from bioMSAR(TM) testing on 4-stroke diesel
engines, MSC expressed an interest in advancing the option of
bioMSAR(TM) testing on their electronic 2-stroke engines alongside
MSAR(R) . This is now our focus, with a view to commencing
commercial-scale 4000-hour LONO trials in H1 calendar 2022.
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 deposits located at
Asphalt Ridge in Utah, USA. Oil samples were provided from the
Petroteq Oil Sands Plant ("POSP") operated by our client,
Greenfield Energy LLC ("Greenfield") which is owned by AIM-listed
TOMCO Energy PLC. Due to both COVID and adverse weather conditions,
the POSP start-up and commissioning process experienced delays,
resulting in the required oil samples from site not being received
at QRF until August 2021. During August our RDI team at QRF
successfully converted these samples to both MSAR(R) and
bioMSAR(TM), and in September a report was issued to Greenfield in
accordance with our Commercial Trial Agreement, as announced.
Quadrise are now working with Greenfield to finalise the plans for
future commercial implementation.
Morocco - Our industrial client in Morocco is a major consumer
of HFO. Since the successful pilot plant trial in October 2020, our
plans have been impacted by COVID related travel restrictions
causing delays to the trial programme. Following the easing of
these restrictions, our Head of Operations, Bernard Johnston, was
able to visit the site ("Site B") in August 2021 in order to
prepare for the next stage of the programme; the combustion of 60mt
of MSAR(R) . The site consumes around one third of the client's
annual HFO consumption. The Site B trial is now expected to take
place in Q4 2021. Testing of bitumen samples for the MSAR(R) fuel
production has now been completed, with production scheduled to
commence in Q4, and shipment of the trial equipment to the client
site organised for October 2021. The Site B trial results and a
feasibility study for MSAR(R) use at a second client site ('Site
A') are expected to be delivered to the client in Q4 2021, with
Quadrise receiving GBP0.1m. A subsequent commercial trial will then
take place at "Site A" later in Q4 2021 or early Q1 2022 with
shared trial costs reimbursed to Quadrise under a separate
agreement. Assuming the successful conclusion of these trials, the
intention would then be to conclude a commercial supply agreement
covering one or more of the client's sites in Morocco during Q1
2022.
Americas - Using our regional agent network we are progressing
projects in Panama with power generators, and in Mexico and Ecuador
with the state oil companies and utilities respectively and look
forward to providing updates as these projects progress.
Outlook
The downstream oil sector has had to adapt rapidly to changes in
demand driven by the IMO 2020 restrictions on marine sulphur
emissions as well as the COVID pandemic. These changes affected
both the availability and values (relative to HFO) of refinery
residuals utilised in MSAR(R) and bioMSAR(TM), unfavourably
impacting MSAR(R) economics over the past year. However, during the
latter part of 2021 the trends are looking increasingly positive,
as despite changes to oil consumption, the underlying crude oil
price has remained robust, which is positive for the upstream
sector. The demand for HFO in the power and marine sectors has also
remained strong, the latter driven by the increasing use of exhaust
gas cleaning systems (or "scrubbers") to comply with IMO 2020. It
is expected that distillate fuel demand will continue to recover in
2022 driven by the transportation sector. This will be positive for
refinery margins and the HFO-distillate spread, underpinning the
economic value of refinery residuals as an energy source for
MSAR(R) and bioMSAR(TM) in our key markets. These trends will
provide a positive backdrop to our ongoing discussions with
refinery suppliers regarding potential supply of residue for our
key projects.
The public attitude towards renewables and low emission fuel
options is accelerating interest in bioMSAR(TM) and increasing the
market opportunity in various sectors. During the next 12 months we
plan to demonstrate the long-term economic and environmental
benefits of MSAR(R) and bioMSAR(TM) projects through
commercial-scale trials that, on successful completion, should lead
to supply contracts and commercial revenues.. In parallel our RDI
team are focused on finding new Net Zero carbon future fuel
solutions.
Mark Whittle, Quadrise's former COO, who left the Group in
September 2021, made a major contribution during his 6 years at
Quadrise and left with our best wishes. I am glad to report that we
have now selected and appointed a new COO, who will start in the
next few months. Having streamlined the team during the COVID-19
pandemic period we are now expanding, both in terms of permanent
resources and experienced consultants in relevant sectors to
enhance project delivery and extend the capabilities of QRF in
Essex.
The Quadrise team look forward to an exciting 2022 for the
Company and shareholders.
Jason Miles
Chief Executive Officer
1 October 2021
Strategic Report
For the year ended 30 June 2021
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") 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 on pages 5 and 6.
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
business development progress review held fortnightly 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 2021, the
financial performance of the Group was ahead of budget due to lower
than forecast expenditure as a result of cost-reducing measures put
in place due to the Covid-19 pandemic.
Going Concern
The Group had a cash balance of GBP7.0m as of 30 June 2021
following a successful fundraise in March 2021 which raised GBP6.5m
(net of costs). The funds raised, in conjunction with the existing
cash balance, are expected to be sufficient for the Group to reach
commercial revenues and sustainable positive cashflows, with these
expected to commence in Q1 2023. The Directors therefore have
determined that it is appropriate to prepare the financial
statements on a going concern basis. For further details behind the
judgments and estimations used by the Directors in reaching this
determination, refer to note 2.
Climate Change
As discussed in both the Chairman's and CEO's statements on
pages 2 to 4, the Quadrise 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 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.
Market scope and risk
Aligned with the constraints above, and faced with the move away
from hydrocarbons, the Company 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
Company 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 MSAR(R) fuels is affected by numerous factors
beyond the control of the Group , for example the variability of
price spreads between light and heavy oils, and the relative
competitiveness of oil, gas and coal prices both for prompt and
future delivery.
Commercial return
The Group has made considerable progress in its rapid
development 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)
The removal of the Cepsa operational facilities obviously
results in additional costs and delays in securing new sources of
MSAR (R) feedstock. In addition, IMO2020 has impacted high sulphur
residue supply, and MSAR (R) economics are vulnerable to changes in
f uel 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)
The volumes and quality of renewable glycerine required for a
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.
Delay in commercialisation of MSAR(R) and funding risks due to
COVID-19
There is a risk that the commercialisation of MSAR (R) and
bioMSAR(TM) could be delayed further due to the global COVID-19
pandemic, or unforeseen technical and/or commercial challenges.
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. Further discussion of the impact of
COVID-19 on the Group and the Group's mitigating action is included
in the CEO's Statement.
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, although at the date of this report no evidence of
significant competition has been noted. 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-exec 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. The Group's recruitment programme to find a
successor to Mark Whittle is complete, with a new candidate joining
the Company during the next few months.
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.
Mike Kirk
Chairman
1 October 2021
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
Notes Year ended Year ended
30 June 2021 30 June 2020
GBP'000s GBP'000s
Continuing operations
Revenue 17 -
Production and development costs (1,377) (1,357)
Other administration expenses (1,527) (1,821)
Fair value adjustments arising
on Convertible Securities 10 (1,257) (1,133)
Share option charge 11 (303) (474)
Warrant charge 12 - (65)
Foreign exchange loss (9) (1)
---------------------------------- ------ -------------- --------------
Operating loss 4 (4,456) (4,851)
Finance costs (4) (146)
Finance income 50 7
---------------------------------- ------ -------------- --------------
Loss before tax (4,410) (4,990)
Taxation 5 150 147
---------------------------------- ------ -------------- --------------
Loss and total comprehensive loss
for the year
from continuing operations to owners
of the parent (4,260) (4,843)
------------------------------------------ -------------- --------------
Loss per share - pence
Basic 6 (0.36)p (0.49)p
Diluted 6 (0.36)p (0.49)p
---------------------------------- ------ -------------- --------------
Consolidated Statement of Financial Position
As at 30 June 2021
Notes As at As at
30 June 2021 30 June 2020
GBP'000s GBP'000s
Assets
Non-current assets
Property, plant and equipment 7 460 582
Intangible assets 8 2,924 2,924
Non-current assets 3,384 3,506
------------------------------- ------ -------------- --------------
Current assets
Cash and cash equivalents 7,006 2,380
Trade and other receivables 117 213
Prepayments 95 112
Stock 61 61
------------------------------- ------ -------------- --------------
Current assets 7,279 2,766
------------------------------- ------ -------------- --------------
TOTAL ASSETS 10,663 6,272
------------------------------- ------ -------------- --------------
Equity and liabilities
Current liabilities
Trade and other payables 276 198
Convertible Securities 10 - 2,045
------------------------------- --- --------- ---------
Current liabilities 276 2,243
------------------------------- --- --------- ---------
Equity attributable to owners
of the parent
Issued share capital 14,069 10,351
Share premium 77,189 75,431
Merger reserve 3,777 -
Share option reserve 3,344 3,927
Warrant reserve 1,017 1,122
Reverse acquisition reserve 522 522
Accumulated losses (89,531) (87,324)
------------------------------- --- --------- ---------
Total shareholders' equity 10,387 4,029
------------------------------- --- --------- ---------
TOTAL EQUITY AND LIABILITIES 10,663 6,272
------------------------------- --- --------- ---------
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
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 2019 9,227 74,438 - 3,455 105 522 (82,985) 4,762
Loss and total
comprehensive
loss
for the year - - - - - (4,843) (4,843)
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Fair value
adjustments
arising on
Convertible
Securities - - - - - - 502 502
Share option
charge - - - 474 - - - 474
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Transfer of
balances
relating to
expired
share options - - - (2) - - 2 -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Warrant charge - - - - 65 - - 65
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Warrants
issued
as part of
Open
Offer and
Subscription - (816) - - 816 - - -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Shares and
warrants
issued as
part
of
Convertible
Securities
transaction 84 101 - - 136 - - 321
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
New shares
issued 647 1,914 - - - - - 2,561
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Share issue
costs - (263) - - - - - (263)
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Shares issued
upon
exercise of
Convertible
Security 393 57 - - - - - 450
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
30 June 2020 10,351 75,431 - 3,927 1,122 522 (87,324) 4,029
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
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
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Consolidated Statement of Cash Flows
For the year ended 30 June 2021
Notes Year ended Year ended
30 June 2021 30 June 2020
GBP'000s GBP'000s
Operating activities
Loss before tax from continuing
operations (4,410) (4,990)
Fair value adjustments
arising on Convertible
Securities 10 1,257 1,133
Convertible Securities
finance costs (non-cash) 10 - 140
Depreciation 7 135 172
Loss on disposal of fixed 16 -
assets
Finance costs paid 4 6
Finance income received (50) (7)
Share option charge 11 303 474
Warrant charge - 65
Working capital adjustments
Decrease/(increase) in
trade and other receivables 96 (44)
Decrease/(increase) 17 (6)
Increase/(decrease) in
trade and other payables 78 (90)
Cash utilised in operations (2,554) (3,147)
--------------------------------- --------- -------------- --------------
Finance costs paid (4) (6)
Taxation received 5 150 147
Net cash outflow from operating
activities (2,408) (3,006)
--------------------------------- --------- -------------- --------------
Investing activities
Finance income received 50 7
Purchase of property, plant
and equipment 7 (29) (24)
Net cash outflow from investing
activities 21 (17)
--------------------------------- --------- -------------- --------------
Financing activities
Issue of ordinary share
capital 7,015 2,606
Issue costs (502) (263)
Increase in Convertible
Securities 10 500 2,000
Net cash inflow from financing
activities 7,013 4,343
Net increase in cash and
cash equivalents 4,626 1,320
Cash and cash equivalents
at the beginning of the
year 2,380 1,060
--------------------------------- --------- -------------- --------------
Cash and cash equivalents
at the end of the year 7,006 2,380
--------------------------------- --------- -------------- --------------
Notes to the Financial Information
1. Basis of Preparation and Significant Accounting Policies
The financial information for the year ended 30 June 2021 has
been prepared in accordance with International Financial Reporting
Standards ("IFRS's") in accordance with 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
these statements.
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 2021.
The financial information is prepared in Pounds Sterling and all
values are rounded to the nearest thousand Pounds (GBP'000) except
where otherwise indicated.
The financial information contained in this announcement does
not constitute the Company's statutory financial statements for the
year ended 30 June 2021 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.
Statutory financial statements for the year ended 30 June 2020
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 2021 (2020: nil).
This announcement was approved by the Board on 1 October
2021.
2. Going Concern
As at 30 June 2021 the Group had a cash balance of GBP7.0m. The
increase in funds during the year was the result of a successful
fund-raising exercise, which raised GBP6. 5m after costs in March
2021 in two phases, a 'cash box' placing, which raised net funds of
GBP5.5m and a 1-for-30 Open Offer to existing shareholders, which
raised a further GBP1m.
The funds raised, in conjunction with the existing cash balance,
are expected to be sufficient for the Group to reach commercial
revenues and sustainable positive cashflows, with these expected to
commence in Q1 2023. The basis for this expectation is the Group
business model, budget and business plan, and sensitivity analysis,
which have been reviewed and approved by the Board. The business
model shows total forecast Group cashflows up to 30 June 2031 and
the Group budget and business plan covers the next two financial
years in detail. The model comprises the financial forecasts
associated with each project opportunity deemed to have a realistic
chance of progressing, with assumptions made about i) the operating
mode (licence, tolling or merchant), ii) the equity percentage held
in the venture, iii) the cost of chemicals and equipment, iv)
margins and v) rates of growth. These assumptions are based on the
latest market information, agreements with counterparties and the
status of discussions. The Directors therefore have a reasonable
basis for assuming that the Group's portfolio of projects and
business development opportunities will result in the generation of
commercially sustainable revenues in the near term.
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, the Group has
continued to progress its projects and business development
activities utilising a combination of web-conferencing and, where
possible, in-person meetings with the Group's in-country agents and
representatives. COVID-19 has had minimal impact on the Group's UK
operations, with London based staff working remotely for the
majority of the year, and QRF remaining fully operational
throughout the year, albeit with social-distancing measures in
place and highly restricted acceptance of third-party visitors.
Significant cost savings have also been made since the outbreak of
COVID-19 through careful management of discretionary expenditure
and human resources.
The Directors also note the positive and sustained levels of
engagement with partners, prospective clients and project
stakeholders worldwide during the year, despite global COVID-19
disruption. 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 Directors acknowledge that project activities that require
being on site at client premises have been delayed and could be
subject to further delays depending upon the status of the pandemic
and restrictions put in place by governments in the months ahead.
Whilst these delays do not inherently affect the longer-term
business case, the revenues resulting from projects may be
impacted.
Based on the rationale for the key assumptions outlined above,
the Directors have therefore made the judgement that the financial
statements should be prepared on a going concern basis.
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 2021 30 June 2020
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
: 43 23
Audit of accounts of subsidiaries 35 23
Tax compliance services - 3
Consultants and other professional
fees (including legal) 273 286
Depreciation of property, plant and
equipment 135 172
Research and development costs 300 241
5. Taxation
Year ended Year ended
30 June 2021 30 June 2020
GBP'000s GBP'000s
UK corporation tax credit (150) (147)
Total (150) (147)
--------------------------- -------------- --------------
No liability in respect of corporation tax arises as a result of
trading losses.
Tax Reconciliation Year ended Year ended
30 June 2021 30 June 2020
GBP'000s GBP'000s
Loss on continuing operations before
taxation (4,410) (4,990)
Loss on continuing operations before
taxation multiplied by
the UK corporation tax rate of 19%
(2020: 19%) (838) (948)
Effects of:
Non-deductible expenditure 58 208
R&D tax credit (150) (147)
Temporary differences 24 (13)
Tax losses carried forward 756 753
Total taxation credit on loss from
continuing operations (150) (147)
-------------------------------------- ---------------- -----------------
The Group has tax losses arising in the UK of approximately
GBP58.4m (2020: GBP53.7m ) that are available, under current
legislation, to be carried forward against future profits. GBP30.7m
(2020: GBP26.6m) of the tax losses carried forward represent
trading losses within Quadrise Fuels International plc, GBP25.8m
(2020: GBP25.8m) represent non-trade deficits arising on intangible
assets within Quadrise International Limited, GBP0.2m (2020:
GBP0.6m) represent pre-trading losses incurred by subsidiaries,
GBP0.9m (2020: GBPnil) represent non-trade loan relationships,
GBP0.8m (2020: GBP0.8m) represent management expenses incurred by
Quadrise International Limited, an d GBPnil (2020: GBP0.1m)
represent capital losses within Qua drise Fuels International
plc.
A deferred tax asset representing these losses and other
temporary differences at the statement of financial position date
of approximately GBP11.1m (2020: GBP10.2m) 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 2021 30 June 2020
Loss for the year (GBP'000s) (4,260) (4,843)
Weighted average number of shares:
Basic 1,175,406,844 982,793,918
Diluted 1,175,406,844 982,793,918
Loss per share:
-------------------------------------- -------------- --------------
Basic (0.36)p (0.49)p
-------------------------------------- -------------- --------------
Diluted (0.36)p (0.49)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 28.3m 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 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
------------------ -------------- ----------- --------- ----------- --------------- ---------
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 2019 181 91 43 16 1,390 1,721
Additions - 4 - - 20 24
Disposals - - - - - -
Closing balance
- 30 June 2020 181 95 43 16 1,410 1,745
------------------ -------------- ----------- --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2019 (166) (78) (41) (16) (690) (991)
Depreciation
charge for the
year (15) (11) (2) - (144) (172)
Disposals - - - - - -
------------------ -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 30 June 2020 (181) (89) (43) (16) (834) (1,163)
------------------ -------------- ----------- --------- ----------- --------------- ---------
Net book value
at 30 June 2020 - 6 - - 576 582
------------------ -------------- ----------- --------- ----------- --------------- ---------
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
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
----------------------------- ------------ ------------ -------------- ---------
Cost
Balance as at 1 July
2019 and 30 June 2020 7,686 3,100 25,901 36,687
Amortisation and Impairment
Balance as at 1 July
2019 and 30 June 2020 (7,686) (176) (25,901) (33,763)
Net book value as
at 30 June 2020 - 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 2031 with an assumed
growth rate being used beyond that date.
The key assumptions used in this calculation are as follows:
2021 2020
Royalty rate (%
of projected revenue)
(1) 0.5% 0.5%
------------- -------------
Discount rate (2) 20% 20%
------------- -------------
Revenues forecast 30 June 2031 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 2021 revenue forecast extends to 30 June 2031 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 GBP1.74m (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 would
(GBP'm) reduce headroom
to nil
Delayed revenues 0.95 A 3 year delay to
(1 year) forecast revenues.
------------------- ------------------------
Delayed revenues 0.30 A 3 year delay to
(2 years) forecast revenues.
------------------- ------------------------
Increase in discount 0.19 Increase in discount
rate to 25% rate to 25.86%.
------------------- ------------------------
Removal of projects 0.56 Removal of projects
which generate 25% which generate 37.1%
of forecast revenues of revenues.
------------------- ------------------------
Finite company lifespan 0.20 Finite company lifespan
(to 30 June 2032). (to 30 June 2031).
------------------- ------------------------
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 2021.
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 2021. The shares in each of
these companies were valued at CAD $nil on 1 July 2020 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
2021.
10. Convertible Securities
On 22 August 2019, the Company entered into an agreement with
Bergen Global Opportunity Fund LP ('the Investor') whereby the
Investor would provide up to GBP4.0 million of interest free
unsecured funding, provided in two tranches through the issue by
the Company of Convertible Securities with a nominal value of up to
GBP4.3 million, convertible into Ordinary Shares.
An initial tranche of Convertible Securities with a nominal
value of GBP2.15 million was subscribed for by the Investor for
GBP2.0 million on 30 August 2019. A second tranche of Convertible
Securities, with a nominal value of up to GBP537.5k was subscribed
for by the Investor for GBP0.5 million on 10 February 2021. Both
tranches have 24 month maturity dates from the dates of their
respective issuance, and any Convertible Securities not converted
prior to such dates will automatically convert into Ordinary Shares
at such time.
Upon entry into the agreement, the Company issued 4.9 million 36
month warrants to subscribe for new Ordinary Shares to the Investor
by way of a Warrant Instrument initially exercisable at 5.78p per
Ordinary Share, subject to anti-dilution and exercise price
reduction provisions. The Company also issued to the Investor
3,888,889 new Ordinary Shares in settlement of a commencement fee
of GBP140,000 and a further 4,500,000 new Ordinary Shares to
collateralise the Agreement subscribed for at nominal value by the
Investor.
The Convertible Securities are only converted to the extent that
the Company has corporate authority to do so, and it is a term of
the agreement that the Company must retain sufficient authority to
issue and allot (on a non-pre-emptive basis) a sufficient number of
Ordinary Shares potentially required to be issued under the terms
of the Agreement (and the Warrant Instrument).
The Agreement was completed and both tranches funded to the
Company on the basis of the remaining Authority from the 2018
Annual General Meeting, and the updated authority obtained at the
27 September 2019 General Meeting of shareholders.
Debt and equity instruments issued by the Company are classified
as either financial liabilities or as equity. An equity instrument
is any contract that evidences a residual interest in the assets of
an entity after deducting all of its liabilities. Under the terms
of the Convertible Securities agreement of 22 August 2019, the
Company has no obligation to repay the securities in cash (unless
the Company defaults on the terms) and the number of shares which
may be issued upon conversion is variable. As there is no residual
interest in the assets of the Company after conversion of the
Convertible Securities, the Convertible Securities meet the
criteria to be classified entirely as a financial liability.
Tranches 1 and 2 of the Convertible Securities instrument were
designated at fair value on initial recognition. The fair value of
tranche 1 was assessed as GBP1.86m, being the nominal value of
GBP2.15m less interest and warrant charges. At 30 June 2020, the
remaining nominal value of GBP1.70 million of tranche 1 was
assessed to have a fair value of GBP2.05m. The fair value of
tranche 2, which has a nominal value of GBP537.5k was assessed as
GBP1.19m, with tranche 2 being fully converted on 30 April 2021,
and therefore no balance remaining outstanding as at 30 June 2021.
Upon each exercise of conversion rights, the portion of the
Convertible Securities converted is assessed at fair value, with
the resulting fair value adjustment being recorded in the Statement
of Comprehensive Income.
The fair value adjustment charge arising for the year of
GBP1.257m (2020:1,133m) comprises fair value adjustments arising
upon initial recognition, revaluation as at balance sheet dates and
upon subsequent conversion.
During the years ended 30 June 2020 and 2021, the Investor
exercised their conversion rights as follows:
Conversion Convertible Conversion No. of Share price Fair value
date Securities price (p) shares on conversion adjustment
converted awarded date (GBP'000)
(GBP) upon conversion
23 March
2020 100,000 1.2 8,333,333 1.68 40
------------ ----------- ----------------- --------------- ------------
15 April
2020 100,000 1.2 8,333,333 1.64 36
------------ ----------- ----------------- --------------- ------------
22 June
2020 250,000 1.1 22,727,273 2.98 426
------------ ----------- ----------------- --------------- ------------
19 August
2020 300,000 1.6 18,750,000 2.90 244
------------ ----------- ----------------- --------------- ------------
7 September
2020 400,000 1.7 23,529,412 2.76 248
------------ ----------- ----------------- --------------- ------------
5 January
2021 500,000 1.8 27,777,778 3.01 336
------------ ----------- ----------------- --------------- ------------
26 January
2021 500,000 2.0 25,000,000 3.40 350
------------ ----------- ----------------- --------------- ------------
30 April
2021 537,500 3.2 16,796,875 5.50 386
------------ ----------- ----------------- --------------- ------------
Total 2,687,500 151,248,004 2,066
------------ ----------- ----------------- --------------- ------------
As at 30 June 2021, both tranches have been converted in full,
and no nominal value remains outstanding to the investor under the
terms of the Convertible Security instrument.
11. 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
2021 2021 2020 2020
Outstanding as at 1
July 39,250,000 17.95 39,400,000 17.91
Granted during the year 10,000,000 7.50 - -
Expired during the year (6,500,000) 23.36 (150,000) 7.50
Exercised during the - - - -
year
Options outstanding
as at 30 June 42,750,000 14.69 39,250,000 17.95
------------------------- ------------ --------- ----------- ---------
Exercisable as at 30
June 28,312,500 18.36 29,250,000 20.09
------------------------- ------------ --------- ----------- ---------
The weighted average remaining contractual life of the 42.8
million options outstanding at the statement of financial position
date is 5.17 years (2020: 5.05 years). The weighted average share
price during the year was 2.98p (2020: 3.18p) 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 two year or 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 10 million share options to directors and
employees during the year (2020: nil).
The fair value was calculated using the Black Scholes option
pricing model. The weighted average inputs were as follows
2021 2020
Stock price: 3.08p -
Exercise Price 7.50p -
Interest Rate 0.1% -
Volatility 126.91% -
Expected term (years) 4.0 -
======== =====
12. 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
2021 2021 2020 2020
Outstanding as at 1
July 45,228,026 6.56 5,000,000 3.16
Granted during the year - - 40,228,026 6.98
Exercised during the - - - -
year
Expired during the year (5,000,000) 3.16 - -
Warrants outstanding
as at 30 June 40,228,026 6.98 45,228,026 6.56
------------------------- ------------ --------- ----------- ---------
Exercisable as at 30
June 40,228,026 6.98 45,228,026 6.56
------------------------- ------------ --------- ----------- ---------
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:
2021 2020
Stock price: - 3.93p
Exercise Price - 6.98p
Interest Rate - 0.75%
Volatility - 128%
Expected term (years) - 2.89
===== =========
The weighted average remaining contractual life of the 40.2
million warrants outstanding at the statement of financial position
date is 1.15 years (2020: 1.99 years). The weighted average share
price during the year was 2.98p (2020: 3.18p) 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 GBP45k (2020: GBP30k). The balance payable at the
statement of financial position date was GBPnil (2020: 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 3 September 2021, the Company granted a total of 10,500,000
options over new ordinary shares of 1p each in the Company to
executive directors of the Company in accordance with the
provisions of the Company's Unapproved Share Option Plan 2016
("2016 Plan"). The issue of these options follows the lapsing in
full of the 10,000,000 options issued by the Company on 24 August
2020 due to the specific performance conditions of those options
not having been met.
Director Number of Performance Plan Exercise
Options price
Mike Kirk 3,000,000 2016 Plan 7.5p
---------------------- ---------- ---------
Jason Miles 7,500,000 2016 Plan 7.5p
---------------------- ---------- ---------
Total 10,500,000 - -
---------------------- ---------- ---------
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 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 3 September 2021 Quadrise also granted 2,552,793 nominal
value options ("NVO") over new ordinary shares of 1p each in the
Company to the Company's executive directors in lieu of cash
bonuses for the year ended 30 June 2021. The NVOs have been issued
under the 2016 Plan.
Director Number of NVOs Plan Exercise
price
Mike Kirk 776,931 2016 Plan 1.0p
--------------- ---------- ---------
Jason Miles 1,775,862 2016 Plan 1.0p
--------------- ---------- ---------
Total 2,552,793 - -
--------------- ---------- ---------
The NVOs will vest after 12 months from the date of grant, have
no performance conditions and will be exercisable from vesting
until the eighth anniversary of the date of grant.
On 3 September 2021, the Company granted 1,462,929 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 2021.
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
Copies of the annual report 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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END
FR EAFEAEAAFFFA
(END) Dow Jones Newswires
October 04, 2021 02:00 ET (06:00 GMT)
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