TIDMQED
RNS Number : 2558O
Quadrise PLC
02 October 2023
2 October 2023
Quadrise plc
("Quadrise", "QED", the "Company" and together with its
subsidiaries the "Group")
Final Results and Notice of AGM
Quadrise (AIM:QED) , 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
2023.
The Company also gives notice that the Company's Annual General
Meeting ("AGM") will be held at 12 noon on 27 November 2023 at the
Park Plaza County Hall Hotel, 1 Addington Street, London, SE1
7RY.
Operational Summary:
-- Marine - Following the completion of key preparatory steps
for the Proof-of-Concept and Letter Of No Objection ("LONO")
commercial trials on bioMSAR(TM) with MSC Shipmanagement during the
year, Quadrise intends to conclude agreements with project
stakeholders, which include a major global trading company, as soon
as possible. Quadrise equipment will be installed and commissioned
at the bunker terminal site ahead of the commercial-scale
Proof-of-Concept and LONO trials on bioMSAR(TM), which are expected
to commence in Q1 2024 provided the relevant permits are received
in time.
-- Morocco -The industrial demonstration test at the client site
in Morocco is now expected to be completed in October 2023,
following the installation and commissioning of a replacement pump
and maintenance of the client's commercial unit during September.
The client remains supportive of the Company's efforts to progress
the commercial trial. Upon successful conclusion of the trial, the
parties will enter into discussions for potential commercial
supply, in addition to concluding agreements for testing at other
client sites as required.
-- Utah - Valkor Technologies LLC ("Valkor") has informed the
Company that it expects to conclude project nancing relating to
their primary project site at in Utah in Q4 2023. Provided a
minimum of US$15 million is successfully raised, Valkor will pay
Quadrise US$1.0 million under the terms of the Site License and
Supply Agreement signed in June 2023. The Agreement was amended in
August 2023 in order to remove conditionality with regard to
Valkor's receipt of drilling permits. A further US$0.5 million is
due from Valkor upon delivery of an MSAR(R) Manufacturing Unit to
the project site in Utah, again, subject to Valkor's receipt of the
minimum project financing.
-- bioMSAR(TM) - In June 2023, Quadrise signed a Joint
Development Agreement with BTG Bioliquids to investigate the use of
their propriety pyrolysis bio-oil (FPBO) as an alternative biofuel
feedstock for bioMSAR(TM). In addition, Quadrise successfully
produced stable blends of bioMSAR(TM) containing up to 40% of
Vertoro's crude sugar oil (CSO(TM)) at pilot scale at the Company's
research facility. This demonstrated improved engine efficiency,
and lower NOx and particulate emissions upon combustion when
compared to conventional diesel. Further testing is also ongoing
with other biofuels suppliers.
Financial Summary:
-- Loss after tax of GBP3.1m (2022: GBP2.6m), of which of
GBP1.7m (2022: GBP1.5m) is attributable to production and
development costs and GBP1.3m (2022: GBP1.4m) relates to
administrative and corporate expenses.
-- Total assets of GBP5.0m as at 30 June 2023 (2022: GBP8.0m).
-- Cash balances as at 30 June 2023 of GBP1.3m (2022: GBP4.4m).
An additional GBP1.94m (gross) was raised in July 2023 via a
placing and open offer.
-- Cumulative tax losses of GBP62.1m (2020: GBP60.0m)
potentially available for set-off against any future profits.
Jason Miles, Chief Executive Officer of Quadrise, commented:
"The decarbonisation of the energy sector continues to advance
during a period of escalating energy costs, increasing legislation
and pressure to reduce emissions and control global warming.
Against this background, Quadrise is positioning itself to be
one of the key decarbonisation solution providers in this rapidly
changing global energy market.
Whilst progress across each of the Company's key projects during
the period has been at a slower pace than we had initially
envisaged, important milestones for each are now nearing.
Agreements covering our commercial vessel trial with MSC and other
stakeholders are expected to be signed in Q4 2023, with the trial
itself planned to commence in Q1 2024. Supply of our first MSAR(R)
site license and equipment to Valkor in Utah is expected in Q4
2023, pending successful conclusion of Valkor's project financing.
Following the installation of an alternative pump, the MSAR(R) and
bioMSAR(TM) commercial trial in Morocco is due to conclude before
the end of October 2023.
We continue to invest and collaborate in research and
development to enhance our IP portfolio and future opportunities,
evidenced by our patent applications and the continuing advancement
of bioMSAR(TM) and bioMSAR(TM) Zero with a growing number of
partners in the renewable fuel sector.
We look forward to the important period ahead during which we
expect to make significant progress in commercialising our
innovative fuel technology."
Notice of Annual General Meeting
The Company's Annual General Meeting ("AGM") will be held at 12
noon on 27 November 2023 at the Park Plaza County Hall Hotel, 1
Addington Street, London, SE1 7RY.
For additional information, please contact:
Quadrise Plc +44 (0)20 7031 7321
Andy Morrison, Chairman
Jason Miles, Chief Executive Officer
Nominated Adviser
Cavendish Securities plc +44 (0)20 7220 0500
Ben Jeynes
Katy Birkin
Joint Brokers
Shore Capital Stockbrokers Limited +44 (0)20 7408 4090
Toby Gibbs, Rachel Goldstein (Corporate
Advisory)
Fiona Conroy (Corporate Broking)
VSA Capital Limited
Andrew Raca (Corporate Finance)
Andrew Monk (Corporate Broking) +44 (0)20 3005 5000
Public & Investor Relations
Vigo Consulting
Patrick D'Ancona
Finlay Thomson +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.quadrise.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
The cost of energy and the transition to secure sustainable
fuels continue to be top priorities for governments, businesses and
communities. During the year ended 30 June 2023, Quadrise has
continued to position itself as a provider of innovative
decarbonisation solutions and the Board remains confident in both
the quality of the Company's solutions and the commercial
opportunities that they provide.
In July 2023, the Company announced that it had raised gross
proceeds of GBP1.94 million via a placing of new ordinary shares in
the Company and subsequent open offer to qualifying shareholders at
an issue price of 1.25 pence per share. The funds raised will,
together with receipts from contracted but conditional payments in
respect of the Company's Utah project with Valkor, enable the
Company to continue to finance its projects through to mid-2024 and
thereby to achieve further milestones that add shareholder
value.
The successful completion of the fundraising under difficult
market conditions demonstrated the continuing confidence of new and
existing investors in the potential of our technology and its
applicability to real-world problems. The result is that the
current financial year is pivotal for Quadrise, with our key
objectives being:
-- To progress business in North America, building on a bridgehead to be established in Utah.
-- To contract sources of heavy residues and glycerine for product supply outside North America.
-- To be ready to scale-up our marine business following the
planned completion of the trial with MSC.
Our near-term strategy remains to focus on the key projects in
Morocco, Utah and with MSC, which represent the most efficient use
of our financial resources and provide the fastest and most
material pathways to commercialisation. Important milestones are
expected to be achieved in Q4 2023 in each of these key
projects:
-- Following the signing of a Site License & Supply
Agreement with Valkor Technologies LLC in June 2023, commercial
revenues are now expected from Valkor subject to successful
completion of their heavy oil project financing. This is a critical
milestone in attracting new customers, investors and strategic
partners. We now look forward to the commencement of Valkor's pilot
drilling operations ahead of the winter season.
-- The trial with our customer in Morocco is anticipated to
resume in early October 2023 after a series of technical delays
caused by feed pump problems, with commercial discussions then to
take place following confirmation of a successful trial.
-- We also look forward to being able to update the market on
the next steps with respect to fuel supply logistics for the
long-awaited on-board trial of bioMSAR(TM) with MSC, with the
finalisation of trial agreements expected in Q4 2023. The
4,000-hour trial is planned to start in Q1 2024.
Looking further ahead, we continue to develop the next
generation of bioMSAR(TM) fuel and energy delivery technologies,
with the goal of producing a commercially competitive net-zero
product before 2030.
The year ended 30 June 2023 could be characterised as one of
continued strategic and operational progress, but without a
breakthrough. Each of our projects has several moving parts, and
the management task is significant in bringing the Company to an
inflexion point. However, we hope to see the results of progress to
date come to fruition during the final quarter of 2023. The Board
remains active in evaluating strategic initiatives that would
de-risk and/or facilitate the delivery of our key objectives set
out above, such as M&A activity, joint ventures or other
strategic partnerships. As I stated last year, our ambitions for
the business are limited more by the availability of financial and
operational resources than by the scale of the significant
opportunities that the Company can address.
The Board remains committed in its determination for the Company
to deliver on its strategic objectives and together with
management, we look forward to driving the business into commercial
revenues and generating value for our shareholders, whom I thank
for their continued support and engagement throughout the year.
Results for the Year
The consolidated after-tax loss for the year to 30 June 2023 was
GBP3.1m (2022: GBP2.6m), with the loss per share for the year
increasing to 0.22p from 0.18p in 2022. Production and development
costs of GBP1.7m (2022: GBP1.5m) 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 largely related to fixed costs with the increase
due to bioMSAR(TM) development and testing costs.
Administration expenses of GBP1.3m (2022: GBP1.4m), comprise the
Group's corporate staff and directors' costs, professional advisor
fees, PR/IR costs and head office costs.
At 30 June 2023, the Group had total assets of GBP5.0m (2022:
GBP8.0m). The most significant balances were cash of GBP1.3m (2022:
GBP4.4m), intangible assets of GBP2.9m (2022: GBP2.9m), and
property, plant and equipment of GBP0.4m (2022: GBP0.4m). The Group
has tax losses arising in the UK of approximately GBP62.0m (2020:
GBP60.0m) that are potentially available to be carried forward
against any future profits.
Andy Morrison
Non-executive Chairman
29 September 2023
Chief Executive's Statement
Introduction
The global energy industry faces mounting pressure to reduce
carbon emissions whilst delivering practical and cost-efficient
energy solutions to consumers. In recent times, escalating energy
prices have emerged as significant contributors to global
inflation, exacerbated by the ongoing Ukraine conflict and Russian
sanctions. Simultaneously, there is a crucial global goal to halve
greenhouse gas ("GHG") emissions by 2050, a target set by the IPCC
to mitigate the severe consequences of climate change.
Addressing the Maritime Decarbonisation Challenge
The shipping sector is responsible for roughly 3% of global GHG
emissions. The sector is under increasing scrutiny from European
regulators who are encouraging maritime operators to explore
lower-carbon and eventually net-zero alternatives. These include
longer-term options such as green hydrogen, ammonia, and methanol,
with each of these demanding substantial investments and posing
logistical and safety challenges. While several lower-carbon and
potentially net-zero solutions are in development, these are not
yet ready for widespread adoption. Implementation will require
significant investment, either in retrofitting existing fleets or
the building of new vessels and the logistical challenges of
delivery should not be underestimated in the context of currently
reduced global ship building capacity.
Revolutionary Quadrise Technology
Our patented Quadrise technology offers a practical and
cost-effective path for operators in the marine, industrial, and
power sectors to decarbonise, reduce energy costs, and lower
associated emissions safely. MSAR(R) reduces fuel consumption in
diesel engines by up to 10% and simultaneously lowers GHG emissions
by the same margin. By incorporating renewable glycerine to produce
the economical bioMSAR(TM), we can further reduce GHG emissions by
over 20%. The Quadrise solutions are readily available, utilising
existing infrastructure to achieve cost savings and GHG reduction.
bioMSAR(TM) outperforms LNG and FAME marine fuel blends in terms of
lower CO(2) emissions per unit of energy. Other bioMSAR(TM)
benefits include its water dispersibility, improved safety, and
biodegradability.
Immediate and Future Deployment
Our technology is ready for rapid deployment, delivering
immediate benefits as we transition towards net-zero fuel
solutions, which may become mandatory as early as 2030. To seize
this opportunity, we have established an R&D strategy,
leveraging our innovative and adaptable technology. We are
collaborating with fellow innovators in the sustainable fuel sector
to expand our portfolio of lower-cost, renewable, and abundant
biofuel components. As an example, we are formulating a bioMSAR(TM)
blend with Vertoro BV, producers of a crude sugar oil ("CSO(TM)").
Diesel engine testing of this blend at Aquafuel is set to conclude
in Q4 2023. Additionally, Quadrise has entered into a Joint
Development Agreement with BTG Bioliquids to explore the use of
their 'FPBO' biofuel, derived from agricultural and sawmill waste,
alongside other related net-zero R&D activities.
Ongoing Projects
Our core projects encompass the marine, upstream, and industrial
sectors, with further projects in the pipeline for downstream and
power plant applications. Our current focus is on demonstrating
MSAR(R) and bioMSAR(TM) technology at a commercial scale,
progressing these opportunities into commercial supply
agreements.
The demand for scalable and certified low or zero-emission
shipping services is evident in the historic tender recently issued
by an alliance of freight buyers including Amazon, IKEA, Philips
and over 20 other major global companies. The RfP (Request for
Proposal) launched by ZEMBA (Zero Emission Maritime Buyers
Alliance) seeks bids with sufficient capacity to move 600,000
containers over 3 years on ships that offer 90% reduction in GHG
emissions compared to traditional fossil fuels. This is further
evidence of the demand for our technology solutions and the
concerted industry effort to accelerate decarbonisation in
shipping.
MSC - A framework agreement with MSC Shipmanagement ("MSC") was
signed in July 2022 to test and trial both of our economical,
cleaner marine fuel and biofuel alternatives on their container
vessels. Quadrise is excited to be collaborating with MSC to
decarbonise the largest container ship fleet in the world as they
lead the way in advancing the marine sector's transition towards a
net-zero future.
A number of preparatory steps have been completed by
stakeholders prior to commencing the Letter Of No Objection
("LONO") fuel trials of both bioMSAR(TM) and MSAR(R) on board the
MSC Leandra:
-- Wärtsilä Services of Switzerland carried out optical
combustion and engine wear tests on bioMSAR(TM) in December
2022.
-- The emulsion fuel booster unit was inspected, upgraded where
necessary, and tested in readiness for use.
-- The vessel was fully inspected by MSC and installed with
equipment designed to reduce emissions and improve vessel ef
ciency.
-- A hazard identi cation and operability workshop was recently
completed involving MSC, Quadrise, Wärtsilä and Lloyds Register
using the framework developed for the prior use of MSAR(R) on the
main 2-stroke engine, when the vessel was owned by Maersk.
Quadrise is progressing the fuel production and supply
activities necessary for the above commercial trials, with the
intention of concluding agreements with project stakeholders, which
include a major global trading company, as soon as possible.
Following the installation and commissioning of Quadrise equipment
at the bunker terminal site, the intention is then to commence
commercial-scale Proof-of-Concept and LONO trials on bioMSAR(TM) in
Q1 2024 provided the relevant permits are received in time.
Once the initial MSAR(R) or bioMSAR(TM) fuel has been loaded and
the on-board systems commissioned, the vessel will be bunkering and
burning bioMSAR(TM) through the initial Proof-of-Concept testing
phase, followed by the LONO trial, which is currently expected to
be of 4,000-hour duration.
In addition to progressing this opportunity with MSC, the
Company continues to assess strategic means and/or partnerships
with the intention of accelerating the commercialisation of both
bioMSAR(TM) and MSAR(R) for marine applications.
Utah - Our project in Utah, USA with Valkor Technologies LLC
("Valkor") involves the use of MSAR(R) technology to emulsify
low-sulphur heavy oil. Valkor has interests in multiple projects at
the Asphalt Ridge site with anticipated oil deposits of billions of
barrels. Valkor plan to recover heavy oil from oil-sand and
sub-surface oil deposits at their Primary Project Site ("PPS") at
Asphalt Ridge using production methods that mitigate greenhouse gas
emissions. Crucially, by using Quadrise technology, the viscosity
of the extracted heavy oil is reduced, facilitating transportation
whilst avoiding the use of costly diluents or excessive heat in the
supply chain. The resulting MSAR(R) or bioMSAR(TM) produced is an
alternative to very low sulphur fuel oil (<0.5%S "VLSFO") or
biofuels used in multiple industrial, power and marine fuel
applications. Oil samples from the PPS supplied by Valkor were
successfully converted to both MSAR(R) and bioMSAR(TM) by our RDI
team in 2022.
Valkor is leading activities for the award of drilling permits
at Asphalt Ridge as follows:
-- Valkor undertook successful exploration drilling and
optimisation of oil sands processing technologies during 2022.
-- In December 2022, and on behalf of their project partners
Heavy Sweet Oil LLC ("HSO") and AC Oil LLC ("ACO"), Valkor
submitted a pilot drilling development plan to the State of Utah's
Board of Oil, Gas and Mining (the "OGM Board") and the permits for
this were awarded subject to technical approval by the Utah
Division of Oil, Gas and Mining (the "Division").
-- Once technical approval is received (expected by Valkor to be
in early October 2023), Valkor plan to commence pilot drilling at
the PPS in October 2023 and in parallel submit Underground
Injection Control permit applications for the subsequent injection
of steam for enhanced heavy oil recovery.
-- Using standard well spacing of 40 acres, Valkor expect to be
able to drill up to 12 wells under the pilot development plan
approved by the OGM Board in December 2022 and managed by the
Division, upon receipt of technical approvals as stated above.
-- In addition to the pilot drilling programme, Valkor, on
behalf of project sponsors HSO and ACO, applied for approval of a
Unitisation Plan. This allows for up to 119 wells to be drilled at
Asphalt Ridge, using a reduced well spacing of 2.5 acres. The OGM
Board met in August 2023 to review the Plan, and this was, for the
moment, declined. Their view was that without a producing well in
place, there was insufficient evidence of heavy oil properties and
sub-surface locations within the planned area to support the Plan
as submitted.
-- It is important to note that the OGM Board's decision on the
Unitisation plan does not impact Valkor's intention to drill the
pilot wells conditionally granted by the Board in December 2022.
Pilot well drilling would then potentially support a further PPS
Unitisation Plan application in due course. Valkor are also
managing conventional oil sands projects for other clients that are
not subject to associated approvals for drilling or
Unitisation.
-- Valkor are now actively seeking minimum project financing of
US$15 million which is required in order to progress their
activities at the PPS planned for Q4 2023.
In June 2023, Quadrise signed a Site License and Supply
Agreement ("SLA") with Valkor. Under the SLA, Quadrise has granted
Valkor the exclusive right and licence to use its technology at the
PPS and to market the fuel on a non-exclusive basis from Utah. In
exchange, Valkor will pay Quadrise US$1.0 million subject to
receipt by Valkor of a minimum US$15 million of PPS project nancing
referred to above, which Valkor expect to receive in Q4 2023.
Further conditionality in the SLA, relating to the award by the
Division of the drilling and underground injection permits for the
PPS was waived by Valkor in August 2023, based on the positive
progress already made on these activities. Also under the SLA,
Valkor will pay Quadrise a further US$0.5 million upon delivery of
an MSAR Manufacturing Unit ("MMU") to the PPS, again, subject to
Valkor's receipt of the minimum project financing.
The Company is in regular contact with Valkor, who remain
confident of receipt of the minimum project financing of US$15
million in the near term, however, until this is received there
remains a risk that the aggregate US$1.5m due to Quadrise is
significantly delayed or not received at all.
Following Valkor's receipt of the MMU, Quadrise will provide
engineering and other support services for a minimum of two years
in exchange for a quarterly retainer of US$75,000. Valkor may then
choose to purchase the technology and MMU for a further US$1.0
million.
A non-binding Heads of Agreement has also been entered into
between the parties which sets out the basis on which Quadrise and
Valkor will seek to agree a conditionally exclusive Sub-License
Agreement to be granted to Valkor covering the state of Utah, as
well as the terms on which the resulting net pro t generated will
be shared between Quadrise and Valkor.
Morocco - In June 2022, QIL signed a new Material Transfer &
Cooperation Agreement with its client in Morocco, a major chemicals
company, under which QIL will manufacture trial quantities of
MSAR(R) and bioMSAR(TM) for the purpose of an industrial
demonstration test at the client's 'Site-B' facility. QIL will then
provide the client with a written report on the ef cacy of using
MSAR(R) and bioMSAR(TM). Provided the client-speci ed deliverables
regarding performance and product quality are met, the parties will
enter into discussions for a potential commercial supply of MSAR(R)
and/or bioMSAR(TM). In parallel with preparations for the site
demonstration tests, Quadrise has completed a technical and
economic feasibility study for a potential additional industrial
demonstration test at a second site of the client. This additional
industrial demonstration test will be subject to future agreement,
once con rmed.
Following the signature of the new Agreement, volumes of MSAR(R)
and bioMSAR(TM) were produced by Quadrise at a site in Europe and
shipped to Morocco in Q4 2022. Due to the process of clearing a new
fuel through Moroccan customs, the commencement of the MSAR(R)
demonstration test was subject to delays, with 60mt of MSAR(R) and
10mt of bioMSAR(TM) arriving at Site B in late February 2023.
Following the completion of the site engineering set up, and
nalisation of the client's production schedule, the trial formally
commenced in May 2023.
Cold start-up of the client's commercial unit was carried out
and the initial unit combustion warm-up sequence was tested using
MSAR(R) fuel. Whilst running at 100% load a mechanical component in
the pumping and heating unit ("PHU") failed progressively. This
reduced the available unit load achievable from the burner, and it
became impossible to complete the testing during May as originally
planned. The parties agreed to pause the trial so that the client
could complete their scheduled production run, and the respective
pump could be replaced. Unfortunately, it was not possible to
complete the test at full load due to a progressive decline in
replacement fuel pump performance on several occasions during
August 2023, indicating a design issue with the pump units at high
pressure.
A replacement pump of alternative design from a new supplier has
been expedited to Morocco, installed in the PHU, and commissioned
by the Quadrise team. The trial is now expected to be completed in
October 2023, following maintenance of the client's commercial unit
where the testing was carried out in September. The client remains
supportive of the Company's efforts to resolve this final issue and
progress the commercial trial at the next available
opportunity.
Upon successful conclusion of the trial, the parties will enter
discussions for potential commercial supply, in addition to
concluding agreements for testing at other client sites as
required. Commercial supply will be dependent on the Company being
able to source appropriately situated and priced feedstock.
Other projects - QIL signed a Letter of Intent in Q1 2023 with a
central American power provider outlining our mutual intent for a
commercial test of MSAR(R) and bioMSAR(TM) at the provider's power
plant, with the conclusion of a Test Agreement and site trial being
the precursors for entry into a Fuel Supply Agreement. Discussions
are ongoing and we originally expected agreements to be nalised
during Q4'23. However, the region is experiencing a significant and
extended drought that is forcing the electricity sector into an
ongoing emergency situation as hydroelectric dams are generating
less power, and all other power plants are running at full capacity
in order to close the gap. Therefore, the opportunity to conduct a
site trial is delayed. Together with our local agents, we continue
to explore other opportunities in the region. Efforts continue to
progress activities in Mexico with the state oil company (Pemex)
and utility operators.
In December 2022, Quadrise received and successfully
commissioned our prototype 5 tonne per hour emulsion system that
will be used for the production of MSAR(R) and bioMSAR(TM) fuels
for site trials and potential 'blend-on-board' ("BoB") testing on
marine vessels. BoB involves installation of an MSAR(R)
Manufacturing Unit ("MMU") and associated equipment on board a
marine vessel, with MSAR(R) and bioMSAR(TM) produced on board. This
allows vessels additional routing exibility as well as simplifying
the MSAR(R) and bioMSAR(TM) supply chain. A joint patent
application with Nouryon was filed in April 2023 covering BoB.
Quadrise has received enquiries from a number of marine operators
regarding BoB which are in the scoping phase of project development
and BoB is also under investigation as part of the MSC framework
agreement. QIL is currently in discussions with a refinery in Asia
who are interested in using this unit to conduct a refinery
refuelling trial using MSAR(R) in advance of a potential commercial
agreement.
bioMSAR(TM) and bioMSAR(TM) Zero development - During the
period, Quadrise has successfully tested bioMSAR(TM) produced using
glycerine sourced from a variety of European suppliers in advance
of commercial vessel trials with MSC. In parallel the Company has
been investigating alternative feedstocks to glycerine for
bioMSAR(TM) and oil-soluble biofuels that would allow the
development of a commercial net-zero version, 'bioMSAR(TM) Zero',
by 2030. As part of this work, following the June 2023 signature of
a Joint Development Agreement with BTG Bioliquids, their propriety
pyrolysis bio-oils (FPBO) and related sugars have been tested at
the Company's research facility QRF, with successful bioMSAR(TM)
blends being produced using the sugars. In addition, Quadrise
successfully produced stable blends of bioMSAR(TM) containing up to
40% of Vertoro's crude sugar oil (CSO(TM)) at pilot scale. Engine
tests of CSO bioMSAR(TM) demonstrated improved engine efficiency,
as well as lower NOx and visible particulate emissions during use
when compared to conventional diesel. A joint patent application
with Vertoro was filed in August 2023 covering CSO bioMSAR(TM).
Further testing will now take place including the Vertoro CSO
and
BTG Bioliquids sugars feedstocks in bioMSAR(TM) fuels at
reputable third-party testing facilities.
Outlook
In March 2023, the Group rebranded as Quadrise plc to better
align with our focus on energy decarbonisation and carbon
mitigation. Our annual Sustainability Report, launched in November
2022, provides valuable insights into our environmental
contributions and commitment to create a net-zero fuel by 2030.
Environmental considerations and emissions regulations are
becoming ever more prominent in driving the business case for
MSAR(R) and bioMSAR(TM) technology. In the United States, the In
ation Reduction Act has created a favourable environment for energy
decarbonisation technologies which we look forward to capitalising
upon with our partner, Valkor.
The introduction and implementation of environmental
regulations, particularly in Europe, is expected to increase
biofuel use in our target sectors. Shipping is now included in the
EU ETS and Fit-for-55 regulations, which are expected to increase
the use of marine biofuels from 2024 for most vessels operating
within or near EU waters. Revenues raised in the sector via the ETS
are to be reinvested into an Innovation Fund reserved for
sustainable shipping, the protection of maritime habitats and for
funding programmes to decarbonise the maritime sector.
Additionally, subsidies are still available for renewable
waste-based biofuel feedstocks such as glycerine that should
enhance the attractiveness of bioMSAR(TM) against competing
biofuels in certain bunker locations. Market conditions and trends
therefore provide a favourable environment for Quadrise to progress
its contract discussions and business development activities on all
fronts.
During 2022-23, we have seen energy security, climate change,
and fuel costs rise to the top of the policy agenda for governments
and businesses alike, and the need for solutions such as ours has
never been more vital. The positioning of Quadrise as an energy
decarbonisation enabler is an important statement of intent to
progress licence agreements and commercial-scale trials which are
expected to lead to supply contracts and commercial revenues from
MSAR(R) and bioMSAR(TM).
The energy sector is experiencing significant shifts, with
energy security, climate change, and fuel costs taking centre
stage. Quadrise remains dedicated to its mission and appreciates
the ongoing support of our shareholders in seeking to shape a
cleaner future.
Jason Miles
Chief Executive Officer
29 September 2023
Strategic Report
For the year ended 30 June 2023
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 progress against the key
performance indicators above, with a 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 are discussed at length in the Chairman
and CEO Statements.
Each year, a detailed two-year budget and cash forecast is
prepared by the Executive team, 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 2023, progress against the Group's
business model 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 operations, staff and consulting costs and
net project expenditure as a result of delays to project
timetables.
Going Concern
The Group had a cash balance of GBP1.34m as of 30 June 2023. In
July 2023, the Company raised funds of GBP1.94 million (before
expenses) via a placing and subsequent open offer of new ordinary
shares in the Company. Based on the latest Company forecasts which
assume the anticipated and important receipt of an aggregate of
US$1.5m from Valkor as described above, these funds are expected to
be sufficient to reach forecast commercial revenues and cover net
project expenditure and fixed costs up to the end of June 2024.
Additional funding will be required beyond this point to bridge the
gap to the generation of sustainable positive cashflows, which are
currently planned to commence in H2 2025. The Directors have
determined that the continuation of the Group as a going concern
will be dependent upon successfully raising sufficient funds in the
future to bridge this gap and the prior receipt of the Valkor
income. 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. This may cast significant
doubt on 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 3.
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 positive cashflow. This period is applicable because
it extends to the point at 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 and target markets, 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'.
In its sensitivity analysis and review of underlying
assumptions, which cover these risks, the Board looked at delays in
project timelines or that certain projects might not be realised.
The impact on the Company's longer-term viability is that the
timing and level of funds required to take the Group to the point
of sustainable positive cashflows is then 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
in receipt of the Valkor income and 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, our
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. The review considers each
operational sector and organisational level including the Company's
research and development facility, QRF, and risks are then triaged
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.
Receipt of funds from Valkor
The Company's cashflow forecasts assume the receipt of an
aggregate of US$1.5m of revenues from Valkor, which, together with
the GBP1.34m cash balance as at 30 June 2023 and the GBP1.94million
(gross) raised via the July 2023 placing and open offer, are
expected to be sufficient to reach forecast commercial revenues and
cover net project expenditure and fixed costs up to the end of June
2024. At the date of this report, there remains a risk that the
$1.5m from Valkor is either not received or is significantly
delayed, in which event the Company's ability to progress its
projects will be at risk without further funding. The Group
mitigates this risk by maintaining strong control over its
pre-revenue expenditure, as well as by actively evaluating
strategic initiatives that would de-risk and/or facilitate the
delivery of the Group's key objectives.
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 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
researching other renewable feedstocks that could be utilised
together with, or instead of glycerine, such as Vertoro's CSO(TM)
biofuel.
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 the Company'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, high 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 the 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
29 September 2023
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
Notes Year ended Year ended
30 June 30 June 2022
2023 GBP'000s
GBP'000s
Continuing operations
Revenue - 75
Production and development costs (1,741) (1,447)
Other administration expenses (1,331) (1,419)
Share option (charge)/credit 9 (178) 44
Warrant charge 10 - (18)
Foreign exchange (loss)/gain (6) 5
---------------------------------- ------ ----------- --------------
Operating loss (3,256) (2,760)
Finance costs (4) (3)
Finance income 12 1
---------------------------------- ------ ----------- --------------
Loss before tax (3,248) (2,762)
Taxation 4 154 164
---------------------------------- ------ ----------- --------------
Loss and total comprehensive loss
for the year
from continuing operations to owners
of the parent (3,094) (2,598)
------------------------------------------ ----------- --------------
Loss per share - pence
Basic (0.22) (0.18)
Diluted (0.22) (0.18)
---------------------------------- ------ ----------- --------------
Consolidated Statement of Financial Position
As at 30 June 2023
Notes As at As at
30 June 30 June 2022
2023 GBP'000s
GBP'000s
Assets
Non-current assets
Property, plant and equipment 6 374 398
Intangible assets 7 2,924 2,924
Non-current assets 3,298 3,322
------------------------------- ------ ---------- --------------
Current assets
Cash and cash equivalents 1,342 4,423
Trade and other receivables 89 103
Prepayments 119 177
Inventory 174 -
------------------------------- ------ ---------- --------------
Current assets 1,724 4,703
------------------------------- ------ ---------- --------------
TOTAL ASSETS 5,022 8,025
------------------------------- ------ ---------- --------------
Equity and liabilities
Current liabilities
Trade and other payables 175 262
Current liabilities 175 262
-------------------------------- --------- ---------
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 718 1,151
Warrant reserve - 970
Reverse acquisition reserve 522 522
Accumulated losses (91,428) (89,915)
-------------------------------- --------- ---------
Total shareholders' equity 4,847 7,763
-------------------------------- --------- ---------
TOTAL EQUITY AND LIABILITIES 5,022 8,025
-------------------------------- --------- ---------
Consolidated Statement of Changes in Equity
For the year ended 30 June 2023
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 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
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
1 July 2022 14,069 77,189 3,777 1,151 970 522 (89,915) 7,763
Loss and total
comprehensive
loss
for the year - - - - - - (3,094) (3,094)
Share option
charge - - - 178 - - - 178
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Transfer of
balances
relating to
expired
share options - - - (611) - - 611 -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Transfer of
balances
relating to
expired
warrants - - - - (970) - 970 -
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
30 June 2023 14,069 77,189 3,777 718 - 522 (91,428) 4,847
--------------- ---------- ---------- ----------- ---------- ----------- ------------ ------------- ----------
Consolidated Statement of Cash Flows
For the year ended 30 June 2023
Notes Year ended Year ended
30 June 30 June 2022
2023 GBP'000s
GBP'000s
Operating activities
Loss before tax from continuing
operations (3,248) (2,762)
Depreciation 6 119 120
Finance costs paid 4 3
Finance income received (12) (1)
Share option charge/(credit) 9 178 (44)
Warrant charge - 18
Working capital adjustments
Decrease in trade and other
receivables 14 14
Decrease/(increase)in prepayments 58 (82)
Decrease in trade and other
payables (87) (14)
(Increase)/decrease in
inventory (174) 61
Cash utilised in operations (3,148) (2,687)
----------------------------------- -------- ----------- --------------
Finance costs paid (4) (3)
Taxation received 4 154 164
Net cash outflow from
operating activities (2,998) (2,526)
----------------------------------- -------- ----------- --------------
Investing activities
Finance income received 12 1
Purchase of property, plant
and equipment 6 (95) (58)
Net cash outflow from
investing activities (83) (57)
----------------------------------- -------- ----------- --------------
Net decrease in cash and
cash equivalents (3,081) (2,583)
Cash and cash equivalents
at the beginning of the
year 4,423 7,006
----------------------------------- -------- ----------- --------------
Cash and cash equivalents
at the end of the year 1,342 4,423
----------------------------------- -------- ----------- --------------
Notes to the Financial Information
1. Basis of Preparation and Significant Accounting Policies
The financial information for the year ended 30 June 2023 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 2023 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 2023.
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 2022
were 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 2023 (2022: nil).
This announcement was approved by the Board on 29 September
2023.
2. Going Concern
The Group had a cash balance of GBP1.34m as of 30 June 2023. In
July 2023, the Company raised funds of GBP1.94 million (before
expenses) via a Placing and subsequent Open Offer. These funds are
expected to be sufficient to cover net project expenditure and
fixed costs up to 30 June 2024. Additional funding will be required
to bridge the gap to the generation of sustainable positive
cashflows, with these now forecast to commence in H2 2025.
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 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 progress continuing with regard to
the Company's primary projects 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 and sustainable
positive cashflows 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 both the Group and Company's ability
to operate as a going concern up to the 31 December 2024, and have
determined that the continuation of the Group and Company 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 Company
is the 100% parent of Quadrise International Limited ('QIL'), the
subsidiary through which the Group runs the operating and project
activities discussed above. 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 and Company 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
audit report draws attention to going concern by way of a material
uncertainty.
The financial statements do not include the adjustments that
would result if the Group and Company were 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. Taxation
Year ended Year ended
30 June 30 June 2022
2023 GBP'000s
GBP'000s
UK corporation tax credit (154) (164)
Total (154) (164)
--------------------------- ----------- --------------
No liability in respect of corporation tax arises as a result of
trading losses.
Tax Reconciliation Year ended Year ended
30 June 30 June 2022
2023 GBP'000s
GBP'000s
Loss on continuing operations before
taxation (3,248) (2,762)
Loss on continuing operations before
taxation multiplied by
the UK corporation tax rate of 20.5%
(2022: 19%) (666) (525)
Effects of:
Non-deductible expenditure 38 6
Super deduction (3) (4)
R&D tax credit (154) (164)
Non-taxable income - (10)
Temporary differences - -
Tax losses carried forward 631 532
Total taxation credit on loss from
continuing operations (154) (164)
--------------------------------------- ----------------- -----------------
The Group has tax losses arising in the UK of approximately
GBP62.10m (2022: GBP59.97m ) 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 2022
2023 GBP'000s
GBP'000s
Trading losses 36,255 33,215
Non-trade deficits arising in Intangible
Assets within Quadrise International
Limited 25,758 25,758
Management expenses incurred by Quadrise
International Limited - 817
Non-trade loan relationships - 89
Capital losses 89 89
Total 62,101 59,968
------------------------------------------ -------------------- --------------------
A deferred tax asset representing these losses and other
temporary differences at the statement of financial position date
of approximately GBP15.53m (2022: GBP14.99m) has not been
recognised as a result of existing uncertainties in relation to its
realisation.
5. 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 2023 30 June 2022
Loss for the year (GBP'000s) (3,094) (2,598)
Weighted average number of shares:
Basic 1,406,904,968 1,406,904,000
Diluted 1,406,904,968 1,406,904,000
Loss per share:
-------------------------------------- -------------- --------------
Basic (0.22)p (0.18)p
-------------------------------------- -------------- --------------
Diluted (0.22)p (0.18)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 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.
6. Property, plant and equipment
Consolidated
Leasehold Computer Software Furniture Plant Total
Improvements Equipment and Office and machinery
Equipment
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2022 89 94 43 16 1,440 1,682
Additions - 3 - 8 84 95
Disposals - (1) - - - (1)
Closing balance
- 30 June 2023 89 96 43 24 1,524 1,776
------------------ -------------- ------------------ --------- ------------ --------------- ---------
Depreciation
Opening balance
- 1 July 2022 (76) (90) (43) (16) (1,059) (1,284)
Depreciation
charge for the
year (3) (2) - - (114) (119)
Disposals 1 - - - 1
------------------ -------------- ------------------ --------- ------------ --------------- ---------
Closing balance
- 30 June 2023 (79) (91) (43) (16) (1,173) (1,402)
------------------ -------------- ------------------ --------- ------------ --------------- ---------
Net book value
at 30 June 2023 10 5 - 8 351 374
------------------ -------------- ------------------ --------- ------------ --------------- ---------
Company
Leasehold Computer Software Furniture Plant Total
Improvements Equipment and Office and machinery
Equipment
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2022 - 67 44 16 - 127
Additions - 3 - 8 - 11
Disposals - (1) - - - (1)
------------------ ----------------------- ----------- --------- ------------------- --------------- ---------
Closing balance
- 30 June 2023 - 69 44 24 - 137
------------------ ----------------------- ----------- --------- ------------------- --------------- ---------
Depreciation
Opening balance
- 1 July 2022 - (66) (44) (16) - (126)
Depreciation
charge for the
year - (1) - - - (1)
Disposals - 1 - - - 1
------------------ ----------------------- ----------- --------- ------------------- --------------- ---------
Closing balance
- 30 June 2023 - (66) (44) (16) - (126)
------------------ ----------------------- ----------- --------- ------------------- --------------- ---------
Net book value
at 30 June 2023 - 3 - 8 - 11
------------------ ----------------------- ----------- --------- ------------------- --------------- ---------
7. 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
2022 and 30 June 2023 7,686 3,100 25,901 36,687
Amortisation and
Impairment
Balance as at 1 July
2022 and 30 June 2023 (7,686) (176) (25,901) (33,763)
Net book value as
at 30 June 2023 - 2,924 - 2,924
------------------------ ------------ ------------ -------------- ---------
Cost
Balance as at 1 July
2020 and 30 June 2022 7,686 3,100 25,901 36,687
Amortisation and
Impairment
Balance as at 1 July
2020 and 30 June 2022 (7,686) (176) (25,901) (33,763)
Net book value as
at 30 June 2022 - 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 2033 with an assumed
growth rate being used beyond that date.
The key assumptions used in this calculation are as follows:
2023 2022
Royalty rate (%
of projected revenue)
(1) 0.5% 0.5%
------------- -------------
Discount rate (2) 20% 20%
------------- -------------
Revenues forecast 30 June 2033 30 June 2032
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 2023 revenue forecast extends to 30 June 2033 which is
considered to be a reasonable timeframe that
allows each project included within the forecast to reach 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 1.32 A 3 year delay to
(1 year) forecast revenues.
------------------- ------------------------
Delayed revenues 0.61 A 3 year delay to
(2 years) forecast revenues.
------------------- ------------------------
Increase in discount 0.46 Increase in discount
rate to 25% rate to 26.95%.
------------------- ------------------------
Removal of projects 0.89 Removal of projects
which generate 25% which generate 42%
of forecast revenues of revenues.
------------------- ------------------------
Finite company lifespan 0.71 Finite company lifespan
(to 30 June 2035). (to 30 June 2033).
------------------- ------------------------
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 2023.
8. 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 2023. The shares in each of
these companies were valued at CAD $nil on 1 July 2022 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
2023.
9. Share Options
Share option expense for the year ended 30 June 2023 was GBP178k
(2022: credit of GBP44k).
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
2023 2023 2022 2022
Outstanding as at 1
July 21,385,343 9.00 42,750,000 14.69
Granted during the year 36,233,038 3.28 14,515,722 5.70
Expired during the year (21,854,570) 7.07 (35,880,379) 14.44
Exercised during the - - - -
year
Options outstanding
as at 30 June 35,763,811 4.39 21,385,343 9.00
------------------------- ------------- ---------- ------------- ---------
Exercisable as at 30
June 16,231,895 6.55 18,250,000 10.37
------------------------- ------------- ---------- ------------- ---------
The weighted average remaining contractual life of the 35.76
million options outstanding at the statement of financial position
date is 6.40 years (2022: 4.64 years). The weighted average share
price during the year was 1.57p (2022: 2.66p) 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 36.2 million share options to directors and
employees during the year (2022: 14.5 million). The fair value was
calculated using the Black Scholes option pricing model. The
weighted average inputs were as follows:
2023 2022
Stock price: 1.46p 4.10p
Exercise Price 3.28p 5.70p
Interest Rate 2.16% 0.1%
Volatility 104.85% 124.12%
Expected term (years) 3.69 4.0
10. 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
2023 2023 2022 2022
Outstanding as at 1
July 40,228,026 6.98 40,228,026 6.98
Granted during the year - - 3,000,000 1.80
Exercised during the - - - -
year
Expired during the year (40,228,026) 6.98 (3,000,000) 3.53
Warrants outstanding
as at 30 June - - 40,228,026 6.85
------------------------- ------------- ---------- ------------ ---------
Exercisable as at 30
June - - 40,228,026 6.85
------------------------- ------------- ---------- ------------ ---------
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:
2023 2022
Stock price: - 1.87p
Exercise Price - 1.80p
Interest Rate - 1.25%
Volatility - 91.94%
Expected term (years) - 0.72
===== =======
No warrants remain outstanding at the statement of financial
position date. As at 30 June 2022, the weighted average remaining
contractual life of the 40.2 million warrants outstanding was 0.23
years. The weighted average share price during the year was 1.57p
(2022: 2.66p) 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 GBPnil (2022: GBP5k). The balance payable at the
statement of financial position date was GBPnil (2022: GBPnil).
QED 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
Placing and Open Offer
On the 7 July 2023, the Company raised total gross proceeds of
GBP1.1 million pursuant to a Placing of 88,000,000 New Ordinary
Shares at a price of 1.25 pence per share. On 25 July 2023,
additional gross proceeds of GBP0.84 million were raised from an
Open Offer to qualifying shareholders for a total of 67,573,855 New
Ordinary Shares at a price of 1.25 pence per share. T he Placing
and subsequent Open Offer raised a total of GBP1.94 million (before
expenses) for the Company.
Issuance of Share Options
Performance Options
On 3 August 2023, the Company granted a total of 13,500,000
options (the 'Performance Options') over new ordinary shares of 1p
each in the Company executives and employees of the Company in
accordance with the provisions of the Company's Enterprise
Management Incentive Plan ("EMI Plan"). The issue of these options
follows the lapsing in full of the 11,950,000 options issued by the
Company on 27 January 2023 due to the specific performance
conditions of those options not having been met. 7,500,000 of the
Performance Options were granted to Jason Miles, Chief Executive
Officer of the Company.
The Performance Options have an exercise price of 2.5p, and 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.
Additional Options
On 3 September 2023 Quadrise also granted 4,500,000 options over
new ordinary shares of 1p each in the Company to Non-Executive
Directors of the Company in accordance with the provisions of the
Company's Unapproved Share Option Plan 2016 ("2016 Plan") in the
amounts set out below (the "Additional Options").
Director No . of
Share Options
Andrew Morrison 2,000,000
---------------
Laurie Mutch 1,000,000
---------------
Philip Snaith 1,000,000
---------------
Dilip Shah 500,000
---------------
Total 4,500,000
---------------
The Additional Options have an exercise price of 2.5p. There are
no performance conditions to the vesting of the Additional Options,
which 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. The Additional Options will be exercisable from vesting
until the eighth anniversary of the date of grant.
Nominal Value Options
On 3 August 2023, the Company granted a total of 35,555,555
nominal value options ('NVOs') over new ordinary shares of 1p each
in the Company to executives and employees in accordance with the
provisions of the Company's Enterprise Management Incentive Plan
("EMI Plan"). 6,666,667 of the Performance Options were granted to
Jason Miles, Chief Executive Officer of the Company.
These Options have an exercise price of 1p, and will vest after
12 months from the date of grant, with vesting not subject to
performance conditions. The NVOs 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 2023 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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END
FR SEUFAUEDSEIU
(END) Dow Jones Newswires
October 02, 2023 02:00 ET (06:00 GMT)
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