REG - Quadrise PLC - Final Results and Notice of AGM
02/10/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231002:nRSB2558Oa&default-theme=true
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(®) and bioMSAR™ 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™ 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™, 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 financing 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(®) Manufacturing Unit to the project site in
Utah, again, subject to Valkor's receipt of the minimum project financing.
· bioMSAR™ - 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™.
In addition, Quadrise successfully produced stable blends of bioMSAR™
containing up to 40% of Vertoro's crude sugar oil (CSO™) 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 £3.1m (2022: £2.6m), of which of £1.7m (2022:
£1.5m) is attributable to production and development costs and £1.3m (2022:
£1.4m) relates to administrative and corporate expenses.
· Total assets of £5.0m as at 30 June 2023 (2022: £8.0m).
· Cash balances as at 30 June 2023 of £1.3m (2022: £4.4m). An
additional £1.94m (gross) was raised in July 2023 via a placing and open
offer.
· Cumulative tax losses of £62.1m (2020: £60.0m) 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(®) 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(®) and bioMSAR™ 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™ and bioMSAR™ 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 +44 (0)20 3005 5000
Andrew Raca (Corporate Finance)
Andrew Monk (Corporate Broking)
Public & Investor Relations
Vigo Consulting +44 (0)20 7390 0230
Patrick D'Ancona
Finlay Thomson
About Quadrise
Quadrise is the supplier of MSAR(®) and bioMSAR™ 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
(https://url.avanan.click/v2/___http:/www.quadrise.com___.YXAxZTpzaG9yZWNhcDphOm86YzIxNmIzMDY1NzgwZjE4MWQyN2ZkYzkxZTg4MDQ2OWQ6Njo2OWU5OmYwYWQxYjYyZGY1OWIyOWY0OGJiZjZjNWY5OTRkNjBlYzVmNThkNjFhODU0ODJlNzAyYjk4NjQ5NGE5NDM0ODI6cDpU)
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
£1.94 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™ 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™ 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 £3.1m (2022:
£2.6m), with the loss per share for the year increasing to 0.22p from 0.18p
in 2022. Production and development costs of £1.7m (2022: £1.5m) comprise
the costs of the Group's R&D facility ('QRF' in Essex), its operational
staff and consultants, and ongoing bioMSAR™ and MSAR(®) development costs.
These costs are largely related to fixed costs with the increase due to
bioMSAR™ development and testing costs.
Administration expenses of £1.3m (2022: £1.4m), 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 £5.0m (2022: £8.0m). The most
significant balances were cash of £1.3m (2022: £4.4m), intangible assets of
£2.9m (2022: £2.9m), and property, plant and equipment of £0.4m (2022:
£0.4m). The Group has tax losses arising in the UK of approximately £62.0m
(2020: £60.0m) 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(®) 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™, 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™
outperforms LNG and FAME marine fuel blends in terms of lower CO(2) emissions
per unit of energy. Other bioMSAR™ 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™ blend with Vertoro BV, producers of a
crude sugar oil ("CSO™"). 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(®) and bioMSAR™ 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™
and MSAR(®) on board the MSC Leandra:
· Wärtsilä Services of Switzerland carried out optical combustion and
engine wear tests on bioMSAR™ 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 efficiency.
· A hazard identification and operability workshop was recently
completed involving MSC, Quadrise, Wärtsilä and Lloyds Register using the
framework developed for the prior use of MSAR(®) 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™ in Q1 2024
provided the relevant permits are received in time.
Once the initial MSAR(®) or bioMSAR™ fuel has been loaded and the on-board
systems commissioned, the vessel will be bunkering and burning bioMSAR™
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™ and MSAR(®) for marine applications.
Utah - Our project in Utah, USA with Valkor Technologies LLC ("Valkor")
involves the use of MSAR(®) 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(®) or bioMSAR™ 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(®) and bioMSAR™ 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
financing 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
profit 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(®) and bioMSAR™ 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 efficacy of
using MSAR(®) and bioMSAR™. Provided the client-specified deliverables
regarding performance and product quality are met, the parties will enter into
discussions for a potential commercial supply of MSAR(®) and/or bioMSAR™.
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 confirmed.
Following the signature of the new Agreement, volumes of MSAR(®) and
bioMSAR™ 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(®) demonstration test was subject to
delays, with 60mt of MSAR(®) and 10mt of bioMSAR™ arriving at Site B in
late February 2023. Following the completion of the site engineering set up,
and finalisation 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(®) 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(®) and bioMSAR™ 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 finalised 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(®) and bioMSAR™ fuels for site trials and potential
'blend-on-board' ("BoB") testing on marine vessels. BoB involves installation
of an MSAR(®) Manufacturing Unit ("MMU") and associated equipment on board a
marine vessel, with MSAR(®) and bioMSAR™ produced on board. This allows
vessels additional routing flexibility as well as simplifying the MSAR(®)
and bioMSAR™ 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(®) in advance of a potential commercial agreement.
bioMSAR™ and bioMSAR™ Zero development - During the period, Quadrise has
successfully tested bioMSAR™ 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™ and oil-soluble biofuels that would allow the
development of a commercial net-zero version, 'bioMSAR™ 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™ blends being produced using the sugars. In addition,
Quadrise successfully produced stable blends of bioMSAR™ containing up to
40% of Vertoro's crude sugar oil (CSO™) at pilot scale. Engine tests of
CSO bioMSAR™ 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™. Further testing will now take place including the
Vertoro CSO and BTG Bioliquids sugars feedstocks in bioMSAR™ 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(®) and bioMSAR™ technology.
In the United States, the Inflation 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™ 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(®) and
bioMSAR™.
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(®) and bioMSAR™ 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 £1.34m as of 30 June 2023. In July 2023, the
Company raised funds of £1.94 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(®) 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 £1.34m cash balance as at
30 June 2023 and the £1.94million (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(®) provides considerable environmental
advantages, and bioMSAR™ 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(®) and bioMSAR™
endeavours into a volume business. The Group mitigates this challenge by
continuing to promote the environmental contribution of MSAR(®) and
bioMSAR™ 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™ whilst continuing to advance commercial
opportunities for MSAR(®) and reduce its treat costs in the face of changes
to fuel oil-gasoil spreads. During the product development of bioMSAR™ 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(®)
IMO2020 has impacted high sulphur residue supply, and MSAR(®) 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(®) commercial contract would motivate candidate feedstock suppliers to
expedite feedstock supply.
Feedstock sourcing - bioMSAR™
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™ 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™ biofuel.
Delay in commercialisation of MSAR(®) and funding risks
There is a risk that the commercialisation of MSAR(®) and bioMSAR™ 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(®) and bioMSAR™ 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(®) and bioMSAR™
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
(https://www.quadrise.com/investor-relations/corporate-governance/) , 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 2023 30 June 2022
£'000s £'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 (3,094) (2,598)
from continuing operations to owners of the parent
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 2023 30 June 2022
£'000s £'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
Issued capital Share premium Share option reserve Reverse acquisition reserve Total
£'000s £'000s Merger reserve £'000s Warrant reserve £'000s £'000s Accumulated £'000s
losses
£'000s
£'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 2023 30 June 2022
£'000s £'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 (£'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 £1.34m as of 30 June 2023. In July 2023, the
Company raised funds of £1.94 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(®) 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(®)
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(®) 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™ and the similar properties of MSAR(®) and bioMSAR™ mean that
trials involving bioMSAR™ do not have a significantly higher risk of failure
than the MSAR(®) 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 2023 30 June 2022
£'000s £'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 2023 30 June 2022
£'000s £'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 £62.10m (2022:
£59.97m) 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 2023 30 June 2022
£'000s £'000s
Trading losses 36,255 33,215
Non-trade deficits arising in Intangible Assets within Quadrise International 25,758 25,758
Limited
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 £15.53m (2022:
£14.99m) 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 30 June 2023 Year ended 30 June 2022
Loss for the year (£'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 Improvements Computer Equipment Software Furniture and Office Equipment Plant and machinery Total
£'000s £'000s £'000s £'000s £'000s £'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 Improvements Computer Equipment Software Furniture and Office Equipment Plant and machinery Total
£'000s £'000s £'000s £'000s £'000s £'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 payments MSAR(®) trade name Technology and know-how Total
£'000s £'000s £'000s £'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 £36.7m,
including assets of finite and indefinite life. Quadrise Canada Corporation's
("QCC's) royalty payments of £7.7m and the MSAR(®) trade name of £3.1m 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 £25.9m, 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(®) 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® 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 up to (3) 30 June 2033 30 June 2032
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(®) 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 £1.48m (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(®) 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 (£'m) Scenario which would reduce headroom to nil
Delayed revenues (1 year) 1.32 A 3 year delay to forecast revenues.
Delayed revenues (2 years) 0.61 A 3 year delay to forecast revenues.
Increase in discount rate to 25% 0.46 Increase in discount rate to 26.95%.
Removal of projects which generate 25% of forecast revenues 0.89 Removal of projects which generate 42% of revenues.
Finite company lifespan (to 30 June 2035). 0.71 Finite company lifespan (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 £178k (2022: credit
of £44k).
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 2023 30 June 2023 30 June 2022 30 June 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 2023 30 June 2023 30 June 2022 30 June 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 £nil (2022: £5k). The balance
payable at the statement of financial position date was £nil (2022: £nil).
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 £1.1 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 £0.84 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. The Placing and subsequent Open Offer raised a total
of £1.94 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SEUFAUEDSEIURecent news on Quadrise
See all newsREG - Quadrise PLC - Total Voting Rights
AnnouncementREG - Quadrise PLC - Management Update
AnnouncementREG - AIM - AIM Notice - 08/04/2025
AnnouncementREG - Quadrise PLC - Exercise of Share Options
AnnouncementREG - Quadrise PLC - MAC2 Services Agreement
Announcement