REG - Quadrise PLC - Final Results and Notice of AGM
30/09/2024 07:00
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RNS Number : 1126G Quadrise PLC 30 September 2024
30 September 2024
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 cleaner alternatives
to fuel oil and biofuels, is pleased to announce its audited final results for
the year ended 30 June 2024.
Operational Summary:
· Marine - The signature of the binding trial agreement between
Quadrise, MSC Shipmanagement Ltd ("MSC") and Cargill NV ("Cargill") has been
subject to delays, however, the parties are collaborating positively to
finalise as soon as possible. Upon signature, installation and commissioning
of the Company's trial equipment at the MAC² terminal is planned in Q4 2024,
ahead of fuel production and the Proof-of-Concept tests commencing in early Q1
2025. The bioMSAR™ LONO trial is planned to complete 6-8 months following
the 2-month long Proof-of-Concept tests of MSAR(®) and bioMSAR™. During the
LONO trial the parties intend to conclude a Commercial Supply Agreement and
secure bioMSAR™ bunker supply operations to the marine sector by Cargill
from MAC(2) facilities in Antwerp and Bruges on a permanent basis in
anticipation of a successful trial conclusion.
· Morocco - Following the successful industrial demonstration test at
an OCP SA ("OCP") industrial site in Morocco, a Commercial Framework Agreement
was signed with OCP in May 2024. Preparations for a 30-day commercial trial at
OCP's Jorf Lasfar site are now underway and in parallel Quadrise has opened
discussions with candidate suppliers for long-term commercial MSAR(®) supply
with a view to signing term supply agreements following successful trial
completion.
· Utah - Following successful pilot drilling in Q2 2024, oil production
testing commenced in July 2024 managed by Valkor. Oil production from the
first well was confirmed in September 2024. Representative production barrels
of heavy sweet oil were prepared by Valkor in September, samples of which are
being shipped to Quadrise for analysis and formulation optimisation testing at
QRF. Commercial marketing of MSAR(®) to commence once the samples have been
tested. Valkor expect to drill additional oil wells on site by 2024 year-end
to increase oil production to 500-800 barrels per day. Provided a minimum of
US$15 million of project financing is successfully raised by Valkor, Valkor
will pay Quadrise US$1.0 million under the terms of the Site License and
Supply Agreement. A further US$0.5 million is then due from Valkor upon
delivery of an MSAR(®) Manufacturing Unit to the project site in Utah. Valkor
have confirmed to the Company that they are confident about their efforts to
secure the necessary project financing to enable these activities.
· bioMSAR™ ( )- ( )During the period, testing commenced on blends
of bioMSAR™ incorporating 'B30' marine biofuel (a blend of 30% biodiesel and
70% fuel oil) which, combined with glycerine, reduces the fossil fuel content
of our emulsion blends, providing an additional potential pathway to
bioMSAR™ Zero. When compared to diesel, the B30-based bioMSAR™ blends
demonstrated over 38% well-to-wake CO(2) reductions, enhanced diesel engine
efficiency of 3-7%, and reductions in NOx emissions of 43%-59% compared with
diesel fuel during testing. Testing is now underway on higher concentrations
of waste-based bio-oils with the intention to produce our first prototypes of
'B100' bioMSAR™ Zero, a 100% sustainable biofuel. Quadrise is therefore on
track to being able to demonstrate a commercial bioMSAR™ Zero product well
ahead of the Company's 2030 target.
Financial Summary:
· Loss after tax of £2.9m (2023: £3.1m), of which of £1.5m (2023:
£1.7m) is attributable to production and development costs and £1.3m (2023:
£1.3m) relates to administrative and corporate expenses.
· Total assets of £6.7m as at 30 June 2024 (2023: £5.3m).
· Cash balances as at 30 June 2024 of £3.0m (2023: £1.3m).
· Cumulative tax losses of £64.7m (2023: £62.1m) potentially available
for set-off against any future profits.
Jason Miles, Chief Executive Officer of Quadrise, commented:
"The Company entered the 2024-25 financial year with strong momentum and is
preparing to play its part in accelerating the global transition away from
fossil fuels.
Energy economics, environmental considerations, and emissions regulations are
increasingly driving the business case for MSAR(®) and bioMSAR™ technology.
With strong market conditions, the Company is well-positioned to progress
commercial trials with industry majors and build on traction gained during the
period with new potential clients while advancing biofuel options for
bioMSAR™ production and net-zero solutions.
The pending agreement with MSC and Cargill will formally kick off activities
at the MAC² terminal during Q4 2024, to prepare for fuel supply to the MSC
vessel trial from Q1 2025 onward followed by commercial supply upon success.
Our team is also preparing to complete the OCP commercial trial in Morocco in
early Q4 and has commenced discussions with candidate suppliers for long-term
commercial MSAR(®) supply upon success. Heavy sweet oil from the Valkor
projects in Utah has commenced production, with the State of Utah approving
Valkor's plans for future drilling. Conclusion of the MSAR(®) site license
and planned equipment delivery to Valkor in Utah is therefore expected,
pending successful resolution of eagerly awaited project financing by Valkor.
We acknowledge that progress during the period has been slower than we had
previously anticipated, however the time for Quadrise technology delivery is
now and the team are focused on achieving that goal."
Notice of Annual General Meeting
Quadrise also gives notice that the Company's Annual General Meeting ("AGM")
will be held at 12 noon on 22 November 2024 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 Capital Markets Limited +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
Cutbill Jacoby
Andy Cutbill +44 (0)7841 576000
Paul Brannon +44 (0)7759 629406
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.
Chair's Statement
The 2023-24 financial year has been one of incremental progress, with the
Company in a stronger position operationally and financially at year end than
at the same time last year. Events after year end are further strengthening
the Company's position, with the awaited signature of a collaboration
agreement with MSC and Cargill allowing sitework to commence for the vessel
trials. With drilling samples from Valkor having now been prepared and trials
in Morocco with OCP due to commence soon, the Company has entered the 2024-25
financial year with strong momentum and remains both eager and well placed to
play its part in the global transition away from fossil fuels.
The global commercial and regulatory landscape has never been more favourable
for the adoption of Quadrise technology. This was especially evident at the
December 2023 COP 28 climate conference in Dubai, which saw nearly 200
countries reach a landmark agreement to phase out fossil fuels. This milestone
is boosting global efforts to fast-track decarbonisation technologies, as
governments, companies, and investors push to prevent the worst effects of
climate change.
The shipping sector is now at the forefront of this transition, with shipping
operators and their customers leading the way. At COP 28, CEOs of major
shipping companies called for a deadline on the manufacture of newbuild fossil
fuel-powered vessels and urged the IMO to establish regulations for green fuel
adoption. Meanwhile, marine freight buyers like Amazon, Philips, and Nike
joined the Zero Emission Maritime Buyers Alliance (ZEMBA) to promote
zero-emission shipping. In September 2023, ZEMBA launched a request for
proposals, seeking bids to transport 600,000 containers over three years on
ships that offer a 90% reduction in emissions compared to traditional fossil
fuels.
Quadrise technology focuses on the affordable and progressive decarbonisation
of shipping through the replacement of heavy fuel oils. It enables production
of MSAR(®) and lower carbon bioMSAR™ fuels, which are lower cost, cleaner,
simpler and safer alternatives to heavy fuel oil and currently available
biofuels. This allows shipping companies to meet their emissions targets
whilst avoiding the need for new vessels or expensive and time-consuming
retrofits.
Quadrise continues to build its profile within our target market sectors.
Efforts to expand our client network this year have resulted in several
promising opportunities arising with prospective commercial partners. As part
of these efforts, the Company launched its second Sustainability Report in
November 2023. This report provides an accessible reference point for leaders
and decision-makers in the shipping and industrial sectors who are looking to
decarbonise their businesses practically and economically.
The Sustainability Report sets out our firm ambition to develop a commercially
competitive net-zero carbon emission fuel, 'bioMSAR™ Zero', by replacing the
hydrocarbon element of bioMSAR™ fuel with zero-carbon or carbon-negative
substitutes. Our goal is to have this fuel market-ready by 2030 and the
development programme is already well underway with formulations tested to
date that reduce CO(2) by up to 38% on a 'well to wake' basis.
Whilst we look to develop new opportunities, our near-term approach remains
unchanged, with continued focus on our key projects with MSC, Valkor and OCP.
These represent the most appropriate use of our financial and other resources
and provide the most material pathways to commercialisation and profitability
in line with the Company's core strategy.
Our project portfolio has been developed to address the Company's strategy of
creating demand points for our technology in key geographical locations,
whilst stimulating supply around these areas. This will enable marine
customers such as MSC to bunker our fuel worldwide and incentivise production
partners to produce MSAR(®) and bioMSAR™. Our project with Valkor is
directed towards the production of less carbon-intensive and very low sulphur
versions of MSAR(®) and bioMSAR™ for marine and power customers in North
America. Our project with OCP in Morocco is intended to generate MSAR(®)
supply in the Mediterranean, whilst our prospective projects in Southeast Asia
and Central America potentially provide further points of presence in those
regions, preparing ourselves for the scaling of our business to meet demand.
In last year's final results, I commented that the year had been one of
"continued strategic and operational progress, but without a breakthrough".
The year ending 30 June 2024 may have been more of the same, with the clear
promise shown around the time of the April 2024 fundraise then severely tested
by project delays outside the direct control of the Company. Planned
activities will provide a clear validation of Quadrise focus on the
decarbonisation of shipping and enable us to plan in earnest for profitability
and scaling of the business. We are not yet completely "in the clear", as
trials still need to be successfully navigated, but our technology is tested,
and we are confident of success.
As I have stated on occasions before, 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 Quadrise can address.
Subject to financial circumstances, we intend to explore and advance
complementary technologies to strengthen our decarbonisation proposition to
customers. This will increase the Company's impact on sustainability and
ensure that our products and services are high on the list when potential
clients are looking for solutions to reduce emissions.
On behalf of the Board, I would like to express my sincere appreciation to our
loyal shareholders for their support. We recognise that this has been another
year of frustration and slower than expected progress, but we are confident
your patience will be rewarded.
Financial Results
The consolidated after-tax loss for the year to 30 June 2024 was £2.9m (2023:
£3.1m), with the loss per share for the year reducing to 0.18p from 0.22p in
2023. Production and development costs of £1.5m (2023: £1.7m) 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 reduction due to lower
bioMSAR™ development and testing costs.
Administration expenses of £1.3m (2023: £1.3m), comprise the Group's
corporate staff and directors' costs, professional advisor fees, PR/IR costs
and head office costs.
At 30 June 2024, the Group had total assets of £6.7m (2023: £5.3m). The most
significant balances were cash of £3.0m (2023: £1.3m), intangible assets of
£2.9m (2023: £2.9m), and property, plant and equipment of £0.4m (2023:
£0.4m). The Group has tax losses arising in the UK of approximately £64.7m
(2023: £62.1m) that are potentially available to be carried forward against
any future profits.
Andy Morrison
Non-executive Chair
27 September 2024
Chief Executive's Statement
Addressing the Energy Transition Challenge
The shipping sector is responsible for roughly 3% of global GHG emissions and
is therefore under increasing pressure from regulators and customers to
decarbonise. The sector is now in the midst of great transformation, with
numerous alternative fuel sources already in use or proposed as longer-term
options. Each solution has its benefits and drawbacks, with some requiring
entirely new vessels to be built (in the case of future fuels, such as
liquified natural gas 'LNG' or methanol). Some require expensive retrofitting
of existing vessels with them removed from active service for long periods of
time, and some posing significant safety and logistical challenges (ammonia,
nuclear).
Quadrise offers a solution for shipping operators to meet their
decarbonisation targets whilst continuing to use their existing fleet with
minimal capital investment, thus extending the life of vessels and reducing
both fuel costs and emissions.
Revolutionary Quadrise Technology and Synthetic Fuels
Our patented Quadrise blending technology and fuels offer a practical and
cost-effective path for operators in the marine sector, as well as those in
the industrial and power sectors, to decarbonise, reduce energy costs and
lower associated emissions safely. Our unique technology can blend a wide
range of oil and water-soluble components to produce highly stable MSAR(®)
and bioMSAR™ emulsion fuels.
· MSAR(®) is a synthetic fuel oil that is supplied at lower energy
cost. When compared to conventional fuel oil, it reduces carbon dioxide
("CO(2)") emissions by up to 10% in diesel engines by lowering fuel
consumption (further lowering costs) as well as lowering emissions of nitrogen
oxides and particulates. It is an oil-in-water emulsion, made by blending oil
refinery residue streams (or heavy bitumen or crude oils) with water and
specialised additives in a proprietary production process.
· bioMSAR™ incorporates renewable glycerine to produce a synthetic
biofuel that offers all the benefits of MSAR(®) but with 20-30% less CO(2)
than fuel oil and cost savings of approximately 10% compared to standard
biofuels. bioMSAR™ outperforms LNG and marine biofuel blends in terms of
lower CO(2) emissions per unit of energy "well to wake". Other benefits
include improved safety during use, and improved dispersibility and
biodegradability in the unlikely event of a spill.
Immediately Deployable, Future-Proof Solutions
Our modular systems are commercially proven and ready for rapid deployment at
scale to the downstream, power, industrial and global shipping sectors. The
economic and environmental savings generated deliver immediate benefits to
users as the world transitions towards net-zero fuel solutions at a pace that
is still uncertain and governed by regulation, adoption and customer choice.
A Quadrise blending module is a low capital technology that can manufacture
MSAR(®) or bioMSAR™ interchangeably, providing a lower-cost environmental
solution to conventional liquid fuels today whilst offering the opportunity to
transition to sustainable biofuels based on consumer choice.
With one eye on the future, we have an established R&D strategy that
leverages our innovative, adaptable technology and our commercial application
experience. We are collaborating with fellow innovators in the sustainable
fuel sector to expand our portfolio of lower-cost, renewable, and abundant
biofuel components.
Supply partners and collaborators include Cargill NV (who supply sustainable
biofuels, bio-oils and glycerine), Vertoro BV (producers of a crude sugar oil
"CSO™" that we have successfully tested in diesel engines ) and BTG
Bioliquids BV (using their 'FPBO' biofuel products and sugar components
produced by fast pyrolysis) derived from sustainable biomass such as
agricultural and sawmill waste.
Our Quadrise Research Facility (QRF) in Essex is a valuable resource for
"proof-of-concept" testing of a range of second-generation biofuel components
offered by an increasing number of potential suppliers interested in the
bioMSAR™ solution to ultimately provide a net-zero solution for
hard-to-abate energy sectors.
Quadrise is the transition technology partner that creates low-carbon,
low-emission and low-cost energy solutions. These solutions are more
accessible than future fuel alternatives and are compatible and retrofit-ready
with existing fleets, enhancing profitability, extending asset life, and
reducing emissions and GHG impacts.
Key project status
Decarbonisation of Global Shipping: MSC
Our flagship project with MSC Shipmanagement, which operates the largest
shipping container fleet in the world, will demonstrate that Quadrise can play
an important role in the decarbonisation of shipping. The project covers
trials of MSAR(®) and bioMSAR™ fuels on board an operationally active MSC
vessel (the MSC Leandra V) ahead of commercial supply to MSC upon successful
trial completion.
In preparation for the MSC vessel trial fuel supply, a Collaboration Agreement
between Quadrise, Cargill NV and MAC² Solutions NV was signed in February
2024. The fuels for the trial will be produced using a Quadrise MSAR(®)
Manufacturing Unit ('MMU') and associated equipment, which will be installed
at the MAC² bunker facility in Antwerp, Belgium. MSAR(®) and bioMSAR™
fuels will then be produced using fuel oil and glycerine feedstocks supplied
by Cargill, who will also be responsible for bunkering operations to supply
the fuels to the MSC vessel. Planning for success, during the LONO trial the
parties expect to conclude a Commercial Supply Agreement and secure bioMSAR™
bunker supply operations to the marine sector by Cargill from MAC(2)
facilities in Antwerp and Bruges on a permanent basis.
Following signature of the Collaboration Agreement, Quadrise have completed
the purchase of critical-path trial equipment, including centrifuges and fuel
filters, whilst MAC(2) have obtained the permits required for the trial to
proceed and have prepared the groundworks in readiness for installation of
Quadrise equipment.
The signature of the binding agreement between Quadrise, MSC and Cargill has
unfortunately taken longer than envisaged, however, the parties are
collaborating positively to finalise this as soon as possible. The binding
3-way agreement establishes heads-of-terms covering associated binding
bilateral agreements for toll manufacture, terminal services and fuel supply,
which will also follow during Q4 2024, and in parallel trial preparations will
commence as soon as the initial binding agreement has been signed.
The trial will comprise initial Proof of Concept ("POC") tests of MSAR(®) and
bioMSAR™, followed by 4,000 hours of operation on bioMSAR™ to obtain a
Letter of No Objection ("LONO") from the engine manufacturer, Wärtsilä. The
bioMSAR™ LONO trial is expected to conclude 6-8 months following completion
of the 2-month long POC tests. Approximately 10,000-12,000 tonnes of Quadrise
fuels will be consumed over the period. In preparation for the vessel trial a
Hazard Identification Study ("HAZID") was completed in September 2023 by
Lloyds Register as Class Society for the vessel. This involved experts from
MSC, Wärtsilä and Quadrise. Installation and commissioning of the Quadrise
trial equipment at MAC² is currently expected in Q4 2024, ahead of fuel
production commencing in early Q1 2025.
In addition to the MSC project, the Company continues to develop strategic
options and partnerships with other shipping companies with the intention of
accelerating the commercialisation of both bioMSAR™ and MSAR(®) for marine
applications.
In line with our strategy to decarbonise shipping, we are exploring
opportunities in parallel to supply MSAR(®) to MSC and others from North-West
Europe, the Mediterranean, North and Central America, and Southeast Asia to
support demand from the major marine bunker hubs and our other clients.
Morocco: OCP
The Company's key project with OCP S.A. ('OCP'), a major international
manufacturing and mining group in Morocco, will at the same time stimulate
supply of MSAR(®) in the Mediterranean, a significant region for maritime
trade and bunkering due to its strategic location.
In November 2023, Quadrise successfully completed an industrial demonstration
test of MSAR(®) and bioMSAR™ at one of OCP's major industrial sites in
Morocco. The industrial unit tested was successfully operated at varying loads
of up to 100%, equivalent to 33MW of energy that is supplied by a single
burner. This is similar to the energy consumption of a medium-sized container
ship. This was the first demonstration of bioMSAR™ in a commercial
application.
Under the Commercial Framework Agreement ("CFA") signed in May 2024, a further
paid-for trial was agreed to expand the opportunity for both OCP and Quadrise,
as well as the process to progress commercial supply discussions for MSAR(®).
The Company is thus currently finalising preparations for a 30-day MSAR(®)
trial at OCP's Jorf Lasfar site ('Jorf') whilst also completing the
engineering studies necessary for commercial MSAR(®) use there. The MSAR(®)
equipment has been shipped to site to prepare for the trial, which is
scheduled to be completed in Q4 2024.
Quadrise has opened discussions with candidate suppliers for long-term
commercial MSAR(®) production and delivery with a view to signing a term
supply agreement following successful completion of the Jorf trial.
USA lower carbon fuels: Valkor, Utah
The project with Valkor targets the supply of very-low sulphur MSAR(®) and
bioMSAR™ from extra-heavy oil deposits directly into the marine and power
sectors. Quadrise technology will be installed at a central processing
facility at Valkor's Asphalt Ridge site in Utah, USA, with the finished
products then transported to major ports and power stations. The available
hydrocarbon reserves at Asphalt Ridge comprise billions of barrels, with
Valkor having sizeable interests in several projects at this location.
Unitisation and enhanced oil recovery plans for the project were approved by
State of Utah's Board of Oil, Gas and Mining in July 2024.
The properties of Valkor's heavy oil will enable MSAR(®) or bioMSAR™
derived from it to comply with International Maritime Organisation regulations
without the need for costly and carbon-intensive oil refining, providing
highly marketable lower carbon, ultra-low sulphur emulsion fuel.
In June 2023, Quadrise signed a Site License and Supply Agreement ("SLS") with
Valkor, under which the Company granted Valkor the exclusive right and license
to use its technology at the planned central processing facility and to market
the finished products on a non-exclusive basis. Under the SLS, Valkor will pay
Quadrise a US$1.0 million license fee subject to receipt by Valkor of project
financing of at least US$15 million. Valkor will pay Quadrise a further US$0.5
million upon receipt of an MMU and a quarterly retainer of US$75,000 for
engineering, project development and support services for at least two years.
Following successful pilot drilling in Q2 2024, oil production testing of the
downhole electrical heating system commenced in July 2024 managed by Valkor.
Oil production from the first well was confirmed in September 2024.
Representative production barrels of 6-8°API extra-heavy sweet oil were
prepared by Valkor in September, samples of which are being shipped to
Quadrise for analysis and formulation optimisation testing at QRF. Commercial
marketing to the marine, utilities and industrial sectors is expected to
commence as soon as testing is completed by Quadrise. Initial marketing
targets will include local power producers and marine vessels bunkering on the
US West Coast. Valkor expect to drill additional oil wells by 2024 year-end to
increase oil production to 500-800 barrels per day and are increasingly
confident about their efforts to secure project financing.
Other Projects
During the period, Quadrise commenced discussions with an oil refinery in
Southeast Asia that is interested in conducting a trial using MSAR(®)
technology for internal thermal applications, as a precursor to commercial
supply of a "Mini-MMU" producing 5 tons per hour. The refinery is situated
near to bulk oil storage and offers potential opportunities to supply
Singapore, the world's largest bunker hub.
The expansion of availability of MSAR(®) and bioMSAR™ into other major
marine hubs such as the Panama Canal is seen by the Board as being vital to
the future scaling of the Company's business. In 2023, Quadrise signed a
Letter of Intent with Sparkle Power, a power generator in Panama for a
commercial test of MSAR(®) and bioMSAR™. During this financial year,
prolonged drought conditions in Panama reduced hydroelectric power supply
capacity and Sparkle Power were called upon to provide additional emergency
power. With no spare capacity available, they were not able to progress trial
preparations. Environmental conditions have now improved, and discussions with
Sparkle have resumed.
Together with our local agents, we also continue to explore other
opportunities in the region to create demand and stimulate supply in and
around Panama and Honduras, the latter being a large consumer of fuel oil for
power generation.
bioMSAR™: the transition solution for net-zero energy
The Quadrise product development roadmap is focused on providing low-carbon,
low-emission and low-cost solutions to address key transition challenges for
maritime decarbonisation and other market sectors that we serve:
· Supplying a drop-in biofuel solution (bioMSAR™) rapidly, at
commercial scale globally at terminals or on-board vessels.
· Ensuring the bioMSAR™ platform is sufficiently adaptable to
incorporate a range of sustainable biofuel feedstocks.
· Delivering a commercially viable 'bioMSAR™ Zero' (labelled 'B100' -
with 100% biogenic energy) solution before 2030.
Collaboration is key to this initiative, and we are working with several
like-minded strategic partners to investigate lower cost, renewable and
abundant biofuel feedstocks for bioMSAR™. Work on this important programme
during the period has been very active:
bioMSAR™ incorporating biodiesel and bio-oil byproducts
During the period, testing commenced on blends of bioMSAR™ incorporating
'B30' biofuel, supplied by major trading companies. B30 is a blend of 30%
fatty acid methyl esters (or 'FAME', which is also used in biodiesel) and 70%
fuel oil and is currently the most widely available marine biofuel.
Incorporation of B30 combined with glycerine further reduces the fossil fuel
content of our emulsion blends, providing an additional potential pathway to
bioMSAR™ Zero.
When compared to diesel, the B30-based bioMSAR™ blends demonstrated:
· Over 38% well-to-wake CO(2) reductions based on the carbon intensity
of the components.
· Enhanced diesel engine efficiency of 3-7% with a corresponding
reduction in fuel consumption (further reducing overall CO(2) emissions to
45%).
· Reductions in NOx emissions of 43%-59%.
During Q3 2024, testing continued, incorporating higher concentrations of
waste-based bio-oils with the intention to produce our first prototypes of
'B100' bioMSAR™ Zero, a 100% sustainable biofuel. Following successful pilot
testing at QRF, engine testing is now scheduled at Aquafuel Research Limited,
where our 40kW Cummins diesel engine is situated. Quadrise is therefore on
track to demonstrate a commercial bioMSAR™ Zero product well ahead of the
Company's 2030 target.
bioMSAR™ incorporating sustainable biomass-derived sugars and alcohols
Large-scale supply and wide availability of fuel options are seen as key
customer requirements for scale-up into marine and industrial applications.
The ability to use water-soluble biomass sugars within the Company's unique
oil-in-water emulsion fuels opens access to abundant bio-energy waste
resources, presenting the Company with a significant opportunity.
In December 2023, a bioMSAR™ blend incorporating crude sugar oils ("CSO™")
provided by Vertoro BV was successfully tested on the Company's Cummins
engine. This testing showed reductions of up to 25% in CO(2) emissions, engine
efficiency improvements of 6-7% (taking total CO(2) reductions to >30%) and
reductions in NOx of around 30% compared with diesel.
In May 2024 Vertoro announced a partnership with Force Motor Yachts to design
and supply a luxury yacht that will run on bioMSAR™ Zero incorporating
CSO™. This initiative was formally launched at the Cannes Yacht Show in
September 2024. The new Force yacht provides a floating laboratory and
validation unit to accelerate access to Quadrise bioMSAR™ Zero and
Blend-on-Board technologies to lower costs and emissions.
Work has also progressed during the year with BTG Bioliquids BV ("BTL"), whose
technology produces pyrolysis sugars derived from biomass. BTL and Quadrise
are working with prospective partners who can use BTL's technology to supply
sugars for incorporation into bioMSAR™ at commercial scale. Following
successful pilot testing at QRF on bioMSAR™ incorporating around 20% BTL
pyrolysis sugars, engine testing is now scheduled with results expected early
Q4 2024.
Outlook
To paraphrase a recent report by Lloyd's Register "The challenge of maritime
decarbonisation is not that it is happening, but that it needs to happen so
quickly."
Energy economics, environmental considerations and emissions regulations are
increasingly driving the business case for MSAR(®) and bioMSAR™ technology.
Quadrise intends to make a significant contribution to the decarbonisation of
shipping through the coming year with the signature of further license
agreements and completion of commercial-scale trials, leading to supply
contracts and commercial revenues from MSAR(®) and bioMSAR™ during the next
12 months.
Green fuel choices for the marine and industrial markets that Quadrise serves
are still far off, and e-fuel availability at a competitive price remains a
problem. This has led some proponents of future fuels to hedge their bets with
new ship orders for conventional fuels. Those taking delivery of new
"dual-fuel" liquified natural gas (LNG) vessels are complaining about limited
fuel availability, with 80% still running on marine fuel oil or biofuels. As
conventional bio and renewable diesel fuels face growing demand from other
sectors, the need for lower-cost and more widely available biofuels is likely
to rise.
Market and regulatory trends are set to create an increasingly favourable
environment for the Company to advance its business. The implementation of new
environmental regulations, particularly in Europe, such as the EU ETS and
'Fit-for-55' are expected to significantly boost biofuel use and technology
investment, especially in the shipping sector. As conventional biofuels like
biodiesel and renewable diesel, currently used in shipping, face growing
demand from other sectors, the need for lower-cost and widely available
non-conventional biofuels is likely to rise. These regulations, along with
subsidies for renewable waste-based biofuel feedstocks such as glycerine,
should enhance the attractiveness of bioMSAR™ for end-users. With strong
market conditions, the Company is well-positioned to progress through
commercial trials and gain further traction with key clients.
The focus of Quadrise on the decarbonisation of shipping and other sectors is
an important statement of intent. License agreements and commercial-scale
trials are designed to lead to supply contracts and commercial revenues from
MSAR(®) and bioMSAR™. Looking ahead, our continued development of
bioMSAR™ and net-zero solutions opens exciting opportunities to deploy our
unique proven emulsion technology, helping our partners and clients to deliver
a cleaner future for us all.
Quadrise has a small, highly motivated and capable team and our continued
progress is only possible through the significant contribution of everyone
working within the business and our shareholders for their loyal support. We
are very aware that project delays outside of our control have disrupted our
planned commercial progress this year, but we are doing all that we can to
expedite successful outcomes in multiple continents and applications that
should benefit us all.
Jason Miles
Chief Executive Officer
27 September 2024
Strategic Report
For the year ended 30 June 2024
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 large marine diesel engines, power generation plants
and industrial applications.
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:
· Performance against its annual plan, including 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 a comprehensive 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 2024, 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.
Going Concern
The Group had a cash balance of £3.0m as of 30 June 2024. 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 2025. 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 H1
2026. 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 2.4.
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™
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 principal and
emerging 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, its potential impact on the Company,
and whether these factors have 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 each
year.
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
(approx. £1.2m) of revenues from Valkor, which, together with the £3.0m cash
balance as at 30 June 2024 is expected to be sufficient to reach forecast
commercial revenues and cover net project expenditure and fixed costs up to
the end of June 2025. 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.
Market scope and risk
Faced with pressure to move away from hydrocarbons, the Group still needs to
progress its MSAR(®) and bioMSAR™ endeavours into a volume business. The
Group addresses this challenge by continuing to promote the immediate and
practical environmental contribution of MSAR(®) and bioMSAR™ to the
shipping industry. The Group further mitigates this risk by promoting the
applicability of Quadrise technology to other sectors such as in the power
generation and industrial sectors discussed in the CEO's Statement. The
marketability of our technology and the fuels produced is affected by 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 and other factors beyond
the control of the Group.
Commercial return
The Group has made considerable progress in its rapid development and
enhancement of bioMSAR™ to meet the requirement for cleaner biofuels, whilst
continuing to advance commercial opportunities for MSAR(®) and reduce its
treat costs in the face of reductions to fuel oil-gasoil spreads in the
future. During the commercial roll-out of bioMSAR™ there remain the
considerable challenges of testing, feedstock availability (see below),
biofuel treatment options, formulation optimisation and commercial demand
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(®)
The IMO2020 regulation designed to motivate the use of very low sulphur fuel
oils has negatively impacted high sulphur residue supply, due to lack of
alternative markets. There is a risk that appropriately located high sulphur
residues cannot be sourced. The Group mitigates this risk by utilising its
deep understanding of the global refining industry, targeting qualifying
suppliers matched to prospective major consumers. There are economic and other
advantages to refiners in running a proportion of high sulphur crude oils and
the Group believes that the emergence of an MSAR(®) commercial business would
motivate candidate feedstock suppliers to expedite high sulphur residue
supply.
Feedstock sourcing - bioMSAR™
Sufficient quantities have been identified for immediate trial purposes, but
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 contracting with suppliers such
as Cargill NV. Clearly a commercial contract would again stimulate this market
and thus expedite feedstock supply. The Company is researching other renewable
feedstocks that could be utilised together with, or instead of glycerine, such
as Vertoro's CSO™ and BTL's pyrolysis sugar biofuels from sustainable
biomass.
Delay in commercialisation 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.quadrisefuels.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 and is not directly
affected by the ongoing conflict in the Middle East.
Andy Morrison
Non-executive Chair
27 September 2024
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2024
Notes Year ended Year ended
30 June 2024 30 June 2023 (Restated)
£'000s £'000s
Continuing operations
Revenue - -
Production and development costs (1,461) (1,746)
Other administration expenses (1,336) (1,334)
Share option charge 9 (260) (178)
Warrant charge 10 (30) -
Loss on disposal on fixed assets 6 (3) -
Foreign exchange loss (2) (6)
Operating loss (3,092) (3,264)
Finance costs (9) (8)
Finance income 32 12
Loss before tax (3,069) (3,260)
Taxation 4 209 154
Loss and total comprehensive loss for the year (2,860) (3,106)
from continuing operations to owners of the parent
Loss per share - pence
Basic 5 (0.18) (0.22)
Diluted 5 (0.18) (0.22)
Consolidated Statement of Financial
Position
As at 30 June
2024
Notes As at As at As at
30 June 2024 30 June 2023 (Restated) 1 July 2022 (Restated)
£'000s £'000s £'000s
Assets
Non-current assets
Property, plant and equipment 6 388 374 398
Right of Use assets 159 283 85
Intangible assets 7 2,924 2,924 2,924
Non-current assets 3,471 3,581 3,407
Current assets
Cash and cash equivalents 3,048 1,342 4,423
Trade and other receivables 118 89 103
Prepayments 91 119 177
Inventory - 174 -
Current assets 3,257 1,724 4,703
TOTAL ASSETS 6,728 5,305 8,110
Equity and liabilities
Current liabilities
Trade and other payables 239 175 262
Lease liabilities due in less than one year 102 108 26
Provision for lease dilapidations 56 56 28
Current liabilities 397 339 316
Non-current liabilities
Lease liabilities due in greater than one year 43 145 45
Non Current liabilities 43 145 45
Equity attributable to owners of the parent
Issued share capital 17,648 14,069 14,069
Share premium 77,647 77,189 77,189
Merger reserve 3,777 3,777 3,777
Share option reserve 839 718 1,151
Warrant reserve 30 - 970
Reverse acquisition reserve 522 522 522
Accumulated losses (94,175) (91,454) (89,929)
Total shareholders' equity 6,288 4,821 7,749
TOTAL EQUITY AND LIABILITIES 6,728 5,305 8,110
Consolidated Statement of Changes in Equity
For the year ended 30 June 2024
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 2022 (as reported) 14,069 77,189 3,777 1,151 970 522 (89,915) 7,763
Prior year adjustment - - - - - - 14 14
1 July 2022 (as restated) 14,069 77,189 3,777 1,151 970 522 (89,929) 7,749
Loss and total comprehensive loss for the year (Restated) - - - - - - (3,106) (3,106)
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 (Restated) 14,069 77,189 3,777 718 - 522 (91,454) 4,821
1 July 2023 14,069 77,189 3,777 718 522 (91,454) 4,821
Loss and total comprehensive loss for the year - - - - - - (2,860) (2,860)
New shares issued 3,579 895 4,474
Share issue costs (437) (437)
Share option charge - - - 260 - - - 260
New warrants issued - - - - 30 - - 30
Transfer of balances relating to expired share options - - - (139) - - 139 -
30 June 2024 17,648 77,647 3,777 839 30 522 (94,175) 6,288
Consolidated Statement of Cash Flows
For the year ended 30 June 2024
Notes Year ended Year ended
30 June 2024 30 June 2023 (Restated)
£'000s £'000s
Operating activities
Loss before tax from continuing operations (3,069) (3,260)
Depreciation 6 205 197
Loss on disposal of fixed assets 6 3 -
Finance costs paid 9 8
Finance income received (32) (12)
Share option charge 9 260 178
Warrant charge 30 -
Working capital adjustments
(Increase)/decrease in trade and other receivables (29) 14
Decrease in prepayments 28 58
Increase/(decrease) in trade and other payables 64 (87)
Decrease/(increase) in inventory 174 (174)
Net cash used in Operating Activities (2,357) (3,078)
Finance costs paid (9) (8)
Taxation received 4 209 154
Net cash outflow from operating activities (2,157) (2,932)
Investing activities
Finance income received 32 12
Purchase of property, plant and equipment 6 (98) (95)
Net cash outflow from investing activities (66) (83)
Financing activities
Issue of Ordinary Share Capital 4,474 -
Issue Costs (437) -
Payment of lease liabilities (108) (66)
Net cash inflow/(outflow) from financing activities 3,929 (66)
Net decrease in cash and cash equivalents 1,706 (3,081)
Cash and cash equivalents at the beginning of the year 1,342 4,423
Cash and cash equivalents at the end of the year 3,048 1,342
Notes to the Financial Information
1. Basis of Preparation and Significant Accounting Policies
The financial information for the year ended 30 June 2024 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 2024
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 2024.
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 2023 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
2024 (2023: nil).
This announcement was approved by the Board on 27 September 2024.
2. Going Concern
As at 30 June 2024, the Group had a cash balance of £3.0m. These funds are
expected to be sufficient to cover net project expenditure and fixed costs up
to 30 June 2025, beyond which additional funding will be required to bridge
the gap to the generation of sustainable positive cashflows, with these now
forecast to commence in H1 2026.
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 OCP 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™ 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 forthcoming trial in Morocco involves the combustion
of MSAR(®) for thermal applications. This is a similar application to that
successfully trialled by Quadrise at another OCP facility on a larger kiln
installed with a 33MW burner in 2023.
· MSC: Once agreements are signed, 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 and in Venezuela with Orimulsion involving Quadrise employees and
consultants.
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 2026, 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 2024 30 June 2023
£'000s £'000s
UK corporation tax credit (209) (154)
Total (209) (154)
No liability in respect of corporation tax arises as a result of trading
losses.
Tax Reconciliation Year ended Year ended
30 June 2024 30 June 2023 (Restated)
£'000s £'000s
Loss on continuing operations before taxation (3,069) (3,260)
Loss on continuing operations before taxation multiplied by
the UK corporation tax rate of 25% (2023: 20.5%) (767) (668)
Effects of:
Non-deductible expenditure 77 40
Super deduction (3)
R&D tax credit (209) (154)
Tax losses carried forward 690 631
Total taxation credit on loss from continuing operations (209) (154)
At the Spring Budget 2021, the government announced that the Corporation Tax
rate would increase from 19% to 25% from 1 April 2023. As such, a blended rate
of 20.5% has been applied to the previous financial year to account for the
change in Corporation tax as at 1 April 2023. The current year UK corporation
tax rate is 25%.
The Group has tax losses arising in the UK of approximately £64.7m (2023:
£62.1m) 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 2024 30 June 2023
£'000s £'000s
Trading losses 38,879 36,255
Non-trade deficits arising in Intangible Assets within Quadrise International 25,758 25,758
Limited
Capital losses 89 89
Total 64,726 62,101
A deferred tax asset representing these losses and other temporary differences
at the statement of financial position date of approximately £16.18m (2023:
£15.53m) 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 2024 30 June 2023 (Restated)
Loss for the year (£'000s) (2,860) (3,106)
Weighted average number of shares:
Basic 1,600,731,743 1,406,904,968
Diluted 1,600,731,743 1,406,904,968
Loss per share:
Basic (0.18)p (0.22)p
Diluted (0.18)p (0.22)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 2023 89 96 43 24 1,524 1,776
Additions - 1 - - 97 98
Disposals - - (20) - (64) (84)
Closing balance - 30 June 2024 89 97 23 24 1,557 1,790
Depreciation
Opening balance - 1 July 2023 (79) (91) (43) (16) (1,173) (1,402)
Depreciation charge for the year (3) (2) - (1) (75) (81)
Disposals - - 20 - 61 81
Closing balance - 30 June 2024 (82) (93) (23) (17) (1,187) (1,402)
Net book value at 30 June 2024 7 4 - 7 370 388
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 2023 - 69 44 24 - 137
Additions - - - - - -
Disposals - - (20) - - (20)
Closing balance - 30 June 2024 - 69 24 24 - 117
Depreciation
Opening balance - 1 July 2023 - (66) (44) (16) - (126)
Depreciation charge for the year - (1) - (1) - (2)
Disposals - - 20 - - 20
Closing balance - 30 June 2024 - (67) (24) (17) - (108)
Net book value at 30 June 2024 - 2 - 7 - 9
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 2023 and 30 June 2024 7,686 3,100 25,901 36,687
Amortisation and Impairment
Balance as at 1 July 2023 and 30 June 2024 (7,686) (176) (25,901) (33,763)
Net book value as at 30 June 2024 - 2,924 - 2,924
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
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 2034 with an assumed
growth rate being used beyond that date.
The key assumptions used in this calculation are as follows:
2024 2023
Royalty rate (% of projected revenue) (1) 0.5% 0.5%
Discount rate (2) 20% 20%
Revenues forecast up to (3) 30 June 2034 30 June 2033
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 2024 revenue forecast extends to 30 June 2034 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 £2.02m (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) 1.52 A 3 year delay to forecast revenues.
Delayed revenues (2 years) 0.78 A 3 year delay to forecast revenues.
Increase in discount rate to 25% 0.61 Increase in discount rate to 27.6%.
Removal of projects which generate 25% of forecast revenues 1.07 Removal of projects which generate 45% of revenues.
Finite company lifespan (to 30 June 2035). 0.88 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 2024.
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 2024. 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 2024.
9. Share Options
Share option expense for the year ended 30 June 2024 was £260k (2023:
£178k).
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 2024 30 June 2024 30 June 2023 30 June 2023
Outstanding as at 1 July 35,763,811 4.39 21,385,343 9.00
Granted during the year 52,444,444 1.51 36,233,038 3.28
Expired during the year (18,500,000) 3.60 (21,854,570) 7.07
Exercised during the year - - - -
Options outstanding as at 30 June 69,708,255 2.44 35,763,811 4.39
Exercisable as at 30 June 29,763,811 4.17 16,231,895 6.55
The weighted average remaining contractual life of the 69.71 million options
outstanding at the statement of financial position date is 7.45 years (2023:
6.40 years). The weighted average share price during the year was 1.61p (2023:
1.57p) 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 52.4 million share options to directors and employees
during the year (2023: 36.2 million). The fair value was calculated using the
Black Scholes option pricing model. The weighted average inputs were as
follows
2024 2023
Stock price: 1.18p 1.46p
Exercise Price 1.51p 3.28p
Interest Rate 5.25% 2.16%
Volatility 98.23% 104.85%
Expected term (years) 2.69 3.69
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 2024 30 June 2024 30 June 2023 30 June 2023
Outstanding as at 1 July - - 40,228,026 6.98
Granted during the year 3,600,000 1.45 - -
Exercised during the year - - - -
Expired during the year - - (40,228,026) 6.98
Warrants outstanding as at 30 June 3,600,000 1.45 - -
Exercisable as at 30 June 3,600,000 1.45 - -
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:
2024 2023
Stock price: 1.70p -
Exercise Price 1.45p -
Interest Rate 5.25% -
Volatility 112.86% -
Expected term (years) 1.0 -
As at 30 June 2024, the weighted average remaining contractual life of the 3.6
million warrants outstanding was 0.92 years. The weighted average share price
during the year was 1.61p (2023: 1.57p) per share. No warrants were
outstanding as at 30 June 2023. The warrant charge for the year ended 30 June
2024 was £30k (2023: £nil).
11. Prior year restatement
Under IFRS 16, the disclosures and accounting treatment of leases required
under this standard should have been adopted for the year ended 30 June 2023.
The comparative figures for the year ended 30 June 2023 have been therefore
been restated to reflect the correct accounting treatment.. Each of the
affected financial statement line items for the prior periods has been
restated as follows:
Consolidated Statement of Comprehensive Income 30 June 2023 £'000 Increase/(decrease) 30 June 2023 (Restated) £'000
Production and development cost (1,741) (5) (1,746)
Other administrative expenses (1,331) (3) (1,334)
Finance costs (4) (4) (8)
Loss before tax (3,248) (12) (3,260)
Consolidated Statement of Financial Position 30 June 2023 £'000 Increase/(decrease) 30 June 2023 (Restated) £'000
Right of use assets - 283 283
Provision for lease dilapidations - (56) (56)
Lease liabilities due in less than one year - (108) (108)
Lease liabilities due in greater than one year - (145) (145)
Accumulated losses (91,428) (26) (91,454)
Consolidated Statement of Changes in Equity 30 June 2023 £'000 Increase/(decrease) 30 June 2023 (Restated) £'000
Accumulated losses as at 1 July 2022 (89,915) (14) (89,929)
Loss and total comprehensive loss for the year (3,094) (12) (3,106)
Consolidated Statement of Cash Flows 30 June 2023 £'000 Increase/(decrease) 30 June 2023 (Restated) £'000
Loss before tax from continuing operations (3,248) (12) (3,260)
Depreciation 119 178 197
Finance costs paid 4 4 8
Payment of lease liabilities - (66) (66)
12. Related Party Transactions
There are no transactions with Directors or other related parties during the
period other than their remuneration as disclosed in the Report of Directors'
Remuneration.
13. Events After the end of the Reporting Period
Issuance of Share Options
Performance Options
On 1 August 2024, the Company granted a total of 13,880,000 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") and the
Company's Unapproved Share Option Plan 2016 ("2016 Plan"). The issue of these
options follows the lapsing in full of the 13,500,000 options issued by the
Company on 3 August 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 issued under the EMI Plan will be
exercisable from vesting until the tenth anniversary of the date of grant. The
Performance Options issued under the 2016 Plan will be exercisable from
vesting until the eighth anniversary of the date of grant
Additional Options
On 1 August 2024 Quadrise also granted 6,000,000 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 Number of Additional Options
Andrew Morrison 3,000,000
Laurie Mutch 1,500,000
Vicky Boiten-Lee 1,500,000
Total 6,000,000
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 2024, the Company granted a total of 4,195,804 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 EMI Plan.
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.
14. Copies of the Annual Report and Notice of Annual General Meeting
Copies of the annual report and of the notice convening the Company's 2024
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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