Final Results and Notice of AGM

RNS Number : 4534B

Quadrise Fuels International PLC

03 October 2022

 

3 October 2022

Quadrise Fuels International plc

("Quadrise", "QFI", the "Company" and together with its subsidiaries the "Group")

Final Results, Notice of AGM and Investor Presentation

Quadrise (AIM:QFI) ,   the supplier of MSAR^® 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 2022.

The Company also gives notice that the Company's Annual General Meeting ("AGM") will be held at 12 noon on 25 November 2022 at the Park Plaza County Hall Hotel, 1 Addington Street, London, SE1 7RY.

Throughout FY2022, Quadrise has seen material progress across a range of international projects and expects to deliver commercial revenues in the current financial year.

Operational Highlights:

· MSC - In July 2022, Quadrise signed a Framework Agreement with MSC to carry out trials of bioMSAR™ and MSAR^® fuels with a view to the commercial supply of one or both of the fuels to MSC's global fleet. Proof-of-concept tests are planned for Q1 2023, following which MSC will run the LONO trials. With positive trial progression, Quadrise, MSC and other key stakeholders expect to commence discussions for commercial supply to MSC's global fleet.

· Morocco - In June 2022, Quadrise signed a new Material Transfer & Cooperation Agreement with the client, under which an industrial demonstration test using MSAR^® and bioMSAR™ will be carried out at a client site. The MSAR^® fuel for this test has now been manufactured and is being delivered to Morocco, with bioMSAR™ following imminently. The site test is now scheduled for early Q4. Upon successful completion, the parties will enter into discussions for potential commercial supply before year-end.

· Utah - In April 2022, Quadrise entered into a Commercial Development Agreement with Valkor Technologies LLC ("Valkor") to commercialise both MSAR^® and bioMSAR™ at their projects in Utah. The parties are working together to conclude a commercial agreement during Q4 2022.

· Americas - Quadrise and its local agents are progressing discussions with candidate sites in Panama and Honduras to trial MSAR^® and bioMSAR™ at power plants as a precursor to potential commercial supply in 2023. Joint discussions are also underway with a large refinery in the Caribbean with an interest in potential MSAR^® supply, and the Company continues to progress activities in Mexico.

· bioMSAR™ - In September 2022, Quadrise signed a Joint Development Agreement ("JDA") with Vertoro to investigate the use of their crude sugar oils (CSO^TM) as an alternative biofuel feedstock for bioMSAR™.

Financial Summary:

· Loss after tax of £2.6m (2021: £4.3m), of which of £1.5m (2021: £1.4m) is attributable to production and development costs and £1.4m (2021: £1.5m) relates to administrative and corporate expenses.

· Total assets of £8.0m as at 30 June 2022 (2021: £10.7m).

· Cash balances as at 30 June 2022 of £4.4m (2021: £7.0m).

· Cumulative tax losses of £60.0m (2020: £58.4m) potentially available for set-off against future profits.

Jason Miles, Chief Executive Officer of Quadrise, commented:

"During 2022 Quadrise has positioned itself as one of the key decarbonisation solution providers in a rapidly changing global energy market.

2022 has seen the Company sign key agreements with MSC Shipmanagement for marine fuel, Valkor for upstream applications, and with our client in Morocco to trial our bioMSAR™ and MSAR^® fuels as a precursor to commercial supply. Project activities are ongoing to deliver positive outcomes for Quadrise, and we continue to invest and collaborate in RDI to enhance our IP portfolio and future.

The pace of decarbonisation continues to accelerate, and the energy industry that we serve is having to adapt quickly to this and other world events that have impacted supply and demand, and escalated energy costs. Our innovative fuel and biofuel solutions offer clients key opportunities to reduce energy costs and greenhouse gas emissions today to effect an early transition to net zero carbon.

I look forward to an exciting period ahead for Quadrise and our loyal shareholders, we have never been better positioned to deliver our innovative fuel technology and ultimately a cleaner planet."

Investor Presentation

Jason Miles (CEO) and Andy Morrison (Chairman) will provide  a live investor presentation in relation to the Final Results via the Investor Meet Company ("IMC") platform at 10.00am on 4 October 2022.

The presentation is open to all existing and potential shareholders and questions can be submitted pre-event or at any time during the presentation via the "Ask a Question" function. Responses to the Q&A from the presentation will be published at the earliest opportunity on IMC.

Investors can sign up to Investor Meet Company for free and add  Quadrise via:

www.investormeetcompany.com/quadrise-fuels-international-plc/register-investor

For further information please contact:

Quadrise Fuels International Plc	[phone]
Andy Morrison, Chairman Jason Miles, Chief Executive Officer
Nominated Adviser
Cenkos Securities plc	[phone]
Ben Jeynes
Katy Birkin
Broker Shore Capital Stockbrokers Limited	[phone]
Toby Gibbs
Fiona Conroy
Public & Investor Relations
Vigo Consulting Patrick D'Ancona Charlie Neish	[phone]

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.quadrisefuels.com

Certain of the information contained within this announcement is deemed by the Company to constitute inside information as stipulated under The Market Abuse Regulation (EU 596/2014) pursuant to the Market Abuse (Amendment) (EU Exit) Regulations 2018. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Chairman's Statement

After joining Quadrise as Chairman in February 2022, I expressed my belief that this was a pivotal time for the Company. Almost no-one could have foreseen how much change and volatility has been witnessed in energy markets since then. The war in Ukraine and record global temperatures pushing the cost, security and carbon intensity of energy supply to the top of the political and business agenda. With the need to find greener, more cost-effective energy solutions becoming more urgent by the month, Quadrise now finds itself very well positioned to capture new business by offering practical, economic and greener solutions to real world problems through its MSAR^® and lower carbon bioMSAR™ fuels.

In February, I also stated that our immediate priorities were to determine which of our projects would be able to achieve revenue generation and positive cashflows in the timeliest manner and within our available resources, and to position Quadrise squarely amongst the growing cohort of Green Economy companies.

On the first of these priorities, it has been pleasing to note that the progress achieved to date should enable Quadrise to become revenue generating within the current financial year. Our flagship project with MSC has reached the milestone of a signed Framework Agreement and trials are expected to commence in early 2023. In Morocco, with preparatory work now complete, we expect completion of the trial early next quarter. In Utah, the commencement of drilling by Valkor and their partners will provide the oil samples needed to progress trials and commercial agreements. The agreements in place provide a clear line of sight from trials to commercial revenues.

The Company's immediate future will be to a large extent determined by our ability to deliver on the projects in hand, but it is pleasing to note the increasing enquiries from potential customers and partners who are interested to work with Quadrise and our real-world decarbonisation solutions. Once we secure our first commercial agreements, we should be confident of further growth.

On positioning Quadrise squarely in the Green Economy ecosystem, work is underway to enhance our ESG messaging, with our maiden sustainability report currently being researched and drafted. Shareholders will note our streamlined Annual Report this year as we migrate our sustainability messaging to this report, expected to be published before the end of the calendar year. In September, we were delighted to appoint Vicky Boiten-Lee as an ESG adviser to the board, in order to assist us in our efforts to make Quadrise a market leader in sustainability and to bring her industrial marketing experience and international perspectives to the board table.

Looking further ahead, we continue to develop the next generation of bioMSAR™ fuel and energy delivery technologies, with the goal of producing a fully net-zero product by 2030. These efforts have been bolstered by our recent JDA with Vertoro. We also remain open to M&A transactions that could de-risk and/or facilitate the expansion of the core emulsion fuels business. Our ambitions for the business are limited more by our available financial resources than by the scale of the opportunities that we can address.

We have come a long way during the financial year, and especially since the end of the Covid-19 pandemic restrictions. External factors and management's successful efforts on project definition and decarbonisation initiatives have combined to convince the board that now is the time to double down on their delivery, rather than to seek a change of direction.

I remain firm in my belief that Quadrise's time has come and am delighted to lead an experienced and determined board. Together with management, the board looks forward to driving the Company towards commercial revenues and generating value for our shareholders, whom I thank for their support and engagement throughout the year.  

Results for the Year

The consolidated after-tax loss for the year to 30 June 2022 was £2.6m (2021: £4.3m), with the loss per share for the year reducing to 0.18p from 0.36p in 2021. Production and development costs of £1.5m (2021: £1.4m) 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 consistent with the previous year, as they largely relate to fixed costs.

Administration expenses of £1.4m (2021: £1.5m), comprise the Group's corporate staff and directors' costs, professional advisor fees, PR/IR costs and head office costs. These have decreased as a result of reduced professional fees and lower office costs due to the move from our previous office in February 2021.

At 30 June 2022, the Group had total assets of £8.0m (2021: £10.7m). The most significant balances were cash of £4.4m (2021 £7.0m), intangible assets of £2.9m (2021: £2.9m), and property, plant and equipment of £0.4m (2021: £0.5m). The Group has tax losses arising in the UK of approximately £60.0m (2020: £58.4m) that are potentially available to be carried forward against future profits.

Andy Morrison

Non-executive Chairman

30 September 2022

Chief Executive's Statement

Our Energy Decarbonization Solutions

As a result of our collective efforts during the year, Quadrise has positioned itself as one of the key decarbonisation solutions providers in a rapidly changing global energy market. The world has until 2030 to cut human-caused CO₂emissions by half, in addition to other greenhouse gas ("GHG") emissions such as methane. These steps are required to have a 50% chance of avoiding the worst effects of climate change by 2050, according to the Intergovernmental Panel for Climate Change. Our unique technology can play a significant role in helping the world achieve this goal economically, today.

Our patented MSAR^® technology enhances the combustion of residual fuels and fuel oils, reducing harmful emissions. MSAR^® use lowers fuel consumption in diesel engines by up to 10% and reduces greenhouse gas emissions by the same amount. Our innovative low carbon bioMSAR™ fuel takes advantage of this proven fuel technology platform and incorporates renewable glycerine, currently a by-product of biodiesel manufacture, as a clean fuel component to reduce greenhouse gas emissions by over 25%.

Since presenting bioMSAR™ at the International Maritime Organisation (" IMO") in London during their International Shipping Week in September 2021 there has been a steady flow of enquiries from the maritime sector. According to UK Research and Innovation, the shipping industry is responsible for over 900 million tonnes of carbon dioxide emissions annually, roughly 2.5% of the world's total emissions. While a number of lower-carbon and potentially net-zero solutions are in development, they are not ready to be utilised at scale and will require significant investment in either retrofitting existing fleets or building new vessels. Quadrise's solutions are available immediately, and can be deployed at low cost to achieve immediate benefits during the transition to a Net Zero GHG future. 

Just as we continue to promote our current technology and products, we also recognise that Net Zero fuel solutions will be mandatory in the future, potentially as early as 2030. We have an RDI strategy in place to take advantage of this opportunity using our innovative and adaptable technology as well as collaborations with others in the field. During the period we have completed a joint study with University of Greenwich to explore the production of glycerine and other products from algae and commenced testing of various biofuel components that are soluble in oil or water. 

A Joint Development Agreement ("JDA") was signed with Vertoro of the Netherlands to investigate the use of concentrated sugars extracted from biomass as lignocellulose as an alternative water-based lower cost and abundant biofuel feedstock for bioMSAR™. Initial testing at Quadrise Research Facility ("QRF") in Essex has been positive - incorporating their crude sugar oils (CSO™) into bioMSAR™ formulations. A joint patent application has been filed with Vertoro as a result and diesel engine testing is planned under the JDA during the next 12 months. Additionally, a new patent was filed by Quadrise and Nouryon to cover "blend-on-board" solutions for the production of MSAR^® and bioMSAR™ in situ for diesel engines using conventional fuels and biofuels to strengthen our IP portfolio, and we are generating data using our Cummins engine at Aquafuel to support this.

Key Project Delivery

Our lead projects are in the marine, upstream and industrial sectors, with further projects progressing for downstream and powerplant applications. Our current focus is on demonstrating MSAR^® and bioMSAR™ technology at commercial scale and progressing each of the opportunities into commercial supply agreements. During the period agreements have been signed to progress these projects accordingly:

MSC - In July 2022, we were delighted to finally sign a framework agreement with MSC Shipmanagement ('MSC') to test and trial both of our economical, cleaner marine fuel and biofuel alternatives on their vessels. Having built a good relationship with MSC over a number of years, Quadrise is excited to be collaborating with them to decarbonise the largest container ship fleet in the world as they lead the way in helping the marine sector transition towards a net-zero carbon future.

The agreement with MSC is a multi-stage process, with pilot-scale marine testing shortly to be completed in Italy in early Q4, managed by Wärtsilä. The MSC Leandra, which is to be used for testing is a 54,000-deadweight tonne container ship in active commercial service. The Wärtsilä Flex-powered vessel, formerly known as the Seago Istanbul, is familiar to us from previous successful tests of MSAR^®, which simplifies and de-risks the planned testing and extended operational use of bioMSAR™. The project team have inspected the MSAR^® systems previously installed for the Maersk tests to ensure the unit is ready for fuel testing, and commissioning tests are scheduled to be completed during the coming weeks. Planning is ongoing with MSC and Lloyd's Register to complete a safety review to obtain Flag State approval for the trials as before.

Proof-of-concept ("POC") tests aboard the Leandra are planned for Q1 2023, after the vessel returns from drydock for its scheduled maintenance and regulatory class inspection. Confirmation of the vessel route and the MSAR^® / bioMSAR™ bunker supply point and partner will be made in Q4 2022, with discussions underway with potential fuel supply partners. Following the POC tests, MSC will run operational trials for which approximately 25,000 tonnes of each fuel will be supplied. Each trial encompasses 4,000 hours of testing on board the vessel, with a view to obtaining a letter of no objection ("LONO") from Wärtsilä upon completion. The first operational LONO trial on bioMSAR™ is expected to be completed by the second half of next year. As the trials progress positively Quadrise, MSC and other key stakeholders expect to commence discussions for the commercial supply of bioMSAR™ and MSAR^® to MSC's global fleet. Successful trial results will also facilitate negotiations for the supply of our technology to other shipping companies and advance our collaboration to help decarbonise shipping globally.

Morocco - Our project in Morocco is with a key client interested in using MSAR^® and potentially bioMSAR™. In June 2022, Quadrise signed a new Material Transfer & Cooperation Agreement ("MTCA") with the client, superseding the original agreement announced late 2019. Under the MTCA Quadrise is contracted to manufacture trial quantities of MSAR^® and bioMSAR™ for the purpose of an industrial demonstration test at one of the client's sites, and to complete a technical and economic feasibility study for a potential additional industrial demonstration test at a second site. The draft feasibility study for the second site was submitted to the client in June 2022 as planned.

Preparations for the industrial demonstration test are well advanced, the trial equipment is on site and the client is ready to receive the MSAR^® and bioMSAR™ fuel following several visits by Quadrise personnel to site. Preparation of the MSAR^® fuel was delayed by several weeks due to hold ups with the commissioning of our new five tonne-per-hour MSAR^® unit in Denmark. This was caused by the late supply of key electronic components for the control system, and limited availability of personnel at our third-party contractor over summer. With these issues now resolved, the MSAR^® is now manufactured and is being delivered to Morocco, with bioMSAR™ manufacture and shipment to follow imminently. The site test is now scheduled for early Q4. On completion of the trial Quadrise will provide the Client with a written report on the efficacy of using MSAR^® 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^® before year-end. The additional industrial demonstration test will be subject to a future agreement following positive results from the first test.

Utah - Our project in Utah involves using MSAR^® technology to emulsify low-sulphur 10-13° API heavy oil that can be recovered from the billions of barrels of oil-sand and conventional oil deposits at Asphalt Ridge. MSAR^® technology reduces the viscosity of the heavy oil, saving the use of diluents or excessive heat in the supply chain. The resulting MSAR^® or bioMSAR™ produced is an alternative to very low sulphur (<0.5%) fuel oil ("VLSFO") or FAME-based biofuel for the industrial, power and marine fuel sectors.

In August 2021, our RDI team at QRF successfully converted Utah oil samples provided by Greenfield Energy LLC ("Greenfield", a subsidy of AIM-listed TOMCO Energy plc) to both MSAR^® and bioMSAR™. In April 2022, Quadrise entered into a Commercial Development Agreement ("CDA") with Valkor Technologies LLC ("Valkor") to commercialise Quadrise's MSAR^® and bioMSAR™ technologies at its projects in Utah. Valkor has equity interests in the majority of heavy oil projects in Utah, including those of Greenfield, Petroteq Energy Inc, Heavy Sweet Oil LLC and Big Sky Resources LLC. During the period up to the end of August 2022, Valkor managed an extended and expansive core sampling programme in the oil-producing region to accurately define recoverable reserves from surface oil sands and sub-surface heavy oil. In parallel, further work was undertaken by Valkor and partners on selecting and optimising the solvent process used for extraction of oil from the sand, so as to enable finished products of each. Valkor was also involved with presentations to the Utah authorities to obtain drilling permits for 4 pilot wells, Valkor expect to obtain these drilling permits imminently and first oil is anticipated later in Q4 2022.

The result of these activities has secured heavy oil availability by end 2022, but delayed the assay information and potential samples that Quadrise and Valkor need to market MSAR^® and bioMSAR™ in the region. Despite these minor delays the parties are working together to finalise the commercial terms for Phase 1 (the "Primary Project") to conclude an agreement during Q4 2022. The future use of sequestered CO₂ for enhanced oil recovery in Utah could result in a low carbon MSAR^® or bioMSAR™ VLSFO alternative that would have compelling competitive advantages, especially for the marine sector.

Americas - Through our regional agent network we are progressing projects in Panama and Honduras with thermal power generators, and in Mexico and the Caribbean with national oil companies and utilities respectively. Quadrise and its local agents, E&PC, are progressing discussions with several candidate sites in Panama and Honduras to trial MSAR^® and bioMSAR™ at power plants equipped with medium speed 4 stroke diesel engines (many of which are Wärtsilä), as a precursor to potential commercial supply in 2023. Joint discussions have also recently commenced with a large refinery in the Caribbean with an interest in potential MSAR^® supply for internal consumption or sale to regional power plants. In Mexico, the Company submitted a multi-site study in Q3 2022 to the National Oil Company supporting the implementation of MSAR^® technology at a number of their refineries, together with documentation for one of the sites to carry out a demonstration of MSAR^® refinery refuelling on a fuel oil boiler and/or fired heater in 2023.

Outlook

During the reporting period the downstream oil sector has had to react to a combination of increased product demand for refined transportation fuels as the world emerged from the global pandemic, and then a rapid supply-demand shift resulting from the partial embargo on Russian oil and products due to the invasion of Ukraine. These events elevated oil prices and the relative value of refined products globally. This has been positive for refinery margins in general and has elevated the fuel oil - distillate spread, enhancing the economic value of refinery residuals as an energy source for MSAR^® and bioMSAR™ in our key markets. The refining sector is adapting to changes in renewable fuel demand, with many refineries in the developed world investing in biofuel production. Major energy companies are also heavily investing in decarbonisation initiatives, an example being the recent $2.75bn acquisition of the Renewable Energy Group by Chevron in June 2022.

Russia's invasion of Ukraine has also had a material impact on the availability and price of natural gas and LNG, with European shortages and embargoes impacting global demand. Higher energy prices, coupled with increased scrutiny of the role of methane slip in the supply of natural gas are causing a new uncertainty over decisions on future energy supply. Methane is a potent greenhouse gas that has a global warming potential approximately 80 times greater than CO₂ over 20 years (IPCC), hence a small gas leak can materially negate any benefits in CO₂ reductions over fuel oil or biofuel-based products such as MSAR^® and bioMSAR™. Many commentators are now questioning the longer-term use and full environmental impact of LNG when the world needs to decarbonise.

New legislation and regulations to advance decarbonisation efforts are coming thick and fast, initiated by the EU but now spreading globally by other regions and the IMO. The shipping sector is one of the hardest sectors to decarbonise but there is increased consumer pressure for operators to address this challenge. The IMO and the Maritime Environment Protection Committee (MEPC) policy goal is to cut annual greenhouse gas emissions in shipping by at least 40% by 2030, pursuing a 70% reduction by 2050. The forthcoming Energy Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations have resulted from this policy goal. The former's purpose is to regulate the overall energy efficiency of a vessel's design, whilst the latter regulates the operational carbon intensity of a vessel by measuring how efficiently it transports goods or passengers. In addition to the environmental, economic and operational benefits, our fuels represent an effective and swift solution to meet these regulations.

During the period Philip Hill joined us in January 2022 to replace Mark Whittle as COO, and Andy Morrison joined us in February 2022 as Non-executive Chairman to replace Mike Kirk. Both Philip and Andy have settled in well and have hit the ground running. In addition, we have recently welcomed two new staff at QRF in Essex to strengthen the RDI team there, working under Bernard Johnston to advance our projects and decarbonisation initiatives. Vicky Boiten-Lee has recently joined us in an ESG Advisory role to assist David Scott and myself in enhancing our sustainability programmes and reporting during the coming months.

I am pleased to say that Quadrise is entering an exciting period of growth and I look forward to generating value for our loyal shareholders, whilst delivering innovative solutions for a cleaner planet.

Jason Miles

Chief Executive Officer

30 September 2022

Strategic Report

For the year ended 30 June 2022

Principal Activity

The principal activity of the Company is to develop markets for its proprietary emulsion fuels, MSAR^® 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 business model, with a progress review held at least monthly with Non-Executive Directors. The commercial performance of the Company and each of the Company's key projects and business development opportunities is discussed at length in the Chairman and CEO Statements.

Each year, a detailed two-year budget and cash forecast is prepared by the Executive Directors and the Head of Finance, and following an extensive review process, is then approved by the Board. Performance against budget and updated cash projections are included within the monthly management accounts issued to and reviewed by the Board.

For the year ended 30 June 2022, progress against the Group's business model and was slower than anticipated, with delays to key projects as discussed in the CEO statement. The financial performance of the Group was ahead of budget due to lower than forecast expenditure on bioMSAR™ testing,  staff costs and up-front project expenditure as a result of delays to project timetables.

Going Concern

The Group had a cash balance of £4.4m as of 30 June 2022, expected to be sufficient to reach forecast commercial revenues in H1 2023 and to cover project expenditure and fixed costs up to early H2 2023. Additional funding will be required beyond this point to bridge the gap between exhaustion of existing funds and the generation of sustainable positive cashflows, expected to commence in H2 2024. The Directors have determined that the continuation of the Group as a going concern will be dependent upon successfully raising sufficient funds to bridge this gap. The Directors have a reasonable expectation that such funds will be raised, although no binding funding agreements are in place at the date of this report, and have therefore determined that it is appropriate to prepare the financial statements on a going concern basis. However, in the absence of additional funding being in place at the date of this report, these conditions indicate the existence of a material uncertainty which may cast significant doubt over the Company's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. For further details behind the judgments and estimations used by the Directors in reaching this determination, refer to note 2.

Longer term viability statement

In reaching its conclusion on the going concern assessment and longer term viability of the Group, the Board reviewed the Group's three year cash flow forecasts which cover the period to revenue generation and the generation of positive cashflow. This period is applicable because it extends to the point during which the Group is forecast to be generating sustainable positive cashflows. The Board reviewed the underlying assumptions in this cashflow, together with sensitivity analysis performed on these projections. The Board believes these forecasts are based on a prudent assessment of the Group's prospects, target markets and past experience, taking account of reasonably possible scenarios given current market and economic conditions. The risks outlined below have been considered by the Board in their determination of longer-term viability, most significantly 'Delay in commercialisation of MSAR^® and funding risks' and ' No profit to date'

The Board have reviewed sensitivity analysis which cover these risks, modelling delays in project timelines as well as the removal of certain projects and have determined that the effect of these risks on the Company's longer term viability is that the timing and amount of funds required to take the Group to the point of sustainable positive cashflows is affected. However, the Board consider that the Group remains viable in the longer term under the sensitivities modelled.

The Board therefore has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, provided it is able to raise the funding required as outlined in the Going Concern note above.

Climate Change

As discussed in both the Chairman's and CEO's statements , Quadrise's bioMSAR^TM technology offers an alternative to HFO with over 25% lower CO₂ emissions. The Directors believe that the growing global emphasis on the COP 26 Goals, specifically the goal of transition to global net-zero carbon by 2050, present Quadrise with increasing opportunities to assist marine, power and industrial clients in obtaining a cost-effective solution to lowering their carbon emissions. Government actions to reduce climate change therefore provide opportunities to Quadrise, but the Board acknowledges that the Company may also be presented with additional risks due to these actions. 

Risks, including those introduced by climate change and governmental actions to reduce climate change, are discussed in the next section. 

Principal Business Risks

Each year in the second quarter, the Audit Committee assists the Executive Team in a structured zero-based re-assessment of the Company's emerging and principal risks. This is conducted for each operational sector and organisational level including the Company's research and development facility, QRF, and then aggregated for the Company as a whole. The risk level is determined by its probability, impact on the Company, and whether the risk has increased or decreased over the last 12 months. A summary of "Principal Risks and Uncertainties" is reviewed at a Board meeting. Subsequently a Risk Mitigation Strategy and Action Plan is incorporated into the annual Business Planning exercise conducted in June.

The principal risks identified during this exercise, ranked in order of the likelihood of occurrence, are set out below. These may not include all the risk factors that could affect future results. Actual results could differ materially from those anticipated because of these and various other factors, and those set forth in the Group's other periodic and current reports filed with the authorities from time to time.

Environmental constraints, climate change and decarbonisation

The increasingly hostile public attitude towards fossil fuels is a significant challenge resulting in a rapid move away from hydrocarbons towards fully renewable fuels. Whilst MSAR^® 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's provides progressive decarbonisation solutions for applications such as shipping, where the existing legacy fleet will be in service for many years to come. 

Market scope and risk

Aligned with the constraints above, and faced with the move away from hydrocarbons, the Group must still progress its MSAR ^® 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 investigating the feasibility of algal production of glycerine with the University of Greenwich, as well as researching other renewable feedstocks that could be utilised together with, or instead of glycerine, such as Vertoro's CSO™ biofuel feedstock.

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 Quadrise's process. Were such competition to emerge, this could result, over time, in further price competition and pressure on margins beyond that assumed in the Group's business planning. This risk is mitigated by the limited global pool of expertise in the emulsion fuel market combined with an enhanced R&D programme aimed at optimising cost and performance and protection of intellectual property. The Group also makes best use of scarce expertise by developing close relationships with strategic counterparties such as Nouryon while ensuring that key employees are suitably incentivised.

Environment, Social and Governance risks (ESG)

Quadrise is committed to providing safer, cleaner and more affordable energy. By leveraging our extensive RDI capabilities, and through continuous improvement processes, Quadrise aims to be carbon-neutral by 2030. Furthermore, the highest standards of corporate governance have always been a strength and this places the Company in the top tier of AIM companies. We maintain this commitment by adopting the highest disclosure standards of the UK Corporate Governance Code, through the experience and commitment of our Non-executive Directors and by following stringent Board policies and procedures. The Company works to exceptional health, safety, environmental protection and quality standards, with strong risk management processes in place, all of which are supported by a first-class team of professional advisors. 

Other Business Risks

Dependence on key personnel

The Group's business is dependent on obtaining and retaining the services of key personnel of the appropriate calibre as the business develops. The success of the Group will continue to be dependent on the expertise and experience of the Directors and the management team, and the loss of personnel could still have an adverse effect on the Group. The Group mitigates this risk by ensuring that key personnel are suitably incentivised and contractually bound.

Environmental risks

The Group's operations are subject to environmental risks inherent in the oil processing and distribution industry. The Group is subject to environmental laws and regulations in connection with all its operations. Although the Group ensures compliance with all applicable environmental laws and regulations, there are certain risks inherent to its activities, such as accidental spills, leakages or other circumstances that could expose the Group to potential liability.

Further, the Group may require approval from the relevant authorities before it can undertake activities which are likely to impact the environment. Failure to obtain such approvals may prevent or delay such activities. The Group is unable to predict definitively the effect of additional environmental laws and regulations, which may be adopted in the future, including whether any such laws or regulations would materially increase the Group's cost of doing business, or affect its operations in any area of its business. The Group mitigates this risk by ensuring compliance with environmental legislation in the jurisdictions in which it operates, and closely monitoring any pending regulation or legislation to ensure compliance.

No profit to date

The Group has incurred aggregate losses since its inception, and it is therefore not possible to evaluate its prospects based on past performance. There can be no certainty that the Group will achieve or sustain profitability or achieve or sustain positive cash flow from its activities.

Corporate and regulatory formalities

The conduct of petroleum processing and distribution requires compliance by the Group with numerous procedures and formalities in many different national jurisdictions. It may not in all cases be possible to comply with or obtain waivers of all such formalities. Additionally, functioning as a publicly listed Company requires compliance with the stock market regulations. The Group mitigates this risk through commitment to a high standard of corporate governance and 'fit for purpose' procedures, and by maintaining and applying effective policies.

Economic, political, judicial, administrative, taxation or other regulatory factors

The Group may be adversely affected by changes in economic, political, judicial, administrative, taxation or other regulatory factors, in the areas in which the Group operates and conducts its principal activities. The Group has no direct exposure to the Ukraine/Russia conflict.

Andy Morrison

Non-executive Chairman

30 September 2022

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2022

	Notes	Year ended 30 June 2022 £'000s	Year ended 30 June 2021 £'000s
Continuing operations
Revenue		75	17
Production and development costs		(1,447)	(1,377)
Other administration expenses		(1,419)	(1,527)
Fair value adjustments arising on Convertible Securities		-	(1,257)
Share option credit/(charge)	10	44	(303)
Warrant charge	11	(18)	-
Foreign exchange loss		5	(9)
Operating loss	4	(2,760)	(4,456)
Finance costs		(3)	(4)
Finance income		1	50
Loss before tax		(2,762)	(4,410)
Taxation	5	164	150
Loss and total comprehensive loss for the year from continuing operations to owners of the parent		(2,598)	(4,260)
Loss per share - pence
Basic	6	(0.18)p	(0.36)p
Diluted	6	(0.18)p	(0.36)p

Consolidated Statement of Financial Position 

As at 30 June 2022  

	Notes	As at 30 June 2022 £'000s	As at 30 June 2021 £'000s
Assets
Non-current assets
Property, plant and equipment	7	398	460
Intangible assets	8	2,924	2,924
Non-current assets		3,322	3,384
Current assets
Cash and cash equivalents		4.423	7,006
Trade and other receivables		103	117
Prepayments		177	95
Stock		-	61
Current assets		4,703	7,279
TOTAL ASSETS		8,025	10,663

Equity and liabilities
Current liabilities
Trade and other payables		262	276
Current liabilities		262	276
Equity attributable to owners of the parent
Issued share capital		14,069	14,069
Share premium		77,189	77,189
Merger reserve		3,777	3,777
Share option reserve		1,151	3,344
Warrant reserve		970	1,017
Reverse acquisition reserve		522	522
Accumulated losses		(89,915)	(89,531)
Total shareholders' equity		7,763	10,387
TOTAL EQUITY AND LIABILITIES		8,025	10,663

Consolidated Statement of Changes in Equity

For the year ended 30 June 2022

	Issued capital £'000s	Share premium £'000s	Merger reserve £'000s	Share option reserve £'000s	Warrant reserve £'000s	Reverse acquisition reserve £'000s	Accumulated losses £'000s	Total £'000s
1 July 2020	10,351	75,431	-	3,927	1,122	522	(87,324)	4,029
Loss and total comprehensive loss for the year	-	-	-	-	-	-	(4,260)	(4,260)
Fair value adjustments arising on Convertible Securities	-	-	-	-	-	-	1,564	1,564
Share option charge	-	-	-	303	-	-	-	303
Transfer of balances relating to expired share options	-	-	-	(886)	-	-	886	-
Transfer of balances relating to expired warrants	-	-	-	-	(105)	-	105	-
New shares issued	2,599	639	3,777	-	-	-	-	7,015
Share issue costs	-		-	-	-	-	(502)	(502)
Shares issued upon exercise of Convertible Security	1,119	1,119	-	-	-	-	-	2,238
30 June 2021	14,069	77,189	3,777	3,344	1,017	522	(89,531)	10,387
1 July 2021	14,069	77,189	3,777	3,344	1,017	522	(89,531)	10,387
Loss and total comprehensive loss for the year	-	-	-	-	-	-	(2,598)	(2,598)
Share option charge	-	-	-	(44)	-	-	-	(44)
Transfer of balances relating to expired share options	-	-	-	(2,149)	-	-	2,149	-
Warrant charge	-	-	-	-	18	-	-	18
Transfer of balances relating to expired warrants	-	-	-	-	(65)	-	65	-
30 June 2022	14,069	77,189	3,777	1,151	970	522	(89,915)	7,763

Consolidated Statement of Cash Flows

For the year ended 30 June 2022

	Notes	Year ended 30 June 2022 £'000s	Year ended 30 June 2021 £'000s
Operating activities
Loss before tax from continuing operations		(2,762)	(4,410)
Fair value adjustments arising on Convertible Securities		-	1,257
Depreciation	7	120	135
Loss on disposal of fixed assets		-	16
Finance costs paid		3	4
Finance income received		(1)	(50)
Share option (credit)/charge	10	(44)	303
Warrant charge		18	-
Working capital adjustments
Decrease in trade and other receivables		14	96
(Increase)/decrease in prepayments		(82)	17
(Decrease)/increase in trade and other payables		(14)	78
Decrease in stock		61	-
Cash utilised in operations		(2,687)	(2,554)
Finance costs paid		(3)	(4)
Taxation received	5	164	150
Net cash outflow from operating activities		(2,526)	(2,408)
Investing activities
Finance income received		1	50
Purchase of property, plant and equipment	7	(58)	(29)
Net cash outflow from investing activities		(57)	21
Financing activities
Issue of ordinary share capital		-	7,015
Issue costs		-	(502)
Increase in Convertible Securities		-	500
Net cash inflow from financing activities		-	7,013
Net (decrease)/increase in cash and cash equivalents		(2,583)	4,626
Cash and cash equivalents at the beginning of the year		7,006	2,380
Cash and cash equivalents at the end of the year		4,423	7,006

Notes to the Financial Information

1.  Basis of Preparation and Significant Accounting Policies

The financial information for the year ended 30 June 2022 has been prepared in accordance UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and effective, or issued and early adopted, as at the date of those statements.

The financial information contained in this announcement does not constitute the Company's statutory financial statements for the year ended 30 June 2022 but has been extracted from them. These financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on these financial statements, and their report was unqualified and did not contain any statement under section 498(2) or (3) Companies Act 2006.

The financial information has been prepared on the historical cost basis, except for the revaluation of certain financial instruments. Details of the accounting policies applied are set out in the financial statements for the year ended 30 June 2022.

The financial information is prepared in Pounds Sterling and all values are rounded to the nearest thousand Pounds (£'000) except where otherwise indicated.

Statutory financial statements for the year ended 30 June 2021 have been delivered to the Registrar of Companies. The auditor's report on these financial statements was unqualified and did not contain any statement under section 498(2) or (3) Companies Act 2006.

The Directors do not propose a dividend in respect of the year ended 30 June 2022 (2021: nil).

This announcement was approved by the Board on 30 September 2022.

2.  Going Concern

The Group had a cash balance of £4.42m as of 30 June 2022, expected to be sufficient to cover project expenditure and fixed costs up to H2 2023. Additional funding will be required to bridge the gap to the generation of sustainable positive cashflows, with these now forecast to commence in H2 2024.

The basis for these expectations is the Group business model, budget and business plan, and sensitivity analysis, which have been reviewed and approved by the Board. The model comprises the financial forecasts associated with each project opportunity deemed to have a realistic chance of progressing, with assumptions based on the latest market information, agreements with counterparties and the status of discussions.

The Directors carry out a detailed risk assessment process each year, with key risks and mitigating actions identified. Despite the ongoing global disruption caused by COVID-19 and Russia's invasion of Ukraine, the Directors note the positive and sustained levels of engagement with partners, prospective clients and project stakeholders worldwide during the year, with three major agreements signed during the year with MSC, Valkor and the client in Morocco. Existing and prospective commercial partners make decisions based on long-term considerations, and the Directors believe that the economic and environmental advantages offered by MSAR^® and bioMSAR^TM are increasingly attractive in periods of global uncertainty as counterparties look to both generate savings and further improve their environmental performance.

The Group's ability to reach commercial revenues in H1 2023 will be determined by the successful outcome of the forthcoming trials. The Board are confident that the trials will be successful based upon the following:

· Morocco: The trial in Morocco involves the combustion of MSAR^® 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 the Group's ability to operate as a going concern up to the 31 December 2023, and have determined that the continuation of the Group as a going concern will be dependent upon successfully raising sufficient funds within 12 months of the financial statements sign off date to bridge the gap between the exhaustion of existing funds and the generation of sustainable positive cashflows. The Directors have a reasonable expectation that with positive trial results and ongoing progress to commercial revenues, such funds will be raised, although no binding funding agreements are in place at the date of this report, furthermore, notwithstanding the Board's confidence, there are currently no binding agreements in place in respect of commercial revenues.

The Directors have therefore concluded that it is appropriate to prepare the Group's financial statements on a going concern basis; however, in the absence of additional funding being in place at the date of this report, these conditions indicate the existence of a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

The financial information does not include the adjustments that would result if the Group was unable to continue as a going concern.

3.  Segmental Information

For the purpose of segmental information, the reportable operating segment is determined to be the business segment. The Group principally has one business segment, the results of which are regularly reviewed by the Board. This business segment is a business to produce emulsion fuel (or supply the associated technology to third parties) as a low-cost substitute for conventional heavy fuel oil ("HFO") for use in power generation plants and industrial and marine diesel engines.

Geographical Segments

The Group's only geographical segment during the year was the UK.

4.  Operating Loss

Operating loss is stated after charging:	Year ended 30 June 2022 £'000s	Year ended 30 June 2021 £'000s
Fees payable to the Company's auditor for the audit of the Company's annual accounts. Fees payable to the Company's auditor and its associates for other services :	41	43
Audit of accounts of subsidiaries  Tax compliance services	41 -	35 -
Consultants and other professional fees (including legal)	211	273
Depreciation of property, plant and equipment	120	135
Research and development costs	326	300

5.  Taxation

	Year ended 30 June 2022 £'000s	Year ended 30 June 2021 £'000s
UK corporation tax credit	(164)	(150)
Total	(164)	(150)

No liability in respect of corporation tax arises as a result of trading losses.

Tax Reconciliation	Year ended 30 June 2022 £'000s	Year ended 30 June 2021 £'000s
Loss on continuing operations before taxation	(2,762)	(4,410)
Loss on continuing operations before taxation multiplied by the UK corporation tax rate of 19% (2021: 19%)	(525)	(838)
Effects of:
Non-deductible expenditure	4	58
R&D tax credit	(164)	(150)
Temporary differences	(6)	24
Tax losses carried forward	527	756
Total taxation credit on loss from continuing operations	(164)	(150)

The Group has tax losses arising in the UK of approximately £59.97m (2021: £58.46m ) that are available, under current legislation, to be carried forward against future profits. However the ability to utilise the losses is restricted, being dependant on the type of loss and when it arose. The use of losses under the UK corporation tax regime was reformed from 1 April 2017 such that different rules on the use of losses apply to losses arising pre-April 2017 and post-April 2017. Pre-2017 trading losses can only be deducted against profits of the same trade within the company in which they arose, whereas the post-2017 trading losses can be used more widely and are deductible against total profits of the group.

Reconciliation of tax losses	Year ended 30 June 2022 £'000s	Year ended 30 June 2021 £'000s
Trading losses	33,215	30,692
Non-trade deficits arising in Intangible Assets within Quadrise International Limited	25,758	25,758
Pre-trading losses incurred by subsidiaries	-	200
Management expenses incurred by Quadrise International Limited	817	817
Non-trade loan relationships	89	899
Capital losses	89	89
Total	59,968	58,455

A deferred tax asset representing these losses and other temporary differences at the statement of financial position date of approximately £14.99m (2021: £11.1m) has not been recognised as a result of existing uncertainties in relation to its realisation. 

6.  Loss Per Share

The calculation of loss per share is based on the following loss and number of shares:

	Year ended  30 June 2022	Year ended  30 June 2021
Loss for the year (£'000s)	(2,598)	(4,260)
Weighted average number of shares:
Basic	1,406,904,000	1,175,406,844
Diluted	1,406,904,000	1,175,406,844
Loss per share - pence:
Basic	(0.18)p	(0.36)p
Diluted	(0.18)p	(0.36)p

Basic loss per share is calculated by dividing the loss for the year from continuing operations of the Group by the weighted average number of ordinary shares in issue during the year.

For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive options over ordinary shares. Potential ordinary shares resulting from the exercise of share options have an anti-dilutive effect due to the Group being in a loss position. As a result, diluted loss per share is disclosed as the same value as basic loss per share. The 18.3m dilutive share options and the 40.2m dilutive warrants issued by the Company and which are outstanding at year-end could potentially dilute earnings per share in the future if exercised when the Group is in a profit making position.

7.  Property, plant and equipment

Consolidated
	Leasehold Improvements	Computer Equipment	Software	Office Equipment	Plant and machinery	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Cost
Opening balance - 1 July 2021	74	98	43	16	1,397	1,628
Additions	15	-	-	-	43	58
Disposals	-	(4)	-	-	-	(4)
Closing balance - 30 June 2022	89	94	43	16	1,440	1,682
Depreciation
Opening balance - 1 July 2021	(74)	(92)	(43)	(16)	(943)	(1,168)
Depreciation charge for the year	(2)	(2)	-	-	(116)	(120)
Disposals		4	-	-	-	4
Closing balance - 30 June 2022	(76)	(90)	(43)	(16)	(1,059)	(1,284)
Net book value at 30 June 2022	13	4	-	-	381	398
Consolidated
	Leasehold Improvements	Computer Equipment	Software	Office Equipment	Plant and machinery	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Cost
Opening balance - 1 July 2020	181	95	43	16	1,410	1,745
Additions	-	3	-	-	26	29
Disposals	(107)	-	-	-	(39)	(146)
Closing balance - 30 June 2021	74	98	43	16	1,397	1,628
Depreciation
Opening balance - 1 July 2020	(181)	(89)	(43)	(16)	(834)	(1,163)
Depreciation charge for the year	-	(3)	-	-	(132)	(135)
Disposals	107	-	-	-	23	130
Closing balance - 30 June 2021	(74)	(92)	(43)	(16)	(943)	(1,168)
Net book value at 30 June 2021	-	6	-	-	454	460

8.  Intangible Assets

Consolidated

	QCC royalty payments	MSAR® trade name	Technology and know-how	Total
	£'000s	£'000s	£'000s	£'000s
Cost
Balance as at 1 July 2021 and 30 June 2022	7,686	3,100	25,901	36,687
Amortisation and Impairment
Balance as at 1 July 2021 and 30 June 2022	(7,686)	(176)	(25,901)	(33,763)
Net book value as at 30 June 2022	-	2,924	-	2,924

Cost
Balance as at 1 July 2020 and 30 June 2021	7,686	3,100	25,901		36,687
Amortisation and Impairment
Balance as at 1 July 2020 and 30 June 2021	(7,686)	(176)	(25,901)		(33,763)
Net book value as at 30 June 2021	-	2,924	-		2,924

Intangible assets comprise intellectual property with a cost of £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 2032 with an assumed growth rate being used beyond that date.

The key assumptions used in this calculation are as follows:

	2022	2021
Royalty rate (% of projected revenue) 1	0.5%	0.5%
Discount rate 2	20%	20%
Revenues forecast up to 3	30 June 2032	30 June 2031
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 2022 revenue forecast extends to 30 June 2032 which ensures that each project included within the forecast reaches full maturity.

4)  No growth has been forecast beyond the forecast period due to the uncertainty inherent in the revenue projections beyond the stage of project maturity.

The revenue forecast is based on the latest Company business model, which is regularly reviewed by management. The basis for the inclusion of projects and the estimation of growth rates, margins and project lifespans within the business model is based on the latest agreements with counterparties, commodity and chemical prices and the most recent discussions with customers, suppliers and other business partners.

The 'base-case' impairment assessment based on the above inputs shows a recoverable amount for the asset that is in excess of the net book value of asset and therefore no impairment has been identified, with the VIU exceeding the carrying value by £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)	0.74	A 3-year delay to forecast revenues.
Delayed revenues (2 years)	0.13	A 3-year delay to forecast revenues.
Increase in discount rate to 25%	0.01	Increase in discount rate to 25.03%.
Removal of projects which generate 25% of forecast revenues	0.38	Removal of projects which generate 33.6% of revenues.
Finite company lifespan (to 30 June 2034).	0.23	Finite company lifespan (to 30 June 2032).

Amortisation of Intangible Assets

The Board has reviewed the accounting policy for intangible assets and has amortised those assets which have a finite life. All intangible assets with a finite life were fully amortised as at 30 June 2022.

9.  Investments

At the statement of financial position date, the Group held a 20.44% share in the ordinary issued capital of Quadrise Canada Corporation ("QCC"), a 3.75% share in the ordinary issued capital of Paxton Corporation ("Paxton"), a 9.54% share in the ordinary issued capital of Optimal Resources Inc. ("ORI") and a 16.86% share in the ordinary issued capital of Porient Fuels Corporation ("Porient"), all of which are incorporated in Canada.

QCC is independent of the Group and is responsible for its own policy-making decisions. There have been no material transactions between QCC and the Group during the period or any interchange of managerial personnel. As a result, the Directors do not consider that they have significant influence over QCC and as such this investment is not accounted for as an associate.

The Group has no immediate intention to dispose of its investments unless a beneficial opportunity to realise these investments arises.

Given that there is no active market in the shares of any of above companies, the Directors have determined the fair value of the unquoted securities at 30 June 2022. The shares in each of these companies were valued at CAD $nil on 1 July 2021 due to their business models being highly uncertain, with minimal possibility of any material value being recovered from their asset base. During the year there has been no indication that this situation has changed, therefore the Directors have determined that the investments should continue to remain valued at CAD $nil at 30 June 2022.   

10.  Share Options

Movement in the year:

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options during the year:

	Number 30 June 2022	WAEP (pence) 30 June 2022	Number 30 June 2021	WAEP (pence) 30 June 2021
Outstanding as at 1 July	42,750,000	14.69	39,250,000	17.95
Granted during the year	14,515,722	5.70	10,000,000	7.50
Expired during the year	(35,880,379)	14.44	(6,500,000)	23.36
Exercised during the year	-	-	-	-
Options outstanding as at 30 June	21,385,343	9.00	42,750,000	14.69
Exercisable as at 30 June	18,250,000	10.37	28,312,500	18.36

The weighted average remaining contractual life of the 21.4 million options outstanding at the statement of financial position date is 4.64 years (2021: 5.17 years). The weighted average share price during the year was 2.66p (2021: 2.98p) per share.

The expected volatility of the options reflects the assumption that historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The expected life of the options is based on historical data available at the time of the option issue and is not necessarily indicative of future trends, which may not necessarily be the actual outcome. 

The Share Option Schemes are equity settled plans, and fair value is measured at the grant date of the option. Options issued under the Schemes vest over a one to three year period provided the recipient remains an employee of the Group. Options also may be exercised within an agreed period of an employee leaving the Group at the discretion of the Board.

The Company issued 14.5 million share options to directors and employees during the year (2021: 10 million).

The fair value was calculated using the Black Scholes option pricing model. The weighted average inputs were as follows

			2022	2021
Stock price:			4.10p	3.08p
Exercise Price			5.70p	7.50p
Interest Rate			0.1%	0.1%
Volatility			124.12%	126.91%
Expected term (years)			4.0	4.0

11.  Warrants

Movement in the year:

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, warrants during the year:

	Number 30 June 2022	WAEP (pence) 30 June 2022	Number 30 June 2021	WAEP (pence) 30 June 2021
Outstanding as at 1 July	40,228,026	6.98	45,228,026	6.56
Granted during the year	3,000,000	1.80	-	-
Exercised during the year	-	-	-	-
Expired during the year	(3,000,000)	3.53	(5,000,000)	3.16
Warrants outstanding as at 30 June	40,228,026	6.85	40,228,026	6.98
Exercisable as at 30 June	40,228,026	6.85	40,228,026	6.98

The warrants are equity settled warrants which vest immediately on grant date. Fair value is measured at the grant date of the option using the Black Scholes pricing model. The inputs into this model are: Stock price at the date of grant, exercise price, interest rate, expected term and expected volatility. The expected volatility of the warrants reflects the assumption that historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The expected life of the warrants is based on historical data available at the time of the option issue and is not necessarily indicative of future trends, which may not necessarily be the actual outcome. 

The weighted average inputs into the Black Scholes option pricing model were as follows:

			2022	2021
Stock price:			1.87p	-
Exercise Price			1.80p	-
Interest Rate			1.25%	-
Volatility			91.94%	-
Expected term (years)			0.72	-

The weighted average remaining contractual life of the 40.2 million warrants outstanding at the statement of financial position date is 0.23 years (2021: 1.15 years). The weighted average share price during the year was 2.66p (2021: 2.98p) per share.

11.  Related Party Transactions

Non-executive Director Laurence Mutch is also a Director of Laurie Mutch & Associates Limited, which has provided consulting services to the Group. The total fees charged for the year amounted to £5k (2021: £45k). The balance payable at the statement of financial position date was £nil (2021: £nil).

QFI defines key management personnel as the Directors of the Company. Other than as above, there are no transactions with Directors, other than their remuneration as disclosed in the Report of Directors' Remuneration.

12. Events After the end of the Reporting Period

On 4 August 2022, the Company granted a total of 12,500,000 options (the "Performance Options") over new ordinary shares of 1p each in the Company to employees and management of the Company in accordance with the provisions of the Company's Unapproved Share Option Plan 2016 ("2016 Plan") a nd Enterprise Management Incentive Share Option Plan ("EMI Plan"), as appropriate . 7,500,000 Performance Options were issued to Jason Miles following the lapsing in full of the 7,500,000 options issued by the Company on 3 September 2021 due to the specific performance condition of reaching certain project milestones prior to the option vesting date not having been met.

Director	Number of Performance Options	Plan	Exercise price
Jason Miles	7,500,000	2016 Plan	3.0p

These Performance Options will vest as to 50% on the first anniversary of grant and the remaining 50% shall vest on the second anniversary of the date of grant. All vestings are subject to the satisfaction of specific performance conditions, being the achievement of certain project milestones and remaining in employment with the Company, prior to the first anniversary of grant. The Performance Options will be exercisable from vesting until the eighth anniversary of the date of grant.

On 4 August 2022 Quadrise also granted 14,000,000 options over new ordinary shares of 1p each in the Company to the Company's non-executive directors in accordance with the provisions of 2016 Plan (the "Additional Options").

Director	Number of Options	Plan	Exercise price
Andrew Morrison	4,000,000	2016 Plan	3.0p
Laurie Mutch	4,000,000	2016 Plan	3.0p
Philip Snaith	4,000,000	2016 Plan	3.0p
Dilip Shah	2,000,000	2016 Plan	3.0p
Total	14,000,000	-	-

The Additional Options will vest as to 50% on the first anniversary of grant and the remaining 50% shall vest on the second anniversary of the date of grant and have no performance conditions to vesting attached. The Additional Options will be exercisable from vesting until the eighth anniversary of the date of grant. The vestings are not subject to the satisfaction of specific performance conditions.

On 4 August 2022, the Company granted 6,382,979 NVOs over new ordinary shares of 1p each in the Company to the Company's employees in lieu of cash bonuses for the year ended 30 June 2022. These NVOs were issued under the Company's Enterprise Management Incentive Plan and w ill vest after 12 months from the date of grant, have no performance conditions and will be exercisable from vesting until the tenth anniversary of the date of grant.

13. Copies of the Annual Report and Notice of Annual General Meeting

Copies of the annual report and of the notice convening the Company's 2022 annual general meeting will be available shortly from the Company's website at www.quadrisefuels.com and from the Company's registered office, Eastcastle House, 27-28 Eastcastle Street, London, W1W 8DH.

 

END

 

 

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