TIDMQFI
RNS Number : 8979O
Quadrise Fuels International PLC
07 October 2019
7 October 2019
Quadrise Fuels International plc
("Quadrise", "QFI", the "Company" and together with its
subsidiaries the "Group")
Final Results for the year ended 30 June 2019
Quadrise Fuels International plc (AIM: QFI) announces its
audited final results for the year ended 30 June 2019 and gives
notice that the Company's Annual General Meeting ("AGM") will be
held at 12:00 noon on 29 November 2019.
Completion of Fundraising
Following the fundraising that closed in January 2019 and
ensured that the business was funded through to October 2019, a
structured process was put in place to enable a substantive
fundraising programme before the end of Q3 2019. This process was
concluded successfully at the end of September 2019, providing the
Company with assured funding through the medium-term of up to
GBP6.5m (before expenses), of which GBP4.5m is now in place
consisting of:
-- GBP2m of funding from Bergen Global Opportunity Fund, LP
("Bergen"), with the potential to draw down a further GBP2m tranche
available in August 2020.
-- A fully underwritten Open Offer raising GBP1.84m (before
expenses), with take-up of approximately 75% - an excellent
response from our long-term shareholders.
-- Further funding via subscriptions of about GBP0.72m (before expenses).
Operational summary for the period and since the period end
Business Development
Quadrise has demonstrated staged progress in a number of
important areas:
-- Following an introduction by Freepoint Commodities LLC
("Freepoint"), Quadrise entered into an agreement with Aleph
Commodities in February 2019 covering Kuwait, which led to the
Agency Agreement with Hawazin in May 2019 to progress opportunities
for MSAR(R) in Kuwait.
-- New representation in the Kingdom of Saudi Arabia ("KSA") in
May 2019 - Quadrise is now working with Al Khafrah to progress
MSAR(R) opportunities in KSA - augmented with a Services Agreement
with Aleph, in June 2019 covering KSA.
-- Agreement with Younes Maamar, former CEO of the Moroccan
state-owned power and water utility, ONEE, in February 2019.
-- A number of other agreements to cover important emerging
markets including Russia and Eastern Europe, China and Mexico.
Financial summary for the period
-- GBP1.1m in cash reserves as at 30 June 2019 (30 June 2018:
GBP2.2m) with a further GBP4.5m raised after year end.
-- Loss after tax of GBP3.0m (2018: GBP3.3m) of which GBP1.5m
(2018: GBP2.0m) relates to production and development costs, and
GBP1.5m (2018: 1.5m) relates to administrative and corporate
expenses.
-- Cumulative tax losses of GBP51.0m (2018: GBP49.5m) available
for set-off against future profits.
-- Total assets of GBP5.1m at 30 June 2019 (2018: GBP6.5m).
Commenting on the results and the recent successful funding,
Mike Kirk, Executive Chairman of QFI, said:
"2019 has been a hugely important year for Quadrise in which we
have made significant progress in implementing our strategy of
accessing a broader range of project opportunities. Through this
approach, we are now developing momentum in a number of markets in
which we are seeking to progress these opportunities to
commercial-scale trials and ultimately supply contracts. With the
recently confirmed funding in place, we now have the financial
capacity to progress these through the remainder of 2019 and into
2020.
With a broader range of opportunities allied to our proven
project management and research, development and innovation
expertise, we have significantly reduced delivery risk. We remain
acutely aware that there may be further challenges ahead, but we
have made real progress so far in 2019 and are well positioned to
build on these milestones.
We have a high degree of confidence that Quadrise will be in a
position to demonstrate material progress during the current
financial year, providing the pathway to future commercial
revenues.
The dedication and professionalism of the team at Quadrise
remains fundamental to our continued success, and I would like to
thank everyone for their commitment during the year. I would also
like to thank our shareholders, once again, for their support at a
critical time for the business."
Notice of Annual General Meeting
The AGM is to be held at Park Plaza Victoria, 239 Vauxhall
Bridge Road, London SW1V 1EQ on 29 November 2019 at 12.00 noon.
For additional information, please contact:
Quadrise Fuels International plc +44 (0)20 7031 7321
Mike Kirk, Executive Chairman
Jason Miles, Chief Operating Officer
Cenkos Securities plc +44 (0)20 7397 8900
Nominated Adviser
Dr Azhic Basirov
Ben Jeynes
Katy Birkin
Peel Hunt LLP +44 (0)20 7418 8900
Joint Broker
Richard Crichton
David McKeown
Shore Capital Stockbrokers Limited +44 (0)20 7408 4090
Joint Broker
Tony Gibbs
Fiona Conroy
FTI Consulting +44 (0)20 3727 1000
Public and Investor Relations
Ben Brewerton
Ntobeko Chidavaenzi
Chairman's Statement
Overview of the 2019 Financial Year and substantial post
year-end events
The 2019 financial year was one in which we made concrete steps
to implement our strategy of developing a wider range of MSAR(R)
project and commercial opportunities. We have demonstrated staged
progress in a number of important markets for Quadrise and are,
therefore, well positioned to advance these opportunities with our
commercial partners in the relevant countries/regions. This
provides, we believe, firm foundations for the Company's future
growth. The recently completed up to GBP6.5m funding (GBP4.5m of
which is in place now) secures the Company's financial position in
enabling the Company to continue to operate and advance its
business development initiatives at current levels of expenditure
until 31 December 2020.
The GBP2m Bergen funding and proposed open offer was announced
on 23 August 2019. We felt it was important to demonstrate that we
value our long-term and very supportive retail shareholders by
offering them the opportunity to participate in the funding on
substantially the same terms as Bergen. We were, therefore,
delighted to announce on 9 September 2019 that we had increased the
scale of the open offer by 20% to GBP1.84m and to have had this
fully underwritten by Peel Hunt. In addition, we had been able to
raise a further GBP0.72m via a subscription. The results of the
open offer announced on 30 September 2019 showed that take-up was
75% which we and our advisors regarded as an excellent outcome in
challenging stock-market conditions.
Business Development
As noted in the Company's interim results to 31 December 2018.
we are very clear on the requirement to deliver near-term business
development milestones and secure additional funding to progress to
sustainable commercial revenues and we have been actively engaged
in delivering on both fronts during 2019. Important developments
during (and immediately after) the period included:
November 2018
-- Co-Marketing and Project Development Agreement ("CMPDA") with Freepoint
-- Memorandum of Understanding ("MoU") and MSAR(R) test programme with a European oil major.
February/March 2019
-- Agreement with Aleph Commodities ("Aleph") covering Kuwait (a
territory under the CMPDA with Freepoint), which builds on
Quadrise's earlier work to demonstrate the feasibility of MSAR
opportunities in the country.
-- Agreement with Younes Maamar, former CEO of the Moroccan
state-owned power and water utility, ONEE.
May/June 2019
-- Agency Agreement with Hawazin (Ahmad Al Otaibi and Faisal
Al-Kharafi) in Kuwait - delivery of the first milestone with Aleph
triggering the award of 5 million warrants to them.
-- Memorandum of Agreement ("MoA") with our new partner, Al
Khafrah Holding Group, to accelerate the substantial opportunities
in the Kingdom of Saudi Arabia ("KSA").
-- Services Agreement with Aleph covering KSA, to work in
collaboration with Quadrise and Al Khafrah to accelerate our access
to this major market opportunity.
-- Other agreements to enable access to markets in China and Mexico.
August 2019
-- MoA with a European Oil Refiner to evaluate and develop a
potential MSAR(R) project at one of their refineries, including
proof of concept testing and project scoping activities.
-- MoU with Merlin Energy Resources to evaluate, develop and
promote upstream heavy-oil projects using MSAR(R) as a
cost-effective solution to unlock value.
We now have a much broader pipeline of activities and
opportunities that we will continue to progress during 2019-2020.
The use of relevant local partners to assist in this activity
enables Quadrise to access these markets in a cost and time
effective manner and to align our internal resources appropriately
to projects that present the most immediate opportunities. These
priorities are reviewed regularly with resources reallocated
appropriately. Progress on individual projects varies over time,
with periods of relatively little apparent activity suddenly
transforming into intense project-based activity, or vice versa,
primarily due to external circumstances outside of Quadrise's
control.
Delivery of Key Business Objectives
With this broad spread of activities and the progress achieved
in core markets, we believe that we have delivered strong progress
on one of our key objectives for the year; to rebuild shareholder
confidence and demonstrate that their long-term support continues
to be justified.
We were delighted to secure the fundings announced on 23 August
and 9 September 2019, the combination of which will be fundamental
to the Company being able to advance towards material commercial
revenues and profitability.
Collectively, these actions will, we believe, enable us to build
a sustainable business based on the commercial adoption of MSAR(R)
technology at scale and, through this, to rebuild investor
confidence and deliver long term shareholder value.
MSAR(R) Market Background
As stated in the interim results, the positive shifts in the
liquid fuel markets continued throughout 2018 and this trend has
been maintained through 2019. This trend is a combination of strong
MSAR(R) economics, driven by the widening Heavy Fuel Oil ("HFO")
and distillate fuels spread, together with increasing acceptance in
the market that there will continue to be a significant demand for
high sulphur HFO post the implementation of the International
Maritime Organisation ("IMO") 2020 regulations. Marine operators,
including Maersk, are accelerating plans for Exhaust Gas Cleaning
System ("EGCS" or "scrubbers") installations as retrofits on
existing vessels and on newbuilds. This should provide a stable
platform for Quadrise to work with refiners and fuel consumers in
the power, marine and industrial markets to progress MSAR(R)
projects over the next year.
Power Generation Opportunities
In Kuwait, our agreements with Aleph and Hawazin have positioned
Quadrise to build on the work we had already concluded successfully
in 2018 to demonstrate our technology to key participants in the
local refining market. We are jointly building on this strong base
and look forward to demonstrating substantial progress during 2019.
In Morocco, we are making good progress with Younes Maamar. whilst
the power market may provide further complimentary supply
opportunities.
KSA still offers a very large market opportunity and we have put
in place material changes to better address this. We amicably
exited our long-term relationship with Rafid and established a new
agreement with Al Khafrah to act as our local agent, supplemented
by a further services agreement with Aleph. Through these actions
we expect to develop broad and influential relationships that will
enable us to reengage in the country and accelerate plans to
develop the substantial opportunities for fuel oil substitution
with MSAR(R) .
The agreements that we have reached with agents generally
include a success-based incentive structures, with material rewards
only due upon the delivery of relevant disclosable project
milestones and contracts that lead to the establishment of MSAR(R)
projects and commercial sales. This ensures that the interests of
all parties are aligned to bring projects and commercial
opportunities at pace.
We continue to pursue power market opportunities in other
regions through existing relationships with major stakeholders,
though in the near-term our focus will be on the opportunities in
Europe, the Middle East and Morocco.
Marine MSAR(R) Opportunities
The impending implementation of the IMO 2020 sulphur regulations
has provided an increasingly positive market background for
Quadrise across all markets. In the marine market in particular,
the increasing uptake of scrubbers combined with the continued use
of high sulphur fuel oil is widely regarded as the lowest cost
compliance option for ship owners and operators in all major
segments including the container, tanker and dry bulk markets.
Although there remains some limited debate in the market regarding
open-loop scrubbers and resulting seawater discharge, this is now
widely regarded as proven technology. We believe that any coastal
water or port authority bans on open loop discharge will have a
minimal impact on the overall economic viability of scrubber
installation, with rapid investment payback of one to two years for
most installations.
Quadrise is benefiting from this market dynamic and remains in
discussions with a number of market participants to progress trials
ahead of making decisions on the adoption of MSAR(R) alongside
existing scrubber installation. However, capacity within the
technical teams at shippers is at a premium, given the impending
IMO deadline of 1st January 2020, so engagement and resourcing
remains challenging. Maersk has now reversed its previous policy
decision to only use compliant fuels and will now be installing
scrubbers on some of its fleet. We have continued our discussions
with Maersk in relation to the Royalty Agreement and related future
MSAR(R) opportunities.
RDI and Operations Activities
We have maintained investment in our Research, Development and
Innovation ("RDI") activities and have hosted a number of investor
and client visits during the year to demonstrate the high-quality
team and facilities at QRF which remain central to our
technology-led offering and the provision of operational project
support, that includes bespoke equipment manufacture and supply. We
continue to develop our pilot production facilities at QRF to
handle the more challenging residues from complex refineries. These
residues need to be emulsified at much higher temperatures and
pressures and this capability will be increasingly important to
support our broader business development activities. The ability of
Quadrise to manufacture small volumes of MSAR(R) at QRF could play
a vital role in expediting future trial activities.
PR/IR Activities
Our close control of costs has continued without impacting our
business development and PR/IR activities that are essential to the
development of our business. Targeted investment during the period
has included continued development of the website, more active use
of other media such as Proactive Investors to reinforce the value
of the positive news-flow that our business development activities
have generated and increased use of investor conference calls to
engage directly with our shareholders on a regular basis.
Results for the Year
The consolidated after-tax loss for the year to 30 June 2019 was
GBP3.0m (2018: GBP3.3m). This included production and development
costs of GBP1.5m (2018: GBP2.0m), administration expenses of
GBP1.5m (2018: GBP1.5m), a share option charge of GBP0.2m (2018:
GBP0.1m), interest income of GBP3k (2018: GBP18k) and a tax credit
of GBP184k (2018: GBP294k).
Basic and diluted loss per share was 0.34p (2018: 0.38p).
Statement of Financial Position
At 30 June 2019, the Group had total assets of GBP5.1m (2018:
GBP6.5m). The most significant balances were intangible assets of
GBP2.9m (2018: GBP2.9m), property, plant and equipment of GBP0.7m
(2018: GBP1.0m), and cash of GBP1.1m (2018: GBP2.2m). Further
information on intangible assets is provided in note 8 below.
Cash Flow
The Group ended the year with GBP1.1m of cash and cash
equivalents (2018: GBP2.2m) with GBP1.5m having been raised through
the open offer in January 2019, and GBP2.7m having been utilised in
its operating activities during the year (2018: GBP3.0m).
Capital Structure
The Company had 862,204,976 ordinary shares of 1p each in issue
at 31 December 2018. As announced on 21 January 2019, the Company
issued 60,506,919 new ordinary shares raising a total of GBP1.51m
(before expenses). On 30 August 2019, 8,388,889 new ordinary shares
were issued as part of the Convertible Security transaction
announced on 23 August 2019.. A further 64,656,049 new ordinary
shares were issued on 1 October 2019 as a result of the Open Offer
and Subscription announced on 9 September 2019. The Company's
current issued share capital stands at 995,756,835 ordinary shares
of 1p each all with voting rights.
Taxation
The Group has tax losses arising in the UK of approximately
GBP51.0m (2018: GBP49.5m) that are available, under current
legislation, to be carried forward against future profits. GBP23.5m
(2018: GBP21.5m) of the tax losses carried forward represent
trading losses within Quadrise Fuels International plc, GBP25.8m
(2018: GBP25.8m) represent non-trade deficits arising on intangible
assets within Quadrise International Limited, GBP0.9m (2018:
GBP1.3m) represent pre-trading losses incurred by subsidiaries,
GBP0.8m (2018: GBP0.8m) represent management expenses incurred by
Quadrise International Limited, and GBP0.1m (2018: GBP0.1m)
represent capital losses within Quadrise Fuels International
plc.
Outlook - Current trading and prospects. `
We are now building significant momentum across a broad range of
opportunities in the power and marine markets, and our efforts
remain focused on moving these forwards at pace through the
remainder of 2019 and into 2020, now that we have secured
substantial funding. Our evolved business development approach is
reducing risk through having a broader portfolio of opportunities
supported by our partners. Alongside this, our proven project
management and RDI expertise enhances our ability to engage with
leading companies and reduces the delivery risk to our project
activities.
Though progress remains subject to potential delays and
challenges, we have made substantive progress so far in 2019. We
are well positioned to capitalise on the significant opportunities
that we have secured to date, and to manage the risk that we still
face - though we believe that these risks have reduced materially
during the year.
We will continue to invest in PR/IR activities to ensure that
there is a broad and deep understanding of Quadrise among our
current and potential shareholders and customers. As part of this
process, we have continued to upgrade the website and have most
recently included an animated video which we will also be using at
relevant industry events and meetings. We will also be investing in
enhancing our capabilities to better support our loyal and
longstanding shareholder base.
With 2020 approaching we firmly believe that MSAR(R) technology
has significant commercial potential, and our recent announcements
demonstrate that an increasing number of participants in the
energy, power and marine markets are aligned to this view and are
incentivised to deliver value for Quadrise and our shareholders. As
a result, the Directors have a high degree of confidence that
Quadrise will be in a position to demonstrate that material
progress has been made which will provide the pathway to commercial
revenues. We look forward to being able to provide timely updates
as we progress through the current financial year.
QFI comprises a small, but very capable team and the progress
that we have made, and that is still to be delivered, is only
possible through the significant contribution of everyone working
within the business and I would like to thank all for their
continued dedication and professionalism. Finally, I would like to
thank our shareholders once again for their support through some
challenging times. This support has been, and will remain,
fundamental to the long-term success of Quadrise.
Mike Kirk
Executive Chairman
4 October 2019
Strategic Report
For the year ended 30 June 2019
Principal Activity
The principal activity of the Company is to develop markets for
its proprietary emulsion fuel ("MSAR(R) ") as a low-cost substitute
for conventional heavy fuel oil ("HFO") for use in power generation
plants, industrial 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's
Statement.
Key Performance Indicators
The Group's key performance indicators are:
-- Development and commercial performance against the Group's
business plans and project timetables established with clients,
and
-- Financial performance and position against the approved budgets and cashflow forecasts.
The Board regularly reviews the Group business plans, project
timetables, budgets and cashflow forecasts in order to optimise the
application of available resources. Consideration of the Group's
performance against Key Performance Indicators is contained in the
Chairman's Statement.
Going Concern
The Group had a cash balance of GBP1.1m as at 30 June 2019.
Funds of GBP4.5m (gross) were raised during the period following
year end. Having conducted a full review of the updated business
plan, budgets and associated commitments, the Directors have
concluded that the Group has sufficient financial resources to
continue in operational existence for at least the forthcoming year
and, therefore, continues to adopt the going concern basis in
preparing the accounts. Note 2 contains further details in this
respect.
Principal Business Risks
Set out below are certain risk factors relating to the Group's
business. However, these may not include all of the risk factors
that could affect future results. Actual results could differ
materially from those anticipated as a consequence 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.
Delay in commercialisation of MSAR(R) and funding risks
There is a risk that the commercialisation of MSAR(R) could be
delayed further due to unforeseen technical and/or commercial
challenges. This could mean that the Group may need to raise
further equity funds to remain operational. Depending on market
conditions and investor sentiments, 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 as far as possible, and maintaining regular contact with
the financial markets and investor community.
Market risk
The marketability of MSAR(R) fuels is affected by numerous
factors beyond the control of the Group. These include variability
of price spreads between light and heavy oils, the relative
competitiveness of oil, gas and coal prices both for prompt and
future delivery, and the future use of hydrocarbons for energy,
utilities, transportation, petrochemicals and industrial
applications. The Group cannot mitigate this risk by its nature,
other than by increasing the potential applicability of MSAR(R)
technology to various sectors but pays close attention to these
markets in order to react in a timely and effective manner and
focus its efforts.
Feedstock sourcing
There is a risk in respect of appropriately located and ongoing
price competitive availability of heavy oil residue 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.
Commercial risks
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 changes to
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.
Technological risk
There is a risk that the technology used for the production of
MSAR(R) fuel may not be adequately robust for all applications in
respect of the character and nature of the feedstock and the
particular parameters of transportation and storage pertaining to a
specific project. This risk may jeopardise the early
commercialisation of the technology and subsequent implementation
of projects; or give rise to significant liabilities arising from
defective fuel during plant operations. The Group mitigates this
risk by ensuring that its highly experienced key personnel are
closely involved with all areas of MSAR(R) formulation and
manufacture, and that the MSAR(R) 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 MSAR(R)
process. 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 AkzoNobel while ensuring that key
employees are suitably incentivised.
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 of its operations. Although the Group intends to be in
compliance, in all material respects, 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 extensive
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 the Group from undertaking its desired activities.
The Group is unable to predict definitively the effect of
additional environmental laws and regulations, which may be adopted
in the future, including whether any such laws or regulations would
materially increase the Group's cost of doing business, or affect
its operations in any area of its business. The Group mitigates
this risk by ensuring compliance with environmental legislation in
the jurisdictions in which it operates, and closely monitoring any
pending regulation or legislation to ensure compliance.
No profit to date
The Group has incurred aggregate losses since its inception and
it is, therefore, not possible to evaluate its prospects based on
past performance. There can be no certainty that the Group will
achieve or sustain profitability or achieve or sustain positive
cash flow from its activities.
Corporate and regulatory formalities
The conduct of petroleum processing and distribution requires
compliance by the Group with numerous procedures and formalities in
many different national jurisdictions. It may not in all cases be
possible to comply with or obtain waivers of all such formalities.
Additionally, functioning as a publicly listed company requires
compliance with the stock market regulations. The Group mitigates
this risk through commitment to a high standard of corporate
governance and 'fit for purpose' procedures, and by maintaining and
applying effective policies.
Economic, political, judicial, administrative, taxation or other
regulatory factors
The Group may be adversely affected by changes in economic,
political, judicial, administrative, taxation or other regulatory
factors, in the areas in which the Group operates and conducts its
principal activities.
Mike Kirk
Executive Chairman
4 October 2019
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2019
Notes Year ended Year ended
30 June 2019 30 June 2018
GBP'000s GBP'000s
Continuing operations
Revenue 22 9
Production and development costs (1,475) (2,002)
Other administration expenses (1,462) (1,518)
Share option charge 10 (154) (53)
Warrant charge (105) -
Foreign exchange gain/(loss) 10 (3)
---------------------------------- ------ -------------- --------------
Operating loss 4 (3,164) (3,567)
Finance costs (6) (7)
Finance income 3 18
---------------------------------- ------ -------------- --------------
Loss before tax (3,167) (3,556)
Taxation 5 184 294
---------------------------------- ------ -------------- --------------
Loss and total comprehensive loss
for the year
from continuing operations (2,983) (3,262)
------------------------------------------ -------------- --------------
Loss per share - pence
Basic 6 (0.34)p (0.38)p
Diluted 6 (0.34)p (0.38)p
---------------------------------- ------ -------------- --------------
Consolidated Statement of Financial Position
As at 30 June 2019
Notes As at As at
30 June 2019 30 June 2018
GBP'000s GBP'000s
Assets
Non-current assets
Property, plant and equipment 7 730 961
Intangible assets 8 2,924 2,924
Non-current assets 3,654 3,885
------------------------------- ------ -------------- --------------
Current assets
Cash and cash equivalents 1,060 2,229
Trade and other receivables 169 188
Prepayments 106 122
Stock 61 61
------------------------------- ------ -------------- --------------
Current assets 1,396 2,600
------------------------------- ------ -------------- --------------
TOTAL ASSETS 5,050 6,485
------------------------------- ------ -------------- --------------
Equity and liabilities
Current liabilities
Trade and other payables 288 400
-------------------------------- --------- ---------
Current liabilities 288 400
-------------------------------- --------- ---------
Equity attributable to equity
holders of the parent
Issued share capital 9,227 8,622
Share premium 74,438 73,642
Share option reserve 3,455 3,432
Warrant reserve 105 -
Reverse acquisition reserve 522 522
Accumulated losses (82,985) (80,133)
-------------------------------- --------- ---------
Total shareholders' equity 4,762 6,085
-------------------------------- --------- ---------
TOTAL EQUITY AND LIABILITIES 5,050 6,485
-------------------------------- --------- ---------
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Share Reverse
Issued Share option Warrant acquisition Accumulated
capital premium reserve reserve reserve losses Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
1 July 2017 8,622 73,642 3,704 - 522 (77,196) 9,294
Loss and
total comprehensive
loss for
the year - - - - (3,262) (3,262)
Share option
charge - - 53 - - - 53
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
Transfer
of balances
relating
to expired
share options - - (325) - - 325 -
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
30 June
2018 8,622 73,642 3,432 - 522 (80,133) 6,085
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
1 July 2018 8,622 73,642 3,432 - 522 (80,133) 6,085
Loss and
total comprehensive
loss for
the year - - - - - (2,983) (2,983)
Share option
charge - - 154 - - - 154
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
Transfer
of balances
relating
to expired
share options - - (131) - - 131 -
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
Warrant
charge - - - 105 - - 105
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
New shares
issued net
of costs 605 796 - - - - 1,401
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
30 June
2019 9,227 74,438 3,455 105 522 (82,985) 4,762
---------------------- ---------- ---------- ---------- ----------- ------------- -------------- ----------
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
Notes Year ended Year ended
30 June 2019 30 June 2018
GBP'000s GBP'000s
Operating activities
Loss before tax from continuing
operations (3,167) (3,556)
Depreciation 7 230 230
Loss on disposal of fixed 25 -
assets
Finance costs paid 6 7
Finance income received (3) (18)
Share option charge 154 53
Warrant charge 105 -
Working capital adjustments
Decrease in trade and other
receivables 19 114
Decrease in prepayments 16 31
(Decrease)/increase in
trade and other payables (112) 153
Cash utilised in operations (2,727) (2,986)
--------------------------------- ------ -------------- --------------
Finance costs paid (6) (7)
Taxation received 184 294
Net cash outflow from operating
activities (2,549) (2,699)
--------------------------------- ------ -------------- --------------
Investing activities
Finance income received 3 18
Purchase of property, plant
and equipment 7 (24) (135)
Net cash outflow from investing
activities (21) (117)
--------------------------------- ------ -------------- --------------
Financing activities
New shares issued net of 1,401 -
issue costs
Net cash inflow from financing 1,401 -
activities
Net decrease in cash and
cash equivalents (1,169) (2,816)
Cash and cash equivalents
at the beginning of the
year 2,229 5,045
--------------------------------- ------ -------------- --------------
Cash and cash equivalents
at the end of the year 14 1,060 2,229
--------------------------------- ------ -------------- --------------
Notes to the Financial Information
1. Basis of Preparation and Significant Accounting Policies
The financial information for the year ended 30 June 2018 set
out in this announcement has been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRS).
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 2019.
The financial information is prepared in Pounds Sterling and all
values are rounded to the nearest thousand Pounds (GBP'000) except
where otherwise indicated.
The financial information contained in this announcement does
not constitute the Company's statutory financial statements for the
year ended 30 June 2019 but has been extracted from them. These
financial statements will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The
auditors have reported on these financial statements, and their
report was unqualified and did not contain any statement under
section 498(2) or (3) Companies Act 2006.
Statutory financial statements for the year ended 30 June 2018
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 2019 (2018: nil).
This announcement was approved by the Board on 4 October
2019.
2. Going Concern
The Group's business activities and financial position, together
with the factors likely to affect its future development,
performance and position are set out in the Chairman's
Statement.
The Group had a cash balance of GBP1.1m as at 30 June 2019. On
22 August 2019 the Group issued the first tranche of a convertible
security, for which proceeds of GBP2m were received in exchange. On
9 September 2019 the Group announced a fully underwritten open
offer to raise a further gross GBP1.8 million, as well as a
subscription to raise further gross proceeds of GBP0.7m. The open
offer and subscription were conditional on shareholder approval of
resolutions at the General Meeting of 27 September 2019, which was
duly granted.
The directors have carried out a detailed assessment of going
concern as part of the financial reporting process, and having
conducted a full review of the updated business plan, budgets and
associated commitments at the year end, have concluded that the
Group has adequate financial resources to continue in operational
existence for at least the forthcoming year, and therefore continue
to adopt the going concern basis in preparing the accounts.
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.
The Group's only geographical segment during the year was the
UK.
4. Operating Loss
Operating loss is stated after charging: Year ended Year ended
30 June 2019 30 June 2018
GBP'000s GBP'000s
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts.
Fees payable to the Company's auditor
and its associates for other services: 16 15
Audit of accounts of subsidiaries 16 15
Tax compliance services 5 8
Consultants and other professional
fees (including legal) 238 269
Depreciation of property, plant and
equipment 230 230
Research and development costs 178 296
5. Taxation
Year ended Year ended
30 June 2019 30 June 2018
GBP'000s GBP'000s
UK corporation tax credit (184) (294)
Total (184) (294)
--------------------------- -------------- --------------
No liability in respect of corporation tax arises as a result of
trading losses.
Tax Reconciliation Year ended Year ended
30 June 2019 30 June 2018
GBP'000s GBP'000s
Loss on continuing operations before
taxation (2,983) (3,262)
Loss on continuing operations before
taxation multiplied by
the UK corporation tax rate of 19%
(2018: 19%) (567) (620)
Effects of:
Non-deductible expenditure 40 51
R&D tax credit (184) (294)
Tax losses carried forward 528 569
Total taxation credit on loss from
continuing operations (184) (294)
-------------------------------------- ---------------- ----------------
The Group has tax losses arising in the UK of approximately
GBP51.0m (2018: GBP49.5m) that are available, under current
legislation, to be carried forward against future profits. GBP23.5m
(2018: GBP21.5m) of the tax losses carried forward represent
trading losses within Quadrise Fuels International plc, GBP25.8m
(2018: GBP25.8m) represent non-trade deficits arising on intangible
assets within Quadrise International Limited, GBP0.9m (2018:
GBP1.3m) represent pre-trading losses incurred by subsidiaries,
GBP0.8m (2018: GBP0.8m) represent management expenses incurred by
Quadrise International Limited, and GBP0.1m (2018: GBP0.1m)
represent capital losses within Quadrise Fuels International
plc.
A deferred tax asset representing these losses and other timing
differences at the statement of financial position date of
approximately GBP8.7m (2018: GBP8.4m) has not been recognised as a
result of existing uncertainties in relation to its
realisation.
6. Loss Per Share
The calculation of loss per share is based on the following loss
and number of shares:
Year ended Year ended
30 June 2019 30 June 2018
Loss for the year (GBP'000s) (2,983) (3,262)
Weighted average number of shares:
Basic 888,728,557 862,204,976
Diluted 888,728,557 862,204,976
Loss per share:
-------------------------------------- -------------- --------------
Basic (0.34)p (0.38)p
-------------------------------------- -------------- --------------
Diluted (0.34)p (0.38)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 23.1m dilutive share options and the 5m
dilutive warrants issued by the Company and which are outstanding
at year-end could potentially dilute earnings per share in the
future if exercised when the Group is in a profit making
position.
7. Property, plant and equipment
Consolidated
Leasehold Computer Software Office Plant Total
Improvements Equipment Equipment and machinery
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2018 166 91 43 16 1,428 1,744
Additions 15 - - - 9 24
Disposals - - - - (47) (47)
Closing balance
- 30 June 2019 181 91 43 16 1,390 1,721
------------------ -------------- ----------- --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2018 (109) (63) (36) (16) (559) (783)
Depreciation
charge for the
year (57) (15) (5) - (153) (230)
Disposals - - - - 22 22
------------------ -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 30 June 2019 (166) (78) (41) (16) (690) (991)
------------------ -------------- ----------- --------- ----------- --------------- ---------
Net book value
at 30 June 2019 15 13 2 - 700 730
------------------ -------------- ----------- --------- ----------- --------------- ---------
Consolidated
Leasehold Computer Software Office Plant Total
Improvements Equipment Equipment and machinery
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Opening balance
- 1 July 2017 107 91 43 16 1,352 1,609
Additions 59 - - - 76 135
Closing balance
- 30 June 2018 166 91 43 16 1,428 1,744
------------------ -------------- ----------- --------- ----------- --------------- ---------
Depreciation
Opening balance
- 1 July 2017 (67) (47) (31) (15) (393) (553)
Depreciation
charge for the
year (42) (16) (5) (1) (166) (230)
------------------ -------------- ----------- --------- ----------- --------------- ---------
Closing balance
- 30 June 2018 (109) (63) (36) (16) (559) (783)
------------------ -------------- ----------- --------- ----------- --------------- ---------
Net book value
at 30 June 2018 57 28 7 - 869 961
------------------ -------------- ----------- --------- ----------- --------------- ---------
8. Intangible Assets
Consolidated
QCC royalty MSAR(R) Technology Total
payments trade name and know-how
GBP'000s GBP'000s GBP'000s GBP'000s
Cost
Balance as at 1 July
2018 and 30 June 2019 7,686 3,100 25,901 36,687
Amortisation and Impairment
Balance as at 1 July
2018 and 30 June 2019 (7,686) (176) (25,901) (33,763)
Net book value as
at 30 June 2019 - 2,924 - 2,924
----------------------------- ------------ ------------ -------------- ---------
Cost
Balance as at 1 July
2016 and 30 June 2018 7,686 3,100 25,901 36,687
Amortisation and Impairment
Balance as at 1 July
2016 and 30 June 2018 (7,686) (176) (25,901) (33,763)
Net book value as
at 30 June 2018 - 2,924 - 2,924
----------------------------- -------- ------ --------- ---------
Intangible assets comprise intellectual property with a cost of
GBP36.7m, including assets of finite and indefinite life. Quadrise
Canada Corporation's ("QCC's) royalty payments of GBP7.7m and the
MSAR(R) trade name of GBP3.1m are termed as assets having
indefinite life as it is assessed that there is no foreseeable
limit to the period over which the assets would be expected to
generate net cash inflows for the Group, as they arise from
cashflows resulting from Quadrise and QCC gaining a permanent
market share. The assets with indefinite life are not amortised,
but the QCC royalty payments intangible asset became fully impaired
in 2012.
The remaining intangibles amounting to GBP25.9m, primarily made
up of technology and know-how, are considered as finite assets and
were amortised over 93 months, being fully amortised in 2012. The
Group does not have any internally generated intangibles.
The recoverable amount of intangible assets is determined based
on a 'value in use' calculation using cash flow forecasts derived
from the most recent financial model information available. These
cash flow forecasts extend to 30 June 2035 to ensure the full
benefit of all current projects is realised. The rationale for
using a timescale up to 2035 with the growth projections forecast,
is that as time progresses, Quadrise expects to gain an increasing
foothold in the existing HFO market ( 450m tonnes p.a.) which is
already well established. The key assumptions used in these
calculations include discount rates, turnover projections, growth
rates, joint venture participation expectations, expected gross
margins and the lifespan of the project. 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. Turnover projections, growth rates,
margins and project lifespans are all estimated based on the latest
business models and the most recent discussions with customers,
suppliers and other business partners.
For the MSAR(R) trade name intangible, the pre-tax discount rate
applied to the cash flow projections is 20% (2018: 20%) and the
growth rate used for the extrapolation of cash flows beyond
budgeted projections is 0% (2018: 0%).
A 5% increase in the discount rate used would result in no
impairment charge for the MSAR(R) trade name intangible.
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 2019.
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 2019. The shares in each of
these companies were valued at CAD $nil on 1 July 2018. Shareholder
communications received during the year to 30 June 2019 indicate
that the business models for each of these companies remain highly
uncertain, with minimal possibility of any material value being
recovered from their asset base. On that basis, the directors have
determined that the investments should continue to remain valued at
CAD $nil at 30 June 2019.
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:
WAEP WAEP
Number (pence) Number (pence)
30 June 30 June 30 June 30 June
2019 2019 2018 2018
Outstanding as at 1
July 22,500,000 26.90 24,000,000 27.41
Granted during the year 19,150,000 7.29 - -
Repurchased by grantor - - - -
during the year
Expired during the year (2,250,000) 17.35 (1,500,000) 35.16
Exercised during the - - - -
year
Options outstanding
as at 30 June 39,400,000 17.91 22,500,000 26.90
------------------------- ------------ --------- ------------ ---------
Exercisable as at 30
June 23,149,719 25.39 22,000,000 27.30
------------------------- ------------ --------- ------------ ---------
The weighted average remaining contractual life of the 39.4
million options outstanding at the statement of financial position
date is 6.07 years (2018: 4.23 years). The weighted average share
price during the year was 3.15p (2018: 5.55p) per share.
The expected volatility of the options reflects the assumption
that historical volatility is indicative of future trends, which
may not necessarily be the actual outcome. The expected life of the
options is based on historical data available at the time of the
option issue and is not necessarily indicative of future trends,
which may not necessarily be the actual outcome.
The Share Option Schemes are equity settled plans, and fair
value is measured at the grant date of the option. Options issued
under the Schemes vest over a two year or three year period
provided the recipient remains an employee of the Group. Options
may be also exercised within one year of an employee leaving the
Group at the discretion of the Board.
The Company issued 19.15m share options to directors and
employees during the year (2018: nil) with a weighted average
exercise price of 7.29p and the weighted average fair value of
4.60p.
The fair value was calculated using the Black Scholes option
pricing model. The weighted average inputs were as follows
2019 2018
Stock price: 6.29p -
Exercise Price 7.29p -
Interest Rate 0.75% -
Volatility 113.4% -
Expected term 4 years -
======== =====
11. Related Party Transactions
QFI defines key management personnel as the Directors of the
Company. There are no transactions with Directors, other than their
remuneration as disclosed in the Report of Directors' Remuneration
in the Annual Report.
12. Events After the end of the Reporting Period
On 22 August 2019, the Company entered into an agreement with
Bergen Global Opportunity Fund LP ('the Investor') whereby the
Investor will provide up to GBP4.0 million of interest free
unsecured funding, provided in two tranches through the issue by
the Company of Convertible Securities with a nominal value of up to
GBP4.3 million, convertible into Ordinary Shares.
An initial tranche of Convertible Securities with a nominal
value of GBP2.15 million was subscribed for by the Investor for
GBP2.0 million 30 August 2019. A second tranche of Convertible
Securities, with a nominal value of up to GBP2.15 million is
conditionally available to the Company with a subscription price of
up to GBP2.0 million. Both tranches have 24 month maturity dates
from the dates of their respective issuance, and any Convertible
Securities not converted prior to such dates will automatically
convert into Ordinary Shares at such time.
The Company also issued 4.9 million 36 month warrants to
subscribe for new Ordinary Shares to the Investor by way of a
Warrant Instrument initially exercisable at 5.78 pence per Ordinary
Share, subject to anti-dilution and exercise price reduction
provisions.
In connection with the Agreement, on 30 August 2019 the Company
also issued to the Investor 3,888,889 new Ordinary Shares in
settlement of a commencement fee of GBP140,000 and a further
4,500,000 new Ordinary Shares to collateralize the Agreement
subscribed for at nominal value by the Investor.
The Convertible Securities are only converted to the extent that
the Company has corporate authority to do so, and it is a term of
the agreement that the Company must retain sufficient authority to
issue and allot (on a non-pre-emptive basis) a sufficient number of
Ordinary Shares potentially required to be issued under the terms
of the Agreement (and the Warrant Instrument).
Pursuant to the terms of the Agreement, the Company is required
to obtain and maintain sufficient non-pre-emptive share issuance
authority from its shareholders in relation to the Ordinary Shares
that may be required to be issued pursuant to the Agreement and
Warrant Instrument.
The Agreement was completed and the Initial Tranche funded to
the Company on the basis of the remaining current Authority from
the 2018 annual general meeting, and also on the basis that an
updated authority must be obtained at a General Meeting of
shareholders. Such authority was obtained at a General Meeting held
on September 27 2019.
On 9 September 2019 the Company announced a fully underwritten
open offer to raise up to approximately GBP1.8 million through the
issue of up to 46,555,039 Open Offer Shares at the Issue Price of
3.96 pence per Open Offer Share on the basis of 1 Open Offer Share
for every 20 Existing Ordinary Shares held on the Record Date (the
"Open Offer").
The Company announced that it had entered into conditional
binding agreements with the Subscribers to raise additional gross
proceeds of GBP716,800 through the issue of an aggregate 18,101,012
Subscription Shares at 3.96 pence per Subscription Share, with
9,050,506 Subscription Warrants attached. inter alia, on the
Resolutions being passed at the General Meeting.
The Open Offer and Subscription were conditional upon
Shareholder approval of the Resolutions at the General Meeting of
27 September 2019, which was duly granted.
13. Copies of the Annual Report
Copies of the Annual Report (including the Notice of Annual
General Meeting) will be posted to shareholders and will be
available shortly from the Company's website at
www.quadrisefuels.com and from the Company's registered office,
Gillingham House, 38-44 Gillingham Street, London, SW1V 1HU.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DZLFBKBFBFBK
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October 07, 2019 02:00 ET (06:00 GMT)
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