Quadrise Fuels International plc Annual Report 2019

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FY2019 Annual Report · Quadrise Fuels International plc

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ANNUAL
REPORT &
ACCOUNTS
2019

CONTENTS
Highlights

Quadrise MSAR® fuel

Chairman’s Statement

Strategic Report

Directors

Directors’ Report

Statement of Directors’ Responsibilities

Report on Directors’ Remuneration

Corporate Governance Statement

Independent Auditors’ Report

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Company Statement of Financial Position

Company Statement of Changes in Equity

Company Statement of Cash Flows

Notes to the Financial Statements

Corporate Information

QUADRISE IS THE INNOVATOR
AND GLOBAL SUPPLIER OF A
DISRUPTIVE REFINERY UPGRADING
TECHNOLOGY THAT ENABLES
THE PRODUCTION OF MSAR®
(MULTIPHASE SUPERFINE ATOMISED RESIDUE),
A SYNTHETIC HEAVY FUEL OIL
WHICH HAS SIGNIFICANT
ECONOMIC AND ENVIRONMENTAL
BENEFITS.

HIGHLIGHTS

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. We are now developing momentum in a
number of markets in which we are seeking to progress 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 2020 and beyond.

Medium-term Funding Secured

First £2m tranche of £4m
Bergen Facility received
2 September 2019.

Open Offer increased
by 20% to £1.8m – fully
underwritten, plus £0.7m
from subscriptions
Open Offer take-up 75% at close - an
excellent outcome.

Total cash funding
of £4.5m
Increasing to £6.5m with second
tranche of Bergen funding. A further
£2.5m available if the warrants
relating to the Bergen funding, the
open offer and subscription are
exercised.

Business Development - Project Opportunity Progression

REDLINER

AMERICAS
>9M tpa HFO

BITUMINA

E. EUROPE / FSU
>18M tpa HFO

MAERSK
LINE

EUROPEAN
OIL MAJOR

EUROPEAN OIL
REFINER

YOUNES
MAAMAR

AFRICA
>7M tpa HFO

MIDDLE EAST
>50M TPA HFO

API POLY GCL

JGC

ASIA
>65M tpa HFO

ALEPH
(Freepoint
Introduction)
HAWAZIN
(Al Kharafi)

FREEPOINT

GLOBAL MARINE
FUELS
230M tpa HFO

AL KHAFRAH

ALEPH

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION

MSAR®: RELIABLE EMULSION
FUEL BLENDING TECHNOLOGY

MSAR® technology draws on over 30 years of
experience in the production of oil-in water
emulsion-based fuels. MSAR® fuel is a direct
substitute for Heavy Fuel Oil (“HFO”) and
Quadrise’s MSAR® technology has established
a strong reputation with market leading
companies.

The global HFO market currently exceeds 400 million tons
per annum, with marine bunker fuel oil currently comprising
approximately 50% of the total.

MSAR® technology is a potential game-changer for oil
refiners. It frees up valuable distillates traditionally used
for HFO manufacture and viscosity control, increasing
profitability. This is achieved rapidly and without incurring
significant expenditure – which differentiates MSAR® from
alternative upgrading solutions.

In a refinery producing HFO...

In a refinery producing MSAR®...

...typically just 50-60% of the crude processed is
sold as premium-value transport fuels

...some 70% of the crude processed is sold as
premium-value transport fuels

20-40% Distillates

30% Water (inc <1% additives)

HFO

MSAR® systems
are scalable
and modular.
The oil refinery
recovers 10-20%
transport fuels for
minimal capex

MSAR®

60-80% Residuals

HFO requires 20-40% premium
fuels to make residue flow

70% Residuals

MSAR® uses c. 30% water instead of
premium fuels to make residue flow

MSAR® Enhances Refinery Margins

Because premium distillate fuels are replaced with low-
cost water and a small amount (<1%) of additives, a higher
proportion of the valuable components of the oil barrel can
be sold as higher-margin refined products.

MSAR® technology is modular and can be integrated into an
oil refinery in under 12 months, with any tie-ins incorporated
into scheduled maintenance shutdowns.

The MSAR® fuel produced is:

•

Extremely stable, with storage and handling possible
at ambient conditions.
Compatible with MSAR® fuels from other refineries
and a variety of hydrocarbons.
Transported to end-users using existing HFO
infrastructure.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

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MSAR®: HOW IT WORKS:

The MSAR® process is simple:

1 Oil residues are taken from within the
refinery and cooled to under 200°C to
achieve the required viscosity (typically
<500 centistokes).

3 Special additives are included in the water
phase to stabilise the emulsion for long-
term storage and conventional transport,
and to promote complete combustion.

2 Water, which can be derived from several
utility or waste-water sources, is added to
the residue.

4 The mixture is processed in a proprietary
MSAR® module to a high hydrocarbon
content (typically 70%) oil-in-water
emulsion with enhanced fuel properties.

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QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONMSAR®: PROVEN FUEL OIL SUBSTITUTE

Compared with HFO, MSAR® fuel offers
consumers typically 10–20% lower energy
costs due to the distillate savings made
at the refinery.

Quadrise’s MSAR® technology is applicable
to a wide variety of heavy oils and refinery
residue streams and end-user applications.
Whilst the process is specific to each refinery/
residue stream, the low-cost MSAR® fuel is
generally supplied as one of two products:

•

Marine MSAR®; a replacement bunker fuel,
developed with A.P. Møller-Maersk and major
diesel engine companies. This requires much
higher dynamic stability and much tighter limits on
the water quality (de-mineralised).

MSAR®; a replacement HFO for stationary
applications developed for major oil and power
generation companies, industrial users and
equipment suppliers globally.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

MSAR® AND THE ENVIRONMENT

Lowest Cost Solution To Meet Current And
Future Environmental Regulations For Fuel Oil

Residual fuels have higher levels of sulphur and impurities
than distillate fuels, such as gas oil or diesel. Therefore,
where environmental legislation dictates, either emissions
scrubbing equipment is required or a switch to a distillate or
low sulphur fuel is needed for compliance purposes.

The International Maritime Organisation (IMO) has adopted
a global cap for marine fuel sulphur of no more than 0.5% by
weight from 1st January 2020. For shipowners the choice is
either to use higher cost compliant fuels (with fuel already
a large portion of the ship’s operating cost) or to install
exhaust gas cleaning systems (“scrubbers”) on their vessels
to use higher sulphur HFO. This regulation will increase the
demand and cost of low sulphur distillate fuels relative to
HFO, it also reduces the cost of MSAR® and improves the
investment case.

The business case for most refiners to invest in the necessary
equipment to make compliant fuels is not clear cut,
especially as the financial returns for these billion dollar
investments are uncertain and the overall environmental
impact (including increased CO2 emissions) is worse when
compared over the life-cycle with the status quo of HFO
plus scrubbing.

At a macro level, refineries that produce MSAR® also sell
more higher value distillates, with some of the savings
shared with the consumer to invest in scrubbers, enabling
affordable compliance for all.

MSAR® offers significant environmental
advantages which are of increasing
importance to consumers:

Lower Energy Consumption Costs

The MSAR® process transforms hydrocarbons that are solid
at room temperatures into a product that can be stored and
transported at ambient temperatures of 20-30°C. As a result,
the energy requirements for handling and transporting
MSAR® are lower than HFO (which is handled at 50-100°C).

Lower NOx & PM (Black Carbon)

The emulsification of heavy fuels has been shown over
the years to be the most effective way of simultaneously
reducing particulate matter (“PM”) that includes unburned
carbon (also known as “Soot” or “Black Carbon”) and
nitrogen oxide (“NOx”) emissions during combustion.

The micron-sized MSAR® fuel droplets burn more efficiently
than HFO and result in high conversion of fuel to energy with
virtually no Soot. The 30% water in MSAR® fuel immediately
evaporates, causing secondary atomisation and reducing
combustion temperatures, typically reducing NOx emissions by
20-30%. NOx gases are significant atmospheric pollutants that
contribute to the formation of smog and related health issues.

Black Carbon results from the incomplete combustion
of hydrocarbon, which increases the total amount of
PM produced and is estimated to be 5–15% of shipping
particulate emissions. It absorbs heat in the atmosphere
and reduces the ability, on deposition, for snow and ice
to reflect sunlight. Studies indicate that Black Carbon is a
major contributor to global warming.

Steam Atomised
Heavy Fuel Droplet

Pre-Atomised
MSAR® Droplet

~5 microns
Oil-in-Water
emulsion

80 to 100
microns

*Burn occurs on droplet surface

*MSAR® droplets have 17 times the
surface area per mass of Heavy Fuel

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCHAIRMAN’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® 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 £6.5m funding (£4.5m 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 £2m 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 £1.84m and to have had this
fully underwritten by Peel Hunt. In addition, we had been
able to raise a further £0.72m via 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 Commodities LLC (“Freepoint”)

Memorandum of understanding (“MoU”) and MSAR® 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® 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®
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.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

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Collectively, these actions will, we believe, enable us to build
a sustainable business based on the commercial adoption
of MSAR® technology at scale and, through this, to rebuild
investor confidence and deliver long term shareholder value.

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
Europe, the Middle East and Morocco opportunities.

MSAR® Market Background

Marine MSAR® Opportunities

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® 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® 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®.

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® projects and commercial sales. This
ensures that the interests of all parties are aligned to bring
projects and commercial opportunities at pace.

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® 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® 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® at QRF could play a
vital role in expediting future trial activities.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION

CHAIRMAN’S STATEMENT (CONTINUED)

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 £3.0m (2018: £3.3m). This included production and
development costs of £1.5m (2018: £2.0m), administration
expenses of £1.5m (2018: £1.5m), a share option charge of
£0.2m (2018: £0.1m), interest income of £3k (2018: £18k)
and a tax credit of £184k (2018: £294k).

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 £5.1m (2018:
£6.5m). The most significant balances were intangible
assets of £2.9m (2018: £2.9m), property, plant and
equipment of £0.7m (2018: £1.0m), and cash of £1.1m (2018:
£2.2m). Further information on intangible assets is provided
in note 11 to the Group Financial Statements.

Cash Flow

The Group ended the year with £1.1m of cash and cash
equivalents (2018: £2.2m) with £1.5m having been raised
through the open offer in January 2019, and £2.7m having
been utilised in its operating activities during the year
(2018: £3.0m).

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 £1.51m (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
£51.0m (2018: £49.5m) that are available, under current
legislation, to be carried forward against future profits.
£23.5m (2018: £21.5m) of the tax losses carried forward
represent trading losses within Quadrise Fuels International
plc, £25.8m (2018: £25.8m) represent non-trade deficits
arising on intangible assets within Quadrise International
Limited, £0.9m (2018: £1.3m) represent pre-trading losses
incurred by subsidiaries, £0.8m (2018: £0.8m) represent
management expenses incurred by Quadrise International
Limited, and £0.1m (2018: £0.1m) 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®
technology has significant commercial potential, and our

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

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

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONSTRATEGIC
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®”) 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 partners and 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 £1.1m as at 30 June 2019.
As set out in note 27, funds of £4.5m (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 3 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.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Delay in commercialisation of MSAR® and funding
risks

There is a risk that the commercialisation of MSAR®
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® 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® 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® 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® formulation and manufacture, and that
the MSAR® 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® 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 Nouryon
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.

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.

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

Mike Kirk
Executive Chairman
4 October 2019

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONDIRECTORS

Mike Kirk
Executive Chairman

Laurie Mutch
Non-Executive Director

Mike served as a corporate finance
partner at Cazenove providing
advisory services to several clients in
the utilities, oil and gas and oilfield
service sectors. Whilst at Cazenove, Mike led the flotation
of Wood Group, Expro International and KBC Advanced
Technologies (where he also served as a non-executive
director for 9 years). Since leaving the City, Mike has held
a portfolio of non executive directorships for a variety
of companies and is currently Chairman of Portsmouth
Water and Chair of VIVID Housing (a housing association
with c30,000 properties). Prior to working in the City, Mike
worked in the chemical and nuclear industries and has a
BSc in Chemical Engineering from Leeds University, an MSc
in Nuclear Fuels Technology from Imperial College and a
Finance MBA from Cass Business School. Mike is a member of
the Nominations committee. Mike has extensive experience
in the energy and oilfield/engineering services and utilities
sectors, as a senior corporate finance advisor and non-
executive director and works closely with Jason and the
senior management to support business development and
commercialisation plans.

Jason Miles
Chief Operating Officer

Jason spent over twelve years
of his career prior to Quadrise
developing emulsified fuel projects;
initially as a process engineer for
BP and subsequently for PDVSA, as Business Development
Manager where he implemented numerous Orimulsion®
projects globally. Jason has an honours degree in chemical
engineering from Loughborough University and an
Executive MBA from the Cass Business School in London
and is a chartered Chemical Engineer. Jason has extensive
emulsion fuel and oil market knowledge and is responsible
for managing MSAR® business development, project
delivery and commercialisation of the refining, power,
marine and industrial sectors.

Laurie is a management consultant
to multi-national organisations.
He had 25 years’ experience in
the energy industry with the
Royal Dutch/Shell Group where he sat on the Board of
Shell International Gas & Power, as Executive Director
for business development in the Eastern Hemisphere.
From 1994 to 1996, he was the Finance Director in
Shell International Gas, and Principal Executive to the
International Energy Agency’s Coal Industry Advisory Board
(CIAB). Prior roles include senior management positions
in Shell’s Coal and Chemical Divisions. During his last two
years of service he was Group Chief Information Officer.
Laurie holds a BSc in Mathematics & Physics and an MSc in
Astrophysics. He is chairman of the QFI Audit and Funding
committees and a member of the Compensation and
Nominations committees.

Bryan Sanderson
Non-Executive Director

Bryan has spent more than 35
years with BP in senior executive
positions, latterly as Managing
Director from 1991 to 2000 and as
Chief Executive of BP Chemicals
from 1990 to 2000. Since retiring from BP in 2000, Bryan has
held the position of Chairman at Standard Chartered Bank,
BUPA and Northern Rock amongst others. Bryan was also
previously a non-executive director of Corus/British Steel,
Six Continents and Argus Media. He is currently Interim
Chairman of the UK Government’s Low Pay Commission and
holds a number of other board positions. Bryan holds a BSc
in Economics from the London School of Economics, where
he is currently an Emeritus Governor, as well as Honorary
Doctorates from the University of York and the University of
Sunderland. He is also an Honorary Fellow of the Institution
of Chemical Engineers.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Dilipkumar Shah
Non-Executive Director

Hemant Thanawala
Non-Executive Director

Hemant is a Chartered Accountant
with over 30 years professional and
commercial experience. He played a
key role in the AIM listings of Nautical
Petroleum plc in 2005 and Quadrise Fuels International
plc in 2006, assuming the role of finance director in both
companies upon their listings. He remained on the board of
Nautical Petroleum plc until late 2008. Prior to 2005, Hemant
served as CFO of Masefield AG, a Swiss-based energy trader,
for a period of 4 years. Between 1989 and 2001, he served
as CFO for Premier Telesports Group and Rostel Group, with
diversified business interests in the emerging markets of
Eastern Europe, Former Soviet Union and Africa. Before that,
Hemant was engaged in professional practice, following
his qualification with KMG Thomson McLintock (now
KPMG) in 1981. Since becoming a non-executive director in
August 2018, Hemant serves on the QFI Audit, Funding and
Compensation committees.

Dilip brings with him over 25
years of commercial experience in
trading, finance, manufacturing
and distribution. Dilip has most
recently been involved in trading and manufacturing in West
Africa with focus on Nigeria, Democratic Republic of Congo
and Ghana. He is a founder member of various successful
companies in West Africa involved in the distribution of
fertilizers, chemicals, tobacco related products and the
manufacture of food products. In addition, he serves on
the boards of a number of private UK and international
companies.

Philip Snaith
Non-Executive Director

Philip has spent more than 35
years with the Royal Dutch Shell
Group in senior executive positions,
latterly as General Manager of Shell
International Trading & Shipping Company Limited in
London. Between 2004 and 2008, Philip spent four years in
Singapore as President of Shell International Eastern Trading
Company – with responsibility for Asia-Pacific trading
portfolio. Concurrent with this executive position, he was
a non-executive director of Shell Eastern Trading Company
(Pte) Ltd, with annual revenues of around US$55 billion, and
was also Chairman of both Shell Tankers Singapore (Pte) Ltd
and Shell International Shipping Services (Pte) Ltd. Philip
holds an MBA from Cranfield University, a BSc (Physics)
from Imperial College and a Diploma in Marketing (Dip.M)
from the UK Chartered Institute of Marketing. Philip is a
member of the QFI Audit committee, and Chairman of the
Compensation and Nominations committees.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONDIRECTORS’
REPORT

The Directors present their report together with the audited accounts of Quadrise Fuels International plc (“the Company”),
and its subsidiaries, (“the Group”) for the year ended 30 June 2019.

Results and Dividends

The consolidated loss from continuing operations after taxation for the year ended 30 June 2019 was £3.0m (2018: £3.3m).
The Directors do not recommend the payment of any dividend for the year (2018: £nil).

Directors

Those who served as Directors during the year are:

•

Mike Kirk (Executive Chairman)

Jason Miles (Chief Operating Officer)

Laurence Mutch (Non-executive Director)

Bryan Sanderson (Non-executive Director – appointed 23 April 2019)

Dilipkumar Shah (Non-executive Director)

Philip Snaith (Non-executive Director)

Hemant Thanawala (Non-executive Director)

Resolutions to re-appoint Mike Kirk and Dilipkumar Shah as Directors, who retire by rotation, will be proposed at the Annual
General Meeting. A resolution to re-appoint Bryan Sanderson, who was appointed as a Director of the Company by the Board
with effect from 23 April 2019 will also be proposed at the Annual General Meeting.

Directors’ Interests

The interests of the Directors holding office at 30 June 2019 were as follows:

Number of Shares held:

Directors
Hemant Thanawala1

Jason Miles

Mike Kirk

Laurence Mutch

Philip Snaith

Dilipkumar Shah

Bryan Sanderson

30 June 2019
Ordinary Shares of
1p each

30 June 2018
Ordinary Shares of
1p each

29,239,579

3,580,633

29,039,579

3,180,633

600,000

365,000

350,000

170,000

500,000

150,000

100,000

Including 23,126,179 Ordinary Shares held by Lucrone Investments GmbH, a company in which Mr Thanawala has a
beneficial interest.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Number of share options held:

Directors
Mike Kirk

Hemant Thanawala

Jason Miles

Laurence Mutch

Dilipkumar Shah

Philip Snaith

Bryan Sanderson

30 June 2019
Share options
3,000,000

30 June 2018
Share options
3,000,000

Exercisable up to
1 April 2024

3,000,000

3,500,000

500,000

2,000,000

5,000,000

1,500,000

3,551,122

1,448,878

3,500,000

2,000,000

500,000

2,000,000

500,000

27 June 2029

3,500,000

1 April 2022

500,000

22 March 2024

27 June 2027

5,000,000

1 April 2022

1,500,000

22 March 2024

27 June 2029

27 June 2027

3,500,000

1 April 2022

27 June 2027

500,000

1 April 2022

27 June 2027

Substantial Shareholders

The Board was aware of the following interests of 3% and over of the issued share capital of the Company as at the date of
this report.

Ruudowen Limited

Phibatec Limited

Intertrust Trustees Limited

Anthony Lowrie

Financial Instruments

Nature of holding
Direct

Number of
ordinary shares
held
60,812,495

Direct

51,562,500

46,081,160

Indirect

31,521,705

Percentage of
issued share
capital and
voting rights
6.11%

5.18%

4.63%

3.17%

The Group’s principal financial instruments comprise cash balances and other payables and receivables that arise in the
normal course of business. The risks associated with these financial instruments are disclosed in note 22.

Research and Development

The Group continues to invest in research and development associated with the design and manufacture of MSAR®
proprietary emulsion fuel. Further information regarding the research and development activities of the Group is contained
in the Chairman’s Statement on pages 6-9 of this report.

Future Developments

Further information regarding the future developments of the Group is contained in the Chairman’s Statement on pages 6-9
of this report.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONDIRECTORS’ REPORT (CONTINUED)

Directors’ Liabilities

Annual General Meeting

The Annual General Meeting will be held on Friday
29 November 2019 as stated in the Notice, which
accompanies this Annual Report.

By order of the Board.

MSP Corporate Services Limited
Company Secretary
4 October 2019

Subject to the conditions set out in the Companies Act
2006, the Company has arranged appropriate Directors’
and Officers’ liability insurance to indemnify the Directors
against liability in respect of proceedings brought by third
parties. Such provisions remain in force at the date of this
report.

Disclosure of Information to Auditors

So far as each person who was a Director at the date of
approving this report is aware, there is no relevant audit
information, being information needed by the auditor in
connection with preparing its report, of which the auditor is
unaware. Having made enquiries of fellow Directors, each
Director has taken all the steps that he ought to have taken
as a Director in order to have made himself aware of any
relevant audit information and to establish that the auditor
is aware of that information.

Re-appointment of Auditors

In accordance with Section 489 of the Companies Act 2006,
a resolution to re-appoint Crowe U.K. LLP will be proposed
at the next Annual General Meeting.

Board Committees

Information on the Audit and Compensation committees is
included in the Corporate Governance section of the Annual
Report on pages 19-28.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

STATEMENT OF DIRECTORS’
RESPONSIBILITIES

The maintenance and integrity of the Quadrise Fuels
International plc website is the responsibility of the
Directors; the work carried out by the auditors does not
involve the consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that
may have occurred in the accounts since they were initially
presented on the website.

Legislation in the United Kingdom governing the
preparation and dissemination of the accounts and the
other information included in annual reports may differ
from legislation in other jurisdictions.

Mike Kirk
Chairman
4 October 2019

The Directors are responsible for preparing the Strategic
Report, Directors Report and the Financial Statements in
accordance with applicable law and regulations.

Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors have elected to prepare the financial statements in
accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the EU and applicable law.

Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Company
and the Group and of the profit or loss of the Group for
that period. In preparing these financial statements, the
Directors are required to:

•

Select suitable accounting policies and then apply them
consistently;

Make judgments and accounting estimates that are
reasonable and prudent;

State whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;

Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.

They are further responsible for ensuring that the Strategic
Report and Report of the Directors and other information
included in the Annual Report and Financial Statements is
prepared in accordance with applicable law in the United
Kingdom.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONREPORT ON DIRECTORS’
REMUNERATION

Key Management Remuneration

The Compensation Committee of the Board of Directors is responsible for determining and reviewing compensation
arrangements for all key management personnel, regarded as the executive Directors and Officers of the Group. The
Compensation Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a
periodic basis and is guided by an approved remuneration policy and takes into account relevant employment market
conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board
and executive team. The Compensation Committee additionally links part of key management remuneration to the
Company’s financial and operational performance.

Details of the nature and amount of each element of the emoluments of each member of Key Management for the year
ended 30 June 2019 were as follows:

Director
Mike Kirk

Jason Miles

Hemant Thanawala

Philip Snaith

Laurence Mutch

Bryan Sanderson

Dilipkumar Shah

Total

Short-term
employee
benefits – as paid
£’000s
255

Short-term
employee benefits –
deferred1
£’000s
(56)

Post-employment
benefits
£’000s
14

206

594

(3)

(8)

(75)

Total
2019
£’000s
213

218

545

Total
2018
£’000s
207

216

115

718

With effect from 1 September 2017 to 31 December 2018, Mike Kirk agreed to reduce his cash salary by 50% and the Non-
executive Directors each agreed to reduce their fees to £24,000 per annum. The deferred balance was repaid in March 2019.
An uplift of 25% due on the deferred balance is included within the 2018 and 2019 totals and remains as a potential future
payment.

Reconciliation of Share Options Granted to Directors

As at 1 July

Granted during the year by QFI

Exercised during the year

Expired during the year

As at 30 June

30 June 2019
Number of share
options

17,500,000

15,000,000

30 June 2018
Number of share
options

17,500,000

32,500,000

17,500,000

No gain was realised on the exercise of share options by Directors during the year (2018: £nil).

The market price of the Company’s shares at the end of the reporting period was 6.70p (2018: 3.55p) and the range during the
year was 2.05p to 7.40p (2018: 2.48p to 14.13p) per share.

Philip Snaith
Chairman of the Compensation Committee
4 October 2019

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

CORPORATE GOVERNANCE
STATEMENT

Since admission to trading on AIM in 2006, the Company
has adopted the UK Corporate Governance Code and at its
Board meeting on 27 June 2018, the Board of the Company
resolved to apply the UK Corporate Governance Code,
published by the Financial Reporting Council, as revised in
July 2018 (the “Code”).

The Code sets standards for good practice in relation
to board leadership and effectiveness, remuneration,
accountability and relations with shareholders. The
provisions of the Code (the 2018 version of which the
Board resolved to adopt) which apply to Quadrise Fuels
International plc are set out below.

Principles of the UK Corporate Governance
Code

Board Leadership & Company Purpose

Effective and entrepreneurial board promoting
sustainable success, generating value for shareholders
and contributing to wider society.

Establish the company’s purpose, values & strategy.
Directors to act with integrity and promote the desired
culture.

Ensure necessary resources to meet objectives and
measure performance. Establish framework of controls
which enable risk to be assessed and managed.

Ensure effective engagement with and encourage
participation from shareholders and stakeholders.

Workforce policies and practices are consistent with the
company’s values and support long term sustainable
success. Workforce able to raise matters of concern.

Division of Responsibilities

Chair responsible for board effectiveness. Promote a
culture of openness and debate, facilitate constructive
board relations and contribution of non-exec directors.
Ensure accurate, timely and clear information.

Appropriate combination of exec and non-exec
(particularly independent) directors so that no one
individual or group dominates. A clear division between
board and company leadership.

Non-exec directors to have sufficient time to meet
responsibilities and provide constructive challenge,
strategic guidance, specialist advice and hold executive
management to account.

Ensure policies, processes, information, time and
resources required to function effectively and efficiently.

Composition, Succession and Evaluation

10. A formal, rigorous and transparent procedure to board
appointment. Establish a succession plan for board
and senior management, based on merit and objective
criteria. Promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.

11. Board and committees to have a combination of skills,
experience and knowledge. Review length of service of
the board with membership regularly refreshed

12. The annual board evaluation to consider its

composition, diversity and effective working together.
Individual evaluation to demonstrate whether each
director continues to contribute effectively.

Audit, Risk and Internal Control

13. Establish formal and transparent policies and

procedures to ensure independence and effectiveness
of internal and external audit functions. Satisfy itself on
integrity of financial and narrative statements.

14. Present a fair, balanced and understandable assessment

of company’s position and prospects.

15. Establish procedures to manage risk, oversee internal
controls and determine nature and extent of principal
risks in achieving its long-term strategic objectives.

Remuneration

16. Policies and practices designed to support strategy

and promote long-term sustainable success. Executive
remuneration aligned to purpose and values and clearly
linked to successful delivery of company’s long-term
strategy.

17. A formal and transparent procedure for developing

policy on executive remuneration should be
established. No director involved in deciding their own
remuneration.

18. Directors to exercise independent judgement and

discretion when authorising remuneration outcomes,
taking account of company and individual performance
and wider circumstances.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCORPORATE GOVERNANCE STATEMENT (CONTINUED)

The Company maintains a comprehensive suite of policies
and practices appropriate for our size and stage of
development. Each of these is reviewed and signed off by
at least one nominated executive or non-executive director
with considerable prior experience of the subject matter.
The executive team frequently consult the chairmen of the
audit, compensation and funding committees on planning,
finance, legal and human resource matters.

In May and June each year the Board undertakes a
structured risk assessment and the outcomes of this
are incorporated in the annual Business Plan and the
associated financial modelling.

I trust these few examples illustrate that the Company has a
healthy approach to oversight on behalf of all shareholders
and that high standards of corporate governance are
inherent in our culture.

I and my fellow directors enjoyed meeting you at the
General Meeting on 27 September 2019 and look forward
to meeting with shareholders at the AGM on 29 November
2019. We plan to hold further investor conference calls
during the latter half of 2019 and would be delighted to
discuss any element of our governance standards on these
calls.

Mike Kirk
Executive Chairman
4 October 2019

Chairman’s Corporate Governance
Statement

Dear Shareholders,

Since its original listing in April 2006, Quadrise Fuels
International has applied strict corporate governance
principles in all our endeavours. As an example, each
year the Board has (albeit informally) tested itself against
the then applicable UK Corporate Governance Code, and
endeavoured to act on any perceived deficiencies.

With the implementation of the new AIM company
corporate governance changes, effective 28 September
2018, it was without hesitation that the Board chose
to apply the Code as revised in July that year. We have
provided details of the Code on our website and explain
where we comply, and if not, why and if appropriate what
corrective steps we are taking to address any deficiencies.
This information will be reviewed each year and our website
will disclose the review date.

As Executive Chairman, it is my duty together with my fellow
Board members to promote and apply good standards of
corporate governance throughout our organisation. The
Company is privileged to have a highly experienced Board,
setting clear values and strategy in our annual Business
Plan, adopting the highest standards of integrity whilst
promoting a hands-on, friendly but professional culture.

Following the disappointments of last year, the 2018-19
financial year was one in which we implemented the new
strategy of developing a wider range of MSAR® projects and
commercial opportunities. In this regard, we have already
demonstrated excellent progress in a number of important
markets for Quadrise and are well positioned to action
these projects with our commercial partners in the relevant
countries/regions. This provides, we believe, firm foundations
for the Company’s future growth. The announcement
on 23 August 2019 of £2m funding and the subsequent
announcement on 9 September 2019 of the fully underwritten
open offer raising a further £1.8m (gross) together with
the £0.75m (gross) subscription ensures that we now have
the ability to convert these opportunities to substantive
commercial ventures during the coming 18 months.

Through a series of meetings with major shareholders, and
the introduction of investor conference calls (1 August and
18 December 2018, and 20 May and 28 August 2019), as well
as the General Meeting on 27 September 2019, we have
endeavoured to keep shareholders fully informed (within
the usual disclosure constraints) on the Company’s strategic
development plans.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Application of the Code

In accordance with AIM Rule 26, the following describes how the
Company complies with the Code and where it departs from the
Code together with an explanation of the reasons for doing so.

Board Leadership and Company Purpose

Principle A: Effective and entrepreneurial board
promoting sustainable success, generating value for
shareholders and contributing to wider society.

The Quadrise Board met formally on 15 occasions during
the year ending 30 June 2019 in its endeavours to progress
the announced relationships and potential projects with
Freepoint Commodities LLC and with a European oil major
(announced November 2018), with Aleph Commodities
(“Aleph”) covering Kuwait and Younes Maamar, former
CEO of the Moroccan state-owned power and water utility,
ONEE (February 2019/March 2019), with the Kharafi Group
in Kuwait, and Al Khafrah Group and Aleph Commodities,
to accelerate opportunities in the Kingdom of Saudi Arabia
(announced in May and June 2019

More recently, in August 2019, the Company announced
a Memorandum of Understanding with Merlin Energy
Resources Limited- an upstream oil and gas consultancy.

The Board, both directly and through the Funding committee
has also allocated considerable time to developing an
appropriate medium term strategy to secure funding for
the Company, the elements of which were announced on
23 August and 9 September 2019, with all of the elements
crystallising after the relevant authorities were approved by
shareholders at the General Meeting on 27 September.

Given the above progress, the opportunity for the Company
to generate future value for shareholders remains sound
in our view. Refer to further information under Provisions
1 and 14, and Principles F, G and H (Board effectiveness,
Independence).

The MSAR® technology has many environmental benefits as
reported elsewhere, and on the company’s website https://
www.quadrisefuels.com/msar-technology/the-benefits-of-msar
and in this way has considerable potential to contribute to
wider society.

Principle B: Establish the company’s purpose,
values & strategy. Directors to act with integrity and
promote the desired culture.

Our mission is to be the world’s leading oil-in-water emulsion
fuels company, providing best available technology,
solutions, services and MSAR® synthetic fuel oil products for
our major, market-leading customers.

Our strategy is to work with global and regional companies
in the refining, shipping and power-generation markets to
develop, simultaneously, the capacity to both produce and
consume MSAR® emulsion fuels on a commercial scale and
world-wide.

The Quadrise team of twelve employees and directors are
highly cohesive and motivated with a clear sense of purpose.
The Company is privileged to have a highly experienced
Board, setting values and strategy in our annual Business
Plan, and adopting the highest standards of integrity whilst
promoting a hands-on, friendly but professional culture. For
further information refer to Provisions 2 and 8.

Principle C: Ensure necessary resources to meet
objectives and measure performance. Establish
framework of controls which enable risk to be
assessed and managed.

We will continue to reduce costs where this is sensible within
the business, without impacting our ability to deliver our
business development plans, including the essential research
and development support. This includes changes to the
executive structure where appropriate.

Refer to Provisions 28: Assessment of Risks, and 29: Internal
Controls, as well as the disclosures under Principles I and O.

Principle D: Ensure effective engagement with and
encourage participation from shareholders and
stakeholders.

A successful AGM was held on 30 November 2018 with some
70 shareholders in attendance. During 2018-19, through
a series of meetings with major shareholders, and the
introduction of investor conference calls (1 August and
18 December 2018, and 20 May and 28 August 2019 ) with in
excess of 100 shareholders on each call, the executive team
has endeavoured to keep shareholders fully informed (within
the usual disclosure constraints) on the Company’s strategic
development plans. Refer to Provisions 4, 5, 6 and 7 for
further information. The Company held a General Meeting on
27 September 2019, to seek approval for its funding plans.

Principle E: Workforce policies and practices are
consistent with the company’s values and support
long term sustainable success. Workforce able to raise
matters of concern.

As a small and cohesive organisation, the Company is quickly
alerted to any practices that are inconsistent with our values
and determination to achieve long-term sustainable success.
The Company nevertheless prides itself in having in place
all of the standard procedures of a much larger corporation,
together with a wealth of experience on the Board to address

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCORPORATE GOVERNANCE STATEMENT (CONTINUED)

Provision 5: Stakeholder engagement mechanisms

Being a small organisation with 12 employees, the
Company can readily consider and respond to views put
forward by the workforce and other key stakeholders.
In view of this, the Company does not have a director
appointed from the workforce, a formal workforce advisory
panel or a designated non-executive director to engage with
the workforce.

Provision 6: A means for the workforce to raise
concerns

During the induction programme and subsequently,
employees are encouraged to bring forward any concerns
at any time including use of a Whistleblowing Policy. If
appropriate the chairman of the compensation committee
would be asked to investigate and seek external advice
should this be necessary.

Provision 7: Identify and manage conflicts of
interest

Both executive and non-executive directors meet and
consult major shareholders within the usual disclosure
constraints to surface and manage any potential conflicts of
interest. Any related party transactions are reported in Note
23 to the financial results.

Provision 8: Board Minutes to record issues that
cannot be resolved

The Board works hard to resolve any concerns about
the management of the company and the operation of
the Board. On occasions a director will request that the
Board minutes record his divergent opinion from the
majority view. A resigning non-executive director would be
encouraged to provide a written statement to the chair if his
resignation resulted from such a concern.

any workforce concerns. During the induction programme,
new employees are encouraged to bring forward any
concerns at any time including use of a Whistleblowing
Policy. Refer to further disclosures in Provisions 2, 5 and 6.

Provision 1: Opportunities and risks to future
success.

The Chairman’s Statement in the 2019 Annual Report
describes the MSAR® market opportunities in the power
generation and marine bunker fuel sectors. The risks
associated with our endeavours are amply illustrated by
the disappointments of the prior terminated trial project in
KSA, and the marine fuel trial by Maersk. Principal Business
Risks are more fully covered on Page 5 in the Annual
Report. Notwithstanding the challenges faced in our key
markets, the Board firmly believes in the sustainability of
the Company’s business model. Progress will not always
be smooth, but we are well positioned to capitalise on
past experience and the significant opportunities that we
see going forwards. The Company would not be able to
attract the attention of partners of this calibre without clear
evidence of its standards of corporate governance.

Provision 2: Monitoring corporate culture

The Company does not formally assess and monitor
culture – this being a small organisation, where any
deviation from policy, practices and behaviour at odds
with the Company’s purpose and values would become
quickly apparent to management. The Quadrise team can
be described as cohesive and highly professional with
a very clear sense of purpose. Team meetings are held
weekly where project progress is reviewed and remedial
action taken. The performance of all employees is assessed
annually together with a discussion on career development
plans. The remuneration scheme for all employees includes
the potential award of bonuses and options subject to
company and personal performance.

Provision 3: Regular engagement with major
shareholders

Refer to Disclosure under Principle D and Provision 7.

Provision 4: Action to be taken in the event there are
20% votes against a resolution

At the 2018 AGM, five ordinary resolutions and one special
resolution were carried by at least 84% voting in favour. At
the General Meeting in September, one ordinary resolution
and one special resolution were carried by 100% voting in
favour, This provision did not therefore apply.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Division of Responsibilities

Principles F, G & H: Chair responsible for board
effectiveness. Promote a culture of openness and
debate, facilitate constructive board relations and
contribution of non-exec directors.

Ensure accurate, timely and clear information. Appropriate
combination of exec and non-exec (particularly independent)
directors so that no one individual or group dominates. A
clear division between board and company leadership.

Non-exec directors to have sufficient time to meet
responsibilities and provide constructive challenge,
strategic guidance, specialist advice and hold executive
management to account.

Quadrise is privileged to have a highly qualified and
practiced Board of directors of an unusual level of seniority
and standing given the Company’s moderate size and still
early stage of development. For example, the Company was
privileged to have Byran Sanderson CBE, former Managing
Director and member of the Executive Committee at BP, join
the Board in April. Refer to Director Profiles on pages 12-13
of the Annual Report. The non-executive directors have a
level of experience and gravitas that ensures a culture of
openness and debate and provide the necessary challenge,
guidance and advice. Detailed board papers are prepared
a week ahead of meetings. For further information
refer to Provision 8: Divergent opinions, Provision 10:
Independence, Provision 15: Demands on time, and
Provisions 16: Company Secretary.

With an Executive Chairman, there is not a clear division
between board and company leadership. This is seen as
appropriate for the Company at this time, though this will
be reviewed as the Company progresses its development
plans. Refer to Provision 9.

Principle I: Ensure policies, processes, information,
time and resources required to function effectively
and efficiently.

The Company has a digital Policies and Procedures
Directory comprising some 100 policies in 22 business
categories. The Policies and Procedures are intentionally
kept short so that these are easy to refer to and keep
current. Of note, each of these is reviewed and signed off
by at least one nominated director (executive or non-
executive) who is required to have considerable prior
experience of the subject matter. Refer to Provision 29.
QFI has a comprehensive disaster recovery plan which is
tested on a regular basis.

Expenditure and other authorities are subject to a tight
Authorities Matrix, reviewed regularly by the Audit Committee.

The Company has implemented a GDPR policy and has
online training facilities for Bribery and Corruption, GDPR
and General Data Protection. Completion of this training is
compulsory for all employees and directors.

Provision 9: The roles of chair and chief executive

Mike Kirk is Executive Chairman of the Company and
therefore the roles of chair and senior executive of the
company are exercised by the same individual. This is seen as
appropriate for the Company at this time, though this will be
reviewed as the Company progresses its development plans.

Provision 10: Independence of non-executive
directors

The profiles and experience of the non-executive directors
are provided on pages 12-13 of the Annual Report.

Mr Dilip Shah is closely associated with significant
shareholders and is not considered independent.

There are no circumstances that might cause the Board to
question Mr Bryan Sanderson’s independence or that of
Mr Philip Snaith, who has the appropriate experience as a
former senior executive of the Royal Dutch Shell Group to
chair the compensation and nominations committees.

Mr Hemant Thanawala stepped down from his role as
Finance Director in August 2017 and became a non-
executive director. He is a significant shareholder and
has share options, and was an executive director of the
Company from 2006 to 2017. As a result, Mr Thanawala
cannot be formally considered independent. However, Mr
Thanawala provides input to the company and the board in
a manner consistent with being an independent director. He
retired by rotation at the 2018 AGM and was re-elected.

Non-executive director Laurence Mutch is also a Director
of Laurie Mutch & Associates Limited, which has in the
past provided consulting services to the Group. The total
fees charged for the 2019 financial year amounted to £nil
(2018: £nil). He is a shareholder and holds options in the
Company, and has been a director since 2006. Mr Mutch
has clearly indicated that these potential impairments do
not and have not hindered his ability to be independent
and after careful consideration the Board concurs with this
view and believes him to be independent. He was a former
senior finance director of the Royal Dutch Shell Group, and
has current financing, corporate governance and regulatory
experience. He thus has the experience to chair the audit
and funding committees. Mr Mutch retired by rotation at the
2018 AGM and was re-elected.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCORPORATE GOVERNANCE STATEMENT (CONTINUED)

Provision 12: Appointment of a Senior Independent
Director

In view of its size, the Company has not appointed a Senior
Independent Director. This will be reviewed as the Company
progresses its development plans.

Provision 13: Appointing and Removing Executive
Directors

On the appointment of Executive Directors refer to Principle
J. As discussed under Provision 41, the Compensation
Committee annually reviews the performance of the
Company and that of the Executive Chairman against
previously determined corporate performance targets
adopted by the Board. The non-executive directors meet
frequently without the Executive Chairman to discuss any
performance concerns.

Provision 14: Meetings of the Board

During the 2019 financial year, the Board comprised the
Executive Chairman, Chief Operating Officer as executive
Directors and three non-executive Directors (four from
23 April 2019) who are independent of management. At
each Annual General Meeting, one third of the Directors
who are subject to retirement by rotation shall retire from
office provided that if their number is more than three,
but not a multiple thereof, then the number nearest to but
not exceeding one-third shall retire. Appropriate Directors’
and Officers’ liability insurance has been arranged by the
Company.

The Board met a total of 15 times during the 2018/19 financial
year, including four formal quarterly meetings to discuss
a scheduled agenda covering key areas of the Group’s
affairs including operational and financial performance and
quarterly management accounts. All relevant information
is circulated in good time. The attendance record of each
director is shown below:

Director
Mike Kirk

Jason Miles

Laurence Mutch

Dilip Shah

Philip Snaith

Hemant Thanawala

Bryan Sanderson1

Attendance
15

1 Bryan Sanderson appointed 23 April 2019

100%

93%

100%

33%

93%

73%

100%

Provision 15: Demands on Directors’ time

In addition to his role as Executive Chairman, Mike Kirk is
Chairman of Portsmouth Water and Chair of VIVID Housing.
Laurence Mutch is also a non-executive director and
chairman of the audit committee at Georgian Mining, an AIM
company. Hemant Thanawala and Dilip Shah have other
disclosed external appointments. These positions have
been disclosed to the Board and do not, of themselves,
impact the time they need to commit to the Company.

Provision 16: Advice from the Company Secretary

In Ian Farrelly the Company has a highly experienced
Company Secretary and, for example, both the chairman of
the compensation committee and the chairman of the audit
committee are in regular contact to seek his guidance.

Composition, Succession and Evaluation of
the Board

Principle J: A formal, rigorous and transparent
procedure to board appointments. Establish a
succession plan for board and senior management,
based on merit and objective criteria. Promote
diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths.

The Board Nominations Committee is chaired by Philip
Snaith and comprises Philip Snaith, Mike Kirk and Laurence
Mutch. There is indeed a formal, rigorous and transparent
procedure to board appointments with the use of external
recruitment advisers as may be necessary. Refer to
Provision 20. In view of its small size the Board does not have
a formal succession plan, and this will be put in place as the
Company progresses its development plans. The Board is
keen to promote diversity as the Company develops.

Principle K: Board and committees to have a
combination of skills, experience and knowledge.
Review length of service of the board with
membership regularly refreshed.

Refer to Director Profiles in the Annual Report pages 12-13.
Each of the members of the Audit Committee has
considerable financial experience. The members of the
Audit and Compensation Committees formerly held senior
executive positions in large organisations. External guidance
is used in setting remuneration policy guidelines.

Two of the directors have been on the Board for 13 years
(since listing in April 2006). Whilst this is at odds with
regularly refreshing the Board, their experience is highly
valued by shareholders when the directors retire by rotation
and are then re-elected. Refer to Provisions 18 and 19.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Principle L: The annual board evaluation to consider
its composition, diversity and effective working
together. Individual evaluation to demonstrate
whether each director continues to contribute
effectively.

An annual appraisal is undertaken of the contribution of
each director, and the effectiveness of the Board and its
committees. This involves the completion of a confidential
evaluation matrix with 10 contribution attributes, together
with an opportunity to propose improvements on board
and committee performance. These are returned to the
Company’s Nomad and a consolidated review is provided
to the Executive Chairman for review by the Board. Refer to
“Evaluation of the board” under Provisions 21, 22 and 23
below.

The Executive Chairman oversees an annual evaluation of
all employees with targets set for the following year. The
Compensation Committee undertakes an evaluation of the
Company’s performance and that of the Executive Chairman.
Refer to Provision 41.

Provision 17: The Nominations Committee

Refer to Principle J.

Provision 18: Re-election of Directors

In accordance with the Company’s Articles of Association,
at each Annual General Meeting, one third of the Directors
who are subject to retirement by rotation shall retire from
office provided that if their number is more than three, but
not a multiple thereof, then the number nearest to but not
exceeding one-third shall retire.

Provision 19: Nine-year limitation of Chairman

Mike Kirk was appointed Executive Chairman on 1 April 2016,
having been appointed as a director on 1 December 2015

Provision 20: External search consultant

The Company did not appoint an external search consultant
during the year.

Provisions 21, 22 and 23: Evaluation of the board.

The Board did not use the services of an external evaluator
during the year. However, under the direction of the
Audit Committee, the Board during the year evaluated its
performance, the contribution of each of the directors and
the effectiveness of the committees by way of a confidential
survey completed by each director. The Company’s Nomad,
Cenkos Securities plc (formerly Smith & Williamson)
aggregated the results and have provided a summary to the
Executive Chairman.

Audit, Risk and Internal Control

Principle M: Establish formal and transparent
policies and procedures to ensure independence
and effectiveness of internal and external audit
functions. Satisfy itself on integrity of financial and
narrative statements.

Refer to the Corporate Governance Statement on pages 19-28
in the Annual Report. In view of its size the Company does
not have an internal audit function. However, the Audit
Committee was closely consulted on the drafting of the 2019
Annual Report and of course is integral to the preparation
of the annual results. The Committee has considerable
governance, control and finance experience. Refer to “The
work of the Audit Committee” under Provisions 24, 25 and 26.

Principle N: Present a fair, balanced and
understandable assessment of company’s position
and prospects.

Refer to the Chairman’s Statement in the Annual Report,
and to Provision 24, 25 and 26: The work of the audit
committee, Provision 27: Board responsibility in preparing
the accounts, Provision 30: Going Concern and Provision 31:
The prospects of the Company.

Principle O: Establish procedures to manage risk,
oversee internal controls and determine nature and
extent of principal risks in achieving its long-term
strategic objectives.

QFI performs a structured risk assessment on an annual
basis. This involves a review of the probability and impact of
adverse events across operational regions and at corporate
level. This culminates in the preparation of a risk dashboard
for consideration by the Board. This is followed by a
documented risk mitigation strategy that is subsequently
incorporated into the annual Business Plan. Refer also
to Provision 28: Assessment of the Company’s Risks and
Provision 29: Risk Management and Internal Control systems.

Provisions 24, 25 and 26: The work of the audit
committee

The Audit Committee is chaired by Laurence Mutch and
comprises Philip Snaith, Laurence Mutch and Hemant
Thanawala, all of whom have recent and relevant financial
experience and have competence in the oil sector. The
chairman of the committee provides a written or detailed
verbal report as necessary of every Audit Committee
meeting at the next board meeting. The committee meets
at least twice a year and is responsible for monitoring
the integrity of the financial statements of the Company,
keeping under review the scope and results of the audit, its

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCORPORATE GOVERNANCE STATEMENT (CONTINUED)

cost effectiveness and the independence and objectivity of
the auditors. The committee provides advice on whether
the annual report and accounts are fair, balanced and
understandable. Due to the size of the Company, there
is currently no internal audit function, although the
committee has oversight responsibility for public reporting,
overall good governance and the Company’s internal
controls. The committee annually assists management in
the formal and robust assessment of the Company’s risks.
Other members of the Board, as well as the auditors, are
invited to attend the Audit Committee meetings as and
when appropriate.

Significant Issues

The significant issues considered relating to the 2019
financial statements were Going Concern, the Valuation of
Intangible Assets and Management Override of Controls.
The subject of Going Concern is covered in the Strategic
Report on pages 10-11 in the Annual Report, in the Auditors
Report on pages 29-32 and in Note 3 to the Financial
Statements. The Valuation of Intangible Assets is addressed
in the Auditors Report on pages 29-32 and in Note 11 to the
Financial Statements.

No Internal Audit function

An internal audit function is not appropriate at this time
given the Company’s current size, and in view of this,
the Audit Committee and the Auditors consider the risk
of management override of controls a significant issue.
In making their assessment the Auditors considered
specifically the controls over journals, any indication
of unusual transactions and any evidence of bias in the
estimates made by management. The Auditors conclusion
was that there is no evidence of inappropriate management
override of controls, and the Audit Committee endorsed this
conclusion.

Assessment and Safeguarding the
Independence and Effectiveness of the
external audit process

Following a selection process conducted by the Audit
Committee, Crowe U.K. LLP were appointed by the board as
auditors in 2011 and are reappointed each year by ordinary
resolution put before the AGM.

The committee has not identified any issues with regards to
integrity, objectivity and independence of the Auditors and
therefore considers them to be independent.

Provision 27: Board responsibility in preparing the
accounts

The Board is responsible for the direction and overall
performance of the Group with emphasis on policy and
strategy, financial results and major operational issues.
In addition, the Board is responsible for preparing the
annual report and accounts, and considers this annual
report and accounts, taken as a whole, to be fair, balanced
and understandable, and that it provides the information
necessary for shareholders to assess the company’s
position, performance, business model and strategy.

Provision 28: Assessments of the Company’s 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 region 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 Risk Strategy and Action Plan is
reviewed each year by the auditors who consider this to be a
robust assessment to be regularly monitored.

Provision 29: Risk Management and Internal Control
systems.

The Board is responsible for the effectiveness of the Group’s
internal control system and is supplied with information to
enable it to discharge its duties. Internal control systems
are designed to meet the particular needs of the Group and
to manage rather than eliminate the risk of failure to meet
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.

The Company has a digital Policies and Procedures Directory
comprising some 100 policies in 22 business categories.
The Policies and Procedures are intentionally kept short
so that these are easy to refer to and remain current. Of
note, each of these is reviewed and signed off by at least
one nominated director (executive or non-executive) who is
required to have considerable prior experience of the subject
matter. Expenditure and other authorities are subject to
a tight Authorities Matrix, reviewed regularly by the Audit
Committee. QFI has a comprehensive disaster recovery plan
which is tested on a regular basis.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

The Board has established a Bribery Policy, signed by all
Directors and employees, to achieve compliance with the
UK Bribery Act 2010, which came into effect on 1st July
2011. Agreements with third parties contain statements
that the Company and its associates are required to adhere
at all times to the UK Bribery Act 2010. The Company
has implemented a GDPR policy and has online training
facilities for Bribery and Corruption, GDPR and General Data
Protection. Completion of this training is compulsory for all
employees and directors.

Provision 30: Going Concern

The subject of Going Concern is covered in the Strategic
Report on pages 10-11 of the Annual Report, in the Auditors
Report on pages 29-32 and in Note 3 to the Financial
Statements.

Provision 31: The prospects of the Company

The Outlook for the Company is addressed as part of the
Chairman’s Statement on pages 6-9 of the Annual Report

Principles P, Q & R: Remuneration

Policies and practices designed to support strategy
and promote long-term sustainable success. Executive
remuneration aligned to purpose and values and clearly
linked to successful delivery of company’s long-term
strategy.

A formal and transparent procedure for developing policy
on executive remuneration should be established. No
director involved in deciding their own remuneration.

Directors to exercise independent judgement and
discretion when authorising remuneration outcomes,
taking account of company and individual performance
and wider circumstances.

Refer to the Report on Directors’ Remuneration on page 18.

With reference to Provision 41, the Compensation
Committee reviews remuneration policy on an annual
basis to assess its effectiveness, and on behalf of the Board
conducts performance appraisals of the Company and
the Executive Chairman each year. External guidance is
sought as necessary in setting the terms of senior executive
compensation. Refer to Provision 35: Remuneration
Consultant. In consultation with the Executive Chairman,
the committee prepares corporate targets for formal
adoption by the Board to determine the award of bonuses
and / or options. These are clearly linked to the delivery of
long-term objectives and corporate strategy. Refer also to
Provision 37: Compensation Committee discretion.

Provision 32: Appointment of the Compensation
Committee

The Compensation Committee is chaired by Philip Snaith
and comprises Philip Snaith, Laurence Mutch and Hemant
Thanawala. The chairman of the committee provides a
written or detailed verbal report as necessary of every
compensation committee meeting at the next Board
Meeting. Philip Snaith served on the committee prior to
taking over as chairman.

Provision 33: Remuneration Policy

Refer to Provision 41

Provision 34: Remuneration of Non-executive
Directors

The Board determines the remuneration of the non-
executive directors and no Director participates in
discussions about his own remuneration. Hemant
Thanawala holds share options resulting from his prior
role as Finance Director. On 27 June, Laurence Mutch,
Philip Snaith, and Hemant Thanawala were each granted
2 million share options for exceptional services to the
Company given their roles on the Audit, Compensation,
Nominations and Funding Committees. Dilip Shah and
Bryan Sanderson were each granted 500,000 share options.
These options vest 25% on date of grant and 25% on each
annual anniversary thereafter. Provision 34 of the Code
states that remuneration for non-executive directors should
not include share options or other performance-related
elements. However as stated above, the Company’s non-
executive directors are of an unusual level of seniority
and standing given the Company’s moderate size and still
early stage of development. The Company has a small
full-time team and therefore the non-executive directors
are more closely engaged in the strategic development
of the Company than is normally the case, and their fee
compensation is low given their seniority.

Provision 35: Remuneration Consultant

At this time the committee does not make use of a
remuneration consultant, but the committee does make use
of independent remuneration surveys when these become
readily available.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCORPORATE GOVERNANCE STATEMENT (CONTINUED)

In determining executive director compensation,
the committee places considerable importance on
proportionality, clearly linking remuneration to the delivery
of long-term objectives and corporate strategy. In view
of the challenging issues of the past year, no bonuses
were awarded to the Executive Directors. In designing
remuneration policy, the committee has endeavoured
to incorporate the principles of clarity, simplicity, and
predictability. As an external measure, the committee
refers to remuneration surveys of AIM companies of similar
size and complexity, when these are readily available.
Shareholder views on compensation have been expressed
at the AGM and in other meetings, and the committee has
taken these and the company’s performance into account in
its deliberations.

The Report on Directors’ Remuneration is on page 18.

Laurence Mutch
Chairman of the Audit Committee
4 October 2019

Provision 36: The award of share options to
Executive Directors

Options are granted by board resolution in line with
one or more of the three QFI Share Option Schemes, a
Schedule 5 Enterprise Management Incentive Share Option
Plan (“EMIP”), a Schedule 4 Company Share Option Plan
(“CSOP”) and an Unapproved Share Option Plan (“USOP”).
The award of options is tightly linked to the delivery of
long-term objectives and corporate strategy. The views of
shareholders are taken into consideration.

Provision 37: Compensation Committee discretion

The committee retains an attitude of applying discretion
when this is applicable in regard to outstanding individual
performance.

Provision 38: Only basic salary to be pensionable

Only basic salary is pensionable and pension contribution
rates for executive directors are in line with those for other
staff.

Provision 39: Contract periods and no reward for
disappointing performance

The contracts for executive directors have no fixed end date.
No bonuses were awarded to the Executive Directors in
2018/19.

Provision 40: Remuneration Policy Principles

Refer to Provision 41.

Provision 41: The work of the Compensation
Committee

The committee works within the framework of a regularly
reviewed compensation policy approved by the Board.
It meets at least twice a year and conducts performance
appraisals of the Company and the Executive Chairman
against previously determined corporate performance
targets adopted by the Board. External guidance is sought
as necessary in setting the terms of senior executive
compensation including the award of bonuses and / or
options.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

INDEPENDENT AUDITOR’S REPORT TO
THE SHAREHOLDERS OF QUADRISE FUELS
INTERNATIONAL PLC

Opinion

We have audited the financial statements of Quadrise Fuels plc (the “Parent Company”) and its subsidiaries (the “Group”) for
the year ended 30 June 2019, which comprise:

•

the Group statement of comprehensive income for the year ended 30 June 2019;

the Group and Parent Company statements of financial position as at 30 June 2019;

the Group and Parent Company statements of cash flows for the year then ended;

the Group and Parent Company statements of changes in equity for the year then ended; and

the notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion:

•

the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
30 June 2019 and of the Group’s loss for the period then ended;

the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;

the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union as applied in accordance with the provisions of the Companies Act 2006; and

•

the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:

•

The directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or

The directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Overview of our audit approach

Materiality

In planning and performing our audit we applied the concept of materiality. An item is considered material if it could
reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of
materiality to both focus our testing and to evaluate the impact of misstatements identified.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONINDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS
OF QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)

Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be
£230,000, based on approximately 8% of the Group’s estimated loss before tax at the planning stage and we did not consider
it necessary to change that assessment.

We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the
financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as
to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment.

Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.

We agreed with the Audit Committee to report to it all identified errors in excess of £7,000. Errors below that threshold would
also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.

Overview of the scope of our audit

The Group and its subsidiaries are accounted for from one central operating location, the Group’s registered office. Our audit
was conducted from the main operating location and all Group companies were within the scope of our audit testing.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.

We determined the matters described below to be the key audit matters to be communicated in our report. This is not a
complete list of all risks identified by our audit.

Key audit matter

Going concern

The Group continues to be loss making and at 30 June 2019
held cash of £1,060,000 which was not sufficient to support
the production, development and administrative costs of
the Group for 12 months.

The going concern basis of preparation of the financial
statements may not be appropriate

How the scope of our audit addressed the key audit matter

We reviewed management’s process for considering going
concern. We obtained management’s assessment of going
concern, comprising cash flow and profit and loss forecasts
for at least 12 months from the date at which the financial
statements were approved and a summary of the funding
available to the Group to cover that period.

Our procedures included, but were not limited to:

•

Identifying the key assumptions included within the
forecasts which we discussed with management and,
where appropriate, challenged the appropriateness of;

• Performing sensitivity analysis on the projections; and

•

Reviewing relevant documentation in relation to funds
raised by the Parent Company after the reporting date
and described in note 27.

We also assessed the adequacy of disclosures made in the
financial statements in relation to going concern

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Carrying value of intangible assets

The MSAR® trade name, which has a carrying value of
£2.9m, is considered to have an indefinite useful life
and is tested annually for impairment. This requires an
estimation of the value in use of the intangible asset which
requires management to estimate the expected cash flows
and select a suitable discount rate in order to calculate
the present value of those cash flows when making its
assessment.

We have considered the evidence supporting the carrying
value of the intangible asset and that no impairment to the
carrying value is required.

We reviewed the underlying economic models challenging
the key assumptions made by management. Our review
included:

•

Considering the appropriateness of the assumptions
concerning the timing and discounting of the cash flows;

Considering the various projects and opportunities in
the pipeline and the likelihood of them happening; and

Performing scenario sensitivity analysis in relation to
underlying assumptions.

Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were
not designed to enable us to express an opinion on these matters individually and we express no such opinion.

Other information

The directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a material misstatement in the financial statements
or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion based on the work undertaken in the course of our audit

•

the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and

•

the directors’ report and strategic report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:

•

adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or

the Parent Company financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONINDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS
OF QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)

Responsibilities of the directors for the financial statements

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have
no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.

Stephen Bullock (Senior Statutory Auditor)

for and on behalf of

Crowe U.K. LLP

Statutory Auditor

London

4 October 2019

Note: The maintenance and integrity of the Quadrise Fuels International plc website is the responsibility of the directors. The work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 30 June 2019

Notes

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

Continuing operations

Revenue

Production and development costs

Other administration expenses

Share option charge

Warrant charge

Foreign exchange gain/(loss)

Operating loss

Finance costs

Finance income

Loss before tax

Taxation

Loss and total comprehensive loss for the year from
continuing operations

Loss per share – pence

Basic

Diluted

(1,475)

(1,462)

(154)

(105)

(3,164)

(6)

(3,167)

184

(2,983)

(2,002)

(1,518)

(53)

(3)

(3,567)

(7)

(3,556)

294

(3,262)

(0.34)p

(0.38)p

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 30 June 2019

Company No. 05267512

Notes

As at
30 June 2019
£’000s

As at
30 June 2018
£’000s

Assets

Non-current assets

Property, plant and equipment

Intangible assets

Non-current assets

Current assets

Cash and cash equivalents

Trade and other receivables

Prepayments

Stock

Current assets

TOTAL ASSETS

Equity and liabilities

Current liabilities

Trade and other payables

Current liabilities

Equity attributable to equity holders of the parent

Issued share capital

Share premium

Share option reserve

Warrant reserve

Reverse acquisition reserve

Accumulated losses

Total shareholders’ equity

TOTAL EQUITY AND LIABILITIES

730

2,924

3,654

1,060

169

106

1,396

5,050

288

9,227

74,438

3,455

105

522

(82,985)

4,762

5,050

961

2,924

3,885

2,229

188

122

2,600

6,485

400

8,622

73,642

3,432

522

(80,133)

6,085

6,485

The financial statements, accompanying policies and notes 1 to 28 (forming an integral part of these financial statements),
were approved and authorised for issue by the Board on 4 October 2019 and were signed on its behalf by:

M. Kirk
Chairman

J. Miles
Director

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2019

Issued
capital
£’000s
8,622

Share
premium
£’000s
73,642

Share option
reserve
£’000s
3,704

Warrant
reserve
£’000s
-

Reverse
acquisition
reserve
£’000s
522

Accumulated
losses
£’000s
(77,196)

Total
£’000s
9,294

1 July 2017

Loss and total comprehensive loss for
the year

Share option charge

Transfer of balances relating to expired
share options

30 June 2018

1 July 2018

(325)

8,622

73,642

3,432

8,622

73,642

3,432

Loss and total comprehensive loss for
the year

Share option charge

Transfer of balances relating to expired
share options

Warrant charge

New shares issued net of costs

605

796

154

(131)

30 June 2019

9,227

74,438

3,455

For an explanation of the nature and purpose of other reserves refer to note 20.

(3,262)

325

522

(80,133)

6,085

522

(80,133)

6,085

(2,983)

131

154

105

1,401

4,762

522

(82,985)

105

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCONSOLIDATED STATEMENT OF
CASH FLOWS
For the year ended 30 June 2019

Notes

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

Operating activities

Loss before tax from continuing operations

Depreciation

Loss on disposal of fixed assets

Finance costs paid

Finance income received

Share option charge

Warrant charge

Working capital adjustments

Decrease in trade and other receivables

Decrease in prepayments

(Decrease)/increase in trade and other payables

Cash utilised in operations

Finance costs paid

Taxation received

Net cash outflow from operating activities

Investing activities

Finance income received

Purchase of property, plant and equipment

Net cash outflow from investing activities

Financing activities

New shares issued net of issue costs

Net cash inflow from financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

(3,167)

230

(3,556)

230

(3)

154

105

(112)

(2,727)

(6)

184

(2,549)

(24)

(21)

1,401

(1,169)

2,229

1,060

(18)

114

153

(2,986)

(7)

294

(2,699)

(135)

(117)

(2,816)

5,045

2,229

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANY STATEMENT OF
FINANCIAL POSITION
As at 30 June 2019

Assets

Non-current assets

Property, plant and equipment

Investments in subsidiaries

Non-current assets

Current assets

Cash and cash equivalents

Trade and other receivables

Prepayments

Current assets

TOTAL ASSETS

Equity and liabilities

Current liabilities

Trade and other payables

Current liabilities

Equity attributable to equity holders of the parent

Issued capital

Share premium

Share option reserve

Warrant reserve

Accumulated losses

Total shareholders’ equity

TOTAL EQUITY AND LIABILITIES

Company No. 05267512

Notes

As at
30 June 2019
£’000s

As at
30 June 2018
£’000s

32,441

32,451

460

121

660

33,111

169

9,227

74,438

3,455

105

(54,283)

32,942

33,111

29,783

29,825

1,709

113

1,895

31,720

287

8,622

73,642

3,432

(54,263)

31,443

31,720

The loss for the year dealt with in the accounts of Quadrise Fuels International plc was £151,000 (2018: £63,000).

M. Kirk
Chairman

J. Miles
Director

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCOMPANY STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2019

Issued
capital
£’000s
8,622

Share
premium
£’000s
73,642

Share option
reserve
£’000s
3,704

Warrant
reserve
£’000s
-

Accumulated
losses
£’000s
(54,525)

1 July 2017

Loss and total comprehensive loss for the year

Share option charge

Transfer of balances relating to expired share
options

30 June 2018

1 July 2018

(325)

8,622

73,642

3,432

8,622

73,642

3,432

Loss and total comprehensive loss for the year

Share option charge

Transfer of balances relating to expired share
options

Warrant charge

New share issued net of costs

605

796

154

(131)

Total
£’000s
31,443

(63)

325

(54,263)

31,433

(54,263)

31,443

(151)

131

(151)

154

105

1,401

30 June 2019

9,227

74,438

3,455

105

(54,283)

32,942

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANY STATEMENT OF
CASH FLOWS
For the year ended 30 June 2019

Notes

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

Operating activities

Loss before tax from continuing operations

Depreciation

Finance costs paid

Finance income received

Share option charge

Warrant charge

Working capital adjustments

(Increase)/decrease in trade and other receivables

(Increase)/decrease in prepayments

(Decrease)/increase in trade and other payables

Cash generated by operations

Finance costs paid

Net cash inflow from operating activities

Investing activities

Finance income received

Purchase of property, plant and equipment

Loan to subsidiary

Net cash outflow from investing activities

Financing Activities

Issue of Ordinary Share Capital

Net cash inflow from financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

(151)

(2)

154

105

(8)

(6)

(118)

(1)

(2,658)

(2,656)

1,401

(1,249)

1,709

460

(63)

(18)

173

236

(1)

235

(3,364)

(3,346)

(3,111)

4,820

1,709

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS

1. General Information

Quadrise Fuels International plc (“QFI”, “Quadrise”,
“Company”) and its subsidiaries (together “the Group”) are
engaged principally in the manufacture and marketing of
emulsion fuel for use in power generation, industrial and
marine diesel engines and steam generation applications.
The Company’s ordinary shares are listed on the AIM market
of the London Stock Exchange.

QFI was incorporated on 22 October 2004 as a limited
company under UK Company Law with registered number
05267512. It is domiciled at, and is registered at, Gillingham
House, 38-44 Gillingham Street, London, SW1V 1HU.

All inter-company balances, transactions, income and
expenses and profits and losses resulting from intra-group
transactions are eliminated on consolidation. Subsidiaries
are fully consolidated from the date of acquisition, being
the date on which the Group obtains control, and continue
to be consolidated until the date that such control ceases.
Accounting policies of subsidiaries are consistent with those
adopted by the Group.

Control is defined as when QFI, or a company which it
controls, is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect
those returns through its power over the investee. Thus QFI
demonstrates control when it has all the following:

2. Summary of Significant Accounting Policies

The Board has reviewed the accounting policies set out
below and considers them to be the most appropriate to the
Group’s business activities.

•

(2.1) Basis of Preparation

The financial statements have been prepared in accordance
with International Financial Reporting Standards (“IFRS’s”) as
adopted by the European Union, and effective, or issued and
early adopted, as at the date of these statements. The financial
statements have been prepared under the historical cost
convention as modified for financial assets carried at fair value.

At the date of authorisation of these financial statements, a
number of Standards and Interpretations were in issue but
not yet effective. IFRS 16 (leases) requires adoption by the
Group in the next financial year.

The directors do not conclude that the adoption of these
standards and interpretations, or any of the amendments
made to existing standards as a result of the annual
improvements cycle, would have a material effect on these
financial statements.

The preparation of financial statements in conformity with
IFRS accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period.
Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results
ultimately may differ from those estimates.

(2.2) Basis of Consolidation

The consolidated financial statements incorporate the
financial statements of entities controlled by the Group as at
30 June 2019.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

power over the investee;

exposure, or rights, to variable returns from its
involvement with the investee; and

the ability to use its power over the investee to affect the
amount of the investor’s returns.

(2.3) Changes in Accounting Principles and Adoption

of New and Revised Standards

IFRS 15 Revenue from Contracts with Customers

IFRS 15 became applicable to QFI from 1 July 2018. The Group
did not record any revenue in the year and the adoption of IFRS
15 has not therefore had any impact on its financial statements.

IFRS 9 Financial Instruments

IFRS9 became applicable to QFI from 1 July 2018 when the
Group adopted it with retrospective effect in accordance
with the transitional provisions. IFRS 9 supersedes IAS 39
Financial Instruments: Recognition and Measurement with
new requirements for the classification and measurement
of financial assets and liabilities, impairment of financial
assets and hedge accounting. IFRS 9 introduces a new
forward-looking impairment model based on expected
credit losses to replace the incurred loss model in IAS 39.
This determines the recognition of impairment provisions as
well as interest revenue.

The Group’s principal financial assets are cash and cash
equivalents and receivables. As set out in note 15 there were
no receivables past due at the reporting date. The adoption
of IFRS9 has not therefore had a material impact on the
financial statements of the Group and no adjustments were
required as a result of the adoption of IFRS 9.

IFRS 16 Leases

(2.5) Revenue Recognition

IFRS16 became applicable to QFI on 1 July 2019. IFRS 16
supersedes IAS 17 Leases and introduces a new single lessee
accounting model which eliminates the current distinction
between operating and finance leases for lessees. IFRS 16
requires lessees to capitalise all leases on the statement of
financial position by recognising a ‘right-of-use’ asset and
a corresponding lease liability for the present value of the
obligation to make lease payments, except for certain short-
term leases and leases of low-value assets. Subsequently,
the lease assets will be amortised and the lease liabilities
will be measured at amortised cost.

QFI has elected no to apply the requirements of paragraphs
22 to 49 of IFRS16 in relation to short term leases and has
only one material operating leases which is other than short
term, that in relation to its office premises. The minimum
future lease payments on the Group’s office premises at
30 June 2019 were £151,000.

Other

A number of other new standards and amendments to
standards and interpretations have been issued but are
not yet effective and, in some cases, have not yet been
adopted by the EU. Other than IFRS 16, the Directors do
not expect that the adoption of new standards will have a
material impact on the financial statements of the Group in
future periods.

(2.4) Significant Accounting Estimates and

Assumptions

The key assumptions concerning the future and other
key sources of estimation uncertainty at the statement
of financial position date that have a significant risk of
causing a material adjustment to the carrying amounts
of assets and liabilities in the next financial period are
discussed below:

•

Intangible Assets – The Group tests intangible assets
annually for impairment or more frequently if there are
indications that they might be impaired. This requires
an estimation of the value in use of the intangible asset.
Estimating the value in use requires management to
make an estimate of the expected future cash flows
from the intangible assets and also to choose a suitable
discount rate in order to calculate the present value of
those cash flows. The carrying value of intangible assets
at 30 June 2019 is determined to be £2.9m (2018: £2.9m).
Further details are given in Note 11.

Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Group and the
revenues can be reliably measured. Revenue is recognised
at the fair value of the consideration received, excluding
discounts, rebates, and other sales taxes or duty. The
following recognition criteria must also be met before
revenue is recognised:

Sale of goods

Revenue for the sale of goods is recognised when the
significant risks and rewards of ownership of the goods have
passed to the buyer.

Interest income

Revenue is recognised as interest accrues.

(2.6) Foreign Currencies

The Group financial statements are presented in sterling,
which is the Company’s functional and presentation
currency. Each entity in the Group uses Sterling as its own
functional currency and items included in the financial
statements of each entity are measured using that functional
currency. Transactions in foreign currencies are initially
recorded using the functional currency rate ruling at the
date of the transaction. Any resulting exchange differences
are included in the statement of comprehensive income.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date
when the fair value was determined.

The following exchange rates are used in the Group’s major
currencies:

Statement of
Financial
Position
(closing rate at
30 June 2019)
1.269

Statement of
Comprehensive
Income (average
rate throughout
the financial
year)
1.293

1.116

1.133

ISO
Code
USA

EUR

USA

Europe

(2.7) Finance Costs

Finance costs include interest charges and other costs
incurred in connection with the borrowing of funds and
are expensed as incurred. Interest and costs are accounted
for on the accruals basis and are recognised through the
statement of comprehensive income in full. No interest or
borrowing costs have been capitalised.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(2.8) Business Combinations

Acquisition of subsidiaries is accounted for using the
purchase method. The results of businesses acquired are
consolidated from the effective date of acquisition, whereby
upon acquisition of a business or an associate, net assets are
stated at fair value.

On 18 April 2006, Zareba plc (renamed Quadrise Fuels
International plc) became the legal parent of Quadrise
International Limited in a share-for-share transaction. Due
to the relative size of the companies, the shareholders
of Quadrise International Limited became the majority
shareholders of Quadrise Fuels International plc.
Accordingly, the substance of the combination was that
Quadrise International Limited acquired Quadrise Fuels
International plc and was therefore accounted for as a
reverse acquisition under IFRS 3.

(2.9) Intangible Assets

Intangible assets acquired separately are measured initially
at cost. The costs of intangible assets acquired in a business
combination are measured at the fair value as at the date of
acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and
accumulated impairment loss.

Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever
there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life
are reviewed at each financial year-end. Changes in the
expected useful life or the expected pattern of consumption
of future economic benefits embodied in the assets
are accounted for by changing the amortisation period
or method, as appropriate, and treated as a change in
accounting estimate. The intangible assets of finite life
are amortised over 93 months. The amortisation expense
on intangible assets with finite lives is recognised in the
statement of comprehensive income in the expenses
category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for
impairment annually either individually or at the cash-
generating unit level. Such intangibles are not amortised.
The useful life of an intangible asset with an indefinite life
is reviewed annually to determine whether indefinite life
assessment continues to be supportable and, if not, the
change in the useful life assessment from indefinite to finite
is made on a prospective basis. Research expenditure is
recognised as an expense when it is incurred.

Development expenditure is recognised as an expense
except that costs incurred on development projects are
capitalised as long-term assets to the extent that such
expenditure is expected to generate future economic
benefits.

(2.10) Property, plant and equipment:

Property, plant and equipment is stated at cost less
accumulated depreciation. Depreciation is calculated using
a straight line method with an allowance for estimated
residual values. Rates are determined based on the
estimated useful lives of the assets as follows:

Plant and equipment

3 to 15 years

Additions to property, plant and equipment are comprised
of the cost of the contracted services, direct labour and
materials. Depreciation commences in the month the asset
is placed in service.

(2.11) Financial Instruments

Financial assets and liabilities are recognised in the Group’s
statement of financial position when the Group becomes a
party to the contractual provisions of the instrument. The
Group currently does not use derivative financial instruments
to manage or hedge financial exposures or liabilities.

(2.12) Investments and other Financial Assets

The measurement at initial recognition did not change on
adoption of IFRS 9. Subsequent to the initial recognition,
loans and receivables and held-to-maturity investments
were carried at amortised cost using the effective interest
method. Available-for-sale financial assets are subsequently
carried at fair value. Gains or losses arising from changes in
the fair value are recognised in profit or loss.

Investments in Subsidiaries

Investments in subsidiaries are carried at cost less
impairment. The Company tests investments annually for
impairment, or more frequently if there are indications that
they might be impaired. Impairment is based on the value in
use of the subsidiaries.

Equity instruments

Following the introduction of IFRS 9, the Group subsequently
measures all equity investments at fair value. Changes in the
fair value of financial assets is recognised in the statement of
profit or loss as applicable.

The fair value of investments that are actively traded in
organised financial markets is determined by reference to
quoted market bid prices at the closure of business on the
statement of financial position date. For investments where

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

there is no active market, fair value is determined using
valuation techniques. Such techniques include using recent
arm’s length market transactions, reference to the current
market value, discounted cash flow analysis and option
pricing models.

(2.13) Impairment

At each statement of financial position date, reviews
are carried out on the carrying amounts of tangible and
intangible assets to determine whether there is any
indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent, if any,
of the impairment loss. Where the asset does not generate
cash flows that are independent from the other assets,
estimates are made of the cash-generating unit to which the
asset belongs. Intangible assets with an indefinite useful life
are tested for impairment at least annually and whenever
there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value, less costs
to sell, and value in use. In assessing value in use, estimated
future cash flows are discounted to their present value using
a discount rate appropriate to the specific asset or cash-
generating unit. If the recoverable amount of an asset or
cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating
unit is reduced to its recoverable amount. Impairment
losses are recognised immediately in the statement of
comprehensive income.

(2.14) Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash and
cash equivalents comprise cash-in-hand bank balances,
call money and unrestricted time deposit balances with a
maturity of 90 days or less.

(2.15) Trade and Other Receivables and Payables

Trade and other receivables and trade and other payables are
initially recognised at fair value. Fair value is considered to be
the original invoice amount, discounted where material, for
short-term receivables and payables. Long term receivables and
payables are measured at amortised cost using the effective
interest rate method. Where receivables are denominated in a
foreign currency, retranslation is made in accordance with
the foreign currency accounting policy previously stated.

(2.16) Taxation

Current Tax

Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be

recovered from or paid to the tax authorities. The tax rates
and the tax laws used to compute the amount are those that
are enacted or substantively enacted by the statement of
financial position date.

Deferred Tax

Deferred income tax is recognised on all temporary
differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial
statements, with the following exceptions:

•

where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at
the time of the transaction, affects neither accounting
nor taxable profit or loss;

in respect of taxable temporary differences associated
with investment in subsidiaries, associates and joint
ventures, where the timing of the reversal of the
temporary differences can be controlled and it is
probable that the temporary differences will not reverse
in the foreseeable future and

deferred income tax assets are recognised only to the
extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried
forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on
an undiscounted basis at the tax rates that are expected
to apply when the related asset is realised or liability is
settled, based on tax rates and laws enacted or substantively
enacted at the statement of financial position date.

The carrying amount of deferred income tax assets is
reviewed at each statement of financial position date.
Deferred income tax assets and liabilities are offset, only if
a legal enforcement right exists to set off current tax assets
against current tax liabilities, the deferred income taxes
related to the same taxation authority and that authority
permits the Group to make a single net payment.

Income tax is charged or credited directly to equity if it
relates to items that are credited or charged to equity.
Otherwise income tax is recognised in profit or loss or other
comprehensive income as appropriate.

(2.17) Employee Retirement Benefits

The Group maintains a defined contribution pension plan for
providing employee retirement benefits. The retirement benefit
plan is generally funded by contributions from the Group to
an independent entity that operates the retirement benefit
schemes. Current service cost for the defined contribution

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

plan is equivalent to the employer’s contributions due for that
period. The Group’s contributions to the defined contribution
pension plans are charged to the statement of comprehensive
income in the year to which they relate.

(2.18) Share-based Payments

Employees (including Directors and senior executives) of
the Group receive remuneration in the form of share-based
payment transactions, whereby these individuals render
services as consideration for equity instruments (“equity-
settled transactions”). These individuals are granted share
option rights approved by the Board, which can only be
settled in shares of the respective companies that award the
equity-settled transactions. No cash settled awards have
been made or are planned.

The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over the
period in which the performance and/or service conditions
are fulfilled, ending on the date on which the relevant
individuals become fully entitled to the award (“vesting
point”). The cumulative expense recognised for equity-
settled transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has
expired and the Group’s best estimate of the number of
equity instruments and value that will ultimately vest.
The statement of comprehensive income charge for the
year represents the movement in the cumulative expense
recognised as at the beginning and end of that period.

The fair value of share-based remuneration is determined
at the date of grant and recognised as an expense in the
statement of comprehensive income on a straight-line basis
over the vesting period, taking account of the estimated
number of shares that will vest. The fair value is determined
by use of a Black Scholes model.

(2.19) Financial Risk Management, Recognition and

Accounting

The Group’s multi-national operations expose it to a variety
of financial risks that include the effects of changes in
foreign currency exchange rates, credit risks, liquidity and
interest rates. The Group has in place a risk management
programme that seeks to limit the adverse effects on the
financial performance of the Group. The Board has approved
the risk management policies applied by the Group.

These policies are implemented by central finance that
prepares regular reports to enable prompt identification
of financial risks so that appropriate actions may be taken.
The Group has a policy and procedures manual that sets out
specific guidelines to manage foreign exchange risk, interest

rate risk, credit risk and the use of financial instruments
to manage these. No forward hedging activities are
undertaken.

(2.20) Leasing Commitments

Office rental charges payable under operating leases are
charged to the Statement of Comprehensive Income as part
of administration expenses over the lease term.

3. 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 £1.1m as at 30 June 2019.
As set out in note 27, on 22 August 2019 the Group issued
the first tranche of a convertible security, for which proceeds
of £2m were received in exchange. On 9 September 2019
the Group announced a fully underwritten open offer to
raise a further gross £1.8 million, as well as a subscription
to raise further gross proceeds of £0.7m. 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.

4. 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.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

5. Operating Loss

Operating loss is stated after charging:

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:

Audit of accounts of subsidiaries

Tax compliance services

Consultants and other professional fees (including legal)

Depreciation of property, plant and equipment

Research and development costs

6. Staff Cost

Head count
Average number of employees of the Group (including executive Directors employed
by the Company) during the year was:
Management

Technical staff / support / other

Staff costs

Wages and salaries
Social security costs

Pension costs

Total

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

238

230

178

269

230

296

Year ended
30 June 2019
Number

Year ended
30 June 2018
Number

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

1,081
140

1,292

1,316
162

1,562

Included in total staff costs are the costs of the Executive Directors as employed by the Company as follows:

Director

Mike Kirk
Wages and salaries - as paid
Wages and salaries – deferred1

Pension costs

Total

Jason Miles

Wages and salaries – as paid

Pension costs

Total

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

255

(56)

213

200

218

102

207

200

216

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Director
Hemant Thanawala

Wages and salaries - as paid
Wages and salaries – deferred1

Pension costs

Total

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

431

102

115

538

458

122

660

Aggregate emoluments of the Directors of the Company (excluding social security costs) were as follows:

Salaries and fees – as paid
Salaries and fees – deferred1

Share option expense

Pension costs

Total

594

(75)

122

667

With effect from 1 September 2017 to 31 December 2018, Mike Kirk agreed to reduce his cash salary by 50% and the
Non-executive Directors each agreed to reduce their fees to £24,000 per annum. The deferred balance was repaid in
March 2019. An uplift of 25% due on the deferred balance is included within the 2018 and 2019 totals and remains a
potential future payment.

Non-executive Directors fees for the year amounted to £115k (2018: £80k), this is net of the release of £18k of deferred from
the prior year (2018: deferment of £26k).

The highest paid Director’s remuneration totalled £218k (2018: £216k), represented by all aggregate emoluments.

Refer to the Report of Directors’ Remuneration (on page 11) for further details, the Key Management Personnel referred to
therein are the Directors of the Company.

Further details regarding Non-executive Directors’ remuneration are disclosed in note 23 – Related Party Transactions.

7. Losses Attributable to Quadrise Fuels International plc

As provided by s.408 of the Companies Act 2006, no statement of comprehensive income is presented in respect of Quadrise
Fuels International plc.

8. Taxation

UK corporation tax credit
Total

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

(184)
(184)

(294)
(294)

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

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

Tax Reconciliation

Loss on continuing operations before taxation
Loss on continuing operations before taxation multiplied by the
UK corporation tax rate of 19% (2018: 19%)

Effects of:

Non-deductible expenditure

R&D tax credit

Tax losses carried forward
Total taxation credit on loss from continuing operations

Year ended
30 June 2019
£’000s

Year ended
30 June 2018
£’000s

(2,983)

(3,262)

(567)

(184)

528
(184)

(620)

(294)

569
(294)

The Group has tax losses arising in the UK of approximately £51.0m (2018: £49.5m) that are available, under current
legislation, to be carried forward against future profits. £23.5m (2018: £21.5m) of the tax losses carried forward represent
trading losses within Quadrise Fuels International plc, £25.8m (2018: £25.8m) represent non-trade deficits arising on
intangible assets within Quadrise International Limited, £0.9m (2018: £1.3m) represent pre-trading losses incurred by
subsidiaries, £0.8m (2018: £0.8m) represent management expenses incurred by Quadrise International Limited, and £0.1m
(2018: £0.1m) 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 £8.7m (2018: £8.4m) has not been recognised as a result of existing uncertainties in relation to its realisation.

9. Loss Per Share

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

Loss for the year (£’000s)

Weighted average number of shares:

Basic

Diluted

Loss per share:

Basic

Diluted

Year ended
30 June 2019

Year ended
30 June 2018

(2,983)

(3,262)

888,728,557

862,204,976

(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.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

10. Property, plant and equipment

Consolidated

Cost

Opening balance – 1 July 2018

Additions

Disposals

Closing balance – 30 June 2019

Depreciation

Opening balance – 1 July 2018

Depreciation charge for the year

Disposals

Closing balance – 30 June 2019

Net book value at 30 June 2019

Company

Cost

Opening balance – 1 July 2018

Additions

Closing balance – 30 June 2019

Depreciation

Opening balance – 1 July 2018

Depreciation charge for the year

Closing balance – 30 June 2019

Leasehold
Improvements
£’000s

Computer
Equipment
£’000s

Software
£’000s

Office
Equipment
£’000s

Plant and
machinery
£’000s

Total
£’000s

166

181

(109)

(57)

(166)

(63)

(15)

(78)

(36)

(5)

(41)

(16)

1,428

1,744

(47)

1,390

1,721

(559)

(153)

(690)

(783)

(230)

(991)

700

730

Leasehold
Improvements
£’000s

Computer
Equipment
£’000s

Software
£’000s

Office
Equipment
£’000s

Plant and
machinery
£’000s

107

(90)

(17)

(107)

(51)

(10)

(61)

(36)

(5)

(41)

(16)

Total
£’000s

235

(193)

(32)

(225)

Net book value at 30 June 2019

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Consolidated

Cost

Opening balance – 1 July 2017

Additions

Closing balance – 30 June 2018

Depreciation

Opening balance – 1 July 2017

Depreciation charge for the year

Closing balance – 30 June 2018

Net book value at 30 June 2018

Company

Cost

Opening balance – 1 July 2017

Additions

Closing balance – 30 June 2018

Depreciation

Opening balance – 1 July 2017

Depreciation charge for the year

Closing balance – 30 June 2018

Net book value at 30 June 2018

Leasehold
Improvements
£’000s

Computer
Equipment
£’000s

Software
£’000s

Office
Equipment
£’000s

Plant and
machinery
£’000s

107

166

(67)

(42)

(109)

(47)

(16)

(63)

(31)

(5)

(36)

Total
£’000s

1,609

135

1,744

(553)

(230)

(783)

(15)

(1)

(16)

1,352

1,428

(393)

(166)

(559)

869

961

Leasehold
Improvements
£’000s

Computer
Equipment
£’000s

Software
£’000s

Office
Equipment
£’000s

Plant and
machinery
£’000s

107

(68)

(22)

(90)

(40)

(11)

(51)

(31)

(5)

(36)

(15)

(1)

(16)

Total
£’000s

235

(154)

(39)

(193)

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11. Intangible Assets
Consolidated

Cost

QCC royalty
payments
£’000s

MSAR® trade name
£’000s

Technology and
know-how
£’000s

Total
£’000s

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

Net book value as at 30 June 2019

Cost

(7,686)

(176)

2,924

(25,901)

(33,763)

2,924

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

Net book value as at 30 June 2018

(7,686)

(176)

2,924

(25,901)

(33,763)

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.

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® 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® 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.

12. 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.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

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.

13. Investments in Subsidiaries

Direct Investment

Opening balance

Long term loans advanced

Closing balance

Company
30 June 2019
£’000s

Company
30 June 2018
£’000s

29,783

2,658

32,441

26,419

3,364

29,783

The Company tests investments annually for impairment, or more frequently if there are indications that they might be
impaired. Impairment is based on the value in use of the subsidiaries. The Directors performed a review of the value in use
of the investments at 30 June 2019 by assessing the probability weighted value in use of the financial assets and liabilities
in the underlying subsidiaries. Based on this the Directors concluded that no impairment is necessary for the year ended
30 June 2019. Holdings in subsidiaries are detailed in note 25.

14. Cash and Cash Equivalents

Cash at bank

Total

15. Trade and Other Receivables

Trade receivables

Other receivables

Other taxes

Total

Consolidated
30 June 2019
£’000s
1,060

1,060

Consolidated
30 June 2018
£’000s
2,229

2,229

Company
30 June 2019
£’000s
460

460

Company
30 June 2018
£’000s
1,709

1,709

Consolidated
30 June 2019
£’000s
7

Consolidated
30 June 2018
£’000s
11

Company
30 June 2019
£’000s
-

Company
30 June 2018
£’000s
-

169

188

121

113

Group receivables of £nil (2018: £nil) and Company receivables of £nil (2018: nil) were past due at year-end.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

16. Trade and Other Payables

Trade payables

Other taxes

Accruals

Total

Consolidated
30 June 2019
£’000s
90

Consolidated
30 June 2018
£’000s
106

Company
30 June 2019
£’000s
30

Company
30 June 2018
£’000s
55

147

288

250

400

103

169

208

287

There are no material differences between the fair value of trade and other payables and their carrying values at year-end.

Trade payables as at 30 June 2019 amount to 24 days (2018: 23 days) of purchases made in the year. All trade payables
balances are less than 30 days old.

Amounts due to related parties at year end amounted to £nil (2018:£nil).

17. 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:

Outstanding as at 1 July

Granted during the year

Repurchased by grantor during the year

Expired during the year

Exercised during the year

Options outstanding as at 30 June

Exercisable as at 30 June

Number
30 June 2019
22,500,000

19,150,000

(2,250,000)

39,400,000

23,149,719

WAEP (pence)
30 June 2019
26.90

Number
30 June 2018
24,000,000

WAEP (pence)
30 June 2018
27.41

7.29

17.35

17.91

25.39

(1,500,000)

22,500,000

22,000,000

35.16

26.90

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

Stock price:

Exercise Price

Interest Rate

Volatility

Expected term

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

2019
6.29p

7.29p

0.75%

113.4%

4 years

2018
-

18. 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:

Outstanding as at 1 July

Granted during the year

Exercised during the year

Warrants outstanding as at 30 June

Exercisable as at 30 June

Number
30 June 2019

WAEP (pence)
30 June 2019

Number
30 June 2018

WAEP (pence)
30 June 2018

5,000,000

3.16

The weighted average remaining contractual life of the 5 million warrants outstanding at the statement of financial position
date is 1.66 years. The weighted average share price during the year was 3.15p (2018: 5.55p) per share.

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 warrants are equity settled warrants, and fair value is measured at the grant date of the option. The warrants vest
immediately on grant date The Company issued 5 million warrants during the year (2018: nil) with a weighted average
subscription price of 3.16p and the weighted average fair value of 2.1p.

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

Stock price:

Exercise Price

Interest Rate

Volatility

Expected term (years)

19. Share Capital

2019
3.38p

3.16p

0.75%

129%

1.75

2018
-

The company has one class of ordinary share capital which carries no rights to fixed income, any preferences or restrictions.

Issued and fully paid:
922,711,895 (2018: 862,204,976) Ordinary shares of £0.01 each

20. Other Reserves

Nature and purpose of other reserves

Reverse acquisition reserve

2019
£

2018
£

9,227,119

8,622,050

The reverse acquisition reserve arose on the reverse acquisition of Zareba plc (now Quadrise Fuels International plc) by
Quadrise International Limited on 18 April 2006 as accounted for under IFRS 3.

Share option reserve

The share option reserve is used to record the cumulative fair value of share options granted by the Company net of lapsed
and exercised options.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Warrant reserve

The warrant reserve is used to record the cumulative fair value of warrants granted by the Company net of lapsed and
exercised warrants.

21. Pension Commitments

For direct employees of Quadrise Fuels International plc, the Company contributes between 7% and 20% of salary to a
defined contribution pension scheme. Pension cost to the Company for the year amounted to £70k (2018: £84k).

22. Derivatives and Other Financial Instruments

The Group’s principal financial instruments comprise cash balances, accounts payable and accounts receivable arising in the
normal course of its operations.

The financial instruments of the Group and the Company at year-end are:

Consolidated
30 June 2019
£’000s

Consolidated
30 June 2018
£’000s

Company
30 June 2019
£’000s

Company
30 June 2018
£’000s

Financial assets
Loans and receivables - Cash and cash equivalents
Loans and receivables - Trade and other receivables

1,060
169

2,229
188

Financial liabilities
Other financial liabilities - Trade and other payables

288

400

All receivables and payables are current and are due within 30 days.

Foreign currency exchange risk

460
121

169

1,709
113

287

The Group does not generally undertake foreign currency hedging. The majority of the Group’s transactions are denominated
in Sterling and it uses this as its reporting currency. Exposure to any foreign exchange movements exists primarily in the Euro
currency.

The net monetary balances in other currencies at 30 June 2019 were assets of US$43k (2018: US$48k) and €28k (2018: €99k).

A 10% strengthening of Sterling against the Euro at the statement of financial position date would have increased loss for
the year by £4k (2018: £9k) whilst a 10% weakening of Sterling against the Euro would have reduced loss for the year by £4k
(2018: £10k). This analysis assumes that all other variables remain constant.

A 10% strengthening of Sterling against the US$ at the statement of financial position date would have increased loss for
the year by £3k (2018: £4k) whilst a 10% weakening of Sterling against the US$ would have reduced loss for the year by £3k
(2018: £5k). This analysis assumes that all other variables remain constant.

Interest rate risk

The Group has floating rate financial assets in the form of deposit accounts with major banking institutions; however, it is not
currently subjected to any other interest rate risk.

Based on cash balances at the statement of financial position date, a rise in interest rates of 1% will reduce loss for the
year by approximately £9k (2018: £21k) per annum. A decrease in interest rates of 1% will increase loss for the year by
approximately £3k (2018: £6k) per annum.

Liquidity risk

The Group regularly reviews its major funding positions to ensure that it has adequate financial resources in meeting its
financial obligations. The Group takes liquidity risk into consideration when deciding its sources of funds.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Credit risk

The Group had receivables of £169k at 30 June 2019 (2018: £188k), of which £nil (2018: £nil) was receivable from related
parties. Receivables of £169k represent the maximum credit risk to which the Group is exposed.

Capital risk management

The Group defines capital as the total equity of the Group. The Group’s objectives when managing capital are to safeguard
the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt.

Fair value of financial assets and liabilities

There are no material differences between the fair value of the Group’s financial assets and liabilities and their carrying
values in the financial information.

Borrowings Facilities

The Group had no external borrowing facilities as at 30 June 2019.

23. 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.

24. Ultimate Parent Undertaking and Controlling Party

The directors have determined that there is no Controlling Party as no individual shareholder holds a controlling interest in
the Company.

25. Subsidiaries

The financial statements include the financial statements of Quadrise Fuels International plc and the following subsidiaries:

Name
Quadrise International Limited

Quadrise Limited

Quadrise KSA Limited

Quadrise Marine Limited

Percentage interest
held and voting
rights
100%

100%

Class of
share held
Ordinary

Ordinary

Quadrise Fuels International plc and its subsidiaries are involved in the production and development of MSAR® emulsion fuel
(along with supplying the associated technology to third parties) as a low cost substitute for conventional heavy fuel oil for
use in power generation plants and industrial and marine diesel engines.

The registered office for all subsidiaries is Gillingham House, 38-44 Gillingham Street, London, SW1V 1HU.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONNOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

26. Commitments and Contingencies

The Group and the Company have entered into commercial leases for the rental of operational and office premises. The
leases earliest expiry dates are 28 February 2020 and 28 September 2020, and there are no restrictions placed on the Group
or Company by entering into these leases. The minimum future lease payments for non-cancellable leases are as follows:

Operational and office premises

One year

Two to five years

Consolidated
30 June 2019
£’000s

Consolidated
30 June 2018
£’000s

Company
30 June 2019
£’000s

Company
30 June 2018
£’000s

136

121

Additionally, the Group and the Company have no capital commitments or contingent liabilities as at the statement of
financial position date.

27. 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 £4.0 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 £4.3 million, convertible into Ordinary Shares.

An initial tranche of Convertible Securities with a nominal value of £2.15 million was subscribed for by the Investor for
£2.0 million 30 August 2019. A second tranche of Convertible Securities, with a nominal value of up to £2.15 million is
conditionally available to the Company with a subscription price of up to £2.0 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 £140,000 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 £1.8 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 £716,800 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.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

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.

28. Copies of the Annual Report

Copies of the annual report 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.

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATIONCORPORATE
INFORMATION

Registered Office

Gillingham House
38-44 Gillingham Street
London
SW1V 1HU

Company Secretary

Ian Farrelly
MSP Corporate Services Ltd
27-28 Eastcastle Street
London
W1W 8DH

Nominated Adviser

Cenkos Securities plc
6.7.8 Tokenhouse Yard
London
EC2R 6AS

Broker

Peel Hunt
Moor House
120 London Wall
London
EC2Y 5ET

Broker

Shore Capital
Cassini House,
57-58 St. James’s Street
London
SW1A 1LD

Solicitors

BDB Pitmans LLP
50 Broadway
London
SW1H 0BL

Registrars

Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR

Auditors

Crowe U.K. LLP
St Bride’s House
10 Salisbury Square
London EC4Y 8EH

Bankers

Coutts & Co
440 Strand
London
WC2R 0QS

QUADRISE FUELS INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS 2019

Perivan 256345

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Gillingham House | 38-44 Gillingham Street | London SW1V 1HU
T +44 (0) 20 7031 7321 | F +44(0) 20 7031 7339
www.quadrisefuels.com