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ANNUAL
REPORT &
ACCOUNTS
2021
CLEANER FUEL
CLEANER PLANET
Eastcastle House | 27-28 Eastcastle Street | London W1W 8DH
T +44 (0) 20 7031 7321
www.quadrisefuels.com
QUADRISE IS THE INNOVATOR AND GLOBAL SUPPLIER OF A
DISRUPTIVE TECHNOLOGY THAT ENABLES THE PRODUCTION
OF MSAR®* AND BIOMSAR™, SYNTHETIC HEAVY FUEL OIL AND
BIOFUEL RESPECTIVELY, WHICH HAVE SIGNIFICANT ECONOMIC AND
ENVIRONMENTAL BENEFITS.
MSAR® IS THE REGISTERED TRADEMARK FOR MULTIPHASE SUPERFINE ATOMISED RESIDUE
CONTENTS
Highlights
1
MSAR® and bioMSAR™ technology
2
Chairman’s Statement
6
Chief Executive’s Statement
8
Strategic Report
11
Directors’ Section 172 Statement
15
Directors
16
Directors’ Report
18
Statement of Directors’ Responsibilities
21
Report on Directors’ Remuneration
22
Corporate Governance Statement
23
33
Independent Auditors’ Report
Consolidated Statement of Comprehensive Income 42
43
Consolidated Statement of Financial Position
44
Consolidated Statement of Changes in Equity
45
Consolidated Statement of Cash Flows
46
Company Statement of Financial Position
47
Company Statement of Changes in Equity
48
Company Statement of Cash Flows
49
Notes to the Financial Statements
75
Corporate Information
CORPORATE
INFORMATION
Registered Office
Eastcastle House
27-28 Eastcastle Street
London
W1W 8DH
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
Solicitor
BDB Pitmans LLP
One Bartholomew Close
London
EC1A 7BL
Registrar
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Banker
Coutts & Co
440 Strand
London
WC2R 0QS
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Perivan 262112
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
75
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HIGHLIGHTS
2020-21 has been a year of substantial progress for Quadrise, despite the many challenges
faced during the pandemic. Rapid progress was made in developing bioMSAR™ from concept
to a proven fuel which delivers >20% reductions in CO2 emissions compared to HFO. Trials
in Morocco are now poised to commence following a successful on-site pilot trial, we are
now finalising plans for the next stage of our Utah project following positive test results, and
are advancing plans for the testing of bioMSAR™ along with MSAR on board MSC container
vessels. This momentum, alongside the funds we now have in place, is expected to take the
Company through to sustainable positive cashflows in Q1 2023.
1
2
3
bioMSAR™ launch
In less than 12 months Quadrise
have developed and tested
bioMSAR™ from a concept to a
proven fuel which offers >20%
reductions in CO2, reductions in
NOx and improved engine efficiency
to reduce fuel use.
Progress with key projects
Quadrise plans to complete the
trial at the client site in Morocco in
Q4 2020, and is finalising plans for
the next stage of the Utah project
with Greenfield Energy. Our project
with MSC is advancing with LONO
trials planned for H1 2022.
Funds in place to reach
commercialisation
A successful placing and open
offer raised £6.5m (net), ensuring
that following successful trials
and entry into commercial supply
agreements, Quadrise has funds
in place to reach sustainable
commercial revenues, forecast to
commence in Q1 2023.
GREENFIELD ENERGY LLC
Utah USA 5-10kbpd oil per site
Refinery/
Terminal (tba)
MSC CONTAINERSHIPS
Global 6kbpd oil per 10 vessels
E. EUROPE/FS U
M. EAST
INTERNATIONAL CHEMICALS
& MINING GROUP
Morocco 4-5kbpd oil
bioMSAR fuelled vessel
MSAR fuelled vessel
Other Global Marine Companies
National Oil Companies & Utilities
KSA & Americas
Industrial plant
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
1
PROVEN EMULSION FUEL TECHNOLOGY
Reliable emulsion fuel technology
Quadrise’s technology draws on over 30 years of experience in the production of oil-in-water emulsion-based fuels. MSAR®
and bioMSAR™ are direct substitutes for fuel oil (also called Heavy Fuel Oil or “HFO”) and biofuel respectively, and Quadrise’s
technology has established a strong reputation with market leading companies.
The global fuel oil market currently is around 6 million barrels per day (340 million tons per annum), with marine bunker fuel
oil comprising approximately 50% of the total.
Quadrise’s technology is a potential game changer for oil refiners and heavy oil producers. It frees up valuable distillates
traditionally used for fuel viscosity control, increasing profitability. This is achieved rapidly and without incurring significant
expenditure or costs – which differentiates Quadrise’s technology from alternative upgrading solutions.
HFO vs MSAR® & bioMSAR™
Crude oil production and refining often result in heavy residual oils that require expensive refined distillates to reduce
viscosity and meet pipeline and HFO specifications. HFO is sold at a discount to crude oil, resulting in a loss for the producer.
Low-cost MSAR® technology enables additives and water to replace these distillates, which can then be sold at a premium.
MSAR® technology can also be used to produce bioMSAR™, that incorporates renewable fuel-grade glycerine to provide a
lower-cost biofuel solution offering over 20% lower CO2 emissions today.
Enhancing 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.
In a refinery producing HFO, typically just 50-60% of the crude processed is sold as premium value transport oils, whereas in
a refinery producing MSAR or bioMSAR™, this can increase to up to 70%.
Quadrise’s technology is modular and can be integrated for production in under 12 months, with any tie-ins incorporated
into scheduled maintenance shutdowns.
Both MSAR and bioMSAR™ fuels are:
•
Extremely stable, with storage and handling possible at ambient conditions.
• Compatible with MSAR and bioMSAR™ fuels from other refineries and a variety of hydrocarbons.
• Transported to end-users using existing fuel infrastructure.
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QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
SIMPLE PRODUCTION
Quadrise’s technology is applicable to a wide variety of heavy oils and refinery
residue streams:
1 Oil residues are taken from the refinery or heavy oil
production and cooled to under 200 C to achieve the
required viscosity (typically <500 centistokes).
2 Water, which can be derived from several utility or
waste-water sources, is added to the residue.
3 Special additives are included in the water phase
to stabilise the emulsion for long term storage and
transport, and to promote complete combustion.
4 The mixture is processed in a proprietary
emulsion module to produce a highly stable
oil-in-water emulsion with enhanced
fuel properties.
5 Glycerine can be added to produce bioMSAR™
as an alternative to MSAR® for further CO2
savings. bioMSAR™ and MSAR® can be made
interchangeably and are compatible with
one another.
(cid:22)(cid:29)(cid:21)(cid:20)(cid:23)(cid:26)(cid:25)(cid:29)(cid:30)(cid:19)(cid:26)(cid:25)
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MULTIPLE APPLICATIONS
MSAR® and bioMSAR™ are applicable to a wide variety of energy applications:
Marine: MSAR® is operationally and commercially proven as a marine bunker fuel in both 2- and 4-stroke
engines. It can be supplied directly from candidate refineries and delivered to marine vessels using
conventional infrastructure designed for HFO.
Power: MSAR® is commercially and operationally proven in both steam boilers and diesel engines. It
can be supplied directly from candidate refineries and delivered to a power plant using conventional
infrastructure designed for HFO.
Industrial: MSAR® and bioMSAR™ can be used in industrial applications for the generation of heat
and power.
Upstream: MSAR® and bioMSAR™ can be used to generate energy for the extraction of crude oil from oil
wells and oil sands deposits, with on-site MSAR and bioMSAR™ manufacture for commercial supply.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
3
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION bioMSAR™
Our exciting new bioMSAR™ fuel combines MSAR® technology with renewable glycerine to
produce a low carbon, environmentally friendly alternative to HFO and biofuels.
As with MSAR®, Quadrise’s proven proprietary technology is used to mix heavy residual oils and glycerine with
small amounts of specialist chemicals and water (patent pending) to produce bioMSAR™, a synthetic biofuel
with lower emissions, including over 20% less CO2.
bioMSAR™ is a blend of heavy residual oils and glycerine with small amounts of specialist chemicals and water (patent
pending) that are mixed using our proprietary MSAR® technology. bioMSAR™ is an oil-in-water emulsified synthetic biofuel,
with lower emissions than conventional fuels. The amount of glycerine added can be tailored to future CO2 reduction
requirements. Adding 40% renewable glycerine to make bioMSAR™ results in over 20% fewer carbon dioxide emissions.
WHY GLYCERINE?
Glycerine is a bio-degradable, non-toxic liquid that is colourless, odourless, water soluble, non-flammable and non-volatile.
Glycerine burns almost pollutant-free and is virtually CO2-neutral, it also has excellent lubricity. Glycerine is generally
obtained from plant and animal sources. It is a renewable raw material that is a waste product in the production of bio-
diesel, fatty acids and alcohols.
BENEFITS
•
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•
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•
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Low CO2 emissions – bioMSAR™ offers a 20% reduction in CO2 emissions compared to HFO. This is comparable with LNG
use, but without the risk of methane slip, which is 21 times worse than CO2 as a greenhouse gas.
Low cost implementation – an LNG conversion requires new, highly expensive cryogenic storage and liquefaction
systems. In comparison, bioMSAR™ can be implemented cheaply using existing HFO infrastructure.
Minimal risk – bioMSAR™ is a stable water-based synthetic biofuel containing glycerine, which is non-volatile and
biodegradable.
Uses existing technology – MSAR® and bioMSAR™ are interchangeable and fully compatible with each other.
Increased engine efficiency compared to conventional fuels.
Low emissions – bioMSAR™ is a lower-CO2 fuel solution, but also offers reductions in emissions of SO2, NOx and
particulates (including black soot).
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QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
ESG
ENVIRONMENTAL
MSAR® and bioMSAR™ fuel solve key environmental problems including CO2, Black Soot,
NOx & SOx.
Our fuels offer enhanced combustion performance when compared to conventional fuel oil due to their inherent physical
characteristics; pre-atomised micro fuel droplets suspended in water.
This results in less ash and black carbon particulate matter (PM) and nitrogen oxide (NOx) reductions of typically 30%, which
are significant reductions for improving local air quality and lowering the global warming potential of fuel oil use. In addition,
bioMSAR™ offers reductions of over 20% in CO2 emissions due to its incorporation of renewable glycerine and improved
engine efficiency.
Our fuels are fully compatible with Exhaust Gas Cleaning Systems, EGCS or “Scrubbers”, which can be used in marine
and power applications to reduce emissions of sulphur oxides (SOx), NOx and PM. The reduced fuel cost from adopting
Quadrise’s technology can also be used to subsidise what may otherwise be unaffordable abatement options.
SOCIAL
The world needs better energy solutions to ensure sustainable, responsible growth. We
are committed to providing safer, cleaner and more affordable energy that creates value.
Quadrise:
•
•
•
•
•
•
•
Assists our partners & clients to promote sustainable development through the responsible use of MSAR® fuel
and technology.
Enables clients to enhance their engagement with local communities and stakeholders by reducing their social impacts
by following stringent CSR and HSEQ procedures. Secure local support wherever we directly interact with the community.
Maintains high ethical standards in carrying out business activities in accordance with the Group Compliance Policy,
Practices & Procedures (which comply with the Bribery Act 2010).
Put safety at the forefront of our corporate culture and practices, regularly reviewing our Health, Safety and Environment
(HSE) policies.
Provide equal employment opportunities, and respecting the rights of employees, consultants, partners and counter
parties, treating them fairly and without discrimination.
Provide opportunities for training and development of our staff such that they can fully exploit their potential.
Develop a culture of continuous improvement and encourage openness, fairness and trust ensuring stakeholders are
satisfied with the results and the way the Group operates.
GOVERNANCE
The highest standards of corporate governance have always been a strength of Quadrise and
we believe that this places us not only in the very top tier of AIM companies, but amongst the
best in the FTSE as well:
•
•
•
•
We have always adopted the highest disclosure standards of the UK Corporate Governance Code;
Our board of directors contains experienced non-exec directors and we follow stringent board policies and procedures;
We work to exceptional HSEQ standards, with strong risk management processes in place; and
We are supported by a first class team of professional advisors.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
5
CHAIRMAN’S
STATEMENT
I am immensely proud of the progress that Quadrise has
made during the 2021 financial year. Despite the significant
challenges posed by the COVID-19 pandemic, the Company
has made substantial progress across our project portfolio,
accelerated the development of low-carbon bioMSAR™
and secured the funding to take the Company through
to commercial sustainability. These developments have
only been possible because of the dedication of the entire
Quadrise team and the support of our loyal shareholders.
Our new low-carbon bioMSAR™ fuel incorporates renewable
glycerine to reduce CO2 emissions, whilst maintaining
MSAR®’s lower NOx and lower particulate emissions. Initial
development work on bioMSAR™ commenced in Spring
2020, with the fuel being formally launched in December
2020. This rapid progress was instrumental in our ability
to finalise the Joint Development Agreement with MSC in
January 2021 and was followed by the successful placing
and open offer in March 2021. This raised gross proceeds
of £7.0 million, was significantly oversubscribed and
included two new major institutional investors. The funds
raised ensure that, pending the positive conclusion of the
current trial programmes and the agreement of appropriate
commercial agreements, Quadrise now has the resources in
place to reach forecast sustainable commercial revenues in
Q1 2023.
Quadrise has always had strong Environmental, Social and
Governance credentials, and we have worked hard during
the year to promote these. Emphasis has been placed on
Quadrise’s environmental credentials, in particular, via the
development and launch of bioMSAR™. This stood Quadrise
in good stead as the global response to delivering Net Zero
in CO2 emissions accelerated at a pace that took most by
surprise. As a result, bioMSAR™ caught the imagination of
our current and prospective customers, as evidenced by
MSC’s decision to shift the basis for the forthcoming LONO
trials and advance the use of bioMSAR™ alongside MSAR®.
The work with MSC in the marine sector sits alongside our
other active projects in the industrial sector in Morocco and
the upstream sector in Utah with Greenfield. All of these
projects have progressed positively during the period,
though not always at the pace we would have preferred.
This has required the RDI (Research, Development and
Innovation) team at our QRF research facility, to provide
both testing and operational support. In addition, this team
has been key to the continued development and testing of
bioMSAR™ and in producing the fuel for testing at Aquafuel
Research Ltd (‘Aquafuel’) and the VTT facility in Finland.
Quadrise’s established network of in-country partners
played a crucial role during the financial year, as they
maintained direct contact with our customers when travel
restrictions meant this was not possible for Quadrise. But
as restrictions ease, the Company looks forward to re-
establishing direct contact with our customers. As Quadrise
progresses the delivery of its key projects through 2022
and beyond, it will be building on strong foundations.
The focus will be on the successful delivery of our current
active projects, though there will also be opportunities
to advance other projects that are currently at an earlier
stage of development. The year ahead promises to be
an exciting one for Quadrise as it progresses its trial
programmes, further develops its sustainable and net-zero
fuel solutions, and transitions to commercial revenues and
positive cashflows.
The small, tightly knit team at Quadrise will be fundamental
to delivering this and I know that they will rise to the
challenge. The forthcoming executive appointment of a
new COO to replace Mark Whittle completes the Company’s
senior executive team led by Jason Miles, CEO, with the
new COO, working alongside David Scott, Head of Finance,
Bernard Johnston, Head of Operations, and Patrick
Brunelle, Head of RDI.
With the Company now well positioned to deliver on the
next phase of its development, it is, therefore, appropriate
for me to hand over to a new Non-Executive Chair to lead
the next stage of development of Quadrise following a
period of transition to ensure a seamless hand-over of
executive duties. A search for a new Independent Non-
Executive Chair will start imminently and I will formally
leave the business on 26 November 2021 following the
Company’s Annual General Meeting. Laurie Mutch will take
over as Interim Chairman from that time until a until a new
Chair is in place. I would like to thank all of my colleagues at
QFI, our excellent advisers and our loyal shareholders with
whom it has been a pleasure to work with over the last 6
years or so.
Results for the Year
The consolidated after-tax loss for the year to 30 June
2021 was £4.3 million (2020: £4.8 million), with the loss per
share for the year reducing to 0.36p from 0.49p in 2020.
Production and development costs of £1.4 million (2020:
£1.4 million) comprise the costs of the Group’s operational
staff and consultants, and QRF running costs (equipment,
consumables etc). These costs are consistent with the
previous year, as they largely relate to fixed costs.
6
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
Administration expenses of £1.5 million (2020: £1.8 million),
comprise the Group’s corporate staff and directors’ costs,
professional advisor fees, PR/IR costs and head office costs.
These have decreased as a result of reduced professional
fees, no directors’ cash bonuses being awarded and lower
office costs due to the move from our previous office in
February 2021.
The loss for the year includes £1.6 million of non-cash
expenses (2020: £1.6 million), relating to fair value
adjustment charges to the Convertible Securities of £1.3
million (2020: £1.1 million) (see note 17) and share option
charges of £0.3 million (2020: £0.5 million) arising due to the
award of share options, which are expensed over the vesting
period (see note 18).
At 30 June 2021, the Group had total assets of £10.7 million
(2020: £6.3 million). The most significant balances were
cash of £7.0 million (2020 £2.4 million), intangible assets
of £2.9 million (2020: £2.9 million), and property, plant and
equipment of £0.5 million (2020: £0.6 million). The Group has
tax losses arising in the UK of approximately £58.4 million
(2019: £53.7 million) that are available to be carried forward
against future profits.
The Group raised £6.5 million (net of costs) in March 2021 via
a successful cash box placing and open offer. A further £0.5
million (net) was raised via the issuance of the second and
final tranche of Convertible Securities to Bergen. £2.6 million
was utilised in operating activities during the year (2020: £3.1
million).
Mike Kirk
Chairman
1 October 2021
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
7
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CHIEF EXECUTIVE’S
STATEMENT
Our global opportunity
During the past year, Quadrise has positioned itself to take
advantage of a rapidly changing global energy landscape.
This increasingly prioritises sustainable and economic
pathways to a Net Zero future, presenting significant
opportunities for Quadrise. Our 2020-21 Strategic Review
resulted in the decision to accelerate the commercialisation
of our bioMSAR™ technology, and in parallel develop a
Net Zero fuel solution to offer to our global clients. We
are well on our way towards commercialising bioMSAR™,
which is a remarkable achievement for the Quadrise team
during challenging times, and work has commenced on the
development of a Net Zero carbon fuel. According to the
Intergovernmental Panel for Climate Change (IPCC), the
world has until 2030 to cut human-caused CO2 emissions by
half, in addition to other greenhouse gas (GHG) emissions
such as methane, to have a 50% chance of avoiding the
worst effects of climate change by 2050. We believe that
Quadrise’s unique MSAR® and bioMSAR™ technology can
play a significant role in helping the world achieve this goal.
bioMSAR™ and our transition to Net Zero
Our innovative low carbon bioMSAR™ fuel takes advantage
of our proven emulsion fuel technology platform and
utilises renewable glycerine, currently a by-product of
biodiesel manufacture, as a clean fuel component. The
glycerine content of bioMSAR™ can be adjusted to meet
the client’s required CO2 savings, providing a cost-effective
transition fuel solution to meet increasingly stringent
decarbonisation requirements. An international patent
application for bioMSAR™ has been submitted jointly with
Nouryon and complements our existing MSAR® IP.
Following successful laboratory and pilot testing of
bioMSAR™ at QRF, an engine testing programme was
initiated at Aquafuel to demonstrate potential application
in our Cummins diesel generator. The NOx emissions
savings and higher engine efficiency results surpassed our
expectations. This successful proof of concept test was
followed by a larger trial using 5 tons of bioMSAR™ at the
VTT facility in Finland on a 4-stroke medium speed Wärtsilä
engine of the type that is typically used in diesel power
plants, cruise ships and ferries. Results on the Wärtsilä
engine demonstrated a 26% average reduction in equivalent
CO2 emissions, which was due to the renewable energy
content and the higher engine efficiency. Further engine
optimisation tests are planned for bioMSAR™ at Aquafuel,
with plans underway to accelerate testing for bioMSAR™ use
in a range of sectors that are demanding “drop in” transition
fuels to advance decarbonisation.
During the year we joined the UK Chamber of Shipping
and are delighted to be a part of their “Making Waves:
The Future of Shipping” programme, to chart the role
of Quadrise in driving efforts across the sector to tackle
climate change and reduce shipping’s footprint on the
environment with bioMSAR™. The launch ahead of COP26
at London International Shipping Week in September 2021
was excellent timing. The marine sector has reduced CO2
emissions by 30% from 2008 to 2020, but still contributes
940 million tons or 2.5% of global emissions of CO2. Based
on recent results from VTT testing, bioMSAR™ could reduce
emissions of CO2 by over 25% from a large vessel consuming
25,000 tons of HFO annually, equating to 23,000 tons of CO2,
which is equivalent to the annual emissions from 11,000
average petrol cars.
We strongly believe that both MSAR® and bioMSAR™
will have an important role to play in the transition to a
sustainable future for energy. However, we also recognise
that Net Zero fuel solutions will be mandatory in the
future, potentially as early as 2030, and we have an RDI
strategy in place to take advantage of this opportunity
using our innovative and adaptable technology. Our RDI
team are now in the early stages of investigating the use of
other renewable fuels such as lignin (a renewable, wood-
derived fuel source) to produce a fuel with a Net-Zero
carbon contribution. We are also working with a team led
by Professor Pat Harvey at the University of Greenwich to
explore the production of glycerine and other products from
algae. Algae could provide new supply opportunities for
renewable fuels, as well as potentially further reducing the
CO2 emissions of bioMSAR™ to net-zero in future.
Key projects
Currently, our key projects are in the marine, upstream and
industrial sectors, with further projects in development
involving significant downstream and powerplant
applications. Our short-term focus is on demonstrating
MSAR® and bioMSAR™ technology at commercial scale and
progressing each of the opportunities into commercial
supply agreements.
•
MSC – In January 2021 we were delighted to announce
the signature of a Joint Development Agreement with
MSC Shipmanagement to carry out LONO (‘Letter Of
No Objection’) fuel trials on board their commercial
container vessels. We are now working to finalise the
8
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
•
•
preparatory work to enable these trials. This work
has taken longer than anticipated, as the availability
of engine manufacturer and Class Society resources
has been limited at times and the marine sector is
stretched due to COVID logistics challenges, and various
evaluations and tests of future fuel options. As a result
of positive results from bioMSAR™ testing on 4-stroke
diesel engines, MSC expressed an interest in advancing
the option of bioMSAR™ testing on their electronic
2-stroke engines alongside MSAR®. This is now our
focus, with a view to commencing commercial-scale
4000-hour LONO trials in H1 calendar 2022.
Utah – Our project in Utah involves using MSAR®
technology to emulsify low-sulphur 10-13° API heavy
oil that can be recovered from the billions of barrels
of oil-sand deposits located at Asphalt Ridge in Utah,
USA. Oil samples were provided from the Petroteq
Oil Sands Plant (“POSP”) operated by our client,
Greenfield Energy LLC (“Greenfield”) which is owned
by AIM-listed TOMCO Energy PLC. Due to both COVID
and adverse weather conditions, the POSP start-up and
commissioning process experienced delays, resulting
in the required oil samples from site not being received
at QRF until August 2021. During August our RDI team
at QRF successfully converted these samples to both
MSAR® and bioMSAR™, and in September a report was
issued to Greenfield in accordance with our Commercial
Trial Agreement, as announced. Quadrise are now
working with Greenfield to finalise the plans for future
commercial implementation.
Morocco – Our industrial client in Morocco is a major
consumer of HFO. Since the successful pilot plant trial in
October 2020, our plans have been impacted by COVID
related travel restrictions causing delays to the trial
programme. Following the easing of these restrictions,
our Head of Operations, Bernard Johnston, was able to
visit the site (“Site B”) in August 2021 in order to prepare
for the next stage of the programme; the combustion
of 60mt of MSAR®. The site consumes around one
third of the client’s annual HFO consumption. The
Site B trial is now expected to take place in early Q4
2021. Testing of bitumen samples for the MSAR® fuel
production has now been completed, with production
scheduled to commence in Q4, and shipment of the
trial equipment to the client site organised for October
2021. The Site B trial results and a feasibility study for
MSAR® use at a second client site (‘Site A’) are expected
to be delivered to the client in Q4 2021, with Quadrise
receiving £0.1 million. A subsequent commercial trial
will then take place at “Site A” later in Q4 2021 or early
Q2 2022 with shared trial costs reimbursed to Quadrise
under a separate agreement. Assuming the successful
conclusion of these trials, the intention would then be
to conclude a commercial supply agreement covering
one or more of the client’s sites in Morocco during
Q1 2022.
•
Americas – Using our regional agent network we are
progressing projects in Panama with power generators,
and in Mexico and Ecuador with the state oil companies
and utilities respectively and look forward to providing
updates as these projects progress.
Outlook
The downstream oil sector has had to adapt rapidly to
changes in demand driven by the IMO 2020 restrictions on
marine sulphur emissions as well as the COVID pandemic.
These changes affected both the availability and values
(relative to HFO) of refinery residuals utilised in MSAR® and
bioMSAR™, unfavourably impacting MSAR® economics over
the past year. However, during the latter part of 2021 the
trends are looking increasingly positive, as despite changes
to oil consumption, the underlying crude oil price has
remained robust, which is positive for the upstream sector.
The demand for HFO in the power and marine sectors has
also remained strong, the latter driven by the increasing use
of exhaust gas cleaning systems (or “scrubbers”) to comply
with IMO 2020. It is expected that distillate fuel demand will
continue to recover in 2022 driven by the transportation
sector. This will be positive for refinery margins and the
HFO-distillate spread, underpinning the economic value
of refinery residuals as an energy source for MSAR® and
bioMSAR™ in our key markets. These trends will provide a
positive backdrop to our ongoing discussions with refinery
suppliers regarding potential supply of residue for our
key projects.
The public attitude towards renewables and low emission
fuel options is accelerating interest in bioMSAR™ and
increasing the market opportunity in various sectors. During
the next 12 months we plan to demonstrate the long-
term economic and environmental benefits of MSAR® and
bioMSAR™ projects through commercial-scale trials that, on
successful completion, should lead to supply contracts and
commercial revenues.. In parallel our RDI team are focused
on finding new Net Zero carbon future fuel solutions.
Mark Whittle, Quadrise’s former COO, who left the Group
in September 2021, made a major contribution during
his 6 years at Quadrise and left with our best wishes. I am
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
9
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
glad to report that we have now selected and appointed
a new COO, who will start in the next few months. Having
streamlined the team during the COVID-19 pandemic
period we are now expanding, both in terms of permanent
resources and experienced consultants in relevant sectors
to enhance project delivery and extend the capabilities of
QRF in Essex.
The Quadrise team look forward to an exciting 2022 for the
Company and shareholders.
Jason Miles
Chief Executive Officer
1 October 2021
10
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC
REPORT
For the year ended 30 June 2021
Principal Activity
The principal activity of the Company is to develop markets
for its proprietary emulsion fuels, MSAR® and bioMSAR™
as low-cost, more environmentally friendly substitutes
for conventional heavy fuel oil (“HFO”) for use in power
generation plants, industrial and upstream oil applications,
and marine diesel engines.
Business Review and Future Developments
A full review of the Group’s activities during the year,
recent events and future developments is contained in the
Chairman and CEO Statements on pages 2 and 6.
Key Performance Indicators
The Group’s key performance indicators are:
•
•
Development and commercial performance against
the Group’s business model and project timetables
established with partners and clients, and
Financial performance and position against the
approved budgets and cashflow forecasts.
The Board regularly reviews the Group’s business model,
with a business development progress review held
fortnightly with Non-Executive Directors. The commercial
performance of the Company and each of the Company’s
key projects and business development opportunities is
discussed at length in the Chairman and CEO Statements.
Each year, a detailed two-year budget and cash forecast
is prepared by the Executive Directors and the Head of
Finance, and following an extensive review process, is then
approved by the Board. Performance against budget and
updated cash projections are included within the monthly
management accounts issued to and reviewed by the Board.
For the year ended 30 June 2021, the financial performance
of the Group was ahead of budget due to lower than
forecast expenditure as a result of cost-reducing measures
put in place due to the Covid-19 pandemic.
Going Concern
The Group had a cash balance of £7.0 million as of 30
June 2021 following a successful fundraise in March 2021
which raised £6.5 million (net of costs). The funds raised, in
conjunction with the existing cash balance, are expected to
be sufficient for the Group to reach commercial revenues
and sustainable positive cashflows, with these expected
to commence in Q1 2023. The Directors therefore have
determined that it is appropriate to prepare the financial
statements on a going concern basis. For further details
behind the judgments and estimations used by the Directors
in reaching this determination, refer to note 3.
Climate Change
As discussed in both the Chairman’s and CEO’s statements
on pages 2 to 7, the Quadrise bioMSAR™ technology offers
an alternative to HFO with over 25% lower CO2 emissions.
The directors believe that the growing global emphasis on
the COP 26 Goals, specifically the goal of transition to global
net-zero carbon by 2050, present Quadrise with increasing
opportunities to assist marine, power and industrial clients
in obtaining a cost-effective solution to lowering their
carbon emissions. Government actions to reduce climate
change therefore provide opportunities to Quadrise, but
the Board acknowledges that the Company may also be
presented with additional risks due to these actions.
Risks, including those introduced by climate change
and governmental actions to reduce climate change, are
discussed in the next section.
Principal Business Risks
Each year in the second quarter, the Audit Committee
assists the Executive Team in a structured zero-based
re-assessment of the Company’s emerging and principal
risks. This is conducted for each operational sector and
organisational level including the Company’s research
and development facility, QRF, and then aggregated for
the Company as a whole. The risk level is determined by
its probability, impact on the Company, and whether the
risk has increased or decreased over the last 12 months. A
summary of “Principal Risks and Uncertainties” is reviewed
at a Board meeting. Subsequently a Risk Mitigation Strategy
and Action Plan is incorporated into the annual Business
Planning exercise conducted in June.
The principal risks identified during this exercise, ranked
in order of the likelihood of occurrence, are set out below.
These may not include all the risk factors that could affect
future results. Actual results could differ materially from
those anticipated because of these and various other
factors, and those set forth in the Group’s other periodic and
current reports filed with the authorities from time to time.
Environmental constraints, climate change and
decarbonisation
The increasingly hostile attitude towards fossil fuels is a
significant challenge resulting in a rapid move away from
hydrocarbons towards fully renewable fuels. Whilst MSAR®
provides considerable environmental advantages, and
bioMSAR™ offers the added benefits of carbon reduction,
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
11
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION STRATEGIC REPORT (CONTINUED)
For the year ended 30 June 2021
neither offer a net-zero carbon solution. The Group mitigates
this risk by continuing to invest in research and development
to pursue ‘net-zero’ carbon fuel solutions as part of its aim
to be at net zero by 2030 and pursue business opportunities
that will assist in the achievement of this goal.
Market scope and risk
Aligned with the constraints above, and faced with the
move away from hydrocarbons, the Company must still
progress its MSAR® and bioMSAR™ endeavours into a
volume business. The Group mitigates this challenge by
continuing to promote the environmental contribution of
MSAR® and bioMSAR™ and explaining the assured ongoing
contribution of hydrocarbons to the global energy mix.
The Company further mitigates this risk by increasing the
potential applicability of Quadrise technology to various
sectors, as evidenced by the opportunities in the upstream
and industrial sectors discussed in the CEO’s Statement.
Nevertheless, the marketability of MSAR® fuels is affected
by numerous factors beyond the control of the Group, for
example the variability of price spreads between light and
heavy oils, and the relative competitiveness of oil, gas and
coal prices both for prompt and future delivery.
Commercial return
The Group has made considerable progress in its rapid
development of bioMSAR™ whilst continuing to advance
commercial opportunities for MSAR®. and reduce its treat
costs in the face of changes to fuel oil-gasoil spreads. During
the product development of bioMSAR™ there remain the
considerable challenges of testing, feedstock availability
(see below), glycerine treatment options, formulation costs
and commercial feasibility still to overcome. There is a risk
the Group will not achieve a commercial return due to major
unanticipated change in a key variable or, more likely, the
aggregate impact of changes to several variables which
results in sustained depressed margins.
The competitive position could be affected by government
regulations concerning taxation, duties, specifications,
importation and exportation of hydrocarbon fuels and
environmental aspects. Freight costs contribute substantially
to the final cost of supplied products and a major change
in the cost of bulk liquid freight markets could have an
adverse effect on the economics of the fuels business.
The Group would mitigate this risk through establishing
appropriate flexibilities in the contractual framework, offtake
arrangements and price risk management through hedging.
Feedstock sourcing – MSAR®
The removal of the Cepsa operational facilities obviously
results in additional costs and delays in securing new
sources of MSAR® feedstock. In addition, IMO2020 has
impacted high sulphur residue supply, and MSAR®
economics are vulnerable to changes in fuel oil-gasoil
spreads. Securing low-cost residue looks increasingly
challenging. There is a risk in respect of appropriately
located residues and ongoing price competitive availability
of such feedstock as oil refiners seek to extract more
transportation fuels from each barrel of crude using residue
conversion processes. The Group mitigates this risk where
possible by utilising its deep understanding of the global
refining industry, targeting qualifying suppliers matched
to prospective major consumers. An MSAR® commercial
contract would motivate candidate feedstock suppliers to
expedite feedstock supply.
Feedstock sourcing – bioMSAR™
The volumes and quality of renewable glycerine required
for a commercial marine or industrial bioMSAR™ contract
are beyond those readily accessible. To mitigate this the
Company is rapidly increasing its knowledge of current and
potential glycerine sources and engaging with suppliers.
Clearly a commercial contract would again stimulate this
market and thus expedite feedstock supply. The Company
is also investigating the feasibility of algal production
of glycerine with the University of Greenwich, as well as
researching other renewable feedstocks that could be
utilised together with, or instead of glycerine.
Delay in commercialisation of MSAR® and funding
risks due to COVID-19
There is a risk that the commercialisation of MSAR® and
bioMSAR™ could be delayed further due to the global
COVID-19 pandemic, or unforeseen technical and/or
commercial challenges. This could mean that the Group
may ultimately need to raise further equity funds to remain
operational. Depending on market conditions and investor
sentiment, there is a risk that the Group may be unable
to raise the required funds when necessary. The Group
mitigates this risk by maintaining strong control over its pre-
revenue expenditure, keeping up the momentum on its key
projects and maintaining regular contact with the financial
markets and investor community. Further discussion of the
impact of COVID-19 on the Group and the Group’s mitigating
action is included in the CEO’s Statement.
12
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
Technological risk
There is a risk firstly that the markets for MSAR® and
bioMSAR™ fuels adopt alternative fuels making these
technologies redundant or secondly that the technology
used for their production may not be adequately robust
for all applications. This is in respect of the character
and nature of the feedstock and the parameters of
transportation and storage pertaining to a specific project.
This risk may jeopardise the early commercialisation of the
technology and subsequent implementation of projects;
or give rise to significant liabilities arising from defective
fuel during plant operations. The Group mitigates this risk
by ensuring that its highly experienced key personnel are
closely involved with all areas of MSAR® and bioMSAR™
formulation and manufacture, and that the fuel is
thoroughly tested before being put into operational use.
Competition risks
There is a risk that new competition could emerge with
similar technologies sufficiently differentiated to challenge
Quadrise’s process, although at the date of this report no
evidence of significant competition has been noted. Were
such competition to emerge, this could result, over time, in
further price competition and pressure on margins beyond
that assumed in the Group’s business planning. This risk
is mitigated by the limited global pool of expertise in the
emulsion fuel market combined with an enhanced R&D
programme aimed at optimising cost and performance
and protection of intellectual property. The Group also
makes best use of scarce expertise by developing close
relationships with strategic counterparties such as Nouryon
while ensuring that key employees are suitably incentivised.
Environment, Social and Governance risks (ESG)
Quadrise is committed to providing safer, cleaner and
more affordable energy. By leveraging our extensive
RDI capabilities, and through continuous improvement
processes, Quadrise aims to be carbon-neutral by
2030. Furthermore, the highest standards of corporate
governance have always been a strength and this places
the Company in the top tier of AIM companies. We maintain
this commitment by adopting the highest disclosure
standards of the UK Corporate Governance Code, through
the experience and commitment of our non-exec directors
and by following stringent Board policies and procedures.
The Company works to exceptional health, safety,
environmental protection and quality standards, with
strong risk management processes in place, all of which are
supported by a first-class team of professional advisors.
Other Business Risks
Dependence on key personnel
The Group’s business is dependent on obtaining and
retaining the services of key personnel of the appropriate
calibre as the business develops. The success of the
Group will continue to be dependent on the expertise and
experience of the Directors and the management team, and
the loss of personnel could still have an adverse effect on
the Group. The Group mitigates this risk by ensuring that
key personnel are suitably incentivised and contractually
bound. The Group’s recruitment programme to find a
successor to Mark Whittle is complete, with a new candidate
joining the Company during the next few months.
Environmental risks
The Group’s operations are subject to environmental risks
inherent in the oil processing and distribution industry. The
Group is subject to environmental laws and regulations
in connection with all its operations. Although the Group
ensures compliance with all applicable environmental
laws and regulations, there are certain risks inherent
to its activities, such as accidental spills, leakages or
other circumstances that could expose the Group to
potential liability.
Further, the Group may require approval from the relevant
authorities before it can undertake activities which are likely
to impact the environment. Failure to obtain such approvals
may prevent or delay such activities. The Group is unable to
predict definitively the effect of additional environmental
laws and regulations, which may be adopted in the future,
including whether any such laws or regulations would
materially increase the Group’s cost of doing business,
or affect its operations in any area of its business. The
Group mitigates this risk by ensuring compliance with
environmental legislation in the jurisdictions in which it
operates, and closely monitoring any pending regulation or
legislation to ensure compliance.
No profit to date
The Group has incurred aggregate losses since its inception,
and it is therefore not possible to evaluate its prospects
based on past performance. There can be no certainty that
the Group will achieve or sustain profitability or achieve or
sustain positive cash flow from its activities.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
13
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION STRATEGIC REPORT (CONTINUED)
For the year ended 30 June 2021
Corporate and regulatory formalities
The conduct of petroleum processing and distribution
requires compliance by the Group with numerous
procedures and formalities in many different national
jurisdictions. It may not in all cases be possible to comply
with or obtain waivers of all such formalities. Additionally,
functioning as a publicly listed Company requires
compliance with the stock market regulations. The Group
mitigates this risk through commitment to a high standard of
corporate governance and ‘fit for purpose’ procedures, and
by maintaining and applying effective policies.
Economic, political, judicial, administrative, taxation
or other regulatory factors
The Group may be adversely affected by changes in
economic, political, judicial, administrative, taxation or other
regulatory factors, in the areas in which the Group operates
and conducts its principal activities.
Mike Kirk
Chairman
1 October 2021
14
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
DIRECTORS’ SECTION 172
STATEMENT
Statement by the directors in performance of their statutory duties in accordance with s172(1)
Companies Act 2006.
(e) the desirability of the company maintaining a reputation
for high standards of business conduct: The highest
standards of corporate governance have always been
a strength for Quadrise, and the Board believes that
this places Quadrise in the top tier of AIM companies.
We have always adopted the highest disclosure
standards of the UK Corporate Governance Code; our
board of directors contains experienced, independent
non-exec directors and we follow stringent Board
policies and procedures. We work to exceptional HSEQ
standards, with strong management procedures in
place, and we are supported by a first-class team of
professional advisors.
(f)
the need to act fairly between members of the
Company. The Board endeavours to keep shareholders
fully informed (within the usual disclosure constraints)
on the Company’s strategic development plans, and
welcomes the views of shareholders, as evidenced
during 2020-21 by the open question and answer
session following the closed Annual General Meeting on
27 November 2020 This has been further demonstrated
by the investor conference calls, media interviews,
presentations, and regular updates to the Company’s
website that have occurred throughout the year.
The Strategic Report was approved by the Board of Directors
on 1 October 2021 and was signed on its behalf by:
Mike Kirk
Chairman
1 October 2021
The Board of Directors acknowledge that they have a
statutory duty under s172 (1) (a-f) of the Act to promote
the success of the Company for the benefit of the members
considering broader stakeholder interests, and notably
having regard to:
(a) the likely consequence of any decision in the long term:
see the ‘Outlook’ section of the CEO’s statement on
page 8, and principal business risks on page 11.
(b) the interests of employees: The Group’s employees are
fundamental to the delivery of its strategy. The Board
has prioritised fair remuneration arrangements for
employees and undertakes regular communication
updates in an open environment. Decisions to
maximise the resilience of the business, preserve
cash and minimise risk are taken after prioritising the
continued employment of those employee roles that are
instrumental to the success of the business.
(c) the need to foster business relationships with advisors,
partners, suppliers, potential MSAR® and bioMSAR™
consumers and producers and others: As a small team
of only nine employees, it is essential to the Group that
close relationships are fostered. The Group has healthy
longstanding relationships with its key counterparties,
based on open and supportive channels of
communication and ensuring that payment of invoices
to suppliers is made on a timely basis.
(d) the impact of operations on the community and the
environment: Use of MSAR® fuel contributes to the
solution of key environmental problems, reducing
Black Soot emissions and producing less NOx and SOx
emissions compared to HFO. The energy requirements
for handling and transporting MSAR® are lower than
fuel oil, and pre-atomisation means that MSAR® fuel
can be burned at lower temperatures than fuel oil,
further reducing energy consumption during use. The
Board believe that MSAR® use provides a safer, cleaner
and more affordable energy that bridges the gap to a
sustainable future, and that the many environmental
benefits of MSAR® technology (as discussed on the
company’s website https://www.quadrisefuels.com/
esg/environmental/) have considerable potential to
contribute to wider society.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
15
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION Mark Whittle
Chief Operating Officer
Mark is a chemical engineer with
over 25 years’ experience in energy,
covering both the downstream
oil and renewables sectors. He
started his career as an Engineer
with Esso at their Fawley refinery before working for
Criterion Catalysts & Technologies (Shell), Louis Dreyfuss
and ConocoPhilips on a worldwide basis. His experience
is both technical and commercial, and includes refining,
technology transfer, asset optimisation, refinery economics
& strategic planning, project development and trading.
Mark has an honours degree in chemical engineering with
minerals from the University of Birmingham. Mark resigned
from the QFI board with effect from 16 July 2021.
Laurie Mutch
Non-Executive Director
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 a senior adviser
to the International Energy Agency. 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.
DIRECTORS
Mike Kirk
Chairman
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
Chair Elect of Hyde Housing (a large London-based housing
association) and an Advisor to the Board and member of
the Finance Committee of the Ironbridge Gorge Museums
Trust. 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. As outlined in the Chairman’s Statement, Mike
provided notice of his intention to resign from the QFI board
on 1 October 2021, and will formally leave the board on
26 November 2021.
Jason Miles
Chief Executive 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.
16
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
Dilipkumar Shah
Non-Executive Director
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. Bryan resigned from the QFI board
with effect from 14 July 2020 in order to assist with the
Company’s cost-cutting measures.
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 several 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 the 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 2021
17
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION DIRECTORS’
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 2021.
Results and Dividends
The consolidated loss from continuing operations after taxation for the year ended 30 June 2021 was £4.3 million
(2020: £4.8 million). The Directors do not recommend the payment of any dividend for the year (2020: £nil).
Directors
Those who served as Directors during the year are:
•
•
•
•
•
•
•
Mike Kirk (Chairman)
Jason Miles (Chief Executive Officer)
Mark Whittle (Chief Operating Officer) – resigned 16 July 2021
Laurence Mutch (Non-executive Director)
Bryan Sanderson (Non-executive Director) – resigned 14 July 2020
Dilipkumar Shah (Non-executive Director)
Philip Snaith (Non-executive Director)
A resolution to re-elect Philip Snaith who will retire as a director by rotation under the Company’s Articles of Association and,
being eligible, will offer himself for re-election, will be proposed at the Company’s 2021 Annual General Meeting.
Directors’ Interests
The interests of the Directors holding office at 30 June 2021 were as follows:
Number of Shares held:
Directors
Jason Miles
Mike Kirk
Laurence Mutch
Philip Snaith
Dilipkumar Shah
Mark Whittle
30 June 2021
Ordinary Shares of
1p each
30 June 2020
Ordinary Shares of
1p each
3,905,988
3,759,664
814,575
522,107
506,649
170,000
129,629
784,323
491,263
476,262
170,000
-
18
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
Number of share options held:
Directors
Mike Kirk
Jason Miles
Mark Whittle
Laurence Mutch
Dilipkumar Shah
Philip Snaith
30 June 2021
Share options
30 June 2020
Share options
Exercisable up to
3,000,000
3,000,000
1,261,756
738,244
5,000,000
1,500,000
3,551,122
1,448,878
5,000,000
500,000
500,000
1,000,000
3,000,000
3,500,000
2,000,000
500,000
500,000
3,000,000 1 April 2024
3,000,000 27 June 2029
- 21 August 2030
- 21 August 2028
5,000,000 1 April 2022
1,500,000 22 March 2024
3,551,122 27 June 2029
1,448,878 27 June 2027
- 21 August 2028
500,000 25 Nov 2023
500,000 25 July 2026
1,000,000 13 May 2029
- 21 August 2030
3,500,000 1 April 2022
2,000,000 27 June 2027
500,000 1 April 2022
500,000 27 June 2027
2,000,000
2,000,000 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.
Hargreaves Lansdown
Interactive Investor Trading Limited
Premier Miton Investors
HDSL
Cannacord Genuity Wealth Management
Barclays Smart Investor
Ruudowen Limited
Financial Instruments
Number of
ordinary shares
held
Percentage of
issued share
capital and
voting rights
Nature of holding
Indirect
244,398,286
Indirect
207,466,945
Direct
117,222,661
Indirect
90,272,567
Direct
70,172,439
Indirect
68,736,545
Direct
62,839,261
17.37%
14.75%
8.33%
6.42%
4.99%
4.89%
4.47%
The Group’s principal financial instruments comprise cash balances and other payables and receivables that arise in the
normal course of business, as well as the convertible security (see note 17 for further details). The risks associated with these
financial instruments are disclosed in note 23.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
19
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION DIRECTORS’ REPORT (CONTINUED)
Research and Development
Appointment of Auditors
In accordance with Section 489 of the Companies Act 2006,
a resolution to appoint BDO 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.
Annual General Meeting
The Annual General Meeting will be held on Friday
26 November 2021 as stated in the Notice, which
accompanies this Annual Report.
By order of the Board.
MSP Corporate Services Limited
Company Secretary
1 October 2021
The Group continues to invest in research and development
associated with the design and manufacture of MSAR® and
bioMSAR™ proprietary emulsion fuel. Further information
regarding the research and development activities of the
Group is contained in the Chairman’s Statement.
Future Developments
Further information regarding the future developments of
the Group is contained in the Chairman’s Statement.
Directors’ Liabilities
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.
20
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
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.
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
1 October 2021
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 and in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 for reporting year
ended 30 June 2021.
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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
21
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION REPORT 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 considers 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 2021 were as follows:
Director
Mike Kirk
Jason Miles
Mark Whittle1
Philip Snaith
Laurence Mutch
Bryan Sanderson2
Hemant Thanawala3
Dilipkumar Shah
Total
Short-term
employee
benefits
£’000s
98
Social security
costs
£’000s
12
Post-employment
benefits
£’000s
8
Other benefits
£’000s
9
219
144
40
40
1
-
-
542
29
19
4
4
-
-
68
10
11
-
-
-
-
-
5
5
-
-
-
-
-
Total
2021
£’000s
127
263
179
44
44
1
-
-
Total
2020
£’000s
270
322
121
48
47
31
20
-
1 – Appointed 1 February 2020, resigned 16 July 2021
2 – Resigned 14 July 2020
3 – Resigned 31 December 2019
Reconciliation of Share Options Granted to Directors
As at 1 July
Granted during the year by QFI
Exercised during the year
Appointment of Director
Resignation of Director
Expired during the year
As at 30 June
29
19
658
859
30 June 2021
Number of share
options
28,500,000
10,000,000
-
-
30 June 2020
Number of share
options
32,500,000
-
-
2,000,000
(500,000)
(6,000,000)
-
-
38,000,000
28,500,000
On 3 September 2021, 13.0m share options were awarded to executive directors, see note 27.
No share options were exercised by Directors during the year (2020: nil).
The market price of the Company’s shares at the end of the reporting period was 3.50p (2020: 1.76p) and the range during the
year was 1.63p to 6.35p (2020: 1.18p to 7.42p) per share.
Philip Snaith
Chairman of the Compensation Committee
1 October 2021
22
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
CORPORATE GOVERNANCE
STATEMENT
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.
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
1.
2.
3.
4.
5.
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
6.
7.
8.
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.
9.
Ensure policies, processes, information, time and
resources required to function effectively and efficiently.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
23
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
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 is reviewed at least
once each year and our website will disclose the review date.
As 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.
During the period we made good progress across a wide range
of projects/opportunities in every major end-user market for
Quadrise and we are well positioned to action these projects
with our commercial partners in the relevant countries/regions.
Whilst this progress was not always been as rapid as we would
have liked, which has led, in some instances, to gaps in the
provision of updates; though we always strive to keep our
shareholders informed of material progress on our projects.
The successful fundraise in early 2021 provided Quadrise with
the ability to progress to sustainable commercial revenues in
calendar 2022 and that remains our absolute focus.
We have been delighted with the response from investors
to our use of Investor Meet Company (“IMC”). This has now
replaced our previous use of investor conference calls and the
change has been almost universally supported – though we
do understand that some investors do prefer to ask questions
directly. However, our approach has been very clear – there is
no attempt to “duck” challenging questions and whilst many
are answered during the event – we do ensure that all questions
are answered and posted on the IMC website. Feedback from
IMC is that we are a positive outlier in terms of the number
of questions that we get asked and the diligence with which
we answer them. We believe that this demonstrates a real
commitment from the Company to treat our retail shareholders
in the same manner as our institutional and longstanding high-
net-worth shareholders – with the opportunity to directly ask
questions of management on a regular basis. Alongside this we
have increased our use of social media (Twitter and LinkedIn) to
provide background/supporting information to shareholders.
This has also recently been supplemented with a blog which
we publish on our website and then promote via social media.
We have continued to use Proactive Investors and have recently
started to use Directors Talk to further enhance our outreach
to investors. Although we have only limited current experience
with Directors Talk, we have been pleased with the feedback so
far and it brings an extra dimension with the ability to include
commentary from analysts and fund managers in addition to
providing another channel for our own news flow.
Whilst we regard the broadening of our channels to
shareholders as helpful, it is important to emphasise that
all substantive announcements are made via RNS. As a
management team we are fully aware of our responsibilities in
this regard and we have regular contact with our
high-quality advisory team including our NOMAD,
joint-brokers and our legal advisors. Our approach to the use
of social media, blogs and other non-RNS news dissemination
is always discussed in detail with our NOMAD to ensure that
we are not disclosing any material that should be disclosed
via RNS. This open dialogue with our advisors ensures that the
information that we do provide via RNS meets the regulatory
requirements of AIM – and that any supplementary information
we disclose via other channels does not contain anything that is
material/price sensitive.
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
proactive and transparent approach to oversight on behalf
of all shareholders and those high standards of corporate
governance are inherent in our culture.
The COVID restrictions in late 2021 meant that it was not
possible to hold our AGM in person as we would normally do.
However, we did successfully use IMC to provide an update
presentation and Question & Answer session as we would have
normally done at an in-person AGM. I am glad to say that we
are now planning to hold the 2021 AGM in person, and we look
forward to being able to meet investors again face to face. For
those that cannot or would prefer not to attend the meeting,
we will are planning to provide an update via IMC shortly after
the AGM. Whilst we realise that the priority for most investors
at these meetings is project progress, we are always pleased to
discuss any element of our governance standards on these calls.
Mike Kirk
Executive Chairman
1 October 2021
24
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
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 12 occasions during
the year ending 30 June 2021 in its endeavours to progress
the announced relationships and potential projects more
fully described above and, in the Chairman’s Corporate
Governance statement to Shareholders.
The Board, both directly and through the Funding
Committee also allocated considerable time to developing
an appropriate medium-term strategy to secure the funding
required by the Company to reach commercial revenues and
sustainable cashflows, forecast for Q1 calendar 2023.
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).
MSAR® and bioMSAR™ technology has many environmental
benefits as reported elsewhere, and on the company’s
website https://www.quadrisefuels.com/esg/environmental/
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® and bioMSAR™ 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® and bioMSAR™ emulsion fuels on a
commercial scale and world-wide.
The Quadrise team of nine 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, as evidenced by the
promotion of Jason Miles to CEO and Mark Whittle to the
board as COO effective 1 February 2020.
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.
Due to Covid-19 restrictions, the AGM held on 27 November
2020 was a closed meeting. Through investor conference
calls (9 September 2020, 13 October 2020, 27 November
2020, 8 March 2021 and 30 June 2021) with an average of 147
shareholders on each call, media interviews, presentations
and regular updates to the Company website, 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.
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
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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
25
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Provision 5: Stakeholder engagement mechanisms
Being a small organisation with 9 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
24 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.
Provision 1: Opportunities and risks to future
success.
The CEO’s Statement in the 2021 Annual Report describes
the MSAR® and bioMSAR™ market opportunities in the
power generation, industrial, upstream oil and marine
bunker fuel sectors. The risks associated with our
endeavours have been demonstrated historically by the
disappointments of the terminated trial project in KSA,
and the marine fuel trial by Maersk. Principal Business
Risks are more fully covered on Page 11 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 AGM of 27 November 2020, five ordinary resolutions
were carried by at least 93.6% voting in favour. One special
resolution, about the disapplication of pre-emption rights,
was not carried due to only 22.5% voting in favour. Failure
to pass did not impact upon the Company’s ability to raise
the funding referred to in Principal A, and if it became
necessary to require the disapplication requested, this
proposal could be put to shareholders at a General Meeting.
26
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
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. Refer to Director Profiles on
page 16 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 a Chairman exercising executive responsibilities,
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 update.
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
Addressed under Division of responsibilities above.
Jason Miles has been appointed CEO and at this stage of
development of the company Mike Kirk retains the senior
executive role in the company as Chairman.
Provision 10: Independence of non-executive
directors
The profiles and experience of the non-executive directors
are provided on Page 16 of the Annual Report.
Mr Dilip Shah is closely associated with significant
shareholders, he is a shareholder and holds options in the
Company, and is not considered independent.
Mr Snaith has the appropriate experience as a former
senior executive of the Royal Dutch Shell Group to chair
the compensation and nominations committees. He is a
shareholder and holds options in the Company. Mr Snaith
has clearly indicated that these holdings 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.
Mr Bryan Sanderson stepped down from his role as
non-executive director on 14 July 2020. There were no
circumstances that might cause the Board to question
his independence.
Non-executive director Laurence Mutch is also a Director
of Laurie Mutch & Associates Limited, which from time to
time provides consulting services to the Group. The total
fees charged for the 2021 financial year amounted to £45k
(2020: £30k). 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 2021
27
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
In view of their long-term contribution to the Company,
Mr Shah, Mr Snaith and Mr Mutch have been awarded
options in the Company, as more fully detailed on page 22
and Provision 34. In addition, Mr Snaith and Mr Mutch have
each shown their support for, and confidence in, the future
of the company at fund raisings and accordingly hold shares
in the company refer page 18. Whilst this may question
their independence in accordance with the Code, the Board
continues to hold the view that this has not and does not
impair their ability to act as independent directors.
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. To the extent that there
are unusual circumstances that may require the duties and
role of a Senior Director, Mr Mutch acts in this capacity.
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 Chairman against previously
determined corporate performance targets adopted by the
Board. The non-executive directors meet frequently without
the Chairman to discuss any performance concerns.
Provision 14: Meetings of the Board
At the start of the 2020-21 financial year the Board
comprised the Chairman, Chief Executive Officer and
Chief Operating Officer as executive Directors and four
non-executive Directors, following the resignation of
Bryan Sanderson on 14 July 2020 this reduced to three
non-executive directors. 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 12 times during the 2020-21
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
Mark Whittle
Laurence Mutch
Dilip Shah
Philip Snaith
Bryan Sanderson***
***resigned 14 July 2020
Attendance
12
12
11
12
8
12
-
100%
100%
92%
100%
66%
100%
0%
Provision 15: Demands on Directors’ time
In addition to his role as Chairman, Mike Kirk has been
Chairman of Portsmouth Water and Chair of VIVID Housing
until his resignation from these posts during the year, he
is currently Chair Elect of Hyde Housing (a large London-
based housing association) and an Advisor to the Board and
member of the Finance Committee of the Ironbridge Gorge
Museums Trust. Dilip Shah has 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.
28
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
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 page 16. 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.
Mr Mutch has been on the Board for 15 years (since listing
in April 2006). Whilst this is at odds with regularly refreshing
the Board, long experience is highly valued by shareholders
when the directors retire by rotation and are then
re-elected. Refer to Provisions 18 and 19.
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
director evaluation matrix with 10 contribution attributes,
and a detailed questionnaire on board and committee
performance together with an opportunity to propose
improvements to Board and committee effectiveness. These
are returned to the Company Secretary and a consolidated
review is provided to the Chairman for review by the Board.
Provision 19: Nine-year limitation of Chairman
Mike Kirk was appointed 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.
Refer to the commentary under Principle L above.
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 23-32
in the Annual Report. In view of its size the Company does
not have an internal audit function. However, the Audit
Committee is closely consulted on the drafting of the
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.
The 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 Chairman. Refer to
Provision 41.
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.
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.
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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
29
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Provisions 24, 25 and 26: The work of the audit
committee
The Audit Committee is chaired by Laurence Mutch and
comprises Philip Snaith and Laurence Mutch, both of
whom have recent and relevant financial experience
and considerable competence across all elements of
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 four times 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 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, the Head of Finance, as well as the auditors, typically
attend the Audit Committee meetings.
The performance of the committee is reviewed annually by
the Board as more fully described under Principle L above.
Significant Issues
The significant issues considered relating to the 2021
financial statements were Going Concern, the Valuation of
Intangible Assets, the treatment of the Convertible Security
instrument and Management Override of Controls. The
subject of Going Concern is covered in the Strategic Report
on Page 11 in the Annual Report, in the Auditors Report
on Page 33 and in Note 3 to the Financial Statements.
The Valuation of Intangible Assets is addressed in the
Auditors Report on Page 33 and in Note 11 to the Financial
Statements. The treatment of the Convertible Security
instrument is addressed in the Auditors Report on Page 33
and in Note 17 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 consider the risk of management override
of controls a significant issue. In making their assessment
the Audit Committee considered specifically the controls
over and approval processes covering cash payments and
journals, as well as any indication of unusual transactions
and any evidence of bias in the estimates made by
management. The Audit Committee also considered the
quality and frequency of management information provided
to the Board. The Audit Committee’s conclusion was that
there is no evidence of inappropriate management override
of controls.
Assessment and Safeguarding the
Independence and Effectiveness of the
external audit process
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 sector and
organisational level including the Company’s research
and development facility, QRF, and then aggregated for
the Company as a whole. The risk level is determined by
its probability, impact on the Company, and whether the
risk has increased or decreased over the last 12 months. A
summary of “Principal Risks and Uncertainties” is reviewed
at a Board meeting. Subsequently a Risk Mitigation Strategy
and Action Plan is incorporated into the annual Business
Planning exercise conducted in June.
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.
30
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
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.
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 1 July 2011.
Agreements with third parties contain statements that the
Company and its associates are required to always adhere
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 and Longer Term
Viability
The subject of Going Concern is covered in the
Strategic Report on Page 11 of the Annual Report, in
the Auditors Report on Page 33 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
CEO’s Statement on Page 8 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 22.
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 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 Chairman, the
committee prepares corporate targets for formal adoption
by the Board and proposals 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 and Laurence Mutch. 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. Each of the
non-executive directors have been awarded share
options in prior years. 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 2021
31
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
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 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.
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 22.
The performance of the committee is reviewed annually
by the board at large as more fully described under
Principle L above.
Laurence Mutch
Chairman of the Audit Committee
1 October 2021
Provision 37: Compensation Committee discretion
The committee retains an attitude of applying
discretion when this is applicable regarding 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. Bonuses to Executive Directors are proposed by the
Compensation Committee with the amount determined
by a formula which factors in both Company and
individual performance.
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 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.
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 designing
remuneration policy, the committee has endeavoured
to incorporate the principles of clarity, simplicity, and
predictability. As an external measure, the committee
32
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
INDEPENDENT AUDITOR’S REPORT TO
THE SHAREHOLDERS OF QUADRISE FUELS
INTERNATIONAL PLC
Opinion on the financial statements
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 2021 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the Parent Company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and 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.
We have audited the financial statements of Quadrise Fuels International Plc (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 30 June 2021 which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement
of Cash Flows, the Company Statement of Financial Position, the Company Statement of Changes in Equity, the Company
Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in their preparation is applicable law and international accounting
standards in conformity with the requirements of the Companies Act 2006 and, as regards the Parent Company financial
statements, as applied in accordance with the provisions 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 believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company 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 as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
We identified going concern as a key audit matter based on our assessment of the significance of the risk and the effect on
our audit strategy. The company is currently pre-revenue and is therefore loss making. The company also received gross
funds of £7.0m from the issue of new ordinary shares in the period. The going concern disclosures are included in note 3 to
the financial statements.
Our evaluation of the Directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going
concern basis of accounting and in response to the key audit matter included:
•
We critically assessed management’s cash flow forecast and underlying assumptions which have been approved by the
Board. Our testing included checking the mathematical accuracy, reviewing the underlying data upon which the cash
flow forecast is based and confirming this is in line with the audited results at 30 June 2021 where applicable.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
33
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS
OF QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)
•
•
•
•
•
•
We critically assessed the assumptions applied in the forecasts to consider their appropriateness, comparing forecast
operating cash expenditure against historic actuals, obtaining explanations from management and support for any
significant variances.
We checked the consistency of the assumptions for projected project revenue and costs and capital commitments with
the intangible assets valuation model (refer to Carrying value of the (MSAR) intangible asset KAM).
We reviewed management’s assessment of the impact of COVID-19 on the going concern assumption and challenged
key assumptions and judgements. We discussed the actual and ongoing potential impact of COVID-19 with management
and the Audit Committee including their assessment of risks and uncertainties associated with areas such as the Group’s
workforce, supply chain, business development partners and access to sites, as well as commodity prices.
We reviewed management’s sensitivity analysis and performed our own sensitivity analysis in respect of the key
assumptions underpinning the cash flow forecasts.
We reviewed the conditions of funding during the period to identify any related terms or conditions which could impact
the going concern assumption.
We reviewed the financial statement disclosures regarding going concern to satisfy ourselves that the disclosures
are in accordance with the requirements of the applicable accounting standards and are consistent with
management’s assessment.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the
Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage
100% (2020: 100%) of Group loss before tax
100% (2020: 100%) of Group total assets
Key audit matters
Carrying value of the (MSAR) intangible asset
Accounting for Convertible Securities Deed
Going concern
2021
✓
✓
✓
2020
✓
✓
✓
Materiality
Group financial statements as a whole
£220,000 (2020: £240,000) based on 5% (2020: 5%) of Loss before tax
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system
of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk
of management override of internal controls, including assessing whether there was evidence of bias by the Directors that
may have represented a risk of material misstatement.
The Group and its subsidiaries are accounted for from one central operating location, the Group’s registered office. We
identified two significant components for which we conducted a full scope audit, and three non-significant components for
which we conducted a desktop review. All procedures were performed by the Group engagement team.
34
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
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, including 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. In addition to the matter described in the Conclusions related to going concern section,
we have determined the matters below to be the key audit matters to be communicated in our report
Key Audit Matter
1) Carrying value of the (MSAR) intangible asset
The Group holds the MSAR intangible asset which has a carrying value of £2.9million.
The MSAR intangible asset is considered to have an indefinite useful life and is tested annually for
impairment as required by the applicable accounting standards.
As detailed in note 11, management prepared a discounted cash flow valuation model which
indicated the recoverable amount was above the carrying value of the MSAR intangible asset. The
accounting policies and critical judgements applied are disclosed in note 2.
The appropriateness of judgements and estimates applied, including forecast project revenues,
operating and capital costs and discount rates, in the determination of the recoverable amount
represented a significant focus area for our audit.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
35
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS
OF QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)
How the scope of
our audit addressed
the key audit matter
We obtained and examined management’s assessment of impairment in accordance with IAS
36 Impairment of Assets challenging the key assumptions made by management. Our audit
procedures included:
•
•
•
•
•
•
We met with the management team to discuss project progress and key developments,
reviewed correspondence, contracts and other documents relating to the
business development opportunities included within the economic model supporting the
impairment test.
We checked the mathematical accuracy of management’s model.
We critically challenged the key estimates and assumptions used by management, including
project revenue projections, operating costs, capital costs, discount rate and royalty rate. We
assessed the discount and royalty rates used against those used in the industry. We reviewed
project correspondence and contracts relating to revenue projections, which include the
operating and capital costs.
We reviewed management’s sensitivity analysis and performed our own sensitivity analysis
over individual key inputs, including: timing of forecast project revenues; royalty rate; forecast
period and discount rate together with a combination of sensitivities over such inputs.
We have reviewed the outcomes of prior year forecasts to assess management’s forecasting
accuracy, obtaining explanations from management and support for significant variances.
We have assessed the impact of COVID-19 on the model and assumptions, by considering
the impact of COVID-19 on the industry as a whole and for the Group specifically. We also
considered the impact of a delay in project progressions as a result of COVID-19.
Key observations
We observed that although individually these sensitivities described above did not impact on
the headroom, however if a combination of the sensitivities above occurred, headroom would be
negatively impacted.
Based on the procedures performed, we consider the judgements and estimates made in
determining the carrying value of the MSAR intangible asset to be appropriate.
Key Audit Matter
2) Accounting for Convertible Securities Deed
As detailed in note 17, the Group entered into a Convertible Securities Issue Deed which requires
management to exercise judgement and estimation of certain aspects of the instruments including
the valuation of the Convertible Securities. The accounting policies and critical judgements
applied are disclosed in note 2.
Given the nature of the instrument and the judgement and estimation required by management
we considered this area to be a significant risk for our audit. The key judgements and estimates
are in the assessment of the fair value at recognition and determining the appropriateness of the
accounting treatment applied.
36
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
How the scope of
our audit addressed
the key audit matter
•
•
•
•
We obtained and reviewed the Convertible Securities agreement and evaluated the accounting
treatment adopted by Management against the relevant accounting standards.
We obtained management’s assessment and vouched the value of each element of the
instrument at inception, at conversion points and at the year end to supporting documentation
as applicable.
With the use of our internal valuation experts we challenged management’s assessment on key
judgements and estimates made relating to the fair value at recognition and assessed the key
inputs for reasonableness.
We have reviewed equity conversion documents during the year and checked that all
conversions have been calculated appropriately and in accordance with the agreement and
applicable accounting standards. We have also agreed the Fair Value Through Profit and Loss
movement at the conversion points during the year.
Key observations
We found the Group’s accounting treatment for the instruments and the associated judgements
and fair value estimates applied in the accounting treatment to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
37
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS
OF QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Materiality
Group financial statements
Parent company financial statements
2021
2020
£220,000
£240,000
2021
£48,000
2020
£159,000
Basis for determining materiality
5% of loss before tax
Rationale for the benchmark applied
The Group and Parent company is still significantly involved in business
development activities and has not generated any significant revenue from
its ongoing projects. The ultimate value of the entity remains within its MSAR
technology under development and the ongoing results of the business,
and therefore an earnings-based materiality was considered to be the
most appropriate.
Performance materiality
£165,000
£180,000
£36,000
£119,250
Basis for determining performance
materiality
75% of materiality based on consideration of factors including the level of
historical errors and nature of activities.
Component materiality
We capped materiality for each component of the Group at a percentage of 75% of Group materiality dependent on the size
and our assessment of the risk of material misstatement of that component. Component materiality ranged from £48,000
to £165,000. In the audit of each component, we further applied performance materiality levels of 75% of the component
materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £11,000
(2020: £12,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the
annual report and financial statements 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. 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 course of 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 this gives rise to a material
misstatement in the financial statements themselves. 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.
38
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
Corporate governance statement
As the Group has voluntarily adopted the UK Corporate Governance Code 2018 we are required to review the Directors’
statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to
the Parent Company’s compliance with the provisions of the UK Corporate Governance Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and
longer-term viability
Other Code
provisions
•
•
•
•
•
The Directors’ statement with regards to the appropriateness of adopting the going concern
basis of accounting and any material uncertainties identified set out on page 11; and
The Directors’ explanation as to its assessment of the entity’s prospects, the period this
assessment covers and why the period is appropriate set out in Note 3.
Directors’ statement on fair, balanced and understandable set out on page 23;
Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on page 24;
The section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on page 23; and
•
The section describing the work of the audit committee set out on page 23.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
Matters on which
we are required to
report by exception
In our opinion, based on the work undertaken in the course of the 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 Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
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 in relation to which 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 2021
39
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS
OF QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities, 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 the 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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below:
•
•
•
•
•
•
We gained an understanding of the legal and regulatory framework applicable to the Group and industry in which
it operates, through discussion with management and the Audit Committee and our knowledge of the industry. We
focussed on significant laws and regulations that could give rise to a material misstatement in the financial statements,
including, but not limited to the applicable accounting standards, UK Employment Legislation, Companies Act 2006,
Health and Safety Law, environmental legislation and HMRC tax regulations.
We considered compliance with these laws and regulations through discussions with management, those charged
with governance and the company secretary. Our procedures also included reviewing minutes from board meetings,
inspecting invoices for legal fees incurred in the period and agreeing disclosures to underlying documentation.
We assessed the susceptibility of the Group’s financial statements to material misstatements, including how fraud might
occur via management override of controls and bias in key estimates. We obtained an understanding of management’s
controls designed to prevent and detect irregularities.
We performed a review of the Group’s year end adjusting entries and journals throughout the year and investigated any
that appeared unusual as to nature or amount. We identified and tested journals with unusual posting dates and unusual
descriptions by agreeing to supporting documentation.
We identified areas at risk of management bias, particularly cashflow models to support intangible asset valuations,
and reviewed key estimates and judgements applied by Management in the financial statements to assess their
appropriateness (refer to Carrying value of the (MSAR) intangible asset KAM)
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout
the audit.
40
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware
of it.
A further description of our responsibilities is available 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 Parent 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 Parent Company and the Parent Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Laura Pingree (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
1 October 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
41
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 30 June 2021
Notes
Year ended
30 June 2021
£’000s
Year ended
30 June 2020
£’000s
Continuing operations
Revenue
Production and development costs
Other administration expenses
Fair value adjustments arising on Convertible Securities
Share option charge
Warrant charge
Foreign exchange loss
Operating loss
Finance costs
Finance income
Loss before tax
Taxation
Loss and total comprehensive loss for the year from continuing
operations to owners of the parent
Loss per share – pence
Basic
Diluted
17
18
19
5
8
9
9
17
(1,377)
(1,527)
(1,257)
(303)
-
(9)
(4,456)
(4)
50
(4,410)
150
(4,260)
-
(1,357)
(1,821)
(1,133)
(474)
(65)
(1)
(4,851)
(146)
7
(4,990)
147
(4,843)
(0.36)p
(0.36)p
(0.49)p
(0.49)p
42
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 30 June 2021
Company No. 05267512
Notes
As at
30 June 2021
£’000s
As at
30 June 2020
£’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
Convertible Securities
Current liabilities
Equity attributable to owners of the parent
Issued share capital
Share premium
Merger reserve
Share option reserve
Warrant reserve
Reverse acquisition reserve
Accumulated losses
Total shareholders’ equity
TOTAL EQUITY AND LIABILITIES
10
11
14
15
16
17
20
20
22
21
21
21
460
2,924
3,384
7,006
117
95
61
7,279
10,663
276
-
276
14,069
77,189
3,777
3,344
1,017
522
(89,531)
10,387
10,663
582
2,924
3,506
2,380
213
112
61
2,766
6,272
198
2,045
2,243
10,351
75,431
-
3,927
1,122
522
(87,324)
4,029
6,272
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 1 October 2021 and were signed on its behalf by:
M. Kirk
Chairman
J. Miles
Director
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
43
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2021
1 July 2019
Loss and total comprehensive
loss for the year
Fair value adjustments arising
on Convertible Securities
Share option charge
Transfer of balances relating
to expired share options
Warrant charge
Warrants issued as part of
Open Offer and Subscription
Shares and warrants issued as
part of Convertible Securities
transaction
New shares issued
Share issue costs
Shares issued upon exercise of
Convertible Security
Issued
capital
£’000s
9,227
Share
premium
£’000s
74,438
-
-
-
-
-
-
-
-
-
-
-
(816)
84
101
647
-
393
1,914
(263)
57
30 June 2020
1 July 2020
10,351
10,351
75,431
75,431
Loss and total comprehensive
loss for the year
Fair value adjustments arising
on Convertible Securities
Share option charge
Transfer of balances relating
to expired share options
Transfer of balances relating
to expired warrants
-
-
-
-
-
-
-
-
-
-
New shares issued
Share issue costs
2,599
-
639
3,777
Shares issued upon exercise of
Convertible Security
1,119
1,119
Merger
reserve
£’000s
Share option
reserve
£’000s
Warrant
reserve
£’000s
105
Reverse
acquisition
reserve
£’000s
Accumulated
losses
£’000s
522
(82,985)
Total
£’000s
4,762
(4,843)
(4,843)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,455
-
-
474
(2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65
816
136
-
-
-
502
-
2
-
-
-
-
-
-
502
474
-
65
-
321
2,561
(263)
450
4,029
4,029
3,927
3,927
1,122
1,122
522
522
(87,324)
(87,324)
-
-
303
(886)
-
-
-
-
-
-
-
-
(105)
-
-
-
-
-
-
-
-
-
-
-
(4,260)
(4,260)
1,564
1,564
-
886
105
-
(502)
-
303
-
-
7,015
(502)
2,238
30 June 2021
14,069
77,189
3,777
3,344
1,017
522
(89,531)
10,387
For an explanation of the nature and purpose of other reserves refer to note 21.
44
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
CONSOLIDATED STATEMENT OF
CASH FLOWS
For the year ended 30 June 2021
Notes
Year ended
30 June 2021
£’000s
Year ended
30 June 2020
£’000s
Operating activities
Loss before tax from continuing operations
Fair value adjustments arising on Convertible Securities
Convertible Securities finance costs (non-cash)
Depreciation
Loss on disposal of fixed assets
Finance costs paid
Finance income received
Share option charge
Warrant charge
Working capital adjustments
Decrease/(increase) in trade and other receivables
Decrease/(increase) in prepayments
Increase/(decrease) 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
Issue of ordinary share capital
Issue costs
Increase in Convertible Securities
Net cash inflow from financing activities
Net increase 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
17
17
10
18
15
16
8
10
20
20
17
14
(4,410)
1,257
(4,990)
1,133
-
135
16
4
(50)
303
-
96
17
78
140
172
-
6
(7)
474
65
(44)
(6)
(90)
(2,554)
(3,147)
(4)
150
(2,408)
50
(29)
21
7,015
(502)
500
7,013
4,626
2,380
7,006
(6)
147
(3,006)
7
(24)
(17)
2,606
(263)
2,000
4,343
1,320
1,060
2,380
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
45
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
COMPANY STATEMENT OF
FINANCIAL POSITION
As at 30 June 2021
Company No. 05267512
Notes
As at
30 June 2021
£’000s
As at
30 June 2020
£’000s
Assets
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Amount due from subsidiary
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
Convertible Securities
Amount due to subsidiary
Current liabilities
Equity attributable to equity holders of the parent
Issued capital
Share premium
Merger reserve
Share option reserve
Warrant reserve
Accumulated losses
Total shareholders’ equity
TOTAL EQUITY AND LIABILITIES
10
13
13
14
15
16
17
13
20
20
21
21
21
2
21,479
23,644
45,125
6,541
63
73
6,677
51,802
161
-
7,666
7,827
14,069
77,189
3,777
3,344
1,017
(55,421)
43,975
51,802
1
21,479
20,725
42,205
2,157
131
91
2,379
44,584
116
2,045
7,666
9,827
10,351
75,431
3,927
1,122
(56,074)
34,757
44,584
The loss for the year dealt within the accounts of Quadrise Fuels International plc was £1.40m (2020: £2.30m).
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 2 October 2021 and were signed on its behalf by:
M. Kirk
Chairman
J. Miles
Director
46
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
COMPANY STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2021
1 July 2019
Loss and total comprehensive loss
for the year
Fair value adjustments arising on
Convertible Securities
Share option charge
Transfer of balances relating to
expired share options
Warrant charge
Warrants issued as part of Open
Offer and Subscription
Shares and warrants issued as part
of Convertible Securities transaction
New shares issued
Share issue costs
Shares issued upon exercise of
convertible security
30 June 2020
1 July 2020
Loss and total comprehensive loss
for the year
Fair value adjustments arising on
Convertible Securities
Share option charge
Transfer of balances relating to
expired share options
Transfer of balances relating to
expired warrants
New shares issued
Share issue costs
Shares issued upon exercise of
convertible security
Issued
capital
£’000s
9,227
Share
premium
£’000s
74,438
Merger
reserve
£’000s
-
Share option
reserve
£’000s
3,455
Warrant
reserve
£’000s
105
Accumulated
losses
£’000s
(54,283)
Total
£’000s
32,942
-
-
-
-
-
-
84
647
-
393
-
-
-
-
-
(816)
101
1,914
(263)
57
10,351
10,351
75,431
75,431
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,599
-
639
-
1,119
1,119
3,777
-
-
-
-
474
(2)
-
-
-
-
-
-
-
-
-
-
65
816
136
-
-
-
(2,295)
(2,295)
502
-
2
-
-
-
-
-
-
502
474
-
65
-
321
2,561
(263)
450
3,927
3,927
1,122
1,122
(56,074)
(56,074)
34,757
34,757
-
-
303
(886)
-
-
-
-
-
-
-
-
(105)
-
-
-
(1,400)
(1,400)
1,564
1,564
-
303
886
105
-
(502)
-
-
-
7,015
(502)
2,238
30 June 2021
14,069
77,189
3,777
3,344
1,017
(55,421)
43,975
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
47
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION COMPANY STATEMENT OF
CASH FLOWS
For the year ended 30 June 2021
Operating activities
Loss before tax from continuing operations
Fair value adjustments arising on Convertible Securities
Convertible Securities finance costs (non-cash)
Depreciation
Finance costs paid
Finance income received
Share option charge
Warrant charge
Working capital adjustments
Decrease/(increase) in trade and other receivables
Decrease/(increase) in prepayments
Increase/(decrease) in trade and other payables
Cash generated by/(utilised in) operations
Finance costs paid
Net cash inflow/(outflow) 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
Issue costs
Increase in Convertible Securities
Net cash inflow from financing activities
Net increase/(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
Notes
Year ended
30 June 2021
£’000s
Year ended
30 June 2020
£’000s
17
10
18
15
16
10
13
17
14
(1,400)
1,257
-
1
-
(49)
303
-
68
18
45
243
-
243
49
(2)
(2,919)
(2,872)
7,015
(502)
500
7,013
4,384
2,157
6,541
(2,295)
1,133
140
10
1
(6)
474
65
(10)
(12)
(53)
(553)
(1)
(554)
6
(1)
(2,097)
(2,092)
2,606
(263)
2,000
4,343
1,697
460
2,157
48
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES 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.
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:
• power over the investee;
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, Eastcastle
House, 27-28 Eastcastle Street, London, W1W 8DH.
•
•
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. 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”)
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and effective, or issued and early adopted, as at the date
of these statements. The financial statements have been
prepared under the historical cost convention as modified
for financial assets carried at fair value.
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 2021.
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.
(2.3) Changes in Accounting Principles and Adoption
of New and Revised Standards
Other
The Group does not expect any other standards issued by
the IASB, but not yet effective, to have a material impact on
the group. 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 (see note 11)
The recoverable amount of the MSAR® trade name intangible
asset has been determined using a VIU model. The expected
future cash flows utilised in the VIU model are derived by
quantifying the royalties that would result if the asset was
licensed from a third party in order to determine the income
stream directly attributable to the asset in isolation. The
royalties are based on a percentage of projected future
revenues up to 30 June 2031 with an assumed growth
rate being used beyond that date. The key assumptions
used by management in this VIU model are a) royalty rate,
b) discount rate, c) the period over which cashflows are
forecast d) the growth rate beyond that period. The basis for
the assumptions used is discussed further in note 11.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
49
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION The carrying value of intangible assets at 30 June 2021 is
determined to be £2.9 million (2020: £2.9 million). Further
details are given in Note 11.
Estimates of credit losses (‘ECL’) (see note 13)
Management makes judgement in relation to the future
recoverability of receivables. In relation to the parent
Company there is a net substantial loan to subsidiaries.
Management has used the ‘General Approach’ guidance
as noted in IFRS 9 to make judgements in relation to the
future risk of default and the ability of the subsidiary to
raise the funds necessary to repay the loan in the event that
it was called due. Inherent in this model are a number of
judgements. Management have estimated that a provision
was required of £426k at 30 June 2021 (2020: £373k).
Under the General Approach, at each reporting date,
entities are required to determine whether there has been
a Significant Increase in Credit Risk (SICR) since initial
recognition and whether the loan is credit impaired. This
determines whether the loan is in Stage 1, Stage 2 or
Stage 3, which in turn determines both:
•
•
The amount of ECL to be recognised: 12-month ECL or
Lifetime ECL; and
The amount of interest income to be recognised in future
reporting periods: EIR based on gross carrying amount of
the loan which excludes ECL or the net carrying amount
(i.e. the amortised cost) which includes ECL.
Lifetime ECL are the ECL that result from all possible default
events over the expected life of the loan whereas 12-month
ECL are a portion of Lifetime ECL that represent the ECL
that result from default events that are possible within 12
months of the reporting date. For loans with an expected life
in excess of 12 months, Lifetime ECL will typically be greater
than 12-month ECL because entities will need to factor in all
possible default event rather than only those possible within
12 months.
(2.5) Revenue Recognition
Under IFRS 15, revenue is recognised based on the delivery
of performance obligations and an assessment of when
control is transferred to the customer. In determining the
amount of revenue and profits to record, and associated
statement of financial position items (such as trade
receivables, accrued income and deferred income),
management is required to review performance obligations
within individual contracts.
Revenue is recognised to depict the transfer of promised
goods or services to the customer in an amount that reflects
the consideration to which the entity expects to be entitled
in exchange for those goods or services.
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 2021)
1.383
Statement of
Comprehensive
Income (average
rate throughout
the financial
year)
1.354
1.165
1.132
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.
(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.
50
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 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) Financial liabilities and equity instruments
Financial assets and financial liabilities are recognised when
a Company becomes a party to the contractual provisions of
the instruments.
•
•
Initial Recognition: Financial assets and financial
liabilities are initially measured at fair value. Transaction
costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other
than financial assets and financial liabilities at fair
value through profit or loss and ancillary costs related
to borrowings) are added to or deducted from the fair
value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss
are charged to the Statement of Profit and Loss over the
tenure of the financial assets or financial liabilities.
Classification as debt or equity: Debt and equity
instruments issued by the Company are classified as
either financial liabilities or as equity in accordance
with the substance of the contractual arrangements
and the definitions of a financial liability and an equity
instrument. An equity instrument is any contract
that evidences a residual interest in the assets of
an entity after deducting all of its liabilities. Equity
instruments issued by a Company are recognised at the
proceeds received.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
51
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION •
Classification and Subsequent Measurement: Financial
liabilities are classified as either financial liabilities at
FVTPL or ‘other financial liabilities’.
At 30 June 2020, the group had a convertible securities
instrument which is classified entirely as a liability. As the
instrument contained an embedded derivative, it has been
designated at fair value through profit or loss on initial
recognition and as such the embedded conversion feature
was not separated. The convertible securities instrument
was converted in parts, and was fully converted during the
current financial year. At the conversion dates, the fair value
loss or gain on the portion converted was determined.
The Company de-recognises financial liabilities when and
only when, the Company’s obligations are discharged,
cancelled or have expired. The difference between the fair
value amount of the financial liability de-recognised and
the consideration paid and payable is recognised in the
Statement of Profit and Loss.
Fair value measurement
The fair value measurement of the Group’s financial
liabilities utilises market observable inputs and data as far
as possible.
Inputs used in determining fair value measurements are
categorised into different levels based on how observable
the inputs used in the valuation technique utilised are
(the ‘fair value hierarchy’): – Level 1: Quoted prices in
active markets for identical items (unadjusted) – Level
2: Observable direct or indirect inputs other than Level 1
inputs – Level 3: Unobservable inputs (i.e. not derived from
market data).
The classification of an item into the above levels is based
on the lowest level of the inputs used that has a significant
effect on the fair value measurement of the item. Transfers of
items between levels are recognised in the period they occur.
Convertible Securities are designated as fair value through
profit or loss, with all subsequent gains and losses, included
in the income statement as part of fair value adjustments
arising on Convertible Securities.
The fair value of the Convertible Securities instrument is
estimated using an appropriate valuation method. The key
input to the assumptions are:
•
•
The propensity to convert factor.
The forecast conversion price of the Convertible
Securities.
•
The estimated timing of the conversions.
•
•
•
•
The value converted upon each historical conversion.
The lifespan of the Convertible Security.
The historical volatility of the Company share price.
The Company risk of default before the maturity date of
the Convertible Security.
Inputs to the valuation technique are observable and
unobservable (Level 3 fair value hierarchy).
(2.13) Investments and other Financial Assets
Subsequent to the initial recognition, trade and other
receivables in the Group accounts and the loan receivable
in the Company accounts are measured at amortised cost
using the effective interest method. These assets arise
principally from the provision of goods and services to
customers (eg trade receivables), but also incorporate
other types of financial assets where the objective is to
hold these assets in order to collect contractual cash flows
and the contractual cash flows are solely payments of
principal and interest. They are initially recognised at fair
value plus transaction costs that are directly attributable to
their acquisition or issue, and are subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
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.
Investments, where there is no active market are held at
fair value, are determined using valuation techniques which
include using recent arm’s length market transactions,
reference to the current market value, discounted cash flow
analysis and option pricing models.
(2.14) 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,
52
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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.
(2.15) 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.
(2.16) 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.
(2.17) 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.
(2.18) 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 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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
53
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION (2.19) Share-based Payments
(2.21) 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.
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.
(2.20) Warrants
Warrants are recognised at fair value on date of grant.
The fair value is measured using the Black-Scholes model.
Where warrants are issued in exchange for services, under
IFRS 2 they are expensed on a straight line basis over the
vesting period. Warrants issued as part of an equity based
fundraising fulfil the criteria to be recognised as an equity
instrument under IAS 32, with the fair value recorded in
the warrants reserve and recognised in Share Premium. At
initial recognition, the consideration received as part of the
Convertible Security issuance that also included the issue of
warrants (see note 17) was apportioned to the Convertible
Security instrument with the treatment as outlined per 2.12
and the warrants based on their relative fair values.
54
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The Directors also note the positive and sustained levels of
engagement with partners, prospective clients and project
stakeholders worldwide during the year, despite global
COVID-19 disruption. Existing and prospective commercial
partners make decisions based on long-term considerations,
and the Directors believe that the economic and
environmental advantages offered by MSAR® and bioMSAR™
are increasingly attractive in periods of global uncertainty
as counterparties look to both generate savings and further
improve their environmental performance.
The Directors acknowledge that project activities that
require being on site at client premises have been delayed
and could be subject to further delays depending upon
the status of the pandemic and restrictions put in place by
governments in the months ahead. Whilst these delays do
not inherently affect the longer-term business case, the
revenues resulting from projects may be impacted.
Based on the rationale for the key assumptions outlined
above, the Directors have therefore made the judgement
that the financial statements should be prepared on a going
concern basis.
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.
3. Going Concern
As at 30 June 2021 the Group had a cash balance of
£7.0 million. The increase in funds during the year was the
result of a successful fund-raising exercise, which raised
£6.5 million after costs in March 2021 in two phases, a ‘cash
box’ placing, which raised net funds of £5.5 million and a
1-for-30 Open Offer to existing shareholders, which raised a
further £1 million.
The funds raised, in conjunction with the existing cash
balance, are expected to be sufficient for the Group to reach
commercial revenues and sustainable positive cashflows,
with these expected to commence in Q1 2023. The basis for
this expectation is the Group business model, budget and
business plan, and sensitivity analysis, which have been
reviewed and approved by the Board. The business model
shows total forecast Group cashflows up to 30 June 2031
and the Group budget and business plan covers the next two
financial years in detail. The model comprises the financial
forecasts associated with each project opportunity deemed
to have a realistic chance of progressing, with assumptions
made about i) the operating mode (licence, tolling or
merchant), ii) the equity percentage held in the venture, iii)
the cost of chemicals and equipment, iv) margins and v)
rates of growth. These assumptions are based on the latest
market information, agreements with counterparties and
the status of discussions. The Directors therefore have a
reasonable basis for assuming that the Group’s portfolio of
projects and business development opportunities will result
in the generation of commercially sustainable revenues in
the near term.
The Directors carry out a detailed risk assessment process
each year, with key risks and mitigating actions identified.
Despite the ongoing global disruption caused by COVID-19,
the Group has continued to progress its projects and
business development activities utilising a combination of
web-conferencing and, where possible, in-person meetings
with the Group’s in-country agents and representatives.
COVID-19 has had minimal impact on the Group’s UK
operations, with London based staff working remotely for
the majority of the year, and QRF remaining fully operational
throughout the year, albeit with social-distancing measures
in place and highly restricted acceptance of third-party
visitors. Significant cost savings have also been made since
the outbreak of COVID-19 through careful management of
discretionary expenditure and human resources.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
55
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 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
UK Government COVID-19 employee furlough receipts
Total
Year ended
30 June 2021
£’000s
Year ended
30 June 2020
£’000s
43
35
-
273
135
300
23
23
3
286
172
241
Year ended
30 June 2021
Number
Year ended
30 June 2020
Number
3
6
3
8
Year ended
30 June 2021
£’000s
Year ended
30 June 2020
£’000s
887
116
62
(15)
1,050
1,192
158
67
(14)
1,403
56
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
98
-
8
106
219
10
229
144
11
155
490
194
29
10
233
271
10
281
101
5
106
620
688
39
434
25
1,186
Included in total staff costs are the costs of the Executive Directors as employed by the Company as follows:
Year ended
30 June 2021
£’000s
Year ended
30 June 2020
£’000s
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
Mark Whittle2
Wages and salaries – as paid
Pension costs
Total
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
542
-
290
29
861
1
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
2020. The uplift of 25% due on the deferred balance was repaid in January 2020.
2 Appointed 1 February 2020, resigned 16 July 2021.
Non-executive Directors fees for the year amounted to £81k (2020: £132k ) which included a £10k uplift of previously deferred
fees paid in January 2020 as set out in (1) above).
The highest paid Director’s remuneration totalled £229k (2020: £281k), represented by all aggregate emoluments.
Refer to the Report of Directors’ Remuneration (on page 22) 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 24 – Related Party Transactions.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
57
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
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
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% (2020: 19%)
Effects of:
Non-deductible expenditure
R&D tax credit
Temporary differences
Tax losses carried forward
Total taxation credit on loss from continuing operations
Year ended
30 June 2021
£’000s
Year ended
30 June 2020
£’000s
(150)
(150)
(147)
(147)
Year ended
30 June 2021
£’000s
(4,410)
(838)
Year ended
30 June 2020
£’000s
(4,990)
(948)
58
(150)
24
756
(150)
208
(147)
(13)
753
(147)
The Group has tax losses arising in the UK of approximately £58.4 million (2020: £53.7 million) that are available, under
current legislation, to be carried forward against future profits. £30.7 million (2020: £26.6 million) of the tax losses carried
forward represent trading losses within Quadrise Fuels International plc, £25.8 million (2020: £25.8 million) represent non-
trade deficits arising on intangible assets within Quadrise International Limited, £0.2 million (2020: £0.6 million) represent
pre-trading losses incurred by subsidiaries, £0.9 million (2020: £nil) represent non-trade loan relationships, £0.8 million
(2020: £0.8 million) represent management expenses incurred by Quadrise International Limited, and £nil (2020: £0.1 million)
represent capital losses within Quadrise Fuels International plc.
A deferred tax asset representing these losses and other temporary differences at the statement of financial position date of
approximately £11.1 million (2020: £10.2 million) has not been recognised as a result of existing uncertainties in relation to
its realisation.
58
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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 2021
£’000s
Year ended
30 June 2020
£’000s
(4,260)
(4,843)
1,175,406,844
1,175,406,844
982,793,918
982,793,918
(0.36)p
(0.36)p
(0.49)p
(0.49)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 28.3m dilutive share options and the 40.2m dilutive warrants issued by the Company and which
are outstanding at year-end could potentially dilute earnings per share in the future if exercised when the Group is in a profit
making position.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
59
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 10. Property, plant and equipment
Consolidated
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
machinery
£’000s
Cost
Opening balance – 1 July 2020
Additions
Disposals
Closing balance – 30 June 2021
Depreciation
Opening balance – 1 July 2020
Depreciation charge for the year
Disposals
Closing balance – 30 June 2021
Net book value at 30 June 2021
Company
Cost
Opening balance – 1 July 2020
Additions
Disposals
Closing balance – 30 June 2021
Depreciation
Opening balance – 1 July 2020
Depreciation charge for the year
Disposals
Closing balance – 30 June 2021
Net book value at 30 June 2021
181
-
(107)
74
(181)
-
107
(74)
-
95
3
-
98
(89)
(3)
-
(92)
6
43
-
-
43
(43)
-
-
(43)
-
Total
£’000s
1,745
29
(146)
1,628
(1,163)
(135)
130
(1,168)
16
-
-
16
(16)
-
-
(16)
1,410
26
(39)
1,397
(834)
(132)
23
(943)
-
454
460
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
machinery
£’000s
107
-
(107)
-
(107)
-
107
-
-
69
2
-
71
(68)
(1)
-
(69)
2
44
-
-
44
16
-
-
16
(44)
(16)
-
-
-
-
(44)
(16)
-
-
-
-
-
-
-
-
-
-
-
Total
£’000s
236
2
(107)
131
(235)
(1)
107
(129)
2
60
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Property, plant and equipment
Consolidated
Cost
Opening balance – 1 July 2019
Additions
Disposals
Closing balance – 30 June 2020
Depreciation
Opening balance – 1 July 2019
Depreciation charge for the year
Disposals
Closing balance – 30 June 2020
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
machinery
£’000s
Total
£’000s
181
-
-
181
(166)
(15)
-
(181)
91
4
-
95
(78)
(11)
-
(89)
43
-
-
43
(41)
(2)
-
(43)
16
-
-
16
(16)
-
-
1,390
1,721
20
-
24
-
1,410
1,745
(690)
(144)
-
(991)
(172)
-
(16)
(834)
(1,163)
Net book value at 30 June 2020
-
6
-
-
576
582
Company
Cost
Opening balance – 1 July 2019
Additions
Closing balance – 30 June 2020
Depreciation
Opening balance – 1 July 2019
Depreciation charge for the year
Closing balance – 30 June 2020
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
machinery
£’000s
107
-
107
(107)
-
(107)
68
1
69
(61)
(7)
(68)
44
-
44
(41)
(3)
(44)
16
-
16
(16)
-
(16)
Total
£’000s
235
1
236
(225)
(10)
(235)
1
-
-
-
-
-
-
-
Net book value at 30 June 2020
-
1
-
-
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
61
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 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 2020 and 30 June 2021
7,686
3,100
25,901
36,687
Amortisation and Impairment
Balance as at 1 July 2020 and 30 June 2021
Net book value as at 30 June 2021
Cost
(7,686)
-
(176)
2,924
(25,901)
-
(33,763)
2,924
Balance as at 1 July 2019 and 30 June 2020
7,686
3,100
25,901
36,687
Amortisation and Impairment
Balance as at 1 July 2019 and 30 June 2020
Net book value as at 30 June 2020
(7,686)
-
(176)
2,924
(25,901)
-
(33,763)
2,924
Intangible assets comprise intellectual property with a cost of £36.7 million, including assets of finite and indefinite life.
Quadrise Canada Corporation’s (“QCC’s) royalty payments of £7.7 million and the MSAR® trade name of £3.1 million 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 £25.9 million, primarily made up of technology and know-how, are considered as
finite assets and were amortised over 93 months, being fully amortised in 2012. The Group does not have any internally
generated intangibles.
MSAR® trade name intangible asset
In accordance with IAS 36 “impairment of assets” and IAS 38 “intangible assets”, a review of impairment for indefinite life
intangible assets is undertaken annually or at any time an indicator of impairment is considered to exist. The discount rate
applied to calculate the present value is for the cash generating unit (“CGU”). A CGU is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The
recoverable amount of the CGU is assessed by reference to the value in use (“VIU”), being the net present value (“NPV”) of
future cash flow expected to be generated by the asset, and fair value less costs to sell (“FVLCS”).
The recoverable amount of the MSAR® trade name intangible asset has been determined using a VIU model. The expected
future cash flows utilised in the VIU model are derived by quantifying the royalties that would result if the asset was licensed
from a third party in order to determine the income stream directly attributable to the asset in isolation. The royalties are
based on a percentage of projected future revenues up to 30 June 2031 with an assumed growth rate being used beyond
that date.
The key assumptions used in this calculation are as follows:
Royalty rate (% of projected revenue) 1
Discount rate 2
Revenues forecast up to 3
Growth rate beyond forecast period 4
62
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
2021
0.5%
20%
2020
0.5%
20%
30 June 2031
30 June 2031
0%
0%
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1
2
3
4
The royalty rate used upon initial recognition of this intangible asset was 0.33% of revenues determined as part of a third-
party intangible asset valuation exercise. This was increased to 0.5% of revenues from 2011 onwards to reflect the wider
awareness of the MSAR® trademark in the market.
The discount rate of 20% has been determined by management as conservative estimate based on the uncertainty
inherent in the revenue forecasts. Management estimates the discount rates using pre-tax rates that reflect current
market assessments of the time value of money and risks specific to expected future projects.
The 2021 revenue forecast extends to 30 June 2031 which ensures that each project included within the forecast reaches
full maturity.
No growth has been forecast beyond the forecast period due to the uncertainty inherent in the revenue projections
beyond the stage of project maturity.
The revenue forecast is based on the latest Company business model, which is regularly reviewed by management. The basis
for the inclusion of projects and the estimation of growth rates, margins and project lifespans within the business model is
based on the latest agreements with counterparties, commodity and chemical prices and the most recent discussions with
customers, suppliers and other business partners.
The ‘base-case’ impairment assessment based on the above inputs shows a recoverable amount for the asset that is in
excess of the net book value of asset and therefore no impairment has been identified, with the VIU exceeding the carrying
value by £1.74 million (the ‘headroom’).
Management have performed sensitivity analyses whereby certain parameters were flexed downwards by reasonable
amounts and certain scenarios were modelled for the CGU to assess whether the recoverable value would result in an
impairment charge. In isolation, none of these scenarios would result in an impairment to the MSAR® Trade Name intangible
asset. However, a combination of two or more of these scenarios could result in an impairment charge, but management do
not consider this likely.
The following sensitivities were applied:
Results of sensitivity analysis
Scenario
Delayed revenues (1 year)
Delayed revenues (2 years)
Increase in discount rate to 25%
Removal of projects which generate 25% of
forecast revenues
Finite company lifespan (to 30 June 2032).
Amortisation of Intangible Assets
Resulting headroom
(£’m)
0.95
0.30
0.19
0.56
0.20
Scenario which would reduce headroom to nil
A 3 year delay to forecast revenues.
A 3 year delay to forecast revenues.
Increase in discount rate to 25.86%.
Removal of projects which generate
37.1% of revenues.
Finite company lifespan (to 30 June 2031).
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 2021.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
63
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
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.
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 2021. The shares in each of these companies were valued at CAD $nil on 1 July 2020
due to their business models being highly uncertain, with minimal possibility of any material value being recovered from
their asset base. During the year there has been no indication that this situation has changed, therefore the Directors have
determined that the investments should continue to remain valued at CAD $nil at 30 June 2021.
13. Investments and loans in Subsidiaries
Opening balance
Long term loans advanced
Movement in expected credit loss arising under
IFRS 9
Closing balance
Loans to/from subsidiaries
Company
Amount due from
subsidiary
£’000s
Company
Amount due to
subsidiary
£’000s
Company
Direct investment
£’000s
20,725
2,972
(53)
23,644
(7,666)
21,479
-
-
-
-
(7,666)
21,479
Total
34,538
2,972
(53)
37,457
In accordance with IFRS 9, a Company must recognise expected credit losses for all financial assets held at amortised cost,
including most intercompany loans from the perspective of the lender. Expected credit losses are based on the assumption
that repayment of the loan is demanded at the reporting date. As at 30 June 2021, the Company has a loan of £24.1 million
(2020: £21.1 million) due from its 100% subsidiary Quadrise International Limited (‘QIL’), and a loan payable of £7.7 million
(2020: £7.7 million) due to its 100% subsidiary Quadrise Limited (‘QL’). Both loans are repayable upon demand.
As at 30 June 2021, QIL has no ability to repay the balance due if this were to be demanded, there would therefore be a 100%
probability of default. In this event, the Company must assess the expected manner of recovery.
The directors have determined that the most expeditious means of recovery of this balance would be via the means of a
sale of QIL’s assets in order to raise the balance due. The assets held by QIL include the Group’s intangible assets, patents
and trademarks, assets which underpin the value of the Group’s business model. The directors have determined that the
sale of these assets at a sufficient discount would allow QIL to obtain the funds necessary to raise the balance due and have
further assumed that such a sale would be completed within a period of 6 months. The expected credit loss is calculated by
discounting the balance due over the period of recovery at a determined discount rate.
On 29 April 2015 a Debenture agreement was finalised between QIL and the Company, in which QIL agrees to pay any
balances when due, and to pay interest of 3.5% above the base rate on any sum demanded until payment. The base rate at
30 June 2021 is 0.1%. The discount rate used to calculate the expected credit loss is 3.6%.
The resulting expected credit loss arising on the loan due from QIL is £426k (2020: £373k).
64
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Investment in subsidiaries
In accordance with IAS 36 a Company’s assets must not be carried at more than their recoverable amount. Where there is any
indication of impairment, an impairment test must be carried out.
The Group’s business model relies upon the assets held by QIL – intangible assets, patents and trademarks. The recoverable
amount of the investment in QIL is therefore determined by calculation of the net present value of the forecast cashflows
produced by the Group’s business model, which is regularly reviewed by management. The basis for the inclusion of
projects and the estimation of growth rates, margins and project lifespans within the business model is based on the latest
agreements with counterparties, commodity and chemical prices and the most recent discussions with customers, suppliers
and other business partners.
As at 30 June 2021, there is no indication that the carrying value of the investment held by the Company in QIL is being
held at more than its recoverable amount as determined by the net present value of the forecast cashflows produced by
the Group’s business model. Based on this the Directors concluded that no impairment is necessary for the year ended
30 June 2021.
Holdings in subsidiaries are detailed in note 26.
14. Cash and Cash Equivalents
Cash at bank
Total
15. Trade and Other Receivables
Trade receivables
Other receivables
Other taxes
Total
16. Trade and Other Payables
Trade payables
Other taxes
Accruals
Total
Consolidated
30 June 2021
£’000s
7,006
7,006
Consolidated
30 June 2020
£’000s
2,380
2,380
Company
30 June 2021
£’000s
6,541
6,541
Company
30 June 2020
£’000s
2,157
2,157
Consolidated
30 June 2021
£’000s
16
Consolidated
30 June 2020
£’000s
43
Company
30 June 2021
£’000s
-
Company
30 June 2020
£’000s
-
39
62
117
101
69
213
30
33
63
92
39
131
Consolidated
30 June 2021
£’000s
87
Consolidated
30 June 2020
£’000s
69
Company
30 June 2021
£’000s
67
Company
30 June 2020
£’000s
36
33
156
276
49
80
198
32
62
161
34
47
117
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 2021 amount to 17 days (2020: 14 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 (2020: £nil).
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
65
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
17. Convertible Securities
On 22 August 2019, the Company entered into an agreement with Bergen Global Opportunity Fund LP (‘the Investor’)
whereby the Investor would 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 on 30 August 2019. A second tranche of Convertible Securities, with a nominal value of up to £537.5k was subscribed
for by the Investor for £0.5 million on 10 February 2021. 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.
Upon entry into the agreement, the Company 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 5.78p per Ordinary Share, subject to anti-dilution and
exercise price reduction provisions. 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 collateralise 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).
The Agreement was completed and both tranches funded to the Company on the basis of the remaining Authority
from the 2018 Annual General Meeting, and the updated authority obtained at the 27 September 2019 General Meeting
of shareholders.
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity. An equity
instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Under the terms of the Convertible Securities agreement of 22 August 2019, the Company has no obligation to repay
the securities in cash (unless the Company defaults on the terms) and the number of shares which may be issued upon
conversion is variable. As there is no residual interest in the assets of the Company after conversion of the Convertible
Securities, the Convertible Securities meet the criteria to be classified entirely as a financial liability.
Tranches 1 and 2 of the Convertible Securities instrument were designated at fair value on initial recognition. The fair value
of tranche 1 was assessed as £1.86 million, being the nominal value of £2.15 million less interest and warrant charges. At
30 June 2020, the remaining nominal value of £1.70 million of tranche 1 was assessed to have a fair value of £2.05 million.
The fair value of tranche 2, which has a nominal value of £537.5k was assessed as £1.19 million, with tranche 2 being fully
converted on 30 April 2021, and therefore no balance remaining outstanding as at 30 June 2021. Upon each exercise of
conversion rights, the portion of the Convertible Securities converted is assessed at fair value, with the resulting fair value
adjustment being recorded in the Statement of Comprehensive Income.
The fair value adjustment charge arising for the year of £1.257 million (2020: 1,133 million) comprises fair value adjustments
arising upon initial recognition, revaluation as at balance sheet dates and upon subsequent conversion.
66
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) During the years ended 30 June 2020 and 2021, the Investor exercised their conversion rights as follows:
Conversion date
23 March 2020
15 April 2020
22 June 2020
19 August 2020
7 September 2020
5 January 2021
26 January 2021
30 April 2021
Total
Convertible
Securities
converted
(£)
100,000
100,000
250,000
300,000
400,000
500,000
500,000
537,500
Conversion
price
(p)
No. of shares
awarded upon
conversion
Share price on
conversion date
Fair value
adjustment
(£’000)
1.2
1.2
1.1
1.6
1.7
1.8
2.0
3.2
8,333,333
8,333,333
22,727,273
18,750,000
23,529,412
27,777,778
25,000,000
16,796,875
1.68
1.64
2.98
2.90
2.76
3.01
3.40
5.50
40
36
426
244
248
336
350
386
2,066
2,687,500
151,248,004
As at 30 June 2021, both tranches have been converted in full, and no nominal value remains outstanding to the investor
under the terms of the Convertible Security instrument.
18. 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
Expired during the year
Exercised during the year
Options outstanding as at 30 June
Exercisable as at 30 June
Number
30 June 2021
39,250,000
10,000,000
(6,500,000)
-
42,750,000
28,312,500
WAEP (pence)
30 June 2021
17.95
7.50
23.36
-
14.69
18.36
Number
30 June 2020
39,400,000
-
(150,000)
-
39,250,000
29,250,000
WAEP (pence)
30 June 2020
17.91
-
7.50
-
17.95
20.09
The weighted average remaining contractual life of the 42.8 million options outstanding at the statement of financial position
date is 5.17 years (2020: 5.05 years). The weighted average share price during the year was 2.98p (2020: 3.18p) 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 also may be exercised within an agreed period of an employee leaving the Group at the discretion of the Board.
The Company issued 10 million share options to directors and employees during the year (2020: nil).
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
67
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 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. Warrants
Movement in the year:
2021
3.08p
7.50p
0.1%
126.91%
4.0
2020
-
-
-
-
-
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
Expired during the year
Warrants outstanding as at 30 June
Exercisable as at 30 June
Number
30 June 2021
45,228,026
-
-
(5,000,000)
40,228,026
40,228,026
WAEP (pence)
30 June 2021
6.56
-
-
3.16
6.98
6.98
Number
30 June 2020
5,000,000
40,228,026
-
-
45,228,026
45,228,026
WAEP (pence)
30 June 2020
3.16
6.98
-
-
6.56
6.56
The warrants are equity settled warrants which vest immediately on grant date. Fair value is measured at the grant date of
the option using the Black Scholes pricing model. The inputs into this model are: Stock price at the date of grant, exercise
price, interest rate, expected term and expected volatility. The expected volatility of the warrants reflects the assumption
that historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The expected life of
the warrants is based on historical data available at the time of the option issue and is not necessarily indicative of future
trends, which may not necessarily be the actual outcome.
The weighted average inputs into the Black Scholes option pricing model were as follows:
Stock price:
Exercise Price
Interest Rate
Volatility
Expected term (years)
2021
-
-
-
-
-
2020
3.93p
6.98p
0.75%
128%
2.89
The weighted average remaining contractual life of the 40.2 million warrants outstanding at the statement of financial
position date is 1.15 years (2020: 1.99 years). The weighted average share price during the year was 2.98p (2020: 3.18p)
per share.
68
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 20. Share Capital
The company has one class of ordinary share capital which carries no rights to fixed income, any preferences or restrictions.
Issued and fully paid:
1,406,900,659 (2020: 1,035,150,774) Ordinary shares of £0.01 each
2021
£
2020
£
14,069,007
10,351,508
The table below shows a reconciliation of movement in share capital and share premium during the year:
As at 1 July 2020
Aug 2020 – Conversion of convertible securities
Sep 2020 – Conversion of convertible securities
Jan 2021 – Conversion of convertible securities
Feb 2021 – Conversion of convertible securities
March 2021 – Placing and Open Offer
May 2021 – Conversion of convertible securities
As at 30 June 2021
No. of shares
1,035,150,774
18,750,000
23,529,412
27,777,778
25,000,000
259,895,820
16,796,875
1,406,900,659
Share Capital
(£’000)
£
10,351
Share Premium
(£’000)
£
75,431
188
235
278
250
2,599
168
14,069
112
165
222
250
639
370
77,189
On 9 March 2021, 222,222,222 new ordinary shares were issued at 2.70p per share under the Placing announced on 2 March
2021, raising gross funds of £6.0 million.
On 24 March 2021, 37,673,598 new ordinary shares were issued at 2.70p per share under the Open Offer announced on 2
March 2021, raising gross funds of £1.0 million.
Fees and commissions of £502k were deducted from the proceed of the Placing and Open Offer, resulting in total net receipts
of £6.50 million.
New ordinary shares issued upon Bergen’s exercise of conversion rights under the Convertible Security were as follows:
18,750,000 on 25 August 2020 at 1.6p, 23,529,412 on 11 Sep 2020 at 1.7p, 27,777,778 on 11 Jan 2021 at 1.8p, 25,000,000 on
1 Feb 2021 at 2.0p and 16,796,875 on 7 May 2021 at 3.2p.
21. Other Reserves
Nature and purpose of other reserves
Merger reserve
In March 2021, the Company incorporated a Jersey registered ‘Cash Box’ company. This was used to facilitate the placing
of 222,222,222 new ordinary shares of 1p each on 9 March 2021 at a placing price of 2.7p per share. The placing raised £6.0
million and the Company received cash proceeds of £5.5 million net of expenses. The proceeds of the share issue were
parcelled into the ‘cash box’ Company which was then acquired by way of a share exchange which qualified for merger relief
so avoided the need to recognise a share premium on the share issue. The net amount booked to share capital and reserves
was £6.0 million £2.2 million was allocated to nominal share capital and the excess of £3.8 million was recorded within the
merger reserve. All shares are fully paid up.
Reverse acquisition reserve
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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
69
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 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.
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.
22. Pension Commitments
For direct employees of Quadrise Fuels International plc, the Company contributes 8% of salary to a defined contribution
pension scheme. Pension cost to the Company for the year amounted to £67k (2020: £67k).
23. 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:
Financial assets
Loans and receivables – Cash and cash equivalents
Loans and receivables – Trade and other receivables
Financial liabilities
Other financial liabilities – Convertible Securities
Other financial liabilities – Trade and other payables
Consolidated
30 June 2021
£’000s
Consolidated
30 June 2020
£’000s
Company
30 June 2021
£’000s
Company
30 June 2020
£’000s
7,006
117
-
263
2,380
213
2,045
149
6,541
63
-
153
2,157
131
2,045
83
All receivables are current and are due within 30 days. Trade and other payables are due within 30 days. For further
information on the Convertible Securities, see note 17.
Foreign currency exchange risk
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 2021 were net assets of US$13k (2020: US$16k) and €64k
(2020: €8k).
A 10% strengthening of Sterling against the Euro at the statement of financial position date would have increased loss for
the year by £1k (2020: £1k) whilst a 10% weakening of Sterling against the Euro would have reduced loss for the year by £1k
(2020: £1k). This analysis assumes that all other variables remain constant.
A 10% strengthening of Sterling against the US$ at the statement of financial position date would have increased loss for the
year by £6k (2020: £2k) whilst a 10% weakening of Sterling against the US$ would have reduced loss for the year by £6k (2020:
£2k). This analysis assumes that all other variables remain constant.
70
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 £69k (2020: £23k) per annum. A decrease in interest rates of 1% will increase loss for the year by
approximately £21k (2020: £7k) 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.
Credit risk
The Group had receivables of £117k at 30 June 2021 (2020: £213k), of which £nil (2020: £nil) was receivable from related
parties. Receivables of £117k 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 2021 (2020: The Group had Convertible Securities instrument
outstanding – see note 17 for further details.)
24. Related Party Transactions
Non-executive Director Laurence Mutch is also a Director of Laurie Mutch & Associates Limited, which has provided
consulting services to the Group. The total fees charged for the year amounted to £45k (2020: £30k). The balance payable at
the statement of financial position date was £nil (2020: £nil).
QFI defines key management personnel as the Directors of the Company. Other than as above, there are no transactions with
Directors, other than their remuneration as disclosed in the Report of Directors’ Remuneration.
25. 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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
71
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 26. 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%
100%
100%
Class of
share held
Ordinary
Ordinary
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 Eastcastle House, 27-28 Eastcastle Street, London, W1W 8DH.
27. Events After the end of the Reporting Period
On 3 September 2021, the Company granted a total of 10,500,000 options over new ordinary shares of 1p each in the
Company to executive directors of the Company in accordance with the provisions of the Company’s Unapproved Share
Option Plan 2016 (“2016 Plan”). The issue of these options follows the lapsing in full of the 10,000,000 options issued by the
Company on 21 August 2020 due to the specific performance conditions of those options not having been met.
Director
Mike Kirk
Jason Miles
Total
Number of
Performance
Options
3,000,000
7,500,000
10,500,000
Plan
2016 Plan
2016 Plan
-
Exercise price
7.5p
7.5p
-
These Performance Options will vest as to 50% on the first anniversary of grant and the remaining 50% shall vest on the
second anniversary of the date of grant. All vestings are subject to the satisfaction of specific performance conditions prior
to the first anniversary of grant. The Performance Options will be exercisable from vesting until the eighth anniversary of the
date of grant.
On 3 September 2021 Quadrise also granted 2,552,793 nominal value options (“NVO”) over new ordinary shares of 1p each in
the Company to the Company’s executive directors in lieu of cash bonuses for the year ended 30 June 2021. The NVOs have
been issued under the 2016 Plan.
Director
Mike Kirk
Jason Miles
Total
Number of NVOs
776,931
1,775,862
2,552,793
Plan
2016 Plan
2016 Plan
-
Exercise price
1.0p
1.0p
-
The NVOs will vest after 12 months from the date of grant, have no performance conditions and will be exercisable from
vesting until the eighth anniversary of the date of grant.
On 3 September 2021, the Company granted 1,462,929 NVOs over new ordinary shares of 1p each in the Company to
the Company’s employees in lieu of cash bonuses for the year ended 30 June 2021. These NVOs were issued under
the Company’s Enterprise Management Incentive Plan, and will vest after 12 months from the date of grant, have no
performance conditions and will be exercisable from vesting until the tenth anniversary of the date of grant.
72
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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, Eastcastle House, 27-28 Eastcastle Street,
London, W1W 8DH
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
73
COMPANYOVERVIEW BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION NOTES
74
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
QUADRISE IS THE INNOVATOR AND GLOBAL SUPPLIER OF A
DISRUPTIVE TECHNOLOGY THAT ENABLES THE PRODUCTION
OF MSAR®* AND BIOMSAR™, SYNTHETIC HEAVY FUEL OIL AND
BIOFUEL RESPECTIVELY, WHICH HAVE SIGNIFICANT ECONOMIC AND
ENVIRONMENTAL BENEFITS.
MSAR® IS THE REGISTERED TRADEMARK FOR MULTIPHASE SUPERFINE ATOMISED RESIDUE
CONTENTS
Highlights
1
MSAR® and bioMSAR™ technology
2
Chairman’s Statement
6
Chief Executive’s Statement
8
Strategic Report
11
Directors’ Section 172 Statement
15
Directors
16
Directors’ Report
18
Statement of Directors’ Responsibilities
21
Report on Directors’ Remuneration
22
Corporate Governance Statement
23
33
Independent Auditors’ Report
Consolidated Statement of Comprehensive Income 42
43
Consolidated Statement of Financial Position
44
Consolidated Statement of Changes in Equity
45
Consolidated Statement of Cash Flows
46
Company Statement of Financial Position
47
Company Statement of Changes in Equity
48
Company Statement of Cash Flows
49
Notes to the Financial Statements
75
Corporate Information
CORPORATE
INFORMATION
Registered Office
Eastcastle House
27-28 Eastcastle Street
London
W1W 8DH
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
Solicitor
BDB Pitmans LLP
One Bartholomew Close
London
EC1A 7BL
Registrar
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Banker
Coutts & Co
440 Strand
London
WC2R 0QS
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QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2021
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ANNUAL
REPORT &
ACCOUNTS
2021
CLEANER FUEL
CLEANER PLANET
Eastcastle House | 27-28 Eastcastle Street | London W1W 8DH
T +44 (0) 20 7031 7321
www.quadrisefuels.com