COMPANY REGISTRATION NO. 05267512
ANNUAL
REPORT &
ACCOUNTS
2022
CLEANER FUEL
CLEANER PLANET
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Eastcastle House | 27-28 Eastcastle Street | London W1W 8DH
T +44 (0) 20 7031 7321
www.quadrisefuels.com
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 Advisor
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London
EC2R 6AS
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
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
1
Highlights
2
Chairman’s Statement
4
Chief Executive’s Statement
7
Strategic Report
11
Directors’ Section 172 Statement
12
Directors
14
Directors’ Report
17
Statement of Directors’ Responsibilities
18
Report on Directors’ Remuneration
19
Corporate Governance Statement
Independent Auditors’ Report
29
Consolidated Statement of Comprehensive Income 37
38
Consolidated Statement of Financial Position
39
Consolidated Statement of Changes in Equity
40
Consolidated Statement of Cash Flows
41
Company Statement of Financial Position
42
Company Statement of Changes in Equity
43
Company Statement of Cash Flows
44
Notes to the Financial Statements
69
Corporate Information
Perivan 264071
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
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HIGHLIGHTS
Throughout FY2022, Quadrise has seen material progress across a range of
international projects. Key agreements have been signed with MSC, Valkor
and our client in Morocco, with Morocco and MSC now entering the trial phase.
Development of lower carbon bioMSAR™ continues, as well as plans to develop
‘bioMSAR™ Zero’ by 2030, assisted by the signature of an agreement with
Vertoro. These developments, together with the funds in place, are expected to
take the Company to commercial revenues in the current financial year.
MSC
Americas
In July 2022, Quadrise signed a Framework Agreement with
MSC to carry out trials of bioMSAR™ and MSAR® fuels with a
view to the commercial supply of one or both of the fuels to
MSC’s global fleet. Proof-of-concept tests are planned for Q1
2023, following which MSC will run LONO trials. With positive
trial progression, Quadrise, MSC and other key stakeholders
expect to commence discussions for commercial supply to
MSC’s global fleet.
Quadrise and its local agents are progressing discussions
with candidate sites in Panama and Honduras to trial
MSAR® and bioMSAR™ at power plants as a precursor to
potential commercial supply in 2023. Joint discussions are
also underway with a large refinery in the Caribbean with
an interest in potential MSAR® supply, and the Company
continues to progress activities in Mexico.
Morocco
bioMSAR™
In June 2022, Quadrise signed a new Material Transfer &
Cooperation Agreement with the client, under which an
industrial demonstration test using MSAR® and bioMSAR™
will be carried out at a client site. The MSAR® fuel for this
test has now been manufactured and is being delivered to
Morocco, with bioMSAR™ following imminently. The site test
is now scheduled for early Q4. Upon successful completion,
the parties will enter into discussions for potential
commercial supply before year-end.
In September 2022, Quadrise signed a Joint Development
Agreement with Vertoro to investigate the use of their crude
sugar oils (CSO™) as an alternative biofuel feedstock for
bioMSAR™.
Utah
Financial
In April 2022, Quadrise entered into a Commercial
Development Agreement with Valkor Technologies LLC to
commercialise both MSAR® and bioMSAR™ at their projects
in Utah. The parties are working together to conclude a
commercial agreement during Q4 2022.
Cash balance of £4.4m as at 30 June 2022, with commercial
revenues forecast to commence before the end of the current
financial year.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
1
CORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
CHAIRMAN’S
STATEMENT
After joining Quadrise as Chairman in February 2022,
I expressed my belief that this was a pivotal time for
the Company. Almost no-one could have foreseen how
much change and volatility has been witnessed in energy
markets since then. The war in Ukraine and record global
temperatures pushing the cost, security and carbon
intensity of energy supply to the top of the political and
business agenda. With the need to find greener, more
cost-effective energy solutions becoming more urgent by
the month, Quadrise now finds itself very well positioned
to capture new business by offering practical, economic and
greener solutions to real world problems through its MSAR®
and lower carbon bioMSAR™ fuels.
In February, I also stated that our immediate priorities were
to determine which of our projects would be able to achieve
revenue generation and positive cashflows in the timeliest
manner and within our available resources, and to position
Quadrise squarely amongst the growing cohort of Green
Economy companies.
On the first of these priorities, it has been pleasing to
note that the progress achieved to date should enable
Quadrise to become revenue generating within the
current financial year. Our flagship project with MSC
has reached the milestone of a signed Framework
Agreement and trials are expected to commence in
early 2023. In Morocco, with preparatory work now
complete, we expect completion of the trial early next
quarter. In Utah, the commencement of drilling by
Valkor and their partners will provide the oil samples
needed to progress trials and commercial agreements.
The agreements in place provide a clear line of sight from
trials to commercial revenues.
The Company’s immediate future will be to a large
extent determined by our ability to deliver on the
projects in hand, but it is pleasing to note the increasing
enquiries from potential customers and partners who
are interested to work with Quadrise and our real-world
decarbonisation solutions. Once we secure our first
commercial agreements, we should be confident of
further growth.
On positioning Quadrise squarely in the Green Economy
ecosystem, work is underway to enhance our ESG
messaging, with our maiden sustainability report currently
being researched and drafted. Shareholders will note
our streamlined Annual Report this year as we migrate
our sustainability messaging to this report, expected
to be published before the end of the calendar year.
In September, we were delighted to appoint Vicky Boiten-Lee
as an ESG adviser to the board, in order to assist us in our
efforts to make Quadrise a market leader in sustainability
and to bring her industrial marketing experience and
international perspectives to the board table.
Looking further ahead, we continue to develop the
next generation of bioMSAR™ fuel and energy delivery
technologies, with the goal of producing a fully net-zero
product by 2030. These efforts have been bolstered by
our recent JDA with Vertoro. We also remain open to
M&A transactions that could de-risk and/or facilitate
the expansion of the core emulsion fuels business.
Our ambitions for the business are limited more by our
available financial resources than by the scale of the
opportunities that we can address.
We have come a long way during the financial year,
and especially since the end of the Covid-19 pandemic
restrictions. External factors and management’s successful
efforts on project definition and decarbonisation initiatives
have combined to convince the board that now is the time
to double down on their delivery, rather than to seek a
change of direction.
I remain firm in my belief that Quadrise’s time has come
and am delighted to lead an experienced and determined
board. Together with management, the board looks
forward to driving the Company towards commercial
revenues and generating value for our shareholders,
whom I thank for their support and engagement
throughout the year.
Results for the Year
The consolidated after-tax loss for the year to
30 June 2022 was £2.6m (2021: £4.3m), with the loss
per share for the year reducing to 0.18p from 0.36p
in 2021. Production and development costs of £1.5m
(2021: £1.4m) comprise the costs of the Group’s R&D
facility (‘QRF’ in Essex), its operational staff and
consultants, and ongoing bioMSAR™ and MSAR®
development costs. These costs are consistent with the
previous year, as they largely relate to fixed costs.
Administration expenses of £1.4m (2021: £1.5m), comprise
the Group’s corporate staff and directors’ costs, professional
advisor fees, PR/IR costs and head office costs. These have
decreased as a result of reduced professional fees and lower
office costs due to the move from our previous office in
February 2021.
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QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
At 30 June 2022, the Group had total assets of £8.0m
(2021: £10.7m). The most significant balances were
cash of £4.4m (2021 £7.0m), intangible assets of £2.9m
(2021: £2.9m), and property, plant and equipment of
£0.4m (2021: £0.5m). The Group has tax losses arising
in the UK of approximately £60.0m (2020: £58.4m) that
are potentially available to be carried forward against
future profits.
Andy Morrison
Non-executive Chairman
30 September 2022
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
3
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CHIEF EXECUTIVE’S
STATEMENT
Our Energy Decarbonization Solutions
As a result of our collective efforts during the year, Quadrise
has positioned itself as one of the key decarbonisation
solutions providers in a rapidly changing global energy
market. The world has until 2030 to cut human-caused
CO2emissions by half, in addition to other greenhouse
gas (“GHG”) emissions such as methane. These steps
are required to have a 50% chance of avoiding the worst
effects of climate change by 2050, according to the
Intergovernmental Panel for Climate Change. Our unique
technology can play a significant role in helping the world
achieve this goal economically, today.
Our patented MSAR® technology enhances the combustion
of residual fuels and fuel oils, reducing harmful emissions.
MSAR® use lowers fuel consumption in diesel engines by
up to 10% and reduces greenhouse gas emissions by the
same amount. Our innovative low carbon bioMSAR™ fuel
takes advantage of this proven fuel technology platform and
incorporates renewable glycerine, currently a by-product of
biodiesel manufacture, as a clean fuel component to reduce
greenhouse gas emissions by over 25%.
Since presenting bioMSAR™ at the International Maritime
Organisation (“IMO”) in London during their International
Shipping Week in September 2021 there has been a steady
flow of enquiries from the maritime sector. According
to UK Research and Innovation, the shipping industry is
responsible for over 900 million tonnes of carbon dioxide
emissions annually, roughly 2.5% of the world’s total
emissions. While a number of lower-carbon and potentially
net-zero solutions are in development, they are not ready
to be utilised at scale and will require significant investment
in either retrofitting existing fleets or building new vessels.
Quadrise’s solutions are available immediately, and can be
deployed at low cost to achieve immediate benefits during
the transition to a Net Zero GHG future.
Just as we continue to promote our current technology and
products, we also recognise that Net Zero fuel solutions
will be mandatory in the future, potentially as early as 2030.
We have an RDI strategy in place to take advantage of this
opportunity using our innovative and adaptable technology
as well as collaborations with others in the field. During the
period we have completed a joint study with University of
Greenwich to explore the production of glycerine and other
products from algae and commenced testing of various
biofuel components that are soluble in oil or water.
A Joint Development Agreement (“JDA”) was signed
with Vertoro of the Netherlands to investigate the use
of concentrated sugars extracted from biomass as
lignocellulose as an alternative water-based lower cost
4
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
and abundant biofuel feedstock for bioMSAR™. Initial
testing at Quadrise Research Facility (“QRF”) in Essex has
been positive - incorporating their crude sugar oils (CSO™)
into bioMSAR™ formulations. A joint patent application
has been filed with Vertoro as a result and diesel engine
testing is planned under the JDA during the next 12 months.
Additionally, a new patent was filed by Quadrise and
Nouryon to cover “blend-on-board” solutions for the
production of MSAR® and bioMSAR™ in situ for diesel
engines using conventional fuels and biofuels to strengthen
our IP portfolio, and we are generating data using our
Cummins engine at Aquafuel to support this.
Key Project Delivery
Our lead projects are in the marine, upstream and
industrial sectors, with further projects progressing
for downstream and powerplant applications. Our
current focus is on demonstrating MSAR® and bioMSAR™
technology at commercial scale and progressing each of the
opportunities into commercial supply agreements. During
the period agreements have been signed to progress these
projects accordingly:
•
MSC – In July 2022, we were delighted to finally sign
a framework agreement with MSC Shipmanagement
(‘MSC’) to test and trial both of our economical, cleaner
marine fuel and biofuel alternatives on their vessels.
Having built a good relationship with MSC over a
number of years, Quadrise is excited to be collaborating
with them to decarbonise the largest container ship fleet
in the world as they lead the way in helping the marine
sector transition towards a net-zero carbon future.
The agreement with MSC is a multi-stage process, with
pilot-scale marine testing shortly to be completed in
Italy in early Q4, managed by Wärtsilä. The MSC Leandra,
which is to be used for testing is a 54,000-deadweight
tonne container ship in active commercial service.
The Wärtsilä Flex-powered vessel, formerly known
as the Seago Istanbul, is familiar to us from previous
successful tests of MSAR®, which simplifies and de-risks
the planned testing and extended operational use
of bioMSAR™. The project team have inspected the
MSAR® systems previously installed for the Maersk
tests to ensure the unit is ready for fuel testing, and
commissioning tests are scheduled to be completed
during the coming weeks. Planning is ongoing with
MSC and Lloyd’s Register to complete a safety review
to obtain Flag State approval for the trials as before.
Proof-of-concept (“POC”) tests aboard the Leandra
are planned for Q1 2023, after the vessel returns from
drydock for its scheduled maintenance and regulatory
class inspection. Confirmation of the vessel route and
the MSAR® / bioMSAR™ bunker supply point and partner
will be made in Q4 2022, with discussions underway
with potential fuel supply partners. Following the
POC tests, MSC will run operational trials for which
approximately 25,000 tonnes of each fuel will be
supplied. Each trial encompasses 4,000 hours of testing
on board the vessel, with a view to obtaining a letter of
no objection (“LONO”) from Wärtsilä upon completion.
The first operational LONO trial on bioMSAR™ is
expected to be completed by the second half of next
year. As the trials progress positively Quadrise, MSC
and other key stakeholders expect to commence
discussions for the commercial supply of bioMSAR™
and MSAR® to MSC’s global fleet. Successful trial results
will also facilitate negotiations for the supply of our
technology to other shipping companies and advance
our collaboration to help decarbonise shipping globally.
•
Morocco – Our project in Morocco is with a key client
interested in using MSAR® and potentially bioMSAR™.
In June 2022, Quadrise signed a new Material Transfer
& Cooperation Agreement (“MTCA”) with the client,
superseding the original agreement announced late
2019. Under the MTCA Quadrise is contracted to
manufacture trial quantities of MSAR® and bioMSAR™
for the purpose of an industrial demonstration test at
one of the client’s sites, and to complete a technical
and economic feasibility study for a potential additional
industrial demonstration test at a second site. The draft
feasibility study for the second site was submitted to the
client in June 2022 as planned.
Preparations for the industrial demonstration test are
well advanced, the trial equipment is on site and the
client is ready to receive the MSAR® and bioMSAR™ fuel
following several visits by Quadrise personnel to site.
Preparation of the MSAR® fuel was delayed by several
weeks due to hold ups with the commissioning of
our new five tonne-per-hour MSAR® unit in Denmark.
This was caused by the late supply of key electronic
components for the control system, and limited
availability of personnel at our third-party contractor
over summer. With these issues now resolved, the
MSAR® is now manufactured and is being delivered to
Morocco, with bioMSAR™ manufacture and shipment
to follow imminently. The site test is now scheduled
for early Q4. On completion of the trial Quadrise
will provide the Client with a written report on the
efficacy of using MSAR® and bioMSAR™. Provided the
Client-specified deliverables regarding performance
and product quality are met, the parties will enter
into discussions for a potential commercial supply
of MSAR® before year-end. The additional industrial
demonstration test will be subject to a future agreement
following positive results from the first test.
•
Utah – Our project in Utah involves using MSAR®
technology to emulsify low-sulphur 10-13° API heavy
oil that can be recovered from the billions of barrels of
oil-sand and conventional oil deposits at Asphalt Ridge.
MSAR® technology reduces the viscosity of the heavy oil,
saving the use of diluents or excessive heat in the supply
chain. The resulting MSAR® or bioMSAR™ produced is an
alternative to very low sulphur (<0.5%) fuel oil (“VLSFO”)
or FAME-based biofuel for the industrial, power and
marine fuel sectors.
In August 2021, our RDI team at QRF successfully
converted Utah oil samples provided by Greenfield
Energy LLC (“Greenfield”, a subsidy of AIM-listed TOMCO
Energy plc) to both MSAR® and bioMSAR™. In April 2022,
Quadrise entered into a Commercial Development
Agreement (“CDA”) with Valkor Technologies LLC
(“Valkor”) to commercialise Quadrise’s MSAR® and
bioMSAR™ technologies at its projects in Utah. Valkor
has equity interests in the majority of heavy oil projects
in Utah, including those of Greenfield, Petroteq Energy
Inc, Heavy Sweet Oil LLC and Big Sky Resources LLC.
During the period up to the end of August 2022, Valkor
managed an extended and expansive core sampling
programme in the oil-producing region to accurately
define recoverable reserves from surface oil sands and
sub-surface heavy oil. In parallel, further work was
undertaken by Valkor and partners on selecting and
optimising the solvent process used for extraction of
oil from the sand, so as to enable finished products of
each. Valkor was also involved with presentations to
the Utah authorities to obtain drilling permits for 4 pilot
wells, Valkor expect to obtain these drilling permits
imminently and first oil is anticipated later in Q4 2022.
The result of these activities has secured heavy
oil availability by end 2022, but delayed the assay
information and potential samples that Quadrise
and Valkor need to market MSAR® and bioMSAR™ in
the region. Despite these minor delays the parties
are working together to finalise the commercial
terms for Phase 1 (the “Primary Project”) to conclude
an agreement during Q4 2022. The future use of
sequestered CO2 for enhanced oil recovery in Utah
could result in a low carbon MSAR® or bioMSAR™ VLSFO
alternative that would have compelling competitive
advantages, especially for the marine sector.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
5
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
•
Americas – Through our regional agent network we
are progressing projects in Panama and Honduras
with thermal power generators, and in Mexico and the
Caribbean with national oil companies and utilities
respectively. Quadrise and its local agents, E&PC, are
progressing discussions with several candidate sites in
Panama and Honduras to trial MSAR® and bioMSAR™
at power plants equipped with medium speed 4
stroke diesel engines (many of which are Wärtsilä), as
a precursor to potential commercial supply in 2023.
Joint discussions have also recently commenced with
a large refinery in the Caribbean with an interest in
potential MSAR® supply for internal consumption or
sale to regional power plants. In Mexico, the Company
submitted a multi-site study in Q3 2022 to the National
Oil Company supporting the implementation of MSAR®
technology at a number of their refineries, together
with documentation for one of the sites to carry out a
demonstration of MSAR® refinery refuelling on a fuel oil
boiler and/or fired heater in 2023.
Outlook
During the reporting period the downstream oil sector has
had to react to a combination of increased product demand
for refined transportation fuels as the world emerged from
the global pandemic, and then a rapid supply-demand
shift resulting from the partial embargo on Russian oil
and products due to the invasion of Ukraine. These events
elevated oil prices and the relative value of refined products
globally. This has been positive for refinery margins in
general and has elevated the fuel oil - distillate spread,
enhancing the economic value of refinery residuals as an
energy source for MSAR® and bioMSAR™ in our key markets.
The refining sector is adapting to changes in renewable
fuel demand, with many refineries in the developed world
investing in biofuel production. Major energy companies
are also heavily investing in decarbonisation initiatives,
an example being the recent $2.75bn acquisition of the
Renewable Energy Group by Chevron in June 2022.
Russia’s invasion of Ukraine has also had a material impact
on the availability and price of natural gas and LNG, with
European shortages and embargoes impacting global
demand. Higher energy prices, coupled with increased
scrutiny of the role of methane slip in the supply of natural
gas are causing a new uncertainty over decisions on future
energy supply. Methane is a potent greenhouse gas that has
a global warming potential approximately 80 times greater
than CO2 over 20 years (IPCC), hence a small gas leak can
materially negate any benefits in CO2 reductions over fuel
oil or biofuel-based products such as MSAR® and bioMSAR™.
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QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Many commentators are now questioning the longer-term
use and full environmental impact of LNG when the world
needs to decarbonise.
New legislation and regulations to advance decarbonisation
efforts are coming thick and fast, initiated by the EU
but now spreading globally by other regions and the
IMO. The shipping sector is one of the hardest sectors to
decarbonise but there is increased consumer pressure
for operators to address this challenge. The IMO and the
Maritime Environment Protection Committee (MEPC) policy
goal is to cut annual greenhouse gas emissions in shipping
by at least 40% by 2030, pursuing a 70% reduction by 2050.
The forthcoming Energy Existing Ship Index (EEXI) and
Carbon Intensity Indicator (CII) regulations have resulted
from this policy goal. The former’s purpose is to regulate
the overall energy efficiency of a vessel’s design, whilst
the latter regulates the operational carbon intensity of
a vessel by measuring how efficiently it transports goods or
passengers. In addition to the environmental, economic and
operational benefits, our fuels represent an effective and
swift solution to meet these regulations.
During the period Philip Hill joined us in January 2022 to
replace Mark Whittle as COO, and Andy Morrison joined us
in February 2022 as Non-executive Chairman to replace
Mike Kirk. Both Philip and Andy have settled in well and
have hit the ground running. In addition, we have recently
welcomed two new staff at QRF in Essex to strengthen
the RDI team there, working under Bernard Johnston to
advance our projects and decarbonisation initiatives. Vicky
Boiten-Lee has recently joined us in an ESG Advisory role to
assist David Scott and myself in enhancing our sustainability
programmes and reporting during the coming months.
I am pleased to say that Quadrise is entering an exciting
period of growth and I look forward to generating value
for our loyal shareholders, whilst delivering innovative
solutions for a cleaner planet.
Jason Miles
Chief Executive Officer
30 September 2022
STRATEGIC
REPORT
For the year ended 30 June 2022
Principal Activity
The principal activity of the Company is to develop markets
for its proprietary emulsion fuels, MSAR® and bioMSAR™
as low-cost, more environmentally friendly substitutes for
conventional heavy fuel oil (“HFO”) and biofuels for use
in power generation plants, industrial and upstream oil
applications, and marine diesel engines.
Business Review and Future Developments
A full review of the Group’s activities during the year,
recent events and future developments is contained in the
Chairman and CEO Statements on pages 2 and 4.
Key Performance Indicators
The Group’s key performance indicators are:
•
•
Development and commercial performance against
the Group’s business model and project timetables
established with partners and clients, and
Financial performance and position against the
approved budgets and cashflow forecasts.
The Board regularly reviews the Group’s business
model, with a progress review held at least monthly with
Non-Executive Directors. The commercial performance of
the Company and each of the Company’s key projects and
business development opportunities is discussed at length
in the Chairman and CEO Statements.
Each year, a detailed two-year budget and cash forecast
is prepared by the Executive Directors and the Head of
Finance, and following an extensive review process, is
then approved by the Board. Performance against budget
and updated cash projections are included within the
monthly management accounts issued to and reviewed by
the Board.
For the year ended 30 June 2022, progress against the
Group’s business model was slower than anticipated, with
delays to key projects as discussed in the CEO statement
on pages 4-6. The financial performance of the Group was
ahead of budget due to lower than forecast expenditure
on bioMSAR™ testing, staff costs and up-front project
expenditure as a result of delays to project timetables.
Going Concern
The Group had a cash balance of £4.4m as of 30 June 2022,
expected to be sufficient to reach forecast commercial
revenues in H1 2023 and to cover project expenditure
and fixed costs up to early H2 2023. Additional funding
will be required beyond this point to bridge the gap
between exhaustion of existing funds and the generation
of sustainable positive cashflows, expected to commence
in H2 2024. The Directors have determined that the
continuation of the Group as a going concern will be
dependent upon successfully raising sufficient funds
to bridge this gap. The Directors have a reasonable
expectation that such funds will be raised, although no
binding funding agreements are in place at the date of this
report, and have therefore determined that it is appropriate
to prepare the financial statements on a going concern
basis. However, in the absence of additional funding being
in place at the date of this report, these conditions indicate
the existence of a material uncertainty which may cast
significant doubt over the Company’s ability to continue
as a going concern and, therefore, that it may be unable to
realise its assets and discharge its liabilities in the normal
course of business. For further details behind the judgments
and estimations used by the Directors in reaching this
determination, refer to note 3.
Longer Term Viability Statement
In reaching its conclusion on the going concern assessment
and longer term viability of the Group, the Board reviewed
the Group’s three year cash flow forecasts which cover
the period to revenue generation and the generation of
positive cashflow. This period is applicable because it
extends to the point during which the Group is forecast to
be generating sustainable positive cashflows. The Board
reviewed the underlying assumptions in this cashflow,
together with sensitivity analysis performed on these
projections. The Board believes these forecasts are based
on a prudent assessment of the Group’s prospects, target
markets and past experience, taking account of reasonably
possible scenarios given current market and economic
conditions. The risks outlined below have been considered
by the Board in their determination of longer-term viability,
most significantly ‘Delay in commercialisation of MSAR® and
funding risks’ and ‘No profit to date’
The Board have reviewed sensitivity analysis which cover
these risks, modelling delays in project timelines as well as
the removal of certain projects and have determined that
the effect of these risks on the Company’s longer term
viability is that the timing and amount of funds required
to take the Group to the point of sustainable positive
cashflows is affected. However, the Board consider that
the Group remains viable in the longer term under the
sensitivities modelled.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
7
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION STRATEGIC REPORT (CONTINUED)
For the year ended 30 June 2022
The Board therefore has a reasonable expectation that
the Group will be able to continue in operation and meet
its liabilities as they fall due over the period of their
assessment, provided it is able to raise the funding required
as outlined in the Going Concern note above.
Climate Change
As discussed in both the Chairman’s and CEO’s statements
on pages 2 to 6, Quadrise’s bioMSARTM 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.
8
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Environmental constraints, climate change and
decarbonisation
The increasingly hostile public attitude towards fossil fuels is
a significant challenge resulting in a rapid move away from
hydrocarbons towards fully renewable fuels. Whilst MSAR®
provides considerable environmental advantages, and
bioMSAR™ offers the added benefits of carbon reduction,
neither offer a net-zero carbon solution. The Group mitigates
this risk by continuing to invest in research and development
to pursue ‘net-zero’ carbon fuel solutions as part of its aim
to be at net zero by 2030 and pursue business opportunities
that will assist in the achievement of this goal. The Company
provides progressive decarbonisation solutions for
applications such as shipping, where the existing legacy fleet
will be in service for many years to come.
Market scope and risk
Aligned with the constraints above, and faced with the move
away from hydrocarbons, the Group must still progress its
MSAR® and bioMSAR™ endeavours into a volume business.
The Group mitigates this challenge by continuing to promote
the environmental contribution of MSAR® and bioMSAR™
and explaining the assured ongoing contribution of
hydrocarbons to the global energy mix. The Group further
mitigates this risk by increasing the potential applicability
of Quadrise technology to various sectors, as evidenced by
the opportunities in the upstream and industrial sectors
discussed in the CEO’s Statement. Nevertheless, the
marketability of our fuels is affected by numerous factors
beyond the control of the Group, for example the variability
of price spreads between light and heavy oils, the relative
cost of biofuel components, and the relative competitiveness
of oil, gas, biofuel and coal prices both for prompt and future
delivery.
Commercial return
The Group has made considerable progress in its rapid
development and enhancement of bioMSAR™ whilst
continuing to advance commercial opportunities for
MSAR® and reduce its treat costs in the face of changes to
fuel oil-gasoil spreads. During the product development
of bioMSAR™ there remain the considerable challenges
of testing, feedstock availability (see below), glycerine
treatment options, formulation costs and commercial
feasibility still to overcome. There is a risk the Group will not
achieve a commercial return due to major unanticipated
change in a key variable or, more likely, the aggregate impact
of changes to several variables which results in sustained
depressed margins.
The competitive position could be affected by government
regulations concerning taxation, duties, specifications,
importation and exportation of hydrocarbon fuels and
environmental aspects. Freight costs contribute substantially
to the final cost of supplied products and a major change
in the cost of bulk liquid freight markets could have an
adverse effect on the economics of the fuels business.
The Group would mitigate this risk through establishing
appropriate flexibilities in the contractual framework, offtake
arrangements and price risk management through hedging.
Feedstock sourcing - MSAR®
IMO2020 has impacted high sulphur residue supply,
and MSAR® economics are vulnerable to changes in
fuel oil-gasoil spreads. Securing low-cost residue looks
increasingly challenging. There is a risk in respect
of appropriately located residues and ongoing price
competitive availability of such feedstock as oil refiners
seek to extract more transportation fuels from each barrel
of crude using residue conversion processes. The Group
mitigates this risk where possible by utilising its deep
understanding of the global refining industry, targeting
qualifying suppliers matched to prospective major
consumers. An MSAR® commercial contract would motivate
candidate feedstock suppliers to expedite feedstock supply.
Feedstock sourcing - bioMSAR™
Whilst sufficient quantities have been identified for
immediate trial purposes, the volumes and quality of
renewable glycerine required for a substantial commercial
marine or industrial bioMSAR™ contract are beyond
those readily accessible. To mitigate this the Company is
rapidly increasing its knowledge of current and potential
glycerine sources and engaging with suppliers. Clearly a
commercial contract would again stimulate this market
and thus expedite feedstock supply. The Company is also
investigating the feasibility of algal production of glycerine
with the University of Greenwich, as well as researching
other renewable feedstocks that could be utilised together
with, or instead of glycerine, such as Vertoro’s CSO™ biofuel.
Delay in commercialisation of MSAR® and funding risks
There is a risk that the commercialisation of MSAR®
and bioMSAR™ could be delayed further, or unforeseen
technical and/or commercial challenges arise. This could
mean that the Group may ultimately need to raise further
equity funds to remain operational. Depending on market
conditions and investor sentiment, there is a risk that the
Group may be unable to raise the required funds when
necessary. The Group mitigates this risk by maintaining
strong control over its pre-revenue expenditure, keeping up
the momentum on its key projects and maintaining regular
contact with the financial markets and investor community.
Technological risk
There is a risk firstly that the markets for MSAR® and
bioMSAR™ fuels adopt alternative fuels making these
technologies redundant or secondly that the technology
used for their production may not be adequately robust
for all applications. This is in respect of the character
and nature of the feedstock and the parameters of
transportation and storage pertaining to a specific project.
This risk may jeopardise the early commercialisation of the
technology and subsequent implementation of projects;
or give rise to significant liabilities arising from defective
fuel during plant operations. The Group mitigates this risk
by ensuring that its highly experienced key personnel are
closely involved with all areas of MSAR® and bioMSAR™
formulation and manufacture, and that the fuel is
thoroughly tested before being put into operational use.
Competition risks
There is a risk that new competition could emerge with
similar technologies sufficiently differentiated to challenge
Quadrise’s process. Were such competition to emerge,
this could result, over time, in further price competition
and pressure on margins beyond that assumed in the
Group’s business planning. This risk is mitigated by the
limited global pool of expertise in the emulsion fuel market
combined with an enhanced R&D programme aimed
at optimising cost and performance and protection of
intellectual property. The Group also makes best use of
scarce expertise by developing close relationships with
strategic counterparties such as Nouryon while ensuring
that key employees are suitably incentivised.
Environment, Social and Governance risks (ESG)
Quadrise is committed to providing safer, cleaner and
more affordable energy. By leveraging our extensive
RDI capabilities, and through continuous improvement
processes, Quadrise aims to be carbon-neutral by
2030. Furthermore, the highest standards of corporate
governance have always been a strength and this places the
Company in the top tier of AIM companies. We maintain this
commitment by adopting the highest disclosure standards
of the UK Corporate Governance Code, through the
experience and commitment of our Non-executive Directors
and by following stringent Board policies and procedures.
The Company works to exceptional health, safety,
environmental protection and quality standards, with
strong risk management processes in place, all of which are
supported by a first-class team of professional advisors.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
9
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION compliance with the stock market regulations. The Group
mitigates this risk through commitment to a high standard of
corporate governance and ‘fit for purpose’ procedures, and
by maintaining and applying effective policies.
Economic, political, judicial, administrative, taxation
or other regulatory factors
The Group may be adversely affected by changes in
economic, political, judicial, administrative, taxation or other
regulatory factors, in the areas in which the Group operates
and conducts its principal activities. The Group has no direct
exposure to the Ukraine/Russia conflict.
Andy Morrison
Non-executive Chairman
30 September 2022
STRATEGIC REPORT (CONTINUED)
For the year ended 30 June 2022
Other Business Risks
Dependence on key personnel
The Group’s business is dependent on obtaining and
retaining the services of key personnel of the appropriate
calibre as the business develops. The success of the
Group will continue to be dependent on the expertise and
experience of the Directors and the management team, and
the loss of personnel could still have an adverse effect on
the Group. The Group mitigates this risk by ensuring that key
personnel are suitably incentivised and contractually bound.
Environmental risks
The Group’s operations are subject to environmental risks
inherent in the oil processing and distribution industry.
The Group is subject to environmental laws and regulations
in connection with all its operations. Although the Group
ensures compliance with all applicable environmental
laws and regulations, there are certain risks inherent
to its activities, such as accidental spills, leakages or
other circumstances that could expose the Group to
potential liability.
Further, the Group may require approval from the relevant
authorities before it can undertake activities which are
likely to impact the environment. Failure to obtain such
approvals may prevent or delay such activities. The Group
is unable to predict definitively the effect of additional
environmental laws and regulations, which may be adopted
in the future, including whether any such laws or regulations
would materially increase the Group’s cost of doing
business, or affect its operations in any area of its business.
The Group mitigates this risk by ensuring compliance with
environmental legislation in the jurisdictions in which it
operates, and closely monitoring any pending regulation or
legislation to ensure compliance.
No profit to date
The Group has incurred aggregate losses since its inception,
and it is therefore not possible to evaluate its prospects
based on past performance. There can be no certainty that
the Group will achieve or sustain profitability or achieve or
sustain positive cash flow from its activities.
Corporate and regulatory formalities
The conduct of petroleum processing and distribution
requires compliance by the Group with numerous
procedures and formalities in many different national
jurisdictions. It may not in all cases be possible to comply
with or obtain waivers of all such formalities. Additionally,
functioning as a publicly listed Company requires
10
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
I
B
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S
N
E
S
S
R
E
V
I
E
W
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 Group maintaining a reputation
for high standards of business conduct: The Group has
always adopted the highest disclosure standards of the
UK Corporate Governance Code; the Board of Directors
contains experienced, independent Non-executive
Directors who follow stringent Board policies and
procedures. The Group works to high HSEQ standards,
with strong management procedures in place, and
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 the year by the open question and answer
session following the Annual General Meeting on
26 November 2021. 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 30 September 2022 and was signed on its
behalf by:
Andy Morrison
Non-executive Chairman
30 September 2022
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 Group 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 6, and principal business risks on page 8.
(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 could
provide a safer, cleaner and more affordable energy
and a pathway to a more sustainable future. 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 2022
11
CORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
DIRECTORS
Andy Morrison
Non-Executive Chairman
(appointed 1 February 2022)
Andy is a director of growth
businesses with almost forty years
of experience encompassing major
multi-national corporations and
junior public companies. Andy
spent 17 years at Shell plc in their oil products, lubricants
and speciality chemicals divisions, where his roles included
VP positions in sales, marketing, trading and strategy. Andy
then held senior positions at BG Group plc and BOC Group
plc in Corporate Strategy and New Business Development
respectively. Since 2007, Andy has led a number of junior
listed companies in both the energy and ESG sectors,
where he has significant experience covering restructuring,
turnarounds, new listings and acquisitions. Andy holds a
first-class bachelor’s degree in chemical engineering and
fuel technology from the University of Sheffield.
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.
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.
Dilipkumar Shah
Non-Executive Director
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.
12
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Mark Whittle
Chief Operating Officer
(resigned 16 July 2021)
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.
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.
Mike Kirk
Chairman
(resigned 26 November
2021)
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. 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 has
extensive experience in the energy and oilfield/engineering
services and utilities sectors, as a senior corporate finance
advisor and Non-executive Director. Mike resigned from the
QFI board on 26 November 2021.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
13
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 2022.
Results and Dividends
The consolidated loss from continuing operations after taxation for the year ended 30 June 2022 was £2.9m (2021: £4.3m).
The Directors do not recommend the payment of any dividend for the year (2021: £nil).
Directors
Those who served as Directors during the year are:
•
•
•
•
•
•
•
Andy Morrison (Non-executive Chairman) – appointed 1 February 2022
Mike Kirk (Chairman) - resigned 26 November 2021
Jason Miles (Chief Executive Officer)
Mark Whittle (Chief Operating Officer) - resigned 16 July 2021
Laurence Mutch (Non-executive Director)
Dilipkumar Shah (Non-executive Director)
Philip Snaith (Non-executive Director)
Resolutions to elect Andy Morrison who was appointed by the Board with an effective appointment date of 1 February 2022
as a Director of the Company and to re-elect Laurie Mutch who will retire as a Director by rotation under the Company’s
Articles of Association, will be proposed at the Company’s 2022 Annual General Meeting.
Directors’ Interests
The interests of the Directors holding office at 30 June 2022 were as follows:
Number of Shares held:
Directors
Andy Morrison1
Jason Miles
Laurence Mutch
Philip Snaith
Dilipkumar Shah
1 – On 1 August 2022, Andy Morrison purchased 700,000 shares.
30 June 2022
Ordinary Shares of
1p each
30 June 2021
Ordinary Shares of
1p each
-
-
3,905,988
3,905,988
522,107
506,649
170,000
522,107
506,649
170,000
14
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Number of share options held:
Directors
Andy Morrison
Jason Miles
Laurence Mutch
Dilipkumar Shah
Philip Snaith
Substantial Shareholders
30 June 2022
Share options
-
30 June 2021
Share options
-
Exercisable up to
-
-
5,000,000 1 April 2022
1,500,000
3,551,122
1,448,878
1,500,000 22 March 2024
3,551,122 27 June 2029
1,448,878 27 June 2027
-
5,000,000 21 August 2028
1,775,862
- 3 September
2029
-
3,500,000 1 April 2022
2,000,000
2,000,000 27 June 2027
-
500,000 1 April 2022
500,000
2,000,000
500,000 27 June 2027
2,000,000 27 June 2027
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
HDSL
Barclays Smart Investor
Ruudowen Limited
AJ Bell
Phibatec Limited
HSBC Private Bank
Financial Instruments
Number of
ordinary shares
held
302,010,511
Percentage of
issued share
capital and
voting rights
21.47%
Nature of holding
Indirect
Indirect
249,322,740
17.72%
Indirect
123,379,623
Indirect
77,456,126
Direct
62,839,261
Indirect
56,909,544
Direct
51,558,994
Indirect
44,198,416
8.77%
5.51%
4.47%
4.05%
3.66%
3.14%
The Group’s principal financial instruments comprise cash balances and other payables and receivables that arise in the
normal course of business. The risks associated with these financial instruments are disclosed in note 23.
Research and Development
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 Chief Executive’s Statement.
Future Developments
Further information regarding the future developments of the Group is contained in the Chief Executive’s Statement.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
15
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION DIRECTORS’ REPORT (CONTINUED)
Directors’ Liabilities
Re-appointment of Auditor
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 Auditor
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.
In accordance with Section 489 of the Companies Act 2006,
a resolution to re-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
25 November 2022 as stated in the Notice, which
accompanies this Annual Report.
By order of the Board.
MSP Corporate Services Limited
Company Secretary
30 September 2022
16
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
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.
Andy Morrison
Non-executive Chairman
30 September 2022
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 UK adopted international accounting
standards in conformity with the requirements of the
Companies Act 2006 for reporting year ended 30 June 2022.
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 2022
17
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 2022 were as follows:
Director
Andy Morrison1
Mike Kirk2
Jason Miles
Mark Whittle3
Philip Snaith
Laurence Mutch
Bryan Sanderson4
Dilipkumar Shah
Short-term
employee
benefits
£’000s
30
Social
security
costs
£’000s
4
Post-
employment
benefits
£’000s
-
Other
benefits
£’000s
-
Share
option
benefits*
£’000s
-
6
34
5
4
5
-
48
251
38
40
47
-
-
4
10
3
-
-
-
-
5
6
2
-
-
-
-
(56)
(1)
(48)
9
9
-
2
Total
2021
(as disclosed)
£’000s
-
Share
option
benefits
£’000
-
Total
2021
£’000*s
-
127
263
179
44
44
1
-
75
119
47
22
22
-
5
202
382
226
66
66
1
5
Total
2022
£’000s
34
7
300
-
53
61
-
2
Total
454
58
17
13
(85)
457
658
290
948
1 – Appointed 1 February 2022
2 – Resigned 26 November 2021
3 – Appointed 1 February 2020, resigned 16 July 2021
4 – Resigned 14 July 2020
* – Non-cash share option expense. Negative figures denote a reversal of prior year share option expense due to the lapsing
of unvested share options.
Reconciliation of Share Options Granted to Directors
As at 1 July
Granted during the year by QFI
Exercised during the year
Resignation of Director
Expired during the year
As at 30 June
30 June 2022
Number of share
options
30 June 2021
Number of share
options
38,000,000
13,052,793
-
(16,776,931)
(21,500,000)
28,500,000
10,000,000
-
(500,000)
-
12,775,862
38,000,000
No share options were exercised by Directors during the year (2021: nil).
The market price of the Company’s shares at the end of the reporting period was 1.60p (2021: 3.50p) and the range during the
year was 1.49p to 4.47p (2021: 1.63p to 6.35p) per share.
Philip Snaith
Chairman of the Compensation Committee
30 September 2022
18
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
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-executive
Directors. Ensure accurate, timely and clear information.
Appropriate combination of Executive and
Non-executive (particularly independent) Directors
so that no one individual or group dominates. A clear
division between board and company leadership.
Non-executive 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 2022
19
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 strong corporate governance
principles in all its 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 Group benefits from a highly experienced Board, setting
clear values and strategy whilst promoting a hands-on,
friendly but professional culture.
The Company strives to keep our shareholders informed
of material progress on our projects, but we acknowledge
that this progress has not been as rapid as we would have
liked, leading in some instances, to gaps in the provision
of updates. However, we continue to receive positive
responses from investors regarding our use of Investor Meet
Company (“IMC”), and ensure that all questions, no matter
how challenging, are answered either during the event
or posted on the IMC website afterwards. 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 IMC, we continue to use Proactive Investors
for interviews around key areas, and regularly update
our social media feeds (Twitter and LinkedIn) to provide
background and supporting information to shareholders.
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 Board
we are fully aware of our responsibilities in this regard and
we have regular contact with our high-quality advisory
team including our NOMAD, brokers and our PR-IR and 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 revealing
any material that should be disclosed via RNS. This open
dialogue with our advisors ensures that the information
that we 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 or 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 appropriate experience of the subject matter.
The executive team frequently consult the Chairman 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.
Following the expiry of Covid restrictions, the Company
was delighted to once again hold an in-person AGM in
November 2021, which was live-streamed via the IMC
platform to shareholders unable to attend in person.
We will be continuing with this hybrid approach for our 2022
meeting, with the investor presentation and subsequent
Q&A livestreamed via IMC.
Andy Morrison
Non-executive Chairman
30 September 2022
20
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Principle C: Ensure necessary resources to meet
objectives and measure performance. Establish
framework of controls which enable risk to be
assessed and managed.
We will continue to reduce costs where this is sensible within
the business, without impacting our ability to deliver our
business development plans, including the essential research
and development support. This includes changes to the
executive structure where appropriate.
Refer to Provisions 28: Assessment of Risks, and 29: Internal
Controls, as well as the disclosures under Principles I and O.
Principle D: Ensure effective engagement with and
encourage participation from shareholders and
stakeholders.
Our AGM held on 26 November 2021 was a hybrid in-person/
online event attended by 25 shareholders in person with a
further 127 attending online. Through investor conference
calls (6 October 2021, 26 November 2021, 1 April 2022)
with an average of 164 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.
Application of the Code
In accordance with AIM Rule 26, the following describes
how the Company complies with 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 2022 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.
Given the progress outlined in the Chairman and
Chief Executive’s statements, 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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
21
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 2022 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 8 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 26 November 2021, four ordinary resolutions
were carried by at least 95.66% voting in favour. Two special
resolutions, about the directors’ authority to allot and the
disapplication of pre-emption rights, were carried with at
least 95.45% voting in favour.
22
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
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-executive 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 12 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 non-Executive Chairman, there is a clear division
between board and company leadership. 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 is the Company’s CEO and Andy Morrison was
appointed as non-Executive Chairman on 1 February 2022.
Provision 10: Independence of non-executive
directors
The profiles and experience of the non-executive directors
are provided on page 12 of the Annual Report.
Non-Executive Chairman Andy Morrison has the appropriate
experience as a former VP at Shell plc and holder of senior
positions at BG Group plc and BOC Group plc, as well as
leadership positions at junior listed companies in both
the energy and ESG sectors. He is a shareholder and holds
options in the Company. Mr Morrison 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 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.
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 2022 financial year amounted to £5k
(2021: £45k). 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 retires by rotation with
a resolution for his re-appointment to be proposed at the
2022 AGM.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
23
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Mr Dilip Shah is closely associated with significant
shareholders, he is a shareholder and holds options in the
Company and is not considered independent.
In view of their contribution to the Company, Mr Morrison,
Mr Snaith, Mr Mutch and Mr Shah have been awarded
options in the Company, as more fully detailed on page 15
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, with Mr Morrison also having purchased
shares in the Company following the end of the financial
year – please refer to page 14. 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 Independent 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
against previously determined corporate performance targets
adopted by the Board. The non-executive directors meet
frequently to discuss any performance concerns.
Provision 14: Meetings of the Board
At the start of the 2021-22 financial year the Board
comprised the Chairman, Chief Executive Officer and
Chief Operating Officer as executive Directors and three
non-executive Directors. Following the resignations of
Mark Whittle on 26 July 2021 and Mike Kirk on 26 November
2021, and the appointment of Andy Morrison on 1 February
2022, the Board now comprises one executive director
and four 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 2021/22
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 monthly management accounts.
All relevant information is circulated in good time.
The attendance record of each director is shown below:
Director
Mike Kirk*
Andy Morrison**
Jason Miles
Mark Whittle***
Laurence Mutch
Philip Snaith
Dilip Shah
Attendance
7
3
12
1
12
12
8
*resigned 26 November 2021
**appointed 1 February 2022
***resigned 26 July 2021
100%
100%
100%
100%
100%
100%
66%
Provision 15: Demands on Directors’ time
In addition to his role as Non-Executive Chairman, Andy
Morrison is currently also Non-Executive Director of Kanabo
Group Plc and of Ondo InsurTech Plc and Non-Executive
Chairman of Hemspan Ltd. 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 Andy Morrison, Philip Snaith
and Laurence Mutch. There is a formal, rigorous and
transparent procedure to board appointments with the
use of external recruitment advisers as may be necessary.
24
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Refer to Provision 20. In view of its small size the Board
does not have a formal succession plan, and this will be
put in place as the Company progresses its development
plans. The Board is keen to promote diversity as the
Company develops.
Principle K: Board and committees to have a
combination of skills, experience and knowledge.
Review length of service of the board with
membership regularly refreshed.
Refer to Director Profiles in the Annual Report page 12. 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 16 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.
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 and CEO.
Refer to Provision 41.
Provision 17: The Nominations Committee
Refer to Principle J.
Provision 18: Re-election of Directors
In accordance with the Company’s Articles of Association,
at each Annual General Meeting, one third of the Directors
who are subject to retirement by rotation shall retire from
office provided that if their number is more than three, but
not a multiple thereof, then the number nearest to but not
exceeding one-third shall retire.
Provision 19: Nine-year limitation of Chairman
Andy Morrison was appointed Non-executive Chairman on
1 February 2022.
Provision 20: External search consultant
The Company appointed external search consultants during
the year to assist with the recruitment of the Chairman and
COO roles.
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 19-28
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.
Refer to the Chairman’s Statement in the Annual Report,
and to Provision 24, 25 and 26: The work of the Audit
Committee, Provision 27: Board responsibility in preparing
the accounts, Provision 30: Going Concern and Provision 31:
The prospects of the Company.
Principle O: Establish procedures to manage risk,
oversee internal controls and determine nature and
extent of principal risks in achieving its long-term
strategic objectives.
QFI performs a structured risk assessment on an annual
basis. This involves a review of the probability and impact of
adverse events across operational regions and at corporate
level. This culminates in the preparation of a risk dashboard
for consideration by the Board. This is followed by a
documented risk mitigation strategy that is subsequently
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
25
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
incorporated into the annual Business Plan. Refer also
to Provision 28: Assessment of the Company’s Risks and
Provision 29: Risk Management and Internal Control
systems.
Provisions 24, 25 and 26: The work of the audit
committee
The Audit Committee is chaired by Laurence Mutch and
comprises Philip Snaith 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 2022
financial statements were Going Concern, the Valuation
of Intangible Assets, and Management Override of
Controls. The subject of Going Concern is covered in the
Strategic Report on page 7 in the Annual Report, in the
Auditors Report on page 29 and in Note 3 to the Financial
Statements. The Valuation of Intangible Assets is addressed
in the Auditors Report on page 29 and in Note 11 to the
Financial Statements.
No Internal Audit function
An internal audit function is not appropriate at this time
given the Company’s current size, and in view of this, the
Audit Committee 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
26
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
The Company has a digital Policies and Procedures Directory
comprising some 100 policies in 22 business categories.
The Policies and Procedures are intentionally kept short
so that these are easy to refer to and remain current. Of
note, each of these is reviewed and signed off by at least
one nominated director (executive or non-executive) who is
required to have considerable prior experience of the subject
matter. Expenditure and other authorities are subject to
a tight Authorities Matrix, reviewed regularly by the Audit
Committee. QFI has a comprehensive disaster recovery plan
which is tested on a regular basis.
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 7 of the Annual Report, in
the Auditors Report on page 29 and in Note 3 to the
Financial Statements. The Group’s longer term viability
as a revenue and profit generating entity is covered in the
Chairman’s statement and CEO’s statements on pages 2-6
and in the Strategic Report on page 7.
Provision 31: The prospects of the Company
The Outlook for the Company is addressed as part of the
CEO’s Statement on page 4 of the Annual Report.
Principles P, Q & R: Remuneration
Policies and practices designed to support strategy
and promote long-term sustainable success. Executive
remuneration aligned to purpose and values and clearly
linked to successful delivery of company’s long-term
strategy.
A formal and transparent procedure for developing
policy on executive remuneration should be established.
No director involved in deciding their own remuneration.
Directors to exercise independent judgement and
discretion when authorising remuneration outcomes,
taking account of company and individual performance
and wider circumstances.
Refer to the Report on Directors’ Remuneration on page 18.
With reference to Provision 41, the Compensation
Committee reviews remuneration policy on an annual
basis to assess its effectiveness, and on behalf of the
Board conducts performance appraisals of the Company,
the Chairman and CEO 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 2022
27
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Shareholder views on compensation have been expressed
at the AGM and in other meetings, and the committee has
taken these and the company’s performance into account in
its deliberations.
The Report on Directors’ Remuneration is on page 18.
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
30 September 2022
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.
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 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
refers to remuneration surveys of AIM companies of similar
size and complexity, when these are readily available.
28
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS 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 2022 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
the Parent Company financial statements have been properly prepared in accordance with UK adopted international
accounting standards 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 2022 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 UK adopted international
accounting standards 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.
Material uncertainty related to going concern
We draw attention to note 3 to the financial statements, which explains that the Group requires additional funding during
the twelve months after approval of the financial statements in order to continue as a going concern. As stated in note 3,
these events or conditions, indicate that a material uncertainty exists that may cast significant doubt on the Group’s and the
Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
For the reason set out above and based on our risk assessment, we determined going concern to be a key audit matter.
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. Our evaluation of the Directors’ assessment of the Group 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 Directors’ cash flow forecast and underlying assumptions which have been approved by the Board.
Our testing included checking the mathematical accuracy and reviewing the underlying data upon which the cash flow
forecast is based.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
29
I
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS 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 Directors 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 the Directors’ assessment of the impact of COVID-19 and the Russia-Ukraine conflict on the going concern
assumption checking that it has been appropriately factored into the forecasts where applicable. This included
discussing the actual and ongoing potential impact of COVID-19 and the Russia-Ukraine conflict with the Directors 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 the Directors’ sensitivity analysis and performed our own sensitivity analysis in respect of the key
assumptions underpinning the cash flow forecasts.
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 Directors’ assessment.
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% (2021: 100%) of Group loss before tax
100% (2021:100%) of Group total assets
Key audit matters
Carrying value of the (MSAR) intangible asset
Accounting for Convertible Securities Deed
Going concern
2022
✓
✗
✓
2021
✓
✓
✓
Accounting for Convertible Securities Deed is no longer considered to be a key audit matter
because the deed was settled in the prior year ended 30 June 2021.
Materiality
Group financial statements as a whole
£120,000 (2021:£220,000) based on 1.5% (2021: 5%) of Total assets (2021: 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 one non-significant component for
which we conducted a desktop review. All procedures were performed by the Group engagement team.
30
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
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. In addition to the matter disclosed
in the Material uncertainty related to going concern section of our report, we determined the matter below to be the key
audit matter to be communicated in our report. 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.
Key audit matter
How the scope of our audit addressed the 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.
Refer to note 2 for
the accounting
policies and critical
judgements and
note 11 for the
detailed disclosure
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 appropriateness of
judgements and estimates
applied, including forecast
project revenues, operating
and capital costs and discount
rates, in the determination of the
recoverable amount and therefore
the carrying value of the MSAR
intangible asset represented a
significant focus area for our audit
and was determined to be a key
audit matter.
We obtained and examined management’s assessment
of impairment and assessed whether it was performed in
accordance with IAS 36 Impairment of Assets challenging
the key assumptions made by management. Our audit
procedures included the following:
•
•
•
•
•
•
We met with the management team to discuss
project progress and key developments and 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 and the
Russia-Ukraine conflict on the model and assumptions,
by considering the impact of these on the industry as a
whole and for the Group specifically. We also considered
the impact of the delays in project progressions as a result
of COVID-19 and potential delays from the Russia-Ukraine
conflict.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
31
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)
Key audit matter
How the scope of our audit addressed the key audit matter
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.
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.
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QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Group financial statements
Parent company financial statements
Materiality
Basis for determining
materiality
Rationale for the
benchmark applied
2022
£100,000
90% of Group
materiality
Capped at 90% of
Group materiality
taking into
consideration
component
aggregation risk.
2022
£120,000
2021
£220,000
1.5% of Total assets
5% of Loss before tax
Total assets is
considered to be the
most appropriate
basis in determining
materiality taking
into consideration
where the Group is in
its lifecycle and the
metric considered
to be of most
importance to the
users of the financial
statements.
The Group is
still significantly
involved in business
development
activities and has
not generated any
significant revenue
from its ongoing
projects. The
ultimate value of
the Group 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.
2021
£48,000
5% of Loss before tax
The 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 Parent
company 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
Basis for determining
performance
materiality
£90,000
£165,000
£37,000
£36,000
75% of materiality based on our consideration of factors including the level of historical
misstatements and the nature of the Group and Parent Company.
Component materiality
We set materiality for each significant component of the Group based on a percentage of 42% and 90% of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from £50,000 to £100,000. 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
£6,000 (2021:£11,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
33
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)
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.
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 Code 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 27; and
The Directors’ explanation as to their assessment of the Group’s prospects, the period this
assessment covers and why the period is appropriate as set out page 27.
Directors’ statement on fair, balanced and understandable set out on page 25;
Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on pages 8 to 10;
The section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on page 25; and
• The section describing the work of the audit committee set out on page 26.
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QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
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.
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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
35
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
QUADRISE FUELS INTERNATIONAL PLC (CONTINUED)
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.
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.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
36
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 30 June 2022
Notes
Year ended
30 June 2022
£’000s
Year ended
30 June 2021
£’000s
Continuing operations
Revenue
Production and development costs
Other administration expenses
Fair value adjustments arising on Convertible Securities
Share option credit/(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
75
(1,447)
(1,419)
-
44
(18)
5
(2,760)
(3)
1
(2,762)
164
(2,598)
(0.18)
(0.18)
17
(1,377)
(1,527)
(1,257)
(303)
-
(9)
(4,456)
(4)
50
(4,410)
150
(4,260)
(0.36)
(0.36)
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
37
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 30 June 2022
Company No. 05267512
Notes
As at
30 June 2022
£’000s
As at
30 June 2021
£’000s
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Stock
Current assets
TOTAL ASSETS
Equity and liabilities
Current liabilities
Trade and other payables
Current liabilities
Equity attributable to 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
20
20
21
21
21
21
398
2,924
3,322
4.423
103
177
-
4,703
8,025
262
262
14,069
77,189
3,777
1,151
970
522
(89,915)
7,763
8,025
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
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 30 September 2022 and were signed on its behalf by:
A. Morrison
Chairman
J. Miles
Director
38
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2022
Issued
capital
£’000s
10,351
Share
premium
£’000s
75,431
-
-
-
-
-
-
-
-
-
-
2,599
-
639
-
1,119
1,119
14,069
14,069
77,189
77,189
-
-
-
-
-
-
-
-
-
-
Merger
reserve
£’000s
Share option
reserve
£’000s
-
-
-
-
-
-
3,777
-
-
3,777
3,777
-
-
-
-
-
3,927
-
-
303
(886)
-
-
-
-
3,344
3,344
-
(44)
(2,149)
-
-
Warrant
reserve
£’000s
1,122
Reverse
acquisition
reserve
£’000s
Accumulated
losses
£’000s
522
(87,324)
Total
£’000s
4,029
-
-
-
-
(105)
-
-
-
-
-
-
-
-
-
-
-
(4,260)
(4,260)
1,564
1,564
-
886
105
-
(502)
-
303
-
-
7,015
(502)
2,238
1,017
1,017
522
522
(89,531)
(89,531)
10,387
10,387
-
-
-
18
(65)
-
-
-
-
-
(2,598)
(2,598)
-
2,149
-
65
(44)
-
18
-
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
30 June 2021
1 July 2021
Loss and total comprehensive
loss for the year
Share option charge
Transfer of balances relating
to expired share options
Warrant charge
Transfer of balances relating
to expired warrants
30 June 2022
14,069
77,189
3,777
1,151
970
522
(89,915)
7,763
For an explanation of the nature and purpose of other reserves refer to note 21.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
39
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION CONSOLIDATED STATEMENT OF
CASH FLOWS
For the year ended 30 June 2022
Notes
Year ended
30 June 2022
£’000s
Year ended
30 June 2021
£’000s
Operating activities
Loss before tax from continuing operations
Fair value adjustments arising on Convertible Securities
Depreciation
Loss on disposal of fixed assets
Finance costs paid
Finance income received
Share option (credit)/charge
Warrant charge
Working capital adjustments
Decrease in trade and other receivables
(Increase)/decrease in prepayments
(Decrease)/increase in trade and other payables
Decrease in stock
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 (decrease)/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
10
18
15
16
8
10
20
20
17
14
(2,762)
-
120
-
3
(1)
(44)
18
14
(82)
(14)
61
(4,410)
1,257
135
16
4
(50)
303
-
96
17
78
-
(2,687)
(2,554)
(3)
164
(2,526)
1
(58)
(57)
-
-
-
-
(2,583)
7,006
4,423
(4)
150
(2,408)
50
(29)
21
7,015
(502)
500
7,013
4,626
2,380
7,006
40
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
COMPANY STATEMENT OF
FINANCIAL POSITION
As at 30 June 2022
Company No. 05267512
Notes
As at
30 June 2022
£’000s
As at
30 June 2021
£’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
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
13
20
20
21
21
21
1
21,479
26,109
47,589
4,086
50
61
4,197
51,786
148
7,666
7,814
14,069
77,189
3,777
1,151
970
(53,184)
43,972
51,786
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
The income for the year dealt within the accounts of Quadrise Fuels International plc was £0.02m (2021: loss of £1.40m).
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 30 September 2022 and were signed on its behalf by:
A. Morrison
Chairman
J. Miles
Director
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
41
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
COMPANY STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2022
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
30 June 2021
1 July 2021
Income and total comprehensive
income for the year
Share option credit
Transfer of balances relating to
expired share options
Warrant charge
Transfer of balances relating to
expired warrants
Issued
capital
£’000s
10,351
Share
premium
£’000s
75,431
Merger
reserve
£’000s
-
Share option
reserve
£’000s
3,927
Warrant
reserve
£’000s
1,122
Accumulated
losses
£’000s
(56,074)
Total
£’000s
34,757
-
-
-
-
-
-
-
-
-
-
2,599
-
639
-
1,119
1,119
14,069
14,069
77,189
77,189
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,777
-
-
3,777
3,777
-
-
-
-
-
-
-
303
(886)
-
-
-
-
3,344
3,344
-
(44)
(2,149)
-
-
-
-
(105)
-
-
-
(1,400)
(1,400)
1,564
1,564
-
886
105
-
(502)
-
303
-
-
7,015
(502)
2,238
1,017
1,017
(55,421)
(55,421)
43,975
43,975
-
-
-
23
-
2,149
-
65
23
(44)
-
18
-
-
-
18
(65)
30 June 2022
14,069
77,189
3,777
1,151
970
(53,184)
43,972
42
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
COMPANY STATEMENT OF
CASH FLOWS
For the year ended 30 June 2022
Operating activities
Income/(loss) before tax from continuing operations
Fair value adjustments arising on Convertible Securities
Depreciation
Finance costs paid
Finance income received
Share option (credit)/charge
Warrant charge
Working capital adjustments
Decrease in trade and other receivables
Decrease in prepayments
(Decrease)/increase in trade and other payables
Cash generated by operations
Finance costs paid
Net cash inflow from operating activities
Investing activities
Finance income received
Purchase of property, plant and equipment
Loan to subsidiary
Net cash outflow from investing activities
Financing Activities
Issue of Ordinary Share Capital
Issue costs
Increase in Convertible Securities
Net cash inflow from financing activities
Net (decrease)/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
Notes
Year ended
30 June 2022
£’000s
Year ended
30 June 2021
£’000s
10
18
15
16
10
13
17
14
23
-
1
-
(1)
(44)
18
13
12
(13)
9
-
9
1
-
(2,465)
(2,464)
-
-
-
-
(2,455)
6,541
4,086
(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
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
43
I
B
U
S
N
E
S
S
R
E
V
I
E
W
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
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P
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F
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I
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.
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.
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 UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006
and effective, or issued and early adopted, as at the date
of 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 2022.
All inter-company balances, transactions, income and
expenses and profits and losses resulting from intra-group
transactions are eliminated on consolidation. Subsidiaries
are fully consolidated from the date of acquisition, being
the date on which the Group obtains control, and continue
to be consolidated until the date that such control ceases.
Accounting policies of subsidiaries are consistent with those
adopted by the Group.
Control is defined as when QFI, or a company which it
controls, is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect
those returns through its power over the investee. Thus QFI
demonstrates control when it has all the following:
• power over the investee;
•
•
exposure, or rights, to variable returns from its
involvement with the investee; and
the ability to use its power over the investee to affect the
amount of the investor’s returns.
(2.3) Changes in Accounting Principles and Adoption
of New and Revised Standards
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 2032 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.
The carrying value of intangible assets at 30 June 2022 is
determined to be £2.9m (2021: £2.9m). Further details are
given in Note 11.
44
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
Estimates of credit losses (‘ECL’) (see note 13)
Interest income
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 £621k at 30 June 2022 (2021: £426k).
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.
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 2022)
Statement of
Comprehensive
Income (average
rate throughout
the financial
year)
1.214
1.162
1.324
1.179
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.
(2.5) Revenue Recognition
(2.8) Business Combinations
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.
Acquisition of subsidiaries is accounted for using the
purchase method. The results of businesses acquired are
consolidated from the effective date of acquisition, whereby
upon acquisition of a business or an associate, net assets are
stated at fair value.
On 18 April 2006, Zareba plc (renamed Quadrise Fuels
International plc) became the legal parent of Quadrise
International Limited in a share-for-share transaction. Due
to the relative size of the companies, the shareholders
of Quadrise International Limited became the majority
shareholders of Quadrise Fuels International plc.
Accordingly, the substance of the combination was that
Quadrise International Limited acquired Quadrise Fuels
International plc and was therefore accounted for as a
reverse acquisition under IFRS 3.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
45
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION (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.
•
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
prior financial year. At the conversion dates, the fair value
loss or gain on the portion converted was determined.
46
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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.
(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
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.
Following the introduction of IFRS 9, the Group subsequently
measures all equity investments at fair value. Changes in the
fair value of financial assets is recognised in the statement of
profit or loss as applicable.
The fair value of the Convertible Securities instrument is
estimated using an appropriate valuation method. The key
input to the assumptions are:
• The propensity to convert factor.
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.
•
The forecast conversion price of the Convertible
Securities.
(2.14) Impairment
• 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).
At each statement of financial position date, reviews
are carried out on the carrying amounts of tangible and
intangible assets to determine whether there is any
indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent,
if any, of the impairment loss. Where the asset does not
generate cash flows that are independent from the other
assets, estimates are made of the cash-generating unit to
which the asset belongs. Intangible assets with an indefinite
useful life are tested for impairment at least annually and
whenever there is an indication that the asset may be
impaired.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
47
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 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.
•
•
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.
(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;
48
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) (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.
(2.19) Share-based Payments
Employees (including Directors and senior executives)
of the Group receive remuneration in the form of share-
based payment transactions, whereby these individuals
render services as consideration for equity instruments
(“equity-settled transactions”). These individuals are granted
share option rights approved by the Board, which can only
be settled in shares of the respective companies that award
the equity-settled transactions. No cash settled awards have
been made or are planned.
The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over
the period in which the performance and/or service
conditions are fulfilled, ending on the date on which the
relevant individuals become fully entitled to the award
(“vesting point”). The cumulative expense recognised for
equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting
period has expired and the Group’s best estimate of the
number of equity instruments and value that will ultimately
vest. If equity settled transactions are not expected to
vest as at the reporting date, then the cumulative expense
recognised in the statement of comprehensive income up
to the reporting date will be reversed. 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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
49
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 3. Going Concern
The Group had a cash balance of £4.42m as of 30 June 2022,
expected to be sufficient to cover project expenditure and
fixed costs up to H2 2023. Additional funding will be required
to bridge the gap to the generation of sustainable positive
cashflows, with these now forecast to commence in H2 2024.
The basis for these expectations is the Group business
model, budget and business plan, and sensitivity analysis,
which have been reviewed and approved by the Board. The
model comprises the financial forecasts associated with
each project opportunity deemed to have a realistic chance
of progressing, with assumptions based on the latest market
information, agreements with counterparties and the status
of discussions.
The Directors carry out a detailed risk assessment process
each year, with key risks and mitigating actions identified.
Despite the ongoing global disruption caused by COVID-19
and Russia’s invasion of Ukraine, the Directors note
the positive and sustained levels of engagement with
partners, prospective clients and project stakeholders
worldwide during the year, with three major agreements
signed during the year with MSC, Valkor and the client in
Morocco. Existing and prospective commercial partners
make decisions based on long-term considerations, and
the Directors believe that the economic and environmental
advantages offered by MSAR® and bioMSARTM are increasingly
attractive in periods of global uncertainty as counterparties
look to both generate savings and further improve their
environmental performance.
The Group’s ability to reach commercial revenues in H1
2023 will be determined by the successful outcome of the
forthcoming trials. The Board are confident that the trials
will be successful based upon the following:
•
•
•
Morocco: The trial in Morocco involves the combustion of
MSAR® for power generation. This is a similar application
to that successfully trialled by Quadrise at the Orlen
Lietuva plant in Lithuania in 2011, where MSAR® was
consumed in a power plant boiler to generate electricity.
MSC: The MSC trials will take place on the same vessel
used for the Maersk LONO trial (the MSC Leandra,
formerly the Seago Istanbul). In addition, the engine
manufacturer (Wartsila) and MSC are happy to proceed
directly to on-vessel trials, rather than commencing with
an initial stationary engine test, given their assessment
of the low-risk nature of the trial.
Utah: The Utah application is in the upstream sector,
where similar technology has been successfully
demonstrated previously by Quadrise Canada.
In addition, the positive results generated by the Aquafuel
testing on bioMSAR™ and the similar properties of MSAR®
and bioMSAR™ mean that trials involving bioMSAR™ do not
have a significantly higher risk of failure than the MSAR®
equivalents.
The Directors have reviewed both the Group and Company’s
ability to operate as a going concern up to the 31 December
2023, and have determined that the continuation of the
Group and Company as a going concern will be dependent
upon successfully raising sufficient funds within 12 months
of the financial statements sign off date to bridge the gap
between the exhaustion of existing funds and the generation
of sustainable positive cashflows. The Company is the
100% parent of Quadrise International Limited (‘QIL’), the
subsidiary through which the Group runs the operating and
project activities discussed above. The Directors have a
reasonable expectation that with positive trial results and
ongoing progress to commercial revenues, such funds will be
raised, although no binding funding agreements are in place
at the date of this report, furthermore, notwithstanding
the Board's confidence, there are currently no binding
agreements in place in respect of commercial revenues.
The Directors have therefore concluded that it is appropriate
to prepare the Group and Company financial statements on
a going concern basis; however, in the absence of additional
funding being in place at the date of this report, these
conditions indicate the existence of a material uncertainty
which may cast significant doubt over the Group’s ability to
continue as a going concern and, therefore, that it may be
unable to realise its assets and discharge its liabilities in the
normal course of business.
The financial statements do not include the adjustments
that would result if the Group and Company were unable to
continue as a going concern.
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.
50
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 2022
£’000s
Year ended
30 June 2021
£’000s
41
41
-
211
120
326
43
35
-
273
135
300
Year ended
30 June 2022
Number
Year ended
30 June 2021
Number
2
7
3
6
Year ended
30 June 2022
£’000s
Year ended
30 June 2021
£’000s
836
101
57
-
994
887
116
62
(15)
1,050
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
51
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
48
4
52
251
10
261
38
3
41
354
98
8
106
219
10
229
144
11
155
490
542
290
29
861
Included in total staff costs are the costs of the Executive Directors as employed by the Company as follows:
Year ended
30 June 2022
£’000s
Year ended
30 June 2021
£’000s
Director
Mike Kirk1
Wages and salaries - as paid
Pension costs
Jason Miles
Wages and salaries – as paid
Pension costs
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
Share option expense
Pension costs
Total
1 Resigned 25 November 2021
454
(86)
17
385
2 Appointed 1 February 2020, resigned 16 July 2022.
Non-executive Directors fees for the year amounted to £117k (2021: £81k).
The highest paid Director’s remuneration totalled £261k (2021: £229k), represented by all aggregate emoluments.
Refer to the Report of Directors’ Remuneration (on page 18) 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.
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.
52
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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% (2021: 19%)
Effects of:
Non-deductible expenditure
Super deduction
R&D tax credit
Non-taxable income
Temporary differences
Tax losses carried forward
Total taxation credit on loss from continuing operations
Year ended
30 June 2022
£’000s
Year ended
30 June 2021
£’000s
(164)
(164)
(150)
(150)
Year ended
30 June 2022
£’000s
Year ended
30 June 2021
£’000s
(2,762)
(525)
6
(4)
(164)
(10)
-
532
(164)
(4,410)
(838)
58
-
(150)
-
24
756
(150)
The Group has tax losses arising in the UK of approximately £59.97m (2021: £58.46m) that are available, under current
legislation, to be carried forward against future profits. However the ability to utilise the losses is restricted, being dependant
on the type of loss and when it arose. The use of losses under the UK corporation tax regime was reformed from 1 April 2017
such that different rules on the use of losses apply to losses arising pre-April 2017 and post-April 2017. Pre-2017 trading
losses can only be deducted against profits of the same trade within the company in which they arose, whereas the post-2017
trading losses can be used more widely and are deductible against total profits of the group.
Reconciliation of tax losses
Trading losses
Non-trade deficits arising in Intangible Assets within Quadrise International Limited
Pre-trading losses incurred by subsidiaries
Management expenses incurred by Quadrise International Limited
Non-trade loan relationships
Capital losses
Total
Year ended
30 June 2022
£’000s
33,215
25,758
-
817
89
89
Year ended
30 June 2021
£’000s
30,692
25,758
200
817
899
89
59,968
58,455
A deferred tax asset representing these losses and other temporary differences at the statement of financial position date
of approximately £14.99m (2021: £11.1m) has not been recognised as a result of existing uncertainties in relation to its
realisation.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
53
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
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 2022
Year ended
30 June 2021
(2,598)
(4,260)
1,406,904,000
1,175,406,844
1,406,904,000
1,175,406,844
(0.18)p
(0.18)p
(0.36)p
(0.36)p
Basic loss per share is calculated by dividing the loss for the year from continuing operations of the Group by the weighted
average number of ordinary shares in issue during the year.
For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
potential dilutive options over ordinary shares. Potential ordinary shares resulting from the exercise of share options have an
anti-dilutive effect due to the Group being in a loss position. As a result, diluted loss per share is disclosed as the same value
as basic loss per share. The 18.3m dilutive share options and the 40.2m dilutive warrants issued by the Company and which
are outstanding at year-end could potentially dilute earnings per share in the future if exercised when the Group is in a profit
making position.
54
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10. Property, plant and equipment
Consolidated
Cost
Opening balance – 1 July 2021
Additions
Disposals
Closing balance – 30 June 2022
Depreciation
Opening balance – 1 July 2021
Depreciation charge for the year
Disposals
Closing balance – 30 June 2022
Net book value at 30 June 2022
Company
Cost
Opening balance – 1 July 2021
Additions
Disposals
Closing balance – 30 June 2022
Depreciation
Opening balance – 1 July 2021
Depreciation charge for the year
Disposals
Closing balance – 30 June 2022
Net book value at 30 June 2022
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
machinery
£’000s
Total
£’000s
74
15
-
89
(74)
(2)
(76)
13
98
-
(4)
94
(92)
(2)
4
(90)
4
43
-
-
43
16
-
-
16
1,397
1,628
43
-
58
(4)
1,440
1,682
(43)
(16)
-
-
-
-
(943)
(116)
-
(1,168)
(120)
4
(43)
(16)
(1,059)
(1,284)
-
-
381
398
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
machinery
£’000s
-
-
-
-
-
-
-
-
-
71
-
(4)
67
(69)
(1)
4
(66)
1
44
-
-
44
16
-
-
16
(44)
(16)
-
-
-
-
(44)
(16)
-
-
-
-
-
-
-
-
-
-
-
Total
£’000s
131
-
(4)
127
(129)
(1)
4
(126)
1
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
55
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION Property, plant and equipment
Consolidated
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
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Software
£’000s
Office
Equipment
£’000s
Plant and
machinery
£’000s
181
-
(107)
74
(181)
-
107
(74)
95
3
-
98
(89)
(3)
-
(92)
43
-
-
43
(43)
-
-
(43)
16
-
-
16
(16)
-
-
(16)
1,410
26
(39)
1,397
(834)
(132)
23
(943)
Total
£’000s
1,745
29
(146)
1,628
(1,163)
(135)
130
(1,168)
Net book value at 30 June 2021
-
6
-
-
454
460
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
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
56
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 11. Intangible Assets
Consolidated
Cost
QCC royalty
payments
£’000s
MSAR® trade name
£’000s
Technology and
know-how
£’000s
Total
£’000s
Balance as at 1 July 2021 and 30 June 2022
7,686
3,100
25,901
36,687
Amortisation and Impairment
Balance as at 1 July 2021 and 30 June 2022
Net book value as at 30 June 2022
Cost
(7,686)
-
(176)
2,924
(25,901)
-
(33,763)
2,924
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
(7,686)
-
(176)
2,924
(25,901)
-
(33,763)
2,924
Intangible assets comprise intellectual property with a cost of £36.7m, including assets of finite and indefinite life. Quadrise
Canada Corporation’s (“QCC’s) royalty payments of £7.7m and the MSAR® trade name of £3.1m are termed as assets having
indefinite life as it is assessed that there is no foreseeable limit to the period over which the assets would be expected to
generate net cash inflows for the Group, as they arise from cashflows resulting from Quadrise and QCC gaining a permanent
market share. The assets with indefinite life are not amortised, but the QCC royalty payments intangible asset became fully
impaired in 2012.
The remaining intangibles amounting to £25.9m, primarily made up of technology and know-how, are considered as finite
assets and were amortised over 93 months, being fully amortised in 2012. The Group does not have any internally generated
intangibles.
MSAR® trade name intangible asset
In accordance with IAS 36 “impairment of assets” and IAS 38 “intangible assets”, a review of impairment for indefinite life
intangible assets is undertaken annually or at any time an indicator of impairment is considered to exist. The discount rate
applied to calculate the present value is for the cash generating unit (“CGU”). A CGU is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The recoverable amount of the CGU is assessed by reference to the value in use (“VIU”), being the net present value (“NPV”)
of future cash flow expected to be generated by the asset, and fair value less costs to sell (“FVLCS”).
The recoverable amount of the MSAR® trade name intangible asset has been determined using a VIU model. The expected
future cash flows utilised in the VIU model are derived by quantifying the royalties that would result if the asset was licensed
from a third party in order to determine the income stream directly attributable to the asset in isolation. The royalties are
based on a percentage of projected future revenues up to 30 June 2032 with an assumed growth rate being used beyond
that date.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
57
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION The key assumptions used in this calculation are as follows:
Royalty rate (% of projected revenue)1
Discount rate2
Revenues forecast up to3
Growth rate beyond forecast period4
2022
0.5%
20%
2021
0.5%
20%
30 June 2032
30 June 2031
0%
0%
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 2022 revenue forecast extends to 30 June 2032 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 £1.48m (the ‘headroom’).
Management have performed sensitivity analyses whereby certain parameters were flexed downwards by reasonable
amounts and certain scenarios were modelled for the CGU to assess whether the recoverable value would result in an
impairment charge. In isolation, none of these scenarios would result in an impairment to the MSAR® Trade Name intangible
asset. However, a combination of two or more of these scenarios could result in an impairment charge, but management do
not consider this likely.
The following sensitivities were applied:
Results of sensitivity analysis
Scenario
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 2034).
Amortisation of Intangible Assets
Resulting headroom
(£’m)
0.74
0.13
0.01
0.38
0.23
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 25.03%.
Removal of projects which generate 33.6%
of revenues.
Finite company lifespan (to 30 June 2032).
The Board has reviewed the accounting policy for intangible assets and has amortised those assets which have a finite life.
All intangible assets with a finite life were fully amortised as at 30 June 2022.
58
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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 2022. The shares in each of these companies were valued at CAD $nil on 1 July 2021
due to their business models being highly uncertain, with minimal possibility of any material value being recovered from
their asset base. During the year there has been no indication that this situation has changed, therefore the Directors have
determined that the investments should continue to remain valued at CAD $nil at 30 June 2022.
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
23,644
2,660
(195)
26,109
(7,666)
21,479
-
-
-
-
(7,666)
21,479
Total
37,457
2,660
(195)
39,922
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 2022, the Company has a loan of £26.7m (2021:
£24.1m) due from its 100% subsidiary Quadrise International Limited (‘QIL’), and a loan payable of £7.7m (2021: £7.7m) due
to its 100% subsidiary Quadrise Limited (‘QL’). Both loans are repayable upon demand.
As at 30 June 2022, 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 2022 is 1.25%. The discount rate used to calculate the expected credit loss is 4.75%.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
59
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION The resulting expected credit loss arising on the loan due from QIL is £621k (2021: £426k). This is based on the recovery in
full of the loan. In the event the group were only to realise a percentage of QIL’s assets, the expected credit loss would be as
follows:
Percentage recovery
100%
90%
75%
50%
Investment in subsidiaries
Expected Credit
Loss 30 June 2022
(£’000s)
Expected Credit
Loss 30 June 2021
(£’000s)
621
3,231
7,147
13,675
426
2,790
6,337
12,247
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 (‘NPV’) 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.
The NPV valuation of the forecast cashflows was prepared using discount rates of 10%, 20% and 30%. Further sensitivity
analysis was carried out using the following scenarios:
• The base-case scenario using the existing financial forecasts
• A 2 year delay to projects.
• Removal of the projects contributing 60% of cashflows.
• A finite company lifespan assuming activity does not progress beyond 2031-32.
None of the scenarios modelled above result in an NPV below the investment value of £21.5m.
As at 30 June 2022, 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 2022. Holdings in subsidiaries are detailed in note 26.
14. Cash and Cash Equivalents
Cash at bank
Total
Consolidated
30 June 2022
£’000s
4,423
4,423
Consolidated
30 June 2021
£’000s
7,006
7,006
Company
30 June 2022
£’000s
4,086
4,086
Company
30 June 2021
£’000s
6,541
6,541
60
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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 2022
£’000s
Consolidated
30 June 2021
£’000s
Company
30 June 2022
£’000s
Company
30 June 2021
£’000s
24
25
54
103
16
39
62
117
-
20
30
50
-
30
33
63
Consolidated
30 June 2022
£’000s
Consolidated
30 June 2021
£’000s
Company
30 June 2022
£’000s
Company
30 June 2021
£’000s
81
40
141
262
87
33
156
276
53
25
70
148
67
32
62
161
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 2022 amount to 16 days (2021: 17 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 (2021:£nil).
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 2020. 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 2022. 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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
61
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
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 2019 Annual General Meeting, and the updated authority obtained at the 27 September 2020 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 2020, 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 £1.86m, being the nominal value of £2.15m less interest and warrant charges. At 30 June 2021, the
remaining nominal value of £1.70 million of tranche 1 was assessed to have a fair value of £2.05m. The fair value of tranche 2,
which has a nominal value of £537.5k was assessed as £1.19m, with tranche 2 being fully converted on 30 April 2022, and
therefore no balance remaining outstanding as at 30 June 2022. 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 £nil (2021:1.257m) comprises fair value adjustments arising upon
initial recognition, revaluation as at balance sheet dates and upon subsequent conversion.
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 2022, both tranches have been converted in full, and no nominal value remains outstanding to the investor
under the terms of the Convertible Security instrument.
62
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 2022
WAEP (pence)
30 June 2022
42,750,000
14,515,722
(35,880,379)
-
21,385,343
18,250,000
14.69
5.70
14.44
-
9.00
10.37
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
The weighted average remaining contractual life of the 21.4 million options outstanding at the statement of financial position
date is 4.64 years (2021: 5.17 years). The weighted average share price during the year was 2.66p (2021: 2.98p) per share.
The expected volatility of the options reflects the assumption that historical volatility is indicative of future trends, which
may not necessarily be the actual outcome. The expected life of the options is based on historical data available at the time
of the option issue and is not necessarily indicative of future trends, which may not necessarily be the actual outcome.
The Share Option Schemes are equity settled plans, and fair value is measured at the grant date of the option. Options issued
under the Schemes vest over a one to three year period provided the recipient remains an employee of the Group. Options
also may be exercised within an agreed period of an employee leaving the Group at the discretion of the Board.
The Company issued 14.5 million share options to directors and employees during the year (2021: 10 million).
The fair value was calculated using the Black Scholes option pricing model. The weighted average inputs were as follows
Stock price:
Exercise Price
Interest Rate
Volatility
Expected term (years)
2022
4.10p
5.70p
0.1%
2021
3.08p
7.50p
0.1%
124.12%
126.91%
4.0
4.0
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
63
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 19. Warrants
Movement in the year:
The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, warrants
during the year:
Outstanding as at 1 July
Granted during the year
Exercised during the year
Expired during the year
Warrants outstanding as at 30 June
Exercisable as at 30 June
Number
30 June 2022
40,228,026
3,000,000
-
(3,000,000)
40,228,026
40,228,026
WAEP (pence)
30 June 2022
6.98
1.80
-
3.53
6.85
6.85
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
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)
2022
1.87p
1.80p
1.25%
91.94%
0.72
2021
-
-
-
-
-
The weighted average remaining contractual life of the 40.2 million warrants outstanding at the statement of financial position
date is 0.23 years (2021: 1.15 years). The weighted average share price during the year was 2.66p (2021: 2.98p) per share.
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:
1,406,904,968 (2021: 1,406,900,659) Ordinary shares of £0.01 each
2022
£
2021
£
14,069,050
14,069,007
The table below shows a reconciliation of movement in share capital and share premium during the year:
As at 1 July 2021
Sep 2021 – Warrant exercise at 7.48p
As at 30 June 2022
No. of shares
1,406,900,659
4,309
1,406,904,968
Share Capital
(£’000)
£
Share Premium
(£’000)
£
14,069
-
14,069
77,189
-
77,189
On 21 September 2021, 4,039 new ordinary shares were issued at 7.48p per share in respect of an exercise of warrants.
64
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 £6.0m
and the Company received cash proceeds of £5.5m 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 £6.0m.
£2.2m was allocated to nominal share capital and the excess of £3.8m 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.
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 £57k (2021: £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:
Consolidated
30 June 2022
£’000s
Consolidated
30 June 2021
£’000s
Company
30 June 2022
£’000s
Company
30 June 2021
£’000s
Financial assets
Loans and receivables – Cash and cash equivalents
Loans and receivables – Trade and other receivables
4,423
103
7,006
117
4,086
50
6,541
63
Financial liabilities
Other financial liabilities – Trade and other payables
233
263
134
153
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.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
65
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION 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 2022 were net assets of US$38k (2021: US$13k) and €38k
(2021: €64k).
A 10% strengthening of Sterling against the Euro at the statement of financial position date would have increased loss for
the year by £3k (2021: £1k) whilst a 10% weakening of Sterling against the Euro would have reduced loss for the year by
£3k (2021: £1k). This analysis assumes that all other variables remain constant.
A 10% strengthening of Sterling against the US$ at the statement of financial position date would have increased loss for
the year by £6k (2021: £6k) whilst a 10% weakening of Sterling against the US$ would have reduced loss for the year by
£6k (2021: £6k). This analysis assumes that all other variables remain constant.
Interest rate risk
The Group has floating rate financial assets in the form of deposit accounts with major banking institutions; however, it is not
currently subjected to any other interest rate risk.
Based on cash balances at the statement of financial position date, a rise in interest rates of 1% will reduce loss for the
year by approximately £44k (2021: £69k) per annum. A decrease in interest rates of 1% will increase loss for the year by
approximately £21k (2021: £21k) 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 £103k at 30 June 2022 (2021: £117k), of which £nil (2021: £nil) was receivable from related
parties. Receivables of £103k 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 2022 (2021: £nil).
66
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 £5k (2021: £45k). The balance payable at
the statement of financial position date was £nil (2021: £nil).
QFI defines key management personnel as the Directors of the Company. Other than as above, there are no transactions with
Directors, other than their remuneration as disclosed in the Report of Directors’ Remuneration.
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.
26. Subsidiaries
The financial statements include the financial statements of Quadrise Fuels International plc and the following subsidiaries:
Name
Quadrise International Limited
Quadrise Limited
Percentage interest
held and voting
rights
100%
100%
Class of
share held
Ordinary
Ordinary
Quadrise Fuels International plc and its subsidiaries are involved in the production and development of MSAR® and
bioMSARTM 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 Company’s 100% subsidiary companies Quadrise KSA Limited and Quadrise Marine Limited were closed down during
the year. These companies were dormant with no trading activity.
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 4 August 2022, the Company granted a total of 12,500,000 options (the “Performance Options”) over new ordinary
shares of 1p each in the Company to employees and management of the Company in accordance with the provisions of the
Company's Unapproved Share Option Plan 2016 ("2016 Plan") and Enterprise Management Incentive Share Option Plan
("EMI Plan"), as appropriate. 7,500,000 Performance Options were issued to Jason Miles following the lapsing in full of the
7,500,000 options issued by the Company on 3 September 2021 due to the specific performance condition of reaching certain
project milestones prior to the option vesting date not having been met.
Director
Jason Miles
Number of
Performance
Options
7,500,000
Plan
2016 Plan
Exercise price
3.0p
These Performance Options will vest as to 50% on the first anniversary of grant and the remaining 50% shall vest on the
second anniversary of the date of grant. All vestings are subject to the satisfaction of specific performance conditions, being
the achievement of certain project milestones and remaining in employment with the Company, prior to the first anniversary
of grant. The Performance Options will be exercisable from vesting until the eighth anniversary of the date of grant.
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
67
BUSINESS REVIEWCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE INFORMATION
On 4 August 2022 Quadrise also granted 14,000,000 options over new ordinary shares of 1p each in the Company to
the Company's non-executive directors in accordance with the provisions of 2016 Plan (the “Additional Options”).
Director
Andrew Morrison
Laurie Mutch
Philip Snaith
Dilip Shah
Total
Number of Options
4,000,000
4,000,000
4,000,000
2,000,000
14,000,000
Plan
2016 Plan
2016 Plan
2016 Plan
2016 Plan
-
Exercise price
3.0p
3.0p
3.0p
3.0p
-
The Additional Options will vest as to 50% on the first anniversary of grant and the remaining 50% shall vest on the second
anniversary of the date of grant and have no performance conditions to vesting attached. The Additional Options will be
exercisable from vesting until the eighth anniversary of the date of grant. The vestings are not subject to the satisfaction of
specific performance conditions.
On 4 August 2022, the Company granted 6,382,979 NVOs over new ordinary shares of 1p each in the Company to the
Company’s employees in lieu of cash bonuses for the year ended 30 June 2022. These NVOs were issued under the
Company’s Enterprise Management Incentive Plan, and 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.
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
68
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 Advisor
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London
EC2R 6AS
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
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
1
Highlights
2
Chairman’s Statement
4
Chief Executive’s Statement
7
Strategic Report
11
Directors’ Section 172 Statement
12
Directors
14
Directors’ Report
17
Statement of Directors’ Responsibilities
18
Report on Directors’ Remuneration
19
Corporate Governance Statement
Independent Auditors’ Report
29
Consolidated Statement of Comprehensive Income 37
38
Consolidated Statement of Financial Position
39
Consolidated Statement of Changes in Equity
40
Consolidated Statement of Cash Flows
41
Company Statement of Financial Position
42
Company Statement of Changes in Equity
43
Company Statement of Cash Flows
44
Notes to the Financial Statements
69
Corporate Information
Perivan 264071
QUADRISE FUELS INTERNATIONAL PLC
ANNUAL REPORT AND ACCOUNTS 2022
69
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COMPANY REGISTRATION NO. 05267512
ANNUAL
REPORT &
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2022
CLEANER FUEL
CLEANER PLANET
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Eastcastle House | 27-28 Eastcastle Street | London W1W 8DH
T +44 (0) 20 7031 7321
www.quadrisefuels.com