Quadrise Fuels International plc (AIM: QFI) announces its unaudited interim results for the 6 months ended 31 December 2020.
· £1.1 million in cash reserves at 31 December 2020 (31 December 2019: £3.8 million).
· The Company successfully concluded a placing and significantly oversubscribed open offer which raised gross proceeds of £7.0 million in March 2021. QFI now has sufficient funds in place to progress to commercial revenues and sustainable positive cash generation by July 2022 through the successful migration of positive tests and trials to delivery of commercial supplies to customers, subject to agreeing suitable commercial contractual terms.
· Loss after tax of £2.3million (2019: £2.3 million) after production and development costs of £0.6m (2019: £0.7m), administration expenses of £0.8m (2019: £1.1m) and a £0.7m fair value adjustment arising on Convertible Securities (2019: £nil).
· Total assets of £4.9 million at 31 December 2020 (2019: £7.8 million).
· Our new renewable fuel bioMSAR™ was formally launched in December 2020. In comparison to HFO, bioMSAR™ offers substantial (20-30%) reductions in CO2 emissions and 20-25% lower NOx. This is similar to using LNG, but with none of the risks of methane slip whilst enabling the use of existing HFO infrastructure - with minimal modification costs.
· We announced in December 2020 our collaboration agreement with Aquafuel Research Ltd ("Aquafuel"), a British company specialising in renewable power innovation using conventional biofuels and glycerine in diesel engines.
· bioMSAR™ combustion testing programmes with industry partners commenced in Q4 2020. As announced on 1 February 2021, successful initial testing confirmed bioMSAR™ as a viable diesel engine fuel and demonstrated higher efficiency and 20-25% lower NOx compared to baseline testing on diesel at the prevailing test conditions on a high-speed 4-stroke diesel engine.
· The third-party testing programme includes testing with Wärtsilä and VTT in Finland, and during the first half of calendar 2021 testing will be undertaken on a larger, medium speed, 4-stroke diesel engine, with further quantification of efficiency and emissions on bioMSAR™. During the second half of the calendar year we also plan to schedule testing on 2-stroke engines.
· Following the temporary easing of Covid-19 related site access restrictions, Quadrise was able to successfully complete the pilot trial at the client's site in October 2020. Rather than immediately progressing from the pilot trial to the commercial trial (at "Site A"), the client and Quadrise jointly agreed to undertake the intermediate stage of an industrial scale trial at another of the client's locations ("Site B").
· Work on this industrial-scale trial is progressing, with the new pumping and heating unit fabricated and ready for shipment. The required ~60mt of MSAR® fuel is to be manufactured by a third party and sent directly to site. The trial is scheduled to be completed as early as possible in H1 2021 along with the phase 2 feasibility study. QFI will be paid £100,000 for the industrial trial and phase 2 study under existing agreements with the client.
· Following the successful conclusion of the industrial trial, the plan is to complete the commercial trial at Site A, which is the major fuel oil consumer, by early/mid H2 2021. Assuming the successful conclusion of these trials, the intention would then be to conclude a commercial supply agreement covering one or more of the client's sites in Morocco before calendar year end.
· The Commercial Trial Agreement ("CTA") with Greenfield Energy LLC ("Greenfield") was announced in August 2020. This covers testing at the Petroteq Oil Sands Plant ("POSP") in Utah, USA, which is managed by Greenfield. Phase 1 of the CTA, for which Quadrise is being paid $150,000, includes:
§ Proof of Concept ("POC") formulation and test work at QRF using oil samples supplied by Greenfield.
§ Loan of Quadrise MSAR® commercial production equipment, MSAR® quality control test equipment and supply of MSAR® additives.
§ Supply of specialist services and personnel to assist Greenfield in completing the commercial scale demonstration trial to produce 600 barrels (100mt) of power grade MSAR®.
· With the start-up of the POSP delayed until January 2021, the POC work has been pushed back to Q2 2021 pending receipt of representative samples at QRF. The MMU is ready to be sent to the POSP site and we await Greenfield's confirmation to ship. The trial will then commence once the Quadrise project team is able to gain safe access (under COVID-19 restrictions) to the site.
· Pending the successful completion of Phase 1, Quadrise will then work with Greenfield to develop plans for commercial MSAR® production facilities capable of treating 10,000 barrels of oil per day and to agree terms for the granting of a conditional MSAR® licence to Greenfield once commercial agreements have been signed.
· A Joint Development Agreement ("JDA") with MSC Shipmanagement of Cyprus was signed in January 2021, with planning and preparatory work to enable a LONO trial(s) of Marine MSAR® to take place on a MSC container shipping vessel(s) now underway.
· During Q2-Q3 calendar 2021, we will be working to procure the equipment for fuel production, and the vessel(s) fuel booster system(s) and to commence the process of preparing the vessel(s) and the fuel production site to enable the commencement of the LONO trial(s) in the second half of 2021.
· H2 calendar 2021 will see the active commencement of the trial on the vessel(s), with all the preparatory and commissioning work having been completed for both fuel production and on-vessel storage and use of MSAR®. Once the initial MSAR® fuel has been loaded and the on-board systems commissioned, the vessel(s) will then be bunkering Marine MSAR® throughout the 4,000-hour LONO trial(s). The details of the LONO process and relevant inspections and milestones will be agreed between the parties during the initial phase of the work under the JDA.
Cost Saving Measures
During the period, in order to reduce costs, we restructured staffing and the board, and utilised the furlough scheme for a small number of our team for a limited period. In addition, we took a decision to break our lease on the London office in 2020 and exited the lease on 5 February 2021 with no penalty. These measures, when combined with reduced overseas travel expenses, significantly lowered the Company's monthly expenditure.
Throughout the COVID-19 pandemic we have protected our staff, their families and the business. Overall, there has been limited impact on our activities as the Quadrise Research Facility ("QRF") has operated safely throughout, and the remainder of our staff have worked very effectively from home. We have built in contingencies to all of our projects relating to the potential impact of COVID-19 restrictions. Whilst there can be no certainty on how and when restriction can be eased, based on our most up to date plans, we feel confident that we can manage any downside risks appropriately.
Outlook - Current trading and prospects
· 2021-22 will be a very busy period as we ramp-up our activities across all of our active projects in the industrial, upstream and marine markets, alongside the continued testing and development of our new, renewable fuel bioMSAR™. We are continuing to progress other projects using our local agents and through phone/web conferencing and are still seeing active engagement from our clients, which is encouraging.
· Continued progress in the above projects will, we believe, be instrumental in building the momentum which will significantly improve the engagement with key stakeholders in the Middle East and Central and South America. With White Papers published on the Middle East and the Americas markets and with the bulk of our website available in Arabic and Spanish, we have raised our profile significantly in these markets.
· The recent successful placing and open offer were both oversubscribed, and the gross proceeds of a total of £7m will enable Quadrise to progress its active projects and their planned migration to commercial contracts - providing a clear path to sustainable commercial revenues. It also supports our business development activities to enable progress in key markets such as the Middle East and Central and South America. We know that being able to deliver good news flow will be as important as ever and we have invested significant further effort into our PR/IR activities to support this
Mike Kirk, Chairman of QFI, said:
"The last three quarters have proved to be amongst the most significant periods in Quadrise's history. Through our strategy of a broader range of project opportunities, we have built a firm foundation for Quadrise to progress these through their various stages of tests and trials in 2021/22. This should enable the migration, subject to executing the relevant contracts, to commercial revenues, and by July 2022 we expect to be generating net cash from operations. In addition, we have through a focused Research, Development and Innovation ("RDI") initiative, undertaken the first steps in testing and developing our new renewable fuel, bioMSAR™, that was formally launched in December 2020. Further testing and development is planned throughout 2021, including the potential to include bioMSAR™ alongside MSAR® in the large-scale tests and trial being planned in the industrial, marine and upstream projects.
In combination, these significant developments enabled Quadrise to raise a total of £7.0m (before costs) of funding through a placing and open offer, both of which were oversubscribed and needed to be scaled-back. As a result of the placing, we now have two major institutional investors, Premier Miton and Canaccord Genuity that have major disclosable investments of approximately 9% and 5%, respectively. We were also delighted that our loyal base of existing holders responded so positively to the open offer which was 3.4 times oversubscribed. This funding provides Quadrise with the ability to deliver all of the activities required to migrate our active projects in the industrial, upstream and marine markets to commercial delivery. It also enables completion of the development and testing of bioMSAR™ and the ability to look at what we believe are significant opportunities to add further value in related activities.
2021 is going to be a very busy year and we look forward to providing regular project updates to shareholders, as appropriate in due course."
Investor Conference Call
As we gave investors a very comprehensive update on our progress to date and our plans for 2021 on 8 March 2021, we will not be hosting an additional update around today's results, if you would like to view the previous meeting please click here to view: https://player.vimeo.com/video/521576004. We very much look forward to updating investors in due course.