Interim Results

Quadrise Fuels International PLC 21 March 2007 21 March 2007 Quadrise Fuels International plc ('QFI', 'Quadrise' or 'the Company') Quadrise Fuels International plc (AIM: QFI), specialist manufacturers of MSAR emulsion fuel for power plant and refinery fuelling and steam generation applications, today announces its interim results for the period from 10 October 2005 to 31 December 2006. HIGHLIGHTS Financial • No debt and £ 10.62 million in cash reserves at 31 December 2006. • Operating costs contained at modest levels through outsourcing and shared services. • Loss after tax of £ 6.71 million, which includes a non-cash charge of £ 5.19 million for amortisation of intangible fixed assets reflecting a prudent and conservative accounting policy. • Resultant loss per share 1.58 pence. • Uplift in value of Quadrise Canada Corporation shares, resulting in a net increase in equity of £ 1.40 million. • Acquisition of 8% interest in Paxton Corporation (Canada) ('Paxton') for £ 0.2 million. Operational • Phase 1 substantially completed by end 2006 led to a greatly enhanced understanding of business potential and produced a selective list of key early business opportunities. • Phase 2 leading to selective early commercial contracts is progressing. • Two demonstration MSAR fuel trials are underway in client facilities. • Additional short listed refuelling prospects are in development with further announcements anticipated. Strategic • A two-pronged strategy has evolved to tackle immediate power plant and refinery refuelling prospects, whilst pursuing fuelling of future large-scale oil fired power generation capacity increases in the Middle East. • The Paxton business model involves burning MSAR fuel for the co-generation of power and CO2 for enhanced oil recovery, with coincident CO2 sequestration, avoiding release of green house gases. Paxton is potentially a very substantial future consumer of MSAR fuels creating additional sales potential for associate company Quadrise Canada Corporation. Commenting on the interim results, Bill Howe - Chief Executive of Quadrise said: 'We had planned for a modest loss during the period but this was increased due to the prudent amortisation of certain intangible assets. The Company continues to be debt-free and our cash position remains strong. On this basis, we are adequately funded to cover our projected normal operating expenses to the end of 2008. The QFI team has completed very valuable work during Phase 1, providing new insights and defining new opportunities. A key result has been the recognition and understanding of the scale of opportunity to add substantial value at the interface between QFI and the oil refining industry. The Company is uniquely placed and equipped to promote a paradigm shift in valuation and management of the energy chain from crude oil through refining to fuel supply for steam and power generation. This is currently being applied to specific business opportunities by QFI which we anticipate to translate into full scale project assessment during the course of 2007 and progress to commercial fuel supply contracts thereafter.' MSAR is a registered trade mark of Quadrise Fuels International plc. For further information, please contact: Quadrise Fuels International plc Bill Howe, CEO Hemant Thanawala, CFO T: +44 (0)20 7550 4930 Smith & Williamson Corporate Finance Limited Azhic Basirov / Siobhan Sergeant +44 (0)20 7131 4000 Parkgreen Communications Simon Robinson / Victoria Thomas +44 (0)20 7493 3713 Notes to editors: Quadrise Fuels International plc ('Quadrise') produces an emulsion fuel as a low cost substitute for conventional heavy fuel oil ('HFO') for use in power generation plants and large steam raising or energy consuming industries. In manufacturing its fuels, Quadrise uses the least valuable elements of the oil barrel, thus providing a very cost effective product whilst simultaneously facilitating a means to market for the least desirable heavy crudes and refinery derived residues. The emulsion fuel product, termed MSAR (Multiphase Superfine Atomised Residue), has superior combustion characteristics to conventional HFO and coal, and has comparable or superior environmental performance in respect of greenhouse emissions. In addition to providing operating cost savings MSAR may facilitate the upward revaluation of resource or industrial plant assets by extending their economic life or increasing their on-line load factor. Quadrise adopts a number of business models, including on site fuels manufacture at refineries, at point of use - either adjacent to or on customers facilities, and at central manufacturing facilities acting as bulk fuel suppliers. Chairman and CEO's Statement Quadrise Fuels International plc ('QFI' or 'Quadrise' or 'the Company') has made very substantial progress since its admission to trading on AIM in April 2006. This has resulted in the successful completion of Phase 1, as described below, and progressing well into the Phase 2 of our business development programme. Completion of Phase 1 Following the successful share placing and admission process in April 2006, our attention moved directly to the key elements of Phase 1 of the business development programme. This involved a number of related research, review and marketing activities designed to identify, confirm and select the most prospective early opportunities for the application of our technology and the associated sales of Quadrise MSAR fuel. An important objective of Phase 1 was to secure agreement to test MSAR fuels in client facilities. Programmes for test burns of MSAR fuel are underway with a leading Far East refiner and a North African power generator. In both cases, we are optimistic that the tests will lead to future commercial application of our technology. The review process has provided the management with a basis on which to focus on a limited number of prime business opportunities. The strategy now is to further prioritise these core prospects, which comprise some 2000MWe of power capacity, and secure MSAR fuel supply contracts as early as possible to financially underpin the business. Identified prime prospects, if secured, could result in revenues for QFI in excess of USD $200 million per annum when fully operational. Phase 1 also included a comprehensive international survey of oil refineries which could be candidates for the supply of low value vacuum residue suitable for MSAR fuel feedstock. This work also served to identify and quantify the potential for significant additional profit generation in certain crude oil refining processes which would result when heavy residues are disposed to feedstock for the manufacture of MSAR fuel. QFI is confident of contracting with a number of refineries, not only to secure our feedstock requirements but also to provide them low-cost fuel for internal use within their boilers and furnaces. This internal refinery fuel firing market was identified in the Phase 1 programme and could become a large market for QFI fuels in its own right. This was not anticipated at the time of the Company listing last April. Progressing into Phase 2 The Company is now embarking on Phase 2 of our business development programme, which has two thrusts: 1. The upgrading of our identified core prospects to bankable MSAR supply contracts in joint development programmes with our potential clients. This will typically involve completion of preliminary financial analyses followed by negotiation of binding MOU's and moving thereafter to an agreed joint programme of design, estimating and project development. The detailed scope of work and definitive capital requirements established in this process, together with estimates of operating costs, are all prerequisites to finalising terms and closure of each MSAR supply contract. Preliminary financial analyses are nearing completion for a number of the core prospects. 2. The targeted development of business opportunities in highly prospective oil-fuelled power generation markets. In countries which continue to build new oil-fuelled facilities for power generation and desalination, significant advantage could be realised from the application of Quadrise technology. This is particularly the case in certain Middle Eastern states. QFI has an Alliance Agreement with Akzo Nobel Surface Chemistry AB ('Akzo Nobel') providing for close cooperation on the development of business opportunities and associated specialist services and research programmes. An excellent working relationship has been forged with the Akzo Nobel management and specialists whose expert assistance in progressing our core projects is highly appreciated. Associated Companies Quadrise Canada Corporation ('QCC'), the associate company in which QFI owns a 20.9% equity position, continues to develop well. QCC secured their first contract during the reporting period from Paramount Resources for its Surmont Project. This project involves the processing of heavy oil into MSAR fuel for the production of steam and power in heavy oil production and anticipates the consumption of 3,000 BPD of MSAR from late 2009; rising ultimately to 13,000 BPD. QFI has also acquired an 8% interest in Paxton Corporation. Paxton, a Canadian company, has been established to co-generate power and CO2 through the combustion of MSAR. The CO2 will be used for enhanced oil recovery purposes and will be sequestered underground in the process. This concept permits power generation without the release of greenhouse gases and the associated impact on global warming. The development of the Paxton business is expected to contribute a substantial additional market for MSAR sales by QCC. Financial Performance Cash reserves for the Group stood at £10.62 million as at 31 December 2006. These are considered sufficiently adequate for normal business development activities through to the end of 2008. The Company's outsourcing and shared services policy contributed to the containment of operating expenditure at relatively modest levels through the period to substantive completion of Phase 1. As major projects progress to contract closure, specific associated financing arrangements will be required to take them forward. QFI's contribution to costs and capital expenditure for specific projects will depend on their particular features and the extent of QFI's interest. Project funding should generally be expected to be raised against each business prospect in question through conventional means. Transition to IFRS from UK GAAP The Board has elected to transition to IFRS from UK GAAP for this reporting period, with the effective transition date being 10 October 2005. This has required a review of all the accounting policies to ensure their appropriateness with IFRS. As part of this review, the Board commissioned an independent valuation of the intangible fixed assets which formed part of the reverse takeover transaction in March 2006. This was to identify the key components therein, to confirm their fair values at the time and adopt the appropriate policy. As a result of this review, the Board has adopted a policy for the amortisation of those assets which have a finite life. A key asset that fits this description is the combination of rights secured under the Akzo Nobel Alliance Agreement, together with other unpatented technologies, industry know-how and trade secrets, which drive the principal business case for QFI. Under the present arrangements, the Akzo Nobel Alliance Agreement, while intended to continue on an evergreen basis, could be terminated by Akzo Nobel or QFI on a 12 months' notice at any time after 20 December 2009. Whilst the directors believe that it is likely to be in the commercial best interests of both parties to continue the agreement beyond 20 December 2009, there can be no guarantee that this will occur. The directors have, accordingly, taken a prudent position to amortise this intangible asset over the remaining lifespan of the current agreement. This approach has resulted in a non-cash charge of £5.19 million for the period. The directors have also written-off goodwill arising on acquisition of Zareba plc of £0.58 million during the period. The investment in our associate, Quadrise Canada Corporation, has been fair valued to £15.71 million as at 31 December 2006, based on a price per share of CDN $ 9.75 resulting in an increase in equity, net of deferred tax provision, of £1.4 million in the period. Directors and Staff The Company has a relatively small core team of high quality professionals. The team quickly adopted an effective and constructive approach to combining their efforts in the pursuit of our key objectives. The team is complemented by a wider group of highly experienced specialist outsourced consultants, most of whom have an equity interest in the Company. QFI management will be the key ingredient in successfully realising the future contracts that will put the Company on its path to a prosperous future. Our thanks and appreciation are extended to them for the dedication and enthusiasm shown in progressing opportunities and creating recognition for the Company in a challenging and active energy market. Outlook QFI is able to combine and harness Akzo Nobel technologies with our own expert technical and commercial understanding of oil refining and related oil economics and our specialist knowledge of emulsion fuels combustion. The synergies offered by the novel combination of these elements creates a valuable new paradigm for the energy chain from crude oil through refining to fuel supply for steam and power generation. This novel perspective is currently being applied to specific business opportunities by QFI. We anticipate that this will translate into full scale project assessment during the course of 2007 and progress to commercial fuel supply contracts thereafter. It was announced last year that Orimulsion, the world's most prolific emulsion fuel, would cease manufacture in December 2006. This has left certain power generators stranded and without a cost competitive comparable fuel supply, further enhancing our prospects. With prevailing high oil prices anticipated to continue, our ability to supply a lower cost alternative to conventional fuel oil is an extremely positive factor in our proposition to the oil fuelled power generation industry. Ian Williams Bill Howe Chairman Chief Executive Officer Independent Review Report to Quadrise Fuels International plc Introduction We have been instructed by the Company to review the financial information comprising the Consolidated Balance Sheet, Consolidated Income Statement, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flow and notes thereon and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of their interim report and for no other purpose. We do not, therefore, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board as if that Bulletin applied. A review consists principally of making enquiries of the Directors and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the period ended 31 December 2006. MRI Moores Rowland LLP Chartered Accountants 3 Sheldon Square London W2 6PS 20 March 2007 Consolidated Balance Sheet As at 31 December 2006 2006 £ K Unaudited Assets Non-current assets Intangible assets 31,521 Investments held-for-sale 15,914 Equipment 1 ------- Non-current assets 47,436 ------- Current Assets Cash and cash equivalents 10,615 Trade and other receivables 206 Prepayments and other current assets 43 ------- Current Assets 10,864 ------- TOTAL ASSETS 58,300 ======= Equity and liabilities Non-current liabilities Deferred tax liabilities 600 ------- Non-current liabilities 600 ------- Current liabilities Trade and other payables 3,730 Tax liabilities 39 Accruals and other current liabilities 176 ------- Current liabilities 3,945 ------- Equity attributable to equity holders of the parent Issued capital 4,617 Share premium 53,565 Cumulative translation adjustment 34 Revaluation reserve 1,402 Other reserves 842 Accumulated losses (6,705) ------ Total shareholders' equity 53,755 ------ TOTAL EQUITY AND LIABILITIES 58,300 ====== Consolidated Income Statement for the period 10 October 2005 to 31 December 2006 Note 2006 £ K Unaudited Continuing operations Other income 367 Write-off of goodwill on acquisition 4 (584) Write-down of intangible assets 4 (5,188) Administration expenses (1,686) ------- Operating loss (7,091) Finance costs (27) Finance revenue 340 Write-off investment/asset 4 104 Foreign exchange gains 8 -------- Loss before tax (6,666) Taxation (39) -------- Loss for the period (6,705) ======== Earnings per share - pence loss per share Basic 5 (1.58) Diluted 5 (1.55) Consolidated Statement of Changes in Equity As at 31 December 2006 2006 £ K Unaudited Loss for the financial period (6,705) Share options reserve 320 New shares issued 50,163 Capital contribution 8,019 Reverse acquisition reserve 522 Revaluation of investments held-for-sale 1,402 Cumulative translation adjustment 34 ------- Shareholders' funds at 31 December 2006 53,755 ======= Consolidated Statement of Cash Flows for the period 10 October 2005 to 31 December 2006 2006 £ K Unaudited Operating activities Loss before tax from continuing operation (6,666) Interest expense 27 Interest income (340) Depreciation 1 Write-off of goodwill on acquisition 584 Write-down of intangibles 5,188 Foreign exchange (gain) (8) Share-based payments expense 320 Other gains and losses (264) Write-off capitalised development costs 856 Working capital adjustments: Increase in trade and other receivables (1,331) Increase in trade and other payables (633) Income tax paid (39) ------- Net cash outflows from operating activities (2,305) ------- Investing activities Purchase of investments held-for-sale (639) Acquisition of subsidiaries, net of cash acquired 1,255 Interest received 340 ------- Net cash flows used in investing activities 956 ------- Financing activities Proceeds from issue of shares 12,941 Transaction costs incurred with share issues (1,021) Interest paid (27) ------- Net cash used in financing activities 11,893 ------- Net increase in cash and cash equivalents 10,544 Net foreign exchange differences 71 ------- Cash and cash equivalents at 31 December 2006 10,615 ======= Notes to the Group financial statements 1. General Information Zareba plc changed its name to Quadrise Fuels International plc ('QFI', 'Quadrise', 'Company') on 19 April 2006 via an Extraordinary General Meeting. QFI and its subsidiaries ('the Group') are engaged principally in the manufacture and marketing of emulsified fuel for power generation and steam raising activities. It is listed on the AIM market of the London Stock Exchange. QFI, the legal parent company was incorporated on 22 October 2004 as a limited company under the Companies Act with registered number 5267512. It is domiciled at, and is registered at Parnell House, 25 Wilton Road, London. SW1V 1YD. The information for the period ended 31 December 2006 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for Quadrise Fuels International plc to 31 March 2006, company only, prepared under UK GAAP has been delivered to the Registrar of Companies. The financial statements were authorised for issue on 20 March 2007 by the Board of Directors. 2. Accounting policies (2.1) Basis of preparation The consolidated financial information presented has been prepared on a historical cost basis, except for available-for-sale financial and derivative financial instruments which are valued at fair value. The consolidated financial statements are presented in UK sterling ('£'), due to the nature of the Group's activities and the fact that the Group is presently expected to transact more of its business in UK sterling than any other currency. All values are rounded to thousands of pounds except when otherwise indicated. These financial statements have been prepared in accordance with International Financial Reporting Standard Number 34, Interim Financial Reporting, and the requirements of International Financial Reporting Standard Number 1, First-time adoption of International Financial Reporting Standards, ('IFRS'), and IFRIC interpretations issued, and effective, or issued and early adopted, as at the date of these statements. The preparation of financial statements in conformity with IFRS accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Although theses estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the Group's business activities. (2.2) Basis of Consolidation These interim consolidated financial statements of the Group comprise the financial statements of Quadrise Fuels International plc and its subsidiaries as at 31 December 2006. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies. On 19 June 2006 the Company announced the change of its year-end from 31 March to 30 June. All intercompany balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in full. 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. Control is normally evident when QFI, or a company which it controls, owns more than 50% of the voting rights of a company's share capital. Investments in associated companies (generally investments of between 20% to 50 % in a company's equity) where significant influence is exercised by the company are accounted for using the equity method. An assessment of investments in associates is performed when there is an indication that the asset has been impaired or the impairment losses recognised in prior years no longer exist. When the Group's share of losses exceeds the carrying amount of the investment, the investment is reported at nil value and recognition of losses is discontinued except to the extent of the Group's commitment. Investments where the Company holds less than 20% are accounted for on a fair value basis in accordance with IAS 39 and are held as investments held-for-sale. The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the Group's business activities. (2.3) Changes in accounting principles The accounting policies adopted are consistent with those of the previous financial periods except for: a) Adoption of IFRS Previously the Company and its subsidiaries prepared their financial statements in accordance with UK GAAP. The Group elected to publish its first consolidated financial statements to 31 December 2006 under IFRS with its transition date to IFRS being 10 October 2005. b) Introduction of IFRS - First time adoption The rules for first time adoption of IFRS are set out in IFRS 1, First-time Adoption of International Financial Reporting Standards. In general, selected accounting policies must be applied retrospectively in determining the opening balance sheet under IFRS. However, IFRS 1 allows a number of exemptions to this general principle. Exemptions to which the Group has taken advantage are noted below: Adoption date for subsidiaries The Group has elected not to adopt IFRS for its subsidiaries as permitted by IFRS 1 and will continue to report on local GAAP for the foreseeable future. Fixed asset valuation The Group has elected not to measure fixed assets at fair value on the date of transition. c) Other changes i) During the period Quadrise Power Systems AG changed its accounting policies to write-off development costs as incurred, (note 4c). ii) The Group has adopted the following new and amended IFRS and IFIC interpretations during the period. Adoption of these revised standards and interpretations did not have any affect on the equity of the Group. They did however give rise to additional disclosures: - IAS 1 and 19 Amendment - Actuarial Gains and Losses, Group Plans and Disclosures - IAS 21 Amendment - The Effect of Changes in Foreign Exchange Rates - IAS 39 Amendment - Cash Flow Hedge Accounting of Forecast Intra-group Transactions - IAS 39 Amendment - The Fair Value Option - IAS 39 and IFRS 4 - Financial Guarantee Contracts - IFRIC 4 Determining whether an arrangement contains a Lease iii) The Group has not elected to early adopt IFRS 7, IAS 1 amended of IFRIC 8, IFRIC 7, IFRIC 9, IFRIC 10, IFRIC 11 and IFRIC 12. Adoption of these standards is anticipated to have no effect on the financial statements of the Group. (2.4) Significant accounting judgements and estimates Judgements In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities with the financial period are discussed below. Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the 'value in use' of the cash-generating units to which the goodwill is allocated. Estimating the value in-use required the Group to make an estimate of the expected cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Other intangible assets The Group determines whether the intellectual property is impaired if indication of an impairment come to management's attention. (2.5) Revenue recognition Revenue is recognised to the extent that is probable that the economic benefits will flow to the Group and the revenues can be reliably measured. To date the Group is in a pre revenue-generating start-up phase. (2.6) Foreign currency translation The consolidated financial statements are presented in UK sterling, which is the Company's functional and presentation currency. Each entity in the Group determines 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. Monetary assets and liabilities denominated in foreign currencies are re-translated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement. 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 functional currency of the foreign operations, Quadrise Power Systems AG, is US Dollars. As at the reporting date, the assets and liabilities of this subsidiary are translated into the presentation currency of the Group, namely UK Sterling, at the rate of exchange ruling at the balance sheet date and, its income statement is translated at the weighted average rate for the period. The exchange differences arising on the translation are taken directly to a separate component of equity ('Cumulative Translation Adjustment'). On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement as part of the gain or loss on sale. The following exchange rates are used in the Group's major currencies: ISO Code Unit Balance Sheet Income Statement -------- ---- ------------- ---------------- United States USD $ 1 1.9591 1.85743 Canada CDN $ 1 2.2851 2.09416 Note - The income statement exchange rate noted above relates to the period from 23 February to 31 December 2006. The period relates to the acquisition date of Quadrise Power Systems AG to the end of the accounting period. (2.7) Foreign currency transactions Transactions during the period in foreign currencies are translated into the respective local currencies at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into respective local currencies at the exchange rates prevailing at the period-end. Exchange gains and losses are recognised in the income statement. (2.8) Business combinations 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 restated at fair value in accordance with IFRS. (2.9) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill is reviewed annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units, or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities are assigned to those units or groups of units. Each unit or group of units to which goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. (2.10) Intangible assets Intangible assets include intellectual property. Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any 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 is reviewed at each financial year-end. Changes in the expected useful life of the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in the income statement 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. (2.11) Property and equipment All equipment is stated at cost less depreciation unless otherwise shown. Cost includes all relevant external expenditure incurred in acquiring the asset. No property assets are currently held within the Group. The Group selects its depreciation rates carefully and reviews then regularly to take account of any changes in circumstances. When determining expected economic lives, the Group considers the expected rate of technological developments and the intensity at which the assets are expected to be used. All assets are subject to annual review and where necessary, further write-downs are made for any impairment in value. Equipment is recorded at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes the cost of replacing parts of such plant and equipment when that cost is incurred if the recognition criteria are met. Depreciation is calculated on a straight line basis over the useful life. Useful lives of major classes of depreciable assets are: Computer equipment 3 Years Furniture & fittings 4 Years Equipment 10 Years The initial cost of equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the equipment has been placed into operation, such as repairs and maintenance and overhaul costs, are normally charged to the income statement in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of equipment beyond its original assessed standard of performance, the expenditures are capitalised as an additional cost of equipment. The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of equipment. An item of equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the period the asset is derecognised. (2.12) Investments and other financial assets Financial assets are classified as either financial assets at fair value through the income statement, loans and receivables, held to maturity investments and available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are at fair value plus, in the case of investments not at fair value through the income statement, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end. The Group currently holds only loans and available for sale financial assets which corresponds to this category of assets. All regular way purchases and sales of financial assets are recognised on the trade date being, for example, the day that the Group commits to purchase the asset. Regular way purchases or sales of financial assets are those that require delivery of assets within the period generally established by regulation or convention in the market place. Investments held-for-sale Investments are those non-derivative financial assets that are designated as held-for-sale or are not classified in any of the three preceding categories. After initial recognition available for sale financial assets are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the income statement. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the closure of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to the current market value of which is substantially the same; discounted cash flow analysis and option pricing models. Loans and receivables Loans and receivables are non-derivatives financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised costs using the effective interest method. Gains or losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation period. (2.13) Impairment At each balance sheet date, reviews are carried out of the carrying amounts of tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent if any, of the impairment loss. Where the asset does not generate cash flows that are independent from the other assets, estimates are made of the cash-generating unit to which the asset belongs. Intangible assets with an indefinite useful life are tested for impairment at least annually and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value, less costs to sell, and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a discount rate appropriate to the specific asset or cash-generating unit. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. Impairment losses are recognised immediately in the income statement. (2.14) 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 balance sheet date. Deferred Tax Deferred tax is provided using the liability method on temporary difference at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: (a) Where the deferred tax liability 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 the accounting profit or loss and; (b) In respect of taxable temporary differences associated with investment in subsidiaries and associates 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. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except: (a) Where the deferred income tax asset relating to the deductible temporary differences arise from the initial recognition of an asset or liability and (b) in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable; (c) that the temporary differences will reverse in the foreseeable future and taxable profits will be available against which the temporary differences can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probably that sufficient taxable profits will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognisable deferred income tax assets are re-assessed at each balance sheet date and are recognisable to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. (2.15) Employee benefits The Group maintains various defined contribution plans for providing employee benefits, which conforms to laws and practices in the countries concerned. Retirement benefit plans are generally funded by contributions from both the employees and the companies to independent entities (multi-employer plan) that operate the retirement benefit schemes. Current service cost for defined contribution plans 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 income statement in the year to which they relate. (2.16) Share-based payments Employees (including directors and senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby these individuals render services as consideration for equity instruments ('equity-settled transactions'). These individuals are granted share option rights approved by the Board, which can only be settled in shares of the respective companies that award the equity-settled transactions. No cash settled awards have been made or are planned. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/ or service conditions are fulfilled, ending on the date on which the relevant individuals become fully entitled to the award ('vesting point'). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments and value that will ultimately vest. The income statement charge for the period represents the movement in cumulative expense recognised as at the beginning and end of that period. No equity-settled awards have been modified or cancelled during the period. The fair value of share-based remuneration is determined at the date of grant and recognised as an expense in the income statement 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. (2.17) Separately disclosable items Items that are both material in size and unusual and infrequent in nature are presented as separately disclosable items in the income statement or separately disclosed in the notes to the financial statements. The directors are of the opinion that the separate recording of these items provides helpful information about the Group's underlying business performance. (2.18) Financial risk management, recognition and accounting The Group's multi-national operations and debt financing arrangements expose it to a variety of financial risks that include the effects of changes in debt making prices, foreign currency exchange rates, credit risks, equity securities prices, liquidity and interest rates. The Group has in place a risk management programme that seeks to limit the adverse affects 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 unless approved by the Group's FD. (2.19) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash-in-hand bank balances, call money and unrestricted time deposit balances with an original maturity of 90 days or less. (2.20) Share capital The share capital reported in the consolidated financial statements is that of Quadrise Fuels International plc. (2.21) Financial risk management objectives and policies The QFI business model relies on bespoke contracts that do not contain any complex financial instruments or terms and conditions. Embedded derivatives do exist within contracts (e.g. share options) and these are closely associated with the commercial terms and conditions of each contract but none is required to be further disclosed as part of IAS 32 and IAS 39. The Group does not enter into any forward exchange rate contracts. The main risks arising from the Group's activities are cash flow interest rate risk, liquidity risk, foreign currency risk, price risk (fair value) and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised as: Cash flow interest rate risk - the Group's exposure to the risk of changes in market interest rates relates primarily to the Group's non-current liabilities with a floating interest rate. The Group's policy is to manage its interest cost using variable rate debts that represent market rates. Liquidity risk - the Group raises funds as required on the basis of budgeted expenditure and inflows for the next twelve months. When funds are sought, the Group balances the costs and benefits of equity and debt financing. When funds are received they are deposited with banks of high standing in order to obtain market interest rates. Foreign currency risk - as the Group's significant investment operations are in the UK, its balance sheet can be affected by movements in the US Dollar/English Sterling exchange rates. The Group does not hedge this potential exposure. The Group enters into limited forward currency contracts as the transactional foreign currency exposure is not considered material to the Group at present. Price risk - the carrying amount of the following financial assets and liabilities approximate to their fair value due to their short term nature: cash accounts, accounts receivable, and accounts payable. Available for-sale-investments are valued at fair value based on recent shareholder transactions or the underlying net asset base. Credit risk - with respect to credit risk arising from other financial assets of the Group, which comprise cash and time deposits, account receivables, and held-for-sale investments, the Group's exposure to credit risk arises from default of the counterparty, with a minimum exposure equal to the carrying amount of these instruments. The credit risk on cash is limited as cash is placed with substantial financial institutions. (2.22) Loans and receivables 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. (2.23) Borrowing costs Borrowing 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 income statement in full. No interest or borrowing costs have been capitalised. (2.24) De-recognition and impairment of financial assets and liabilities Financial assets A financial asset is derecognised where; (a) the right to receive cash flows from the asset have expired; (b) the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass-through arrangement; or (c) the Group has transferred the rights to receive cash flows from the asset and (i) either has transferred substantially all the risks and rewards of the asset or (ii) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. Impairment of financial assets The Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired. (2.25) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. (2.26) Commitments and contingencies Commitments and contingent liabilities are recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable. (2.27) Events after the balance sheet date Post period-end events that provide additional information about a company's position at the balance sheet date are reflected in the financial statements. Post period-end events that are not adjusting events are disclosed in the notes when material. 3. Reverse acquisition accounting On 18 April 2006 the Company become the legal parent of Quadrise International Limited in a share-for-share transaction and changed its name from Zareba plc to Quadrise Fuels International plc. Due to the relative size of the companies, the shareholders of Quadrise International Limited became the majority holders of the enlarged share capital. Further, the Company's continuing operations and executive management become those of Quadrise International Limited. Accordingly, the substance of the combination was that Quadrise International Limited acquired Quadrise Fuels International plc in a reverse acquisition accounted for under IFRS 3. Under the Companies Act 1985 it would normally be necessary for the Company's consolidated accounts to follow the legal form of the business combination. In that case, the pre-combination results would be those of Quadrise Fuels International plc and Quadrise International Limited only from 18 April 2006. However, this would portray the combination as the acquisition of Quadrise International Limited by Quadrise Fuels International plc and would, in the opinion of the directors, fail to give a true and fair view of the substance of the business combination. Accordingly, the directors have adopted reverse acquisition accounting as the basis of the consolidation in order to give a true and fair view. In invoking a true and fair view the directors note that the reverse acquisition accounting is endorsed under IFRS 3 and that the Urgent Issues Task Force (UITF) of the UK's Accounting Standard Board has considered the subject and concluded that there are instances where it is right and proper to invoke the true and fair override in such a way. (UITF information sheet 17). By adopting reverse acquisition accounting for consolidation purposes, goodwill on acquisition of Zareba plc arises, which has been fully written-off to the income statement, because Zareba plc had no continuing business and therefore no intrinsic value. The goodwill write-off is £584K. 4. Other income statement disclosures a) On the acquisition of Zareba plc, the AIM cash shell, the goodwill on acquisition of £584K was fully written off. b) The Board has reviewed the accounting policy for intangible assets and has adopted a policy for the amortisation of those assets which have a finite life. A key asset that fits this description is the combination of rights secured under the Akzo Nobel Alliance Agreement, together with other unpatented technologies, industry know-how and trade secrets, which drive the principal business case for QFI. Under the present arrangements, the Akzo Nobel Alliance Agreement, while intended to continue on an evergreen basis, could be terminated by Akzo Nobel or QFI on a 12 months' notice at any time after 20 December 2009. Whilst the directors believe that it is likely to be in the commercial best interests of both parties to continue the agreement beyond 20 December 2009, there can be no guarantee that this will occur. The directors have, accordingly, taken a prudent position to amortise this intangible asset over the remaining lifespan of the current agreement. This approach has resulted in a non-cash charge of £5,188K for the period. c) The write-off investment/asset relates to Quadrise Power Systems AG which during the period wrote-off previously capitalised business development costs relating to Quadrise following a change in accounting policies. 5. Earnings per share Profit/(loss) Weighted average Earnings per share for the period number of shares for the period £ K for the period pence 1p ordinary shares Basic EPS Earnings attributable to ordinary shares (6,705) 424,774,023 (1.58) Effect of dilutive shares Options 107 424,774,023 0.025 ------- ----------- ----- Diluted EPS (6,598) 424,774,023 (1.55) Adjusted earnings - - - ------- ----------- ----- Earnings per share from continuing operations (6,598) 424,774,023 (1.55) Basic Adjustment for asset write down 104 424,774,023 0.02 Adjustment for exceptional items 584 424,774,023 0.14 ------- ----------- ----- Underlying EPS (5,910) 424,774,023 (1.39) ------- ----------- ----- The weighted average number of shares issued during the period, excluding share options, was 424,774,023. Earnings per share is calculated by dividing the loss for the period by the weighted average number of shares in issue during the period. Adjusted earnings per share is calculated by eliminating the effect of exceptional items. Diluted loss per share of 1.55 pence is calculated by reference to the loss for the financial period of £6,598K adjusted for options and the weighted average number of shares in issue during the period of 424,774,023. 6. Share capital 31 December 31 December 2006 2006 Number of £ shares Authorised Ordinary shares of 1 pence each 1,000,000,000 10,000,000 ============= ========== 1,000,000,000 10,000,000 ============= ========== Allotted, called up and fully paid Incorporation of company 100 1 Acquisition of QPS AG and inters 9,249,900 92,499 Acquisition of Quadrise Limited 750,000 7,500 ------------- ---------- Issued equity prior to business combination 10,000,000 100,000 Cost of business combination Consolidated 10 shares at 0.1 pence par value for 1 share at 1 pence par value 20,330,000 203,300 QIL shareholders convert QIL shares for QFI shares 375,827,136 3,758,271 QFI shares list on AIM 64,769,721 647,697 NOMAD Fees 200,000 2,000 Options issued 600,000 6,000 -------------- ---------- 461,726,857 4,617,269 ============== ========== 7. Acquisition of business (a) Quadrise restructuring, acquisition of Quadrise International Limited and reserve takeover to create Quadrise Fuels International plc On 10 October 2005 Quadrise International Limited was incorporated in order to facilitate the acquisition of Quadrise Limited and the transference of all of its Quadrise interests under one new company. On 23 February 2006 International Energy Group transferred its Quadrise interests being 100% of Quadrise Power Systems AG, 1,097,500 common shares in Quadrise Canada Corporation, a 50% interest in Quadrise USA LP Inc, the rights under an alliance agreement with Akzo Nobel and other intangible assets in the commercial department of the Quadrise MSAR technology. £K Net assets acquired: Net worth of QPS AG 43 1,097,500 common share in Quadrise Canada Corporation 4,112 ------ Total net worth of acquisition 4,155 Intellectual property on acquisition 29,861 ------ Total 34,016 ====== Satisfied by: Issuance of shares 34,016 ====== Total consideration 34,016 ====== (b) Acquisition of Quadrise Limited On 10 March 2006 Quadrise International Limited acquired 100% of Quadrise Limited: £K Net assets acquired: Investments held in Quadrise Canada Corporation at fair value 9,278 Intellectual property 6,826 ------ Total 16,104 ====== Satisfied by: Cash consideration 4,692 Shares consideration - Capital contribution 4,286 Shares in Quadrise Canada Corporation at fair value - Capital contribution 3,734 Foreign exchange 25 750K new shares issued in QIL 3,367 ------ Total consideration 16,104 ====== (c) Acquisition of Zareba plc On 18 April 2006 the Company acquired Zareba plc, an AIM cash shell company through a reverse acquisition takeover in order to publicly list as Quadrise Fuels International plc. Goodwill of £584k was realised on the acquisition, which was fully impaired in the period. £K Net assets acquired: Cash 1,201 Goodwill arising on acquisition 584 ------ Total 1,785 ====== Satisfied by: Capital contribution 1,786 ------ Total Consideration 1,786 ====== 8. Post- balance sheet events On 19 March 2007, the Company passed a resolution to exercise 652,874 warrants for the subscription and purchase of 652,874 common shares in the capital of Paxton Corporation, a company registered in Alberta, Canada, at an exercise price of CDN $0.75 per common share. The purchase price of CDN $489,655.50 is to be satisfied in a cash payment on or before 27 March 2007. Following the exercise of warrants, the Company will be interested in a total of 1,305,748 common shares in Paxton Corporation. 9. Comparative figures No comparative figures have been included as the Company has not produced interim results for a corresponding period prior to this announcement. 10. Copies of this announcement Copies of this announcement will be available on the Company's website at www.quadrisefuels.com and from the Company's registered office, Parnell House, 25 Wilton Road, London SW1V 1YD for a period of one month. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Quadrise (QED)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today