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Quadrise Fuels Intnl (QFI)

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Wednesday 21 March, 2007

Quadrise Fuels Intnl

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.



  • 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.


  • 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.


  • 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

  • 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

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

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

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

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

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.


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


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

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

                                                                          £ K
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
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

                                                                           £ K

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

                                                                           £ K

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

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

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

-          IAS 21 Amendment - The Effect of Changes in Foreign Exchange Rates

-          IAS 39 Amendment - Cash Flow Hedge Accounting of Forecast Intra-group

-          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


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

(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

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

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

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

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

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

(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)

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              £
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.


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
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.
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 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

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