QFI.L Regulatory News (QFI)

Quadrise Fuels International plc

("Quadrise", "QFI", the "Company" and together with its subsidiaries the "Group")

Final Results for the year ended 30 June 2015

Quadrise Fuels International plc (AIM: QFI) is the emerging manufacturer and supplier of MSAR® emulsion fuels, a low cost alternative to heavy fuel oil (one of the world's largest fuel markets utilising over 450 million tons per annum) in the global shipping, refining and steam and power generation markets. The Company today announces its audited final results for the year ended 30 June 2015 and gives notice for the convening of an Annual General Meeting ("AGM") of the Company to be held on 27 November 2015.

Operational highlights

· Quadrise MSAR® Marine Fuels: Contracts executed with Mærsk Line A/S and Compania Espanola De Petroleos S.A.U including the production of Marine MSAR® at the San Roque refinery near Gibraltar to supply the seaborne Operational Trial Programme due to commence in H1 2016.

Target completion of the 4000 hour seaborne extended continuous operation programme to support the issue of LONOs by participating marine engine manufacturers by end Q1 2017, enabling thereafter progressive development of supply sources and global commercial roll-out.

· Saudi Arabia: Programme now focused on a fast track 'production to combustion' demonstration pilot project including an extended trial of MSAR® fuel firing for a 400MWe thermal power unit within a large coastal power station complex.

A coastal refinery has been designated for the installation of an MSAR® manufacturing unit with commissioning anticipated by Q2 2016. Work is proceeding with an assessment of installation engineering requirements and any necessary adaptation of power plant boiler and fuel storage.

· Refinery Re-fuelling: The substitution of heavy fuel oil in oil refinery steam and power generation has been identified as an MSAR® target market in its own right presenting an opportunity for refiners to reduce costs and possibly generate power and steam for external sale.

Quadrise is currently leading a feasibility assessment with a mid-sized refinery and anticipating a pilot plant installation during H1 2016.

· Management and Resourcing: Three specialist executive appointments during 2015 considerably strengthened Quadrise management in anticipation of the rapidly growing workload. Former specialist consultants converted to full time employees. Service and R&D facilities and capacity also expanded and enhanced.

Financial highlights

· No debt and £8.4 million (2014: £11.1 million) in cash reserves at 30 June 2015.

· Loss after tax of £4.9 million (2014: £5.9 million) of which £2.3 million (2014: £2.9 million) relates to non-cash charges for share options and adjustments to available for sale investments.

· Cumulative tax losses of £40.7 million (2014: £34.8 million) available for set-off against future profits.

· Total assets of £12.6 million at 30 June 2015 (2014: £16.3 million), which includes further investment in the Group's own comprehensive R&D facility as well as a down-payment for another commercial-scale MSAR® Manufacturing Unit, ear-marked for installation at CEPSA refinery for LONO operational trial.

Significant events post year end

On 14 September 2015, Quadrise International Limited, a wholly owned subsidiary of QFI, executed agreements with Compania Espanola De Petroleos S.A.U. ("CEPSA") Mærsk Line A/S ("Mærsk Line") and A.P. Moller-Mærsk A/S ("Mærsk") for the Operational Trial Programme to provide the basis for the issue of Letters of No Objection ("LONOs") by participating marine engine manufacturers. The Operational Trial includes the supply, installation and commissioning of a Quadrise MSAR® Manufacturing Unit at the CEPSA San Roque refinery near Gibraltar.

Commenting on the results Ian Williams, Executive Chairman of QFI said:

"Very meaningful progress was made over the past year culminating in the achievement of several key objectives. It is particularly pleasing to see significant steps forward in both the Marine MSAR® and Saudi Arabian projects as Quadrise moves ever closer to commercial production. The Group is better prepared and resourced than ever before to convert projects to fully commercial programmes, securing bases from which to grow MSAR® fuel sales into our very large target markets.

Recent developments have further de-risked our business model and served to demonstrate that the Quadrise proposition remains robust in very challenging oil market conditions. In practice, these very conditions have established a more closely aligned view of the value-adding potential of the Quadrise technology between the company and our clients. In an uncertain world where the cost and risk of other means of increasing refinery yield are becoming prohibitive, we fully expect an increased level of interest as our programmes gain visibility.

All things considered, the Company is undoubtedly better resourced and positioned to succeed than ever before."

Notice of Annual General Meeting

The Annual General Meeting ("AGM") of the Company is to be held at the DoubleTree by Hilton Hotel, 2 Bridge Place, Victoria, London SW1V 1QA on 27 November 2015 at 12.00 noon.

For additional information, please contact:

Quadrise Fuels International plc +44 (0)20 7031 7321

Ian Williams

Hemant Thanawala

Jason Miles

Smith & Williamson Corporate Finance Limited +44 (0)20 7131 4000

Dr Azhic Basirov

Ben Jeynes

Peel Hunt LLP +44 (0)20 7418 8900

Richard Crichton

Matthew Armitt

Ross Allister

Bell Pottinger +44 (0)20 3772 2500

Rollo Crichton‐Stuart

Chairman's Statement

I am pleased to present this Annual Report for Quadrise Fuels International plc ("Quadrise", the "Company", "QFI" and together with its subsidiaries, the "Group") for the year ended 30 June 2015 together with recent events.

Business Overview

The past year has been especially challenging for Quadrise on many fronts but, as advised to investors during September, very material progress has been made in our key programmes, and much of the future pathway to commercial operations is now contractually underpinned. The global oil price collapse, related delays in settling terms with key counterparties and legal constraints on interim disclosure combined with adverse stock market conditions clearly impacted investor confidence. While not as far advanced as had been planned and intended by this time, the Company is now more assured of progressing to the prime objective of sustainable commercial multi-source revenues than at any previous time.

The senior executive team of Quadrise International Limited ("QIL"), the 100% Group owned principal operating subsidiary company, has been considerably strengthened by selective recruitment, conversion of consultants to employees and organisational restructuring. The collective effort is focussed on business development - converting relationships and opportunities progressively to contracts, operations and revenue. In this regard the Quadrise capacity to perform and deliver has been very significantly enhanced and the Company is fully equipped and effectively structured to deliver the business programme. Whilst the near term focus remains the Marine MSAR® and Saudi Arabian ventures, both of which are assuming increased scale and complexity, the Company has identified and continues to selectively progress additional initiatives and projects to broaden the business base, and to add significant future value to the Group.

Quadrise clients are generally large companies that produce and consume heavy fuel oil ("HFO") in particular in the marine and power generation markets. Qualifying oil refiners can produce MSAR® fuel under licence using our technology and QIL's specialist services. By converting from 'conventional' processing the refiner increases its own margin and is able to supply former HFO consumers with a superior and cheaper fuel. These markets are very large with annual global HFO demand exceeding 450 million tons per annum with an aggregate value of over US$100 billion even at current low oil prices. The Marine market accounts for approximately 40% of this demand, most of which is 'open ocean' heavy bunker fuel oil.

Marine and power generation fuel oil consumers and the oil refining industry face unrelenting pressure to improve efficiency and reduce cost. Our technology offers a "win-win" proposition to these markets. Semi-complex oil refineries can step-change margins at very modest investment, whilst offering the MSAR® consumer cost and environmental benefits with performance efficiencies from improved combustion and lower emissions.

The Quadrise proposition remains attractive in conditions of both economic growth and recession and through a wide range of oil prices. Longer term economic trends and energy fundamentals continue to validate this proposition, as the demand for distillate transportation fuel is expected to remain relatively strong. While, directionally, a firm crude oil price tends to support the refiner's economics when converting to MSAR® production, the inter-product price spread is the principal driver of the Quadrise value-add. This is the price differential between residue-based fuel oil and distillate diesel fuel. A wider spread yields more value - and the global trend has been for growth in distillate demand to exceed that for fuel oil thereby widening the price differential - which is very positive for the Company's future margin prospects. Experience through 2015 has been that even when oil prices have entered a US$40 per barrel range, the economics of the Quadrise processing mode have remained both viable and relatively attractive. Informed industry forecasters and forward market price projections suggest a widening spread will remain a long term feature. The production of shale gas and shale oil, notably in North America, may well impact global oil and gas supply, demand, movements and prices, but is not expected to materially impact our longer term business opportunity in target markets.

In developing the Marine and Saudi MSAR® programmes, the Company has had to establish relationships with leading corporates in their respective industries. The scale and complexity has been challenging as Quadrise is required to work within our clients' programmes, standards and timetables. During the past year several new associations have been formed, especially within the refining industry and notably with Compania Espanola De Petroleos S.A.U. ("CEPSA"), a leading oil company. While the pace of progress during 2015 did not fully meet prior expectations, valuable experience has been gained which should reduce lead times in future projects. A very positive emerging feature is the depth of enthusiasm which has built progressively within the refining, shipping and power companies involved with our programmes as they have gained confidence in the technical validity and economic promise of the Quadrise proposition.

The more important developments during the period under review have been:

1. Completion of the management resourcing programme to secure expertise and services through conversion of former consultants to employees, and recruitment of high calibre specialists to the newly created general management positions to provide capacity to create, manage and deliver the future business development plan.

2. Execution of the tri-partite Operational Trial and Collaboration agreements with Mærsk Line A/S ("Mærsk Line") and CEPSA which commit all parties to a programme intended to result in the issue of LONOs by marine engine manufacturers to provide the basis for the future development of the Marine MSAR® fuels market.

3. The agreed revision and extension of the Royalty Agreement between A.P. Moller-Mærsk A/S ("Mærsk") and QIL and its novation to Mærsk Line. The revision serves to further clarify the rights and obligations of both parties and commits them to work jointly in developing the market for Marine MSAR® and procuring its availability through qualifying refiners to serve both Mærsk Line and third party requirements at key global supply locations.

4. The designation by Saudi Aramco of the coastal refining complex and the power station and production units which will be used for the planned 'production to combustion' extended demonstration pilot programme scheduled now to commence in Q2 2016.

Financial Overview

The Group held cash and cash equivalents of £11.1 million as at 1 July 2014 following a successful equity placing raising gross £10.7 million which closed on 5 March 2014. Prior business plans underlying the 2015 budget and the associated medium term revenue and cash flow projections did forecast that the funds then held would be sufficient to take the company through to the sustainable revenue phase.

The slippage now affecting both programmes has had two principal effects, actual expenditure during 2015 fell below budget as activities were delayed, and the 'early commercial phase' with related continuous revenues will occur later in the planning period. The combination of these factors should assure that available funds meet requirements for the remaining pre-commercial phases of the lead programmes through to early continuous revenues. In the longer term, any substantial changes to funding requirements are only likely to be associated with significant new business developments or a change in 'business' mode. In both cases it will be possible to assess and plan for any such requirements well in advance and, when doing so, to make judgements on the most appropriate form of funding (i.e. debt or equity) to use to balance risk and optimise shareholder interest.

The oil price collapse impacted directly on the prospective joint venture project with Ecopetrol in Colombia. With oil revenues falling, venture participation was declined by Ecopetrol, and Quadrise could not have gone forward without exposure to 'merchant plant' risk in any combination with third party venture partners. As the Group is not funded for this exposure in the near term it was decided to defer any further activity on the project and to redirect resources on developing refinery power and steam re-fuelling opportunities as a specialist sector. This has the added advantage of reducing the call for capital expenditure in the revised medium term business plan. Tight control has been maintained on all expenditure, and the year closed with costs and cash spend below planned levels. While, in principle, the policy of client contribution to pre-commercial costs continues, the Company has agreed on a selective basis to bear a greater share of pre commercial costs where this will facilitate client commitment and reduce time to market. During the period under review the Operating and Corporate costs of £2.8m (2014: £2.4m) were well within budget. The loss for the year of £4.9m (2014: £5.9m) was in line with expectations in terms of managed operations, but was affected by a further fair value adjustment of £0.4m (2014: £1.0m) to the carried value of the Group's Canadian investments. A non-cash share option charge of £1.9m (2014: £1.9m) is also included in the loss for the year.

The Group continues to favour the 'Licence Mode' as the standard business model in the short term due to the limited capital funding requirements. This is the mode in which the refiner buys the MSAR® Manufacturing Units ("MMUs") and is licenced to use MSAR® manufacturing technology. In this mode QIL revenues are derived from fees, supplies and services. A variation or progression is to contract on a Joint Venture or "Toll Processing" mode in certain projects in which QIL or the Joint Venture owns and operates the MMU and charges a fee per ton to convert the refiner's heavy residue into MSAR® fuel. In the longer term the Company would logically aspire to apply the "Merchant Plant" mode. Here the Company would acquire the heavy residue from the refiner and convert it to MSAR® in our own facilities and sell the fuel directly to consumers. Aside from the funding required to develop the process facilities and related storage and services, in this mode the Company would also have to secure working capital. This generally accounts for a large share of the funds employed in a bulk fuels operation. By restricting ambitions to the licence mode in the early phase, the Company has progressed to the current stage at very modest cost in oil industry terms.

Review of Directly Managed Interests

The principal Group business interests are managed by QIL which owns all associated rights and participations. Where required or advisable, subsidiaries of QIL have been formed to house interests in a particular geographic area or market, or provide for joint venture participations. In principle, the Group looks to simplify the corporate structure wherever possible and will limit the formation of new entities to circumstances where they are appropriate and add value.

All directly managed projects target the substitution of existing conventional fuels - presently consumed in large quantities - with Quadrise MSAR® fuels. The global marine bunker fuel oil market, some 200 million tons per annum, is a prime example. A very modest share converting to MSAR® fuel would represent a sizable business. The 30 million ton per annum market for thermal power generation fuel in the Kingdom of Saudi Arabia ("KSA") is also a major large scale fuel substitution opportunity. It is estimated that at least one third of this is potentially convertible to MSAR® fuels based only on domestic heavy refinery residue conversion - offering considerable advantage to all stakeholders. This creates an enormous value-add opportunity to the Kingdom, with the potential to make a very material contribution to alleviating growing pressures on the KSA energy costs. This capacity to reduce cost is certain to gain more attention as reduced oil sales revenues start to impact more forcefully on the KSA economy.

It is instructive that neither the marine nor the KSA power fuel markets need demand growth for large scale fuel substitution to be attractive. In reality, however, in both cases the market demand is growing and this is expected to continue. In the case of marine, it has become widely acknowledged that the impact of 'slow steaming' on aggregate global demand has run its course, and the marine bunker fuel oil market has again started to grow. KSA continues to have one of the highest levels of electricity demand per capita, and this looks set to continue.

The Group has continued to look for selective opportunities to broaden the portfolio. These often arise through initial enquiries which then lead to joint evaluations with oil majors and associated companies. The party concerned will generally pay Quadrise to determine the feasibility of creating saleable MSAR® fuels by modifying low value 'problem' heavy residue streams from oil and petrochemicals processing to add value and reduce cost. The resulting business development opportunity could serve to broaden the active project portfolio and reduce future dependence on major programmes such as Marine and KSA. In this context a number of prospective 'generic' opportunities are currently in evaluation including re-fuelling refinery steam and power generation.

Unsolicited approaches concerning projects in areas such as the Former Soviet Union, the Caribbean, Asia and Africa continue to be received. Where they have merit the Company has confirmed conditional interest. The key provisos are that the basis of the relationship will be a joint venture, the prospective partner will fund the project with no recourse to QIL, and the Group contribution will be limited to technology and expertise in return for our share in the venture. Our expanded team has enabled more attention to be given to these introductions, and some related work is proceeding. However, 'select and focus' will remain the guiding strategy for some years to come. The Company continues to receive approaches from entities looking for co-investment in prospective 'toll processing' opportunities should these arise. No such commitments have yet been made.

Marine MSAR®

Background

The Marine programme originated from a Quadrise presentation to an international marine fuels conference. Mærsk quickly recognised the potential of the MSAR® technology to reduce open ocean marine fuel costs (then 75% of fleet operating cost). A Joint Development Agreement ("JDA") was executed between QIL, Mærsk and AkzoNobel Surface Chemistry ("Akzo") to formulate Marine MSAR® fuel to meet the exacting requirements of marine diesel propulsion engines. The JDA provisions have guided the development process over the past four years. In January 2011 QIL entered into a marketing and royalty agreement with Mærsk which recorded principles and terms for commercial relationships then expected to follow the development phase.

At the outset standards and targets were established to qualify Marine MSAR® as a fit for purpose "standard" fuel acceptable for use by Mærsk (and other shipping companies). These included the ability to switch readily between fuel oil and/or marine diesel fuel and Marine MSAR®. These key requirements informed the basis used for the subsequent Mærsk Proof of Concept ("POC") assessment and the associated seaborne proving trials programme which was completed by mid-2014.

When formulated, Marine MSAR® fuel has to satisfy the stringent standards set by many industry stakeholders, and national, regional and global regulatory authorities. The sector is heavily regulated, having a high profile due to the impact of freight costs and services on a range of national and international economic interests. The shipping industry is also closely scrutinised on environmental matters, in particular combustion emissions and associated NOx (nitric oxide/nitrogen dioxide), SO2 (sulphur dioxide) and carbon particulates (black soot). Mærsk is the biggest global container shipping company and largest marine fuels consumer. It has an enviable record for efficiency in operations and is an industry leader in environmental performance, adoption of new technology, and continuous improvement. All of these features make Mærsk the ideal partner for the Quadrise Marine MSAR® development programme.

Gaining the endorsement of the major marine engine manufacturers is critical. The continuous development of very large vessel propulsion engines and their fuelling and management systems is focussed on optimising power and improving fuel performance. Qualifying fuels have to be proven in both land-based and seaborne operations to merit a Letter Of No Objection ("LONO") issued by the engine manufacturer without which no modern shipping company would consider using a new fuel in its fleet operations.

The multi-company team has worked closely throughout the development process with two major engine manufacturers, Wärtsilä and MAN Diesel & Turbo ("MAN"), and with selected refiners. Both manufacturers are industry leaders in technology development, and in combination account for the majority of engines installed in the Mærsk fleet, particularly in the most modern and largest container and crude oil carriers. This teamwork resulted in the formulation of Quadrise Marine "MSAR® 2" fuel in late 2012 following an exhaustive series of trials. The fuel was then successfully stress-tested in the Wärtsilä state-of-the-art, multi cylinder propulsion engine test facility in Switzerland, resulting in a very positive comprehensive report accepted by all stakeholders. The MSAR®2 formulation became the 'gold standard' for marine emulsion fuels leading to the seaborne POC programme during the last quarter of 2013 and into the first half of 2014.

The Wartsila and MAN seaborne POC programmes using Marine MSAR® fuel were completed by July 2014 with the very positive results clearing the way to proceed to the LONO phase. The key findings of the MSAR® fuel assessment programme were:

- Fuel stability and optimum handling considerations had been confirmed.

- Comprehensive testing had confirmed good engine and emissions performance on Marine MSAR® fuel.

- Seaborne operational tests were successful on both Wartsila and MAN two stroke propulsion engines.

- Experience during trials included manoeuvring tests and start/stop of engines according to class requirements.

In July 2014, Mærsk formally advised that the POC requirements had been satisfied, and given the quality of results, the JDA partners (Mærsk, Quadrise and Akzo) agreed to move forward as soon as practicable to generate an early return on the investment made during the period of joint development.

This cleared the way for the extended seaborne programme required to provide operating performance data on which the engine manufacturer would, if satisfied, base the issue of a LONO for the engine type concerned. The LONO is the last remaining pre-condition to the commercial phase and progressive 'roll-out' to the first set of selected vessels. The expectation is that circa 4,000 hours of performance data will be required to obtain the LONO. An interim evaluation may be made at 2,000 hours, but it is also possible that requirements could be extended by a further 2,000 hours.

When weighing alternative ways in which to move the marine programme forward in late 2014, the assurance of continuing bulk supply and efficient logistics systems in the 'post-LONO' phase of continuous commercial supply was seen to be more important than early fuel availability at higher unit cost just to deliver LONO certification. As a result the revised plan positioned the LONO programme as the first step of commercial 'roll-out', rather than the last step of the development phase. Provisional volume commitments relating to post LONO requirements and longer term contracts were also expected to benefit manufacturing and supply economics, as were related improvements in location based efficient bulk logistics systems. By adopting a medium term view this approach offered earlier assured availability of larger commercial volumes of Marine MSAR® fuel despite potential short term delays to the LONO programme.

The way forward then jointly agreed with Mærsk in Q4 2014 aimed to:

- Identify candidate refineries to supply Mærsk requirements in Europe.

- Select preferred partners and agree terms for Quadrise MSAR® Technology licensing and services contracts and for supply of Marine MSAR® by the refiner to Mærsk for both the LONO programme and (subject to contract) longer term requirements.

- Extend the availability of Marine MSAR® and selective fleet fuelling progressively to the Rest of the World ("ROW") on success.

The subsequent, and unforeseen, collapse in global oil prices then interceded as was explained in the Company's 2015 Interim Report issued on 30 March 2015. The direct impact of lower oil prices on Marine MSAR® economics is limited as the Quadrise process 'value-add' relates to the $ per ton 'spread' between the heavy fuel oil and diesel fuel prices which has remained relatively stable. However, the principal impact has been the delays experienced in engaging with refiners who were focussed on adjusting to the oil price collapse and associated implications for future oil economics and margins.

The Company was very pleased to report on 16 September 2015 that agreement has been reached and contracts executed between QIL, Mærsk Line and CEPSA to produce Marine MSAR® at the San Roque refinery for the extended seaborne "Operational Trial". The refinery is adjacent to the Algeciras "bunker hub" servicing the EU/Med market. Further contracts were signed relating to the 'post LONO' collaboration between QIL, Mærsk Line and CEPSA, and the basis of 'margin sharing' between CEPSA and QIL for the trial programme. Regulatory approvals for the installation of the MSAR® plant and associated oil processing and operations in refining sites have proved to be a material element of production lead time. While this was anticipated, when combined with the oil price related delays, the original aim of producing MSAR® for the LONO phase during 2015 will have slipped by up to 12 months. The timetable now anticipated will see the installation and commissioning of the first MMU at San Roque in mid H1 2016 subject to local and governmental permitting in Spain. The LONO programme, based on 4000 hours of continuing engine service, will require some 10 months, following which certifications and approvals will be sought to allow as early a start to the 'roll-out programme' as possible. While the unanticipated delays have been frustrating for all stakeholders, the Company will benefit greatly from the participation, commitment and enthusiasm of CEPSA, as a first league refining company operating from a prime location for marine fuels supply. The extended period of the operational trial also provides an opportunity to further refine and de-risk the on-board fuel switching techniques and related hardware.

These developments provided an opportunity for Quadrise and Mærsk to further review the long standing Royalty Agreement and to introduce clarifications intended to smooth the way forward in the roll-out to the Mærsk Line fleet and the introduction of supply to other shipping companies. Terms include, inter alia:

· the commitment by both parties to the commercialisation of Marine MSAR® in the global marine fuels market subject to success with the Operational Trial and associated LONO certification, and

· a further extension of the expiry date of the agreement from 30 December 2022 to the tenth anniversary of first commercial MSAR®  production following the Operational Trial.

Looking forward, developments affecting the shipping industry and marine fuels market continue to be positive for the global commercialisation of Marine MSAR®. While the low oil price has provided some relief on cost as such, competition between operators on major trade routes in containerised, bulk commodity and other cargoes remains as keen as ever. Majors look constantly for competitive advantage, and marginal players for the means to survive. The economic advantage of the MSAR® discount to fuel oil is very relevant, especially when coupled with the environmental benefits associated with both affordable scrubbing and carbon particulate emission mitigation.

On environmental matters the new 0.1% sulphur standards introduced on 1 January 2015 in the Emission Control Areas ("ECA"s) has had a direct effect on cost and led to certain suppliers offering a compliant 'fuel oil'. While sold at a discount to marine diesel, it is priced well above bunker fuel oil. In reality these fuels do not have a residual fuel base, but are largely formulated from heavy distillate components and seem to have found a place in the ECA market. A number of the leading operators in the ECA zones have also wisely invested in scrubbers, enabling the combination of lower fuel costs and technology to achieve compliance. As emissions scrubbing becomes an accepted means of ECA compliance, and the economics of the technology continues to improve, it should be possible in the future for operators to meet standards using a combination of Marine MSAR® and sulphur scrubbers. This combination should also ensure compliance on particulate emissions (black soot), reduce NOx and provide additional benefits from the efficient conversion of all carbon particulates to energy in the propulsion of the ship. Clearly, this way, compliance cost would be considerably lower than any alternative fuels priced to compete with diesel.

In the shorter term Quadrise and Mærsk Line are focussed on 'open ocean' fuelling where MSAR® will comply with current sulphur emissions standards. Because Marine MSAR® mitigates carbon particulate emission, the anticipated IMO 'black soot' emissions standards are not expected to pose many difficulties. Also, as conversion to MSAR® will generally reduce NOx emission by more than 20% our fuel looks very well set to compete effectively in the medium term given anticipated ever decreasing NOx standards. The next major milestone for marine fuel standards is the intended reduction of the 'open ocean' sulphur level from 3.5% to 0.5%. There is no date yet set for this change and industry consensus is that it is now unlikely to be before 2025. A major related issue is the availability of compliant distillate fuels in the quantities implied and the major impact of such a change, even if practically possible, on the cost of shipping. The more general expectation is that while sulphur levels may be moderated, regulators will permit emissions compliance by scrubbing for both sulphur and particulates. In such circumstances it appears that the combination of Marine MSAR® and sulphur scrubbing will represent the lowest cost compliance option for the larger shipping companies with the most modern propulsion engines.

While slippage in the programme for LONO certification of Marine MSAR® has been frustrating, the intervening time has been put to good use in the recruitment of additional personnel, conduct of an extensive programme of formulation and product development, and related expansion of the 'technical knowhow base'. The UK based Quadrise Research Facility has been expanded to serve also as the operations and service base for all active programmes. Where required, and when advantageous, activities have and will include design and fabrication of ancillary plant and specialised equipment which, combined with the MMU, comprise an MSAR® production facility.

The timetable is now contractually committed and the seaborne programme will commence as soon as the MSAR® fuel is available at San Roque/Algeciras. Mærsk Line liftings will be programmed to fit with vessel operating schedules and will continue until the required operating hours have been completed. Further activities will be informed by the Collaboration Agreement with commercial terms subject to contract.

As LONO requirements are met and other regulatory formalities are completed the early commercial phase will get underway. The first agreed joint objective will be to develop and progressively implement a programme to secure supplies to meet the Mærsk Line nominated requirements. These will be prioritised in terms of supply locations and volumes required. QIL and Mærsk Line are committed in terms of the Royalty Agreement to jointly use all reasonable endeavours to develop the commercialisation of Marine MSAR® in the global marine fuels market - fuelling both qualifying Mærsk Line and third party vessels. Priority will be given to Mærsk Line fleet requirements in the early years leading the way for others to follow. If all goes to plan, the rate of conversion and growth in demand from the shipping companies could develop rapidly through the period to 2020 and beyond. A relatively modest share of this large and growing market will provide a strong base underpinning the future expansion and development of the Company.

Saudi Arabia

The business opportunity in the Kingdom of Saudi Arabia ("KSA") is the production of Quadrise MSAR® fuel by Saudi refineries to replace heavy fuel oil and crude oil used in thermal power generation. Over 30 million tons of oil is consumed annually in this application, and it is estimated that currently at least one third of this requirement could be met by MSAR® fuel produced in KSA. Power demand in KSA is growing very rapidly and the scale and potential of the opportunity are clearly exceptional.

By converting from heavy fuel oil to Quadrise MSAR® production in 'qualifying' refineries, large volumes of distillates would be released, adding significant value to refinery yields and responding to consistently strong local market demand growth for high value distillates such as automotive diesel. The release of distillates whether for local market or value added exports, in the tonnages concerned, represents a very attractive production conversion and fuel substitution opportunity - potentially worth billions of dollars annually at a national level. Quadrise has invested a considerable amount of time and sustained effort to gain credibility and recognition within KSA with Saudi Aramco and power generation client organisations. This process has been very effectively supported by our Saudi partner, the Rafid Group, who have long established relationships in the oil and energy industries throughout KSA. Quadrise technology is approved for application within client refineries and there is a growing appreciation at senior levels that Quadrise MSAR® fuel technology can enable a step change in the 'integrated' cost of thermal power generation at a national level, positively contributing to a KSA strategic imperative. The mitigation of carbon particulate and NOx emissions are potentially a very valuable added benefit resulting from conversion of all hydrocarbon in MSAR® fuel into electrical power in the generating plants. The prospective elimination of accumulated carbon particulate which in some cases has to be trucked in bulk to remote disposal sites, represents a material further saving in fully costed power production.

The KSA organisations with whom QIL has been engaged are large and complex, with policies, practices and procedures associated with their scale and complexity. Several past initiatives to create a modest KSA demonstration and reference plant did lose momentum - possibly due to limited profile, lack of senior advocacy and the weight of other urgent priority projects. More recently, however, a more coordinated approach has led to confirmation of support at senior level and active advocacy of the proposed 'production to combustion' pilot demonstration plant project based on a fast-track limited scope programme submitted by QIL. One of the agreed objectives is to advance the application and evaluation of the technology in Saudi Arabia, in both the refining and power station contexts, to determine the fit and role of emulsion fuels in the future national energy strategy.

The KSA trial timetable targets installation of the process plant in the designated major coastal refinery complex in time for commissioning in H1 2016. This should ensure MSAR® fuel availability in the quantities required for an extended combustion trial in a 400MWe generation unit at the nominated power station, which has coastal receipt facilities and an aggregate production capacity of over 5,000MW. Continuous supply to the trial boiler for an extended period will require a very effective supply and logistics operation, and QIL will be working on site at both the refinery and the power plant to guide and advise on all relevant aspects of the operations. Formal acknowledgement of all relevant aspects is a pre-requisite to QIL commitment to longer lead items and related services.

Quadrise has full confidence that this 'semi-commercial' extended demonstration project should meet all of the defined objectives and represent a 'break through event' for development of an extensive application programme in KSA. Aside from the process economics and distillate recovery in oil refining, there are expectations, as mentioned before, that the mitigation of carbon particulate emissions could have a further material impact on the operating costs of the Saudi Electricity Company ("SEC") large scale thermal power stations in KSA. Preliminary studies show that aside from any strategic considerations, there are sufficient economic advantages to handsomely reward both the refining and the power generation companies for conversion to manufacture and combustion of MSAR®. In practical terms, this is neither costly nor complex. Whether approached on a sequential basis or as an integrated programme, the short lead times and high value-add of refinery process conversion will offer rapid recovery of investment and exceptional returns for all stakeholders.

Conversion of the 5 million tons p.a. of fuel oil at the designated refinery alone would represent a large scale project with considerable proven benefits. The scope for 'roll out' within the KSA domestic refining industry has been previously identified in studies conducted jointly with the client. At a national level the availability of heavy residue from the client and joint venture refineries in KSA will limit the potential for MSAR® production to levels well below present thermal power generation requirements. The KSA economy could continue to benefit irrespective of the source of MSAR® and could potentially import at least a further 10 million tons annually from other sources as a 'finished product'- displacing heavy fuel oil imports to considerable financial advantage. In practice availability will, of course, be determined by demand. However, any enquiry from KSA for MSAR® imports would reasonably be expected to produce a positive response.

Shareholders should anticipate that confidentiality considerations may continue to limit the permitted release of information given the nature of the KSA programme.

Americas

No further action has been taken on the PEMEX front as the Mexican situation is in transition and it is not yet clear how far the changes in policy and practices could affect the feasibility and merits of reviving the Quadrise project.

The Colombian/Ecopetrol opportunity looked very prospective in terms of the final report of a joint feasibility study completed late in 2014. Despite the attractions of the project, Quadrise was advised by Ecopetrol in early 2015 that the impact of the oil price collapse on their future crude oil production margins and net cash revenues required the company to freeze all non-essential capital and operating expenditure in the refining, supply and marketing sectors. On this basis they would not be able to invest in the proposed JV and if it were to go ahead Quadrise would have to cover all costs and associated risk, either alone or with an approved partner. The Company is not funded for what would, in effect, be a "merchant plant" type operation which in the early years would also have to also fund its own working capital requirements due to the non-availability of trade finance for finished MSAR® fuel. On review it was decided to shelve the Colombian project pending a change in circumstances in the medium term when oil market conditions stabilise.

Asia

The YTL PowerSeraya Pte. Limited ("PowerSeraya") project opportunity remains as attractive as ever, but the Company has still not been able to secure the required source of heavy residue and participating local or regional refiner. We remain confident that this will change with the advent of Marine MSAR® production to supply the Singapore bunker market. Having two marketing opportunities (marine and power) will encourage refiners now still reluctant to install process plant, convert operations and add a new product stream based on single client supply. There is also a potential Singapore availability link with the confidential on-going extended technical assessment programme with a Global Major which could provide the solution to the PowerSeraya supply chain. Quadrise remains convinced that there is sufficient attraction for both refinery and the power company to assure a positive future result. QIL and PowerSeraya have again agreed a 12 month extension to the MOU which covers the basis for cooperation on developing a MSAR® supply chain for the Singapore power plant.

Refinery Power and Steam Re-fuelling

The Company has identified a refinery based line of business involving substitution of conventional heavy fuel oil with MSAR® for the generation of steam and power within refineries, principally for their own use. While these opportunities tend to be selective, indications are that they could aggregate to a substantial and meaningful business sector. Refining companies frequently have installed power generation capacity in excess of their own needs and, with reduced fuel costs, have the scope to earn revenues by generating and exporting power.

One such opportunity for a MSAR® pilot demonstration (production to combustion) has progressed with a mid-sized refining company. A programme is proceeding to finalise a detailed design feasibility study in four phases for completion and consideration in Q1 2016. This includes proposed commercial terms for implementation and future operations. It is intended that the implementation and initial demonstration will be managed by QIL and that on success the MSAR® fuelling will be progressively extended to fuel several refinery based utilities on a progressive basis.

It is intended that a listing of similar prospects be identified, and that a marketing programme be developed in which the current project could also serve as a reference plant. While these projects may individually be modest in scale, the economics look to be very attractive and are enhanced by simplicity of installation, short lead times and low cost intra-plant logistics.

Global Oil Major

During 2012, QIL agreed to evaluate the conversion of certain residue streams associated with the proprietary technologies used in several large scale process plants of a Global Major. Quadrise is not permitted to disclose the name of the group concerned, but QIL has been successful in converting the residue streams arising from these processing operations into MSAR® fuels. The relationship is ongoing and the technical scope has been extended by agreement. Thus far results indicate that a Quadrise solution will offer a higher value route to market for the heavy hydrocarbons concerned and could potentially be an attractive production and marketing addition compared to their present practice.

The Global Oil Major may also be a potential supplier to the global marine fuels supply programme in several bunker hubs. Understandably, until such time as LONOs are issued stimulating the interest of major shipping companies and demand for marine MSAR®, we do not expect the Global Major to seriously consider adoption of the technology and/or demonstration plant installations. That said, assuming the Marine programme proceeds as planned, we would expect a step-change in interest by oil majors in licensing the Quadrise technology in selected locations.

Board and Management

The Company has greatly benefitted from the continuity of service and high quality informed and professional contributions of our non-executive directors. Collectively they represent a very extensive base of experience across a range of specialised technical and commercial fields directly associated with the business, circumstance and ambitions of the Group. Relations within the board and between board and management are constructively open and frank, and continuous interaction and involvement is encouraged and valued.

The appointment of Mr Philip Snaith as an independent non-executive director was announced during October 2014. Philip brings a wealth of experience having had a successful career in the Royal Dutch Shell Group, progressing through a succession of international senior executive roles in oil refining, supply, trading and marketing.

Mr Laurie Mutch and Dr Ian Duckels continued to chair, respectively, the Audit and Compensation Committees. Their commitment to the maintenance of consistently high standards in all of the associated activities has continued and we thank them for their valuable contribution. Mr Snaith has agreed to serve and has been appointed to the Audit and Compensation Committees. While benefitting from his contribution, this also serves to spread the considerable load borne by his fellow non-executive directors over many years.

A key objective for 2014/5 has been to restructure the organisation and recruit in anticipation of the growing demands of the key business programmes. In doing so, considerations of creating cover, and a reserve of keys skills and competencies featured strongly, as did the need to relieve our ultra-active COO, Jason Miles, from the growing demands of day to day matters. Having established a very clear view on structure and specification for the new roles, candidates were targeted and appointees selected with a high level of confidence. While the process took longer than planned, the quality of the outcome has more than compensated.

The three key General Management roles, Power, Marine and Refining are now held by Sam Saimbi, Robin Lloyd and Mark Whittle respectively. All are very well equipped to meet the requirements in their specialised fields and, in combination with the COO and their other colleagues, have rapidly become a formidable and effective team.

An associated objective of the programme was to secure the full time services of selected contractors and consultants whose expertise, capabilities and continuity are very important in the delivery of services and technical and operational guidance to manufacturing sites and refinery management, supervisors and operators. This has also been achieved with the full time engagement of Bernard Johnston as Head of Operations and Paul Gunter as Programme and Quality Manager.

Business Associates and Partners

The Company continues to share cordial, constructive and supportive relations with the Akzo Nobel group in an association that dates back to 2004. The new contractual framework agreed late 2013 is working very effectively and the joint commitment to securing opportunities and commercialising MSAR® fuels remains strong notwithstanding frustrating delays. This reflects the strong conviction and shared belief within the combined team that the Quadrise MSAR® fundamentals are sound, the competitive advantage is assured and that the programmes will succeed. There is a very strong association and collaboration in the field of research and application and intellectual property development. While the new Quadrise Research Facility in the UK is managed by QIL, its programmes have been integrated with activities in the Akzo facilities in Sweden into a combined joint effort with priorities driven by Group business objectives.  

In Marine Fuels our long standing association with Mærsk has been a key feature of the programme to date. It would not have been possible for Quadrise to even consider entry to the mainstream marine fuels market without a shipping industry partner. Mærsk, as a leader in many fields, distinguishes itself among the elite in the industry. Being a leader in innovation and adaptation Mærsk was uniquely placed to coordinate the Joint Development Process having long established relations with regulators, marine authorities, engine manufacturers and fuel suppliers. Their commercial motivation and associated objectives are a constant in all dealings which is a very good discipline. The recently announced novation and amendments to the Royalty Agreement between Quadrise and Mærsk Line reconfirm the commitment of both parties to work jointly to ensure the successful commercialisation of Marine MSAR® in the international marine market fuelling both Mærsk Line and third party fleets. The terms ensure that success should reward both parties equitably in all cases. The Quadrise Group is very appreciative of the contribution made by Mærsk over an extended period of preparation and the standard of technical and commercial professionalism they have introduced and maintained throughout. As matters now stand, both companies can reasonably expect to reap the considerable prospective benefits of our joint efforts in the foreseeable future.

Rafid, our partner in KSA, supplies a range of specialised products and services to Saudi Aramco and other key industry and state organisations. Efforts and teamwork over the past year have further raised the profile of the "Quadrise opportunity" and improved access at senior level in the refining and power generation sectors. This has led to a new consensus on a pragmatic approach to delivering a commercial scale "production to combustion" pilot demonstration to prove all facets of the Quadrise technology while creating an accessible reference plant in KSA to facilitate familiarity and dispel scepticism. As a local business of considerable standing in the fields of technology and engineering, Rafid are able to engage with the largest state and private sector organisations to identify and actively promote Quadrise business opportunities.

Non - Managed Investments in Canada

The conditions leading to and following the oil price collapse have severely tested the remaining independent Canadian ventures. Anticipating this situation, the carried values have been progressively written down to a level at which they are no longer material for Quadrise shareholders.

Paxton Corporation (PC), in which the Company has a 3.8% interest, has unfortunately been severely affected by the impact of low oil prices on the Canadian oil and energy industries.

In the current year the Company decided, on advice and review, to write down the remaining carried value of Paxton Corporation following the withdrawal of Mærsk group support for the Clean Energy Systems ("CES") technology development programme. This withdrawal has created a funding crisis for CES and is likely to lead to insolvency. The 30% equity interest in CES was previously seen to offer some prospect of access to value for Paxton shareholders. The recent developments now render that expectation highly improbable. QFI now carries this interest at CAD$ nil.

Quadrise Canada Corporation ("QCC"), where the Company has a 20.4% shareholding, is effectively operating on a 'care and maintenance' basis with very limited remaining resources. QFI carries this holding at CAD$ nil.

Optimal Resources Inc. ("ORI"), in which the Company has a 9.5% interest, had no success in securing a partner for its Enhanced Oil Recovery ("EOR") technology. It has more than CAD$8 million in accumulated tax losses but to monetise value is problematic. QFI carries this holding at CAD$ nil.  

Future Outlook

As anticipated in the 2015 Interim Report, the lead Marine and Power programmes have both moved forward to a stage where the road ahead and the respective timetables are firming up with involvement and support from an expanded set of respective stakeholders. In this regard the relationship with CEPSA and the collaboration with the KSA refining company and the power generator, all signal a long anticipated change and increased assurance of project implementation and timing. The early addition of a prospective refinery power and steam re-fuelling project is also most encouraging.

The oil price uncertainties are expected to destabilise the oil and energy sector for some time to come, but this is not expected to have any further material effect on our principal programmes in terms of feasibility or incentive for adoption of MSAR® technology which have remained robust and considerable. On the contrary, the perceived additional risk of investment in conventional high cost refinery upgrading projects to improve distillate yields could well encourage other refiners to follow the CEPSA lead and closely evaluate the Quadrise MSAR® technology alternative. A common objective for refiners, shipping companies and power generators will be to identify and adopt low cost technology which reduces cost and improves efficiency to ensure competitive advantage and, in some cases, survival. For qualifying refineries and power plants Quadrise may offer the best solution, and we are now very well resourced to engage with credibility and to demonstrate the merits of our case.

The Company is now better placed than ever before to make the transition to operations and revenue, and that is the prime objective of the directors and management for the years ahead.

Ian Williams

Executive Chairman

9 October 2015

Financial Review

Overview

Given the impact of the oil price collapse and, in turn, the associated delays in our key programmes, strong treasury management and cost control has been a key feature of the financial management of the Group during the year. Both production & development costs and administration expenses were maintained well within the approved budgets, with greater emphasis being placed on enhancing the management resource base and making further investment to build up our research, development and service facility to meet the future needs of our key programmes as they transition from the development into the commercial phase.

As stated in the Chairman's Statement, despite the consequences and impact of the oil price collapse within the sectors the Group is involved in and the clients it is engaged with, it has continued to make considerable tangible progress on a number of fronts during the financial year and the period since. Particular attention was paid to not only stress-test the economic and commercial viability and attractiveness of our MSAR® fuel in a possible future world of low oil prices but to also provide the necessary assurances and confidence to our clients and other stakeholders to move forward with the key programmes.

Results for the Year

The consolidated after-tax loss for the year to 30 June 2015 was £4.9m (2014: £5.9m). This included a charge of £404k (2014: £1.0m) for adjustments to available for sale investments, general administration expenses of £1.5m (2014: £1.7m), production and development costs of £1.3m (2014: £0.7m), a share option charge of £1.9m (2014: £1.9m) and interest and other income of £233k (2014: £122k).

Basic and diluted loss per share was 0.61p (2014: 0.74p).

Statement of Financial Position

At 30 June 2015, the Group had total assets of £12.6m (2014: £16.3m). The most significant balances were intangible assets of £2.9m (2014: £2.9m), property, plant and equipment of £0.7m (2014: £0.6m), cash of £8.4m (2014: £11.1m), and available for sale investments of £nil (2014: £1.4m). Further information on the intangible assets and available for sale investments is provided in notes 11 and 12.

Cash Flow

The Group ended the year with £8.4m of cash and cash equivalents (2014: £11.1m) with £2.7m having been utilised in its operating activities during the year (2014: £2.3m). The Group continues to remain debt free.

Capital Structure

The Company had 809,585,162 ordinary shares of 1p each in issue at 30 June 2015. The Company's current issued share capital stands at 809,585,162 ordinary shares of 1p each all with voting rights.

Treasury and Financial Risk Management

Control over treasury and financial risk management is exercised by the Board and its Audit Committee through the setting of policies and the regular review of forecasts and financial exposures. Presently, the Group's financial instruments consist principally of cash and liquid resources and other items such as accounts receivable and payable, which arise directly from its operations. It is still the Group's policy not to undertake any trading activity in financial instruments, including derivatives.

The principal risks arising from the Group's financial instruments are those associated with interest, liquidity and foreign exchange. The Board reviews and establishes appropriate policies for the management of such risks and monitors them on a regular basis.

Taxation

The Group has tax losses arising in the UK of approximately £40.7m (2014: £34.8m) that are available, under current legislation, to be carried forward against future profits. £11.2m (2014: £8.3m) of the tax losses carried forward represent trading losses, £25.8m (2014: £23.7m) represent non-trade deficits arising on intangible assets within Quadrise International Limited, £1.7m (2014: £1.2m) represent pre-trading losses incurred by subsidiaries, £1.9m (2014: £1.5m) represent management expenses incurred by Quadrise International Limited, and £0.1m (2014: £0.1m) represent capital losses within Quadrise Fuels International plc.  

Outlook

The key objectives for the current year are to establish our MSAR® manufacturing facilities at CEPSA to commence the extended 'Operational Trial' with Mærsk Line and in the designated Saudi refinery to commence the 'semi-commercial' demonstration at the designated Saudi Electricity Company power plant. The success of both will potentially unlock two major markets for our MSAR® fuel as we transition into the commercial phase.

At the same time, other initiatives such as the refinery refuelling project, converting and testing high viscosity residue streams for the Global Oil Major, engaging with additional candidate refineries for Marine MSAR® production and establishing links in other material oil-based thermal power markets will also continue to receive attention.

Close attention to the Group's treasury and effective financial management remains a firm ethos of the Board and management of the Group and, based on the current plans and expectations, the cash resources of £8.4m at the year end should carry the Group well through what is now considered to be the 'final leg' of the development phase.

Hemant Thanawala

Finance Director

9 October 2015

Strategic Report

For the year ended 30 June 2015

Principal Activity

The principal activity of the Company is to develop markets for its proprietary emulsion fuel ("MSAR®") as a low cost substitute for conventional heavy fuel oil ("HFO") for use in power generation plants and industrial and marine diesel engines.

Business Review and Future Developments

A full review of the Group's activities during the year, recent events and future developments is contained in the Chairman's Statement.

Key Performance Indicators

The Group's key performance indicators are development and commercial performance against Group business plans and project timetables established with clients, and financial performance and position against the approved budgets and cashflow forecasts. The Board regularly reviews the Group business plans, project timetables, budgets and cashflow forecasts in order to optimise the application of available resources. Consideration of the Group's performance against Key Performance Indicators is contained in the Chairman's Statement on pages 2 - 11 of this report.

Going Concern

The Group had £8.4m in treasury as at 30 June 2015. Having conducted a full review of the updated business plan, budgets and associated commitments at the year end, the Directors have concluded that the Group has adequate financial resources to continue in operational existence for at least the forthcoming year and therefore continue to adopt the going concern basis in preparing the accounts. Refer to Note 2 for further details.

Principal Business Risks

Set out below are certain risk factors relating to the Group's business. However, these may not include all of the risk factors that could affect future results. Actual results could differ materially from those anticipated as a consequence of these and various other factors, and those set forth in the Group's other periodic and current reports filed with the authorities from time to time.

Market risk

The marketability of MSAR® fuels is affected by numerous factors beyond the control of the Group. These include variability of price spreads between light and heavy oils and the relative competitiveness of oil, gas and coal prices both for prompt and future delivery. The Group cannot mitigate this risk by its nature, but pays close attention to the energy markets in order to be able to react in a timely and effective manner.

Feedstock sourcing

There is a risk in respect of appropriately located and ongoing price competitive availability of heavy oil residue feedstock as oil refiners seek to extract more transportation fuels from each barrel of crude using residue conversion processes. The Group mitigates this risk where possible by utilising its deep understanding of the global refining industry, targeting qualifying suppliers matched to prospective major consumers.

Commercial risks

There is a risk the Group will not achieve a commercial return due to major unanticipated change in a key variable or, more likely, the aggregate impact of changes to several variables which results in sustained depressed margins. Experience during early 2015 demonstrated that the price spread between heavy fuel oil and diesel fuel was relatively robust while crude oil prices collapsed. As this price spread drives the Quadrise 'value-add', the structure of the oil products market itself mitigates the principal margin risk.

The competitive position could be affected by changes to government regulations concerning taxation, duties, specifications, importation and exportation of hydrocarbon fuels and environmental aspects. Freight costs contribute substantially to the final cost of supplied products and a major change in the cost of bulk liquid freight markets could have an adverse effect on the economics of the fuels business. The Group would mitigate this risk through establishing appropriate flexibilities in the contractual framework, offtake arrangements and price risk management through hedging.

Technological risk

There is a risk that the technology used for the production of MSAR® fuel may not be adequately robust for all applications in respect of the character and nature of the feedstock and the particular parameters of transportation and storage pertaining to a specific project. This risk may jeopardise the early commercialisation of the technology and subsequent implementation of projects; or give rise to significant liabilities arising from defective fuel during plant operations. The Group mitigates this risk by ensuring that its highly experienced key personnel are closely involved with all areas of MSAR® formulation and manufacture, and that the MSAR® fuel is thoroughly tested before being put into operational use.

Delay in commercialisation of MSAR® and funding risks

There is a risk that the commercialisation of MSAR® could be delayed further due to unforeseen technical and/or commercial challenges. This could mean that the Group may need to raise further equity funds to remain operational. Depending on market conditions and investor sentiments, there is a risk that the Group may be unable to raise the requested funds when necessary. The Group mitigates this risk by maintaining strong control over its pre-revenue expenditure, keeping up the momentum on its key projects as far as possible, and maintaining regular contact with the financial markets and investor community.

Competition risks

There is a risk that new competition could emerge with similar technologies sufficiently differentiated to challenge the AkzoNobel process. This could result, over time, in further price competition and pressure on margins beyond that assumed in the Group's business planning. This risk is mitigated by the limited global pool of expertise in the emulsion fuel market combined with an enhanced R&D programme aimed at optimising cost and performance and protection of intellectual property. The Group also makes best use of scarce expertise by developing close relationships with strategic counterparties while ensuring that key employees are suitably incentivised.

Dependence on key personnel

The Group's business is dependent on obtaining and retaining the services of key personnel of the appropriate calibre as the business develops. The appointment in 2015 of three General Managers into a revised organisation structure and the conversion of former consultants to key full time posts has reduced risk and equipped the Company to meet future demands. The success of the Group will continue to be dependent on the expertise and experience of the Directors and the management team, and the loss of personnel could still have an adverse effect on the Group. The Group mitigates this risk by ensuring that key personnel are suitably incentivised and contractually bound.

Environmental risks

The Group's operations are subject to environmental risks inherent in the oil processing and distribution industry. The Group is subject to environmental laws and regulations in connection with all of its operations. Although the Group intends to be in compliance, in all material respects, with all applicable environmental laws and regulations, there are certain risks inherent to its activities, such as accidental spills, leakages or other circumstances that could subject the Group to extensive liability.

Further, the Group may require approval from the relevant authorities before it can undertake activities which are likely to impact the environment. Failure to obtain such approvals may prevent or delay the Group from undertaking its desired activities. The Group is unable to predict definitively the effect of additional environmental laws and regulations, which may be adopted in the future, including whether any such laws or regulations would materially increase the Group's cost of doing business, or affect its operations in any area. The Group mitigates this risk by ensuring compliance with environmental legislation in the jurisdictions in which it operates, and closely monitoring any pending regulation or legislation to ensure compliance.

No profit to date

The Group has incurred aggregate losses since its inception and it is therefore not possible to evaluate its prospects based on past performance. There can be no certainty that the Group will achieve or sustain profitability or achieve or sustain positive cash flow from its activities.

Corporate and regulatory formalities

The conduct of petroleum processing and distribution requires compliance by the Group with numerous procedures and formalities in many different national jurisdictions. It may not in all cases be possible to comply with or obtain waivers of all such formalities. Additionally, functioning as a publicly listed Group requires compliance with stock market regulations. The group mitigates this risk through commitment to a high standard of corporate governance and 'fit for purpose' procedures, and by maintaining and applying effective policies.

Economic, political, judicial, administrative, taxation or other regulatory factors

The Group may be adversely affected by changes in economic, political, judicial, administrative, taxation or other regulatory factors, in the areas in which the Group operates and conducts its principal activities.

Ian Williams

Executive Chairman

9 October 2015

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

Consolidated Statement of Financial Position  

As at 30 June 2015

Consolidated Statement of Changes in Equity

For the year ended 30 June 2015

Attributable to owners of the parent

Consolidated Statement of Cash Flows

For the year ended 30 June 2015

Notes to the Financial Information

1. Basis of Preparation and Significant Accounting Policies

The financial information for the year ended 30 June 2015 set out in this announcement has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).

The financial information has been prepared on the historical cost basis, except for the revaluation of certain financial instruments. Details of the accounting policies applied are set out in the financial statements for the year ended 30 June 2015.

The financial information is prepared in Pounds Sterling and all values are rounded to the nearest thousand Pounds (£'000) except where otherwise indicated.

The financial information does not constitute the Company's statutory financial statements for the year ended 30 June 2015 but has been extracted from them. These financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on these financial statements, and their report was unqualified and did not contain any statement under section 498(2) or (3) Companies Act 2006.

Statutory financial statements for the year ended 30 June 2014 have been delivered to the Registrar of Companies. The auditor's report on these financial statements was unqualified and did not contain any statement under section 498(2) or (3) Companies Act 2006.

The Directors do not propose a dividend in respect of the year ended 30 June 2015 (2014: nil).

This announcement was approved by the Board on 9 October 2015.

2. Going Concern

The Group's business activities and financial position, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement.

The Group had £8.4m in treasury as at 30 June 2015. The Directors have carried out a detailed assessment of going concern as part of the financial reporting process, and having conducted a full review of the updated business plan, budgets and associated commitments at the year end, have concluded that the Group has adequate financial resources to continue in operational existence for at least the forthcoming year and therefore continue to adopt the going concern basis in preparing the accounts.

3. Segmental Information

For the purpose of segmental information the reportable operating segment is determined to be the business segment. The Group principally has one business segment, the results of which are regularly reviewed by the Board. This business segment is a business to produce emulsion fuel (or supply the associated technology to third parties) as a low cost substitute for conventional heavy fuel oil ("HFO") for use in power generation plants and industrial and marine diesel engines.

Geographical Segments

The Group's main geographical segments during the year were the UK and Canada. The following table presents certain asset information regarding the Group's geographical segments.

4. Other Income

5. Operating Loss

6. Finance Costs

7. Finance Income

All finance income recognised during the current and prior year has arisen from interest on bank deposits and loans.

8. Taxation

No liability in respect of corporation tax arises as a result of trading losses.

The Group has tax losses arising in the UK of approximately £40.7m (2014: £34.8m) that are available, under current legislation, to be carried forward against future profits. £11.2m (2014: £8.3m) of the tax losses carried forward represent trading losses, £25.8m (2014: £23.7m) represent non-trade deficits arising on intangible assets within Quadrise International Limited, £1.7m (2014: £1.2m) represent pre-trading losses incurred by subsidiaries, £1.9m (2014: £1.5m) represent management expenses incurred by Quadrise International Limited, and £0.1m (2014: £0.1m) represent capital losses within Quadrise Fuels International plc.

A deferred tax asset representing these losses and other timing differences at the statement of financial position date of approximately £8.1m (2014: £7.3m) has not been recognised as a result of existing uncertainties in relation to its realisation.

9. Loss Per Share

The calculation of loss per share is based on the following loss and number of shares:

Basic loss per share is calculated by dividing the loss for the year from continuing operations of the Group by the weighted average number of ordinary shares in issue during the year.

For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive options over ordinary shares. Potential ordinary shares resulting from the exercise of share options have an anti-dilutive effect due to the Group being in a loss position. As a result, diluted loss per share is disclosed as the same value as basic loss per share. The 31.0m dilutive share options issued by the Company and which are outstanding at year-end could potentially dilute earnings per share in the future if exercised when the Group is in a profit making position.

10. Property, plant and equipment

Property, plant and equipment

11. Intangible Assets

Consolidated

Consolidated

Intangible assets comprise intellectual property with a cost of £36.7m, including assets of finite and indefinite life. QCC's royalty payments of £7.7m and the MSAR® trade name of £3.1m are termed as assets having indefinite life as it is assessed that there is no foreseeable limit to the period over which the assets would be expected to generate net cash inflows for the Group. The assets with indefinite life are not amortised. The remaining intangibles amounting to £25.9m, primarily made up of technology and know-how, are considered as finite assets and were amortised over 93 months. The Group does not have any internally generated intangibles.

The Group tests intangible assets annually for impairment, or more frequently if there are indications that they might be impaired. The recoverable amount of intangible assets is determined based on a value in use calculation using cash flow forecasts derived from the most recent financial model information available. These cash flow forecasts extend to the year 2031 to ensure the full benefit of all current projects is realised. The key assumptions used in these calculations include discount rates, turnover projections, growth rates, joint venture participation expectations, expected gross margins and the lifespan of the project. Management estimates the discount rates using pre-tax rates that reflect current market assessments of the time value of money and risks specific to expected future projects. Turnover projections, growth rates, margins and project lifespans are all estimated based on the latest business models and the most recent discussions with customers, suppliers and other business partners.

For the MSAR® trade name and technology and know-how intangible, the growth rate used for the extrapolation of cash flows beyond budgeted projections is 2.5% (2014: 2.5%) and the pre-tax discount rate applied to the cash flow projections is 12% (2014: 12%).

A 5% increase in the discount rate used would result in no impairment charge for the MSAR® trade name intangible asset or the Technology and know-how intangible asset. A 5% decrease in the discount rate used would also result in no impairment charge.

Amortisation of Intangible Assets

The Board has reviewed the accounting policy for intangible assets and has amortised those assets which have a finite life. All intangible assets with a finite life were fully amortised as at 30 June 2015, and a non-cash charge of £nil (2014: £0.685m) was recorded in the statement of comprehensive income for the year ended 30 June 2015.

12. Available for Sale Investments

Unquoted securities represent the Group's investment in Quadrise Canada Corporation ("QCC"), Paxton Corporation ("Paxton"), Optimal Resources Inc. ("ORI") and Porient Fuels Corporation ("Porient"), all of which are incorporated in Canada.

At the statement of financial position date, the Group held a 20.44% share in the ordinary issued capital of QCC, a 3.75% share in the ordinary issued capital of Paxton, a 9.54% share in the ordinary issued capital of ORI and a 16.86% share in the ordinary issued capital of Porient.

QCC is independent of the Group and is responsible for its own policy-making decisions. There have been no material transactions between QCC and the Group during the year or any interchange of managerial personnel. As a result, the Directors do not consider that they have significant influence over QCC and as such this investment is not accounted for as an associate.

The Group has no immediate intention to dispose of its available for sale investments unless a beneficial opportunity to realise these investments arises.

Given that there is no active market in the shares of any of above companies, the Directors have determined the fair value of the unquoted securities at 30 June 2015. In this regard, the Directors considered other factors such as past equity placing pricing and assessment of risked net present value of the enterprises to arrive at their conclusion on any impairment for all of the unquoted securities.

The QCC shares were valued at CAD $nil on 1 July 2014. Shareholder communications received during the period to 30 June 2015 indicate that the business model of QCC remains uncertain, as does the possibility of any material value being recovered from QCC's asset base. On that basis, the directors have determined that the investment should continue to remain valued at CAD $nil at 30 June 2015.

The Paxton shares were valued at CAD$4.00 per share as at 1 July 2014. Shareholder communications received since 1 July 2014 show that Paxton is no longer considered to be a going concern and steps are being taken to wind up its operations. Based on this, the Directors have determined that a full provision should be made against the value of the 652,874 shares held in Paxton, resulting in a charge of £404k.

ORI shares were valued at CAD $nil per share on 1 July 2014. The viability of ORI's business model continues to remain highly doubtful and no material amounts are expected to be realised from its remaining assets. On that basis, the directors have determined that the investment should continue to remain valued at CAD $nil at 30 June 2015.

The Porient shares were valued at CAD $nil per share on 1 July 2014. Porient is yet to be defined into a business with active projects and the current prospects of this happening are doubtful. Based on this, the Directors concluded that the investment should continue to be valued at CAD $nil at 30 June 2015.

13. Share Options

Movement in the year:

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options during the year:

The weighted average remaining contractual life of the 40.45 million options outstanding at the statement of financial position date is 4.55 years (2014: 4.91 years). The weighted average share price during the year was 23.84p (2014: 29.07p) per share.

The expected volatility of the options reflects the assumption that historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The expected life of the options is based on historical data available at the time of the option issue and is not necessarily indicative of future trends, which may not necessarily be the actual outcome.

The Share Option Scheme is an equity settled plan and fair value is measured at the grant date of the option. Options issued under the Scheme vest over a three year period provided the recipient remains an employee of the Group. Options may be also exercised within one year of an employee leaving the Group at the discretion of the Board.

The Company issued 3.1 million share options to employees during the year (2014: 20 million) the weighted average exercise price of these options was 23.8p (2014: 34.6p) and the weighted average fair value was 13.8p (21.2p). The exercise price of the options issued during the year ranged from 12.1p to 32.3p (2014: 23.3p to 35.2p)

The fair value was calculated using the Black Scholes option pricing model. The weighted average inputs were as follows

14. Related Party Transactions

Non-executive Director Laurence Mutch is also a Director of Laurie Mutch & Associates Limited, which has provided consulting services to the Group. The total fees charged for the year amounted to £41k (2014: £60k). The balance payable at the statement of financial position date was £21k (2014: £4k).

Jason Miles is also a Director of ROE Projects Limited, which provided consulting services to the group until its acquisition by the Company on 22 October 2014. The total fees charged for the year amount to £62k (2014: £242k). The balance payable at the statement of financial position date was £nil (2014: £15k).

Ian Williams and Hemant Thanawala were directors of International Energy Services Limited ("IESL"). QFI provided services to IESL during the year for which QFI received income of £39k (2014: £51k). The balance receivable at the statement of financial position date was £nil (2014: £14k).

On 22 October 2014, the Company issued 1,593,626 new ordinary shares in the Company, equating to a value of £500k, to Jason Miles in consideration for the acquisition by the Company of ROE Projects Limited, which holds a 6.25% interest in each of Quadrise Marine Limited, Quadrise KSA Limited, Quadrise Americas Limited and Quadrise Asia Limited.

QFI defines key management personnel as the Directors of the Company. There are no transactions with Directors, other than their remuneration as disclosed in the Report of Directors' Remuneration.

15. Copies of the Annual Report

Copies of the annual report will be posted to shareholders and will be available shortly from the Company's website at www.quadrisefuels.com and from the Company's registered office, Gillingham House, 38-44 Gillingham Street, London, SW1V 1HU.