7 Dec 2018 07:00
NEITHER THIS ANNOUNCEMENT NOR ANY PART OF IT CONSTITUTES AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE OR ACQUIRE ANY SECURITIES IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, SOUTH AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
The information communicated within this announcement WAS deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 PRIOR TO ITS PUBLICATION. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
7 December 2018
Quadrise Fuels International plc
("Quadrise", "QFI'', the "Company" and together with its subsidiaries the "Group")
Open Offer to raise up to £2.16 million
Quadrise announces a non-underwritten open offer to raise up to £2.16 million through the issue of up to 86,220,497 new Ordinary Shares at a price of 2.5 pence per Ordinary Share on the basis of 1 Open Offer Share for every 10 Existing Ordinary Shares held on the Record Date (the "Open Offer").
In addition, the Open Offer presents Qualifying Shareholders with an opportunity, provided that they take up their Open Offer Entitlements in full, to apply for additional Open Offer Shares through the Excess Application Facility.
A circular setting out full details of the Open Offer, including the terms and conditions and details on how to accept the Open Offer, (the "Circular") and an accompanying Application Form (for Qualifying Non-CREST Shareholders) will today be posted to Shareholders.
A copy of the Circular will shortly be available from the Company's website at www.quadrisefuels.com.
Capitalised terms used but not otherwise defined in this announcement bear the meanings ascribed to them in the Circular.
Open Offer
In the third quarter of 2018 the Company was pleased to announce the renewal of a number of existing relationships and to announce, in November 2018, the signature of a memorandum of understanding and MSAR® test programme with a European multinational integrated oil and gas company and entry by the Company into a Co-Marketing and Project Development Agreement (the "CMPDA") with Freepoint.
Whilst the Company has faced a number of challenges recently, and there continues to be some way to go before the Company anticipates being able to progress to commercial projects, QFI and its clients believe that there are substantial opportunities in the power generation and marine markets for MSAR® in the near term. The recently announced business development milestones, which are further described below, are positive initiatives in this regard.
As at 30 June 2018, the Company held cash resources of £2.2 million. These cash balances were confirmed in the Company's final results for the year ended 30 June 2018, to be sufficient to enable the continue development of the business into early 2019 with, at that time, a number of initiatives, including equity funding, under consideration to provide longer term financing for the business.
As at 30 November 2018, the Company had unaudited estimated cash balances of approximately £1.2 million and monthly expenses of approximately £220,000 per month. The Board therefore considers that, notwithstanding the positive recent business development initiatives, should access to additional funds not be secured by the end of January 2019, the Board would need to consider the commencement of an orderly winding down of the business at that time.
As previously stated, the Board has considered a number of funding initiatives and, following a review of the options currently available to the Company, the Company is now making the Open Offer to Qualifying Shareholders of up to 86,220,497 Open Offer Shares to raise up to, approximately, a further £2.16 million at the Issue Price of 2.5 pence per Open Offer Share on the basis of 1 Open Offer Share for every 10 Existing Ordinary Shares held on the Record Date.
In addition, the Open Offer presents Qualifying Shareholders with an opportunity, provided that they take up their Open Offer Entitlements in full, to apply for additional Open Offer Shares through the Excess Application Facility further described in the Circular.
The Open Offer is expected to raise total gross proceeds of approximately £2.16 million, should the Open Offer be fully subscribed. The Issue Price represents a discount of approximately 22.5 per cent. to the closing mid-market price of 3.225 pence per Existing Ordinary Share on 5 December 2018, being the last practicable date prior to the publication of this document.
The Directors currently believe the funds raised as a result of the Open Offer, will enable the Company to continue to operate and advance its business development initiatives until early October 2019.
Each of the Directors intend to subscribe under the Open Offer, in respect of an aggregate of 1,100,000 Open Offer Shares, with all bar one of the Directors intending to subscribe for their entire Open Offer Entitlements (an aggregate of 608,063 Open Offer Shares) and certain of the Directors applying for an aggregate of 491,937 Open Offer Shares under the Excess Application Facility.
Shareholders should note that should all Open Offer Shares be applied for, and the maximum of £2.16 million before expenses be raised pursuant to the Open Offer, the Company expects to be able to continue to develop the business and its pipeline of business development initiatives until early October 2019 but that the Company does not expect to have any projects generating commercial revenues by that time.
If the Company does not receive the proceeds of the Open Offer, the Company would be compelled to seek alternative forms of finance and, without access to a form of additional funding prior to 31 January 2019, the Board considers that the Company's existing cash resources will be depleted over time such that the Board would need to consider the commencement of an orderly winding down of the business at the end of January 2019. As further described in the Expected Timetable of Principal Events, and subject to the successful conclusion of the Open Offer, the net proceeds of the Open Offer are expected to be received by the Company on 15 January 2019.
The Open Offer is conditional upon:
(i) the Open Offer Agreement being unconditional in all respects and not having been terminated in accordance with its terms; and
(ii) the admission of the Open Offer Shares becoming effective by not later than 8.00 a.m. on 29 January 2019.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for Open Offer | 6.00 p.m. on 5 December 2018 |
Announcement of the Open Offer | 7 December 2018 |
Publication and posting of the Circular and Application Form | 7 December 2018 |
Existing Ordinary Shares marked 'ex' by London Stock Exchange | 8.00 a.m. on 7 December 2018 |
Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts in CREST of Qualifying CREST Shareholders | as soon as practicable after 8.00 a.m. on 10 December 2018 |
Recommended latest time for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST | 4.30 p.m. on 7 January 2019 |
Latest time for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements into CREST | 3.00 p.m. on 8 January 2019 |
Latest time for splitting Application Forms (to satisfy bona fide market claims only) | 3.00 p.m. on 9 January 2019 |
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate) | 11.00 a.m. on 11 January 2019 |
Expected date of announcement of the results of the Open Offer | 14 January 2019 |
Expected time and date Admission effective and dealings in Open Offer Shares commence on AIM | 15 January 2019 |
CREST accounts credited in respect of Open Offer Shares | 15 January 2019 |
Share certificates dispatched for the Open Offer Shares by | 29 January 2019 |
For further information, please refer to the Company's website at www.quadrisefuels.com, or contact ir@quadrisefuels.com or phone:
Quadrise Fuels International Plc |
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Mike Kirk, Executive Chairman | +44 (0)20 7031 7321 |
Jason Miles, Chief Operating Officer |
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Nominated Adviser |
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Smith & Williamson Corporate Finance Limited |
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Dr Azhic Basirov | +44 (0)20 7131 4000 |
Ben Jeynes Katy Birkin |
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Joint Brokers |
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Peel Hunt LLP |
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Richard Crichton | +44 (0)20 7418 8900 |
Ross Allister |
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Stockdale Securities |
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Andy Crossley Daniel Harris | +44 (0)20 7601 6108 |
Public & Investor Relations |
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FTI Consulting |
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Ben Brewerton | +44 (0)20 3727 1000 |
Sara Powell |
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Background to and reasons for the Open Offer
As stated in the Company's Final Results for the 12 months ended 30 June 2018, announced on 24 September 2018, the Company has seen some major challenges. Most notable of these, announced on 26 March 2018, was the inability of our oil company partner in the Kingdom of Saudi Arabia ("KSA") to reach agreement with the local power company to progress the commercial scale trial project, as they had promised. Following this announcement, a strategic decision was made to broaden our engagement in our global markets, whilst ensuring that QFI retains appropriate focus and control. Outcomes of this process were agreements with JGC and Freepoint which are enabling us to work collaboratively to access their established networks for mutual benefit. The Company has also signed agreements with agents to explore specific opportunities, and continues commercial dialogue with a number of major corporations where there is a similar alignment of interests in the fuel and bitumen industries respectively. The timescales over which QFI would therefore expect our proposed project portfolio to generate revenues have therefore extended beyond those anticipated when the Company last raised equity funds in October 2016. As at 30 November 2018, the Company had unaudited cash balances of approximately £1.2 million.
During Q3 2018 the Company announced the renewal of a number of existing partnerships and, importantly, in November 2018 was pleased to announce both the memorandum of understanding and MSAR® Pilot Test Programme with a European multinational oil and gas major, and the entry of a Co-Marketing and Project Development Agreement ("CMPDA") with Freepoint respectively.
Freepoint, which is based in Stamford, Connecticut, is both an established global merchant of physical commodities and a financer of upper and mid-stream commodity-producing assets. Freepoint also provides physical supply services and related structured solutions for counterparties located throughout the world.
The CMPDA provides a clearly defined structure for Quadrise and Freepoint to work together to progress MSAR® projects to long-term commercial agreements for the production and supply of MSAR® fuel to defined territories and counterparties on an exclusive basis. The preferred business model for both parties under the CMPDA is to 'Build Own and Operate' ("BOO") a facility jointly, to purchase residual streams under long-term contracts from a refiner and enter into back to back contracts with other counterparties for the supply of MSAR® fuels. Financial returns under the CMPDA are based on the respective party's contributions to bringing the project to fruition.
Building on the concepts established under the Memorandum of Understanding signed in July 2018, now under the CMPDA, Quadrise and Freepoint will investigate and pursue a carefully selected and mutually agreed list of MSAR® project opportunities. The parties will initially focus on the Americas, the Middle East and Asia, with the intention of jointly investing in projects on a BOO basis. In addition, there may be circumstances where a decision is taken by both parties to pursue a project on a tolling or licensing basis and the CMPDA defines the relevant participation of the parties in those circumstances. If QFI chooses not to participate in a project targeted by the CMPDA, the Company will grant Freepoint a licence to QFI's technology to build and operate a project on a site-by-site basis. The term of the CMPDA is 36 months, after which time it will continue unless terminated by either party with 24 months' notice.
Under the CMPDA the Company looks forward to advancing, together with Freepoint, the identified target list of third-party prospects to signed commercial terms at the earliest opportunity.
The Company's existing cash balances are expected to provide sufficient funding to allow the Company to continue to operate and advance its business development initiatives until the end of January 2019 and the Company does not expect to be able to advance any secured project to the stage of positive cash flow generation in this timeframe.
As a result, the Board believes it is appropriate to raise additional funds by way of the Open Offer. In addition to the proceeds of the Open Offer providing additional core funding, the Board believes that it is prudent to ensure that the Company has a resilient capital base as it enters the negotiation of contracts with prospective clients.
Given the longstanding support of Shareholders, including a large number of private shareholders, the Company is making the Open Offer available to Qualifying Shareholders of up to 86,220,497 Open Offer Shares at the Issue Price of 2.5 pence per Open Offer Share.
The net proceeds from the Open Offer, assuming the maximum number of Ordinary Shares are applied for, together with the Company's existing cash balances, are expected to provide sufficient funding to allow the Company to continue to operate and advance its business development initiatives until early October 2019.
If the Company does not receive additional funding prior to 31 January 2019 pursuant to the Open Offer, or pursuant to a less attractive financing alternative secured thereafter, the Board considers that it would need to consider the commencement of an orderly winding down of the business at that time.
Views of the Board
The Board believes that the net proceeds of the Open Offer (assuming that it is subscribed for in full) will be sufficient, together with the Company's existing cash balances, to enable the Company to continue to operate and advance its business development initiatives until early October 2019. Without the proceeds of the Open Offer (or to another form of financing subsequently considered) prior to 31 January 2019, the Board considers that it would need to consider the orderly winding down of the business.
The Directors therefore believe that the Open Offer is in the best interests of the Company and its Shareholders as a whole.
Each of the Directors intend to subscribe under the Open Offer, in respect of an aggregate of 1,100,000 Open Offer Shares, with all bar one of the Directors intending to subscribe for their entire Open Offer Entitlements (an aggregate of 608,063 Open Offer Shares) and certain of the Directors applying for an aggregate of 491,937 Open Offer Shares under the Excess Application Facility.
Whether or not Qualifying Shareholders decide to participate in the Open Offer will depend, amongst other things, on their view of the Company's prospects and on their own individual circumstances.
Outlook - Current trading and prospects
Notwithstanding the challenges faced in key markets where the Company has dedicated its resources over the period, QFI and our clients believe that there are substantial opportunities in the power generation and marine markets for MSAR® in the near term.
The Company has substantially recovered from the unfortunate setbacks during 2018 and with the recent announcements the Company is on course to develop a broader platform and pipeline of opportunities for MSAR® technology across a larger number of projects. Whilst QFI still has some way to go to progress these to commercial contracts, there has been a real change in the fuel oil and distillate markets, driven by the forthcoming IMO 2020 regulations, that has fundamentally improved the economics for MSAR® projects. Alongside this, adding to our existing relationships with PowerSeraya, JGC, Freepoint, the European oil major and others will enable us to progress new projects and to potentially accelerate existing project opportunities globally across a range of sectors, and QFI are working quickly to progress these at the earliest possible opportunity.
Financial information
Audited accounts for the Group for each of the three financial years ended 30 June 2018, 30 June 2017 and 30 June 2016 are available on the Company's website www.quadrisefuels.com.
As at 30 November 2018, the Group's unaudited cash balance was approximately £1.2 million. The net proceeds of the Open Offer, if fully subscribed, will materially enhance the Company's unaudited cash balances.
Use of proceeds
The Board believes that the net proceeds of the Open Offer, if fully subscribed, will provide sufficient funding to allow the Company to continue to operate and advance its business development initiatives until early October 2019. The Directors currently consider that the Company will be required to raise further capital in the future in order to develop any project to the stage where that project can generate net positive cash flow from continuing operations.