Quadrise : Half yearly interim report – period ended 31 December 2022

Quadrise plc

Company Registration No. 05267512

Interim Report and Consolidated Financial Statements

For the 6 month period to 31 December 2022

Quadrise plc ("Quadrise", "QFI", the "Company" and together with its subsidiaries the "Group") presents its unaudited interim results for the six months ended 31 December 2022

Chairman's Statement

Throughout 2022, the cost of energy and the transition to secure, sustainable fuels have remained top priorities for governments, businesses and society as a whole. During the reporting period and first months of 2023, Quadrise has continued to position itself as a provider of decarbonisation solutions, further highlighted by our recently announced name change and TIDM 'ticker' update to QED to represent the Quadrise focus on Energy Decarbonisation and to highlight the simplicity of our solutions. Despite frustrating delays in recent months, the board remains confident in both the quality of our solutions and the commercial opportunities they provide.

Pleasingly, during the reporting period and in subsequent months, we have seen the gradual easing of supply chain constraints and the continued global recovery from COVID-19, however the broader economic and political landscape remains challenging with the conflict in Ukraine continuing to impact energy prices and economic recovery. The conflict, combined with the related emergence of sustained inflation and recessionary risk in major economies has, despite underlining the need for energy solutions such as ours, prolonged the challenging business environment in which we currently operate.

Our strategy remains to focus on key projects, such as those in Morocco, Utah and with MSC, which represent the most efficient use of the financial resources we currently have and should provide the fastest and most material pathways to commercialisation. Important milestones have been reached in each of these key projects, as detailed by Jason below, and while further funds will be required to see every project through to commercialisation, the Company still expects to deliver commercial revenues in the current financial year, a critical milestone in attracting new customers, investors and strategic partners.

We are confident that our existing projects will be seen through to success and beyond generating commercial revenues will provide real world 'use cases' through which prospective customers in the marine, power and industrial sectors can understand the tangible environmental, operational and economic benefits of our solutions. Our confidence comes not only from our own project discussions, but also from promising dialogue with high-calibre organisations who can see the potential of the Company's technology.

Beyond the significant environmental benefits that the Company's solutions have the potential to create for our customers, Quadrise also seeks to measure and improve its own environmental footprint with Quadrise releasing its maiden sustainability report in November 2022. The report provided an overview of the environmental and economic benefits of the Company's technology as well as its scope 1 and 2 carbon emissions data and its alignment to the UN Sustainable Development Goals. The report, which was developed to highlight the Company's relevance in the broader environmental context, serves as an accessible reference point for decision-makers in our target sectors and has been well received in discussions with prospective and existing partners.

As a company whose purpose is to enable a more sustainable future, understanding our own impact on the environment, formulating a roadmap to reduce our impact, and holding ourselves to account is a responsible action. We intend to continue reporting on our ESG performance on an annual basis. Furthermore, it remains our intention to qualify for the LSE Green Economy Mark, which will provide third-party validation of our ESG credentials and increase visibility among investors and other stakeholders, including industrial partners.

As the Company's financial circumstances permit, we intend to explore and advance complementary technologies to reinforce the Company's reputation and impact in the ESG space, and help to ensure that our products and services are part of the conversation when potential clients are looking for decarbonisation solutions. We maintain a healthy research and development budget and it remains our intention to deliver a commercially competitive net-zero fuel to market by 2030.

On behalf of the Board, I would like to thank our loyal shareholders for their support and patience during a challenging period for the Company. As shareholders would rightly expect from us, the board and management team aim to reward our shareholders for this patience by delivering commercial revenues and driving Quadrise on to an exciting phase of growth this year and beyond.

Financial Position

The Group held cash and cash equivalents of approximately £2.6 million as at 31 December 2022 (31 December 2021: £5.6 million), The Directors acknowledge that this cash balance is not sufficient to cover the Group's operating requirements through the 12-month outlook period and that further funding will be required. In common with many development stage companies, these conditions indicate the existence of material uncertainty regarding the Group's and Company's ability to continue as a going concern. However, directors are confident that additional funding can be secured based on the expected passing of project milestones, and these accounts are, accordingly, presented on a going concern basis.

The Group recorded a loss of £1.7 million for the six months to 31 December 2022 (2021: £1.5 million). This included production and development costs of £1.0 million (2021: £0.7 million) and administration expenses of £0.6 million (2021: £0.7 million).

The basic and diluted loss per share was 0.12p (2021: 0.11p).

The Group's total assets amounted to £6.4 million as at 31 December 2022 (£9.3million as at 31 December 2021). In addition to the cash and cash equivalents, this included fixed tangible assets (mainly plant and equipment) of £0.4 million and MSAR® trade name of £2.9 million.

The Group has tax losses arising in the UK of approximately £60.0m (2021: £58.4m) that are potentially available to be carried forward against future profits.

Andy Morrison Chairman

24 March 2023

Chief Executive's Statement

Quadrise: Energy Decarbonisation

The global energy market is under ever increasing pressure to decarbonise whilst also offering consumers practical and cost-effective energy solutions. Over the last year, energy prices have been a key driver of global inflationary pressures, exacerbated by the ongoing conflict in Ukraine, whilst greenhouse gas ('GHG') emissions must be halved by 2050 if the worst effects of climate change are to be avoided according to the IPCC. Unique Quadrise technology allows operators in the marine, industrial and power sectors to decarbonise whilst also reducing their energy costs.

MSAR® lowers fuel consumption in diesel engines by up to 10% and reduces GHG emissions by the same amount. GHG emissions can be reduced by over 20% by incorporating renewable glycerine to produce low cost bioMSAR™.

The shipping industry alone produces around 2.5% of the world's total GHG emissions. Increasing pressures led by European regulators are incentivising marine operators to develop and trial lower-carbon and eventually net-zero solutions. These include some more challenging long-term options such as green hydrogen, ammonia and methanol, each of which requires significant investment and presents considerable logistical and safety challenges. The Quadrise solutions are available immediately as they use existing infrastructure and can achieve both cost and GHG savings. bioMSAR™ offers lower CO2 emissions than both LNG and FAME marine fuel blends at a lower cost per unit of energy, whilst also being dispersible in water, non-flammable and biodegradable.

Since the initial development of bioMSAR™ in 2021, the results of a testing programme designed to mirror real-world applications have continually surpassed expectations and the fuel is now ready for commercial deployment. Diesel engine testing at Aquafuel and VTT has shown that when compared to marine diesel fuel, use of bioMSAR™ results in:

• • Improvements in diesel engine efficiency of over 3%, increased to up to 13% by advancing injection timing with no increase in NOx emissions over original generator settings for diesel fuel;

• • A 26% average reduction in equivalent CO2 emissions over diesel fuel on a well-to-wake basis; and

• • NOx reductions of over 20%, an important regulatory feature in the marine sector.

The December 2022 optical combustion test demonstrated that bioMSAR™ combustion was similar to MSAR®. The extended fuel injection test of bioMSAR™ evaluated wear and fatigue of components in contact with the fuel over a prolonged time (over 250 hours). The results, learnings and recommendations from these tests are all important steps in preparing bioMSAR™ for commercial use. The HAZOP recommended by Wärtsilä for bioMSAR™ is expected to be carried out in Q2 2023.

In December 2022, Quadrise received and successfully commissioned our prototype 5 tonne per hour emulsion system that will be used for production of MSAR® and bioMSAR™ fuels for site trials and potential blend-on-board testing on marine vessels.

Despite the immediate and cost-effective carbon reductions that bioMSAR™ can offer we recognise that the requirement for net-zero carbon fuel solutions is becoming increasingly urgent. Our RDI strategy is now focused on the delivery of a commercially viable net-zero 'bioMSAR Zero' solution by 2030. As part of this exercise, we continue to work with Vertoro and other strategic partners to investigate the use of crude sugar oils (CSO™) and associated waste biofuel products as an alternative water-based, lower cost, and abundant biofuel feedstock for bioMSAR™. This work has now successfully progressed to diesel engine testing at Aquafuel, with results expected early in Q2 2023.

Key project delivery

Each of our key projects in the marine, upstream and industrial sectors is now nearing a major milestone, and our focus is on the completion of the trials and agreements that will demonstrate MSAR® and bioMSAR™ technology at commercial scale during 2023.

MSC - The preparatory work to enable the Letter Of No Objection ("LONO") fuel trials of both bioMSAR™ and MSAR® on board the MSC Leandra is ongoing. Quadrise is in discussions with potential feedstock suppliers, with the intention to conclude Tripartite Agreements with a fuel supplier and MSC as soon as possible in order to commence commercial-scale Proof-of-Concept and 4000-hour LONO trials in H2 2023. The trials themselves are expected to take nine months to conclude.

The MSC Leandra is scheduled for dry-dock during April-May 2023, during which time it will be inspected and installed with equipment designed to reduce emissions and improve vessel efficiency. The vessel, formerly the Seago Istanbul, was previously used to conduct a successful MSAR® trial. The emulsion fuel booster unit already on board has been inspected and will be upgraded and tested in readiness for use, so the vessel preparation required for the trial is minimal.

Utah - Following the signature of the Commercial Development Agreement with Valkor Technologies LLC ("Valkor") in April 2022, discussions are continuing with regard to the supply of a license and manufacturing unit to enable Valkor to produce MSAR® and bioMSAR™ from oil produced at their oil-sand deposit sites at Asphalt Ridge in Utah. These discussions are expected to conclude shortly. The oil sands reserves at Asphalt Ridge comprise billions of barrels, with Valkor having interests in multiple projects at this location. Oil samples supplied by Valkor were successfully converted to both MSAR® and bioMSAR™ by our RDI team at QRF in 2022.

Valkor is leading activities for the award of drilling permits at Asphalt Ridge, following successful exploration drilling in 2022. Valkor expects the permits to be awarded in Q2 2023, with drilling to commence as soon as weather-permits, with produced heavy oil available for conversion to bioMSAR™ and MSAR® for client trials during H2 2023.

These trials would then be expected to lead to commercial supply, subject to discussions with stakeholders to finalise agreements. Through the application of CO2 sequestration and proprietary new enhanced oil recovery technology in Utah, the extracted heavy oil is anticipated to have a lower carbon intensity than conventional oils. In addition, the very low sulphur content and properties of this heavy oil allows it to comply with the International Maritime Organisation's regulations on marine fuel once converted to MSAR® or bioMSAR™, without the need for carbon-intensive oil refining. This heavy oil would therefore be a low carbon, low sulphur MSAR® or bioMSAR™ option for potential use in the industrial, power and marine sectors.

The Inflation Reduction Act, signed into law on 16 August 2022, is directing significant federal spending toward reducing carbon emissions, and is accelerating the implementation of low-carbon and renewable projects such as this in the United States.

Morocco - The initial MSAR® trial at the client's 'Site-B' has been subject to delays, primarily due to the process of clearing a new fuel through Moroccan customs. This process was finally completed in late February. 60mt of MSAR® and 10mt of bioMSAR™, together with the trial equipment are now all at Site B. Quadrise has now completed the site engineering set up and is concluding scheduling discussions with the client linked to its site production programme. The trial is expected to commence in April 2023, with the results available soon thereafter. Following a successful trial, Quadrise expects to enter discussions to conclude a commercial fuel supply agreement in Q2 2023 as planned, in addition to concluding agreements for testing at other client sites as required.

Americas - Quadrise has recently signed a Letter of Intent with a central American power provider outlining our mutual intent for a commercial test of MSAR® and bioMSAR™ at the provider's power plant, with conclusion of a Test Agreement and site trial being the precursors for entry into a Fuel Supply Agreement. Discussions are ongoing and we expect agreements to be finalised during Q2 2023. Together with our local agents, we continue to explore other opportunities in the region. Discussions with a large refinery in the Caribbean continue to progress subject to them obtaining an operating license. Efforts continue to progress activities in Mexico with the state oil company and utility operators.

Outlook

The invasion of Ukraine in February 2022 and the resulting sanctions on Russian oil exports initially led to a significant elevation in global energy prices. Over the last 12 months however, the price of crude oil has declined by over 30%, with the prices of oil products such as fuel oil and marine diesel decreasing by similar amounts The price spread between fuel oil and diesel, which drives the cost of refinery residuals and the economic case for MSAR® production has only declined by 11% due to strong demand for diesel, with current spreads continuing to provide healthy margins for production of both MSAR® and bioMSAR™ in target refineries. The prices of renewable biofuels including FAME and glycerine by-products reached record prices in the summer, however they have since reduced dramatically which has increased interest and demand in the marine sector for biofuels, including bioMSAR™.

Whilst the higher prices of biofuels resulted in limited demand in the marine sector over the year, the introduction and implementation of environmental regulations, particularly in Europe, is expected to increase biofuel use in all sectors commencing this year. Shipping is now included in the EU ETS and Fit-for-55 regulations, that are expected to increase the use of marine biofuels from 2024 for most vessels operating within or near EU waters. Revenues raised via the ETS are to be reinvested into an Innovation Fund reserved for sustainable shipping, the protection of maritime habitats and for funding programmes to decarbonise the maritime sector. Additionally, subsidies are still available for renewable waste-based biofuel feedstocks such as glycerine that should enhance the attractiveness of bioMSAR™ against competing biofuels in certain bunker locations. Market conditions and trends therefore provide a favourable environment for Quadrise as we progress our contract discussions and business development activities on all fronts.

The positioning of Quadrise as an Energy Decarbonisation enabler is an important statement of intent as we progress licence agreements and commercial-scale trials during 2023 which, on successful completion, will lead to supply contracts and commercial revenues from MSAR® and bioMSAR™ sales. Looking ahead, our continued development of bioMSAR™ and net-zero solutions opens up exciting opportunities to deploy our unique proven emulsion technology platform in new applications, securing a green future for the company and its client base.

I look forward to being able to announce material progress across our projects in coming months and over the course of 2023. Although we have had to overcome a number of challenges this year, and we are not immune from global industry headwinds, Quadrise remains well-positioned to deliver commercial success on a number of fronts and play a key role in decarbonising the shipping, power and industrial sectors.

Jason Miles

Chief Executive Officer 24 March 2023

Consolidated Statement of Comprehensive Income

For the 6 months ended 31 December 2022

Total comprehensive loss for the period from continuing operations

(1,749)

(1,519)

(2,598)

Note	6 months ended	6 months ended	Year ended
31 December	31 December	30 June
2022	2021	2022
Unaudited	Unaudited	Audited
£'000	£'000	£'000
Continuing operations
Revenue	-	75	75
Other Income	27	-	-
Production and development costs	(1,049)	(686)	(1,447)
Other administration expenses	(649)	(743)	(1,419)
Share option (charge)/credit	3	(77)	(165)	44
Warrant charge	-	-	(18)
Foreign exchange (loss)/gain	(4)	1	5
Operating loss	(1,752)	(1,518)	(2,760)
Finance costs	(1)	(1)	(3)
Finance income	4	-	1
Loss before tax	(1,749)	(1,519)	(2,762)
Taxation	-	-	164
Loss per share - pence
Basic	4	(0.12)p	(0.11)p	(0.18)p
Diluted	4	(0.12)p	(0.11)p	(0.18)p