Quadrise Fuels International (LSE: QFI) is an emerging supplier of MSAR(R), a low cost alternative to heavy fuel oil in the shipping, refining, and power generation markets announced a poor set of results today to the 31 December 2014 that left the company with an operating loss of £2.22 million (£1.80 million for 6 months to 31 December 2013) of which £1.1 million relates to a non-cash charge of £1.08 million for share options.
Taking a closer look at those share options Quardrise reported an after tax of of £5.9 million for the year ended 30 June 2014 when results were published on 20 October 2014. £3.6 million related to share options as well.
On 7 May 2014 Quadrise did a fund raise.
It also did a fund raise in March raising £10 million ‘to maintain momentum with its existing projects, in particular, its leading Marine MSAR® and Power MSAR® programmes, and to make progress across a number of other fronts.’
From today’s announcement:
Current expectations are that contract terms for the first commercial production of Marine MSAR® fuel will be settled and production to start the LONO programme should be available Q4 2015. On success, consideration of the commercial roll-out should take place in mid-2016. Arrangements have taken longer than expected due, in part, to the oil price collapse and related uncertainty.
Consideration in mid 2016!
In intervening 18 month period between now and when Quadrise are expected to be paid for their flagship project are we to be treated to more fund raises and option costs?
Ian Williams, Executive Chairman seems to think that shareholders ought not to panic:
Unexpected challenges over the past six months, associated principally with the sudden fall in oil prices, impacted the progress of our key programmes. Fortunately this effect has passed and we are very much on track in all respects.
In the same period the resources, skills and service capacity of the company have been greatly enhanced and the Group is now well prepared to meet the growing demands of our emerging multi client, multi project, geographically diverse business portfolio.
Management is fully focussed on delivering the transition to contracts and operations during the course of 2015
This last line basically means that they need customers to sign on the dotted line for fuel delivery as they actually have no customers.
As a result this company is haemorrhaging cash with revenue of £58,000, production and development costs of £552,000, admin expenses of £700,000 and the share option charge of £1,082,000.
The earnings loss widened but the balance sheet is strong as a result of the £10 million fund raise but they are burning that cash and will need more fund raises between now and mid 2016 to keep going hence the 17% drop in their share price today.
I think I’ll pass for now.