Business
2022 FULL YEAR RESULTS
2022 FULL YEAR RESULTS.
About this update from Iofina Plc
[{"type":"text","content":"\n \n \n \n 25 April 2023 \n \n Iofina plc \n (\"Iofina\", the \"Company\" or the \"Group\") \n (AIM: IOF) \n \n 2022 FULL YEAR RESULTS \n FIFTH SUCCESSIVE YEAR OF RECORD REVENUE AND EBITDA \n Iofina plc, specialists in the exploration and production of iodine and manufacturers of specialty chemical products, announces its audited full year results for the 12 months to 31 December 2022 (the \"Period\"). \n Sustained demand and a strong Iodine spot price accelerated sales and profits in 2022: \n · Revenue increased by 8% to $42.2m to (2021: $39.0m) \n · Gross profit increased by 47% to $15.8m (2021: $10.7m) \n · Adjusted EBITDA improved by 65% to $11.5m (2021: $6.9m) \n · Operating profit increased by 85% to $9.6m (2021: $5.2m) \n · Profit before tax increased by 96% to $10.0m (2021: $5.1m) \n \n Strong balance sheet and further reduction in net debt: \n · Cash of $5.9m at year-end \n · Net debt reduced from $3.0m to $0.9m \n \n Investing for growth: \n · Capital investment into chemical and iodine plants was $3.1m (2021: $1.5m) \n · Commenced site negotiations for future IOsorb® plants in the Period. \n \n 2023 so far: \n · Production of 107.1 MT of crystalline iodine in Q1 from Iofina's five IOsorb® plants \n · The iodine global spot price remains steady at $70/kg and prices are expected to stay at these levels into the second half of 2023 \n · IO#9 is currently scheduled to be operational before the end of Q2 2023 \n \n Commenting, President and CEO, Dr. Tom Becker, stated: \n \"We have delivered another strong year across the business in terms of profitability and have invested in growth projects. Being a low cost producer of iodine means we have continued to capitalise on sustained, higher iodine market prices. Demand for our products coming through Iofina Chemical remains robust and our improved cash position of $5.9m has reduced net debt to below $1m. \n \"Having commenced the construction on IO#9 in Q4 2022, we remain on track to have this in operation by the end of Q2 2023. The new plant is expected to add 100MT-150MT of crystalline iodine per annum, which will be a significant step change in production. We are also pleased that negotiations are progressing well with several interested parties for IO#10, with potential sites identified and further testing underway. Outside of the construction of new IOsorb® plants, the Board is also examining other potential growth projects that complement Iofina's existing skill set and range of products, which would present cross-selling opportunities. \n \"2023 has started well in terms of production from our existing plants and corresponding sales, with the market remaining strong and the Company on track to meet its H1 production targets. We look forward to confirming the completion and switch on of IO#9 soon and updating shareholders on our further progress.\" \n Investor Presentation \n Iofina will be hosting a presentation for retail investors via the Investor Meet Company platform in early May. A further announcement will follow soon to confirm the date and time for the event. \n Enquiries: \n \n Dr. Tom Becker \n CEO & President \n Iofina plc \n Tel: +44 (0)20 3006 3135 \n \n Nomad & Broker: \n Henry Fitzgerald-O'Connor/Patrick Dolaghan/Andrew Potts \n Canaccord Genuity Limited \n Tel: +44 (0)20 7523 8000 \n \n Financial Adviser: \n Kingsley Wilson \n Chrystal Capital Partners LLP \n Tel: +44 (0)20 7850 4761 \n \n Media Contact: \n Charles Goodwin/ Shivantha Thambirajah /Jazmine Clemens \n Yellow Jersey PR Limited \n Tel: +44 (0)7747 788 221/+44 (0)7983 521 488 \n About Iofina: \n Iofina plc (AIM: IOF) is a vertically integrated company that specialises in the production of Iodine and the manufacturing of specialty chemical products. Iofina is the second largest producer of iodine in North America and operates the manufacturing entities Iofina Resources and Iofina Chemical. \n \n LEI: 213800QDMFYVRJYYTQ84 \n \n ISIN: GB00B2QL5C79 \n \n Iofina Resources \n Iofina Resources develops, builds, owns, and operates iodine extraction plants using Iofina's WET® IOsorb® technology. Iofina currently operates five producing IOsorb® plants in Oklahoma and is consistently using technology and innovation to improve and expand its operations. \n \n Iofina Chemical \n Iofina Chemical has manufactured high quality halogen speciality chemicals derived from raw iodine, as well as non-iodine-based products. Iofina Chemical will be celebrating its 40 th anniversary in 2023 as a preeminent halogen-based specialty chemicals company. \n \n www.iofina.com \n \n \n \n \n Contents \n \n COMPANY INFORMATION....................................................................................................... ..2 \n CHAIRMAN'S STATEMENT........................................................................................................ ..3 \n FINANCIAL REVIEW.................................................................................................................. ..7 \n DIRECTORS' BIOGRAPHIES……................................................................................................... 10 \n STRATEGIC REPORT.................................................................................................................... 12 \n S172 STATEMENT…………………………………………………………………………………………………………………..22 \n CORPORATE GOVERNANCE……………………………………………………………………………………………………24 \n DIRECTORS' REPORT................................................................................................................... 25 \n CORPORATE GOVERNANCE STATEMENT..................................................................................... 27 \n ENVIRONMENTAL, SOCIAL AND GOVERNANCE (\"ESG\")…………………………………………………………..34 \n INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA PLC.......................................37 \n CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ..................................................... 48 \n CONSOLIDATED BALANCE SHEET ............................................................................................... 49 \n CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY...................................... 50 \n CONSOLIDATED CASH FLOW STATEMENT ................................................................................... 51 \n COMPANY BALANCE SHEET ........................................................................................................ 52 \n COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY.............................................. 53 \n NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS........................................................... 54 \n \n \n \n COMPANY INFORMATION \n Directors L J Baller \n T M Becker \n W D Bellamy \n M T Lewin \n J F Mermoud \n Mary Fallin Christensen \n \n Secretary Simon Holden \n \n Company number 5393357 \n \n Registered office 48 Chancery Lane \n London WC2A 1JF \n \n Auditor UHY Hacker Young LLP \n Quadrant House \n 4 Thomas More Square \n London E1W 1 YW \n \n Nominated Adviser and Broker 88 Wood Street \n Canaccord Genuity Limited London EC2V 7QR \n \n \n Solicitors Keystone Law Limited \n 48 Chancery Lane \n London WC2A 1JF \n \n Registrar Link Asset Services (Holdings) Limited \n 10th Floor, Central Square \n 29 Wellington Square \n Leeds LS1 4DL \n \n Financial PR Yellow Jersey PR Limited \n Thanet House \n 231-232 Strand \n London WC2R 1DA \n \n \n \n CHAIRMAN'S STATEMENT \n Introduction \n \n The 2022 financial year resulted in several significant milestones for Iofina. We achieved a fifth straight year of record Adjusted EBITDA with an increase of 65% to $11.5m, record sales of $42.2 m up 8.3% on 2021, and a record average sales price of iodine was recorded. Profit before tax increased by 96% to $10.0m. \n \n Iofina produced 516 metric tonnes (MT) of crystalline iodine in 2022. Average prices per kilogram achieved for sales of crystalline iodine, based on 100% iodine, increased 98% on the previous year to an average of $71.20 for 2022 whilst non-iodine product sales increased by 26% from $8.6m to $10.8m. \n \n Additional highlights include a bank debt to Adjusted EBITDA ratio of 0.59 for year-end 2022 compared to 1.18 for year-end 2021 (2.62 for year-end 2020). In addition, the Company was able to reduce its net debt from $3.0m to $0.9m while increasing capital investments into chemical and iodine plants of $3.1m (2021: $1.5m). Net cash inflow from operating activities was $5.6m. The Company achieved these important milestones while having no lost time accidents in 2022 across all facilities, which is our top priority. For the second year in a row Iofina Chemical (IC) was awarded a SOCMA ChemStewards Performance Award and for the first time successfully attained ISO 9001:2015 certification. We have built an excellent business with diversified, low-cost production across a diverse array of IOsorb® plants and a specialty chemicals business supplying customers globally across several end markets. \n \n Iofina Chemical (IC) \n IC had a successful year with its derivatives production, which was helped by the high price of iodine. This helped to help drive both improved revenue and profitability. We delivered an increase in Hydroiodic Acid (HI) production to meet higher domestic and international demand and we also increased Iodopropynyl butylcarbamate (IPBC) production to fulfil large orders. IC returned to growth in our specialty chemical gases business going back to 24/7 shifts in the second half of the year. There was some weakness in numbers for Sodium iodide (NaI), Potassium iodide (KI), and Methyl Iodide (Mel) but the increases in HI helped offset those slowdowns. These shifts in product mixes year over year are common and we will continue to drive sales of all products. During the year we saw higher levels of employee churn at our plant due to a more competitive U.S. labour market, but by the end of the year we were fully staffed for 2023. We also hired to a new Maintenance Supervisor in the second half of the year which will ensure that IC will continue to set the standard for preventive maintenance and safety. \n \n 2022 was a busy year for the engineering department at IC. We began by successfully testing the new specialty gases pilot plant. The material quality was verified by our customers to be relatively comparable to our current process of record. We completed a key set of renovations to our Methyl Iodide process to ensure safer operation. One of the other big projects was running new equipment to determine the best conditions for the recovery of an iodide recycle stream. We have successfully completed our testing in-house and are now working with toll manufacturers to recover this product. Another significant achievement in 2022 was renovating the lab air handling system with four new hoods installed and renovating our original two hoods. We also hired a new plant engineer in August and completed an AutoCAD class in October which will help with process design and building design. IC's engineering team exceeded most of their key performance indicators (KPI's) during the year. \n \n IC had a goal in 2022 to obtain ISO 9001:2015 certification, and following a successful ISO audit in October, we completed ISO certification (an internationally recognised standard that specifies requirements for a quality management system) in December. Additionally, much work was done on improving our quality management system with continued work on all aspects. We have added a quality system session to IC's quarterly training days, to ensure all employees understand the aspects of the quality management system. IC exceeded its quality KPI's which during the year included on-time product deliveries of 87.9%, a high customer satisfaction score, a high rate of completing scheduled preventive maintenance, and kept our customer complaints below 3% at 1.24%. The continued stress testing of IC's strategic direction and quality policy will continue to be a focus as we continue to improve as an organization. \n \n Research and Development (R&D) continues to aid in process development and new product opportunities as well as the production of laboratory size quantities of customer orders typically for specialized iodides. Unfortunately, from April through November the lab HVAC renovations impacted expanded R&D efforts. Most of the year was spent producing lab size products. Work continues on lithium iodide and other specialty iodides. The expanded HVAC project added four new hoods available for R&D efforts in 2023. We have relied on R&D to help with our iodine waste stream recovery project and work continues on the solids obtained from the distillation to convert these to iodide products in 2023. Quality Control and R&D implemented new instrumentation software and added a new moisture analyser for our specialty chemical gases detection to ensure our testing requirements are met and provide backup instrumentation to meet customer needs. \n \n A continued focus on safety remains key to our business and we completed a second consecutive year with no lost time accidents at IC. At the year-end we stood at 780 days with no loss time incidents at IC. Continuing safety improvements are a priority for the Company and at IC additional monthly online safety training was added to provide training on important safety, plant and product awareness issues. Each month employees are required to complete between two and three training courses. This helps to reinforce some of the important topics covered during quarterly safety and quality training. IC was awarded another SOCMA ChemStewards performance award for our continued success of our Employee Health and Safety work. \n \n Iodine Prices \n Since the lows of early 2017, iodine prices have steadily increased from early 2020, reaching $35-37/kg. During the second half of 2020, as global economies contracted, so did the demand for iodine, resulting in prices reducing slightly. Iodine prices began 2021 at approximately $32.5-36/kg, which was similar to where prices were pre-pandemic in early 2020 and ended the year at $50/kg after a significant increase in global demand for iodine. Prices increased during 2022 to end the year at approximately $70/kg. The increase in demand for iodine was led by human health applications such as povidone iodide (PVPI) and X-ray contrast imaging agents. At the time of writing, iodine prices are remaining steady with spot pricing now generally at $70/kg and above. The last time spot prices for iodine were above $60/kg was in June 2013. Iofina expects iodine prices to remain steady in 2023 due to global demand and environmental and geopolitical risks in Chile that slowed increased production. \n \n \n Iofina Resources (IR) \n For IR's current assets, efforts were made to maintain and work with our oil and gas partners to get the highest quality, quantity, and stable brines to our production facilities. IR was successful in our efforts to improve the consistency of brine water supply to our IOsorb® plants. We saw water volumes improve and stabilize across the Mississippian Lime Field. IR continued to work closely with our partner operators to optimize the water volumes and highest possible iodine concentrations. Our expansion efforts are underway with the construction of IO#9 beginning in November. \n \n We have maintained great relationships with our partners that have resulted in successful projects for brine manipulation within their systems, hardware replacements and upgrades (i.e., valves, pipe work, flow meters, etc.), handling IR's return water issues, and stabilizing existing brines with solid iodine concentrations. IR's staff worked closely with our partners' field engineers regarding their well work over program and to identify and prioritize shut-in production wells that would be more beneficial to IR's facilities, as well as having adequate oil production. Several new wells in the IO#4 and IO#6 area are online and helping add brine and iodine to these plants. Through persistence and coordination, we were able to successfully finalize the IO#9 iodine extraction agreement. This was with a large, new operator to IR. Although negotiations took significant time, our efforts were successful and IR has established a strong working relationship with the Operator which we believe may be beneficial in developing additional plants in both Oklahoma and Texas. \n Iofina had a strong end to 2022, with H2 iodine production surpassing our initial target and product sales remaining robust. We produced 516MT in 2022 compared to 518.2MT in 2021. The increase of produced water to IO#2 and IO#7 due to our efforts had the biggest impact in H2. This increased flow was a combination of the increase of investment by the Operator and working with the Operator at the field level to optimize operations. \n Efficiencies were improved due to completing five tower IOsorb® repacks in H1 2022, which played a critical role in exceeding the 2022 H2 projections. We continued to collect and monitor data from each facility to improve effectiveness and have moved more aggressively to repack plants resulting in more partial repacks, reduced downtime and costs, and improved efficiencies. \n IR added a new HSE manager in 2022. He has had an immediate impact the on continual improvement of our safety culture. Several initiatives have been successfully undertaken, including modification to personal protective equipment (PPE) and respirator requirements, improved operating conditions in the labs, and increased training and awareness to issues of health and safety in our operations. As we move forward into 2023, we have chosen a software platform that will improve our data collection and incident classification. This platform also will provide near miss and incident corrective action improvements by using a plan/do/check/review process to ensure sustainability and accurate KPI reporting. There were no lost time injuries (LTI) and zero reportable releases. IR has not experienced a LTI for 628 days. \n In 2023, we are looking forward to building on the successes we achieved in the second half of 2022. We should have continued solid production from our existing plants, the completion of IO#9 construction in the 2nd quarter of 2023, progressing negotiations for IO#10 and beyond, and expanding our exploration efforts. \n \n Field exploration efforts for the targeted areas of interest for Oklahoma have particularly been focused on future site locations and relationship developments with key targeted operators with the goal to identify ideal locations along with understanding their water transport systems (WTS) and saltwater disposals (SWDs). \n \n Through this research and development, we were able to pinpoint the IO#9 location and construction is near completion. Our sampling program will continue to gather data needed for future locations in the field. Looking for future iodine facility locations is a top priority. We have an agreement for collecting weekly samples on ten brine aggregation points with multiple partners. IR's exploration team has continued studies on SWD and manifold locations, at SWD facilities in western Oklahoma, and we are working with potential partners in the Company's northern area of interest. In Texas, we have furthered our investigations by collecting weekly to monthly samples on twelve individual sites of interest with multiple potential partners. Additionally, we are furthering our research efforts on production wells producing from new formations as well as new aggregate points within our partner operator's WTS's. \n \n We have started our fourth internship program with an Oklahoma university, and it has progressed strongly. The interns are assisting Iofina in calculating iodine values in our existing Brine Units for royalty calculations, have assisted in a testing chemical recycling project, and they are working on lithium sample processing techniques. This internship duration goes from May 1, 2022, to April 30, 2024 at which time we will evaluate whether to continue to fund this program. \n \n Outlook \n I have stated in previous annual reports that \"The next few years look to be transformational for Iofina\". As a Group we still believe this. While disappointed that we have been unable to add a new IOsorb® plant each year, we believe that IO#9 will be an important new plant in a new, strategic area and will ignite our development plans. In 2022, we were able to evidence that Iofina is a highly attractive and profitable Group, and we shared our story with global institutional funds, family offices, and retail investors. Our shareholder registry expanded in the financial year with the addition of new institutional holdings. We will continue to hold roadshows and investor programs in 2023 under the stewardship of Canaccord Genuity, the Company's nominated adviser and broker. \n \n In 2022 we explored options to facilitate increased investor access to Iofina with a dual listing on NASDAQ. After reviewing the regulatory reporting requirements, ADR fees, and compliance requirements, the Board decided the expense and additional regulatory and administrative efforts placed on the Group's management team would not be materially beneficial to shareholders. At last year's annual general meeting, the Board received approval from shareholders to buy back up to 19,185,841 ordinary shares. Whilst we have not yet used this authority, instead focusing on reinvesting the Group's profits into our operations, the Board will again this year seek shareholder approval at the annual general meeting for the ability to repurchase shares as appropriate. \n \n In terms of our expansion, we are squarely focused on growing our current iodine production and specialty chemical businesses, including developing new and exciting chemical compounds. We shall continue to develop strategies to reduce our reliance on our current oil and gas partners and explore new geographic areas. We have continued to explore potential business partnerships and combinations that could be beneficial to shareholders. We continue to focus on calculated risks in our approach to growth. In 2022 we implemented additional key performance indicators (\"KPIs\") and will continue to do so in 2023. \n \n I would like to thank all of our shareholders for their continued support. We are looking forward to appraising the excellent opportunities we are seeing as we move the Company forward in setting continued record years. \n \n \n \n \n \n \n Lance J Baller \n Non-Executive Chairman \n Iofina plc \n 24 April 2023 \n \n FINANCIAL REVIEW \n \n Summary 2022 v 2021 \n · Fifth successive year of record revenue and EBITDA \n · Revenue increased by 8% from $39.0m to $42.2m \n · Gross profit increased by 47% from $10.7m to $15.8m \n · Adjusted EBITDA improved by 65% from $6.9m to $11.5m \n · Profit before tax increased by 96% from $5.1m to $10.0m \n · Net debt was reduced from $3.0m to $0.9m* \n · Capital investment into chemical and iodine plants was $3.1m (2021: $1.5m) \n * excludes lease liabilities \n \n Trading results \n \n \n \n \n \n Turnover \n \n \n Crystallised \n \n \n 2022 \n \n \n \n \n \n Crystallised \n \n \n 2021 \n \n \n \n \n \n \n \n Iodine 85% \n \n \n Sales \n \n \n \n \n \n Iodine 85% \n \n \n Sales \n \n \n \n \n \n \n \n MT \n \n \n $m \n \n \n \n \n \n MT \n \n \n $m \n \n \n \n \n Crystallised iodine \n \n \n 220 \n \n \n 13.3 \n \n \n \n \n \n 411 \n \n \n 12.6 \n \n \n \n \n Derivatives \n \n \n 221 \n \n \n 16.3 \n \n \n \n \n \n 321 \n \n \n 15.1 \n \n \n \n \n Prilled iodine \n \n \n \n \n \n 1.8 \n \n \n \n \n \n \n \n \n 2.7 \n \n \n \n \n Total iodine sales \n \n \n 441 \n \n \n 31.4 \n \n \n \n \n \n 732 \n \n \n 30.5 \n \n \n \n \n Non-iodine \n \n \n \n \n \n 10.8 \n \n \n \n \n \n \n \n \n 8.6 \n \n \n \n \n Total sales \n \n \n \n \n \n $42.2 \n \n \n \n \n \n \n \n \n $39.0 \n \n \n \n \n \n Revenue increased by 8% from $39.0m to $42.2m. A key factor driving the results was a substantial increase in the iodine price over the first half of the year to a level that has persisted since then. The reduction in iodine sales volumes reflects exceptionally high demand in 2021 due to restocking by customers who had held back in 2020 due to COVID uncertainties. Although 2022 volumes were lower turnover was nonetheless higher and gross margins were greatly improved. \n \n Average prices per kilogram achieved for sales of crystallised iodine based on 100% iodine were $36.03 for 2021, rising to an average of $71.20 for 2022, an increase of 98%. Sales volumes at these higher price levels were 220 metric tonnes (\"MT\") compared to 411 MT for 2021, but the value of this turnover was higher at $13.3m compared to $12.6m for 2021. \n \n Average prices per kilogram of derivative compounds, based on total weight including non-iodine chemicals, were $42.90, up 54% from the 2021 average of $27.94. Sales volumes of derivatives were 221 MT compared to 321 MT for 2021, but the value of turnover was higher at $16.3m compared to $15.1m for 2021. \n \n Non-iodine sales increased by 26% from $8.6m to $10.8m, reflecting higher volumes and led by the specialty chemical gases business, which saw some inventory rebuilding by a major customer. \n \n \n \n Gross profit improved by $5.1m (47%) to $15.8m (2021 $10.7m), representing 38% (2021 27%) of sales. This reflected the substantial selling price increases described above, offset somewhat by mainly inflationary cost increases of 24% for iodine production and 20% for the Iofina Chemical plant. \n Crystallised iodine production was 516MT compared to 518MT for 2021, from the same five plants. Iodine sales were split 50:50 between raw iodine and derivatives for 2022, as opposed to 56:44 for 2021. \n \n Adjusted EBITDA improved by 65% from $6.9m to $11.5m after deducting $4.4m in SGA expenses (2021 $3.8m) from the gross profit of $15.8m (2021 $10.7m). Operating profit after depreciation and amortisation of $1.8m (2021 $1.7m) was $9.6m compared to $5.2m for 2021. \n \n Release of plant acquisition accrual \n An accrual balance of $0.45m relating to the acquisition of #IO2 plant is no longer considered to be required, and has therefore been transferred to income. No claims have been made, and the period of validity for such claims has expired. \n Interest swap derivative asset \n The derivative asset resulting from the swap contract described in Note 20 has been revalued as at 31 December 2022 by reference to market expectations for future SOFR rates, and an amount of $0.25m has been credited to comprehensive income (2021 $0.07m) and included in the balance sheet. \n Profit before tax \n Profit before tax improved by $4.9m from $5.1m (2021) to $10.0m (2022). The improvement reflects successful trading at substantially higher iodine selling prices, together with containment of inflationary cost pressures. \n Tax \n The Group is utilising previous years' accumulated US Federal tax losses against current profits that would otherwise be taxable. Based on current projections the Group expects that US Federal tax will not be payable in respect of 2023, but is likely to become payable in respect of 2024. \n Capital investment \n The Group invested $3.1m in capital projects and equipment (2021: $1.5m), of which $1.8m relates to construction of the new IO#9 iodine plant in Oklahoma. Most of the balance of expenditure relates to new projects, process improvements and replacements at the Iofina Chemical plant. \n \n \n \n \n \n \n Cash flow \n Cash started the year at $5.3m and ended $0.6m higher at $5.9m, after paying off $1.4m of the bank term loan in accordance with the borrowing schedule and investing $3.1m in capital projects. Net debt was reduced from $3.0m to $0.9m. Net cash inflow from operating activities was $5.6m. \n \n \n Malcolm Lewin \n Chief Financial Officer \n Iofina plc \n 24 April 2023 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n DIRECTORS' BIOGRAPHIES \n Lance J. Baller, Non-Executive Chairman \n Mr. Baller was co-founder, CEO and President of Iofina Plc prior to his departure for health reasons in June 2013. Mr. Baller was the Group's Finance Director from 2007 until his appointment as CEO in 2010. Mr. Baller returned as Chairman in April 2014. Mr. Baller currently serves as CEO of Selectis Health, Inc and as a director and as sole or principal shareholder of several privately owned businesses, including Baller Enterprises, Inc. (personal holding company), Titan Au, Inc, Empire Leasing LLC, Valdez Au, Inc, Extrac Technologies Limited, Extrac, Inc, Wyoming Sand Company LLC (which all are in gold, sand, rock, SiO2 and gravel mining), Ultimate Investment (personal investment company) and Baller Family Foundation, Inc. (personal family foundation) plus many others that he has founded and successfully sold over the years. He is the former managing partner of Shortline Equity Partners, Inc., a mid-market merger and acquisitions consulting and investment company. Mr. Baller is also the former Managing Partner of Elevation Capital Management, LLC and is the former alternative investment hedge fund manager of the Elevation Fund. He is also a former Vice-President of Corporate Development and Communications of Integrated Biopharma, Inc. and prior to that a vice-president of the investment banking firms UBS and Morgan Stanley. Mr. Baller has been a CEO, interim CEO, Chairman, CFO and secretary of various private and public listed companies throughout his career. He has served as Chairman to various companies and has led successful restructurings. Mr. Baller has had extensive experience in all aspects of corporate finance. Mr. Baller currently is on the board of trustees of Index Fund and Digital Funds where he serves as the chairman of the audit committee and as the audit committee financial expert under Sarbanes-Oxley. \n Dr. Thomas M. Becker, Chief Executive Officer \n Dr. Becker has served as President/CEO of Iofina plc since 2014 and has led Iofina Chemical since March 2010. Previously, Dr. Becker was the Vice President of Research and Development at H&S/Iofina Chemical. Iofina bought H&S in July 2009. Dr. Becker has conducted extensive research in both inorganic and organic halogen-based chemistry. Dr. Becker has written a magnitude of published technical papers in his career. Prior to H&S Dr. Becker worked as an Oak Ridge Scholar on behalf of the US EPA and for various other chemical manufacturing companies. Dr. Becker earned a BS in Chemistry from Indiana University, and a PhD in Chemistry from the University of Cincinnati. He has extensive experience in scale-up of chemical processes from laboratory to pilot to full scale production. Dr. Becker is a former member of the Board of Governors of the Society of Chemical Manufacturers and Affiliates (\"SOCMA\"). \n Dr. William D. Bellamy, Non-Executive Director \n Dr. Bellamy is the former Senior Vice President of the Water Business Group at CH2M HILL, Inc. (\"CH2M\"), a company he has worked at for 30 years until his recent retirement. CH2M is one of the largest consulting engineering companies in the world, providing leadership and strategic direction for the water business and application of technologies worldwide. Dr. Bellamy has participated in energy and sustainability forums, including as a panellist at the World Future Energy Conference in Abu Dhabi, the World Bank Sustainable Cities Symposium and the Future of Water Economic Forum. Dr. Bellamy serves as Professor of Practice at the University of Wyoming, where he teaches graduate courses and is responsible for securing grants and research funding in the areas of water resources, water treatment and sustainable energy development. Dr. Bellamy has a PhD in Civil Engineering from Colorado State University, an MSc in Civil (Environmental) Engineering from the University of Wyoming and a BSc in Electrical (Bio-Medical) Engineering from the University of Wyoming. \n Malcolm T. Lewin, Chief Financial Officer \n Mr. Lewin was named CFO and a director of the Group in November 2016 after having joined Iofina as interim CFO in February 2016. Mr. Lewin is based in the UK and has over 30 years of experience in finance and accounting for both public and private companies. As well as being a partner in a chartered accounting firm for 11 years, he has acted for various companies listed on AIM and other exchanges. In particular, from 2000 to 2003 he was the Finance Director of Oxford Metrics plc, an AIM company supplying motion capture and visual geometry systems. From 2004 to 2006 he was the Finance Director of Real Estate Investors plc, an AIM property investment company with interests in quality commercial and industrial properties. From 2006 to 2011 he was a Director and CFO of Hunter Bay Minerals plc, a junior mining company listed on the Toronto Venture Exchange with interests in South America and Canada. From 2011 to 2014 he was CFO and Treasurer of VolitionRX Limited, an OTC life sciences company focused on developing blood tests for a broad range of cancer types and other conditions. Mr. Lewin has an MA in Classics from Oxford University and qualified as a chartered accountant with Coopers & Lybrand. \n J. Frank Mermoud, Non-Executive Director \n Mr. Mermoud has more than 30 years' experience in international business, facilitating trade and investment in both the public and private sectors. He has held senior international, economic and commercial policy positions within the United States Government having served as the Secretary of State's Special Representative for Commercial and Business Affairs at U.S. Department of State from 2002 to 2009. Mr. Mermoud is also a Non-Executive Director of Cub Energy Inc. an oil and gas company headquartered in Houston, Texas. \n Mary Fallin Christensen, Non-Executive Director \n Mary Fallin Christensen has served the State of Oklahoma for over 30 years. She was elected the first female Governor of the State in 2010, and was re-elected for a second term in 2014. Prior to serving as Governor, she held a number of state and federal positions, including serving as US Congresswoman for Oklahoma's 5th district between 2007-2011 and serving as Lieutenant Governor of Oklahoma between 1995-2006. Mary has been a major contributor to natural resources industries in Oklahoma, and implemented the State's first comprehensive energy plan as well as its State-wide water plan. She has held several positions, including Chair of the Southern State Energy Board, Chair of the Interstate Oil & Gas Compact Commission, and has served on the natural resource committee of the National Governors Association (NGA). Previously, she also served on the United States House of Representatives Committee on Small Business, was Small Business Chairman on the Republican Policy Committee, and was named the \"Guardian of Small Business\" by the National Federation of Independent Business. Mary has also served on numerous Boards of Directors for both commercial organizations and non-profits. \n \n \n \n STRATEGIC REPORT \n Principal activities and review of the business \n Iofina plc (\"Iofina\" or the \"Company\") is the holding company of a group of companies (the \"Group\") involved in the exploration and isolation of iodine and the production of specialty chemicals. Iofina Resources, Inc. is the Group's wholly owned subsidiary which uses proprietary Wellhead Extraction Technology® (WET®) and WET® IOsorb® methods to produce iodine from brine. Large volumes of brine water are sourced from partnerships with oil and gas operators and saltwater disposal (\"SWD\") operators in the United States and is used as a raw material to produce iodine at the Group's multiple IOsorb® plants. The Group's unique business model isolates a resource, iodine, from a produced waste stream that, without Iofina's technology, would be lost. The Directors of the Company believe that Iofina's production process, which utilizes brine water from third party oil and gas production, is advantageous for long term sourcing of the raw material as well as minimised production and expansion costs. Iodine containing or other specialty chemicals are produced at and sold through the Company's wholly owned subsidiary, Iofina Chemical, Inc., with the major raw material being the Group's produced iodine. Additionally, the Group's crystalline IOflo® iodine is sold directly to other iodine end-users. \n Iodine is a rare element that is produced only in a few countries in the world, with approximately 90 per cent of global production coming from Chile (~60 per cent) and Japan (~30 per cent, including recycled waste streams).. Iodine and its compounds have many human health related applications, including x-ray contrast agents, pharmaceuticals, antiseptics, thyroid function, and others. Additional high-volume uses of iodine include LCD screen technology, material heat stabilisation, animal feed additives, biocides, catalysts and more. The Group produces iodine in the United States where the overall global iodine production is approximately six per cent of the world's total production, but where there is a large consumption of the world's iodine by various American users. Iofina believes it is the second largest producer of iodine in North America. \n The ability of the Group to expand its iodine production quickly, at low cost, differentiates Iofina from other iodine producers. This has been proven from the expansion of production and opening of IOsorb® plants IO#7 and IO#8 and the current IO#9 project which is expected to open in late Q2 2023. Additionally, the Directors believe that the Group's technology to produce iodine is far more environmentally friendly compared to other producers. By using a waste stream from the oil and gas industry to isolate iodine versus isolating iodine from ores, Iofina's process is ecologically efficient in obtaining a valuable product from a waste stream versus the environmentally intensive processes of mining iodine from ores by Chilean producers. \n Economically viable iodide rich brine co-produced during oil and gas production is not common, and the Group's proprietary geological model to locate and anticipate iodide rich sources is unique. The Directors of Iofina are committed to producing its products in a sustainable and environmentally friendly manner, and to improving communications regarding our long-term strategy in respect of Iofina's sustainable practices and other ESG tenets. \n The focus of Iofina's current business model is the production of iodine from brine and the creation and sales of specialty chemicals through Iofina Chemical. The Directors feel strongly that diversification within the business while focusing on our core expertise is important. Iofina Resources diversifies its iodine production through multiple IOsorb® production plants with multiple brine suppliers in western Oklahoma. The technology the Group has developed, utilizing a waste resource already being produced, allows Iofina the ability to expand its operations quickly with minimal capital expenditure. Continued prudent growth in the number of IOsorb® plants increases production, profit and diversification. Continued expansion of the Group's geological model provides opportunities for Iofina outside of its current core area. \n Iofina Chemical produces a wide range iodine-based products with applications in various industries including agricultural, pharmaceutical, biocides and others, whilst additional diversification is realised by the production of non-iodine-based products at Iofina Chemical. The demand for various products can change, and Iofina Chemical's ability to produce a variety of products allows the Group to take advantage of growing markets while not being as affected by temporarily depressed or declining markets. \n Iodine prices have risen significantly in the last 24 months, exceeding $70/kg by July 2022 and stabilising at these levels through early 2023 at the time of publication. Pricing at these levels has not been seen since 2011, when a combination of the Fukushima disaster in Japan and Chilean supply disruptions resulted in a shortage of iodine and a price spike. Supply and demand changes, as well as manufacturing cost increases, are the major factors influencing the iodine price. Iodine prices slightly retreated in H2 2020 due to lower global demand for both iodine and iodine-based products during the COVID-19 pandemic. As an iodine manufacturer, iodine prices have a significant impact on the Group's gross profit margins. Prices rose marginally in H1 2021 and then significantly from H2 2021 through to H2 2022 with demand outpacing supply as global economies recovered and expanded as COVID impacts waned. \n During 2022, demand for iodine, particularly in X-ray contrast media applications, continued to increase. Currently, iodine prices remain high versus historical levels and the range of prices is larger than typical historical prices. Spot prices began 2022 near $50/kg and reached $70/kg and above by mid-year. Contracted iodine prices for large customers are generally lower than spot prices, but these also increased significantly during the year. Demand for Iofina's iodine and iodine derivatives was robust in 2022 and this is still the case in early 2023. We expect iodine prices to remain steady at least through H1 2023. Whilst the iodine market has expanded in recent years, we note that additional Chilean production coming on stream may increase overall global iodine supplies. Inflation in 2022 has remained at much higher levels than recent years and has resulted in higher costs for Iofina's raw materials, labour and energy. \n The Directors recognized that, as the Company erected its IOsorb® plants, it was imperative for Iofina's iodine production costs to be amongst the lowest in the industry to be competitive. Between 2014 and 2017 numerous initiatives were successfully implemented to optimise Iofina's technology and lower production costs. Once the majority of these goals were achieved and iodine market conditions became more favourable, the Directors commenced the next phase of Iofina's business plan with the focus on growth. In early 2018, the Group's newest iodine plant at the time, IO#7, was completed. By expanding our operations and building IO#7, the Group has successfully lowered overall iodine production costs with its most efficient plant at that time. The next major growth development occurred in Q2 2019, when the Company performed an equity raise to reduce debt and provide working capital for expansion projects. The result was the construction of IO#8, which began in late 2019 and was completed in early April 2020. \n The Group is committed to establishing new routes to growth and is investigating locations and partnerships to expand iodine production. Currently, the Company is building IO#9 and is in negotiations with partners on sites for IO#10. Lessons learned from past expansion play a role in management's iodine plant growth. Building of IOsorb® plants will be done in a prudent manner to ensure to the best of our knowledge long-term, low-cost iodine production. With an expanding iodine market and Iofina's improved balance sheet, it is likely that Iofina will embark on IO#10 soon after IO#9's completion, although this will only be done with the correct evaluations of potential future sites and market conditions. \n The Directors are aware of the risk of declining brine availability if our partners do not maintain or increase their hydrocarbon production in areas that supply the Group's IOsorb® plants. The Group continues to investigate the economics and the technology to have better control of the iodide-rich brine supplies that feed the current and future plants. Iofina Chemical continues to be recognised as a world-renowned halogen specialty chemical producer. Vertical integration of the Group's iodine into iodine derivatives gives Iofina's customers stability of supply in addition to the long-standing quality and technical support to Iofina's global customers for the goods sold to them. Additionally, the non-iodine-based halogen derivatives produced by Iofina Chemical gives the Group further diversity. Iofina Chemical invested in multiple projects in 2022 and will continue to invest in areas to expand current products and develop new products to Iofina using the Company's core expertise. \n \n Key Performance Indicators \n The Directors review a range of financial indicators to assess and manage the Group's performance, including the following relating to revenue and iodine production: \n \n \n \n \n \n \n \n \n \n \n Year ended \n \n \n \n \n \n Year ended \n \n \n \n \n \n \n \n \n \n \n \n \n \n 31 December \n \n \n \n \n \n 31 December \n \n \n \n \n \n \n \n \n \n \n \n \n \n 2022 \n \n \n \n \n \n 2021 \n \n \n \n \n \n \n \n \n \n \n \n \n \n $'000 \n \n \n \n \n \n $,000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Revenue from sales of iodine and iodine derivatives \n \n \n \n \n \n $31,422 \n \n \n \n \n \n $30,473 \n \n \n \n \n \n \n \n Revenue from non-iodine products \n \n \n \n \n \n $10,776 \n \n \n \n \n \n $8,566 \n \n \n \n \n \n \n \n Total revenue \n \n \n \n \n \n $42,198 \n \n \n \n \n \n $39,039 \n \n \n \n \n \n \n \n Total pounds of product shipped (LBS '000) \n \n \n \n \n \n 1,640 \n \n \n \n \n \n 2,580 \n \n \n \n \n \n \n \n Crystallised iodine produced (Metric Tonnes) \n \n \n \n \n \n 516 \n \n \n \n \n \n 518 \n \n \n \n \n \n \n \n IOsorb® plants in operation (year-end) \n \n \n \n \n \n 5 \n \n \n \n \n \n 5 \n \n \n \n \n \n \n \n \n Commentary on some of the above indicators is to be found in the Chairman's Statement on pages 3 to 6. \n Further commentary on the results for the year and the financial position at the year-end is to be found in the Financial Review on pages 7 to 9. \n Objectives \n At the end of 2022 the Group had five operating IOsorb® iodine production facilities in the core area of Northwestern Oklahoma and a sixth under construction. While the theoretical capacity of these plants is very high, the practical capacity of the plants is somewhat lower. Practical capacity takes into account multiple causes of downtime, including weather, repairs and maintenance, inadequate brine (low parts per million of iodine, heavily contaminated brine or little to no supply), power outages and other conditions. As we have proven our technology and continue to improve operations at current facilities, more accurate practical capacity operating targets have been realised as well as improvements for maximising practical capacity. \n Iofina Resources' unique business model allows the Group to determine sites for new iodine production plants utilizing existing brine produced from oil and gas production and quickly bring these sites into production. The execution of this prudent growth strategy was continued with the start of construction of IO#8 in late 2019 which was completed in April 2020. While technology and efficiency improvements at current facilities remain an ongoing priority, the Company continues to explore new iodine production opportunities. This objective of strategic expansion in 2020 and beyond is focused on sites that will continue to improve Iofina's output with low production costs. In late 2022, the Group began construction on IO#9 with an expectation to complete it in late Q2 2023. \n Brine supply to our IOsorb® plants can be affected by regulatory changes and adjustments to our partners' saltwater disposal systems and oil production programs. Iofina continues to work with its partners to implement plans to maximize brine input and iodine output at each of our existing sites. The mutually beneficial relationship between Iofina and its brine supply partners, which allows Iofina to create iodine and for the brine suppliers to realize value from a waste stream, is a key component for existing projects and potentially for future sites. Continued efforts by our business development and geological teams have identified numerous further expansion opportunities. The Company will continue to evaluate and potentially execute these with current and new potential brine supply partners, when management determines the proper timing for new sites. \n Timing of future iodine production growth will be dependent on a series of factors. These include the stability or increase of iodine prices, global demand, availability and cost of production at new sites, partnership agreements, oil prices and production in areas with high iodide content brines, and the regulatory landscape with respect to brine injection. Lower oil prices can lead to lower oil production if certain wells become uneconomical, which in turn can affect brine supplies from our partners. Therefore, the Group is increasingly focused on evaluating alternative brine sourcing opportunities to have better control brine supply at future sites. Whilst the Directors are focused on expanding production capacity in the right manner, it is also important to maintain the Company's strong balance sheet and cash flow. Expansion in 2023 will occur with the completion of IO#9 and negotiations for sites for IO#10 are ongoing. The Directors will evaluate market conditions and the detailed information on potential future plant sites before spending capital on new IOsorb® plants. \n Iofina Chemical has continued to invest in current product lines, safety improvements, and new product R&D. These include investments in both iodine-based products and other non-iodine specialty chemicals. Capital investment projects in 2022 at Iofina Chemical included R&D upgrades and ongoing methyl fluoride process improvements. In 2023, additional process upgrades and product development projects are underway. The R&D and the sales groups continue to investigate and research new opportunities for applications of our existing portfolio of products, as well as identify and produce new halogen-based derivatives to grow this side of the business. It is also expected that Iofina Resources' expansion plans over the next few years will result in the need for expansion of our customer base for our products. The Iofina Chemical sales team developed new sales channels during the reporting period, which it will continue to expand upon, including potential direct sales of the Group's crystalline IOflo® iodine to new customers . Managing existing client relations and developing new sales channels is a high priority for the sales team. To help meet growth targets and maintain high standards, the Group expects to add new talent to the sales team in 2023. \n The Group reported in 2021 that IofinaEX, the hemp seed investment, has not had any appreciable sales and was impaired to Nil. While the Group believes these seeds are still viable for sale, there were no recognised hemp seed sales in 2022. \n Last, the Directors are committed to employee retention whilst controlling costs. Employee safety and training are also key objectives for the Group. A key component for the Group is the high operational gearing whereby the Group's business model allows for the control of administrative and fixed expenses whilst expanding operations. \n \n Principal risks and uncertainties \n Iofina plc is subject to a number of risks and uncertainties, which could have a material effect on its business, operations or future performance, including but not limited to: \n Raw Materials: Brine water produced from oil and gas operations is the raw material source for Iofina's iodine production. The Group continues to evaluate opportunities to integrate its IOsorb® process into produced brine water streams associated with hydrocarbon operations in the USA, as well as other brine stream sources throughout the world. However, there is significant risk and no guarantee as to the volume of commercial quantities of iodide rich brine available to our current and future IOsorb® plants. Oil and gas prices and demand for these hydrocarbons generally will dictate whether our partners continue to expand their production or possibly reduce hydrocarbon output. Changes in hydrocarbon production by our partners will change the total brine availability to isolate iodine and thus the iodine output of our IOsorb® plants. The salt-water disposal wells (SWDs) that our partners operate may have temporary or permanent issues which would likely affect the brine supply to IOsorb® plants. In the past, reduction of capital spent by our partners for new drilling and recompletion of wells in our core area resulted in a decline in total amounts of brine co-produced with oil and gas in our key areas. Current brine volume availability to existing plants is relatively steady but could change. Iofina maintains good relationships with our partners who provide the brine water to our existing IOsorb® plants. Maintaining a positive, mutually beneficial relationship with our brine suppliers is a top priority for the Group. By continuing an aggressive water testing program and active exploration utilising geology and data analytics and incorporating reservoir and production engineering, we are constantly evaluating new potential locations for iodine extraction in our core area and in other locations. \n Iofina Chemical sources raw materials throughout the globe. Understanding the supply chain of these materials is important to minimise supply disruptions. Global supply change disruptions and logistic bottlenecks can adversely affect ability to obtain key raw materials and may result in increased costs of these materials. Iofina Chemical has long term relationships with many of its suppliers. Additionally, when possible, Iofina Chemical sources materials from multiple suppliers to reduce risk. Increased regulations can adversely affect availability and cost of materials. Prices of raw materials and energy can change and if increases in these prices are not able to be passed on to our customers, it would negatively affect margins for our products. \n Global Crises : Global crises, while rare, can impact businesses significantly. The COVID-19 pandemic was an example of such an event. Similar events in the future could have a negative effect on the markets we serve and on the Group's profits. For instance, COVID-19 resulted in a global economic slowdown and a reduced demand for many of Iofina's products. These types of events can also result in delays in shipping, worker limitations, business closures and other challenges which may negatively affect the Group. The diversity of Iofina's products along with the uses of products in areas like human health applications make Iofina less susceptible than many other businesses. During the COVID-19 pandemic, Iofina quickly implemented many protocols to minimize any negative impacts on the business, but these protocols only reduce risk and cannot eliminate risk. COVID-19 or other events such as political unrest, acts of aggression (wars), other health crises, major weather events or others would likely have a negative effect for the Group. \n Currently, Russia's invasion of Ukraine is ongoing but has not directly affected Iofina's operations. Additional political sanctions or negative impacts to global economies as a result of this invasion may adversely impact our business. Iofina does not have any current sales exposure with Russia. Other geopolitical events could negatively affect the Group. \n Environmental: The Group's operations are subject to the environmental risks inherent in the exploration and chemical industries. The Group is subject to environmental laws and regulations in connection with all its operations. Although the Group intends to comply in respect of all applicable environmental laws and regulations, there are certain risks inherent to its activities, such as accidental spills, leakages or other circumstances that could expose the Group to extensive liability. Accordingly, the Group promotes wherever possible environmental sustainability in its working practices and seeks to minimise, mitigate, or remedy any harmful effects from the Group's operations on the environment at each of its operational sites. Regulations on brine injections in the state of Oklahoma into the Arbuckle geological formation in the Group's core area due to seismic activity were implemented mainly in late 2015 to early 2016, and have affected Iofina's partners' brine disposal into this formation near some of our sites. This reduced some brine availability to Iofina at some sites. The Group and its partners have implemented and continue to implement strategies to minimise the effect on the availability of iodine rich brine to Iofina due to these regulations. Moving forward the Group and its partners will continue to monitor these risks and act accordingly. While the frequency and intensity of earthquakes have significantly reduced in Oklahoma, and this reduction is likely a result of regulated changes in brine disposal into the Arbuckle formation, there is still risk of additional earthquakes and regulation moving forward. Changes in laws or regulation of brine streams could affect brine availability or the cost to produce iodine. As a specialty chemical manufacturer, new regulations based on chemical use, adverse human health or environmental impact are a risk and may lead to higher costs or controlled production. Greenhouse Gas (GHG) regulations in the USA have not impacted Iofina's ability to produce products it currently manufactures, however if production allocations are reduced in the future, this would likely negatively affect Iofina's production output. Other environmental regulations that restrict manufacturing of chemicals that Iofina produces would have a negative impact on the Group. The Group has a robust Environmental, Health and Safety program and strives for continual improvement in this area. Additionally, Iofina Chemical is a certified Chemstewards® facility and obtained ISO 9001:2015 certification in 2022. \n Changes in Markets and Competition: Iofina is well diversified in the markets we serve. As a result, small changes to these markets generally will not materially affect our business. However, major disruptions in key markets that use iodine or the other specialty compounds we manufacture could have a material negative effect on the Group. The rising interest rate environment implemented by central banks to combat inflation is likely at a minimum slow down global economies or even create a recession. A significant contraction in global economies may negatively affect demand and pricing of the Group's goods. Additionally, increased competition in the markets we serve could negatively impact prices or the ability to sell our goods. In particular, large increases in iodine production from competitors could negatively affect iodine prices and the Group's market share. The planned expansion of iodine production in Chile may change the market's current supply and demand dynamics. However, the exact change is subject to several factors, the scale of expansion, the timing of increased supply and the overall global demand for iodine at the time of new supplies coming onstream. \n Iodine Price volatility: Iodine's price and demand are highly dependent on a variety of factors, including international supply and demand, the level of consumer product demand, the price and availability of alternatives, actions taken by governments and global economic and political developments. Increases in current iodine producers' production capacities or new iodine producers entering the market could negatively impact prices. Fluctuations in iodine prices and, in particular, a material decline in the price of iodine would have a material adverse effect on the Group's business, financial condition and operations. Iodine prices are currently elevated relative to historical trends. After a lull in demand during the COVID-19 pandemic, demand for iodine rose significantly in H1 2021. Continued strong demand for iodine and iodine incorporated products have continued through today. As a result, iodine prices rose significantly between H1 2021 and mid-year 2022. During H2 2022 through early 2023 iodine prices have generally stabilised. \n Key customers: There are a limited number of potential customers who purchase many of the products of the Group's chemical business, which makes relationships with these customers, as well as the success of those customers' businesses, critical to the Group's success. The loss of one or more major customers could harm the business, operating results and financial condition of the Group. Iofina is continuing to diversify its customer base in its Chemical subsidiary. In addition, Iofina works closely with all of its customers to develop strong relationships, with a significant focus on ensuring that its products and services meet the needs of its customers and are of the highest quality. In 2022, 11% of revenue recognised was attributable to one long term customer and five other customers each contributed to over 5% of sales. Relations with these customers are good. \n Key Partners: Iofina partners with third-party oil and gas producers and saltwater disposal operators to process iodine-rich brine they extract with oil and gas production. Fluctuations of oil and gas prices in the US can affect the financial stability of oil and gas producers. Any changes in operator status or the financial strength of our partners is a risk to brine production and availability. The Group has agreements with our partners to reduce any risk of change in status. Material changes in these brine supply contracts with our partners could negatively affect the Group. In 2022, Iofina executed a new agreement for IO#9 with a new brine supply partner. \n Regulation and Trade : The businesses are subject to various significant international, federal, state and local regulations currently in effect including but not limited to environmental, health and safety and import/export regulations. These regulations are complex, change frequently, can vary from country to country, state to state and have generally increased over time. Iofina may incur significant expense in order to comply with these regulations or to remedy violations of them. The current federal administration in the USA has increased regulations in our industries versus the previous administration. Any new regulation that would increase cost of raw materials the Group uses, reduces availability of these raw materials or caps production of products the Group produces would likely have a negative effect on margins. \n Any failure by Iofina to comply with applicable government regulations could result in non-compliant portions of our operations being shut down, product recalls or impositions of civil and criminal penalties and, in some cases, prohibition from distributing our products or performing our services until the products and services are brought into compliance, which could significantly affect our operations. \n IofinaEX is involved in the sale of hemp seeds, a highly regulated industry. Laws and regulations for handling and selling hemp seeds may change and evolve. \n The Group closely monitors regulations across its businesses to ensure that it complies with the relevant laws and regulations. While Iofina believes that it is compliant with all laws and regulations, any instances of non-compliance would be brought to the attention of the appropriate authorities as soon as possible. \n Trade relationships between the USA and other areas of the world, particularly China, have become more unstable. Increased tariffs implemented by the USA and retaliatory tariffs imposed by other governments against the USA have the potential to adversely affect both raw material supply and final product sales for Iofina in certain areas of the world. Iofina has been proactive in reducing the impact of tariffs which directly impact the Company's supply and sales lines. \n \n Inventory Fluctuations: Inventory level changes can cause a financial instability. High inventories negatively affect cash flow, while low inventories can negatively affect sales volumes and customer relationships. In 2021, the Group started the year with larger than normal iodine inventories and ended the year with lower than normal iodine inventories. In 2022, the Group ended the year with more normalised iodine inventories and slightly elevated than ideal specialty chemical derivative end products and in-process goods. These inventories are cyclical within our business and management closely tracks these inventories along with known and anticipated demand for products in order to maintain appropriate inventories. \n Insurance may not cover all material losses: The Group strives to carry standard insurance for our industry that would minimise loss when events occur. However, certain scenarios or events may not be covered by insurance and could have a negative material impact on the Group. For example, cyber-attacks have increased globally and while the Group has increased measures to thwart potential cyber-attacks, we cannot guarantee these measures will prevent a cyber-attack for which we do not carry specific insurance. \n Personnel: As a small technical organisation, the loss of key technical or senior management employees could negatively affect the business. Additionally, the USA labour market remains tight. This could result in increased labour costs and a risk of delays or inability to produce product due to labour shortages. \n Significant Shareholders: Significant shareholders may have the ability to affect changes that result in a material adverse effect to the organisation including a change in senior management or control of the Group or its Board of Directors. \n Interest Rates and Inflation: As a result of the 2020 debt changes that served to significantly reduce both overall debt and interest rates for the Group, a significant portion of the debt carries variable interest rates. While overall debt has continued to decline, interest rates continue to rise and will likely negatively impact debt costs. In 2022, the Group obtained credit lines in order to support growth projects at both Iofina Chemical and Iofina Resources. These lines carry variable interest rates. \n Inflation in the USA and globally was higher in H2 2021 and throughout 2022 relative to recent years. This has resulted in higher costs for goods, energy, and labour. The ability to maintain margins in an increasing inflationary environment is uncertain. Additionally, as prices rise, there is a risk that some products the Group sells may be replaced by cheaper alternatives which could result in an adverse effect to the business. \n Litigation: While the Group has no pending litigation matters, there are possibilities that future judgements or settlements could result in an adverse effect to our business. \n \n \n \n \n Going concern \n The Group has performed well in 2022, and is performing as anticipated in 2023 and generating cash. In 2022 the Group achieved a profit before taxation of $10.0m and a net cash inflow from operating activities of $5.6m. The markets into which the Group sells its products continue to experience strong demand. Iofina has obtained appropriate credit facilities to fund current business growth objectives. The Group has prepared forecasts and projections that indicate there are adequate resources to continue in operational existence for the foreseeable future. The Directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements. \n On behalf of the board \n \n \n Dr. Thomas M. Becker \n Chief Executive Officer and President \n 24 April 2023 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n STATEMENT IN ACCORDANCE WITH SECTION 172 OF THE COMPANIES ACT 2006 \n \n As required by section 172 of the Companies Act 2006, a director of a company must act in a way they consider, in good faith, would most likely promote the success of the company for the benefit of its shareholders. In doing this, the Director must have regard, amongst other matters, to the: \n (a) likely consequences of any decision in the long-term; \n (b) interests of the company's employees; \n (c) need to foster the company's business relationships with suppliers, customers, and others; \n (d) impact of the company's operations on the community and the environment; \n (e) company's reputation for high standards of business conduct; and \n (f) need to act fairly as between members of the company. \n \n As a Board our aim is always to uphold the highest standards of governance and business conduct, taking decisions in the interests of the long-term sustainable success of the Group, generating value for our shareholders and contributing to wider society. We recognise that our business can only grow and prosper over the long term by understanding the views and needs of our stakeholders. Engaging with stakeholders is key to ensuring the Board has informed discussions and factors stakeholder interests into decision-making. \n The Directors insist on high operating standards and fiscal discipline and routinely engage with management and employees of the Group to understand the underlying issues within the organization. Additionally, the Board looks outside the organization at macro factors affecting the business. The Directors consider all known facts when developing strategic decisions and long-term plans, taking into account their likely consequences for the Group. \n The Directors and management are committed to the interests and well-being of Iofina's employees. Iofina is committed to the highest levels of integrity and transparency possible with employees and other stakeholders. Safety initiatives, consistent training, strong benefits packages and open dialogue between all employees are just some of the ways the Group ensures its employees improve skill sets and work hand-in-hand with management to improve all aspects of the Group's performance. \n Other stakeholders include customers, suppliers, lenders, industry associations, government and regulatory agencies, media, local communities and shareholders. The Board, both individually and together, consider that they have acted in the way they consider would be most likely to promote the success of the Group as a whole. To do this, there is a process of dialogue with stakeholders to understand the issues that they might have. Iofina believes that any supplier/customer relationship must be mutually beneficial, and the Group is known for its commitment to details to its customers. Communications with the Group's lenders and shareholders occur on an ongoing basis and as questions arise. The Group also communicates through media interviews and Twitter. \n The Directors are committed to positive involvement in the local communities where we operate. Part of this commitment is our program 'Iofina Gives Back', where Iofina supports local charities by donating time and goods. Additionally, Iofina adheres to environmental regulations at its sites and supports sustainability practices where possible. \n Integrity is a key tenet for the Directors and the Company's employees. The Company believes that any partnership must benefit both parties. We strive to provide our stakeholders with timely and informative responses and are always striving to meet or exceed customers' needs. \n The Board recognises its responsibilities under section 172 as outlined above and has acted at all times in a way consistent with promoting the success of the Company with regard to all stakeholders. \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n CORPORATE GOVERNANCE \n It is the Chairman's responsibility, working with Board colleagues, to ensure that good standards of corporate governance are embraced throughout the Group. As a Board, we set clear expectations concerning the Group's culture, values and behaviours. \n In September 2018, the Board adopted the Quoted Companies Alliance Corporate Governance Code (the \"QCA Code\"). On our website (https://iofina.com/corporate-governance/) we set out how we seek to comply with the 10 principles of the QCA Code. The following sections of the Corporate Governance Statement explain how the QCA Code is applied by the Company. \n The Board comprises six Directors: the Non-Executive Chairman, two full time Executive Directors and three Non-Executive Directors (each of whom is considered by the Board to be independent), reflecting a blend of different experiences and backgrounds. The function of the Chairman is to supervise and manage the Board and to ensure its effective control of the business. The Board believes that its composition brings a desirable range of skills and experience given the Group's challenges and opportunities as a publicly quoted company, while at the same time ensuring that no individual (or group of individuals) can dominate the Board's decision-making. \n The Board meets regularly to review, formulate and approve the Group's strategy, budgets, corporate actions and oversee the Group's progress towards its goals. The Board has established the following committees to fulfil specific functions, each with formally delegated duties and responsibilities (details of which can be found on our website; see: http://www.iofina.com/about/committees ): the Audit Committee and the Remuneration Committee. These committees meet on a regular basis and at least two times a year. The Board has elected not to constitute a dedicated nomination committee, instead retaining such decision making with the Board as a whole. This approach is considered appropriate to enable all Board members to take an active involvement in the consideration of Board candidates and to support the Chair in matters of nomination and succession. \n From time to time, separate committees may also be set up by the Board to consider specific issues when the need arises. \n \n \n \n \n \n \n \n \n \n \n DIRECTORS' REPORT \n The Directors present their report and financial statements for the Group for the year ended 31 December 2022. \n Strategic report \n Included in the Strategic Report on pages 12 to 21 is the review of the business and principal risks and uncertainties. \n Post balance sheet events \n Post balance sheet events are set out in note 30. \n Directors' responsibilities for the preparation of the financial statements \n The Directors are responsible for preparing the Strategic Report and the Directors' Report and the financial statements in accordance with applicable law and regulations. \n Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the AIM Rules for Companies (as published by the London Stock Exchange) to prepare Group financial statements in accordance with UK adopted International Accounting Standards, and have elected under company law to prepare the Company financial statements in accordance with International Accounting Standards. \n The financial statements are required by law and UK adopted International Accounting Standards to present fairly the financial position of the Group and the Company and the financial performance of the Group. The Companies Act 2006 provides, in relation to such financial statements, that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. \n Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. \n In preparing the Group and Company financial statements, the directors are required to: \n a. select suitable accounting policies and then apply them consistently; \n b. make judgements and accounting estimates that are reasonable and prudent; \n c. state whether they have been prepared in accordance with UK adopted International Accounting Standards; and \n d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. \n \n The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. \n The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Iofina plc website. \n Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. \n Results and dividends \n The results for the year are set out in the consolidated statement of comprehensive income and detailed in the Financial Review. \n The directors do not recommend payment of a dividend. \n Financial instruments and risk management \n Note 14 details the risk factors for the Group and how these risks are managed, including the degree to which it is appropriate to use financial instruments to mitigate risks. \n \n Directors \n The directors who served during the year and subsequently were as follows: \n Lance J. Baller, Non-Executive Chairman \n Dr. William D. Bellamy, Non-Executive Director \n J. Frank Mermoud, Non-Executive Director \n Mary Fallin Christensen, Non-Executive Director \n Dr. Thomas M. Becker, Chief Executive Officer and President \n Malcolm T. Lewin, Chief Financial Officer \n \n Statement as to disclosure of information to the auditor \n The directors who were in office on the date of approval of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the directors has confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor. \n Auditor \n UHY Hacker Young were appointed as auditors to the Company and in accordance with Section 485 of the Companies Act 2006 a resolution proposing that they be reappointed will be put to the next Annual General Meeting. \n On behalf of the Board \n \n Dr. Thomas M. Becker \n Chief Executive Officer and President \n 24 April 2023 \n CORPORATE GOVERNANCE STATEMENT \n The Board ensures that the Group is managed for the long-term benefit of all shareholders with corporate governance being an essential element of this and has adopted the Quoted Companies Alliance (\"QCA\") Corporate Governance Code which is considered appropriate for an AIM quoted company. The Board is responsible for the overall leadership, strategy, development and control of the Group in order to achieve its strategic objectives. \n The Group is led and controlled by the Board which currently consists of two Executive Directors and four Non-Executive Directors. Board meetings are held on a regular basis and no significant decision is made other than by the Directors. All Directors participate in the key areas of decision making. \n Business model, strategy and approach to risk \n The Group focuses on the exploration and production of iodine and halogen-based specialty chemical derivatives. We identify, develop, build, own and operate iodine extraction plants, currently focused in North America, based on Iofina's Wellhead Extraction Technology® (WET®) IOsorb® technology. The Group has complete vertical integration from the production of iodine in the field to the manufacture of the chemical end-products derived from iodine to the consumer, and the recycling of iodine using iodinated side-streams from waste chemical processes. We use patented or proprietary processes throughout all business lines. Together these allow us to be the Technology Leaders in Iodine®. The Group's strategy is to continue to focus on the exploration and production of iodine and iodine specialty chemical derivatives, delivering growth throughout our operations. Growth is intended to be achieved with the continued upgrading and expanding of our plants, which in turn will boost the level of iodine production. \n All the Group's activities involve an ongoing assessment of risks, and the Group seeks to mitigate such risks where possible. The Board has undertaken an assessment of the principal risks and uncertainties facing the Group, including those that would threaten its business model, future performance, solvency and liquidity. Further, the Board has considered the longer-term viability of the Group, including factors such as the prospects of the Group and its ability to continue in operation for the foreseeable future. The Board considers that the disclosures outlined in the Strategic Report on pages 12 to 21 are appropriate. The Board considers that these disclosures provide the information necessary for shareholders and other stakeholders to assess the Group's future viability and potential requirements for further capital to fund its operations. \n Having carried out a review of the level of risks that the Group is taking in pursuit of its strategy, the Board is satisfied that the level of retained risk is appropriate and commensurate with the financial rewards that should result from achievement of its strategy. \n Board of Directors \n As of the date of this Report the Board comprises six Directors in total: the Non-Executive Chairman, two Executive Directors (being the Chief Executive Officer (\"CEO\") and the Chief Financial Officer (\"CFO\")) and three Non-Executive Directors (each of whom are considered by the Board to be independent), reflecting a blend of different experiences and backgrounds. The skills and experience of the Board are set out in their biographical details on pages 10 and 11. The experience and knowledge of each of the Directors give them the ability to challenge strategy constructively and to scrutinize performance. \n The Board is responsible to the shareholders for the proper management of the Group. The Board and the Group's management team are responsible for reviewing and evaluating risk and the Executive Directors meet at least monthly to review ongoing trading performance, discuss budgets and forecasts and new risks associated with ongoing trading. The Board typically meets monthly to set the overall direction and strategy of the Group, review operational and financial performance and advise on management appointments (if necessary). All key operational and investment decisions are subject to Board approval. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with. The number of meetings attended by each Director can be found on page 30. \n There is a clear separation of the roles of CEO and Non-Executive Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board's decision making and ensuring the Non-Executive Directors are properly briefed on matters. The CEO has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group. \n Time commitment \n On joining the Board, Non-Executive Directors receive a formal appointment letter, which identifies the terms and conditions of their appointment and, in particular, the time commitment expected of them. A potential Director candidate (whether an Executive Director or Non-Executive Director) is required to disclose all significant outside commitments prior to their appointment. The Board is satisfied that both the Chairman and the other Non-Executive Directors can devote sufficient time to the Group's business. \n Independence of Directors \n The Directors acknowledge the importance of the principles of the QCA Code which recommends that a company should have at least two independent Non-Executive Directors. The Board considers it has sufficient independence on the Board and that all the Non-Executive Directors are of sufficient competence and calibre to add strength and objectivity to the Board, and bring considerable experience in industry, operational and financial development of chemical products and companies. Specifically, the Board has considered and determined that since the date of their respective appointments William Bellamy, J. Frank Mermoud and Mary Fallin Christensen are independent in character and judgement, specifically that they: \n · have not been employees of the Company within the last five years; \n · do not have a material business relationship with the Group; \n · have no close family ties with any of the Group's advisers, Directors or senior employees; \n · do not hold cross-directorships or have significant links with other Directors through involvement in other companies or bodies; and \n · do not represent any shareholder. \n The Board notes that the Independent Non-Executive Directors have received share options in the Company. The Board does not believe the issue of options affects their independence as they are of a modest amount and not deemed material to the individual. \n The Company Secretary maintains a register of outside interests and any potential conflicts of interest are reported to the Board. \n If they so wish, the Non-Executive Directors have opportunities to meet without Executive Directors being present (including after Board and Committee meetings). Because the Board is spread out geographically, the majority of communications between Directors is conducted by video. However, the Board does convene in person at least once a year, and this presents an opportunity (before, after and between management and operational meetings) for the Non-Executive Directors to meet in person without the Executive Directors being present. \n Professional development \n Throughout their period in office, the Directors are continually updated on the Group's business, the competitive and regulatory environments in which it operates, corporate social responsibility matters and other changes affecting the Group and the industry it operates in as whole. The updates are usually provided by way of written briefings and meetings with senior management. Directors are also advised on appointment of their legal and other duties and obligations as a director of an AIM quoted company both in writing and in communications (being face-to-face meetings whenever possible) with the Company's Nominated Adviser. The Directors also have recourse to the Company Secretary, a qualified and practising solicitor, who is a recognised practitioner within the AIM community. \n All the Directors are subject to election by shareholders at the first Annual General Meeting of the Company (\" AGM \") after their appointmen...