Iofina Regulatory News (IOF)

25 May 2012

Iofina plc

("Iofina" or the "Group")

Iofina Reports Audited Full Year Financials

Iofina (LSE AIM: IOF), specialists in the exploration and production of iodine and iodine specialty chemical derivatives, is pleased to announce its final results for the year ended 31 December 2011.  

Key highlights during the period, and in the subsequent period to date, include:

·; Secured many iodine rich brine sites from major oil, gas, and salt water disposal companies in target regions;

·; Focused the business on two of the five targeted geographic regions for a potential full wide area rollout for many larger plants; which provides for lower OPEX and improved production efficiencies;

·; Building of WET® IOsorb™ plants IO#1 and IO#2 with anticipated combined iodine production of more than 200 metric tonnes (MT) per annum;

o WET® IOsorb™ enables use of high temperature brine streams with minimal pre-treatment and greater iodine extraction efficiencies;

o WET® IOsorb™ plants capable of processing brine streams of up to 30,000 barrels per day (bpd), which delivers an accelerated payback based on current economics; 

·; Pipeline of sites and brine streams for target rollout in 2012 and 2013;

·; Record year in sales for iodine specialty chemical derivates;

·; Post the year end successful entry into the iodine recycling business;

·; Revenues increased during the year under review to £10,045,842 (2010: £8,858,657);

·; Strengthening of iodine recovery team with addition of world renowned iodine engineering and production expert;

·; Iodine prices expected to remain strong through 2012;

·; Freehold purchase of the current iodine derivatives manufacturing facilities, administration office, and a total of eighteen acres;

·; Secured agreement for beneficial use to purchase water once the water rights are granted;

·; Extensive, active negotiations with a potential partner on fresh water resource and believe conclusion is imminent;

·; Expressions of interest in the Bakken/Exshaw and Three Forks horizons under our acreage position in Montana; and

·; Post the year end the Company raised £4.339 million (before expenses) through a placing of 11,571,300 new ordinary shares to meet Iofina's working capital requirements.

Commenting on the interim results, Lance Baller, CEO and President commented:

"The Board has confidence in the period ahead for Iofina as its iodine production business has matured to afford a wide area scalable build out. With the pipeline of large production sites for 2012 and 2013 we have the ability, capital, iodine derivatives distribution and reputation among our clients for an excellent year. I am encouraged about the Group's recent success in the iodine recycling business which completed the full circle of iodine production, iodine chemical derivatives products and reuse of iodine waste streams. While iodine and iodine derivatives are the Group's core focus going forward, the Board believes a lucrative outcome in the form of revenue from our water resource or potential deep rights will materialise. "

Iofina announces that the annual report and accounts for the financial year ended 31 December 2011, will be posted to shareholders by the 28th of May 2012 with the AGM to be held on the 20th of June 2012.

Copies of the report and accounts and the Notice of AGM are available from the Company's registered office at 82 St. John Street, London EC1M 4JN and on the Company's website: www.iofina.com.

For further information, please contact:

CHAIRMAN'S STATEMENT

Introduction

2011 was a mixed year for Iofina, with our success being different to that envisioned early in the period but transformed into a much stronger and scalable business plan. Whilst we did not meet our iodine production guidance in our core business, we did learn several vital lessons that will enable the Company to grow and deliver significant shareholder value going forward. Our mid-stream iodine production technology has now been matured to a level where we are building several units for roll-out in pre-determined areas. We have modified our business plan to focus on targeted geographic regions where we see many larger plants being built, operated more efficiently and producing more favourable economics. The confidence in our technology, geology and operational activity has been coupled with securing many iodine rich brine sites from major oil, gas, and salt water disposal companies in these regions. This achievement has together led to a rollout backlog of large scale sites in 2012. The success was encapsulated in the official launch of our major breakthrough in Iofina's extraction technology in 2011 with the launch of the Iofina's Wellhead Extraction Technology® ("WET®") with IOsorb™. WET® IOsorb™ enables the exploitation of high temperature brine streams with little necessary pre-treatment and results in greater iodine extraction efficiencies. As a first step of the roll-out of the mid-stream business Iofina is currently building its IO#1 plant and IO#2 plant. Iofina anticipates that once commissioned these plants together will produce over 200 metric tonnes (MT) per annum.

Iofina's vertical integration into the end user of iodine specialty chemicals through our Iofina Chemical ("IC") division had a record year in sales. Iofina entered into new iodine chemical derivatives markets with our strong product offering. Sales would have been substantially higher in 2011 if we had additional supplies of iodine in the period. We are optimistic for 2012 as we have had a successful entry into the iodine recycling business and the production from our mid-stream business in 2012.

The Board is also looking forward to developments in our fresh water resource. We have been in extensive, active negotiations with a potential partner and are encouraged by the progress to date and believe that a conclusion is imminent. Additionally, there have been expressions of interest in the deep Bakken potential under our acreage position in Montana.

Operational Update Iodine and Iodine Derivatives

Placing of Shares

We are pleased to announce the Placing (the "Placing") of 11,571,300 new ordinary shares of 1p each (the "Placing Shares") at a price of 37.5p per share (the "Placing Price") to raise £4.339 million (before expenses). The Placing Shares have been placed with existing institutional shareholders by Investec Bank plc, and represent, in aggregate, 10 per cent of the existing issued share capital of the Company being the maximum allowable under the Company's existing authorities.

The Directors explored all forms of non-dilutive financing to fund our WET® IOsorb build out without success due to the tightening of bank financing in the United States. With the uncertainty in the global markets, the Directors believed it was prudent to have the Company fully funded in order to maximise our business plan. Without the Placing, Iofina anticipated slowing down our plant roll out in the second half of 2012. The net proceeds will be used to meet Iofina's funding requirements in relation to the current rollout of the third and fourth plants, iodine leases and to cover accounts receivables up to sixty days due to the anticipated increase in sales from iodine production. Further WET® IOsorb™ plants have a reasonable, accelerated payback based on current economics and thus can be funded out of projected cash flow without decreasing our projected rollout.

 The Placing is conditional, inter alia, on admission of the Placing Shares to trading on AIM ("Admission"). The Placing Shares will rank pari passu in all respects with the existing ordinary shares of the Company. Application will be made for Admission and it is expected that Admission will become effective and that dealings in the Placing Shares will commence at 8.00 a.m. on 1 June 2012. Following completion of the Placing, the Company will have 127,284,398 ordinary shares in issue.

Iodine Outlook

Iodine prices remain firm between $65- $70/kg for large contract users and spot pricing still nears all time highs. Some additional supply was added by the world's largest producer from shut-in production but the producer has been at full capacity for nearly nine months, as other Chilean iodine mines' production declined due to water issues. Just over one year following the Fukushima disaster, Japanese iodine producers have been producing at full capacity since late in the second quarter of 2011 and are unable to bring on any new supply as capacity has been reached. Furthermore, previous iodine extraction industry technology cannot be used on new sites in the US due to by-products not embraced by our clients. Iofina is currently seeing iodine demand outstripping supply and the Board anticipates that the global iodine markets will continue to remain robust in the foreseeable future.

Mid-Stream Third Party Brine Iodine Extraction

The period under review created significant developments within the mid-stream iodine collection and extraction business. Iofina has built a strong reputation and position among many of the top tier oil and gas producers in the US. Iofina is pleased that the Group has secured additional brine contracts with large independent oil and gas producers in 2012. The Group continues to have encouraging discussions with the remaining large independent oil and gas producers within its target areas. Within these areas, the iodine content in the brine is commercially attractive. Further agreements are expected to be signed throughout 2012. As a consequence, Iofina is focusing on producers and site operators who dispose of large volumes of iodine rich brine at multiple sites. This model differs from the past where the emphasis included many small sites. The improved approach achieves economies of scale and compresses the timeline to actual production by deploying multiple units with the same operator. The Group now has a large pipeline of sites and brine streams that it is able to target with a rollout in 2012 and 2013. 

Iofina's WET® can quickly and efficiently be deployed to any location and adapt to variations in brine water streams. As a result, Iofina is able to deploy WET® units to producers' sites throughout North America, presenting a mid-stream option to third party producers and a new revenue source from their waste brine streams.

The WET® approach employs two different iodine extraction methods, depending on brine chemistry and temperature for optimal efficiency. This flexibility removes some of the operational issues experienced previously by adapting to the specific characteristics of each operator's brine streams.

The first technology for cold brine streams is a chemical-based method using an anion exchange resin as an absorption media, to which the iodine anions are attracted. It can also be based on a "physical system" that separates out iodine molecules in a physical trap using carbon. This method, which may require pre-filtration, has lower iodine yield efficiency. The second method is called the WET® IOsorb™ method; it is used on larger higher temperature brine streams which may include oil and other impurities.

Iofina larger modular WET® IOsorb™ plants are capable of handling up to 30,000 bpd. These larger plants have a cost of US$1.3 to US$2 million depending on operational requirements, site preparation and electric utilities present. The plants are built to ensure full redundancy, meaning production can be switched across to backup twin components to maintain 24/7 operation for lower down times and high iodine yield efficiency. The design of the larger WET® IOsorb™ plants enables them to be shipped via five standard sea cargo containers that can be deployed through normal railways and roadways. Custom designed plants or multiple modular WET® plants can be used together in the event that a site produces more than a single unit can handle. The self-contained WET® units are crucial to Iofina's ability to extract third party brine streams in a rapid and highly cost effective manner that had not previously been available in the iodine industry.

The Group, as stated, has a large catalog of sites and brine streams to rollout in 2012 and 2013. In addition, and following on from Iofina's success with the large independent producers, the Group is now focused on five targeted geographic areas. Within each geographic location, Iofina anticipates negotiating multiple agreements. Once each agreement is secured, Iofina will progress with a wide area rollout across multiple locations. Iofina is targeting to place larger WET® IOsorb™ plants capable of handling up to 30,000 bpd in order to maximize production, maximize resources, and achieve higher efficiency, while reducing operational cost. 

Our WET® IOsorb™ plants are capable of producing between 50mt to over 450mt of iodine per annum each, depending on flow and iodine concentrations at these target locations. Locations with abnormally high concentrations will produce even more iodine than stated above.  Having multiple WET® IOsorb™ plants in the same geographic location reduces cost and allows for centralised operations. 

Iofina plans to focus on two of the five targeted geographic locations for a potential full wide area rollout. Each site would take up to four months from the start of permitting to completion. The Group will seek to continue to add additional mid-stream contracts from oil and gas producers in these core areas.

As mentioned in previous market statements, due to the aforementioned business model realignment, and limited space availability, Iofina redirected the California WET® IOsorb™ plant to a core target geographical location. The California producer's recent drilling programme has resulted in increased brine flows thus requiring more water disposal facilities that further restrict the space available for our WET® IOsorb™ plant. In the next quarter Iofina will review a future rollout of that site with the operator along determining space requirements after the California producer has completed the freehold purchase of adjacent additional real estate. We are working on securing additional mid-stream brine contracts in that target area with other oil and gas operators. Due to higher brine volumes, a larger WET® IOsorb™ iodine plant will be needed for that location.

While this had a significant short term impact on our expected iodine production from this site in late 2011 and early 2012, the current core target areas have more than fifty per cent higher iodine and multiple sites allowing long term upside return for the Group. The Group has named it's first large WET® IOsorb™ plant the IO#1 plant. The IO#1 will be commissioned in the summer 2012 and we plan to commission the IO#2 shortly thereafter. In future market statements the Group will issue more precise commissioning dates.

Intellectual Property

Iofina has a series of patents pending relating to its technology for capturing iodine from iodine-rich brine from wells and converting it into a range of iodine molecules. Iofina is pleased to announce new additional environmental friendly patents are being secured on the portfolio of WET® Iodine extraction. The Company believes it is important to capture this intellectual property to protect the Group's interests and enhance the overall value of our technology.

Iofina Chemical Review

During 2011, Iofina had record sales and successfully entered into new markets with our strong product offering. Iofina made a strategic decision to honour our quoted prices to these new markets while iodine prices were changing rapidly. This practice hurt our profitability in the second half of 2011 but has been important in 2012 with repeat orders, customer loyalty and our reputation with our clients as we rollout new products in 2012. Iofina has targeted a rollout of several new products in 2012 for the iodine industry. 

Iofina purchased the freehold of its iodine derivatives manufacturing facilities and administration offices in Covington, Kentucky, USA. Iofina also purchased thirteen acres adjacent to the site to have the potential to expand Iofina's specialty chemicals business further. These purchases bring the total complex to eighteen acres. By purchasing the existing facility, the Group has saved c. US$140,000 on the current lease, plus additional relocation expenditures which would have been incurred as the lease was due to expire in August 2012, as well as production down times and increased inventory to supply customers during the relocation process. The Group has no plan to expand the current site until full capacity is utilised.

As a corporate policy, Iofina 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. Iofina successfully entered into the iodine recycling business to manage waste streams from chemical, nylon, electronics and pharmaceuticals manufacturing. We currently process iodine from these sources at our Iofina Chemical location.

There are numerous instances where iodine, as well as iodine compounds, is used in the processing of various products where the iodine itself does not remain in the final product. Iodine compounds are used as reaction intermediates because of its high reactivity, but often iodine is not introduced into the target products and therefore is discharged as industrial waste after reaction. These waste streams exist in the form of water solutions and solids. In such waste streams not only is iodine evident, but a myriad of other inorganic and organic substances are also evident. Iofina has recently focused on collecting and recycling iodine from these waste streams in view of its sustainability programme, with the added benefits of reduced iodine costs, service to existing customers and conservation of natural resources.

Similar to the Group's brine streams, there are various types of waste streams and, accordingly, the iodine content and impurities in them differ. Iofina's reproduction of iodine is made possible by utilising proper treatment suited to each type of waste stream based on the Group's own technology and industries expertise. The recycled iodine is then used to produce iodine chemical derivatives.

With the successful addition of the iodine recycling business and large production from our mid-stream business this summer, coupled with the entry of new products, we believe 2012 will be strong year for Iofina Chemical and are forecasting record revenues.

Water Operations

As previously reported, we are working to develop our water assets. Our plan is to process our produced water so that it can be discharged into the Fresno Reservoir. The Group has secured an agreement for beneficial use to purchase water for use in hydraulic fracturing once the water rights are granted, been issued a water discharge permit to store in the adjacent reservoir, proven economics of treatability, and have begun securing our water takeout facilities in both Montana and North Dakota. These events are a significant requirement to finalising the water rights. We are encouraged that the Group will secure a partner on this project. Once secured, a payment on closing will be due to the Group, along with a monthly service fee and milestone option payments. We are applying for water rights in Montana and North Dakota to withdraw the water downstream for industrial use. We believe our mitigation plan of producing a "new source" of water to add to the current water shed will assist in the water rights process.

Deep Zone Potential

We have completed an exploration evaluation of the deeper horizons under our current acreage position, specifically the Bakken/Exshaw, Three Forks and Sawtooth horizons. The shale thickness, especially in the Three Forks, is encouraging for reasonable production of oil. The recent activity in the Williston Basin to the east of the Group's acreage and current drill activity to the west and north have created greater interest in our large acreage holding. The relatively high risk associated with this exploration play demands that, prudently, we seek a partner for any potential development of these deeper rights. We are actively marketing the deeper horizons.

Disposal of non-core assets

Iofina has and is currently disposing of non-core assets to reallocate capital over the Group's revenue producing business lines for better use of capital. To date, most of the disposals have been sold at a gain to current carrying cost to the Group. These targeted disposals will have no impact on the Group's current operations. These disposals include the drilling rig, Montana construction equipment, frac units and cement units and various equipment and items non-core to revenue producing divisions for the Group. The majority of the assets targeted for disposal are from the energy services group which has been outsourced since late 2009.

Conclusion

The Board sees an exciting period ahead with the roll out of the Wet® IOsorb™ iodine rich brine iodine extraction plants. Iofina Chemical maintains its position as a quality supplier of iodine derivative products with foundations in place to expand. The various non-core opportunities, including water sales, in our original Montana acreage should provide additional financial benefits to the Group.

Dr. Chris Fay CBE

Non-Executive Chairman

Iofina plc

25 May 2012

FINANCIAL REVIEW

Iofina reported a loss of £1,647,948 in the year ended 31 December 2011 (2010: loss of £3,328,154). The basic loss per share was 1.47p (2010: loss 3.16p) and no dividend is being declared.

In 2011, the Group has concentrated efforts on maximizing iodine recovery from the mid-stream business locations. With newer technologies in place for 2012, substantial growth is achievable.

At year end the Group had property, plant, and equipment of £5,113,393 (2010: £4,588,596) and deferred exploration costs of £1,993,606 (2010: £2,166,374).

The Group's opening cash position for 2011 was £3,745,945 and the closing position was £4,301,344, an increase of £555,399, mainly due to the issue of shares in the period.

T M Coddington

Finance Director

Iofina plc

25 May 2012

SOCIAL RESPONSIBILITY STATEMENT

The Group supports the growing awareness of social, environmental and ethical matters when considering business practices. This statement provides an outline of the policies in place that guide the Company and its employees when dealing with social, environmental and ethical matters in the workplace.

Code of conduct

The Group maintains and requires the highest ethical standards in carrying out its business activities in regard to dealing with gifts, hospitality, corruption, fraud, and the use of inside information. Code of conduct information is detailed in the company handbook.

Equal opportunity and diversity

The Group promotes and supports the rights and opportunities of all people to seek, obtain and hold employment without discrimination. It is our policy to make every effort to provide a working environment free from bullying, harassment, intimidation and discrimination on the basis of disability, nationality, race, sex, sexual orientation, religion or belief.

Employee welfare

The Group aims to assist employees at all levels to improve their professional abilities and to develop their skills. The Group will practice manpower and succession planning in regard to the number and type of employee personnel resources that will be required in the future. Individual career progression activities are developed with this in mind.

Joint venture partners, contractors and suppliers

The Group is committed to being honest and fair in all its dealings with partners, contractors and suppliers. The Group has a policy to provide clarity and protection, within its terms of business, and to ensure the delivery and receipt of products and services at agreed standards. The Group also closely guards information entrusted to it by joint venture partners, contractors and suppliers, and seeks to ensure that it is never used improperly.

Operating responsibly and continuous improvement

The Group is committed to a proactive quality policy to ensure that stakeholders are satisfied with the Group's results and the way in which the business operates and to promote continuous improvement in the overall operation of the Group. In pursuit of these objectives, the Group will use recognised standards and models as benchmarks for its management system.

Environmental policy

The Group adopts an environmental policy which sets standards that meet or exceed industry guidelines and host government regulations. This policy is reviewed on a regular basis.

CORPORATE GOVERNANCE STATEMENT

The directors support high standards of corporate governance and acknowledge the importance of the UK Corporate Governance Code and apply its principles so far as is practicable and appropriate given the size of the Group and constitution of the board.

Board structure and committees

The Board comprises two executive directors and three non-executive directors. The roles of Chairman and Chief Executive Officer are separate, ensuring a division of responsibilities at the head of the company. The Non-Executive Chairman conducts Board and shareholder meetings and ensures all directors are properly briefed. The Board is responsible for formulating, reviewing and approving the Company's strategy, budgets and major items of capital expenditure.

Board meetings are scheduled to take place at least quarterly, with additional meetings to review and approve significant transactions. The Board is provided with Board papers before each Board meeting, of which there were five in the year. The Company Secretary's services are available to all members of the Board. If required, the Directors are entitled to take independent advice and if the Board is informed in advance, the Company will reimburse the cost of the advice. The appointment and removal of the Company Secretary is a decision for the Board as a whole.

Non-executive directors, with the exception of the Chairman, are appointed on a contract with a three month notice period. The Chairman and the executive directors are appointed on a contract with a twelve month notice period. All directors are subject to re-election. Each year, one third of the directors are subject to re-election by rotation. New directors are subject to re-election at the first AGM after their appointment.

At the year end, the Board comprised the Non-Executive Chairman, the Chief Executive, the Chief Executive of Iofina Gas, and two other non-executive directors.

Remuneration Committee and policy

The Remuneration Committee is composed of three non-executive directors: J P Ploen (Chairman), C E Fay and P S Chase-Gardener. It is responsible for the terms and conditions and remuneration of the executive directors and senior management. The Remuneration Committee's policy is that directors' remuneration be commensurate with services provided by them to the Company. The Remuneration Committee may consult external agencies when ascertaining market salaries. All matters concerning the remuneration of executive directors, including the award of bonuses and share options, are considered by the Remuneration Committee.

The remuneration and terms and conditions of appointment of the non-executive directors are set by the Board. No director or member of the senior management is permitted to participate in discussions or decisions concerning his own remuneration. A member of the Remuneration Committee will be available at the AGM to answer any shareholder questions.

Audit Committee

The Audit Committee is comprised of three non-executive directors: P S Chase-Gardener (Chairman) J P Ploen, and C E Fay. The Committee monitors the adequacy of the Group's internal controls and provides the opportunity for the external auditor to communicate directly with the non-executive directors.

The Audit Committee also ensures that the external auditor is independent via the segregation of audit related work from other accounting functions and measures applicable fees with similar auditors.

Relations with shareholders

The Group gives high priority to its communication with shareholders by means of an active investor relations programme. This is achieved through correspondence and extensive corporate information. In addition, the Group visits its main institutional investors on an ongoing basis and makes available to all shareholders, free of charge, its Interim and Annual Reports from the Group's head office. At the AGM the shareholders are given the opportunity to question members of the Board. The notice of the AGM is sent to shareholders at least 14 business days before the meeting (21 days where there is a special resolution).

Internal controls

The Board acknowledges its responsibility for the Group's system of internal control, including suitable monitoring procedures. There are inherent limitations in any system of internal control and accordingly even the most effective system can provide only reasonable, and not absolute, assurance with respect to the preparation of financial information and the safeguarding of assets.

The Group's control environment is the responsibility of the Group's directors and managers at all levels. The Group's organisational structure has clear lines of responsibility. Operating and financial responsibility for subsidiary companies is delegated to the operational management, including key risk assessment. Investment policy, acquisition and disposal proposals and major capital expenditure are authorised and monitored by the Board.

The Group operates a comprehensive budgeting and financial reporting system and, as a matter of routine, compares actual results with budgets, which are approved by the Board.

Management accounts are prepared for the Group on a monthly basis. Material variances from budget are thoroughly investigated. In addition updated forecasts are prepared, at least quarterly, to reflect actual performance and the revised outlook for the year.

The Board considered the usefulness of establishing an internal audit function and decided in view of the size of the Group it was not cost-effective to establish. This will be kept under review.

On behalf of the Board

L J Baller

Chief Executive Officer and President

25 May 2012

We have audited the group and parent company financial statements ("the financial statements") on pages 24 to 57. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

As more fully explained in the Directors' Responsibilities Statement on page 16, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion

·; the financial statements give a true and fair view of the state of the group's and the parent's affairs as at 31 December 2011 and of the group's loss for the year then ended;

·; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union

·; the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and

·; the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

·; adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

·; the parent company financial statements are not in agreement with the accounting records and returns; or

·; certain disclosures of directors' remuneration specified by law are not made; or

·; we have not received all the information and explanations we require for our audit.

PAUL WATTS (Senior Statutory Auditor)

For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor

Chartered Accountants

25 Farringdon Street

London

EC4A 4AB

25 May 2012

This results announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the Group for the year ended 31 December 2010 and the accounting policies adopted in the audited financial statements of the Group for the year ended 31 December 2011. Comparative figures for the year ended 31 December 2010 have been extracted from the statutory financial statements for that period which carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

The financial information in this announcement does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

Statutory financial statements for the year ended 31 December 2011 have not yet been delivered to The Registrar of Companies, carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

IOFINA PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

All activities are classed as continuing.

The accompanying notes form part of these financial statements.IOFINA PLC

CONSOLIDATED BALANCE SHEET

The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 25 May 2012.

L J Baller

Chief Executive Officer and President

Company number: 05393357

The accompanying notes form part of these financial statements.IOFINA PLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

IOFINA PLC

CONSOLIDATED CASH FLOW STATEMENT

COMPANY BALANCE SHEET AS AT 31 DECEMBER 2011

The financial statements were approved and authorized for issue by the Board and were signed on its behalf on 25 May 2012.

L J Baller

Chief Executive Officer and President

Company number: 05393357

IOFINA PLC

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

IOFINA PLC

COMPANY CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting policies

The Company is a public limited company incorporated and domiciled in the United Kingdom. The Company is listed on the AIM Market of the London Stock Exchange.

The registered office is located at 82 St. John Street, London, EC2M 4JN. The principal activities of the Company are that of investment holding and geological and chemical consulting. The principal activities of the subsidiaries are detailed in Note 24.

a) Statement of compliance

The consolidated and parent company financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") adopted by the European Union. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

b) Changes in accounting policies

In the current year, the following new and revised Standards are effective and, where applicable, have been adopted but have not had any material impact on the amounts reported in these financial statements:

At the date of authorisation of the financial statements, the following Standards and Interpretations which have not been applied in the financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

The directors do not expect that the adoption of these Standards or Interpretations in future periods will have a material impact on the financial statements of the Company or the Group.

c) Presentation of financial statements

The financial statements have been prepared on the historical cost basis.

As permitted by Section 408 of the Companies Act 2006, the parent company's income statement has not been included in these financial statements.

d) Revenue recognition

Revenue comprises from the sale of chemicals, natural gas and ancillary products. Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied, excluding VAT, rebates, and trade discounts.

Revenue is recognised when the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity, the costs incurred or to be incurred can be measured reliably and when specific criteria have been met for each of the Group's activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(i) Sale of goods - specialty chemicals

The Group manufactures and sells a range of specialty chemicals. Sale of goods are recognised when a Group entity has delivered products to the customer. Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

(ii) Sale of goods - natural gas

Revenues from the sale of natural gas are recognised when the product is delivered at a fixed or determinable price, title has transferred, and collectability is reasonably assured and evidenced by a contract.

e) Research and development expenditures

Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. Costs that are directly attributable to the development phase of a new customised chemical manufacturing process or development of a natural gas/iodine field are recognised as intangible assets provided they meet the following recognition requirements:

§ completion of the intangible asset is technically feasible so it will be available for use or sale;

§ the Group intends to complete the intangible asset and use or sell it;

§ the Group has the ability to use or sell the intangible asset;

§ the intangible asset will generate probable future economic benefits;

§ there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

§ the expenditure attributable to the intangible asset during its development can be measured reliably.

Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits.

Development costs not meeting these criteria for capitalisation are expensed as incurred. In 2011, all research and development expenditures were expensed as incurred.

f) Going concern

In common with many exploration companies, the Group raises finance for its exploration, appraisal and development activities in discrete tranches. Further funding is raised as, and when, required. In April 2011, the Company raised £2,840,230 (before expenses) of equity funding to pursue opportunities in the iodine market. In May 2012, the Group raised an additional £4,339,000 (before expenses) of equity funding for the Group's working capital requirements in relation to the current rollout of the third and fourth plants, iodine leases and to cover accounts receivables up to sixty days due to the anticipated increase in sales from iodine production.

At its current stage of development, the directors consider that the Group does not need to raise additional funds in order to realise its business plan. For this reason, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements.

g) Basis of consolidation and investments in subsidiary undertakings

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December 2011. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. The acquisition method of accounting is used to account for the purchase of subsidiaries by the Group. On acquisition, the subsidiary's assets and liabilities are recorded at fair value reflecting their condition at the date of acquisition.

The financial statements of subsidiaries are included in the consolidated financial statements from the date control commences until the date control ceases.

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements, unless the losses provide an indication of impairment of the assets transferred.

Amounts reported in the financial statements of the subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Investments in subsidiary undertakings are stated in the parent company balance sheet at cost less provision for any impairment losses.

h) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The acquisition method involves the recognition of the acquiree's identifiable assets and liabilities, including contingent liabilities, regardless of whether they were recorded in the financial statements prior to acquisition. On initial recognition, the assets and liabilities of the acquired subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group's accounting policies. 

Goodwill represents the excess of the fair value of consideration payable in a business combination over the fair value of the Group's share of the identifiable net assets of the acquiree at the date of acquisition. Any excess of identifiable net assets over acquisition cost is recognised in profit or loss immediately after acquisition.

i) Foreign currency

The Group and Company prepare their financial statements in Pounds Sterling.

Transactions denominated in foreign currencies are denominated at the rates of exchange ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date the fair value was determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in profit and loss in the period in which they arise. Exchange differences on non-monetary items are recognised in other comprehensive income to the extent that they relate to a gain or loss on that non-monetary item taken to the statement of changes in equity, otherwise such gains and losses are recognised in profit and loss.

The assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the average rate for the period. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are recognised as other comprehensive income in the "Foreign currency reserve" in equity. On disposal of a foreign operation, the cumulative translation differences are transferred to profit and loss as part of the gain or loss on disposal.

Iofina plc is domiciled in the UK, which is its primary economic environment and the Company's functional currency is Pounds Sterling. The Group's current operations are based in the US and the functional currency of the Group's other entities is the US Dollar. 

Given that the functional currency of the Company is Pounds Sterling, management has elected to continue to present the consolidated financial statements of the Group in Pounds Sterling.

Items included in the financial statements of each of the Group's subsidiaries are measured using the functional currency of the primary economic environment in which the subsidiary operates. Transactions and balances are then converted to the Group's presentational currency on consolidation.

j) Intangible assets

Deferred exploration and evaluation costs

All costs incurred prior to obtaining the legal right to undertake exploration and evaluation activities on a project are written off as incurred.

Once a legal right has been obtained, exploration and evaluation costs are capitalised on a project-by-project basis, pending determination of the technical feasibility and commercial viability of the project. Costs incurred include appropriate technical and administrative overheads.  

Deferred exploration costs are carried at historical cost less any impairment losses recognised. If an exploration project is successful, the related expenditures will be transferred to development assets and amortised over the estimated life of the reserves on a unit of production basis.

The recoverability of deferred exploration and evaluation costs is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain the necessary financing to complete the development of reserves and future profitable production or proceeds from the disposal thereof.

Other identifiable intangible assets

Other identifiable intangible assets arose from the acquisition of H&S Chemical in 2009. These assets were valued by an external, independent valuation firm. Based on the type of asset, the useful life of each asset was estimated. The value of each identifiable intangible asset is amortised evenly over its useful life. The following useful lives are applied:

§ WET® patent: 15 years

§ Customer relationships: 10 years

§ Patent portfolio: 8 years

§ EPA registrations: 2 years

Amortisation is included within administrative expenses.

Goodwill

Goodwill represents the excess of the fair value of consideration in a business combination over the fair value of the Group's share of the identifiable net assets acquired. Goodwill is carried at cost less accumulated impairment losses.

k) Property, plant and equipment

Property, plant and equipment are stated at historical cost, net of depreciation, and any provision for impairment. Cost includes purchase price and costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, such as employee cost relating to construction, site preparation, installation and testing.

Depreciation is provided at rates calculated to write off the depreciable amount of each asset on a straight line basis over its expected useful life, as follows:

§ Buildings: 2.5% per annum

§ Mobile iodine extraction units and computer equipment: 10-33.3% per annum

§ Plant and machinery: 10-20% per annum

§ Drilling equipment and pipeline: 10-20% per annum

§ Leasehold improvements: 6.7% per annum

Reviews of the estimated remaining lives and residual values of individual productive assets are made annually.

Freehold land is not depreciated.

l) Financial instruments

Financial liabilities

Trade and other payables are initially recognised at rate value and subsequently measured at amortised cost using the effective interest rate method.

Financial assets

Cash and cash equivalents represent short term, highly liquid investments with an original maturity of fewer than three months that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

m) Impairment

Whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, that asset is reviewed for impairment. An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying amount.

Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise, typically when one of the following circumstances applies:

i) unexpected geological occurrences that render the resource uneconomic;

ii) title to the asset is compromised;

iii) variations in prices that render the project uneconomic; or

iv) variations in the currency of operation.

Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combinations and represent the lowest level within the Group at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. An impairment loss is recognised for the amount by which the asset's or cash generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value in use. To determine the value in use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash - generating unit and reflect their respective risk profiles as assessed by management.

Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit's recoverable amount exceeds its carrying amount.

n) Equity

Equity comprises the following:

§ "Share capital" represents the nominal value of equity shares

§ "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses for the share issue

§ "Share-based payment reserve" represents the cumulative fair value of options and warrants issued by the Company and recognised in profit and loss.

§ "Foreign currency reserve" represents the cumulative differences arising from translation of foreign operations

§ "Retained earnings" represents retained profits or accumulated losses.

"Distributable reserves" represents the amount of equity that may be paid out as dividends.

o) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

p) Taxation

Tax expense recognised in profit or loss is the tax currently payable based on taxable profit for the year and deferred tax not recognised directly in equity.

Deferred income taxes are calculated using the balance sheet liability method. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and, joint ventures is not provided if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward, as well as other income tax credits to the Group, are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

q) Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit and loss on a straight-line basis over the period of the lease.

r) Share-based payments

The cost of equity settled transactions is measured at fair value at the grant date as measured by use of the Black Scholes model. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Charges made to profit or loss in respect to share-based payments are credited to the share-based payment reserve.

s) Segment reporting

In identifying its operating segments, management generally follows the Group's service lines, which represent the main products provided by the Group and are based on the information presented to the chief operating decision maker, which is the Board. The activities of the Natural Gas segment include the exploration and production of natural gas and iodine. The activities of the Chemical segment include the manufacturing and sale of specialty chemicals.

Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches. All inter-segment transfers are carried out at arm's length prices.

Corporate overheads, assets, and liabilities, which are not directly attributable to the business activities of any operating segment, are not allocated to a segment in arriving at segment result.

2. Significant judgements and estimates

Judgements and estimates are regularly evaluated based on historical experience, current circumstances and expectations of future events.

The critical estimates made in the preparation of the financial statements are set out below. The resulting accounting estimate may not equal the related actual result:

a. Intangible assets are tested for impairment where there is an indication that they may be impaired. In accordance with IAS 36, an intangible asset is considered impaired when its carrying amount exceeds its recoverable amount on an individual cash generating unit basis. The recoverable amounts of relevant cash generating units are based on value in use calculations using management's best estimate of future business performance. In carrying out impairment testing, management will make a number of significant estimates in relation to the assumptions incorporated into their calculations. This will include factors such as growth rates, discount rates and inflation. Details and carrying values of intangible assets and goodwill are provided in notes 9 and 10.

b. On initial recognition in a business combination, the assets and liabilities of the acquired business are included in the consolidated statement of financial position at their fair values. In measuring fair value, management uses estimates about future cash flows and discount rates. Any measurement changes upon initial recognition would affect the measurement of goodwill. See note 9 for details of the significant estimates used in determining these values.

c. Management reviews the useful lives of depreciable and amortisable assets at each reporting date. At 31 December 2011 management assesses that the useful lives represent the expected utility of the assets to the Group. The carrying amounts are analysed in notes 9 and 11. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment.

Management must also make judgements about current circumstances and expectations of future events. Significant judgements made by management include:

a. Identification of costs qualifying for capitalisation as exploration and evaluation assets.

b. Revenue policy is clear estimation of fair value of share options granted.

3. Segment reporting

a. Business segments - The Group reports its business segments in line with IFRS8, which requires reporting based on the information that is presented to the chief operating decision maker. This is determined to be the Board. The Board receives management accounts for each company within the Group and as such the reporting is carried out on this basis. The costs of Iofina plc are included within unallocated corporate expenses.

b. Geographical segments - The Group also reports by geographical segment. The Group's activities are related to exploration for, and development of, natural gas and associated iodine in certain areas of the USA and the manufacturing of specialty chemicals in the USA with support provided by the UK office. All revenue, capital expenditures and depreciation and amortisation related to the USA segment. In presenting information on the basis of geographical segments, segment assets and the cost of acquiring them are based on the geographical location of the assets.

c. Significant customers - Iofina Chemical had three significant customers in 2011; one represents 26% of sales, another 21% and the third accounts for 7% of total sales. In 2010, the three significant customers represented 37%, 28% and 7% of the total sales.

4. Loss before taxation

Loss before taxation is stated after charging/(crediting):

Cost of sales - analysis by nature

Administrative expenses - analysis by nature

5. Staff numbers and costs

The Group averaged 35 employees for 2011 (2010: 37). Staff cost for these employees, which includes the directors, were:

Of the total staff costs above, £464,104 (2010: £559,090) is included within cost of sales; £1,045,987 (2010: £1,383,724) is included within administrative expenses and £170,453 (2010: £nil) has been capitalised as additions to property, plant and equipment.

Of the total staff costs above, £377,812 (2010: £512,572) was paid to directors (considered to be key management personnel) for their services during the year.

Included within wages and salaries above is £134,075 (2010: £135,480) in respect of the highest paid director.

6. Finance income

7. Taxation 

The Group has accumulated tax losses of approximately £8,990,887 (2010: £7,246,497) carried forward which may be deductible from future taxable profits subject to agreement with the relevant tax authorities.

The Iofina Chemical operation, located in the U.S., will likely be the first location that will report Federal tax expense. This tax rate will be a consolidated rate for the Group, which will be based on an escalating tax scale. Initially we would anticipate this tax rate to be approximately 22%.

A deferred tax asset has not been recognised in respect of losses due to uncertainty over the timing of the recovery of these tax losses.

8. Loss per share

The calculation of loss per ordinary share is based on a loss attributable to shareholders of £1,647,948 (2010: £3,328,154) and the weighted average number of ordinary shares outstanding of 112,052,933 (2010: 105,193,726). The warrants and options are not dilutive and there is, therefore, no difference between the diluted loss per share and the basic loss per share.

9. Intangible assets

Deferred exploration costs primarily relate to the costs of acquiring leases to explore, drill and produce oil and gas in certain areas of Montana. Other intangible assets were acquired in the acquisition of H&S Chemical in 2009.

Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indications of impairment arise.

WET® Patent

The WET® Patent technology employs two different iodine extraction methods depending on brine chemistry for optimal efficiency. We utilized a with and without analysis, a variation of the discounted cash-flow method, to estimate the fair value of a WET® Patent at date of acquisition. The methodology compared the cash flow generating capacity of H&S assuming it was operating without the benefit of the WET® Patent to the projected cash flow with the benefit of the patent. The useful life of the patent was estimated as 15 years based on the following:

§ The contractual life of the patent in excess of 20 years

§ Management's expectation for the expected viability of the technology

§ Management's expectations regarding the timing of significant substitute technology

§ The lack of comparable substitute technologies as of the valuation date

Customer relationships

The customer base acquired by Iofina is concentrated, with the top ten customers representing 80 per cent of total sales in 2011. We utilised the discounted cash flow methodology to separately value customer relationships on acquisition according to projected future earnings and cash flows and a discount rate of 18.1 per cent. The useful life was estimated as 10 years according to the following:

§ Historically low customer attrition rates

§ Management's expectation for continued high customer retention rates going forward

§ The lack of substitutes in the market for the products and services offered by Iofina Chemical, Inc

Patent portfolio

This includes all patents held by Iofina Chemical, Inc. related to the production of its iodine derivatives, specifically IPBC. The fair value of the general patent portfolio was estimated using the relief from royalty cash-flow methodology of the income approach. Based on our search for technology licensing agreements in the marketplace, we determined that a royalty rate of 1.5 per cent. was appropriate. An 8 year life was applied to the patent portfolio based on the historical life of the portfolio as well as the intended future use of the asset.

EPA registrations

Iofina Chemical, Inc. held multiple EPA registrations as of the valuation date for IPBC, Methyl Iodide and Lampricide. We utilised the discounted cash flow method to estimate the present value of lost profits assuming that Iofina Chemical, Inc. did not have the registrations and had to enter the application process. The useful life was estimated as 2 years based on estimated time necessary to complete a successful application.

10. Goodwill

Goodwill arose on the acquisition of H&S Chemical in 2009 and is wholly allocated to the Iofina Chemical cash generating unit of the Group. Goodwill impairment testing is conducted annually, based on projected cash flow to be generated.

The Chemical business has been in operation for 28 years. On average, sales have grown at least 10% annually for the past 3 years. Management believes that 25 years of cash flow generation should be used in the impairment review. For impairment testing, a conservative growth rate of 2.25 per cent. was used, with a discounted cash flow rate of 10 per cent. The results of this testing show that the goodwill valuation can be supported by this projected cash flow.

11. Property, plant and equipment