Iofina Regulatory News (IOF)

25 April 2014

Iofina plc

("Iofina" or the "Group")

(LSE AIM: IOF)

Audited Final Results

Full Vertical Integration Achieved

Iofina, specialists in the exploration and production of iodine, with complete vertical integration into specialty chemical iodine derivatives, announces its audited Final Results for the 12 months to 31 December 2013.

12 months to 31 December 2013

KEY OPERATIONAL POINTS:

· Produced a record 171 metric tonnes ("MT") of crystallised iodine in the year;

· Completed construction and commissioning of the IO#2 and IO#3 iodine extraction plants based on the Group's WET® IOsorb™ Technology, achieving a tenfold increase in production capacity compared to unaccompanied IO#1 capacity at year end 2012;

· Achieved iodine production rate exceeding the current organic requirement at Iofina Chemical, allowing for full vertical integration at year end 2013;

· Received significant increase in iodine-rich brine volume at the Company's IO#2 plant as a result of the completion of the Operator's fracking program;

· Operationalised new plant and process designs, resulting in higher recovery efficiencies and industry-leading production costs;

· Completed turnkey, mini plant design capable of producing iodine at sites of varying brine volume and iodine concentrations;

· Awarded a US patent for the Group's IOsorb™ iodine extraction technology;

· Realised record sales levels, despite a 25 per cent decline in Iodine prices during the year 2013; and

· Secured sites for the outtake water depot and additional letters of intent for water sales in the State of Montana.

KEY FINANCIAL POINTS:

· Revenue of $18,931,230 (2012: $18,643,308);

· EBITDA loss of $1,594,886 (2012: positive $182,791);

· Loss before tax of $3,804,293 (2012: $1,182,805) ;

· Successful issuance of $15mil Convertible Bond to fund plant rollout;

· Closing Property, plant and equipment of $21,392,180 (2012: $10,909,843) as a result of construction of additional IOsorb™ plants; and

· Increased inventories to $6,902,227 (2012: $4,055,818) due to significant increase in iodine production compared to 2012.

FIRST QUARTER 2014:

· Produced 47 MT of crystallised iodine, a 260 per cent increase compared to the same period in 2013;

· Completed construction and commissioning of the IO#4 and IO#5 iodine extraction plants, with IO#6 on target for completion during the quarter;

· Realised revenue exceeded target for the quarter due to strong performance of Iofina Chemical;

· Extended maturity of $15mil Convertible Bond at a lower coupon;

· Iodine production target reduced to 400 metric tonnes of crystallized Iodine due to significantly reduced brine supply as a result of principal Operators fracking schedule; and

· $2.3m cash balance at the end of the quarter.

Commenting on today's results, Lance Baller, Non-Executive Chairman, stated: "The Board believes progress and lessons learnt in the year will further advance Iofina's status as a strong competitor in the iodine and iodine derivatives industries with full vertical integration in the manufacturing of iodine derivatives. Iofina Chemical continues to scale output in Q1 2014, and is working to expand its geographical footprint. The addition of IO#2 and IO#3 in 2013, along with the production from IO#4 and IO#5, and shortly from IO#6, provides diversification to the Group's iodine production and presents further future growth opportunities in iodine derivative products.

"Whilst we are now in a position to produce Iodine from five IOsorb™ plants, we are disappointed that the reduction in brine water supply may negatively affect runtime of three of these plants due to the current fracking timetable, resulting in our revised production guidance. We are working hard to re-route additional water to these plants as well as align overheads to our production profile. I believe that over the longer term the Group is well set to benefit from the investment in its WET® IOsorb™ technology."

The Company's report and accounts are available from the Company's website, www.iofina.com.

For further information, please contact:

George Lantz, CEO

Iofina plc

Tel: +44 (0) 20 3006 3135

www.iofina.com

John Prior/Rupert Krefting/Huw Jeremy

Numis Securities

Tel: +44(0)20 7260 1000

Rob Collins/Emily Morris/Liz Williamson

GMP Securities

Tel: +44(0)20 7647 2800

Media Contact:

Dominic Barretto/Anna Legge

Yellow Jersey PR Limited

Tel: +44(0) 7768 537 739

About Iofina

Iofina specializes in the exploration and production of iodine, iodine specialty chemical derivatives, produced water and natural gas. Iofina's business strategy is to identify, develop, build, own and operate iodine extraction plants currently focused in North America based on Iofina's WET® IOsorb™ technology. Iofina has iodine production operations in the United States, specifically in Texas, California, Montana, Oklahoma and Wyoming. 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 in Europe, North America and Asia. The Group utilizes its portfolio of patented and patent pending technology, proprietary methods and trademarks throughout all business lines.

CHAIRMAN'S STATEMENT

The period under review proved to be a year of expansion and improvement for Iofina with the successful installation and start-up of two plants based on the Group's Wellhead Extraction Technology® ("WET®") with IOsorb™, followed by the completion of construction on two additional plants in Q1 2014. The completed IO#2, IO#3, IO#4 and IO#5 plants are located in Oklahoma and are in addition to the IO#1 plant located in Texas which has been in production since August of 2012. The successful, concurrent construction of four complex plants on an aggressive construction schedule demonstrates our ability to upscale production capacity. With these additional plants, and continued optimisation of production processes and design, current raw iodine production rates extend beyond the 2013 organic requirements for raw iodine at Iofina Chemical, enabling outside sales of raw iodine in 2014.

Iofina continues to cooperate with the Oil and Gas Operators ("Operators") to maximize brine supply to each plant. Such efforts have led to an increase in brine volume at IO#1 and resulted in significant improvement in iodine production at the plant. Factors beyond the Group's control resulted in inconsistent brine supply at the IO#2 and IO#3 plants in early 2014. An uncommonly cold winter, with temperatures well below average, proved to be an issue for Operators as they experienced power outages and shut-in production wells. The use of produced brine water by the Operator in the hydraulic fracturing of newly drilled wells also resulted in inconsistent brine supply at IO#3 in early 2014 which is expected to impact brine supply at IO#3, IO#4, IO#5 and IO#6 in the near term. We are working with the Operator to re-route brine water to affected plants in order to obtain consistent brine throughput. We also anticipate the continued drilling activity in the area to result in an increase in the supply of iodine-rich brine to existing and planned IOsorb™ plants in the area. This is similar to what was experienced at IO#2 upon completion of the Operator's drilling program in 2013. This drilling program confirms the operator's intention to maintain and grow the production area for years to come. The additional plants located in Oklahoma also benefit from warmer brine supplied via direct pipelines from well sites, resulting in higher recovery efficiencies using Iofina's patented WET® IOsorb™ Technology.

Iodine and Iodine Derivatives

Iofina produced a record 171 metric tonnes ("MT") of crystallised iodine in the year 2013. Although delays in the completion of IO#3-IO#6 resulted in the Group falling short of expected iodine production for the year, we have learned several vital lessons applicable to the construction and operation of our plants. With the winter weather breaking, recent production from IO#1 and IO#2 has returned to expected levels. The addition of IO#4-IO#6 is expected, at this time, to result in production of circa 400 metric tonnes of crystallized iodine in 2014. This rate of production will satisfy requirements at Iofina Chemical and set the stage for sales of raw iodine to both new and existing customers.

Improved plant and process design resulted in higher recovery efficiencies and further cost reductions. IO#3-IO#6 include improved automation designs that reduce the largest cost components at each plant, specifically chemicals and labour. Average production cost per kg for the year was less than $30. We expect to see significant improvements in production costs with the addition of higher volume plants comparable to IO#2, which produce at a more favourable cost in the low $20 per kilogram range. The recent addition of IO#4 and IO#5, and the addition of IO#6 in Q2 2014, will significantly increase production over current levels and is expected to decrease average production costs in the year 2014 and onward, growing shareholder value.

The Group is pleased with progress towards establishing production at higher iodine concentration and lower brine volume sites. A collaborative effort between the Group's geology and design teams has resulted in a turnkey plant option to produce iodine at such sites. The plants incorporate a process comparable to Iofina's WET® IOsorb™ process and will deliver iodine intermediately that will then be processed at the nearby larger plants. The addition of these low cost units can add additional production capacity, flexibility and diversity to the Group's iodine production.

In 2013, Iofina Chemical ("IC") achieved record sales levels. This was achieved even as worldwide iodine prices declined from near $60/kg at the beginning of 2013 to approximately $45/kg by year end. The revenue and profit margins at IC in 2013 were adversely affected by the lower price of iodine.

IC strengthened its position in the iodine chemical derivatives markets with strong product offerings. A record volume increase of almost 10% year over year enabled IC to continue its growth trend, which is expected to continue in 2014. The use of Iofina Resources' raw iodine commenced this year allowing the Group to become a member of a small group of vertically integrated iodine producers. Expansion of export sales continued as we strengthened our cooperation with existing customers and worked to develop new customer relationships. Research and Development ("R&D") efforts are focused on developing new, high-value products.

IC continues to invest in the Covington, Kentucky facility to improve infrastructure, produce new iodine derivatives, and improve our current process efficiencies and safeguards. As a Chemsteward's® certified facility, we strive for continual improvement and focus on meeting our customers' needs while doing so in a safe and environmentally conscious manner.

The increased production of iodine from our mid-stream business in 2014, coupled with the continuing introduction of new products, gives us confidence in another strong year for IC.

Atlantis Water Project

We made significant progress toward commercialisation of Iofina's fresh water resource in the state of Montana in 2013. The Group secured sites for the outtake water depot and obtained additional letters of intent for water sales and use in Montana. The Department of Natural Resources and Conservation ("DNRC") determined that the requested amount of water is both physically and legally available and that there would be no adverse effect at the point of diversion due to the engineering and design consideration outlined in the engineering study. Iofina provided the requested revisions to the application in March of 2014. On 18 April 2014 the Group was notified that the preliminary determination of DNRC was to deny the application for water rights. The Group is entitled to a hearing with the State to register its disagreement with the preliminary decision of the DNRC. In the hearing, the Board plans to defend the Group's application and further explain the rationale behind the application and why the Group believes it meets regulatory requirements. The hearing is anticipated to occur in May or June 2014. If approved, the Group will continue to pursue the construction and operation of the water depot in Montana, which would require financing. The Board believes the approved permit could add substantial shareholder value in the future. If our permit is ultimately denied, our Montana strategy and assets will need to be reassessed.

Financing

Iofina issued a two year US$15 million convertible note to Stena Investment S.à.r.l in May 2013. The Bond was amended in March 2014 to extend the redemption date by two years to 15 May 2017 and the coupon was reduced to 6.00 per cent per annum from 6.5 per cent. The amended terms allow for conversion at any time upon 28 days' notice to Iofina at a conversion price of $1.67. The proceeds from the issue were used to accelerate the rollout of IOsorb™ plants to increase the rate of production growth. The Group has 127,284,398 ordinary shares in issue. The Group had a market capitalisation of £126.01 million on 31 December 2013.

Iodine Market

Market demand for iodine continued to grow in 2013 as anticipated by the Board and we expect demand to continue to grow throughout 2014. However, increased supply created downward pressure on the price of iodine. Lower iodine prices resulted in producers with high production costs to reduce production, setting the stage for establishment of a near term raw iodine price floor. The production reductions by large iodine producers have resulted in a stabilised price in the low $40 range, in Q1-14, down from circa $60/kg in Q1-13. The Board expects growing demand, particularly in LCD screens, semiconductor manufacturing, X-ray contrast media, and pharmaceuticals and biocides to result in stabilized prices in 2014.

Safety and Environmental Sustainability

As a corporate policy, Iofina promotes health, safety, and environmental sustainability in its working practices and seeks to minimise, mitigate, or remedy any harmful effects from the Group's operations on personnel and the environment at each of its operational sites. The successful entry into the iodine recycling business to manage waste streams from chemical, nylon, electronics, and pharmaceuticals manufacturing as mentioned earlier is a good example of our policy in practise. We currently process all the iodine from these sources at our Chemical plant in Kentucky.

Outlook

2013 was a breakthrough year for the Group, and the Board believes progress and lessons learnt in the year will further advance Iofina's status as a strong competitor in the iodine and iodine derivatives industries. The Group achieved full vertical integration production rates in the year, eliminating the future need to purchase raw iodine on the open market for the manufacturing of iodine derivatives. Iofina Chemical continues to scale output in Q1 2014, and is working to expand its geographical footprint. The addition of IO#2 and IO#3 in 2013, along with the additional production from IO#4 and IO#5 and shortly from IO#6, provides diversification to the Group's iodine production and presents further growth opportunities in iodine derivative products. The Group envisages an economical contribution to production through the implementation of proprietary mini WET® IOsorb™ technology plants at the point operations stabilize in 2014. Recent changes in Board composition are expected to result in the strengthening of our governance, strategy and execution. The Board expects significant improvements to the operation, design, and construction of WET® IOsorb™ plants in the year 2014, positioning the Group for record production and improving financial results.

Lance Baller

Non-Executive Chairman

Iofina plc

FINANCIAL REVIEW

Iofina reported a loss of $3,744,293 for the year ended 31 December 2013 (2012: loss of $1,131,187). The basic and diluted loss per share was $0.029 (2012: loss $0.009) and no dividend is being declared.

In 2013, the Group has concentrated efforts on building additional IO plants to maximize iodine recovery from the mid-stream business locations.

At year end the Group had property, plant, and equipment of $21,392,180 (2012: $10,909,843) and undeveloped leasehold costs of $3,600,106 (2012: $3,146,927).

The Group's opening cash and short term investments position for 2013 was $5,720,664 and the closing position was $8,268,755, an increase of $2,548,091. Proceeds of the May 2013 convertible note of $15,000,000 were primarily used to pay for investment of $11,673,611 in IO#3 which began production in November 2013 and for IO#4, IO#5 and IO#6 which are scheduled to begin production in the first half of 2014.

Gary Gatchell

Finance Director

Iofina plc

24 April 2014

STRATEGIC REPORT

Principal activities and review of the business

Iofina plc ("Iofina" or the "Company") is the holding company of a group of companies (the "Group") involved in the production of iodine with complete vertical integration into the specialty chemical iodine derivatives business. Iodine in brine water sourced from oil and gas operators is used as a raw material for the production of iodine derivatives at Iofina Chemical. As additional IO plants come on-line raw iodine sales outside the group will ensue.

Iodine is a rare element that is only produced in a few countries in the world, with over 90 per cent produced from Chile (58 per cent.) and Japan (32 per cent.). Through the Group's wholly owned subsidiary Iofina Chemical, Inc., the Group is vertically integrated into the iodine derivatives market and the crude iodine sales market. Vertical integration through both production and derivatives results in better margins.

The Group's proprietary Wellhead Extraction Technology® (WET®) and WET® IOsorb™ methods enable the co-production of iodine from brine. The Directors of the Group believe that Iofina's low cost production strategy will provide excellent gross margins and increasing revenue streams.

Key Performance Indicators

The Directors review a range of financial indicators to assess and manage the Group's performance, including the following:

Objectives

With production starting recently at IO#4 and IO#5, the Group has five operating iodine production facilities. IO#6 is expected to come on-line in Q2 2014. 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. Continued operating experience will result in more accurate practical capacity operating targets as well as techniques for maximizing practical capacity.

In 2014, the primary focus is to maximize production from the significant capital investments made over the past year. The Group is working to increase revenue from the sale of iodine derivatives and the Group will need to sell through the iodine produced in excess of the iodine requirements needed for the production of those derivatives.

The first priority for growth in production capacity will be the installation of several mini-plants. These mini-plants have been designed for a lower total facility cost per barrel of water processed. The mini-plants can also be targeted on locations with higher concentrations of iodine in the local brine water. These mini-plants can also be relocated in the event financial returns can be increased by re-location of the units.

The schedule for the rollout of additional full size plants is currently under consideration.

In the event that the Group's water project is approved, work will begin on determining the optimal strategy for development of this business. Financing will be required for the project. Such financing could be obtained through multiple channels, including joint ventures with others.

Principal risks and uncertainties

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:

Exploration:  Exploration for and development of resources involves significant risk. There is no assurance that commercial quantities of resources can be recovered from the Group's current acreage or that resources will be discovered from the Group's future acreage.

Environmental:  The Group is subject to environmental laws and regulations in connection with all of its operations. Although the Group intends to be in compliance in all material respects with all applicable environmental laws and regulations, there are certain risks inherent to its activities, such as accidental spills, leakages or other circumstances which 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.

Price volatility: The demand for, and prices of, iodine and natural gas 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 international cartels and global economic and political developments. International prices have fluctuated widely in recent years and may continue to fluctuate significantly in the future. Fluctuations in iodine and natural gas prices and, in particular, a material decline in the price of iodine and natural gas would have a material adverse effect on the Group's business, financial condition and operations assuming production is achieved by the Group's production and exploration activities.

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 its customers to develop strong relationships with a significant focus on ensuring its products and services meet the needs of its customers and are of the highest quality. In 2013, 49% (2012: 36%) of revenue recognized was attributable to one long term customer, a distributor. Relations with this customer are good.

Regulation

The businesses are subject to various significant international, federal, state and local regulations currently in effect and scheduled to become effective in the near future, 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, and have increased over time. Iofina may incur significant expense in order to comply with these regulations or to remedy violations of them.

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.

The Group closely monitors regulations across its businesses to ensure that it complies with the relevant laws and regulations. Whilst Iofina does not believe that it is non-compliant with any laws or regulations, any instances of non-compliance would be brought to the attention of the appropriate authorities as soon as possible.

Going concern

The Group has historically completed equity and debt offerings to fund its developmental and growth activities as required. Major capital projects initiated in 2013 are expected to be completed in the first half of 2014. In 2013, 49% (2012: 36%) of revenue recognized was attributable to one long term customer, a distributor. Relations with this customer are good.

In May 2013, the Group raised $15.0 million of funding through a convertible note to complete construction of iodine extraction plants. At its current stage of development, the Directors consider that the Group does not need to raise additional funds in order to realise its core business plan. For this reason, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements.

Lance Baller

Non-Executive Chairman

Iofina plc

DIRECTORS' REPORT

The Directors present their report and financial statements for the year ended 31 December 2013.

Post balance sheet events

Following the reporting date, the Group has entered into an agreement to amend the terms of the outstanding $15,000,000 convertible note with Stena Investment S.à.r.l. The redemption date was extended by two years to 15 May 2017. The coupon on the Bond has been reduced to 6.0% per annum from 6.5%. The terms of conversion have been modified such that Stena may convert at any time upon 28 days' notice to Iofina at a conversion price of $1.67.

Directors' responsibilities for the preparation of the financial statements

The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare group and company financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and have elected under company law to prepare the company financial statements in accordance with IFRS as adopted by the EU.

The financial statements are required by law and IFRS adopted by the EU 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.

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.

In preparing the group and company financial statements, the Directors are required to:

a. select suitable accounting policies and then apply them consistently;

b. make judgements and accounting estimates that are reasonable and prudent;

c. state whether they have been prepared in accordance with IFRSs adopted by the EU; and

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.

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.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Iofina website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Indemnity insurance on behalf of Directors is not currently in force.

Results and dividends

The results for the year are set out in the consolidated statement of comprehensive income and detailed in the Financial Review.

The Directors do not recommend payment of a dividend.

Directors

The directors who served during the year and subsequently were as follows:

Dr. Chris E. Fay CBE, Non-Executive Chairman, retired 31 March 2014

Jeffrey P. Ploen, Non-Executive Deputy Chairman

Paul S. Chase-Gardener, Non-Executive Director and Chairman of the Audit Committee

George E. Lantz, Chief Executive Officer and President, appointed 19 September 2013

Forest D. Dorn, Executive Director

Gary Gatchell, Finance Director, Executive Director, appointed 3 September 2013

Lance J. Baller, Chief Executive Officer and President, retired 12 June 2013 and re-appointed 10 April 2014 as Non-Executive Director and Chairman

Stuart M. Eaton, Non-Executive Director, retired 22 November 2013

Dr. William D. Bellamy, Non-Executive Director, appointed 20 March 2014

Statement as to disclosure of information to the auditor

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.

Auditor

Baker Tilly UK Audit LLP has indicated its willingness to continue in office.

On behalf of the Board

George Lantz

Chief Executive Officer and President

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 three executive directors and four 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.

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.

In June 2013, Lance Baller stepped down as CEO, President and Director for health reasons. In September 2013 George Lantz was appointed CEO, President and Director and Gary Gatchell was appointed Finance Director and Director. Stuart Eaton resigned from the Board in November 2013. At the year end, the Board comprised the Non-Executive Chairman, the Chief Executive, the Chief Executive of Iofina Resources, and two other non-executive directors. Subsequent to year end, Dr. Fay resigned from the Board, Dr. William Bellamy was appointed as a Non-Executive Director and Mr. Baller was appointed Chairman and Non-Executive Director.

Remuneration Committee and policy

The Remuneration Committee is composed of two non-executive directors: J P Ploen (Chairman), 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 two non-executive directors: P S Chase-Gardener (Chairman) and J P Ploen. 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 and on its website. 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.

SOCIAL RESPONSIBILITY STATEMENT

The Group supports the growing awareness of social, environmental and ethical matters when considering business practices. See http://iofina.com/community/social-responsibility for an outline of the policies in place that guide the Group and its employees when dealing with social, environmental and ethical matters in the workplace.

Directors

Remuneration provided to each director was as follows:

No pension contributions were paid on behalf of the directors in 2013 or 2012.

The interests of the Directors in office as at 31 December 2013 in the shares of the Company at the end of the financial year and the beginning of the financial year or date of appointment, if later, were as follows: 

31 December 2013 1 January 2013

Dr. C E Fay 1,400,000 1,230,000

J P Ploen (1) 9,361,600 9,440,000

P S Chase-Gardener (2) 350,000 350,000

F D Dorn - -

G D Gatchell - -

G E Lantz 26,433 26,433

L J Baller (3) 4,500,000 9,000,000

(1) Includes 1,200,000 shares held by J Paul Consulting in which Mr. Ploen is President and beneficial owner.

(2) Includes 283,900 shares held individually and 16,100 shares held in the Jane Chase-Gardener pension fund that Union Pension is Trustee.

(3) Comprised of beneficial ownership of shares.

In addition to these shares, Dr. C E Fay was granted options for 100,000 shares on 9 May 2008 with an exercise price of 55 pence, 250,000 shares on 2 July 2010 with an exercise price of 30 pence and 250,000 shares on 6 November 2013 with an exercise price of 163 pence. P S Chase-Gardener was granted options for 100,000 shares on 9 September 2008 with an exercise price of 55 pence. F D Dorn was granted options for 350,000 shares on 2 July 2010 with an exercise price of 30 pence. Gary Gatchell was granted options for 300,000 shares on 3 September 2013 with an exercise price of 146 pence. George E Lantz was granted options for 250,000 shares on 19 September 2013 with an exercise price of 151 pence. In addition, Mr. Baller and Mr. Ploen have each issued an option grant to Mr. Lantz for 125,000 shares with an exercise price of 151 pence. No other director has any interests in options in the Company.

On behalf of the Board

George Lantz

Chief Executive Officer and President

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA PLC

We have audited the group and parent company financial statements ("the financial statements") on pages 23 to 58. 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.

Respective responsibilities of directors and auditor

As more fully explained in the Directors' Responsibilities Statement on page 14, 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 Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. 

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 company's affairs as at 31 December 2013 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 company 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.

Emphasis of matter - Atlantis Water Project (Montana)

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in notes 2(a), 10 and 28 of the financial statements concerning the status of group's application for water rights in the State of Montana. On 18 April 2014, the group was notified that the preliminary determination of the Montana Department of Natural Resources and Conservation ("DNRC") was to deny the group's application. As explained in note 2(a), the directors remain confident that the application will be successful and that the Montana operating segment assets are not impaired. The carrying value as at 31 December 2013 of the non-current assets within the Montana operating segment was $6,558,213. The financial statements do not include the adjustments that would result if the Montana operating segment assets were impaired.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and 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

24 April 2014

GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

All activities are classed as continuing.

The accompanying notes form part of these financial statements.

GROUP CONSOLIDATED BALANCE SHEET

The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 24 April 2014.

George Lantz

Chief Executive Officer and President

Company number: 05393357

The accompanying notes form part of these financial statements.

GROUP CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

GROUP CONSOLIDATED CASH FLOW STATEMENT

COMPANY BALANCE SHEET AS AT 31 DECEMBER 2013

The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 24 April 2014.

George Lantz

Chief Executive Officer and President

Company number: 05393357

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

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 70 Chancery Lane, London, WC2A 1AF. The principal activities of the Company are that of investment holdings in subsidiaries engaged in the production of iodine and iodine derivatives.

a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IFRS Interpretations Committee (IFRS IC) as adopted by the European Union ('EU') and the Companies Act 2006 applicable to companies reporting under IFRS.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

New standards, interpretations and amendments effective from 1 January 2013.

The following new standards, interpretations and amendments, are effective for the first time in these financial statements but none have had a material effect on the financial statements:

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Company's accounting periods beginning on or after 1 January 2014 (or later periods and which the Company has decided not to adopt early. These are:

* Effective in the EU for financial years starting on or after 1 Jan 2014.

Adoption of the above is not considered to have a material impact on the Group financial statements.

c) Presentation of financial statements

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

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 consists of sales of iodine derivatives, chemicals 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 Group, 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.

The Group manufactures and sells a range of iodine derivatives and specialty chemicals. Sales 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 and collectability is reasonably assured.

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 2013, all research and development expenditures were expensed as incurred.

f) Going concern

The Group has historically completed equity and debt offerings to fund its developmental and growth activities as required. Major capital projects initiated in 2013 are expected to be completed in the first half of 2014. In 2013, 49% (2012: 36%) of revenue recognized was attributable to one long term customer, a distributor. Relations with this customer are good.

In May 2013, the Group raised $15.0 million of funding through a convertible note to complete construction of iodine extraction plants. 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 2013. Subsidiaries are wholly owned 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. Acquisition costs are expensed as incurred.

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 the fair value of consideration is recognised in profit or loss immediately after acquisition.

i) Foreign currency

The vast majority of the Group's business is denominated in U.S. Dollars, which is the functional currency of the operating subsidiaries. Therefore, U.S. Dollars is the presentational currency for the Group financial statements. All transactions of Iofina plc are translated from Pound Sterling to U.S. Dollars.

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. The US Dollar/Pounds Sterling exchange rate averaged 1.597 in 2013 and at 31 December 2013 was 1.648 (2012: 1.626).

j) Intangible assets

Undeveloped leasehold 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.

Undeveloped leasehold costs are carried at historical cost less any impairment losses recognised. If a 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 undeveloped leasehold 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 costs 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

§ Equipment and machinery: 10-20% per annum

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

§ IOsorb Plants: 5% per annum (effective in both 2013 and 2012)

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

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

Convertible loan notes

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Interest-bearing loans are recorded initially at their fair value, net of direct transaction costs. Such instruments are subsequently carried at their amortised cost and finance charges, including premiums payable on settlement, redemption or conversion, are recognised in profit or loss over the term of the instrument using the effective rate of interest.

Instruments where the holder has the option to redeem for cash or convert into a pre-determined quantity of equity shares are classified as compound instruments and presented partly as a liability and partly as equity.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. The difference between the proceeds of issue and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity.

Transaction costs are apportioned between the liability and equity components of the convertible loan notes based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity.

The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar nonconvertible debt to the instrument. The difference between this amount and the interest paid is added to the carrying value of the convertible loan note.

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 undeveloped leasehold 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.

§ "Equity reserve" represents the equity component assigned to the compound financial instrument after deducting the fair value of the instrument as a whole.

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

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

§ "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. When inventory is sold the cost is included in Cost of Sales on the Statement of Comprehensive Income.

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 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 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 Iodine and Iodine Derivatives segment include the production of raw iodine and the production of iodine derivatives and other non-iodine based chemical derivatives The Montana segment includes the exploration and production of natural gas, iodine and water for use in various applications. This presentation has changed from the method used in previous reporting to better reflect changes in operations and strategy for the Group.

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

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 10 and 11. The Board has reviewed the issues raised in the Preliminary Determination to Deny (see note 28), which may be considered an indicator of impairment, with legal counsel and recommends proceeding to the Show Cause Hearing. The Board believes the water is physically and legally available and the necessary "possessory interests" to install the water depot and associated infrastructure are established. The Board believes the permit meets all the criteria for the issuance of the water permit and is confident that the application will ultimately be successful. Following Board review and consideration of the indication of impairment, and the likelihood of success with the project, the Board does not consider the Atlantis project (Montana) to be impaired. See also the Chairman's statement above and note 3 below. 

b. Management reviews the useful lives of depreciable and amortisable assets at each reporting date. At 31 December 2013 management assesses that the useful lives represent the expected utility of the assets to the Group. The carrying amounts are analysed in notes 10 and 12. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment.

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. This presentation has changed from the method used in previous reporting to better reflect changes in operations and strategy for the Group. 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, iodine and natural 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 are based on the geographical location of the assets and revenues are shown by the region products are sold into.

c. Significant customers - Iofina Chemical had three significant customers in 2013; one distributor represents 49% of sales, another customer 9% and the third accounts for 8%. In 2012, the three significant customers represented 36%, 10% and 9% 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 73 employees for 2013 (2012: 39). Staff cost for these employees, which includes the directors, were:

Of the total staff costs above, $2,368,023 (2012: $635,429) is included within cost of sales; $2,620,968 (2012: $1,960,835) is included within administrative expenses and $199,832 (2012: $283,077) has been capitalised as additions to property, plant and equipment.

Of the total staff costs above, $727,290 (2012: $549,418) was paid to directors (considered to be key management personnel) for their services during the year.

Included within wages and salaries above is $153,600 (2012: $217,450) in respect of the highest paid director.

6. Finance expense

Interest expense is on the convertible note described in note 20 below.

7. Finance income

8. Taxation

The Group has accumulated tax losses of approximately $18,500,000 (2012: $15,022,804) which may be deductible from future taxable profits subject to agreement with the relevant tax authorities. To the extent tax losses are not utilized to offset current income taxes they will begin to expire in 2029.

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.

9. Loss per share

The calculation of loss per ordinary share is based on a loss attributable to shareholders of $3,744,293 (2012: $1,131,187) and the weighted average number of ordinary shares outstanding of 127,284,398 (2012: 122,719,282). Due to the loss in the year, there is no difference between the diluted loss per share and the basic loss per share.

10. Intangible assets (Group)

Undeveloped leasehold costs primarily relate to the costs of acquiring lease rights to produce iodine, co-produced water and natural gas at the original field as well as a pipeline rights of way which link its operations to the TransCanada pipeline system. Other intangible assets were acquired in the acquisition of H&S Chemical in 2009. The Board has reviewed the issues raised in the Preliminary Determination to Deny with legal counsel and recommends proceeding to the Show Cause Hearing. The Board believes the water is physically and legally available and the necessary "possessory interests" to install the water depot and associated infrastructure are established. The Board believes the permit meets all the criteria for the issuance of the water permit. See also note 2(a).

Impairment reviews for undeveloped leasehold 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. The assumptions used for the impairment testing are:

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 contractual life of the patent is in excess of 20 years, however the useful life of the patent was estimated as 15 years based on the following:

§ 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

§ The remaining amortisation period is 10.5 years

Customer relationships

The amount capitalized relates to the acquisition of Iofina Chemical and the then existing customer base. The initial useful was 10 years and the remaining amortisation period is approximately 5.5 years.

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 percent 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.

11. Goodwill (Group)

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 29 years (2012: 28 years). Management believes that 20 years of cash flow generation should be used in the impairment review. For impairment testing, cash flows discounted at 8.5% per annum indicate that the goodwill valuation can be supported.

12. Property, plant and equipment (Group)