Condensed Consolidated Statement of Cash Flows for the six month period ended 30 June 2022

Notes to the Condensed Consolidated Financial Statements for the six months ended 30 June 2022

1.         General information

Emmerson PLC (the "Company") is a company incorporated and domiciled in the Isle of Man, whose shares were admitted to the Standard Listing segment of the Main market of the London Stock Exchange on 15 February 2017. On 27 April 2021, the Ordinary Shares of the Company were admitted to trading on AIM and the listing of the Company's ordinary shares on the Official List and their trading on the Main Market were cancelled.

The principal activity of the Group is the exploration, development and exploitation of a potash development project in Morocco.

2.         Basis of preparation

2.1     General

The Condensed Consolidated Financial Statements have been prepared in accordance with UK-adopted International Accounting Standards.  The Condensed Consolidated Financial Statements for the six months ended 30 June 2022 are unaudited and have not been reviewed by the Group's auditor, and do not include all of the information required for full annual financial statements.

They should be read in conjunction with the Company's annual financial statements for the year ended 31 December 2021.  The principal accounting policies applied in the preparation of the Condensed Consolidated Financial Statements are unchanged from those disclosed in those statements. These policies have been consistently applied to each of the periods presented.

The financial information of the Group is presented in US Dollars, which is also the functional currency of the Company and has been prepared under the historical cost convention. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency).

2.2     Basis of consolidation

The Consolidated Financial Statements comprise the financial statements of the Company, Moroccan Salts Limited and Moroccan Salts Limited's subsidiaries (the "MSL Group") following the business combination which took place on 4 June 2018.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·      The contractual arrangement with the other vote holders of the investee;

·      Rights arising from other contractual arrangements; and

·      The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the Group Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

All the Group's companies have 31 December as their year-end. Consolidated financial statements are prepared using uniform accounting policies for like transactions.

2.3     Functional and presentational currency

The financial information of the Group is presented in US dollars. The functional currency of the Company Emmerson PLC changed on 1 January 2022 from GBP to US$ reflecting the stage in development of activities whereby the cost base of the Group changed from GBP to US$. The effect of a change in functional currency is accounted for prospectively. All items were translated into the new functional currency using the exchange rate at the date of the change.

The individual financial statements of each of the Company's wholly-owned subsidiaries are prepared in the currency of the primary economic environment in which they operate (functional currency).

2.4     Change in Functional and Presentation Currency

The Group presented its results in US dollars for the first time for the year to 31 December 2021 having previously reported in GBP. This change should help to provide a clearer understanding of the Group's financial position as the future corporate development activity is likely to be US focused.

In order to satisfy the requirements of IAS 21 with respect to a change in presentation currency, the statutory financial information as previously reported in the Group's Annual Reports have been restated from UK Sterling into US Dollars using the procedures outlined below:

·      Assets and liabilities were translated to US Dollars at the closing rates of exchange at each respective balance sheet date.

·      Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions.

·      Income and expenses were translated to US Dollars at an average rate at each of the respective reporting years. This has been deemed to be a reasonable approximation.

·      Differences resulting from the retranslation were taken to reserves.

·      All exchange rates used were extracted from the Group's underlying financial records.

2.5     Going concern

The Directors have reviewed the Group's ongoing activities and have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. For this reason, they have adopted the going concern basis in preparing the Interim Financial Statements.

2.6     Future changes in accounting policies

The Directors have reviewed the IFRS standards in issue which are effective for annual accounting periods ending on or after the stated effective date. In their view, none of these standards would have a material impact on the financial reporting of the Group.

2.7     Segment reporting and cyclicality

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

The Directors consider the Group is engaged in a single segment of business being the exploration activity of potash in one geographical area, being the Khemisset Project in Morocco.

The interim results for the six months ended 30 June 2022 are not necessarily indicative of the results to be expected for the full year ending 31 December 2022. Due to the nature of the entity, the operations are not affected by seasonal variations at this stage.

3.         Administrative fee and other expenses

4.         Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

5.         Intangible assets

The intangible assets consist of capitalised exploration and evaluation expenditure, including the cost of acquiring the mining license and research permits held by the Company's subsidiaries.

6.         Related party transactions

Directors' consultancy fees

Hayden Locke is a Director of the Company and is a director of Benson Capital Limited, which provided consulting services to the Company. During the period, Benson Capital Limited received total fees of US$65k (year to 31 December 2021: US$244k). The amount outstanding as at period end was US$nil (31 December 2021: US$nil).

Robert Wrixon is a Director of the Company and also provided consulting services to the Company. During the period, Robert Wrixon received fees of US$ 55k (year to 31 December 2021: US$116k). The amount outstanding as at period-end was US$ nil (31 December 2021: US$ nil).

Graham Clarke is a Director of the Company and is a director of GCUK Consulting Limited, which provided consulting services to the Company during 2021 for US$99k. No services were provided during the period and no amounts were outstanding at 30 June 2022 or 31 December 2021.

The total Directors' fees during the period is shown in note 3.

7.         Post-balance sheet events

On 26 September 2022, the Company announced it had entered into an agreement with Global Sustainable Minerals Pte Ltd ("GSM") and Gold Quay Capital Pte Ltd ("GQC") to extend the commitment period for the previously announced US$40.0 million convertible loan note subscription to 30 September 2023, providing continued cornerstone financing support for the development of the Khemisset Potash Project, as well as extending the expiry date for the 82.4 million warrants at 8.2 pence due to expire on 6 December 2022 for a further 12 months. GSM received a renewal fee of 50 million warrants at 8.2 pence with an expiry date of 6 December 2023.

GSM also agreed to subscribe for 89.3 million shares at a price of 6.0 pence per Ordinary share representing aggregate proceeds of US$6.0 million before expenses.

8.         Change in Functional and Presentation Currency

The Directors believe that US dollars are a more appropriate currency in which to present the Group's consolidated results, on the basis that, along with most international mining groups, the majority of financing and pricing discussions and presentations are undertaken in that currency.

Consequently, the Group opted for the financial results to be presented in US dollars for the year ended 31 December 2021. The change in presentation currency was applied retrospectively.

In re-presenting the Group Financial Statements for the year ended 31 December 2021, the reported information was converted to US dollars from GBP using the following procedures:

·      Assets and liabilities were translated to US dollars at the closing rates of exchange at each respective balance sheet date (31 December 2021: GBP1: US$1:3532; 31 December 2020: GBP1:US$1.367).

·      Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions.

·      Income and expenses were translated to US dollars at an average rate at each of the respective reporting periods. This has been deemed to be a reasonable approximation (31 December 2021: GBP1: US$1.377; 31 December 2020: GBP1: US$1.276).

·      Differences resulting from the retranslation were taken to reserves.

With effect from 1 January 2022 the Company changed the functional currency to US dollars from GBP. This was deemed appropriate as the Company moves from a prospecting stage to the development of the mining asset.  As a consequence, the expense base for the Group has changed from GBP to US$.

In accordance with IAS 21, the change in functional currency is applied prospectively with all balances being converted to US$ at the rate of exchange on the appropriate date.

To assist shareholders during this change, the impact on the prior period results, closing balance sheet and the numerator for earnings per share as originally reported is set out below:

Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 June 2021 (represented)

Consolidated Statement of Financial Position at 30 June 2021 (represented)

**ENDS**

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Notes to Editors

Emmerson is focused on advancing the Khemisset project ("Khemisset" or the "Project") in Morocco into a low cost, high margin supplier of potash, and the first primary producer on the African continent.  With an initial 19-year life of mine, the development of Khemisset is expected to deliver long-term investment and financial contributions to Morocco including the creation of permanent employment, taxation and a plethora of ancillary benefits.  As a UK-Moroccan partnership, the Company is committed to bringing in significant international investment over the life of the mine.

Morocco is widely recognised as one of the leading phosphate producers globally, ranking third in the world in terms of tonnes produced annually, and the development of this mine is set to consolidate its position as the most important fertiliser producer in Africa. The Project has a large JORC Resource Estimate (2012) of 537Mt @ 9.24% K₂O, with significant exploration potential, and is perfectly located to support the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. The need to feed the world's rapidly increasing population is driving demand for potash and Khemisset is well placed to benefit from the opportunities this presents. The Feasibility Study released in June 2020 indicated the Project has the potential to be among the lowest capital cost development stage potash projects in the world and also, as a result of its location, one of the highest margin projects. This delivered outstanding economics, including a post-tax NPV8 of approximately US$1.4 billion using industry expert Argus' price forecasts, and the spot price for granular MOP fertiliser has since risen, further enhancing the valuations.