Maywood Acquisition Corp. 2 Class A Ordinary Share Annual Report 2021

FY2021 Annual Report · Maywood Acquisition Corp. 2 Class A Ordinary Share

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MYCELX Technologies Corporation

Pioneering a
Greener Future

Annual Report & Accounts 2021

About MYCELX

MYCELX was founded
to address the ever-
increasing global
requirements for clean
water and clean air.
We have developed
numerous technologies
all of which address
these markets.

They are all unique, they are all
patented and they are all developed
within our business. With sustainability
and environmental concerns at the
forefront of all companies and their
impact upon the world, we believe
that MYCELX is ideally positioned
to take advantage of these trends.

Pioneering a
Greener Future

Contents

Strategic Report

At a Glance

Chairman’s Statement

Chief Executive Officer’s Statement

Our Focus Markets

Our Technology and Approach

What Makes Us Different

Our Business Model

Our Strategy

Our Investment Case

Financial Review

Principal Risks and Uncertainties

Corporate Governance

Board of Directors

Corporate Governance Statement

Directors’ Report

Audit Committee Report

Nomination Committee Report

Directors’ Remuneration Report

Directors’ Responsibilities Statement

Financial Statements

Independent Auditors’ Report

Statements of Operations

Balance Sheets

Statements of Stockholders’ Equity

Statements of Cash Flows

Notes to the Financial Statements

Find the latest investor relations at:
https://mycelx.com/investors/

At a Glance

Our Purpose

MYCELX reduces the environmental
impact of industry and improves
sustainability through science and
its unique technology.

Our Vision

MYCELX will become the industry
standard in clean water treatment.

Highlights

Operational

• Middle East:

– Significant new contract and two contract extensions

– Two separate contract wins including REGEN media
sale and paid REGEN trial with leading EOR producer

• U.S. PFAS Market:

– Successful U.S. PFAS trial demonstrating ability to
remove all PFAS compounds to non-detect levels

– Engineered and built two PFAS remediation units

for commercialisation in 2022

• U.S. Business Development

– Seasoned Business Development professional hired

to drive sales in North America

– Further contract win for an industrial water

treatment project

• Launched new website

• Sale of Duluth office for $5.4 million

Post Period

• Closed a Placing of 3,539,273 Common Shares raising gross
proceeds of approximately $2.3 million before expenses

Our Aims & Values

Safe solutions for
everybody at all times
Safety is paramount for MYCELX. Our
staff are our most valuable assets and our
solutions always protect their well-being.

Protect the environment
MYCELX enables its customers to meet
the strictest regulatory standards, thereby
reducing their impact on the environment.
This also allows them to guarantee their
customers that they are complying or
exceeding industry requirements.

Provide future-proof systems
MYCELX systems solve immediate
challenges, are robust and able to
meet future demands as industry’s
requirements become more strict.

Deliver cost effective,
performance optimising solutions
MYCELX systems are proven, reliable
and robust, providing our customers
with superior performance, significant
cost savings and the comfort to focus
solely on their production.

Support local stakeholders
MYCELX protects the environment
in the locations it operates, whilst
providing employment and
supporting local content initiatives by
manufacturing and sourcing locally.

Realise value for shareholders
MYCELX seeks to gain widespread
adoption for its applications to realise
the full value of its technology.

Financial

Revenue

Gross profit

EBITDA

Loss Before Tax

Cash & Cash Equivalents

$8.5m

2020: $7.1m

$3.3m

2020: $1.6m

$19,000

2020: -$4.2m

$1.1m

2020: $5.8m

$3.2m

2020: $3.8m

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Chairman’s Statement

MYCELX meets the growing demand for
innovative technology that mitigates the
environmental impact of industry

I am pleased to address
our shareholders, and all
stakeholders, following my
first year as Chairman of your
Company. MYCELX today
is in a strong position, and
strategically well placed to
capitalise on the growing
demand for innovative
technology, which is designed
with the clear intention of
helping the world mitigate
the environmental impact of
industry. We are leaders in
this field and are supporting
compliance across multiple
industries and geographies.

Throughout 2021, MYCELX continued
to successfully navigate the challenges
presented by the global pandemic.
The Company maintained its focus on
ensuring the welfare of its staff and
serving its customers, and was pleased
to witness the gradual easing of COVID-
related restrictions.

Whilst the pandemic continued to
bring uncertainty throughout the year,
operations did improve in the second
half of 2021. A more stable oil price
benefitted the Company’s core business
which focusses primarily on supporting
the energy industry’s clean production
initiatives. This energy market
strength, along with the Company’s
efforts, helped MYCELX achieve both
new contracts and the extension of
existing contracts across multiple
core geographies.

The need for improved environmental
stewardship has never been more
important. This was made clear at
the recent United Nations Climate
Conference in the U.K., as well as
with the burgeoning adoption of
Environmental, Sustainability and
Governance (‘ESG’) initiatives by
companies around the globe. MYCELX
is uniquely placed to help its industrial
clients fulfil their commitments to
more environmentally sustainable
processes and effective remediation
of contaminated water. The Company
continues its commitment to driving
the global green economy and was
designated with the award of the
London Stock Exchange’s Green
Economy Mark, which recognises
our achievement in ESG initiatives.
This environmental focus remains
the cornerstone of our offering,
which allows MYCELX to be a force
for global sustainability, and it also
presents attractive commercial
growth opportunities.

MYCELX is uniquely
placed to help its
industrial clients fulfil
their commitments to
more environmentally
sustainable processes
and effective
remediation of
contaminated water.

The PFAS remediation market
represents a material opportunity for
MYCELX, and you will read in the report
the significant progress that has been
made to accelerate commercialisation of
our PFAS offering. PFAS, which stands
for perfluoroalkyl and polyfluoroalkyl
compounds, are a collection of long-
lasting man-made toxic chemicals,
which present a threat to the
environment and human health. The
Company estimates the annual PFAS
remediation cost in the United States
alone to be in excess of US$8bn and
growing as contaminated sites continue
to be identified.

Outlook
Our outlook is encouraging on multiple
fronts. The PFAS remediation market
is a significant growth opportunity for
MYCELX, providing real environmental
and health benefits deploying our
effective and efficient technology.
In our traditional energy markets,
today’s high oil price bodes well for
the completion of new commercial
agreements with both existing and new
international customers, and we are
optimistic that the resurgence in bidding
activity will support strong performance
in 2022 and beyond. Our REGEN
offering is also expected to play an
important role as we grow within the
Enhanced Oil Recovery market of the
energy sector. We continue to focus on
taking advantage of these attractive
market opportunities.

On behalf of the Board, I would like
to thank our shareholders for their
continued support. In addition, our
team have worked tirelessly through
a challenging time to advance the
Company’s initiatives, and I would like
to thank them for their dedication
and professionalism. I look forward to
keeping you updated on our progress
throughout the year.

Tom Lamb
Chairman
16 May 2022

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Chief Executive Officer’s Statement

Continued operational delivery and poised
to meet new environmental challenges

We also made significant inroads
into the PFAS remediation market,
announcing in May 2021 the validation
and capacity upgrade of a MYCELX
PFAS system in an Australian
Department of Defence location.
This was an important milestone for
the business as it demonstrated that
our PFAS system is cost effective and
able to remove toxic “forever” chemicals
associated with Teflon-related products.
We were also pleased to commence an
important trial at an industrial site in
upstate New York, in December 2021,
which demonstrated the ability of the
MYCELX system to completely remove
all detected PFAS chemicals, achieving
a 99.99% removal efficiency.

Global markets continued to
be buffeted by geo-political
events in 2021, but the
Company saw green shoots
emerge, on which it seeks
to capitalise.

Following a challenging year in 2020,
the Company continued to deliver in
its core markets despite a challenging
backdrop. Notwithstanding the
continued impact of the COVID-19
pandemic and the effect this has had
on global energy markets, we saw a
resurgence in activity across the various
industries in which we operate.

As ever, the safety of our workforce
remained of the utmost importance
to us and we were pleased with
how we managed to not skip a beat
operationally, whilst simultaneously
safeguarding the wellbeing of our
employees. The travel and work restrictions
in place both kept people safe and
ensured that we were able to manage
our cost base effectively. At the time
of writing, I am pleased to report that
the business is currently experiencing
minimal to no impact of COVID-19 in its
day-to-day business functions.

Although historically the Company
has largely been focused on the oil
and gas sector, the emergence of the
Perfluoroalkyl and Polyfluoroalkyl
Substances (‘PFAS’) remediation market
in the Unites States and Australia led to
a new and potentially highly lucrative
opportunity for us. PFAS chemicals,
commonly found in Teflon-related
consumer goods and other industrial
use products, are highly toxic and pose a
significant threat to human health and the
environment. MYCELX’s unique product
offering is well suited to play an important
role in the global PFAS remediation
challenge. As such, considerable time
and efforts went into pursuing new
opportunities in this market, which I will go
into more detail on later in this statement.

We made a strong start to 2021, signing
a number of new contracts and contract
extensions in the Middle East, in addition
to targeting other opportunities in the
U.S. and Nigeria, and the Company was
actively involved in bidding projects
globally. In the second half of the year,
MYCELX signed a $1 million contract
with a client in the Middle East, with
much of the revenues due to fall in the
2022 financial year.

Looking to the future
Following the uptick in bidding activity
that we witnessed last year, coupled
with the strict capital controls in
place and the successfully executed
fundraise, MYCELX is well placed to
capitalise new, large market applications
with ambitious growth targets. With
industry’s increased focus on mitigating
environmental impact, MYCELX’s
proven technology has never been more
relevant in the fight for clean water
and air. We are excited about what
the future holds and look forward to
updating all our stakeholders on future
corporate developments as appropriate.

Connie Mixon
Chief Executive
16 May 2022

MYCELX’s proven
technology has never
been more relevant
in the fight for clean
water and air.

Operational performance
I am pleased to report that our
operations continue to perform in line
with management expectations, and we
are experiencing little to no disruption
due to COVID-19. We anticipate that
international travel will continue to open
up, meaning that a number of the safety
restrictions we put in place can now be
removed, which will improve our ability
to perform business functions and travel
to meet new and existing clients.

In 2021, the Company achieved
revenue of $8.5 million, an increase
of 20% year-on-year. The Company
continues to manage its working capital
requirements and following the recently
closed fundraise, is well placed to take
advantage of opportunistic applications
and new customer initiatives in the
market. EBITDA was $19,000 and the
Company recorded a loss before tax
of $1.1 million in 2021. In 2022, MYCELX
aims to achieve a similar level of
year-on-year revenue growth, but this
remains subject to market conditions.

After the reporting period, we chose
to undertake a fundraise in order to
help support the Company’s growth
trajectory and capitalise on the rapidly
changing PFAS market. As we have
demonstrated in Australia and in our
recent U.S. trial, MYCELX has the
potential to play an important role
in tackling the enormous challenges
presented by PFAS-laden water. The
Company’s technology is proven and
our unique PFAS systems are installed
and have been operational in Australia
for seven years. In addition, we executed
a highly promising trial in the U.S. We
are very grateful for the support of our
shareholders, as with the inclusion of
the Broker Option, we were able to raise
ca.$2.3 million, which will enable us to
cement our position in the market. The
PFAS market in the U.S. is both nascent
and very large, and one we believe we
are ideally positioned to take advantage
of. We hope to comment further in the
coming months.

Post-period end, we were also pleased
to receive the London Stock Exchange’s
Green Economy Mark, recognising
MYCELX’s contribution to the global
green economy. In order to qualify,
companies and funds must generate
50% or more of their total annual
revenues from products and services
that contribute to the global green
economy. This reinforces our view
that MYCELX is a ‘pure-play’ green
technology business that has the
potential to be a force for good.

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Our Focus Markets

MYCELX has a global footprint across
the oil and gas sector and PFAS market

COLOMBIA

PFAS & Other

USA

Houston

Norcross

Key Applications:
PFAS Groundwater
Remediation

Key Countries:
USA, Australia

Upstream Onshore

Key Applications:
Produced Water
Treatment, Heavy Oils,
cEOR

Key Countries:
USA, Nigeria, Qatar,
Kuwait, Canada

MYCELX has a superior and cost-effective solution
to treat Per-and Polyfluoroalkyl substances
(‘PFAS’) contaminated groundwater. MYCELX
systems are at the forefront of treating PFAS
impacted industrial water for clients across Australia
and are installed at Aqueous Film Forming Foam
(‘AFFF’) impacted sites, globally integrated oil
companies, airports, and military sites. A MYCELX
team of experts works with and assists engineering
firms and end-user clients to design, install and
operate these systems. MYCELX aims to deploy
its superior solutions in the growing US market
for PFAS groundwater remediation.

MYCELX Onshore installations provide superior
performance for clients across the globe.
However, it is the optimised REGEN Retrofit
Solution which has the potential to transform
this focus market by offering the ability to
expand production with the same infrastructure
and overcoming water treatment barriers to
production using lucrative cEOR techniques.

Current Trends
• Environmental challenges continue to grow in number, scope
and complexity, and mounting public pressure and regulatory
changes continue to drive demand for better solutions

Current Trends
• Producers are focussed on ensuring hydrocarbons
are produced in an efficient and environmentally
sustainable manner

•

Increasing public awareness of the risks posed from PFAS
contaminated water and increasing shareholder demand
for environmental accountability has increased the
demand for sustainable solutions

• The Environmental Protection Agency (‘EPA’) expected

to expand the range of PFAS types covered in regulations
due to greater understanding of risks

Opportunities
•

Industry is highly fragmented with no single market
leader. MYCELX is uniquely positioned to establish
itself as a leader in the industry

• MYCELX technology provides competitive advantages
versus conventional treatment methods. MYCELX’s
solution is more robust than conventional methods and
has been shown to remove a broader range of PFAS
contaminants to below detectable levels

• MYCELX’s solution generates significantly less waste and
is more cost effective than conventional alternatives

• Preference of maximising potential of brownfield assets,

rather than starting new greenfield developments

Opportunities
• The cEOR market is forecasted to grow dramatically

over the next 5–7 years as producers increase levels of
production to take advantage of higher product prices
driven by global demand

• Mature production assets will create greater and more
complex treatment challenges as water-cuts increase

• MYCELX’s REGEN retrofit package offers the ability to use
existing on-site equipment and treat up to 30% extra flow
rate at higher removal efficiency and less wastage

• REGEN already recognised by leading industry players as
the industry’s leading option for cEOR water treatment

London

RUSSIA

Jubail

CHINA

MAURITANIA

INDIA

NIGERIA

KEY

MYCELX solution installed

Potential MYCELX opportunity identified

MYCELX offices

AUSTRALIA

KUWAIT

QATAR

U.A.E

OMAN

SAUDI ARABIA

Downstream

Upstream Offshore

Key Applications:
Produced Water
Treatment, Excursion
Management, Early
Production

Key Countries:
USA, Nigeria, Australia

MYCELX’s offshore capability is demonstrated
by its installations on several major platforms
in the Gulf of Mexico. The Company’s nimble
footprint and superior removal capability make
MYCELX an ideal treatment solution for any
offshore location.

Current Trends
•

Increased environmental regulations expected, which
when coupled with hurricane seasons becoming longer
and more serious year on year, means greater production
efficiencies are required

• Significant new field development spending expected in

Australia and South America

Opportunities
• Leverage existing installations in Gulf of Mexico, Nigeria

and Australia to expand footprint in the U.S. offshore and
international markets for excursion management and early
production applications

Key Applications:
Process Water,
Industrial Wastewater,
Turnarounds

Key Countries:
Saudi Arabia, U.A.E,
Oman, Qatar, Kuwait

MYCELX’s well established downstream
capabilities are currently responsible for the
majority of revenue generation and consist
largely of temporary and multi-year rental
projects in Saudi Arabia.

Current Trends
• Vision 2030: Greater adherence to water and air

regulations is shown by stricter monitoring by authorities
to ensure compliance

• With supply chain delays increasing equipment lead times
and the need to provide service now to take advantage of
improved product pricing, rapid-deployment, temporary
rental solutions will be in demand

Opportunities
• One of MYCELX’s major areas of expertise is deploying
its rapid response systems and solutions which will
allow customers to reap the benefits of better pricing
overcoming equipment delays

• Recycle/Reuse Opportunities: MYCELX water expertise
offers chances to reduce water wastage and develop
wastewater recycle/reuse systems

• Planned developments of petrochemical complexes in

Saudi Arabia and rest of GCC

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Our Technology and Approach

MYCELX solutions are a leap forward
in filtration, resulting in clean water

The polymer that we
developed and subsequently
patented is unique molecular
cohesion to remove oil and
other contaminants from
water to customer specifications.
The processed, clean water
can be discharged back to
the original water source with
no environmental impact.

By removing oil at the
molecular level MYCELX
solutions have advantages
over conventional physical
separation methods in terms
of performance, cost and
footprint required.

MYCELX solutions can
achieve oil removal to less
than 1 ppm if required or
tailored for specific discharge
levels and contaminant
removal as well as operational
run time.

MYCELX provides customers
with a new standard in clean
water and air treatment
and an enhanced ability to
protect the environment.

REVOLUTIONARY
TECHNOLOGY

The polymer and its applications are
protected by 36 global patents

RECURRING
MEDIA SALES

Polymer is infused into purpose-built
back-washable media and standard filters

STANDARDISED
EQUIPMENT

Our media is housed inside MYCELX designed
equipment or specially modified standard vessels

ENGINEERED
SOLUTIONS BASED
ON EXTENSIVE
WATER EXPERTISE

Our engineers design tailor-made systems
which meet our customers’ requirements
in terms of overall economics, frequency of
media changeouts and whether they wish
us to handle maintenance of the installation

ENHANCED
CUSTOMER
PERFORMANCE

The end result is oil-free water that
allows MYCELX’s clients to consistently
meet their discharge requirements,
regulations, cost savings and improve
production uptime

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

What Makes Us Different

Bridging the Technology Gap
Where Others Fail

The key differences between MYCELX
and other oil removal processes are:
•

Instant and permanent oil removal at any flow rate

• Broad oil removal spectrum – free oils to

emulsified oils

• Small footprint available, lower capital cost,

highest efficiency

• Enables water reuse

• Reduces need for chemical or biological treatment

• Guaranteed no visible oil sheen in effluent

The ability to remove droplet sizes below 10 microns
sets MYCELX apart from the rest of the conventional
technologies currently used in the Oil and Gas industry.
These very small droplets can contribute a high percentage
of the total oil contamination and wreak havoc on the ability
to reuse or discharge because they evade conventional
treatment systems.

MYCELX offers a total treatment solution for its customers,
or can be retrofitted into existing infrastructure. The methods
of oil and gas production as well as petrochemical processing
have undergone extraordinary technological changes to
improve and increase output but the existing equipment
struggles or no longer meets the new operational demands.
MYCELX’s differentiated performance is filling the gap that
has been created as industry demands evolve.

50 microns

10 microns

1 microns

0.09 microns

Three Phase Separator

Hydrocyclones / Centrifuges

IGF / DGF

Nutshell Filters / CFU

MYCELX Advanced
Coalescer / Separator

MYCELX REGEN

MYCELX Polishers

MYCELX Performer

GAC

RO & IX

Emulsified and Soluble Oil Removal

Free Oil Removal

Dispersed Oil Removal

Dissolved Metals & Organics

PFAS

Fit for the Future
Efficient and More Effective Solutions for PFAS

MYCELX solutions’ superior removal capability creates
solutions which are more robust and that will remain effective
as regulations become more stringent.

The Environmental Protection Agency (‘EPA’) has submitted a
plan for a PFAS Superfund designating two PFAS compounds
– PFOA and PFOS – as “hazardous substances” under the
Comprehensive Environmental Response, Compensation
& Liability Act (CERLA, also known as the Superfund law).
These regulatory actions will have significant financial impacts
for businesses and property owners with any sort of legacy or
current PFOA and PFOS pollution concerns.

Recent EPA evaluation of the potential human health risks
may identify additional compounds to be regulated and drive
certain remedial target levels much lower. Current guidance
recommends using a remediation goal of 70 ppt for PFOA
and PFOS.

The Department of Defense (‘DOD’) identified 687
installations with a known or suspected release of PFAS
from firefighting foams used in training exercises. The DOD
estimates that its future PFAS investigation and clean-up
costs will total more than $2.1b beginning in fiscal year 2021,
which is in addition to $1.1b in actual PFAS costs incurred
through fiscal year 2020. Industrial/military sites with
significant co-contamination are ideally suited for MYCELX’s
advanced technology.

MYCELX technology provides complete removal of the full
spectrum of PFAS compounds to non-detect levels. Complete
removal will prevent future degradation of components into
PFAS compounds that may be subject to future regulation.
This provides MYCELX technology with a significant technical
advantage over costly conventional alternatives.

5,000

4,000

3,000

2,000

1,000

1,400

1,050

700

350

5,000

4,000

3,000

2,000

1,000

PFHxS

PFBS

99.99%

4,440

99.99%

0.504

1,390

0.177

Inlet

MYCELX

Inlet

MYCELX

PFPeS

99.98%

1,270

0.265

Inlet

MYCELX

Per and Polyfluorinated

4:2 FTS

8:2 FTS

99.99%

4,530

99.99%

3,400

0.212

0.407

Inlet MYCELX

60,000

50,000

40,000

30,000

20,000

10,000

6:2 FTS

99.99%

56,900

2.9

Inlet MYCELX

PFOS*

PFOA*

s
e
t
a
n
o
f
l
u
S

C
a
r
b
o
x
y
a
t
e
s

PFHxS*
PFBS*

PFDS
PFNS
PFHpS
PFPeS

PFNA*
PFHpA

PFTeDA,
PFTrDA
PFDoA,
PFUnA
PFDA, PFHxA
PFPeA, PFBA*

Fluorotelomers

All Other PFAs

Perfluorinated (‘PCFs’)

60,000

50,000

40,000

PFOS

99.99%

30,000

59,500

20,000

10,000

2,500

2,000

1,500

0.933

Inlet MYCELX

PFHpA

99.99%

1,000

2,130

500

0.221

Inlet MYCELX

PFBA

PFPeA

99.99%

16,900

99.99%

11,800

6.77

0.481

Inlet MYCELX

PFHxA

20,000

15,000

10,000

5,000

50,000

40,000

30,000

20,000

39,000

99.99%

10,000

0.829

Inlet MYCELX

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Our Business Model

We deploy our assets to pursue
our strategic goals

Driven by our clear
purpose & values

We deploy
our key assets

What we do and
how we make money

Our Purpose
To reduce the environmental
impact of industry and improve
sustainability through science
and our unique technology.

Our Vision
MYCELX aims to be the
new standard in clean
water treatment.

Our Aims
and Values
• Safety

• Protect the Environment

• Future-proof Systems

• Cost Effective Solutions

• Performance Optimisation

• Local Support

• Value Realisation

Technology and IP

People and Culture

Fixed Assets

Reputation & Relationships

Design
Our experts use our patented
technology to design and engineer
robust treatment systems that meet
the client’s specific needs.

Capital Sales
Our solutions can be tailor-made and
manufactured for sale. Due to our
small footprint such sales may be to
retrofit existing systems or as part of
a new greenfield build.

Rental Fleet
We are able to provide equipment
for temporary or long-term rental
solutions. In Saudi Arabia we have
a team that operates and maintains
rental deployments 24/7.

Recurring Media
Our patented technology solutions
comprise MYCELX patented
media which will lead to recurring
media sales.

Overview of our
Achievements

36+

patents issued

countries with
MYCELX systems

We create and secure value
for all our stakeholders

What we do and

how we make money

…Our competitive
advantages

…Value we create for
all stakeholders

Patented Technology

Best-in-class Performance
and Competitive Pricing

Smaller Footprint

Better Understanding
of Water Characteristics

Strong Reputation and
After-Sales Support

Problem Solving
Attitude and Continuous
Improvement Approach

Strong R&D Capability

Clients
Provide environmentally beneficial water treatment that ensures
the client meets their sustainability goals. Consistent superior
performance lifts the performance and lowers maintenance and
repair costs. A better understanding of the water characteristics
allows them to manage their water challenges more cost effectively.

Shareholders
Our robust business model has enabled MYCELX to grow into a
company with a strong reputation and industry traction. As broad
adoption is achieved, it will be possible to unlock further potential
value for all stakeholders.

Local Communities
Benefit from the improved environmental standards, and MYCELX
full support for local content initiatives in terms of employment
and supply chain creation/local manufacture.

Employees
We are committed to develop and train our people and to keep them
safe and healthy. As and when further business growth is achieved,
additional opportunities will become available for our employees.

Environment
Our smart solutions mean that clients can meet stricter
environmental regulations cost effectively – improving overall
adherence and protection.

100%

performance
guarantees
achieved

20+

specific treatment
applications

<5ppm

discharge spec
for Nigeria

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Our Strategy

Supporting our clients’ ambitions
with our superior, sustainable solutions

MYCELX Technology solutions provide a shield for our
clients from the increasingly complicated demands
from society and local stakeholders as well as the
challenging current economic drivers.

MYCELX’s safe, reliable and future-
proof solutions ensure that our
customers can reduce water and
energy usage and reuse or safely
dispose treated water that meets
the highest regulatory standards.
An example of how society and
local stakeholders have demanded
enhanced clean water treatment to
protect the environment and lives
is seen in the growing response to
PFAS groundwater contamination.

A Strategy Focused
on Growth
MYCELX has developed a range
of key applications across its focus
markets and has pursued a strategy
to gain widespread adoption by
first proving technical superiority,
usually through in-field trials, then
gaining industry acceptance with
installations or awards and finally
leveraging those installations to
obtain critical mass and become the
new standard for treatment.

ACHIEVEMENTS TO DATE

Key
Applications

Downstream PROCESS

WATER

Have displaced conventional

tech at world’s largest

ethylene complex since 2011

Systems in place in multiple

Invited to establish global

petrochemical companies

globally. Recognised with

industry award

contract framework

agreement with leading

petrochemical company

INDUSTRIAL
WASTEWATER

TURNAROUNDS

Broad range of wastewater

applications proven in

trial work

In-plant wastewater treatment

systems successfully used

to meet multiple emergency

rapid response requirements

O
S

CIET Y & L

E
T
H
N
T T
E
M
C
N
E
O
T
O
R
I
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r

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c
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L
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a
s
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R
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t
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T A K E H O L D ERS
E V I T A L
R C E S
U

SUPPORT LOCAL
COMMUNITIES

Local Content
focused hiring
and fabricating
locally

r u s a g e
&
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s
u
t e
s
s w a
n
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e r a

s w
e
v
p r o
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(re c y
re d

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b
a
i
l
e
R

eff ectiv

MYCELX’s
Clients

u
r
e
-

proof

ff ers

vin

nifi cant cost-
g & production
ptimisation

Make s E O R
prod u c t i o n
technique s v i a b l e a
l y e ffi
environmen t a l

d
n
c i e

Upstream
onshore

PRODUCED
WATER
TREATMENT

REGEN
RETROFIT

T
E
C
H
N
O
L
O

Upstream
offshore

EXCURSION
MANAGEMENT

Successfully deployed

Incorporated into the design

on several Gulf of

Mexico platforms

of Jack St Malo Platform

by Chevron

EARLY
PRODUCTION

Used by Schlumberger

on several Early

Production projects

PFAS &
others

PFAS
GROUNDWATER

Analysis demonstrates broad

PFAS removal to below

detectable limits

Successful US trial

Several Australian

installations both on military

and industrial locations

ATION

MIC D

RIVERS

EXTR A C T V A L U E
FROM O L D E R A S S E T S

OTHERS

Lab and in-field testing shows

successful applications in

Mercury removal, air filtration

and agri-business applications

Demonstrated ability to

treat contamination levels

that were >10,000x higher

than regulation

Successful turnarounds

undertaken in Saudi Arabia,

Kuwait and Qatar

Established partnership with

leading turnaround support

services company to target full

turnaround market in Saudi Arabia

Establish multi-year pipeline

of turnaround projects

across GCC

Only technology approved for

Multiple project wins in

discharge into shallow water

Nigeria and trials around

of Niger Delta (<5ppm)

the globe

Secure further Nigerian

project wins and gain traction

with other global producers

Successfully trialled with

producers in Canada, Oman

and India

Acknowledged by industry

Technology chosen for water

leaders as the next generation

treatment on leading EOR

solution for Produced

Water Treatment

study at major National

Oil Producer

Replace Nutshell with

REGEN Retrofit on a

500,000bbl/day system

Secure global contract

agreement

Work with customers

to deliver recycle/reuse

solutions to reduce

wastewater disposal

Dedicated Business Development

initiative to expand footprint

in Gulf of Mexico and other

offshore opportunities

Secure further Early

Production opportunities

using lease or capital model

Secure several U.S.-based

PFAS projects

Secure channel partners

to pursue these non-core

applications

ACHIEVEMENTS TO DATE

GOALS

Key

Applications

Proven Technical
Superiority

Industry
Acceptance

Leverage Position to
Obtain Critical Mass

Near-term
Priorities

Downstream PROCESS

WATER

Have displaced conventional
tech at world’s largest
ethylene complex since 2011

Systems in place in multiple
petrochemical companies
globally. Recognised with
industry award

Invited to establish global
contract framework
agreement with leading
petrochemical company

Broad range of wastewater
applications proven in
trial work

In-plant wastewater treatment
systems successfully used
to meet multiple emergency
rapid response requirements

Secure global contract
agreement

Work with customers
to deliver recycle/reuse
solutions to reduce
wastewater disposal

Demonstrated ability to
treat contamination levels
that were >10,000x higher
than regulation

Successful turnarounds
undertaken in Saudi Arabia,
Kuwait and Qatar

Established partnership with
leading turnaround support
services company to target full
turnaround market in Saudi Arabia

Establish multi-year pipeline
of turnaround projects
across GCC

Only technology approved for
discharge into shallow water
of Niger Delta (<5ppm)

Multiple project wins in
Nigeria and trials around
the globe

Secure further Nigerian
project wins and gain traction
with other global producers

Successfully trialled with
producers in Canada, Oman
and India

Acknowledged by industry
leaders as the next generation
solution for Produced
Water Treatment

Technology chosen for water
treatment on leading EOR
study at major National
Oil Producer

Replace Nutshell with
REGEN Retrofit on a
500,000bbl/day system

INDUSTRIAL

WASTEWATER

TURNAROUNDS

Upstream

onshore

PRODUCED

WATER

TREATMENT

REGEN

RETROFIT

Upstream

offshore

EXCURSION

MANAGEMENT

Successfully deployed
on several Gulf of
Mexico platforms

Incorporated into the design
of Jack St Malo Platform
by Chevron

EARLY

PRODUCTION

Used by Schlumberger
on several Early
Production projects

PFAS &

others

PFAS

GROUNDWATER

Analysis demonstrates broad
PFAS removal to below
detectable limits

Successful US trial

Several Australian
installations both on military
and industrial locations

OTHERS

Lab and in-field testing shows
successful applications in
Mercury removal, air filtration
and agri-business applications

Dedicated Business Development
initiative to expand footprint
in Gulf of Mexico and other
offshore opportunities

Secure further Early
Production opportunities
using lease or capital model

Secure several U.S.-based
PFAS projects

Secure channel partners
to pursue these non-core
applications

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Our Investment Case

At a time when companies are focused on
their environmental impact, MYCELX’s patented
technology enables businesses to meet their
sustainability targets

Relevant technology
fit for the future

• Owner and manufacturer of

revolutionary, patented MYCELX
technology that is a leap forward
in cost effective water treatment
over conventional approaches

• MYCELX tackles the toughest

industrial water and air treatment
challenges ensuring clients’
environmental directives are met

• Our technology covers a very broad
range of applications including oil
and gas, groundwater remediation,
commercial marine, power and
air filtration

• Flexibility of the technology means
water can be treated to below
detectable levels of contamination
or to a client’s specific needs

Years of experience
helping clients
achieve their
environmental
protection goals

• Operational in the Middle East

since 2011 providing sustainable,
cost effective water treatment for
closed loop production and recycle
and reuse

• Since 2018 installed on close-to-

shore platforms in Nigeria ensuring
producers meet their environmental
protection goals

•

Installed on Chevron’s state-of-the-
art platform, Jack/St. Malo in 2018
in the Gulf of Mexico providing clean
water management in keeping with
Chevron’s sustainability goals

• Protecting the most environmentally
sensitive waters of the Galapagos
Islands since 2008 ensuring
compliance with IMO (International
Maritime Organization) mandate
of no oil contamination discharge
to the sea

Growing
the business

Continuous
innovation

Financial
metrics

• Expect continued growth in 2022,
building momentum over the
coming years

• Expand the footprint in the Middle
East as we meet the demands
of significantly increased focus
on sustainable, cost effective
water treatment

•

Increasing our Business
Development presence in
Houston and the Middle East
with additional hires

• Focused marketing initiatives

supported by our new website
and business development team

• We innovated differentiated,
leading-edge technology to
treat groundwater contaminated
with PFAS with systems
currently operating

• Product development in 2020

• Strong cash position with no

debt after note payable and line
of credit paid in full with proceeds
from sale of Duluth property
during the period and capital raise
subsequent to year end

on REGEN, our regenerable filter
media, allowing REGEN drop-in into
existing production systems as a
replacement to Nutshell filter media
saving waste and water

• Robust business model based

on recurring revenue

• Healthy margins allowing for
flexibility on contract bidding

• Robust filter product innovation

in 2020 significantly increasing oil
capture capacity ensuring producers
meet or exceed their water
treatment discharge levels

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Financial Review

Due to the resurgence in activity across the various industries
in which we operate, we saw revenue rise 20% to $8.5 million
for 2021, compared to $7.1 million for 2020. Revenue from
equipment sales and leases increased by 36% to $3.8 million
for 2021 (FY20: $2.8 million) and revenue from consumable
filtration media and service increased by 9% to $4.7 million
(FY20: $4.3 million). Whilst the equipment sales are one-off
by nature, there is longevity to the media sales and ongoing
lease and service revenues.

Gross profit increased by 106% to
$3.3 million during the year, compared
to $1.6 million in 2020, and gross profit
margin increased to 39% (FY20: 23%).

Total operating expenses for 2021,
including depreciation and amortisation
and the gain on sale of property and
equipment, decreased by 37% to $4.8
million (FY20: $7.6 million). The largest
component of operating expenses
was selling, general and administrative
expenses, which decreased by
approximately 5% to $6.9 million (FY20:
$7.3 million) due to the continued
impact of a series of company-wide cost
saving measures implemented in 2020.

Depreciation and amortisation within
operating expenses decreased by 34%
to $205,000 (FY20: $310,000), primarily
due to older equipment reaching the
end of its useful life.

EBITDA was $19,000, compared
to negative $4.2 million in 2020.
Normalised EBITDA excluding the sale
of the Company’s building in Duluth,
Georgia was negative $2.5 million.
EBITDA is a non-U.S. GAAP measure
that the Company uses to measure and
monitor performance and liquidity and
is calculated as net profit before interest
expense, provision for income taxes,
and depreciation and amortisation of
fixed and intangible assets, including
depreciation of leased equipment
which is included in cost of goods
sold. This non-U.S. GAAP measure may
not be directly comparable to other
similarly titled measures used by other
companies and may have limited use as
an analytical tool.

The Company recorded a loss before tax
of $1.1 million in 2021, compared to a loss
before tax of $5.8 million in 2020. The
decrease in net loss was partially due
to the $2.6 million gain the Company
recognised on the sale of its building.
Basic loss per share was 7 cents in 2021,
compared to basic loss per share of 31
cents in the previous year.

In March 2021, the Company completed
the sale of its building in Duluth,
Georgia, USA for a total consideration of
$5.4 million. The Company recognised
a financial gain of approximately $2.6
million on the sale of the property and
net cash proceeds were approximately
$2.8 million. The Note Payable and line
of credit were paid in full and $500,000
of cash was reclassified from restricted
cash. The sale enabled the Company
to right-size its office space needs
across its main operating locations and
provided cash proceeds which were
used for working capital purposes to
support the business needs.

As of 31 December 2021, total assets
were $15.6 million with the largest
assets being inventory of $4.3 million,
property and equipment of $3.2 million,
$3.2 million of cash and cash equivalents
including restricted cash and $1.9 million
of accounts receivable.

Total liabilities as of 31 December 2021
were $3.0 million and stockholders’
equity was $12.6 million, resulting in a
debt-to-equity ratio of 24%.

The Company ended the period
with $3.2 million of cash and cash
equivalents, including restricted cash,
compared to $3.8 million in total at
31 December 2020. The Company used
approximately $3.4 million of cash in
operations in 2021 (FY20: $1.5 million
used in operations). The proceeds from
the sale of the Company’s property
offset by purchases of property and
equipment and patents contributed
to $5.1 million provided by investment
activities (FY20: $159,000 used in
investing activities). In 2021, the
Company’s financing activities included
net proceeds of $401,000 from a
forgivable loan and $2.6 million paid
towards debt.

Post the period end, the Company
completed the closing of a Placing of
3,539,273 Common Shares at a price
of US$0.66 (50 pence) per new share
raising gross proceeds of approximately
$2.3 million before expenses. The
Company incurred costs in the issuance
of these shares of approximately
$267,000. The proceeds from the
transaction will be used to accelerate
the commercialisation of the Company’s
Remediation System in the U.S. for per-
and polyfluoroalkyl substances (‘PFAS’)
and in order to support working capital
across the Company’s core markets.

Kimberly Slayton
Chief Financial Officer
16 May 2022

GOALS & KEY PERFORMANCE
INDICATORS

Revenue ($m):

Gross Margin (%):

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

Revenue was impacted by a resurgence
in activity across the various industries
in which we operate.

Gross margin rebounded after the
inventory reserve posted in 2020.

Cash Flow from Operations
(US $000):

Cash and Cash Equivalents
($m):

500

-500

-1,000

-1,500

-2,000

-2,500

-3,000

-3,500

-4,000

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

The Company continued to manage
costs while also investing in strategic
market initiatives.

The Company continues to preserve
the cash position whilst supporting
revenue generating growth activities
and has bolstered its position post
period end with the fundraise.

Geographical Diversity

Client Diversity

MENA
N America
Nigeria
Australia
Other

63.56%
16.15%
15.47%
3.05%
1.77%

54%
9%
7%
5%
4%
3%
2%
2%
1%
1%
12%

The geographical split of revenues reflects
market conditions as well as successful
Company business development efforts
to grow footprint in other geographies.

Currently top 10 customers make up 88% of
Company revenue. These large customers are
industry leaders. As we pursue our strategy of
gaining industry acceptance and critical mass,
the client mix will improve as a consequence.

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Principal Risks and Uncertainties

RISK

Additional
Funds

Retaining
Key Personnel

Existing Products
and Service
Optimisation

Reliance on
Certain Key
Manufacturers

DESCRIPTION

Should the Company require
additional funds in order to
carry out its strategy, there
can be no assurance that the
Company will be able to raise
such additional capital on
favourable terms or at all.

The contribution of the
existing Executive Directors,
senior management team
members and certain key
employees to the immediate
and near-term operations of
the Company is likely to be
of central importance to the
Company’s future success
and growth.

The Company relies on certain
key manufacturers for the
fabrication of the Company’s
equipment in accordance
with the specifications of the
Company’s customers.

The future success of the
Company will depend on its
ability to enhance its existing
products and services,
address the increasingly
sophisticated and diverse
needs of its customers and
respond to technological
advances and emerging
industry and regulatory
standards and practices on
a cost effective and timely
basis, specifically including
further development of the
REGEN market for which the
Company holds significant
inventory as disclosed in the
financial statements.

MITIGATION

Following the fundraise in
early 2022, the Company
is in a robust cash position.

The Company continuously
monitors and reviews
compensation and benefits
offered to its employees.
The Company desires to have
competitive remuneration
and benefit plans in place
to reward and retain
key individuals.

The Company seeks and
acts upon feedback from
its customers and potential
customers through various
means including professional
societies, industry conferences,
trade shows and direct queries.
The Company is continuously
developing intellectual
property to commercialise
new products.

To attempt to manage
this risk, the Company has
expanded the number of
manufacturers it uses that
are capable of conducting
manufacture on similar terms.

However, any disruption in the
Company’s relationship with
a manufacturer could affect
pending orders placed with
that manufacturer and result
in transition costs and delays.

RISK

Competitive
Market

Customer
Diversification

Oil & Gas
Industry Cycles

Geopolitical
Risk

DESCRIPTION

The Company operates in
a competitive market and
it can be expected that the
competition will continue and/
or increase in the future both
from established competitors
and from new entrants to
the market. The Company’s
competitors include
companies with greater
financial, technical and other
resources than the Company.

The Company receives a
significant portion of its
revenue from one customer
through multiple system
installations at several of
the customer’s plants.

Historically, oil supply is
subject to periodic disruption
due to political unrest or
insurrection, sabotage or
terrorism, nationalist policies,
accident or embargo. These
events generally prove to be
transient; however they can
cause material reductions
in production and are often
difficult or impossible to
predict. A disruption in oil
supply can cause significant
fluctuations in oil prices
which, in turn, could have a
material adverse effect on
the Company’s business.

Historically, the oil and gas
industry has been subject
to ‘boom-and-bust’ cycles.
Recession-induced downturns
can affect the development of
various oil and gas projects,
particularly high-cost projects
such as those relating to oil
sands, deepwater offshore
and liquefied natural gas.
High-cost oil projects like
deepwater offshore and oil
sands typically depend on high
oil prices. The market price of
oil is affected by numerous
factors which are beyond the
Company’s control. Should oil
prices fall and remain low for
a prolonged period for any
reason including, for example,
the global COVID-19 pandemic
combined with the recent
collapse of oil prices, high cost
oil projects may be scaled
down, deferred or cancelled.

MITIGATION

The Company is pursuing
a growth strategy to
continuously increase its
financial and technical
resources. The growth
strategy includes partnering
with companies with
complementary technologies
to expand scope and leverage
relationships to garner more
business.

Although the Company is
focused on the oil and gas
industry, it does sell into
other industry sectors and
is continuously developing
intellectual property to
commercialise new products.

While the individual plants
operate autonomously, any
disruption in the Company’s
relationship with this customer
could result in reduced
revenue. The installations
at this customer’s various
plants are performing critical
functions and any stoppage
of the Company’s systems
could have a severe impact
on production and therefore
it is unlikely that the customer
would want to disrupt the
relationship. Furthermore, the
Company is pursuing a growth
strategy that will diversify its
customer base.

The Company’s primary
customers are located in the
lowest quadrants of their
respective industry curves,
which provides them with
some insulation against oil
and related feedstock price
declines. Furthermore, the
Company is continuously
developing intellectual
property to commercialise
new products for other
industry sectors to broaden
its client and market base.

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Board of Directors

Tom Lamb
Non-Executive Chairman

Connie Mixon
Chief Executive Officer and Director

Haluk (Hal) Alper
President, Chief Science Officer
and Director

Committee Membership

Appointed

2019

Appointed

2004

Appointed

1994

Background & Experience
Mr. Lamb joined the MYCELX Board
as a Non-Executive Director, Chairman
of the Compensation Committee
and a member of the Audit and
Nomination Committees in July 2019.
He was appointed Non-Executive
Chairman by the Board in July 2021.
Mr. Lamb has a wealth of strategic and
operating expertise in the industrial
and technology sectors, having spent
over 30 years driving organic growth
and leading businesses in multiple
international settings. He has served
in several executive leadership roles
in public and private companies and
his previous experience includes
Chairman and CEO of Agilex Flavors
and Fragrances, President and CEO of
C.P. Kelco/J.M. Huber Corporation and
Executive VP of Lexmark International.
Mr. Lamb has also served on the
boards of several for-profit companies
in chemical, technology and healthcare
spaces. Mr. Lamb received an MBA
from the Stanford Graduate School
of Business and a BA in Economics
from Union College in Schenectady,
New York.

Current Appointments
Mr. Lamb serves on a number of
corporate and not-for-profit boards.

Background & Experience
Ms. Mixon joined MYCELX in 2004 and
was responsible for rapidly developing
the commercial and financial
infrastructure to provide MYCELX
products to a global customer base.
Prior to joining MYCELX in 2004, she
was a Director for Global Markets
for Deutsche Bank. Her career with
investment banks included pioneering
Deutsche Bank’s institutional presence
in the southern region of the United
States. Before her tenure at Deutsche
Bank, Ms. Mixon was Vice President
at Donaldson, Lufkin & Jenrette. Ms.
Mixon holds an MBA from the Goizueta
Business School Emory University
and a BA in politics from Wake
Forest University.

Current Appointments
None.

Background & Experience
Mr. Alper co-founded the Company
with John Mansfield Sr. in 1994. An
inventor of chemistries and chemical
processes, he has authored and
been granted numerous patents
in the areas of electrochemistry,
polymer chemistry, and environmental
technologies, including approximately
seventy for MYCELX oil removal
chemistry and related applications.

A published author with over fifty
scientific and technical papers to
his credit, Mr. Alper is a member of
numerous professional societies,
including NYAS (New York Academy
of Sciences), AAAS (American
Association for the Advancement of
Science), ASNE (American Society
of Naval Engineers), SNAME (Society
of Naval Architects and Marine
Engineers), NDIA (National Defense
Industrial Association), AFS (American
Filtration and Separations Society),
ACS (American Chemical Society)
and AICHE (American Institute of
Chemical Engineers.

Current Appointments
Mr. Alper is a recipient of the 2005
Ronald Reagan Gold Medal from the
National Republican Congressional
Committee (‘NRCC’) for Technological
Innovation, is on the editorial
board of Filtration News Magazine
and also serves on the Technical
Advisory Board of Environmental
Protection Magazine.

Committee
Membership key

Audit Committee

Nomination and Governance Committee

Compensation Committee

Executive Committee

André Schnabl
Non-Executive Director

Committee Membership

Appointed

2019

Background & Experience
Mr. Schnabl joined the MYCELX Board
as a Non-Executive Director and
Senior Independent Director, and as
Chairman of the Audit Committee and
a member of the Compensation and
Nomination Committees in January
2019. Mr. Schnabl is the managing
principal of Tenor Capital Partners
LLC, a boutique corporate finance
firm focused on advising companies
and shareholders in analysing,
structuring and financing employee
ownership through stock ownership
plans. Prior to Tenor, Mr. Schnabl was
the managing partner of the Atlanta
office of Grant Thornton LLP, from
which he retired in 2012. He joined
Grant Thornton in Zimbabwe and also
spent time in the firm’s Montreal office
before moving to the Atlanta office.
Mr. Schnabl holds a Bachelor degree
in Chemistry and Geology from the
University of London and is a CPA.

Current Appointments
Mr. Schnabl serves on a number of
corporate and not-for-profit boards.

Financial StatementsStrategic ReportCorporate GovernanceMYCELX Technologies Corporation
Annual Report & Accounts 2021

Corporate Governance Statement

The Directors recognise the value and importance of high standards of corporate governance. The Company is incorporated
in the State of Georgia, United States, and is governed by and complies with the Georgia Business Corporation Code (‘GBCC’).
There are a number of differences between the corporate structure of the Company and that of a public limited company
incorporated in England under the Companies Act 2006. Whilst the Directors consider that it is appropriate to retain the
majority of the usual features of a U.S. corporation, they intend to take certain actions to meet U.K. standard practice adopted
by companies incorporated under English law and admitted to AIM.

The Company is committed to high standards of corporate governance and draws upon best practice available. Further to
AIM Rule 26, the Board has determined to follow the QCA code, published by the Quoted Companies Alliance, which sets
out a minimum best practice standard for small and mid-size quoted companies, particularly AIM companies. The following
information is provided to describe how the Company applies the principles of that code and explain any departures from the
specific provisions of that code. This review was originally carried out as at 21 September 2018, and updated on 16 May 2022.

The QCA’s Ten Principles of Corporate Governance
The ten principles of corporate governance set out in the QCA Code and applied by the Company are as follows:

Deliver Growth
1. Establish a strategy and
business model which promote
long-term value for shareholders
MYCELX’s business model and
strategy can be found on pages 12 to
15 of this Annual Report.

2. Seek to understand and
meet shareholder needs and
expectations
At the Company’s Annual Meeting,
usually held in London, the Chairman
and Chief Executive Officer are
available before and after the
meeting for further discussions with
shareholders. A meeting with U.S.
shareholders is also held annually.
The Chief Executive Officer meets
with institutional investors on
various occasions during the year,
primarily following the Company’s
Annual Results and Interim Results
announcements. A number of such
meetings took place in 2021 by way
of video conference.

Further information on the 2022
Annual Meeting, which is scheduled
to be held on 13 July 2022, is set
out in the Notice of 2022 Annual
Meeting, which is available on the
Company’s website.

Special arrangements were in place for
the 2020 and 2021 Annual Meetings
due to COVID-19.

Copies of the Annual Report and
Financial Statements are issued
to all shareholders and copies are
available on the Company’s website.
The Company also uses its website
to provide information to shareholders
and other interested parties, subject
to applicable restrictions of United
States securities laws. The Chief
Financial Officer and Secretary also
deal with shareholder correspondence
as and when it arises, and may be
contacted through the address on the
Company’s website.

3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-
term success
Our business model which identifies
the key resources and relationships
on which the business relies can
be found on pages 12 and 13 of this
Annual Report.

4. Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation
The Company continues to face
and address a number of risks and
uncertainties, some of which are
set out on pages 20 and 21 of this
Annual Report.

The Board is ultimately responsible
for the Company’s system of internal
control and reviewing its effectiveness
on an ongoing basis. The system
is designed to manage rather than
eliminate the risk of failure to achieve
the Company’s strategic objectives,
and cannot provide absolute assurance
against material misstatement or loss.
The key risk management processes
and internal control procedures include
the following:

• The involvement of the Executive
Directors in day-to-day operations.

• Clearly defined responsibilities and

limits of authority.

• A system of financial reporting,
forecasting and budgeting.
Budgets are prepared annually for
the business based upon a multi-
year strategic plan narrowed to a
current year tactical plan to take
advantage of current opportunities
and address near-term risks.
Reviews occur through the
management structure culminating
in a Company budget which is
considered and approved by the
Board. Company management
accounts are prepared monthly
and submitted to the Board for
review. Variances from budget and
prior year are monitored and the
reasons for significant variances
are reviewed.

• An ongoing process for identifying,
evaluating and seeking to manage
significant risks across the
Company.

Maintain a Dynamic Management
Framework
5. Maintain the Board as a well-
functioning, balanced team led
by the Chair
The Board of the Company consists
of two Non-Executive Directors with
relevant experience to complement the
two Executive Directors and to provide
an independent view to the Executive
Directors. The Non-Executive Directors
are Tom Lamb (Chairman) and André
Schnabl. The two Executive Directors
are Connie Mixon (Chief Executive
Officer) and Haluk Alper (President
and Chief Science Officer). Tim
Eggar, who served as Non-Executive
Chairman during the period from
August 2011, resigned as a Director on
7 July 2021 following completion of
three consecutive three-year periods
of office.

Kimberly Slayton was appointed Chief
Financial Officer on 16 March 2016,
but is not a member of the Board
of Directors.

Of the two Non-Executive Directors,
Tom Lamb was independent on his
appointment as a Director on 29
July 2019. Thereafter, the test of
independence is not appropriate
in relation to the Chairman. André
Schnabl, who was appointed as a
Director on 1 January 2019, is regarded
as independent and was appointed
as Senior Independent Director on 1
January 2019.

Following Mr. Eggar’s retirement,
the Company continues to have two
independent Non-Executive Directors
as required under the QCA Code.
The Board is actively searching for a
further Non-Executive Director.

6. Ensure that between them
the Directors have the necessary
up-to-date experience, skills
and capabilities
The Board believes that, as a whole,
it contains the necessary mix of
experience, skills, personal qualities
(including gender balance) and
capabilities to deliver the strategy of
the Company for the benefit of the
shareholders over the medium to long
term. Full details of the Directors are
set out on pages 22 and 23.

Internal Advisory
Responsibilities
The Company is incorporated in the
State of Georgia, United States, and
the role of Company Secretary is
carried out by the U.S.-based Chief
Financial Officer. An experienced
qualified U.K.-based individual
performs the role of Assistant
Secretary, and provides a sounding
board for the Board on U.K. regulatory
issues. In addition, the Company relies
on its external U.S. and U.K. advisers
to provide additional advice when
required, and to ensure the Directors
are fully aware of their responsibilities
as Directors of an AIM company.

There is a process for ensuring that
any new Director receives advice,
including from the Company’s
nominated adviser and external
lawyers where appropriate, on his/her
responsibilities as a Director of an AIM
company, and the Board would ensure
that any new appointee would benefit
from a full induction programme.

7. Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement
The Company has conducted an
internal evaluation of the Board and its
Committees, and their performance,
annually since Admission to AIM in
August 2011. Further information on
the process used can be found below
under QCA Principle 9 – Nomination
and Governance Committee.

Succession planning at Board and
Committee level, and of senior
management, is formally reviewed
on an annual basis. In addition, all
Directors who wish to stand are
subject to re-election at the Annual
Meeting, and due consideration is
given by the Nomination Committee
as to whether individual Directors are
recommended for re-election.

The Company regularly reviews the
ongoing training requirements of
Directors as part of the annual Board
evaluation process, and Directors
are encouraged to attend relevant
training courses.

8. Promote a corporate culture
that is based on ethical values
and behaviours
The Board believes that the business
culture is consistent with the
Company’s objectives, strategy and
business model as set out in the
Strategic Report and the description
of principal risks and uncertainties.

The Board ensures that the Company
has the means to determine that
ethical values and behaviours are
recognised and respected through
the adoption of appropriate policies,
including a Code of Ethics and
Business Conduct; a Whistleblower
Policy, and a Policy on Equal
Employment Opportunities, all
of which are available on the
Company’s website.

In addition, in response to the Market
Abuse Regulations (‘MAR’) which
came into force on 3 July 2016,
and which apply to AIM companies,
the Company has adopted a Share
Dealing Policy and Dealing Code which
apply to all Directors and employees
of the Company.

Financial StatementsStrategic ReportCorporate GovernanceMYCELX Technologies Corporation
Annual Report & Accounts 2021

Corporate Governance Statement continued

Audit Committee
The members of the Audit Committee
are André Schnabl (Chairman) and
Tom Lamb. Meetings are held not
less than three times a year, and take
into account the work programme
set out in the Audit Committee Guide
published by the QCA. André Schnabl
served as Chairman of the Audit
Committee during the year ended
31 December 2021.

The role of the Committee is set out
in its Terms of Reference which are
available on the Company’s website.

Further information on the work of
the Audit Committee can be found
on page 30.

The Audit Committee met formally
three times in 2021. The Committee
meetings were attended by both
Committee members.

9. Maintain governance structures
and processes that are fit for
purpose and support good
decision-making by the Board
The Board met formally eight times in
2021. All of the Board meetings were
attended by all of the Board members.

The Board has adopted policies in
relation to a Schedule of Matters
Reserved for Board Decision and
the Separation of the Roles of
Chairman and Chief Executive Officer,
copies of which are available on the
Company’s website.

Board Committees
The Company has established an
Audit Committee, a Compensation
Committee, a Nomination and
Governance Committee and an
Executive Committee. The minutes
of the committees are circulated to
the Board, and the committee chairs
also report to the Board on the
outcome of committee meetings at
the subsequent Board meeting. All of
the committees annually review and
re-adopt their terms of reference. The
committees have the following roles:

Compensation Committee
The members of the Compensation
Committee are Tom Lamb (Chairman)
and André Schnabl. Tim Eggar served
on the Compensation Committee until
his resignation on 7 July 2021. The
primary duty of the Committee is to
determine and agree with the Board
the framework or broad policy for
the remuneration of the Company’s
Executive Directors, the officers and
such other members of the executive
management as it is designated to
consider. The remuneration of the
Non-Executive Directors is a matter
for the Chairman and the Company’s
Executive Directors. No Director
or officer may be involved in any
decisions as to their own remuneration.

Meetings of the Committee take
place not less than three times a year.
The Compensation Committee met
formally twice in 2021. Both of the
Committee meetings were attended by
both of the Committee members.

The Terms of Reference of the
Compensation Committee are
available on the Company’s website.
Further information on the work of
the Compensation Committee can be
found on pages 32 to 34.

Executive Committee
The members of the Executive
Committee are Connie Mixon
(Chairman) and Tom Lamb. Tim Eggar
served on the Executive Committee
until his resignation on 7 July 2021.
The Executive Committee has the
power to perform all functions of the
Board between meetings of the full
Board, except as otherwise provided
by the GBCC.

Build Trust
10. Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders
The Board ensures that the market
is kept fully appraised of all material
business developments through
formal announcements. The Company
announces the outcomes of all votes
held at Annual Meetings.

Further information is shown under
QCA Principle 2 above.

Kimberly Slayton
Chief Financial Officer
and Secretary
16 May 2022

Nomination and Governance
Committee
The members of the Nomination
and Governance Committee are Tom
Lamb (Chairman) and André Schnabl.
Tim Eggar served as Chairman of
the Nomination and Governance
Committee until his resignation on
7 July 2021. The Nomination and
Governance Committee is responsible
for identifying and nominating
members of the Board, recommending
Directors to be appointed to each
Committee of the Board and the chair
of such Committees and overseeing
the evaluation of the Board.

An internal evaluation of the Board and
its Committees, and their performance,
has been conducted annually since
Admission to AIM in August 2011. The
individual evaluation takes the form of
interviews conducted by the Chairman
with each Director. A performance
evaluation of the Chairman is carried
out by the Non-Executive Directors in
conjunction with the Chief Executive
Officer. Questionnaires covering the
Board and each Committee are also
completed by each relevant Director,
and provide an opportunity to
comment on Board and Committee
procedures. The results of the 2021
evaluation were presented to the
Board in January 2022, and any
findings are followed up at subsequent
Board meetings.

The Terms of Reference of the
Nomination and Governance
Committee are available on the
Company’s website. The Nomination
and Governance Committee met
formally four times in 2021. All the
Committee meetings were attended
by both of the Committee members.

Further information on the work of the
Nomination Committee can be found
on page 31.

Financial StatementsStrategic ReportCorporate GovernanceMYCELX Technologies Corporation
Annual Report & Accounts 2021

Directors’ Report
for the year ended 31 December 2021

Principal Activities
MYCELX Technologies Corporation
(‘MYCELX’ or the ‘Company’) is a
clean water technology company,
incorporated in the State of Georgia,
United States, which provides
novel water treatment solutions
to the oil and gas, power, marine
and heavy manufacturing sectors.
MYCELX operates globally to deliver
environmentally sustainable, low-cost
solutions to manage both produced
water and downstream process
water effectively.

Future Developments
The Board aims to pursue its corporate
strategies as detailed in the Strategic
Report on pages 1 to 21.

Admission to AIM
MYCELX was admitted to trading on
the AIM market of the London Stock
Exchange on 4 August 2011, at which
time 5,787,455 new Common Shares
were placed to raise gross proceeds
of approximately US$20 million.

On 9 December 2014, the Company
received commitments under a U.S.
private placement (the ‘U.S. Placing’)
in accordance with Regulation D of
the U.S. Securities Act of 1933, as
amended, to subscribe for 468,773
Common Shares raising gross
proceeds of approximately $1.1 million
at a price of US$2.35 (150 pence) per
new share.

On 10 December 2014, the Company
completed a U.K. Placing of 4,826,296
new Common Shares of US$0.025
per value each with U.K. institutional
investors at a price of US$2.35 (150
pence) per new share raising gross
proceeds of approximately $10.7
million. On 5 January 2015, the
Company completed the final closing
of the U.S. Placing and issued 78,977
Common Shares at a price of US$2.35
(150 pence) per new share raising
gross proceeds of approximately
US$186,000. The Company incurred
costs in the issuance of these shares
of approximately $657,000.

On 27 February 2019, the Company
completed the closing of a Placing
of 577,246 Common Shares and a
Subscription for 26,387 Common
Shares, both at a price of 230 pence
per new share, raising US$1.8 million
before expenses. The Company
incurred costs in the issuance of these
shares of approximately $229,000.

On 21 March 2022, the Company
completed the closing of a Placing
of 3,539,273 Common Shares at a
price of US$0.66 (50 pence) per
new share raising gross proceeds
of approximately $2.3 million before
expenses. The Company incurred
costs in the issuance of these shares
of approximately $267,000.

Dividends
The Company has never declared
or paid cash dividends on its capital
stock and does not intend to in the
foreseeable future.

Directors
The following Directors held
office throughout the year ended
31 December 2021 and up to the date
of signing the financial statements.

Tom Lamb (Appointed Chairman
7 July 2021)

Haluk (Hal) Alper (President and
Chief Science Officer)

Connie Mixon (Chief Executive Officer)

André Schnabl (Non-Executive Director
and Senior Independent Director)

Tim Eggar (Chairman) – resigned
7 July 2021

Kimberly Slayton was appointed as
Chief Financial Officer and Secretary
on 16 March 2016. Ms. Slayton reports
to, but is not a member of, the Board
of Directors.

Biographical details of the Directors
are shown on pages 22 and 23.

Election of Directors
Directors are elected annually at
the Company’s Annual Meeting
of Shareholders.

2022 Annual Meeting
Further information will be set
out in the Notice of 2022 Annual
Meeting which will be mailed
to Shareholders together with
this Annual Report. Any change
concerning those arrangements will
be announced through the London
Stock Exchange, and published on
the Company’s website.

Directors’ Remuneration
and Interests
The Remuneration Report is set out
on pages 32 to 34. It includes details
of Directors’ remuneration, interests in
the Common Shares of the Company
and share options.

Corporate Governance
The Board’s Corporate Governance
Statement is set out on pages 24 to 27.

Going Concern
Having considered the Company’s
funding position and financial
projections, the Directors have a
reasonable expectation that the
Company has adequate resources
to continue in operational existence
for the foreseeable future and has
prepared the financial statements on
that basis. In assessing whether the
going concern basis is appropriate,
the Directors have considered
the information contained in the
financial statements, the latest
business plan, revenue forecasts
and the latest working capital
forecasts. These forecasts have
been subject to sensitivity tests and
the Directors are satisfied that the
Company has adequate resources
to continue in operational existence
for the foreseeable future. See
Note 1 of the financial statements
for further discussion.

Share Capital and Substantial Shareholdings
At 16 May 2022, a total of 22,983,023 Common Shares were outstanding.
At 16 May 2022, the Company had received notification, or was otherwise aware,
that the following are interested in more than three percent of the issued ordinary
share capital:

Octopus Investments

Connie Mixon

Canaccord Genuity Wealth Management

Hargreaves Lansdown Nominees

Hal Alper

Artemis Investment Management

22.30%

11.11%

11.09%

6.40%

5.31%

5.30%

Directors’ Statement as to Disclosure of Information to Auditors
The Directors who served as members of the Board at 31 December 2021 have
approved this report. Each of these Directors confirms that:

• so far as each Director is aware, there is no relevant audit information of which

the Company’s auditor is not aware; and

• Directors have taken all steps that they ought to have taken as Directors in
order to make themselves aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.

Independent Auditors
During the year the Board engaged Deloitte & Touche LLP, who have indicated
their willingness to continue in office. A resolution concerning their reappointment
will be voted on at the Annual Meeting.

Directors Indemnity Insurance
All Directors benefit from qualifying third party indemnity provisions in place
during the financial year and at the date of this report.

By Order of the Board

Tom Lamb
Chairman
16 May 2022

Financial StatementsStrategic ReportCorporate GovernanceMYCELX Technologies Corporation
Annual Report & Accounts 2021

Audit Committee Report
for the year ended 31 December 2021

Committee Members
The members of the Audit Committee
are currently André Schnabl (Chair)
and Tom Lamb. Meetings are normally
held not less than three times a year
and are based on the work programme
set out in the Audit Committee Guide
published by the QCA.

Roles and Responsibilities
Under its Terms of Reference, which can
be found on the Company’s website, the
Audit Committee reviews inter alia:

Monitoring the integrity of the
Company’s financial statements,
including its annual and
interim reports, preliminary
announcements and any other
formal statements relating to
its financial performance, and
reviewing and reporting to the
Board on significant financial
reporting issues and judgements
which those statements contain;

II.

Reviewing the Company’s
internal financial controls that
identify, assess, manage and
monitor financial risks, and
other internal control and risk
management systems;

III. Reviewing and making

recommendations in relation to
the adequacy and security of the
Company’s arrangements for its
employees to raise concerns over
compliance, whistleblowing and
fraud; and

IV. Making recommendations to
the Board in relation to the
appointment, re-appointment
and removal of the Company’s
external auditor.

Committee Meetings
Meetings are attended by Committee
members, and the Chairman, Chief
Executive Officer, Chief Financial
Officer and external auditors are
invited as appropriate. The Committee
normally meets at least once a year
with the external auditors without the
Executive Directors being present.

Financial Information
The Company prepares detailed
budget and working capital
projections, which are approved
annually by the Board and are
maintained and updated regularly
throughout the year. Detailed
management accounts and working
capital cash flows are prepared on
a monthly basis and compared to
budgets and projections to identify
any significant variances.

Financial Statements
The Audit Committee has considered
the integrity of the Company’s
2021 financial statements and
reviewed the appropriateness of its
critical accounting policies and the
judgements made in applying them.
The year-end financial statements
were reviewed and discussed with
Deloitte & Touche LLP, and the
Committee concluded that in its view
the statements were fair, balanced and
understandable, and recommended
their adoption to the Board.

Significant Areas
The significant reporting matters
and judgements considered by the
Committee during the year included:

• Going concern – see page 28,
for consideration by the Board
regarding going concern

• Valuation of assets (inventory)
• COVID-19

Audit Review
The Audit Committee monitors the
Group’s relationship with the external
auditor, Deloitte & Touche LLP, to
ensure that external independence
and objectivity has been maintained.
The Committee has reviewed Deloitte
& Touch LLP’s audit process, the
findings from the audit of the 2021
financial year, and the effectiveness
of the external audit process. The
Committee reviewed the quality and
cost effectiveness of the external audit,
and the independence and objectivity
of the auditors.

The Audit Committee reviews annually
the quality and cost effectiveness
of the external audit and the
independence and objectivity of the
external auditors. Audit performance
is reviewed annually and audit partner
rotation requirements are observed.

The Committee obtained confirmation
from Deloitte & Touche LLP that their
independence and ethics policies
complied with the International Code
of Ethics for Professional Accountants
issued by the International Ethics
Standards Board for Accountants, and
the rules and standards of the U.S.
Securities and Exchange Commission
and the Public Company Accounting
Oversight Board, and that they are
independent and maintain internal
safeguards to ensure their objectivity.
No contractual obligations exist that
restrict the Company’s choice of
external auditor and the Committee
is satisfied that the external auditor
remains independent.

Non-Audit Services
The Committee has established
policies determining the non-audit
services that the external auditors can
provide and the procedures required
for approval of any such engagement,
and on the engagement of any former
employees of the auditors.

Deloitte & Touche LLP was engaged
to perform the 2021 audit for fees of
$180,000 (2020: $170,000) and was also
engaged to perform tax work in Saudi
Arabia and audit-related services in 2021.

Internal Audit
There is currently no formal internal
audit function in place which the
Audit Committee has concluded
is appropriate given the size and
complexity of the business and
the mitigating controls in place.
The Committee will continue to
keep under review the need for the
Group to introduce such a function.

Approved on behalf of the Audit
Committee by:

Both Committee members attended
each of the three meetings held during
the year ended 31 December 2021.

External Audit
Deloitte & Touche LLP have provided
audit services to the Company since 2019.

André Schnabl
Chairman, Audit Committee
16 May 2022

Nomination Committee Report
for the year ended 31 December 2021

• approves the re-election by

shareholders of Directors under the
annual re-election provisions of the
Company’s byelaws;

•

reviews annually the time required
from Non-Executive Directors
and officers;

• considers Director independence
under the Corporate Governance
Code.

Significant Areas
The significant matters considered
by the committee during the year
included succession planning for the
position of Company Chairman. Tim
Eggar was originally appointed to the
Board in August 2011 and served three
consecutive three-year terms of office.
Tim Eggar notified the Board of his
intention not to stand for re-election
as a Director at the Company’s Annual
Meeting on 7 July 2021. Following Mr.
Eggar’s retirement, the Board resolved
that Mr. Lamb would be appointed as
Company Chairman.

Following Mr. Eggar’s retirement,
the Company continues to have
two independent Non-Executive
Directors as required under the QCA
Code. The Board intends to consider
the appointment of a further Non-
Executive Director in due course.

Approved on behalf of the Nomination
Committee by:

Tom Lamb
Chairman, Nomination Committee
16 May 2022

Committee Members
The members of the Nomination
Committee are currently Tom Lamb
(Chair) and André Schnabl (Senior
Independent Director).

Committee Meetings
Meetings are held not less than
twice a year and are attended by
all Committee members. The Chief
Executive Officer may also be invited
as appropriate.

All current Committee members
attended the four meetings
held during the year ended
31 December 2021.

Roles and Responsibilities
Under its Terms of Reference, which
can be found on the Company’s
website, the Nomination Committee
inter alia:

•

reviews the structure, size and
composition (including the skills,
knowledge, experience and
diversity) of the Board and makes
recommendations to the Board
with regard to any changes;

• gives full consideration to

succession planning for Directors,
officers and other senior
executives, taking into account
the challenges and opportunities
facing the Company, and the skills
and expertise needed on the Board
in the future;

• keeps under review the leadership

needs of the Company, both
executive and non-executive, with
a view to ensuring the continued
ability of the Company to compete
effectively in the marketplace;

•

reviews the results of the Board
performance evaluation process
that relate to the composition of
the Board;

• considers the re-appointment of
Non-Executive Directors at the
conclusion of their specified term
of office;

Financial StatementsStrategic ReportCorporate GovernanceMYCELX Technologies Corporation
Annual Report & Accounts 2021

Directors’ Remuneration Report
for the year ended 31 December 2021

As a U.S. incorporated AIM-listed
Company, MYCELX is not required to
comply with the following regulations:
disclosure requirements of the
Directors’ Remuneration Report
Regulations 2013; the UKLA Listing
Rules; the disclosure provisions under
schedule 8 to SI 2008/410 of the
Large and Medium-sized Companies
and Groups (Accounts and Reports)
Regulations 2008. Consequently,
certain disclosures contained in these
regulations are not included below.

The following disclosures are
therefore made on a voluntary basis.
The information is unaudited.

Remuneration Policy
The Company’s remuneration policy is
based on the following broad principles:

•

to provide competitive
remuneration packages to attract
and retain quality individuals;

to align the interests of
management with the interests
of shareholders; and

to set the pay of the Executive
Directors with due account taken
of (i) pay and conditions throughout
the Company and (ii) corporate
governance best practice.

Remuneration Consists of the
Following Elements:

Base Pay
Executive Directors’ base pay is
designed to reflect the role and
responsibility of the individual within
the Company. Salary levels are
reviewed annually.

Annual Bonus
All Executive Directors and members
of senior management participate in
the Company’s annual bonus scheme,
which is based on the achievement of
individual and Company performance
targets. Annual bonuses are designed
to incentivise performance and
reward achievement in line with the
agreed corporate strategy. Due to the
continuing economic impact of the
COVID-19 pandemic and the need for
the Company to conserve its funds,
no bonuses were paid in respect of
2021 to Executive Directors.

Long-term Incentives
The Compensation Committee
considers that equity-based long-
term incentive schemes are the most
effective way to align the interests of
participants and shareholders.

Service Contracts

Connie Mixon
Ms. Mixon entered into an employment
agreement with the Company on
29 July 2011 to serve as its Chief
Executive Officer and to serve on the
Board of Directors and to serve as
Chair of the Executive Committee.
The employment agreement provides
for, among other things: (i) salary of
$325,000 and participation in the
Executive Bonus Plan to be directed
by the Compensation Committee; (ii)
grant of 163,017 options to purchase
Common Shares of the Company
vesting ratably over a three-year
period; and (iii) a two-year term
(automatically renewing for successive
one-year periods). The agreement
may only be terminated by Ms.
Mixon upon six months’ notice or
by the Company upon providing for
one year’s base salary as severance
if she is terminated without cause
or resigns for good reason. The
agreement provides for customary
non-solicitation, non-compete and
non-disclosure restrictions.

An increase in Ms. Mixon’s base
salary to $400,000 was approved by
the Compensation Committee with
effect 1 January 2019. As part of a
programme to reduce costs, Ms. Mixon
agreed to a reduction of 15 percent in
base salary to $340,000 with effect
1 April 2019. In March 2020, Ms. Mixon
agreed to a further reduction in
base salary to $323,000 with effect
16 April 2020. Ms. Mixon’s base salary
was further reduced to $275,000 with
effect 1 October 2020. On 1 January
2021, Ms. Mixon’s base salary was
partially restored to $350,000.

Hal Alper
Mr. Alper entered into an employment
agreement with the Company on
29 July 2011 to serve as its President
and Chief Science Officer and to
serve on the Board of Directors.
The employment agreement provides
for, among other things: (i) salary of
$225,000 and a technology incentive
bonus between $75,000 and $150,000
per year; (ii) grant of 163,017 options
to purchase Common Shares vesting
ratably over a three-year period; (iii)
a three-year term (automatically
renewing for successive one-year
periods) and no termination without
cause by either party; and (iv)
Company ownership of intellectual
property developed by Mr. Alper: (a)
until 4 August 2013; or (b) that relates
to the Company’s principal business
or the mercury filtration technology,
and a Company option to purchase
any intellectual property developed
by Mr. Alper that is developed after
4 August 2013 and does not relate to
the principal business or the mercury
filtration technology. The terms of
purchase are that Mr. Alper will be
entitled to receive three percent on
gross sales of products relating to that
intellectual property, six percent on
license fees received by the Company
for the license of such intellectual
property and a non-refundable royalty
equal to the amount of $100,000 for
each new and distinct area of business
covered by such intellectual property.
The agreement provides for customary
non-solicitation, non-compete and
non-disclosure restrictions.

As part of a programme to reduce
costs, the agreement with Mr. Alper
was amended in September 2015 (i)
to reduce Mr. Alper’s base salary by
15 percent to $219,013 which is fixed
for the period ending 15 September
2018; (ii) to replace the technology
incentive bonus with an entitlement
to a bonus in respect of each calendar
year of employment as determined
and administered by the Company’s
Compensation Committee; and (iii)
to extend the term of the agreement
for the three-year period ending
15 September 2018.

In September 2018, Mr. Alper’s agreement was extended for another year and an increase in his base salary to $250,000
was approved by the Compensation Committee with effect 16 September 2018.

As part of a programme to reduce costs, Mr. Alper agreed to a reduction of 20 percent in base salary to $200,000 with
effect 1 April 2019. In March 2020, Mr. Alper agreed to a further reduction in base salary to $190,000 with effect 16 April 2020.
Mr. Alper’s base salary was further reduced to $171,000 with effect 1 October 2020. On 1 January 2021, Mr. Alper’s base salary
was partially restored to $200,000.

Annual Re-election of Directors
All Directors are elected each year by the shareholders at the Annual Meeting, to serve until the next succeeding Annual
Meeting and until their successors are elected and qualified, or until their earlier death, resignation or removal.

Directors’ Remuneration
The Directors’ Remuneration for 2021 was as follows:

Salary And
Directors’ Fees
$US

Benefits
In Kind
$US

Performance
Related Bonus
$US

2021
Total
$US

2020
Total
$US

Non-Executive Chairman
Tom Lamb
Tim Eggar*

$43,597
$25,147

–
–

Executive
Connie Mixon
Hal Alper

Non-Executive
André Schnabl

$350,000
$200,000

$17,295
$23,597

$39,100

–

*For period 1 January to 7 July 2021.

Benefits in kind include medical and life insurance.

–
–

–

$43,597
$25,147

$40,825
$50,588

$367,295
$223,597

$332,450
$209,022

$39,100

$40,825

As part of a programme to reduce costs, Tim Eggar, André Schnabl and Tom Lamb agreed to a 15 percent reduction in
Directors’ fees with effect 1 April 2020.

The interests of the Directors at 16 May 2022 in the shares of the Company, not including interests of investment funds in
respect of which the Director may have a managerial interest, and with respect to which such Director disclaims beneficial
ownership, were:

Tom Lamb
Hal Alper
Connie Mixon (1)
André Schnabl

Number of
Common Shares

Percentage of
Issued Share
Capital

292,175
1,219,546
2,552,636
46,413

1.27
5.31
11.11
0.20

(1) The aggregate number of shares shown for Ms. Mixon includes: (a) 150,000 shares held by limited liability companies controlled by
Ms. Mixon; (b) 202,646 shares held by or on behalf of Ms. Mixon’s children; and (c) 10,000 shares which are held by the estate of her
late husband Mark Mixon (0.05 percent of the issued share capital) as a custodian.

Financial StatementsStrategic ReportCorporate GovernanceMYCELX Technologies Corporation
Annual Report & Accounts 2021

Directors’ Remuneration Report continued
for the year ended 31 December 2021

Share Options
Options over Common Shares awarded to Directors under the Omnibus Performance Incentive Plan in place on
31 December 2021 were:

Option Holder

Connie Mixon

Type of Award

Employee Stock Option

Hal Alper

Employee Stock Option

Date of Vesting

1 January 2012
1 January 2013
1 January 2014
31 December 2017
31 December 2018
9 April 2021

1 January 2014
9 April 2021

Exercise Price
($US)

Number of Shares

$3.44
$3.44
$3.44
$0.75
$0.75
$0.69

$3.44
$0.69

54,339
54,339
54,339
20,000
20,000
210,000

54,339
70,000

No Director exercised any options over Common Shares during the year.

Tom Lamb
Chairman, Compensation Committee
16 May 2022

Directors’ Responsibilities Statement

Under the GBCC, all corporate powers are exercised by or under the authority of, and the business and affairs of the
corporation managed under the direction of, its Board of Directors, subject to any limitation set forth in the articles of
incorporation. Under the GBCC, the corporation is required to prepare and disseminate to its shareholders, upon request,
financial statements for each fiscal year. Consequently, the Company has prepared financial statements in accordance with
Generally Accepted Accounting Principles in the United States (‘U.S. GAAP’).

Under the GBCC:
1.

A Director shall discharge the duties of a Director, including duties as member of a committee, in a manner he or she
believes in good faith to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances.

In discharging the duties of a Director, a Director is entitled to rely on information, opinions, reports, or statements,
including financial statements and other financial data, if prepared or presented by:

One or more officers or employees of the corporation whom the Director reasonably believes to be reliable and
competent in the matters presented; or

b. Legal counsel, public accountants, or other persons as to matters the Director reasonably believes are within the

person’s professional or expert competence; or
A committee of the Board of Directors of which the Director is not a member if the Director reasonably believes the
committee merits confidence.

A Director is not entitled to rely if the Director has knowledge concerning the matter in question that makes reliance
otherwise permitted by subsection (2) above unwarranted.

4. A Director is not liable to the corporation or its shareholders for any action taken as a Director, or any failure to take any

action, if the Director performed the duties of the Director’s office in compliance with the foregoing.

André Schnabl
Chairman, Audit Committee
16 May 2022

Contents

Financial Statements

Independent Auditors’ Report

Statements of Operations

Balance Sheets

Statements of Stockholders’ Equity

Statements of Cash Flows

Notes to the Financial Statements

Financial StatementsStrategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

-2- INDEPENDENT AUDITOR’S REPORT To the Board of Directors and Shareholders of MYCELX Technologies Corporation: Opinion We have audited the financial statements of MYCELX Technologies Corporation (the "Company"), which comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements (collectively referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are issued. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from Deloitte & Touche LLP 191 Peachtree Street Suite 2000 Atlanta, Georgia 30303 USA Tel: +1 404 220 1530 Fax: +1 404 220 1530 www.deloitte.com -2- INDEPENDENT AUDITOR’S REPORT To the Board of Directors and Shareholders of MYCELX Technologies Corporation: Opinion We have audited the financial statements of MYCELX Technologies Corporation (the "Company"), which comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements (collectively referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are issued. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from Deloitte & Touche LLP 191 Peachtree Street Suite 2000 Atlanta, Georgia 30303 USA Tel: +1 404 220 1530 Fax: +1 404 220 1530 www.deloitte.com 37

-3- fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Other Information Included in the Annual Report Management is responsible for the other information included in the annual report. The other information comprises the information included in the annual report but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audits of the financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. DELOITTE & TOUCHE LLP May 16, 2022 Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Statements of Operations
(USD, in thousands, except share data)

For the Year Ended 31 December:

Revenue
Cost of goods sold

Gross profit

Operating expenses:
Research and development
Selling, general and administrative
Depreciation and amortisation
Gain on sale of property and equipment

Total operating expenses

Operating loss

Other income (expense)

Gain upon extinguishment of debt
Interest expense
Loss before income taxes

Provision for income taxes

Net loss

Loss per share – basic

Loss per share – diluted

2021

8,478
5,203

3,275

223
6,939
205
(2,584)

4,783

(1,508)

403
(24)
(1,129)

(296)

(1,425)

(0.07)

2020

7,104
5,512

1,592

64
7,271
310
–

7,645

(6,053)

404
(117)
(5,766)

(328)

(6,094)

(0.31)

Shares used to compute basic loss per share

Shares used to compute diluted loss per share

19,443,750

The accompanying notes are an integral part of the financial statements.

Balance Sheets
(USD, in thousands, except share data)

As at 31 December:

Assets
Current Assets
Cash and cash equivalents
Restricted cash
Accounts receivable – net
Unbilled accounts receivable
Inventory
Prepaid expenses
Other assets

Total Current Assets

Property and equipment – net
Intangible assets – net
Operating lease asset – net

Total Assets

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable
Payroll and accrued expenses
Contract liability
Customer deposits
Operating lease obligations – current
Note payable – current
Line of credit

Total Current Liabilities

Operating lease obligations – long-term
Note payable – long-term

Total Liabilities

2021

2020

3,128
84
1,867
175
4,320
203
399

10,176

3,249
774
1,459

15,658

683
758
54
74
251
–
–

1,820

1,216
–

3,036

3,292
500
1,479
–
5,642
84
107

11,104

6,756
790
482

19,132

473
540
745
492
175
102
997

3,524

275
1,541

5,340

Stockholders’ Equity
Common stock, $0.025 par value, 100,000,000 shares authorised,
19,443,750 shares issued and outstanding at 31 December 2021 and 2020.
Additional paid-in capital
Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of the financial statements.

486
42,655
(30,519)

12,622

15,658

486
42,400
(29,094)

13,792

19,132

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Statements of Stockholders’ Equity
(USD, in thousands)

Balances at 31 December 2019
Stock-based compensation expense
Net loss for the period

Balances at 31 December 2020
Stock-based compensation expense
Net loss for the period

Common Stock

19,443,750
–
–

Balances at 31 December 2021

19,443,750

The accompanying notes are an integral part of the financial statements.

Additional
Paid-in
Capital
$

42,358
42
–

42,400
255
–

42,655

Accumulated
Deficit
$

(23,000)
–
(6,094)

(29,094)
–
(1,425)

(30,519)

486
–
–

486

Total
$

19,844
42
(6,094)

13,792
255
(1,425)

12,622

Statements of Cash Flows
(USD, in thousands)

For the Year Ended 31 December:

2021

2020

Cash flow from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortisation
Gain on sale of property and equipment
Inventory reserve adjustment
Gain upon extinguishment of debt
Stock compensation

Change in operating assets and liabilities:

Accounts receivable – net
Unbilled accounts receivable
Inventory
Prepaid expenses
Prepaid operating leases
Other assets
Accounts payable
Payroll and accrued expenses
Contract liability
Customer deposits

Net cash used in operating activities

Cash flow from investing activities
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for internally developed patents

Net cash provided by (used in) investing activities

Cash flows from financing activities
Payments on notes payable
Proceeds from notes payable
Advances on line of credit
Payments on line of credit

Net cash (used in) provided by financing activities

Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of year

Cash, cash equivalents and restricted cash, end of year

Supplemental disclosures of cash flow information:
Cash payments for interest
Cash payments for income taxes
Non-cash movements of inventory and fixed assets
Non-cash operating ROU assets
Non-cash operating lease obligations

The accompanying notes are an integral part of the financial statements.

(1,425)

1,124
(2,584)
(45)
(401)
255

(388)
(175)

1,265
(119)
40
(292)
210
218
(691)
(418)

(3,426)

(327)
5,455
(43)

5,085

(1,643)
401
–
(997)

(2,239)

(580)
3,792

3,212

30
300
102
1,192
1,192

(6,094)

1,427
–
1,061
(401)
42

2,508
–
(562)
134
10
280
(313)
37
745
(372)

(1,498)

(110)
–
(49)

(159)

(96)
401
2,875
(1,878)

1,302

(355)
4,147

3,792

117
247
–
–
–

Strategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

Notes to the Financial Statements

1. Nature of Business and Basis of Presentation
Basis of presentation – These financial statements have been prepared using recognition and measurement principles
of Generally Accepted Accounting Principles in the United States of America (‘U.S. GAAP’).

Nature of business – MYCELX Technologies Corporation (‘MYCELX’ or the ‘Company’) was incorporated in the State of
Georgia on 24 March 1994. The Company is headquartered in Norcross, Georgia with operations in Houston, Texas, Saudi
Arabia and the United Kingdom. The Company provides clean water technology equipment and related services to the oil and
gas, power, marine and heavy manufacturing sectors and the majority of its revenue is derived from the Middle East, Nigeria
and the United States.

Liquidity – The Company meets its day-to-day working capital and other cash flow requirements through operations and
loan facilities. The Company had a Note Payable (Note 10) that matured in March 2023 and access to a line of credit (Note
8) that renewed annually. However, the Note and the line of credit were paid in full, and $500,000 of cash was reclassified
from restricted cash, during the period when the Company completed the sale of its building in Duluth, Georgia, USA for total
consideration of $5.4 million. The sale enabled the Company to right-size its office space needs across its main operating
locations and provided cash proceeds, after repayment of the Note Payable and line of credit, of $2.8 million which is being
used for working capital purposes to support the business needs. Post the period end, the Company completed the closing
of a placing raising gross proceeds of approximately $2.3 million before expenses (see Note 16). The proceeds from the
transaction will be used to accelerate the commercialisation of the Company’s PFAS remediation system in the U.S., and in
order to support working capital across the Company’s core markets. The Company actively manages its financial risk by
operating Board-approved financial policies that are designed to ensure that the Company maintains an adequate level of
liquidity and effectively mitigates financial risks.

Whilst macro events are creating uncertainty within world markets and volatility in oil prices, today’s high oil price bodes
well for the completion of new commercial agreements with both existing and new international customers. On the basis of
current financial projections, including a downside scenario sensitivity analysis taking into account the potential for lingering
effects of the COVID-19 pandemic whilst considering revenues already under contract and adjusting only for cost of goods
sold, the Company believes that it has adequate resources to continue in operational existence for the foreseeable future of at
least 12 months from the date of the issuance of these financial statements and, accordingly, consider it appropriate to adopt
the going concern basis in preparing these Financial Statements.

2. Summary of Significant Accounting Policies
Use of estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the amounts reported in the
financial statements and accompanying notes. Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised. The primary estimates and
assumptions made by management relate to the inventory valuation, accounts receivable valuation, useful lives of property
and equipment, volatility used in the valuation of the Company’s share-based compensation and the valuation allowance on
deferred tax assets. Although these estimates are based on management’s best knowledge of current events and actions
the Company may undertake in the future, actual results ultimately may differ from the estimates and the differences may be
material to the financial statements.

Revenue recognition – The Company’s revenue consists of filtration media product, equipment leases, professional services
to operate the leased assets, turnkey operations and equipment sales. These sales are based on mutually agreed upon pricing
with the customer prior to the delivery of the media product and equipment. The Company recognises revenue when it
satisfies a performance obligation by transferring control over a product or service to a customer.

Revenue from filtration media sales and spare parts is billed and recognised when products are shipped to the customer.
Revenue from equipment leases is recognised over time as the equipment is available for customer use and is typically billed
monthly. Revenue from professional services provided to monitor and operate the equipment is recognised over time when
the service is provided and is typically billed monthly. Revenue from turnkey projects whereby the Company is asked to
manage the water filtration process end to end is recognised on a straight-line basis over time as the performance obligation,
in the context of the contract, is a stand-ready obligation to filter all water provided. Revenue from contracts related to
construction of equipment is recognised upon shipment of the equipment to the customer because the contractual terms
state that control transfers at the point of shipment and there is no enforceable right to payments made as customer deposits
prior to that date. Customer deposits for equipment sales represent payments made prior to transferring control at the point
of shipment that can be refunded at any time when requested by the customer.

Sales tax charged to customers is presented on a net basis within the statements of operations and therefore recorded as
a reduction of net revenues. Shipping and handling costs associated with outbound freight after control over a product has
transferred to a customer are accounted for as a fulfilment cost and are included in cost of goods sold.

The Company’s contracts with the customers state the final terms of the sales, including the description, quantity, and
price of media product, equipment (sale or lease) and the associated services to be provided. The Company’s contracts are
generally short-term in nature and in most situations, the Company provides products and services ahead of payment and
has fulfilled the performance obligation prior to billing.

The Company believes the output method is a reasonable measure of progress for the satisfaction of its performance
obligations that are satisfied over time, as it provides a faithful depiction of (1) performance toward complete satisfaction of
the performance obligation under the contract and (2) the value transferred to the customer of the services performed under
the contract. All other performance obligations are satisfied at a point in time upon transfer of control to the customer.

The Company’s contracts with customers often include promises to transfer multiple products and services. Determining
whether products and services are considered distinct performance obligations that should be accounted for separately
versus together may require significant judgement. Judgement is required to determine stand-alone selling price (‘SSP’) for
each distinct performance obligation. The Company develops observable SSP by reference to stand-alone sales for identical
or similar items to similarly situated clients at prices within a sufficiently narrow range.

All equipment sold by the Company is covered by the original manufacturer’s warranty. The Company does not offer an
additional warranty and has no related obligations.

Unbilled accounts receivable represents revenue recognised in excess of amounts billed. Contract liability represents billings in
excess of revenue recognised. Unbilled accounts receivable at 31 December 2021 and 2020, and 1 January 2020 was $175,000,
$nil and $nil, respectively. Contract liability at 31 December 2021 and 2020, and 1 January 2020 was $54,000, $745,000 and
$nil, respectively.

Corporate GovernanceFinancial StatementsStrategic ReportCorporate GovernanceFinancial StatementsMYCELX Technologies Corporation
Annual Report & Accounts 2021

2. Summary of Significant Accounting Policies continued
Timing of revenue recognition for each of the periods and geographic regions presented is shown below:

Year Ending 31 December
(USD, in thousands)

Middle East
United States
Nigeria
Other

Total revenue recognised under ASC 606
Total revenue recognised under ASC 842

Total revenue

Equipment Leases,
Turnkey Arrangements, and Services
Recognised Over Time

Consumable Filtration Media,
Equipment Sales and Service
Recognised at a Point in Time

2021

4,550
–
–
–

4,550
25

4,575

2020

5,181
–
–
3

5,184
117

5,301

2021

838
1,311
1,312
442

3,903
–

3,903

2020

88
1,394
3
318

1,803
–

1,803

Contract costs – The Company capitalises certain contract costs such as costs to obtain contracts (direct sales commissions)
and costs to fulfil contracts (upfront costs where the Company does not identify the set-up fees as a performance obligation).
These contract assets are amortised over the period of benefit, which the Company has determined is customer life and
averages one year.

During the years ended 31 December 2021 and 2020, the Company did not have any costs to obtain a contract and any costs
to fulfil a contract were inconsequential.

Cash, cash equivalents and restricted cash – Cash and cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash within ninety (90) days of purchase. At 31 December 2021, all of the Company’s cash,
cash equivalent and restricted cash balances were held in checking and money market accounts. The Company maintains its
cash in bank deposit accounts which, at times, may exceed federally insured limits. At 31 December 2021 and 2020, cash in
non-U.S. institutions was $25,000 and $83,000, respectively. The Company has not experienced any losses in such accounts.
The Company classifies as restricted cash all cash whose use is limited by contractual provisions. At 31 December 2021
restricted cash included $84,000 in a money market account to secure the Company’s corporate credit card and a stand-
by letter of credit. At 31 December 2020, restricted cash included $500,000 cash on deposit in a money market account as
required by a lender (see Note 10). The restriction was released when the Note Payable was paid in full during the period with
proceeds from the sale of the Duluth property.

Reconciliation of cash, cash equivalents and restricted cash at 31 December 2021 and 2020:

Cash and cash equivalents
Restricted cash

Total cash, cash equivalents and restricted cash

31 December 2021

US$000

31 December 2020
US$000

3,128
84

3,212

3,292
500

3,792

Accounts receivable – Trade accounts receivable are stated at the amount management expects to collect from outstanding
balances. The Company provides credit in the normal course of business to its customers and performs ongoing credit
evaluations of those customers and maintains allowances for doubtful accounts, as necessary. Accounts are considered
past due based on the contractual terms of the transaction. Credit losses, when realised, have been within the range of the
Company’s expectations and, historically, have not been significant. The allowance for doubtful accounts at 31 December 2021
and 2020 was $90,000 and $33,000, respectively.

Notes to the Financial Statements continuedInventories – Inventories consist primarily of raw materials and filter media finished goods as well as equipment to house the
filter media and are stated at the lower of cost or net realisable value. Equipment that is in the process of being constructed
for sale or lease to customers is also included in inventory (work-in-progress). The Company applies the Average Cost method
to account for its inventory. Manufacturing work-in-progress and finished products inventory include all direct costs, such
as labour and materials, and those indirect costs which are related to production, such as indirect labour, rents, supplies,
repairs and depreciation costs. A valuation reserve is recorded for slow-moving or obsolete inventory items to reduce the
cost of inventory to its net realisable value. The Company determines the valuation by evaluating expected future usage as
compared to its past history of utilisation and future expectations of usage. At 31 December 2021 and 2020, the Company had
REGEN-related inventory of 39 percent and 34 percent of the total inventory balance, respectively, which is in excess of the
Company’s current requirements based on the recent level of sales. The inventory is associated with efforts to expand into
the Enhanced Oil Recovery market that the Company has identified as a large global market. These efforts should reduce this
inventory to desired levels over the near term and Management believes no loss will be incurred on its disposition. No estimate
can be made of a range of amounts of loss that are reasonably possible should the efforts not be successful.

Prepaid expenses and other current assets – Prepaid expenses and other current assets include non-trade receivables that
are collectible in less than 12 months, security deposits on leased space and various prepaid amounts that will be charged to
expenses within 12 months. Non-trade receivables that are collectible in 12 months or more are included in long-term assets.

Property and equipment – All property and equipment are valued at cost. Depreciation is computed using the straight-line
method for reporting over the following useful lives:

Building
Leasehold improvements
Office equipment
Manufacturing equipment
Research and development equipment
Purchased software
Equipment leased to customers

39 years
Lease period or 1–5 years (whichever is shorter)
3–10 years
5–15 years
5–10 years
Licensing period or 5 years (whichever is shorter)
5–10 years

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalised.
Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation expense includes depreciation
on equipment leased to customers and is included in cost of goods sold.

Intangible assets – Intangible assets consist of the costs incurred to purchase patent rights and legal and registration costs
incurred to internally develop patents. Intangible assets are reported net of accumulated amortisation. Patents are amortised
using the straight-line method over a period based on their contractual lives which approximates their estimated useful lives.

Impairment of long-lived assets – Long-lived assets to be held and used, including property and equipment and intangible
assets with definite useful lives, are assessed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If the total of the expected undiscounted future cash flows is less
than the carrying amount of the asset, a loss, if any, is recognised for the difference between the fair value and carrying
value of the assets. Impairment analyses, when performed, are based on the Company’s business and technology strategy,
management’s views of growth rates for the Company’s business, anticipated future economic and regulatory conditions, and
expected technological availability. For purposes of recognition and measurement, the Company groups its long-lived assets
at the lowest level for which there are identifiable cash flows, which are largely independent of the cash flows of other assets
and liabilities. No impairment charges were recorded in the years ended 31 December 2021 and 2020.

Research and development costs – Research and development costs are expensed as incurred. Research and development
expense for the years ended 31 December 2021 and 2020 was approximately $223,000 and $64,000, respectively.

Advertising costs – The Company expenses advertising costs as incurred. Advertising expense for the years ended
31 December 2021 and 2020 was $5,000 and $nil, respectively, and is recorded in selling, general and administrative expenses.

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2. Summary of Significant Accounting Policies continued
Income taxes – The provision for income taxes for annual periods is determined using the asset and liability method, under
which deferred tax assets and liabilities are calculated based on the temporary differences between the financial statement
carrying amounts and income tax bases of assets and liabilities using currently enacted tax rates. The deferred tax assets are
recorded net of a valuation allowance when, based on the weight of available evidence, it is more likely than not that some
portion or all of the recorded deferred tax assets will not be realised in future periods. Decreases to the valuation allowance
are recorded as reductions to the provision for income taxes and increases to the valuation allowance result in additional
provision for income taxes. The realisation of the deferred tax assets, net of a valuation allowance, is primarily dependent on
the ability to generate taxable income. A change in the Company’s estimate of future taxable income may require an addition
or reduction to the valuation allowance.

The benefit from an uncertain income tax position is not recognised if it has less than a 50 percent likelihood of being
sustained upon audit by the relevant authority. For positions that are more than 50 percent likely to be sustained, the
benefit is recognised at the largest amount that is more-likely-than-not to be sustained. Where a net operating loss carried
forward, a similar tax loss or a tax credit carry forward exists, an unrecognised tax benefit is presented as a reduction to a
deferred tax asset. Otherwise, the Company classifies its obligations for uncertain tax positions as other non-current liabilities
unless expected to be paid within one year. Liabilities expected to be paid within one year are included in the accrued
expenses account.

The Company recognises interest accrued related to tax in interest expense and penalties in selling, general and administrative
expenses. During the years ended 31 December 2021 and 2020 the Company recognised no interest or penalties.

Earnings per share – Basic earnings per share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed using the weighted average number of common
and potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of the incremental common
shares issuable upon conversion of the exercise of common stock options. Potentially dilutive shares are excluded from the
computation if their effect is antidilutive. Total common stock equivalents consisting of unexercised stock options that were
excluded from computing diluted net loss per share were approximately 1,782,420 for the year ended 31 December 2021 and
there were no adjustments to net income available to stockholders as recorded on the statement of operations.

The following table sets forth the components used in the computation of basic and diluted net (loss) profit per share for the
periods indicated:

Basic weighted average outstanding shares of common stock
Effect of potentially dilutive stock options
Diluted weighted average outstanding shares of common stock
Anti-dilutive shares of common stock excluded from diluted weighted
average shares of common stock

Years Ended 31 December

2021

2020

19,443,750
–
19,443,750

1,782,420

1,348,638

Fair value of financial instruments – The Company uses the framework in ASC 820, Fair Value Measurements, to determine
the fair value of its financial assets. ASC 820 establishes a fair value hierarchy that prioritises the inputs to valuation
techniques used to measure fair value and expands financial statement disclosures about fair value measurements.

The hierarchy established by ASC 820 gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under ASC 820 are described below:

• Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to

access at the measurement date.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

or indirectly.

• Level 3: Unobservable inputs for the asset or liability.

Notes to the Financial Statements continuedThere were no transfers into and out of each level of the fair value hierarchy for assets measured at fair value for the years
ended 31 December 2021 or 2020.

All transfers are recognised by the Company at the end of each reporting period.

Transfers between Levels 1 and 2 generally relate to whether a market becomes active or inactive. Transfers between
Levels 2 and 3 generally relate to whether significant relevant observable inputs are available for the fair value measurement
in their entirety.

The Company’s financial instruments as of 31 December 2021 and 2020 include cash and cash equivalents, restricted
cash, accounts receivable, accounts payable, the line of credit, and the note payable. The carrying values of cash and cash
equivalents, accounts receivable, accounts payable, and the line of credit approximate fair value due to the short-term
nature of those assets and liabilities. The fair value of the note payable approximates face value.

Foreign currency transactions – From time to time the Company transacts business in foreign currencies (currencies other
than the United States Dollar). These transactions are recorded at the rates of exchange prevailing on the dates of the
transactions. Foreign currency transaction gains or losses are included in selling, general and administrative expenses.

Stock compensation – The Company issues equity-settled share-based awards to certain employees, which are measured at
fair value at the date of grant. The fair value determined at the grant date is expensed, based on the Company’s estimate of
shares that will eventually vest, on a straight-line basis over the vesting period. Fair value for the share awards representing
equity interests identical to those associated with shares traded in the open market is determined using the market price at
the date of grant. Fair value is measured by use of the Black Scholes valuation model (see Note 11).

Recently issued accounting standards – In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses
(Topic 326), which requires measurement and recognition of expected credit losses for financial assets held. The standard is
to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period
in which the guidance is effective. The guidance will become effective for the Company in fiscal years beginning after 15
December 2022, including interim periods within that reporting period. The Company is currently evaluating the impact of
adopting this guidance but does not expect it to have a material impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework, which removes,
modifies and adds to the disclosure requirements on fair value measurements in Topic 820. The amendments on changes in
unrealised gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair
value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the
most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied
retrospectively to all periods presented upon their effective date. The Company adopted this guidance effective 1 January
2020. The adoption of this new guidance did not have a material impact on the financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,
which is expected to simplify income tax accounting requirements in areas deemed costly and complex. The Company
adopted this guidance effective 1 January 2021. The adoption of this new guidance did not have a material impact on the
financial statements.

Recent accounting pronouncements pending adoption not discussed above are either not applicable or are not expected to
have a material impact on the Company.

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3. Accounts Receivable
Accounts receivable and their respective allowance amounts at 31 December 2021 and 2020:

Accounts receivable
Less: allowance for doubtful accounts

Total receivable – net

4. Inventories
Inventories consist of the following at 31 December 2021 and 2020:

Raw materials
Work-in-progress
Finished goods

Total inventory

5. Property and Equipment
Property and equipment consist of the following at 31 December 2021 and 2020:

Land
Building
Leasehold improvements
Office equipment
Manufacturing equipment
Research and development equipment
Purchased software
Equipment leased to customers
Equipment available for lease to customers

Less: accumulated depreciation

Property and equipment – net

31 December 2021

31 December 2020

US$000

1,957
(90)

1,867

1,512
(33)

1,479

31 December 2021

31 December 2020

US$000

1,950
202
2,168

4,320

US$000

2,158
–
3,484

5,642

31 December 2021

31 December 2020

US$000

–
–
107
636
888
545
222
10,254
272

12,924
(9,675)

3,249

US$000

709
2,724
277
710
930
551
222
10,009
89

16,221
(9,465)

6,756

In March 2021, the Company completed the sale of its building in Duluth, Georgia for total consideration of $5.4 million
enabling the Company to right-size its office space needs across its main operating locations. The net book value of the
building and land was $2.8 million so the Company recognised a financial gain of approximately $2.6 million.

During the years ended 31 December 2021 and 2020, the Company removed property, plant and equipment and the
associated gross and accumulated depreciation of approximately $856,000 and $nil, respectively, to reflect the disposal
of property, plant and equipment.

Depreciation expense for the years ended 31 December 2021 and 2020 was approximately $1,066,000 and $1,370,000,
respectively, and includes depreciation on equipment leased to customers. Depreciation expense on equipment leased
to customers included in cost of goods sold for the years ended 31 December 2021 and 2020 was $919,000 and
$1,117,000, respectively.

Notes to the Financial Statements continued6. Intangible Assets
During 2009, the Company entered into a patent rights purchase agreement. The patent is amortised utilising the straight-line
method over a useful life of 17 years which represents the legal life of the patent from inception. Accumulated amortisation on
the patent was approximately $70,000 and $64,000 as of 31 December 2021 and 2020, respectively.

In addition to the purchased patent, the Company has internally developed patents. Internally developed patents include legal
and registration costs incurred to obtain the respective patents. The Company currently holds various patents and numerous
pending patent applications in the United States, as well as numerous foreign jurisdictions outside of the United States.
In 2021, there was $43,000 of new internally developed patents and fees on patents in progress.

Intangible assets as of 31 December 2021 and 2020 consist of the following:

Weighted Average
Useful Lives

31 December 2021

31 December 2020

US$000

Internally developed patents
Purchased patents

15 years
17 years

Less accumulated amortisation – Internally developed patents
Less accumulated amortisation – purchased patents

Intangible assets – net

1,447
100

1,547
(703)
(70)

774

1,405
100

1,505
(651)
(64)

790

At 31 December 2021, internally developed patents include approximately $396,000 for costs accumulated for patents that
have not yet been issued and are not depreciating.

Approximate aggregate future amortisation expense is as follows:

Year Ending 31 December (USD, in thousands)

2022
2023
2024
2025
2026
Thereafter

57
50
48
47
44
132

Amortisation expense for the years ended 31 December 2021 and 2020 was approximately $58,000 and $57,000, respectively.

7. Income Taxes
The components of income taxes shown in the statements of operations are as follows:

Current:
Federal
Foreign
State

Total current provision

Deferred:
Federal
Foreign
State

Total deferred provision

Total provision for income taxes

31 December 2021

31 December 2020

US$000

–
291
5

296

–
–
–

–

–
320
8

328

–
–
–

–

296

328

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7. Income Taxes continued
The provision for income tax varies from the amount computed by applying the statutory corporate federal tax rate
of 21 percent, primarily due to the effect of certain non-deductible expenses, foreign withholding tax, and changes in
valuation allowances.

A reconciliation of the differences between the effective tax rate and the federal statutory tax rate is as follows:

Federal statutory income tax rate
State tax rate, net of federal benefit
Valuation allowance
Other
Foreign withholding tax
Effective income tax rate

31 December 2021

31 December 2020

21.0%
(4.9%)
(13.3%)
(8.8%)
(20.2%)
(26.2%)

21.0%
(0.4%)
(24.0%)
2.0%
(4.4%)
(5.8%)

The significant components of deferred income taxes included in the balance sheets are as follows:

Deferred tax assets
Net operating loss
Equity compensation
Research and development credits
Right of use liability
Inventory valuation reserve
Other

Total gross deferred tax asset

Deferred tax liabilities
Property and equipment
Right of use asset

Total gross deferred tax liability

Net deferred tax asset before valuation allowance
Valuation allowance

Net deferred tax asset (liability)

31 December 2021

31 December 2020

US$000

5,802
272
159
316
349
102

7,000

(578)
(314)

(892)

6,108
(6,108)

–

5,589
327
159
97
358
22

6,552

(635)
(104)

(739)

5,813
(5,813)

–

Deferred tax assets and liabilities are recorded based on the difference between an asset or liability’s financial statement
value and its tax reporting value using enacted rates in effect for the year in which the differences are expected to reverse,
and for other temporary differences as defined by ASC-740, Income Taxes. At 31 December 2021 and 2020, the Company has
recorded a valuation allowance of $6.1 million and $5.8 million, respectively, a change of $300,000 and $1.2 million for each
year, for which it is more likely than not that the Company will not receive future tax benefits due to the uncertainty regarding
the realisation of such deferred tax assets.

As of 31 December 2021, the Company has approximately $26.5 million of gross U.S. federal net operating loss carry
forwards and $3.6 million of gross state net operating loss carry forwards that will begin to expire in the 2022 tax year and
will continue through 2040 when the current year net operating losses will expire. As of 31 December 2020, the Company
had approximately $25.2 million of gross U.S. federal net operating loss carry forwards and $4.4 million of gross state net
operating loss carry forwards.

Notes to the Financial Statements continuedOn 27 March 2020, the U.S. Government enacted the Coronavirus Aid, Relied, and Economic Security Act (the ‘CARES
Act’). The CARES Act includes, but is not limited to, tax law changes related to (1) accelerated depreciation deductions for
qualified improvement property placed in service after 27 September 2017, (2) reduced limitation of interest deductions, and
(3) temporary changes to the use and limitation of NOLs. There was no material impact of the CARES Act to the Company’s
income tax provision for 2021 or 2020.

The Company’s tax years 2017 through 2021 remain subject to examination by federal, state and foreign income
tax jurisdictions.

8. Line of Credit
In October 2014, the Company entered into a bank line of credit that allowed for borrowings up to $500,000. The line of
credit was revolving and was payable on demand. In November 2018, the maximum borrowing capacity was increased
to $1,875,000. The facility renewed annually and was secured by the assignment of a deposit account held by the lender
and a second deed to the property owned by the Company in Duluth, Georgia. The line of credit carried a floating rate of
interest equal to the lender’s Prime Rate and was subject to change any time the Prime Rate changed. Under terms of the
line of credit, the Company was required to maintain a minimum cash balance and a specified cash flow coverage ratio, as
those terms were defined, and the Company was in compliance as throughout the term of the facility. In March 2021, the
line of credit was paid in full with proceeds from the sale of the Company’s building in Duluth, Georgia and the facility was
closed. The balance on the line of credit at 31 December 2020 was $997,000. The interest rate on 31 December 2020 was
4.50 percent. Interest expense related to this loan was $9,000 and $38,000 for the years ended 31 December 2021 and
2020, respectively.

9. Paycheck Protection Program Loan
On 16 April 2020, the Company was granted a loan from Pinnacle Bank, the Company’s existing lender, in the amount of
approximately $401,000, pursuant to the Paycheck Protection Program (‘PPP Loan’), Title I of the CARES Act, which was
enacted 27 March 2020. The PPP Loan issued to the Company matures on 16 April 2022 and bears interest at a fixed rate
of 1 percent per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the
initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together
with the principal, on the maturity date. The Company used all proceeds from the PPP Loan to retain employees, maintain
payroll and make lease and utility payments to support business continuity during the COVID-19 pandemic. All or a portion
of the PPP Loan may be forgiven by the Small Business Administration (‘SBA’) upon application by the Company and upon
documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available
for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the
24-week period beginning on the date of receipt of the PPP Loan with certain stipulated restrictions. On 8 December 2020,
the Company’s PPP Loan was forgiven in full, including all principal and interest outstanding as of the date of the forgiveness.
Any amount forgiven when the Company was legally released as the primary obligor under the loan was recognised in the
Statement of Operations as a gain upon the extinguishment of the loan.

In December 2020, Congress enacted the Consolidated Appropriations Act, 2021. The Act is an approximately $900 billion
COVID-19 relief package and includes $284 billion for a second round of the PPP loan. In January 2021, the Company applied
for and was approved for a second PPP Loan in the amount of approximately $401,000 with an interest rate of 1 percent and a
maturity date of January 2026. All other terms are the same as the initial PPP Loan. On 5 August 2021, the Company’s second
PPP Loan was forgiven in full, including all principal and interest outstanding as of the date of the forgiveness. Any amount
forgiven when the Company was legally released as the primary obligor under the loan was recognised in the Statement of
Operations as a gain upon the extinguishment of the loan.

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10. Note Payable
On 27 March 2013, the Company entered into a term loan agreement with a lender for the purchase of property and a building
for its manufacturing operations and corporate offices. The note was secured by the property and building from which the
Company continued to operate through March 2022. The carrying amount of the property and building was $2.9 million as of
31 December 2020. Upon selling the collateral, the Company was required to repay the term loan in full. The lender was not
allowed to sell the collateral during the term of the loan. The Company borrowed proceeds of $2,285,908 at a fixed interest
rate of 4.45 percent. The loan had a 10-year term with monthly payments based on a 20-year amortisation. The result was
a one-time balloon payment at the end of the term of the note of approximately $1,400,000 during 2023. In accordance
with the terms of the agreement, the Company was required to keep $500,000 in a deposit account with the lending bank.
At 31 December 2020, the Company had restricted cash of $500,000 related to the loan agreement. In March 2021, the Note
Payable was paid in full with proceeds from the sale of the Company’s building in Duluth, Georgia and $500,000 of cash was
reclassified from restricted cash.

11. Stock Compensation
In July 2011, the Company’s shareholders approved the Conversion Shares and the Directors’ Shares, as well as the Plan
Shares and Omnibus Performance Incentive Plan (‘Plan’). This included the termination of all outstanding stock incentive
plans, cancellation of all outstanding stock incentive agreements, and the awarding of stock incentives to Directors and
certain employees and consultants. The Company established the Plan to attract and retain Directors, officers, employees
and consultants. The Company reserved an amount equal to 10 percent of the Common Shares issued and outstanding
immediately following the Public Offering.

Upon the issuance of these shares, an award of share options was made to the Directors and certain employees and
consultants, and a single award of restricted shares was made to a former Chief Financial Officer. In addition, additional stock
options were awarded in each year subsequent. The awards of stock options and restricted shares made upon issuance were
in respect of 85 percent of the Common Shares available under the Plan, equivalent to 8.5 percent of the Public Offering.

In July 2019, the Company’s shareholders approved the extension of the Plan to 2029 and the increase in the possible
number of shares to be awarded pursuant to the Plan to 15 percent of the Company’s issued capital at the date of any award.
The total number of shares reserved for stock options under this Plan is 2,916,563 with 2,043,338 shares allocated as of
31 December 2021. The shares are all allocated to employees, executives and consultants.

Any options granted to Non-Executive Directors, unless otherwise agreed, vest contingent on continuing service with the
Company at the vesting date and compliance with the covenants applicable to such service.

Employee options vest over three years with a third vesting ratably each year, partially on issuance and partially over the
following 24-month period, or if there is a change of control, and expire on the tenth anniversary date the option vests.
Vesting accelerates in the event of a change of control. Options granted to Non-Executive Directors, Consultants and one
Executive vest partially on issuance and will vest partially one to two years later. The remaining Non-Executive Director
options expired at the end of 2016 on the five-year anniversary date of the grant.

As discussed in Note 2, the Company uses the Black Scholes valuation model to measure the fair value of options granted.
The Company’s expected volatility is calculated as the historical volatility of the Company’s stock over a period equal to
the expected term of the awards. The expected terms of options are calculated using the weighted average vesting period
and the contractual term of the options. The risk-free interest rate is based on a blended average yield of two- and five-year
United States Treasury Bills at the time of grant. The assumptions used in the Black Scholes option pricing model for options
granted in 2021 and 2020 were as follows:

Number of
Options Granted

Grant
Date

Risk-free

Expected

Interest Rate

Term

Volatility

Exercise

Price

Fair Value

Per Option

2020

2021

325,000 06/08/2020

762,000
100,000

09/04/2021
11/11/2021

0.17%

1.10%
1.23%

5.7 years

5.7 years
5.2 years

77.00%

76.00%
63.00%

$0.45

$0.69
$1.00

$0.29

$0.45
$0.54

The Company assumes a dividend yield of 0.0 percent.

Notes to the Financial Statements continuedThe following table summarises the Company’s stock option activity for the years ended 31 December 2021 and 2020:

Stock Options

Outstanding at 31 December 2019
Granted
Forfeited

Outstanding at 31 December 2020
Granted
Forfeited

Outstanding at 31 December 2021

Exercisable at 31 December 2021

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term

(in years)

$2.40
$0.45
$1.97

$2.04
$1.69
$2.83

$1.43

$2.00

5.7
5.7

5.8
5.7

5.8

6.0

1,374,542
325,000
(375,204)

1,324,338
862,000
(143,000)

2,043,338

1,192,338

Average
Grant Date
Fair Value

$1.13
$0.29

$1.01
$0.46

$0.76

The total intrinsic value of the stock options exercised during the years ended 31 December 2021 and 2020 was approximately $nil.

A summary of the status of unvested options as of 31 December 2021 and changes during the years ended 31 December 2021
and 2020 is presented below:

Unvested Options

Unvested at 31 December 2019
Granted
Vested
Forfeited

Unvested at 31 December 2020
Granted
Vested
Forfeited

Unvested at 31 December 2021

168,334
325,000
(70,000)
(58,334)

365,000
862,000
(374,000)
(2,000)

851,000

Weighted-Average
Fair Value at
Grant Date

$0.76
$0.29
$1.33

$0.34
$0.46
$0.46

$0.41

As of 31 December 2021, total unrecognised compensation cost of approximately $192,000 was related to unvested
share-based compensation arrangements awarded under the Plan.

Total stock compensation expense for the years ended 31 December 2021 and 2020 was approximately $255,000 and
$42,000, respectively.

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12. Commitments and Contingencies
Operating leases – As of 31 December 2021, the Operating Lease ROU Asset has a balance of $1,459,000, net of accumulated
amortisation of $283,000, and an Operating Lease Liability of $1,467,000, which are included in the accompanying balance
sheet. The weighted average discount rate used for leases is 5.25 percent, which is based on the Company’s secured
incremental borrowing rate.

The Company’s leases do not include any options to renew that are reasonably certain to be exercised. The Company’s leases
mature at various dates through March 2027 and have a weighted average remaining life of 4.58 years.

Future maturities under the Operating Lease Liability are as follows for the years ended 31 December:

Year Ending 31 December

2022
2023
2024
2025
2026
2027

Total future maturities
Portion representing interest

Future Lease
Payments
US$000

307
381
321
280
291
74

1,654
(187)

1,467

Total lease expense for the years ended 31 December 2021 and 2020 was approximately $259,000 and $315,000, respectively.

Total cash paid for leases for the years ended 31 December 2021 and 2020 was $227,000 and $313,000, respectively, and is
part of prepaid operating leases on the Statements of Cash Flows.

The Company has elected to apply the short-term lease exception to all leases of one year or less and is not separating lease
and non-lease components when evaluating leases. Total costs associated with short-term leases was $447,000 and $130,000
for the years ended 31 December 2021 and 2020, respectively.

Legal – From time to time, the Company is a party to certain legal proceedings arising in the ordinary course of business.
In the opinion of management, there are no current legal proceedings or other claims outstanding which could have a material
adverse effect on the results of operations or financial position of the Company.

13. Related Party Transactions
The Company has held a patent rights purchase agreement since 2009 with a shareholder as described in Note 6.

Notes to the Financial Statements continued14. Segment and Geographic Information
ASC 280-10, Disclosures About Segments of an Enterprise and Related Information, establishes standards for reporting
information about operating segments. ASC 280-10 requires that the Company report financial and descriptive information
about its reportable operating segments. Operating segments are components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief operating decision maker (‘CODM’) in deciding how to allocate
resources and in assessing performance. The Company’s CODM is the Chief Executive Officer (‘CEO’). While the CEO is
apprised of a variety of financial metrics and information, the business is principally managed on an aggregate basis as of
31 December 2021. For the year ended 31 December 2021, the Company’s revenues were generated primarily in the Middle
East and the United States (‘U.S.’). Additionally, the majority of the Company’s expenditures and personnel either directly
supported its efforts in the Middle East and the U.S., or cannot be specifically attributed to a geography. Therefore, the
Company has only one reportable operating segment.

Revenue from customers by geography is as follows:

Year Ending 31 December (USD, in thousands)

Middle East
United States
Nigeria
Other

Total

Long lived assets, net of depreciation, by geography is as follows:

Year Ending 31 December (USD, in thousands)

Middle East
United States
Other

Total

2021

5,388
1,336
1,312
442

8,478

2021

2,380
2,328
–

4,708

2020

5,269
1,511
3
321

7,104

2020

3,127
4,109
2

7,238

15. Concentrations
At 31 December 2021, two customers, one with four contracts with four separate plants, represented 82 percent of accounts
receivable. During the year ended 31 December 2021, the Company received 78 percent of its gross revenue from five
customers, one with four contracts with four separate plants.

At 31 December 2020, one customer with three contracts represented 72 percent of accounts receivable. During the year
ended 31 December 2020, that same customer, along with the Company’s second largest customer, accounted for 78 percent
of its gross revenue.

16. Subsequent Events
The Company discloses material events that occur after the balance sheet date but before the financials are issued. In general,
these events are recognised in the financial statements if the conditions existed at the date of the balance sheet, but are not
recognised if the conditions did not exist at the balance sheet date. Management has evaluated subsequent events through
16 May 2022, the date the financial statements were available to be issued, and no events have occurred which require further
disclosure other than the following:

On 21 March 2022, the Company issued an additional 3,539,273 shares of common stock at a price of US$0.66 (50 pence) per share.
The Company incurred costs in the issuance of these shares of approximately $267,000. The Company received net proceeds of
approximately $2.1 million. Upon the conclusion of the public offering, the total shares issued and outstanding were 22,983,023.

Strategic ReportCorporate GovernanceFinancial StatementsM

MYCELX Technologies Corporation