REG - Iofina PLC - Final Results
09/05/2022 07:00
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RNS Number : 7422K Iofina PLC 09 May 2022
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014
9 May 2022
Iofina plc
("Iofina", the "Company" or the "Group")
(LSE AIM: IOF)
2021 FULL YEAR RESULTS
FOURTH SUCCESSIVE YEAR OF RECORD REVENUE AND EBITDA
Iofina plc, specialists in the exploration and production of iodine and
manufacturers of specialty chemical products, announces its audited full year
results for the 12 months to 31 December 2021 (the "Period").
Bounce back in demand boosted sales and profits in 2021:
· Revenue increased by 31% to $39.0m to (2020: $29.7m)
· Gross profit increased by 28% to $10.7m (2020: $8.4m)
· EBITDA improved by 47% to $6.9m (2020: $4.7m)
· Operating profit increased by 78% to $5.2m (2020: $2.9m)
· Profit before tax increased by 301% to $5.1m (2020: $1.3m)
Strong balance sheet and further reduction in net debt:
· Cash flow generation of $5.9m reduced net debt from $8.9m to $3.0m
· Finance expense decreased by 83% to $0.3m (2020: $1.7m)
Investing for growth:
· Commenced site negotiation process for IO#9 construction in the
Period.
· Capital investment into projects and equipment was $1.5m (2020:
$2.4m) including process improvements and replacements at the Iofina Chemical
plant
2022 so far:
· Current global iodine spot prices have reached $60/kg and above, up
20% since the beginning of 2022
· Production of 103.8 MT of crystalline iodine in Q1 from Iofina's five
IOsorb® plants
· Finalising terms with new brine supply partner for IO#9 plant
Commenting, President and CEO Dr. Tom Becker, stated:
"Today we are proud to announce that 2021 was our fourth consecutive year of
record revenues and EBITDA. By executing our fundamental business plans
coupled with a strong bounce back in demand for iodine and its end-use
products in the wake of the COVID-19 pandemic, we were able to deliver
enhanced revenues and profits and significantly reduce our debt through strong
cash generation. Our margins have been bolstered by a strong iodine price
particularly over the last 6 months, and we expect these high prices to
continue during 2022.
"Whilst lower brine supply from our oil and gas partners impacted iodine
production in the Period, we are hopeful supply will improve this year with
oil and gas companies now reinvesting in their assets to boost production. The
delay to the construction of our IO#9 plant has been frustrating, but we are
now finalising an agreement with a new brine supply partner and expect to have
a further update on this shortly.
"Iofina Chemical continued to perform well and was integral to the Group's
sales and earnings. We have been working on enhancements to improve
efficiencies and capacity for certain iodine and non-iodine products, and we
expect a laboratory upgrade in Q2 2022 to improve the Company's R&D
capabilities.
"With market fundamentals remaining favourable, a much-improved balance sheet,
and continued strategic investment in our growth, the Board remains confident
in the future success of the business and looks forward to keeping
shareholders updated on progress."
Investor Presentation
The Company plans to provide a presentation relating to the Company's outlook
and these 2021 results. Details will be provided soon via a RNS Reach
announcement.
Enquiries:
Dr. Tom Becker
CEO & President
Iofina plc
Tel: +44 (0)20 3006 3135
Christopher Raggett/Tim Harper (Corporate Finance)
Tim Redfern/Barney Hayward (ECM)
finnCap Ltd
Tel: +44 (0)20 7220 0500
Media Contact:
Charles Goodwin/Annabel Atkins
Yellow Jersey PR Limited
Tel: +44 (0)7747 788 221
About Iofina:
Iofina plc (AIM: IOF) is a vertically integrated Company that specialises in
the production of Iodine and the manufacturing of specialty chemical products.
Iofina is the second largest producer of iodine in North America and operates
the manufacturing entities Iofina Resources and Iofina Chemical.
LEI: 213800QDMFYVRJYYTQ84
ISIN: GB00B2QL5C79
Iofina Resources
Iofina Resources develops, builds, owns and operates iodine extraction plants
using Iofina's WET® IOsorb® technology. Iofina currently operates five
producing IOsorb® plants in Oklahoma and is consistently using technology and
innovation to improve and expand its operations.
Iofina Chemical
Iofina Chemical has manufactured high quality halogen specialty chemicals
derived from raw iodine, as well as non-iodine based products for over 38
years.
www.iofina.com (http://www.iofina.com/)
Iofina plc Annual Report & Accounts 2021
Contents
COMPANY
INFORMATION.......................................................................................................
..2
CHAIRMAN'S
STATEMENT........................................................................................................
..3
FINANCIAL
REVIEW..................................................................................................................
..9
DIRECTORS'
BIOGRAPHIES……...................................................................................................
12
STRATEGIC
REPORT..................................................................................................................
14
S172
STATEMENT……………………………………………………………………………………………………………………24
CORPORATE
GOVERNANCE……………………………………………………………………………………………………26
DIRECTORS'
REPORT.................................................................................................................
27
CORPORATE GOVERNANCE
STATEMENT...................................................................................
29
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA
PLC..................................... 36
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
..................................................... 47
CONSOLIDATED BALANCE SHEET
..............................................................................................
48
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY.................................... 49
CONSOLIDATED CASH FLOW STATEMENT
.................................................................................
50
COMPANY BALANCE SHEET
.....................................................................................................
51
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY............................................. 52
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.......................................................... 53
COMPANY INFORMATION
Directors
L J Baller
T M Becker
W D Bellamy
M T Lewin
J F Mermoud
M C Fallin-Christensen
Secretary
Simon Holden
Company number 05393357
Registered office 48
Chancery Lane
London WC2A 1JF
Auditor
UHY Hacker Young LLP
Quadrant House
4 Thomas More Square
London E1W 1 YW
Nominated Adviser finnCap Ltd
1 Bartholomew Close
London EC1A 7BL
Brokers
finnCap Ltd
1 Bartholomew Close
London EC1A 7BL
Solicitors
Keystone Law Limited
48 Chancery Lane
London WC2A 1JF
Registrar
Link Asset Services
34 Beckenham Road
Kent BR3 4TU
Financial
PR
Yellow Jersey PR Limited
70-71 Wells Street
London W1T 3QE
CHAIRMAN'S STATEMENT
Introduction
I am delighted to report our fourth consecutive year of record revenue and
EBITDA. Some of the 2021 financial highlights include increased revenue by
31% from $29.7m to $39.0m and EBITDA improvement by 47% from $4.7m to $6.9m.
Additional highlights include a bank debt to EBITDA ratio of 1.18 for year-end
2021 compared to 2.62 for year-end 2020, decreased finance expense by 83% from
$1.7m to $0.3m, increased profit before tax by 301% from $1.3m to $5.1m,
increased shareholder equity from $20.7m to $29.9m and cash flow generation of
$5.9m which reduced net debt from $8.9m to $3.0m. If one compares these
financial reporting metrics to five years ago, it will illustrate a Group
struggling to survive which has now been transformed to a thriving Company
with reasonable debt, growth, and strong cash flow. For 2022 we continue to
see positive trends in our specialty chemical business lines.
We have built an excellent business with diversified, low-cost production
across a diverse array of IOsorb® plants and a specialty chemicals business
supplying customers across a number of end markets. We continue to develop new
niche innovative products and plan to invest approximately $2 million of CAPEX
in 2022 into Iofina Chemical. This will include a unique commercial process on
recycling iodine and other products from customers' chemical waste streams,
which is likely to come online in 2023. With debt reduced for the third
consecutive year and a healthy balance sheet, we can continue investing in the
right areas to deliver future growth and profitability. Recently, we have
seen more investment in our specialty chemical business but we are close to
completing a new partner contract which will quickly lead to the construction
of IO#9. Our main goal remains 'continuous improvement' throughout the
business, which can be measured by financial results, as well as the creation
of new products and the wellbeing of our staff. The management team is
committed to delivering improvements across the business every year, which
will ultimately continue to drive shareholder value.
Iofina Chemical
After reduced H2 2020 demand due to the pandemic, Iofina Chemical ("IC")
emerged in a great position for growth and ended 2021 with $39.0 million in
sales.
Iofina's continued diversification of its iodine derivatives as well as key
other product lines allowed IC to grow at over 30% in revenue year-over-year
("YOY"). Although there were supply challenges in the iodine market in 2021,
IC had 102% revenue growth YOY in iodine derivatives due to the backward
integration of iodine through Iofina Resources. The unexpected rising price
of iodine in 2021 also contributed to the overall success.
A key factor in the continued growth of IC was the successful process upgrade
of a major product produced. In addition, IC received its first industry
Performance Award for excellence in EHS&S practices. I am pleased to
report IC continues to achieve excellence in safety performance finishing 2021
with no lost time accidents. Additional derivative development in emerging
products has also been key in 2021 and is important for growth in future
years. IC is investing in a number of improvement projects in 2022 to achieve
both short-term and long-term growth. These include improvements to R&D
facilities, new product research, expansion of a non-iodine product and
investments for a project involving iodine recycling.
IC is poised for continued growth in 2022 and with the continued global supply
issues of iodine and with backward integrated iodine supply, the Group will be
ready to capitalize on new opportunities.
Iodine Prices
Since the iodine price lows of early 2017, prices steadily increased through
early 2020, reaching $35-37/kg. During the second half of 2020, as global
economies contracted, so did the demand for iodine, resulting in prices
reducing slightly. Iodine prices began 2021 at approximately $32.5-36/kg,
which was similar to where prices were pre-pandemic in early 2020 and ended
the year at $50/kg after a significant increase in global demand for iodine.
Leading the increase for iodine were human health applications such as
povidone iodide (PVPI) and X-ray contrast imaging agents. Additionally, the
recent demand for potassium iodide (KI) pills, following the Russian invasion
of Ukraine, for the use of protecting humans from radioactive exposure has
been reported by many news outlets. The Company believes this demand for KI
will only have a minor impact on the demand for iodine due to the low amount
of iodine needed for protection. Currently iodine prices are trending higher
in a tight supply market with spot pricing now at $60/kg and above. The last
time spot prices for iodine were above $60/kg was June 2013. Iofina now
expects iodine prices to remain steady or slowly increase in 2022 due to
strong global demand and environmental and geopolitical risks in Chile.
Iofina Resources
Iofina Resources ("IR") achieved record sales in 2021, a highly commendable
feat against the backdrop of the ongoing impact of the COVID-19 pandemic. Due
to the diligent efforts of our operational personnel and the dispersed
locations of our 5 producing IOsorb® plants, we were able to continuously
produce iodine throughout the year. Ensuring the safety of our employees and
maximizing our efficiency was our focus while also dealing with issues that
impacted the production of iodine.
In February 2021, there were unprecedented extreme freezing weather conditions
in Oklahoma. These conditions required IR to suspend all iodine production
operations for approximately two weeks in February 2021. Our Operational
personnel successfully executed the plan to protect and ensure the safety of
each person and to winterize each IOsorb® plant to protect the equipment from
the damage imposed by the freezing conditions. Nearly all oil and gas field
production was shut-in. Once the thaw began IR was able to resume production
efficiently and safely.
The Company also experienced issues related to the supply chain of our raw
materials. The challenges were potential shortages of these raw materials and
unprecedented price increases and freight surcharges. IR did not experience a
single hour of downtime due to lack of chemicals at the IOsorb® plants. IR
has developed long standing relationships with multiple suppliers for
chemicals and raw materials over the years. By working with our suppliers
from the boardrooms to the loading dock our supply chain did not break as most
companies had experienced and are currently experiencing. IR continues to
utilize long term supply contracts, open lines of communication and excellent
inventory management to work with our suppliers to ensure continuity of supply
and the best possible prices.
The single largest major challenge IR faced in 2021 was the decline in overall
brine production by our partners, which directly impacted our iodine
production output. This brine decline was caused by two factors. First, as
previously reported, oil and gas operators' budgets were curtailed
significantly during the height of the pandemic due to a sharp decline in
global demand. Capital budgets were slashed and routine maintenance on wells
was deferred wherever possible for producers to survive. Many wells were also
shut in. The second factor has been the dramatic change toward fiscal
discipline within the oil and gas sector due to the tightness of capital
markets and debt financing. In previous commodity cycles the oil and gas
industry would increase spending in response to increases in commodity prices.
Often this spending would exceed the cash flow of these companies, resulting
in increased debt and a weakening of their balance sheet. In 2021 there was a
fundamental shift in this historical business model due to weak demand and
negative prices. Oil and Gas operators have adopted fiscal restraint in
allocating capital. In previous cycles the industry invested in production
and reserves growth at all costs. Today the focus is to maintain free cash
flow, returning capital to stakeholders and meeting aggressive ESG goals. The
publicly traded E&P companies are being rewarded with increased share
prices for their change in focus. Production growth in a sustainable manner
of less than 5% is the norm today. Free cash flow is the mantra of the
day. The impact on IR's business is less brine available for iodine
extraction. The Company's long-term forecast indicated a slow decline curve
over time but Covid factors and change in business practices of the oil and
gas industry caused this decline to exceed our projections. This iodine rich
brine has not been lost but rather its production has been delayed. For
example, one of our operators highlighted in their year-end report that their
oil and gas assets in Oklahoma have a 15-year economic life when prices were
low. The life will be higher now due to the increase in prices.
Oil and gas prices have continued to rise moving into 2022. Global demand is
the fundamental driver of these increases. In addition, various geopolitical
events are adding to the volatility and continued price increase. As a result,
many oil and gas operators, including our partners, will have strong cash
flows in 2022. This will translate into increased spending by the operators to
increase production sustainably and modestly through more aggressive workover
programs including drilling of new wells. Having access to brine streams
from different operators with different balance sheets will minimize future
declines and help to level out overall brine production from existing IOsorb®
plants.
IR continues to diversify its access to iodine rich brine streams through its
exploration efforts. IR is actively collecting brine samples and evaluating
multiple geographic locations continuously. The results of these efforts have
led to discussions with the several different operators and involve the
potential for multiple IOsorb® plant locations. These discussions with the
operators about the economics of iodine extraction also involve ESG objectives
and their role in the life cycle of produced water reuse and disposal. IR is
uniquely qualified to be a key partner with these operators in achieving the
goal of a more sustainable produced water model. IR provides a depth of
knowledge in water quality and in various methods, both mechanically and
chemically, to treat water for reuse as well as the capturing of iodine from
what has heretofore been considered waste. IR welcomes this transformation
in the industry and looks forward to working with the industry to realize
value for all stakeholders in a safe and sustainable manner. The
opportunities to work on and develop produced water reuse and recycling
projects is exciting. The oil and gas industry has always been a global
force for ingenuity and the challenges of produced water reuse and recycling
will be no different. We have chosen IO#9 to be in a new iodine rich area
with robust drilling activity. This will help diversify our geographical
risk and allow the Group to have additional oil and gas partners. We
continue to forge relationship with new partners for multiple sites.
Change requires time and effort. IR believes that building these working
relationships will yield numerous opportunities to increase the production of
iodine and enhancements in the handling of produced water in general. Coupled
with strong commodity prices for both Iodine and oil and gas and strong
balance sheets sets the stage for a period of smart expansion for Iofina.
The experienced team at Iofina has a proven track record and the expertise to
take advantage of this evolving market.
Environment, Health and Safety ("EHS")
Iofina is committed to operating in a safe, efficient, and environmentally
friendly manner. The Group is committed to the highest standards of safety for
our employees and our community. Iofina's iodine production utilizes a
produced brine stream which, without Iofina, would simply be disposed of along
with the contained iodide. Isolation of this valued resource from a produced
stream is an extremely environmentally friendly method in contrast to other
major US based iodine production, which requires the drilling of new brine
wells that serve no other purpose than iodine production.
The Group is constantly striving towards continuous improvements in its EHS
policies and programs. Iofina Chemical is a Chemstewards® certified facility
(recertified in 2019 and currently active) and received a Chemstewards® award
for resource management and waste minimization. Additional improvements to
quality management systems are ongoing. Iofina Resources and Iofina Chemical
each have an EHS manager to oversee practices, and upper management personnel
are regularly updated on EHS performance matrices. All Iofina employees are
engaged in practices to continually improve safety and reduce environmental
impact.
Iofina has also implemented further safety initiatives throughout the COVID-19
pandemic to protect its employees.
Strong Board and Governance
The Directors continue to acknowledge the importance of high standards of
corporate governance. The Group's Corporate Governance Statement is found on
page 26 of this report. Given the Group's size and the constitution of the
Board, the Directors decided to adopt the principles set out in the QCA
Corporate Governance Code published in April 2018 (the "QCA Code") in advance
of the requirement to adopt a corporate governance code under AIM Rule 26 of
the AIM Rules for Companies. In addition, we continue to operate a robust
framework of systems and controls to maintain high standards throughout the
Group, further details of which can be found in the Corporate Governance
Statement. The Board believes that effective corporate governance assists us
in the delivery of our corporate strategy, the sustainable generation of
shareholder value and the safeguarding of our stakeholders' long-term
interests. We continue to strengthen the Board by adding independent
appointments that have the interest of all shareholders at the forefront.
Iofina will continue to seek a diverse Board with strong skill sets that
continue to grow and challenge the Company while representing all
shareholders.
Outlook
Last year I stated that "The next few years look to be transformational for
Iofina." We still believe this. We now have a highly attractive,
profitable Group to present to institutional funds, family offices, and retail
investors worldwide. We are looking forward to the return of non-virtual
investor roadshows and investor programs. We are exploring options to allow
better access to investing in Iofina for potential shareholders outside of the
UK. The Board has also approved and will be requesting shareholder's
authority for the Group's first share buyback of up to 15,000,000 shares of
the Group in open market and privately transacted purchases when available.
In terms of our expansion, we are squarely focused on growing our current
iodine production and specialty chemical businesses including developing new
and exciting chemical compounds. We are also considering strategies to reduce
our reliance on our current oil and gas partners. We have and continue to
explore potential business partnerships and combinations that could be of
benefit to shareholders. Iofina is expanding our M&A efforts to possibly
include smaller niche products being divested from larger companies.
Iofina's niche products continue to propel the Company and we feel that
similar products will work in our model. As stated previously, over the past
several years we have been working to diversify our product lines, recognizing
the importance of product diversification in our core chemical competencies.
This diversification was shown to be particularly important in 2020 as many
sectors contracted and in the coming years, we will continue this
diversification.
We continue to be wise and focused on calculated risks in our approach to
growth. The Group evaluates all the data points we have available including
the paradigm shift we have seen both politically and economically from the low
oil and natural gas prices experienced in 2020. This has had an impact on our
business. This affected the Company in 2021 much more than we had
anticipated both at our current sites and caused delays on our plant expansion
selection in 2021. While we had hoped to begin construction on an additional
IOsorb® plant in 2021 we were regrettably not able to do so.
Earlier I drew the parallel to the Iofina of five years ago when we were
operating in a higher leverage, lower price environment. We navigated those
years through prudent management of the variables in our control. We know what
these variables are and will only expand the business where we can minimize
the influence of those which are uncontrollable. For example, we refused to go
to our second and third choice new plant locations in 2021 - there were simply
too many factors in each location that we could not control. We continue to
apply this rigour today and into the future.
As such, we are confident the optimal target locations will be secured using
the new market considerations, but we can never be exact on the timing. The
Company made mistakes in 2013 with large cost overruns, delayed supplies of
electric to the plants, subpar location selections, and optimistic long term
iodine pricing forecasts which resulted in a large amount of debt and subpar
performance. It took a lot of hard work, dedication, improved efficiencies,
cost reductions, a little luck, and 7 years to fully recover as a Company.
We will not make the same mistakes again. We need to always focus on being a
low-cost producer and not let our standards change as iodine prices may
increase and decrease over time, a variable we can't control. We can only
control our production cost; thus, we are committed to expanding at the best
suited sites which are ideal in all pricing environments.
We look forward to sharing our long-term growth plans highlights to
shareholders as our internal strategic plan continues to roll out and be
updated. Over last few years we have achieved our previous financial goals
which were keenly focused on reducing debt, growing the business with
restraint, and achieving banking relationships. Now we are tasked on
developing new financial goals to match the Group's growth aspirations while
maintaining a safe and acceptable debt/EBDITA ratio and other metrics. We
will also update our key performance indicators ("KPIs") as laid out further
in this report to better align with our strategic plan during the next
calendar year.
I would like to thank all of our shareholders for their continued support as
we guide the business, and we are looking forward to the excellent
opportunities we are seeing as we move the Company forward in setting more
record years.
Lance J Baller
Non-Executive Chairman
Iofina plc
6 May 2022
FINANCIAL REVIEW
Summary 2021 v 2020
· Fourth successive year of record revenue and EBITDA
· Revenue increased by 31% from $29.7m to $39.0m
· Gross profit increased by 28% from $8.4m to $10.7m
· EBITDA improved by 47% from $4.7m to $6.9m
· Operating profit increased by 78% from $2.9m to $5.2m
· Finance expense decreased by 83% from $1.7m to $0.3m
· Profit before tax increased by 301% from $1.3m to $5.1m
· Cash flow generation of $5.9m reduced net debt from $8.9m to $3.0m
· Paycheck Protection Program loans of $1.09m were forgiven and
credited to income
· Non-performing 2019 investment of $0.9m in Organic Vines was impaired
· Exceptional deferred tax credit to profit of $4.1m for US accumulated
tax losses
· Capital investment into chemical and iodine plants was $1.5m (2020:
$2.4m)
Trading results
Total revenue increased by 31% from $29.7m to $39.0m. After a COVID related
drop in sales in H2 2020 demand rebounded in 2021, and sales were boosted by
availability of inventory unsold as of the 2020 year end. Turnover of iodine
related products increased by 65% from $18.5m to $30.5m. Sales revenue from
crystallised iodine increased by 31%, with a 27% volume increase from 324
metric tonnes to 411 metric tonnes. Iodine prices increased, with an average
price of $36.03 (2020: $34.84) per kilogram. The price acceleration seen in Q4
2021 has continued, reaching $60 per kilogram and above as of end Q1 2022.
Sales revenue from iodine derivative products increased by 102% and utilised
321 metric tonnes of production (2020: 155 metric tonnes). Non-iodine products
revenue fell by 23% from $11.2m to $8.6m, with some forecast demand delayed.
Gross profit improved overall by $2.3m (28%) to $10.7m (2020: $8.4m), in line
with 2020 at 27% of sales (2020: 28%). Margins over costs of materials were at
similar percentage levels to 2020 across product categories. Costs of the
Iofina Chemical plant were at the same level as for 2020. Production costs of
iodine per kilogram at Iofina Resources increased by 13%, reflecting similar
overall costs to 2020 applied to a lower production output.
Crystallised iodine production was 518 metric tonnes compared to 610 metric
tonnes for 2020. Sales of crystallised iodine, both as raw iodine and in
derivative compounds, increased by 53% from 479 metric tonnes to 732 metric
tonnes. Sales of crystallised iodine were 56% of the total (2020: 68%), and
sales of crystallised iodine in derivative products were 44% of the total
(2020: 32%).
EBITDA improved by 47% from $4.7m to $6.9m after deducting $3.8m SGA expenses
(2020: $3.7m) from gross profit of $10.7m (2020: $8.4m). Operating profit
after depreciation and amortisation of $1.7m (2020: $1.8m) was $5.2m compared
to $2.9m for 2020.
Finance expense
Finance expense fell by $1.4m from $1.7m in 2020 to $0.3m in 2021. The 2020
expense included $1.0m of interest and fees relating to the borrowing
arrangements prior to the refinancing concluded in September 2020. There was
also $0.4m of refinancing fees relating to the September 2020 restructure
itself. The terms of the Group's current borrowing arrangements are set out in
Note 20.
Profit before tax
Profit before tax improved by $3.8m from $1.3m (2020) to $5.1m (2021). The
improvement mainly reflects much stronger trading driven by increased demand
for iodine and an associated rise in price, together with a step change
reduction in finance costs resulting from the 2020 refinancing.
Paycheck Protection Program loans
Paycheck Protection Program loans totalling $1.09m were received during 2020.
Notification of forgiveness of these loans was received from the Small
Business Administration in January 2021, and the sums advanced have
consequently been credited to income.
Investment
The Group's November 2019 investment of $0.9m in the hemp seed production
undertaken by Organic Vines OP LLC has not provided any of the returns
forecast on the basis of market conditions at that time, with COVID a
significant factor. The Company cannot predict any future income with any
reasonable probability, and therefore the investment has been impaired to Nil.
Deferred tax
In accordance with IAS 12 and in light of the Group's recent much improved
profitability, and therefore its likely utilisation of its $19.4m accumulated
US Federal tax losses in the foreseeable future, a deferred tax asset of $4.1m
reflecting the value of those losses at a tax rate of 21% has now been set up
in the balance sheet and credited to tax in the statement of comprehensive
income. This asset will be amortised to the profit and loss account in line
with future reductions in tax payable from utilisation of the losses.
Capital investment
The Group invested $1.5m in capital projects and equipment (2020: $2.4m), most
of which relates to new projects, process improvements and replacements at the
Iofina Chemical plant. In accordance with IFRS 16 there is also an addition of
$0.4m to right-of-use assets and associated lease liabilities in respect of a
four-year extension to the Iofina Resources Denver office lease. The related
cash outlay will occur through monthly rental payments over the period of the
lease extension.
Cash flow
Cash started the year at $3.5m and ended $1.8m higher at $5.3m, after paying
off $1.4m of the bank term loan in accordance with the borrowing schedule and
also depositing $2.7m of funds to reduce the bank line of credit to Nil, so
avoiding interest charges. Total cash generated was therefore the $5.9m
reflected in the reduction of net debt from $8.9m to $3.0m. The Group
considers that these levels of cash and borrowings make it well placed to fund
further expansion. As regards working capital, inventories reduced by $3.3m
and receivables increased by $2.6m, reflecting more normal ratios after the
drop in demand during 2020.
Malcolm Lewin
Chief Financial Officer
Iofina plc
6 May 2022
DIRECTORS' BIOGRAPHIES
Lance J. Baller, Non-Executive Chairman
Mr. Baller was co-founder, CEO and President of Iofina Plc prior to his
departure for health reasons in June 2013. Mr. Baller was the Group's Finance
Director from 2007 until his appointment as CEO in 2010. Mr. Baller returned
as Chairman in April 2014. Mr. Baller currently serves as CEO of Selectis
Health, Inc and as a director and as sole or principal shareholder of several
privately owned businesses, including Baller Enterprises, Inc. (personal
holding company), Titan Au, Inc, Empire Leasing LLC, Valdez Au, Inc, Extrac,
Inc, (which all are in gold, sand, rock, and gravel mining), Ultimate
Investment (personal investment company) and Baller Family Foundation, Inc.
(personal family foundation). He is the former managing partner of Shortline
Equity Partners, Inc., a mid-market merger and acquisitions consulting and
investment company. Mr. Baller is also the former Managing Partner of
Elevation Capital Management, LLC and is the former alternative investment
hedge fund manager of the Elevation Fund. He is also a former Vice-President
of Corporate Development and Communications of Integrated Biopharma, Inc. and
prior to that a vice-president of the investment banking firms UBS and Morgan
Stanley. Mr. Baller has been a CEO, interim CEO, Chairman, CFO and secretary
of various private and public listed companies throughout his career. He has
served as Chairman to various companies and has led successful restructurings.
Mr. Baller has had extensive experience in all aspects of corporate finance.
Mr. Baller currently is on the board of trustees of Index Fund and Digital
Funds where he serves as the chairman of the audit committee and as the audit
committee financial expert under Sarbanes-Oxley.
Dr. Thomas M. Becker, Chief Executive Officer
Dr. Becker has served as President/CEO of Iofina plc since 2014 and has led
Iofina Chemical since March 2010. Previously, Dr. Becker was the Vice
President of Research and Development at H&S/Iofina Chemical. Iofina
bought H&S in July 2009. Dr. Becker has conducted extensive research in
both inorganic and organic halogen-based chemistry. Dr. Becker has written a
magnitude of published technical papers in his career. Prior to H&S Dr.
Becker worked as an Oak Ridge Scholar on behalf of the US EPA and for various
other chemical manufacturing companies. Dr. Becker earned a BS in Chemistry
from Indiana University, and a PhD in Chemistry from the University of
Cincinnati. He has extensive experience in scale-up of chemical processes from
laboratory to pilot to full scale production. Dr. Becker is a former member of
the Board of Governors of the Society of Chemical Manufacturers and Affiliates
("SOCMA").
Dr. William D. Bellamy, Non-Executive Director
Dr. Bellamy is the former Senior Vice President of the Water Business Group at
CH2M HILL, Inc. ("CH2M"), a company he has worked at for 30 years until his
recent retirement. CH2M is one of the largest consulting engineering companies
in the world, providing leadership and strategic direction for the water
business and application of technologies worldwide. Dr. Bellamy has
participated in energy and sustainability forums, including as a panellist at
the World Future Energy Conference in Abu Dhabi, the World Bank Sustainable
Cities Symposium and the Future of Water Economic Forum. Dr. Bellamy serves as
Professor of Practice at the University of Wyoming, where he teaches graduate
courses and is responsible for securing grants and research funding in the
areas of water resources, water treatment and sustainable energy development.
Dr. Bellamy has a PhD in Civil Engineering from Colorado State University, an
MSc in Civil (Environmental) Engineering from the University of Wyoming and a
BSc in Electrical (Bio-Medical) Engineering from the University of Wyoming.
Malcolm T. Lewin, Chief Financial Officer
Mr. Lewin was named CFO and a director of the Group in November 2016 after having joined Iofina as interim CFO in February 2016. Mr. Lewin is based in the UK and has over 30 years of experience in finance and accounting for both public and private companies. As well as being a partner in a chartered accounting firm for 11 years, he has acted for various companies listed on AIM and other exchanges. In particular, from 2000 to 2003 he was the Finance Director of Oxford Metrics plc, an AIM company supplying motion capture and visual geometry systems. From 2004 to 2006 he was the Finance Director of Real Estate Investors plc, an AIM property investment company with interests in quality commercial and industrial properties. From 2006 to 2011 he was a Director and CFO of Hunter Bay Minerals plc, a junior mining company listed on the Toronto Venture Exchange with interests in South America and Canada. From 2011 to 2014 he was CFO and Treasurer of VolitionRX Limited, an OTC life sciences company focused on developing blood tests for a broad range of cancer types and other conditions. Mr. Lewin has an MA in Classics from Oxford University and qualified as a chartered accountant with Coopers & Lybrand.
J. Frank Mermoud, Non-Executive Director
Mr. Mermoud has more than 30 years' experience in international business, facilitating trade and investment in both the public and private sectors. He has held senior international, economic and commercial policy positions within the United States Government having served as the Secretary of State's Special Representative for Commercial and Business Affairs at U.S. Department of State from 2002 to 2009. Mr. Mermoud is also a Non-Executive Director of Cub Energy Inc. an oil and gas company headquartered in Houston, Texas.
Mary C. Fallin-Christensen, Non-Executive Director
Mary Fallin-Christensen has served the State of Oklahoma for over 30 years. She was elected the first female Governor of the State in 2010, and was re-elected for a second term in 2014. Prior to serving as Governor she held a number of state and federal positions, including serving as US Congresswoman for Oklahoma's 5th district between 2007-2011 and serving as Lieutenant Governor of Oklahoma between 1995-2006. Mary has been a major contributor to natural resources industries in Oklahoma, and implemented the State's first comprehensive energy plan as well as its State-wide water plan. She has held several positions, including Chair of the Southern State Energy Board, Chair of the Interstate Oil & Gas Compact Commission, and has served on the natural resource committee of the National Governors Association (NGA). Previously, she also served on the United States House of Representatives Committee on Small Business, was Small Business Chairman on the Republican Policy Committee, and was named the "Guardian of Small Business" by the National Federation of Independent Business. Mary has also served on numerous Boards of Directors for both commercial organizations and non-profits.
STRATEGIC REPORT
Principal activities and review of the business
Iofina plc ("Iofina" or the "Company") is the holding company of a group of
companies (the "Group") involved in the exploration and isolation of iodine
and the production of specialty chemicals. Large volumes of brine water are
sourced from partnerships with oil and gas operators and saltwater disposal
("SWD") operators in the United States and is used as a raw material to
produce iodine at the Group's multiple IOsorb® plants. The Group's unique
business model isolates a resource, iodine from a produced waste stream that,
without Iofina's technology, would be lost. Iodine containing or other
specialty chemicals are produced at and sold through the Company's wholly
owned subsidiary, Iofina Chemical, Inc., with the major raw material being the
Group's produced iodine. Additionally, the Group's crystalline IOflo® iodine
is sold directly to other iodine end-users.
Iodine is a rare element that is produced only in a few countries in the
world, with approximately 90 percent of global production coming from Chile
(~60 percent) and Japan (~30 percent, including recycled waste streams). The
U.S., where the Group operates, is responsible for approximately six percent
of production but is one of the world's largest consumers of iodine. Iodine
and its compounds have many human health related applications, including x-ray
contrast agents, pharmaceuticals, antiseptics, thyroid function, and others.
Additional high-volume uses of iodine include LCD screen technology, material
heat stabilisation, animal feed additives, biocides, catalysts and more. The
Group produces iodine in the United States where the overall global iodine
production is only a small percentage of the world's total production, but
where there is a large consumption of the world's iodine by various American
users. Iofina believes it is the second largest producer of iodine in North
America.
Iofina Resources, Inc. is the Group's wholly owned subsidiary which uses
proprietary Wellhead Extraction Technology® (WET®) and WET® IOsorb®
methods to produce iodine from brine. The Directors of the Company believe
that Iofina's production process, which utilizes brine water from third party
oil and gas production, is advantageous for long term sourcing of the raw
material as well as minimised production and expansion costs.
The ability of the Group to expand its iodine production quickly, at low cost,
differentiates Iofina from other iodine producers. This has been proven from
the expansion of production and opening of IOsorb® plants IO#7 and IO#8.
Additionally, the Directors believe that the Group's technology to produce
iodine is far more environmentally friendly compared to other producers. By
using a waste stream from the oil and gas industry to isolate iodine versus
isolating iodine from ores, Iofina's process is ecologically efficient in
obtaining a valuable product from a waste stream versus environmentally
intensive processes of mining iodine from ores seen in Chile.
Economically viable iodide rich brine co-produced during oil and gas
production is not common, and the Group's proprietary geological model to
locate and anticipate iodide rich sources is unique. The Directors of Iofina
are committed to producing its products in a sustainable and environmentally
friendly manner, and to improving communications regarding our long-term
strategy in respect of Iofina's sustainable practices and other ESG tenets.
The focus of Iofina's current business model is the production of iodine from
brine and the creation and sales of specialty chemicals through Iofina
Chemical. The Directors feel strongly that diversification of the business
while focusing on our core expertise is important. Iofina Resources
diversifies its iodine production through multiple IOsorb® production plants
with multiple brine suppliers in our core area in western Oklahoma. The
technology the Group has developed, utilizing a waste resource already being
produced, allows Iofina the ability to expand its operations quickly with
minimal capital expenditure. Continued prudent growth in the number of
IOsorb® plants increases production, profit and diversification. Continued
expansion of the Group's geological model provides opportunities for Iofina
outside of its current core area.
Iofina Chemical produces a wide range iodine-based products with applications
in various industries including agricultural, pharmaceutical, biocides and
others, whilst additional diversification is realised by the production of
non-iodine-based products at Iofina Chemical. The end markets for various
products can change, and Iofina Chemical's ability to produce a variety of
products allows the Group to take advantage of growing markets while not being
as affected by temporarily depressed or declining markets.
In 2021 iodine and iodine derivative sales increased while non-iodine product
sales declined versus 2020. Market conditions for specialty chemicals can
change. As an example, there was an inventory build-up by Iofina's key
customers of a key fluorinated chemical in H2 2020 which resulted in increased
sales of this product in H2 2020 but lower sales in 2021. This same
fluorinated product, for Iofina, has recently seen stronger demand during late
Q1 of 2022. Conversely, iodine demand in H2 2020 was low as COVID related
economic downturns affected consumer demand for iodine products particularly
in human health and automotive sectors. As a result, Iofina carried higher
than normal inventories of iodine and iodine derivatives into 2021. With the
quicker than expected economic recovery of iodine markets as countries began
to reopen, these inventories were sold down and had a positive impact on 2021
results. The overall result for Iofina was record revenue and profit and is a
testament to our business model of diversification of business lines while
keeping to our core technologies. Additionally, creating strong, transparent,
long-term, mutually beneficial customer relationships are a fundamental tenet
for Iofina Chemical. Research and Development remain a top focus at Iofina in
order to improve current systems and be at the forefront of new technologies,
new specialty chemical products and applications in our core
competencies.
Iodine prices have risen significantly in the last 18 months, reaching $60/kg
and higher in some instances. This is a level not experienced since 2011, when
a combination of the Fukushima disaster in Japan and Chilean supply
disruptions resulted in a shortage of iodine and a price spike. Supply and
demand changes, as well as manufacturing cost increases, are the major factors
influencing the iodine price. More recently, iodine prices slightly retreated
in H2 2020 as a result of lower global demand for iodine and iodine-based
products during the COVID-19 pandemic. As an iodine manufacturer, iodine
prices have a significant impact on the Group's gross profit margins. Prices
rose marginally in H1 2021 and significantly in H2 2021 as demand outpaced
supply as global economies expanded as COVID impacts waned.
During 2021, demand for many human health related uses of iodine increased
significantly from 2020 levels. Currently, iodine prices are high versus
historical levels and the range of prices is larger than typical historical
prices. Spot prices began 2022 near $50/kg and now are mostly at $60/kg and
above while contracted iodine prices for large customers are generally lower
than spot prices. Iofina expects demand for its products to remain strong in
2022 versus supply and foresees iodine prices to remain at high levels. To the
Group's knowledge, there is no indication of large-scale greenfield iodine
projects currently in development that would significantly increase iodine
supply in the short-term. Additionally, inflation in H2 2021 and into 2022
has resulted in higher costs for Iofina's raw materials, labour and energy,
which is likely to continue through much of 2022.
The Directors recognized that, as the Company erected its IOsorb® plants, it
was imperative for Iofina's iodine production costs to be amongst the lowest
in the industry to be competitive. Between 2014 and 2017 numerous
initiatives were successfully implemented to optimise Iofina's technology and
lower production costs. Once the majority of these process cost optimisation
goals were achieved, and iodine market conditions were positive, the Directors
executed the next phase of Iofina's business plan and began a growth strategy.
In early 2018 the Group's iodine plant, IO#7, was completed. By expanding our
operations and building IO#7, the Group has successfully lowered overall
iodine production costs compared to the costs before IO#7. The Directors
continued this prudent growth strategy in 2019. In Q2 2019, the Company
performed an equity raise to reduce debt and provide working capital for
expansion projects. The result was the construction of IO#8 which began in
late 2019 and was completed in early April 2020.
The Group is committed to continued growth and is investigating locations and
partnerships to expand iodine production. The Group announced its intention
in 2021 to build IO#9. Lessons learned from past expansion play a role in
management's iodine plant growth. Building of IOsorb® plants will be done
in a prudent manner to ensure to the best of our knowledge long-term, low-cost
iodine production. With an expanding iodine market and Iofina's improved
balance sheet it is likely that Iofina will embark on IO#10 soon after IO#9's
completion, if not before, although this will only be done with proper prudent
evaluations of potential future sites.
The Directors are aware of the risk of declining brine availability if our
partners do not maintain or increase their hydrocarbon production in areas
that supply the Group's IOsorb® plants. The Group is investigating the
economics and the technology to better control the iodide rich brine supplies
that feed the current and future plants. Iofina Chemical continues to be
recognised as a world-renowned halogen specialty chemical producer. Vertical
integration of the Group's iodine into iodine derivatives gives Iofina's
customers stability of supply in addition to the long-standing quality and
technical support to Iofina's global customers for the goods sold to them.
Additionally, the non-iodine-based halogen derivatives produced by Iofina
Chemical gives the Group further diversity. Iofina Chemical is investing in
Capital Expenditure projects in 2022 to improve its R&D facilities, scale
up production of a non-iodine product, and begin a new iodine recycling
operation.
Key Performance Indicators
The Directors review a range of financial indicators to assess and manage the
Group's performance, including the following relating to revenue and iodine
production:
Year ended Year ended
31 December 31 December
2021 2020
$'000 $,000
Revenue from sales of iodine and iodine derivatives $30,473 $18,507
Revenue from non-iodine products $8,566 $11,181
Total revenue $39,039 $29,688
Total pounds of product shipped (LBS '000) 2,580 1,800
Crystallised iodine produced (Metric Tonnes) 518 610
IOsorb® plants in operation (year-end) 5 5
Commentary on some of the above indicators is to be found in the Chairman's
Statement on pages 3 to 8.
Further commentary on the results for the year and the financial position at
the year-end is to be found in the Financial Review on pages 9 to 11.
Objectives
At the end of 2021 the Group had five operating IOsorb® iodine production
facilities in the Group's core area in Oklahoma. While the theoretical
capacity of these plants is very high, the practical capacity of the plants is
somewhat lower. Practical capacity takes into account multiple causes of
downtime, including weather, repairs and maintenance, inadequate brine (low
parts per million of iodine, heavily contaminated brine or little to no
supply), power outages and other conditions. As we have proven our technology
and continue to improve operations at current facilities, more accurate
practical capacity operating targets have been realised as well as
improvements for maximising practical capacity.
Iofina Resources' unique business model allows the Group to determine sites
for new iodine production plants utilizing existing brine produced from oil
and gas production and quickly bring these sites into production. The
continued execution of this prudent growth strategy was continued with the
start of construction of IO#8 in late 2019 which was completed in April 2020.
While technology and efficiency improvements at current facilities remain an
ongoing priority, the Company continues to explore new iodine production
opportunities. This objective of strategic expansion in 2020 and beyond is
focused on sites that will continue to improve Iofina's output with low
production costs. In 2021, the Group announced its intention to build IO#9,
with this now expected to be completed later in 2022. Brine supply to our
IOsorb® plants can be affected by regulatory changes and adjustments to our
partners' saltwater disposal systems and oil production programs. Iofina
continues to work with its partners to implement plans to maximize brine input
and iodine output at each of our existing sites. The mutually beneficial
relationship between Iofina and its brine supply partners, which allows Iofina
to create iodine and allows the brine suppliers to realize value from a waste
stream, is a key component for existing projects and potentially for future
sites. Continued efforts by our business development and geological teams have
identified numerous other expansion opportunities that the Company will
continue to evaluate and potentially execute, with current and other potential
brine supply partners, when management determines proper timing for new
sites.
Timing of future iodine production growth will be dependent on various factors
including the stability or increase of iodine prices, global iodine demand,
availability and costs to produce iodine at new sites, partnership agreements,
oil prices and production in areas with high iodide content brines, and the
regulatory landscape with respect to brine injection. With the fluctuations in
oil prices, which was evident in the last two years, the Group is increasingly
focused on evaluating alternative brine sourcing opportunities which may allow
the Group to better control brine supply at future sites. The Directors are
focused on expansion in a prudent manner whilst properly managing the current
debt and cash flow of the organisation. Expansion in 2022 will occur with the
building of IO#9 and investigations into IO#10 are ongoing. The Directors will
evaluate market conditions and the detailed information on potential future
plant sites before spending capital on new IOsorb® plants.
Iofina Chemical has continued to invest in current product lines, safety
improvements, and new product R&D. These include investments in both
iodine-based products and other non-iodine specialty chemicals. Capital
investment projects completed in 2021 at Iofina Chemical included methyl
fluoride upgrades, building containment improvements, and other safety
initiatives. Increased capital expenditures at Iofina Chemical are expected in
2022 as discussed earlier in this report. The R&D and the sales groups
continue to investigate and research new opportunities for and applications of
our existing portfolio of products, as well as identify and produce new
halogen-based derivatives for the Group in order to grow our halogen
derivatives business. It is also expected that Iofina Resources' expansion
plans in 2022 will result in the need for expansion of our customer base for
our products. The sales team at Iofina Chemical continues to develop new sales
channels for our products including direct sales of the Group's crystalline
IOflo® iodine to consumers. Managing existing and developing new sales
channels and relationships, as Iofina continues to grow, is a high priority
for the sales force at Iofina Chemical.
As previously communicated, IofinaEX is now solely focused on monetizing its
hemp seed investment project with Organic Vines OP that resulted in the
production of 22 million certified organic seeds. To date seed sales are low
and no significant sales were made in 2021. While the Group believes these
seeds are viable for sales, the Company cannot predict any future income with
any reasonable probability, and therefore the investment has been impaired to
Nil.
Lastly, the Directors are committed to employee retention whilst controlling
costs. Employee safety and training are also key objectives for the Group. A
key component for the Group is the high operational gearing whereby the
Group's business model allows for the control of administrative and fixed
expenses whilst expanding operations.
Principal risks and uncertainties
Iofina plc is subject to a number of risks and uncertainties, which could have
a material effect on its business, operations or future performance, including
but not limited to:
Raw Materials: Brine water produced from oil and gas operations is the raw
material source for Iofina's iodine production. The Group continues to
evaluate opportunities to integrate its IOsorb® process into produced brine
water streams associated with hydrocarbon operations in the USA, as well as
other brine stream sources throughout the world. However, there is significant
risk and no guarantee as to the volume of commercial quantities of iodide rich
brine available to our current and future IOsorb® plants. Oil and gas prices
and demand for these hydrocarbons generally will dictate whether our partners
continue to expand their production or possibly reduce hydrocarbon output.
Changes in hydrocarbon production by our partners will change the total brine
availability to isolate iodine and thus the iodine output of our IOsorb®
plants. The salt-water disposal wells (SWDs) that our partners operate may
have temporary or permanent issues which would likely affect the brine supply
to IOsorb® plants. In the past year and a half there has been a reduction
of capital spent by our partners for new drilling and recompletion of wells in
our core area which has resulted in a decline in total amounts of brine
co-produced with oil and gas in our key areas. Iofina maintains good
relationships with our partners who provide the brine water to our existing
IOsorb® plants. Maintaining a positive, mutually beneficial relationship with
our brine suppliers is a top priority for the Group. By continuing an
aggressive water testing program and active exploration utilising geology and
data analytics and incorporating reservoir and production engineering, we are
constantly evaluating new potential locations for iodine extraction in our
core area and in other locations.
Iofina Chemical sources raw materials throughout the globe. Understanding
the supply chain of these materials is important to minimise supply
disruptions. Global supply change disruptions and logistic bottlenecks can
adversely affect ability to obtain key raw materials and may result in
increased costs of these materials. Iofina Chemical has long term
relationships with many of its suppliers. Additionally, when possible,
Iofina Chemical sources materials from multiple suppliers to reduce risk.
Increased regulations can adversely affect availability and cost of
materials. Prices of raw materials and energy can change and if increases in
these prices are not able to be passed on to our customers, it would
negatively affect margins for our products.
COVID-19 and Global Crises: Global crises, while rare, can impact businesses
significantly. The COVID-19 pandemic is an example of such an event. Similar
events could have a negative effect on the markets we serve and on the Group's
profits. COVID-19 resulted in a global economic slowdown and a reduced
demand for many of Iofina's products. These types of events can also result
in delays in shipping, worker limitations, business closures and other
challenges which may negatively affect the Group. The diversity of Iofina's
products along with the uses of products in areas like human health
applications make Iofina less susceptible than most other businesses. Iofina
quickly implemented many protocols to minimize any negative impacts on the
business, but these protocols only reduce risk and cannot eliminate risk.
COVID-19 or other events such as political unrest, acts of aggression (wars),
other health crises, major weather events or others would likely have a
negative effect for the Group.
Currently, the Russian invasion of Ukraine has not directly affected Iofina's
operations negatively, however, a prolonged invasion or an escalation of this
conflict may cause negative changes to international sales and supply.
Additional political sanctions or negative impacts to global economies as a
result of this invasion may adversely impact our business.
Environmental: The Group's operations are subject to the environmental risks
inherent in the exploration and chemical industries. The Group is subject to
environmental laws and regulations in connection with all of its operations.
Although the Group intends to be in compliance in all material respects with
all applicable environmental laws and regulations, there are certain risks
inherent to its activities, such as accidental spills, leakages or other
circumstances that could expose the Group to extensive liability. Accordingly,
the Group promotes wherever possible environmental sustainability in its
working practices and seeks to minimise, mitigate, or remedy any harmful
effects from the Group's operations on the environment at each of its
operational sites. Regulations on brine injections in the state of Oklahoma
into the Arbuckle geological formation in the Group's core area due to seismic
activity were implemented mainly in late 2015 to early 2016, and have affected
Iofina's partners' brine disposal into this formation near some of our sites.
This reduced some brine availability to Iofina at some sites. The Group and
its partners have implemented and continue to implement strategies to minimise
the effect on the availability of iodine rich brine to Iofina due to these
regulations. Moving forward the Group and its partners will continue to
monitor these risks and act accordingly. While the frequency and intensity of
earthquakes have significantly reduced in Oklahoma, and this reduction is
likely a result of regulated changes in brine disposal into the Arbuckle
formation, there is still risk of additional earthquakes and regulation moving
forward. Changes in laws or regulation of brine streams could affect brine
availability or the cost to produce iodine. As a specialty chemical
manufacturer, new regulations based on chemical use, adverse human health or
environmental impact are a risk and may lead to higher costs or controlled
production. Recent Greenhouse Gas (GHG) regulations in the USA have not
impacted Iofina's ability to produce products it currently manufactures, but
changes to production allocations may negatively affect Iofina's production
output in the future. Other environmental regulations that restrict
manufacturing of chemicals that Iofina produces would have a negative impact
on the Group. The Group has a robust Environmental, Health and Safety
program and strives for continual improvement in this area. Additionally,
Iofina Chemical is a certified Chemstewards® facility.
Changes in Markets and Competition: Iofina is well diversified in the markets
we serve. As a result, small changes to these markets generally will not
materially affect our business. However, major disruptions in key markets
that use iodine or the other specialty compounds we manufacture could have a
material negative effect on the Group. Additionally, increased competition
in the markets we serve could negatively impact prices or the ability to sell
our goods. In particular, large increases in iodine production from
competitors could negatively affect iodine prices and the Group's market
share. While we do not know of any planned, new, large greenfield iodine
projects in the near term, information is limited.
Iodine Price volatility: The demand for, and prices of, iodine are highly
dependent on a variety of factors including international supply and demand,
the level of consumer product demand, the price and availability of
alternatives, actions taken by governments and global economic and political
developments. Increases in current iodine producers' production capacities or
new iodine producers entering the market could negatively impact prices.
Fluctuations in iodine prices and, in particular, a material decline in the
price of iodine would have a material adverse effect on the Group's business,
financial condition and operations. Since 2017, prices of iodine have been
rising until demand for iodine slowed as the global demand for many products
fell during the second half of 2020 as the COVID-19 pandemic surged. Iodine
prices recovered in H1 2021 and began to rise significantly in H2 2021. During
H1 2022 iodine prices have remained high as demand is strong and is outpacing
supply.
Key customers: There are a limited number of potential customers who
purchase many of the products of the Group's chemical business, which makes
relationships with these customers, as well as the success of those customers'
businesses, critical to the Group's success. The loss of one or more major
customers could harm the business, operating results and financial condition
of the Group. Iofina is continuing to diversify its customer base in its
Chemical subsidiary. In addition, Iofina works closely with all of its
customers to develop strong relationships, with a significant focus on
ensuring that its products and services meet the needs of its customers and
are of the highest quality. In 2021, 10 percent of revenue recognised was
attributable to one long term customer and four other customers each
contributed to over 5% of sales. Relations with these customers are good.
Key Partners: Iofina partners with third party oil and gas producers and
saltwater disposal operators to process iodine rich brine they extract with
oil and gas production. Fluctuations of oil and gas prices in the US can
affect the financial stability of oil and gas producers. Any changes in
operator status or the financial strength of our partners is a risk to brine
production and availability. The Group has agreements with our partners to
reduce any risk of change in status. Material changes in these brine supply
contracts with our partners could negatively affect the Group.
Regulation and Trade: The businesses are subject to various significant
international, federal, state and local regulations currently in effect
including but not limited to environmental, health and safety and
import/export regulations. These regulations are complex, change frequently,
can vary from country to country, state to state and have generally increased
over time. Iofina may incur significant expense in order to comply with these
regulations or to remedy violations of them. The current federal
administration in the USA has increased regulations in our industries versus
the previous administration. Any new regulation that would increase cost of
raw materials the Group uses, reduces availability of these raw materials or
caps production of products the Group produces would likely have a negative
effect on margins.
Any failure by Iofina to comply with applicable government regulations could
result in non-compliant portions of our operations being shut down, product
recalls or impositions of civil and criminal penalties and, in some cases,
prohibition from distributing our products or performing our services until
the products and services are brought into compliance, which could
significantly affect our operations.
IofinaEX is involved in the sale of hemp seeds, a highly regulated industry.
Laws and regulations for handling hemp seeds, biomass and products produced
from hemp continue to change and evolve.
The Group closely monitors regulations across its businesses to ensure that it
complies with the relevant laws and regulations. While Iofina does not believe
that it is non-compliant with any laws or regulations, any instances of
non-compliance would be brought to the attention of the appropriate
authorities as soon as possible.
Recently trade relationships between the USA and other areas of the world have
become more unstable. Increased tariffs implemented by the USA and
retaliatory tariffs imposed by other governments against the USA have the
potential to adversely affect both raw material supply and final product sales
for Iofina in certain areas of the world. Iofina has been proactive in
reducing the impact of tariffs which directly impact the Company's supply and
sales lines.
Inventory Fluctuations: Inventory level changes can cause a financial
instability. High inventories negatively affect cash flow, while low
inventories can negatively affect sales volumes and customer relationships.
In 2021, the Group started the year with larger than normal iodine inventories
and ended the year with lower than normal iodine inventories.
Insurance may not cover all material losses: The Group strives to carry
standard insurance for our industry that would minimise loss when events
occur. However, certain scenarios or events may not be covered by insurance
and could have a negative material impact on the Group. For example,
cyber-attacks have increased globally and while the Group has increased
measures to thwart potential cyber-attacks, we cannot guarantee these measures
will prevent a cyber-attack for which we do not carry specific insurance.
Personnel: As a small technical organisation, the loss of key technical or
senior management employees could negatively affect the business.
Additionally, the USA labour market remains tight. This could result in
increased labour costs and a risk of delays or inability to produce product
due to labour shortages.
Significant Shareholders: Significant shareholders may have the ability to
affect changes that result in a material adverse effect to the organisation
including a change in senior management or control of the Group or its Board
of Directors.
Interest Rates and Inflation: As a result of the 2020 debt changes that served
to significantly reduce both overall debt and interest rates for the Group, a
significant portion of the debt carries variable interest rates. While
overall debt has continued to decline, interest rates are rising and may
negatively impact debt costs.
Inflation in the USA and globally has risen in late 2021 and into 2022. This
has resulted in higher costs for goods, energy and labour. The ability to
maintain margins in an increasing inflationary environment is uncertain.
Additionally, as prices rise, there is a risk that some products the Group
sells may be replaced by cheaper alternatives which could result in an adverse
effect to the business.
Litigation: While the Group has no pending litigation matters, there are
possibilities that future judgements or settlements could result in an adverse
effect to our business.
Going concern
In September of 2020, the Group completed the refinancing of its then
outstanding debt. The size and maturities of the Group's debt obligations
have greatly improved and its operations are generating cash, resulting in a
much improved financial health of the Group. In general, markets the Group
supplies are healthy and continue to experience strong demand for the Group's
products. The Group has prepared forecasts and projections that indicate
there are adequate resources to continue in operational existence for the
foreseeable future. The Directors consider it appropriate to continue to adopt
the going concern basis in preparing the financial statements.
On behalf of the board
Dr. Thomas M. Becker
Chief Executive Officer and President
6 May 2022
STATEMENT IN ACCORDANCE WITH SECTION 172 OF THE COMPANIES ACT 2006
As required by section 172 of the Companies Act 2006, a director of a company
must act in a way they consider, in good faith, would most likely promote the
success of the company for the benefit of its shareholders. In doing this, the
Director must have regard, amongst other matters, to the:
(a) likely consequences of any decision in the long-term;
(b) interests of the company's employees;
(c) need to foster the company's business relationships with
suppliers, customers, and others;
(d) impact of the company's operations on the community and the
environment;
(e) company's reputation for high standards of business conduct;
and
(f) need to act fairly as between members of the company.
As a Board our aim is always to uphold the highest standards of governance and
business conduct, taking decisions in the interests of the long-term
sustainable success of the Group, generating value for our shareholders and
contributing to wider society. We recognise that our business can only grow
and prosper over the long term by understanding the views and needs of our
stakeholders. Engaging with stakeholders is key to ensuring the Board has
informed discussions and factors stakeholder interests into decision-making.
The Directors insist on high operating standards and fiscal discipline and
routinely engage with management and employees of the Group to understand the
underlying issues within the organization. Additionally, the Board looks
outside the organization at macro factors affecting the business. The
Directors consider all known facts when developing strategic decisions and
long-term plans, taking into account their likely consequences for the
Group.
The Directors and management are committed to the interests and well-being of
Iofina's employees. Iofina is committed to the highest levels of integrity
and transparency possible with employees and other stakeholders. Safety
initiatives, consistent training, strong benefits packages and open dialogue
between all employees are just some of the ways the Group ensures its
employees improve skill sets and work hand-in-hand with management to improve
all aspects of the Group's performance.
Other stakeholders include customers, suppliers, lenders, industry
associations, government and regulatory agencies, media, local communities and
shareholders. The Board, both individually and together, consider that they
have acted in the way they consider would be most likely to promote the
success of the Group as a whole. To do this, there is a process of dialogue
with stakeholders to understand the issues that they might have. Iofina
believes that any supplier/customer relationship must be mutually beneficial,
and the Group is known for its commitment to details to its customers.
Communications with the Group's lenders and shareholders occur on an ongoing
basis and as questions arise. The Group also communicates through media
interviews and Twitter.
The Directors are committed to positive involvement in the local communities
where we operate. Part of this commitment is our program 'Iofina Gives
Back', where Iofina supports local charities by donating time and goods.
Additionally, Iofina adheres to environmental regulations at its sites and
supports sustainability practices where possible.
Integrity is a key tenet for the Directors and the Company's employees. The
Company believes that any partnership must benefit both parties. We strive
to provide our stakeholders with timely and informative responses and are
always striving to meet or exceed customers' needs.
The Board recognises its responsibilities under section 172 as outlined above
and has acted at all times in a way consistent with promoting the success of
the Company with regard to all stakeholders.
CORPORATE GOVERNANCE
It is the Chairman's responsibility, working with Board colleagues, to ensure
that good standards of corporate governance are embraced throughout the Group.
As a Board, we set clear expectations concerning the Group's culture, values
and behaviours.
In September 2018, the Board adopted the Quoted Companies Alliance Corporate
Governance Code (the "QCA Code"). On our website
(https://iofina.com/corporate-governance/) we set out how we seek to comply
with the 10 principles of the QCA Code. The following sections of the
Corporate Governance Statement explain how the QCA Code is applied by the
Company.
The Board comprises six Directors: the Non-Executive Chairman, two full time
Executive Directors and three Non-Executive Directors (each of whom are
considered by the Board to be independent), reflecting a blend of different
experiences and backgrounds. The function of the Chairman is to supervise and
manage the Board and to ensure its effective control of the business. The
Board believes that its composition brings a desirable range of skills and
experience given the Group's challenges and opportunities as a publicly quoted
company, while at the same time ensuring that no individual (or group of
individuals) can dominate the Board's decision-making.
The Board meets regularly to review, formulate and approve the Group's
strategy, budgets, corporate actions and oversee the Group's progress towards
its goals. The Board has established the following committees to fulfil
specific functions, each with formally delegated duties and responsibilities
(details of which can be found on our website; see:
http://www.iofina.com/about/committees
(http://www.iofina.com/about/committees) ): the Audit Committee and the
Remuneration Committee. These committees meet on a regular basis and at least
two times a year. The Board has elected not to constitute a dedicated
nomination committee, instead retaining such decision making with the Board as
a whole. This approach is considered appropriate to enable all Board members
to take an active involvement in the consideration of Board candidates and to
support the Chair in matters of nomination and succession.
From time to time, separate committees may also be set up by the Board to
consider specific issues when the need arises.
DIRECTORS' REPORT
The Directors present their report and financial statements for the Group for
the year ended 31 December 2021.
Strategic report
Included in the Strategic Report on pages 14 to 23 is the review of the
business and principal risks and uncertainties.
Post balance sheet events
Post balance sheet events are set out in note 30.
Directors' responsibilities for the preparation of the financial statements
The Directors are responsible for preparing the Strategic Report and the
Directors' Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group and Company financial
statements for each financial year. The Directors are required by the AIM
Rules for Companies (as published by the London Stock Exchange) to prepare
Group financial statements in accordance with UK adopted International
Financial Reporting Standards ("IFRS"), and have elected under company law to
prepare the Company financial statements in accordance with IFRS.
The financial statements are required by law and UK adopted IFRS to present
fairly the financial position of the Group and the Company and the financial
performance of the Group. The Companies Act 2006 provides, in relation to such
financial statements, that references in the relevant part of that Act to
financial statements giving a true and fair view are references to their
achieving a fair presentation.
Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
for that period.
In preparing the Group and Company financial statements, the directors are
required to:
a. select suitable accounting policies and then apply them
consistently;
b. make judgements and accounting estimates that are reasonable
and prudent;
c. state whether they have been prepared in accordance with UK
adopted IFRS; and
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the Company will
continue in business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Group and the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Iofina plc website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Results and dividends
The results for the year are set out in the consolidated statement of
comprehensive income and detailed in the Financial Review.
The directors do not recommend payment of a dividend.
Financial instruments and risk management
Note 14 details the risk factors for the Group and how these risks are
managed, including the degree to which it is appropriate to use financial
instruments to mitigate risks.
Directors
The directors who served during the year and subsequently were as follows:
Lance J. Baller, Non-Executive Chairman
Dr. William D. Bellamy, Non-Executive Director
J. Frank Mermoud, Non-Executive Director
Mary C. Fallin-Christensen, Non-Executive Director
Dr. Thomas M. Becker, Chief Executive Officer and President
Malcolm T. Lewin, Chief Financial Officer
Statement as to disclosure of information to the auditor
The directors who were in office on the date of approval of these financial
statements have confirmed that, as far as they are aware, there is no relevant
audit information of which the auditor is unaware. Each of the directors has
confirmed that they have taken all the steps that they ought to have taken as
directors in order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the auditor.
Auditor
UHY Hacker Young were appointed as auditors to the Company and in accordance
with Section 485 of the Companies Act 2006 a resolution proposing that they be
reappointed will be put to the next Annual General Meeting.
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
6 May 2022
CORPORATE GOVERNANCE STATEMENT
The Board ensures that the Group is managed for the long-term benefit of all
shareholders with corporate governance being an essential element of this and
has adopted the Quoted Companies Alliance ("QCA") Corporate Governance Code
which is considered appropriate for an AIM quoted company. The Board is
responsible for the overall leadership, strategy, development and control of
the Group in order to achieve its strategic objectives.
The Group is led and controlled by the Board which currently consists of two
Executive Directors and four Non-Executive Directors. Board meetings are held
on a regular basis and no significant decision is made other than by the
Directors. All Directors participate in the key areas of decision making.
Business model, strategy and approach to risk
The Group focuses on the exploration and production of iodine and
halogen-based specialty chemical derivatives. We identify, develop, build, own
and operate iodine extraction plants, currently focused in North America,
based on Iofina's Wellhead Extraction Technology® (WET®) IOsorb®
technology. The Group has complete vertical integration from the production of
iodine in the field to the manufacture of the chemical end-products derived
from iodine to the consumer, and the recycling of iodine using iodinated
side-streams from waste chemical processes. We use patented or proprietary
processes throughout all business lines. Together these allow us to be the
Technology Leaders in Iodine®. The Group's strategy is to continue to focus
on the exploration and production of iodine and iodine specialty chemical
derivatives, delivering growth throughout our operations. Growth is intended
to be achieved with the continued upgrading and expanding of our plants, which
in turn will boost the level of iodine production.
All the Group's activities involve an ongoing assessment of risks, and the
Group seeks to mitigate such risks where possible. The Board has undertaken an
assessment of the principal risks and uncertainties facing the Group,
including those that would threaten its business model, future performance,
solvency and liquidity. Further, the Board has considered the longer-term
viability of the Group, including factors such as the prospects of the Group
and its ability to continue in operation for the foreseeable future. The Board
considers that the disclosures outlined in the Strategic Report on pages 14 to
23 are appropriate. The Board considers that these disclosures provide the
information necessary for shareholders and other stakeholders to assess the
Group's future viability and potential requirements for further capital to
fund its operations.
Having carried out a review of the level of risks that the Group is taking in
pursuit of its strategy, the Board is satisfied that the level of retained
risk is appropriate and commensurate with the financial rewards that should
result from achievement of its strategy.
Board of Directors
As of the date of this Report the Board comprises six Directors in total: the
Non-Executive Chairman, two Executive Directors (being the Chief Executive
Officer ("CEO") and the Chief Financial Officer ("CFO")) and three
Non-Executive Directors (each of whom are considered by the Board to be
independent), reflecting a blend of different experiences and backgrounds. The
skills and experience of the Board are set out in their biographical details
on pages 12 and 13. The experience and knowledge of each of the Directors give
them the ability to challenge strategy constructively and to scrutinize
performance.
The Board is responsible to the shareholders for the proper management of the
Group. The Board and the Group's management team are responsible for reviewing
and evaluating risk and the Executive Directors meet at least monthly to
review ongoing trading performance, discuss budgets and forecasts, and new
risks associated with ongoing trading. The full Board typically meets
quarterly to set the overall direction and strategy of the Group, to review
operational and financial performance, and to advise on management
appointments (if necessary). The Board has also convened, when necessary,
during the year to review the strategy and activities of the business. All key
operational and investment decisions are subject to Board approval. The
Company Secretary is responsible for ensuring that Board procedures are
followed, and applicable rules and regulations are complied with. The number
of meetings attended by each Director can be found on page 32.
There is a clear separation of the roles of CEO and Non-Executive Chairman.
The Chairman is responsible for overseeing the running of the Board, ensuring
that no individual or group dominates the Board's decision making and ensuring
the Non-Executive Directors are properly briefed on matters. The CEO has the
responsibility for implementing the strategy of the Board and managing the
day-to-day business activities of the Group.
Time commitment
On joining the Board, Non-Executive Directors receive a formal appointment
letter, which identifies the terms and conditions of their appointment and, in
particular, the time commitment expected of them. A potential Director
candidate (whether an Executive Director or Non-Executive Director) is
required to disclose all significant outside commitments prior to their
appointment. The Board is satisfied that both the Chairman and the other
Non-Executive Directors are able to devote sufficient time to the Group's
business.
Independence of Directors
The Directors acknowledge the importance of the principles of the QCA Code
which recommends that a company should have at least two independent
Non-Executive Directors. The Board considers it has sufficient independence on
the Board and that all the Non-Executive Directors are of sufficient
competence and calibre to add strength and objectivity to the Board, and bring
considerable experience in industry, operational and financial development of
chemical products and companies. Specifically, the Board has considered and
determined that since the date of their respective appointments William
Bellamy, J. Frank Mermoud and Mary Fallin-Christensen are independent in
character and judgement, specifically that they:
· have not been employees of the Company within the last five years;
· do not have a material business relationship with the Group;
· have no close family ties with any of the Group's advisers, Directors
or senior employees;
· do not hold cross-directorships or have significant links with other
Directors through involvement in other companies or bodies; and
· do not represent any shareholder.
The Company Secretary maintains a register of outside interests and any
potential conflicts of interest are reported to the Board.
If they so wish, the Non-Executive Directors have opportunities to meet
without Executive Directors being present (including after Board and Committee
meetings). Because the Board is spread out geographically, the majority of
communications between Directors is conducted by video. However, the Board
does convene in person at least once a year, and this presents an opportunity
(before, after and between management and operational meetings) for the
Non-Executive Directors to meet in person without the Executive Directors
being present.
Professional development
Throughout their period in office, the Directors are continually updated on
the Group's business, the competitive and regulatory environments in which it
operates, corporate social responsibility matters and other changes affecting
the Group and the industry it operates in as whole. The updates are usually
provided by way of written briefings and meetings with senior management.
Directors are also advised on appointment of their legal and other duties and
obligations as a director of an AIM quoted company both in writing and in
communications (being face-to-face meetings whenever possible) with the
Company's Nominated Adviser. The Directors also have recourse to the Company
Secretary, a qualified and practising solicitor, who is a recognised
practitioner within the AIM community.
All the Directors are subject to election by shareholders at the first Annual
General Meeting of the Company ("AGM") after their appointment to the Board.
Each Director will continue to seek re-election at least once every three
years.
Board Committees
There are two committees - the Audit Committee and the Remuneration Committee.
Their full terms of reference are published on the Company's website at
https://iofina.com/committees/.
Audit Committee
During the financial period under review, the members of the Audit Committee
were Lance Baller, Dr William Bellamy, J. Frank Mermoud and Mary
Fallin-Christensen. Mr Baller is the Chairman of the Audit Committee. The
responsibilities of the committee include the following:
· ensuring that the financial performance of the Group is properly
monitored, controlled and reported on;
· reviewing accounting policies, accounting treatment and disclosures
in the financial reports;
· meeting the auditors and reviewing reports from the auditors relating
to accounts and internal control systems; and
· overseeing the Group's relationship with external auditors, including
making recommendations to the Board as to the appointment or re-appointment of
the external auditors, reviewing their terms of engagement, and monitoring the
external auditors' independence, objectivity and effectiveness.
During the year, the committee met to review audit planning and findings. In
addition, it reviewed the appointment of auditors, and agreed unanimously to
re-elect UHY Hacker Young LLP.
Remuneration Committee
During the financial period under review, the members of the Remuneration
Committee were Dr William Bellamy, Lance Baller and J. Frank Mermoud. Dr
Bellamy is the Chairman of the Remuneration Committee. The responsibilities of
the committee include the following:
· reviewing the performance of the Executive Directors and setting the
scale and structure of their remuneration with due regard to the interest of
shareholders;
· overseeing the evaluation of the Executive Directors; and
· determining the vesting of awards, including the setting of any
performance criteria in relation to the exercise of share options, granted
under the Company's share option plan.
During the year, the committee met to discuss remuneration and bonuses for the
Executive Directors, and share option awards for the Directors and senior
management.
The Directors' remuneration information is presented on page 35.
Attendance at meetings
The Board meets regularly, typically on a quarterly basis, together with
further meetings as required. The Audit and Remuneration Committees meet as
required, and try to hold a minimum of two meetings each year.
The Directors attended the following meetings during the year:
Board Audit Remuneration
Lance Baller 3 1 2
Dr Thomas Becker 3 - -
Malcolm Lewin 3 - -
Dr William Bellamy 3 1 2
J. Frank Mermoud 3 1 2
Mary Fallin-Christensen 3 1 -
Risk management and internal control
The Board is responsible for the systems of internal controls and for
reviewing their effectiveness. The internal controls are designed to manage
rather than eliminate risk and provide reasonable but not absolute assurance
against material misstatement or loss. The Board reviews the effectiveness of
these systems annually by considering the risks potentially affecting the
Group.
Iofina employs strong financial and management controls within the business.
Examples of control procedures include:
· an annual budget set by the Board with regular review of progress;
· regular meetings of Executive Directors and senior management to
review management information and follow up on operational issues or
investigate any exceptional circumstances;
· clear levels of authority, delegation and management structure; and
· Board review and approval of significant contracts and overall
project spend.
The Company's system of internal control is designed to safeguard the
Company's assets and to ensure the reliability of information used within the
business. The system of controls manages appropriately, rather than
eliminates, the risk of failure to achieve business objectives and provides
reasonable, but not absolute, assurance against material misstatement or loss.
The Group does not consider it necessary to have an internal audit function
due to the small size of the administrative function. Instead, there is a
detailed monthly review and authorisation of transactions by the CFO and the
CEO.
The independent auditors do not perform a comprehensive review of internal
control procedures, but do report to the Audit Committee on the outcomes of
its annual audit process. The Board confirms that the effectiveness of the
system of internal control, covering all material controls including
financial, operational and compliance controls and risk management systems,
has been reviewed during the year under review and up to the date of approval
of the Annual Report.
The Group maintains appropriate insurance cover in respect of actions taken
against the Directors because of their roles, as well as against material loss
or claims against the Group. The insured values and type of cover are
comprehensively reviewed on a periodic basis.
Board effectiveness and performance evaluation
The Board is mindful that it needs to continually monitor and identify ways in
which it might improve its performance and recognises that board evaluation is
useful for enhancing a board's effectiveness.
The individual contributions of each of the members of the Board are regularly
assessed to ensure that: (i) their contribution is relevant and effective;
(ii) that they are committed; and (iii) where relevant, they have maintained
their independence. The Board intends to review the performance of the team as
a unit to ensure that the members of the Board collectively function in an
efficient and productive manner. One-third of the Directors must stand for
re-election by shareholders annually in rotation and all Directors must stand
for re-election at least once every three years.
The Company considers that the Board and its individual members continue to
perform effectively, that the Chairman performs his role appropriately and
that the process for evaluation of his performance has been conducted in a
professional and rigorous manner.
Corporate Social Responsibility
The Board recognises the growing awareness of social, environmental and
ethical matters and it endeavours to take into account the interest of the
Group's stakeholders, including its investors, employees, suppliers and
business partners, when operating the business.
Employment
The Group endeavours to appoint employees with appropriate skills, knowledge
and experience for the roles they undertake and thereafter to develop and
incentivise staff. The Board recognises its legal responsibility to ensure the
wellbeing, safety and welfare of its employees and maintain a safe and healthy
working environment for them and for its visitors.
Investor Relations
The Board recognises the importance of communication with the Company's
shareholders to ensure that its strategy and performance is understood and
that it remains accountable to shareholders. Our website has a section
dedicated to investor matters and provides useful information for the
Company's shareholders (see: http://iofina.com/investors/
(http://iofina.com/investors/) ). The Board as a whole is responsible for
ensuring that a satisfactory dialogue with shareholders takes place, while the
Chairman and the CEO ensure that the views of the shareholders are
communicated to the Board as a whole. The Board ensures that the Group's
strategic plans have been carefully reviewed in terms of their ability to
deliver long-term shareholder value. Fully audited Annual Reports are
published, and Interim Results notified via Regulatory News Service
announcements. All financial reports and statements are available on the
Company's website (see: http://iofina.com/investors/financial-results
(http://iofina.com/investors/financial-results) ).
There is an opportunity at the Annual General Meeting for individual
shareholders to question the Chairman and the Executive Directors. Notice of
the meeting is sent to shareholders at least 21 clear days before the meeting.
Shareholders are given the opportunity to vote on each separate issue. The
Company counts all proxy votes and indicates the level of proxies lodged on
each resolution, after it has been dealt with by a show of hands.
Directors' remuneration
Remuneration provided to each Director was as follows:
2021 2020
Salary Bonus Total $ Salary Bonus Total $
Lance Baller 109,620 - 109,620 109,620 - 109,620
Dr. Thomas Becker 260,000 35,000 295,000 236,400 50,000 286,400
Malcolm Lewin 191,208 27,315 218,523 160,000 40,000 200,000
William Bellamy 30,000 - 30,000 30,000 - 30,000
Frank Mermoud 30,000 - 30,000 30,000 - 30,000
Mary Fallin-Christensen 30,000 - 30,000 22,500 - 22,500
Total $650,828 $62,315 $713,143 $588,520 $90,000 $678,520
No pension contributions were paid on behalf of the directors in 2020 or 2021.
Directors' and officers' insurance is in place on a Group-wide basis.
The interests of the Directors in office as at 31 December 2021 in the shares
of the Company at the end of the financial year and the beginning of the
financial year or date of appointment, if later, were as
follows:
31 December
2021
1 January 2021
L J
Baller
5,175,000
4,812,500
Dr. T M
Becker
124,430
93,750
W D
Bellamy
46,875
46,875
M T
Lewin
93,750
93,750
J F
Mermoud
23,750
23,750
All outstanding options over shares granted to Directors up to 31 December
2021 are set out in the table below. No Directors exercised options in 2021.
Name 2018 Options granted Exercise price per 2018 Option Lapse date 2019 Options granted Exercise price per 2019 Option Lapse date 2020 Options granted Exercise price per 2020 Option Lapse date
Dr T Becker 660,000 16.2p 13/6/28 242,000 21.3p 24/7/29 266,200 12.5p 15/12/30
M Lewin 330,000 16.2p 13/6/28 165,000 21.3p 24/7/29 181,500 12.5p 15/12/30
L Baller 220,000 16.2p 13/6/28 165,000 21.3p 24/7/29 165,000 12.5p 15/12/30
Dr W Bellamy 110,000 16.2p 13/6/28 82,500 21.3p 24/7/29 82,500 12.5p 15/12/30
JF Mermoud - - - 82,500 21.3p 24/7/29 82,500 12.5p 15/12/30
M Fallin-Christensen - - - - - - 82,500 12.5p 15/12/30
On 9 March 2022 a further 860,200 share options were granted to directors,
with an exercise price of 17.6p.
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
6 May 2022
Independent auditor's report to the members of Iofina PLC
Opinion
We have audited the financial statements of Iofina PLC (the 'Parent Company')
and its subsidiaries (the 'Group') for the year ended 31 December 2021 which
comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Balance Sheet, the Consolidated Statement of Changes in Shareholders' Equity,
the Consolidated Cash Flow Statement, the Company Balance Sheet, the Company
Statement of Changes in Shareholders' Equity and notes to the financial
statements, including the significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK-adopted International Financial Reporting Standards (IFRSs).
In our opinion:
· the financial statements give a true and fair view of the state of
the Group's and of the Parent Company's affairs as at 31 December 2021 and of
the Group's profit for the year then ended;
· the Group and Parent Company financial statements have been properly
prepared in accordance with UK adopted IFRSs; and
· the Group financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. 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 independent of
the Group and Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statement is appropriate.
Our evaluation of the director's assessment of the entity's ability to
continue to adopt the going concern basis of accounting included:
Evaluation of management assessment Key observations
Management have prepared detailed consolidated cash flow forecasts The cash flow forecast demonstrates that the Group will have a cash flow
incorporating all entities within the Group covering the period to 31 December surplus throughout the forecast period. These incorporated all budgeted and
2023. These are based on their expectation of future costs, including budgeted committed expenditure, the schedule of repayment for the term loan and
operating and capital expenditure on all of the group's operating plants movements in working capital.
licence areas and expectations of future iodine production levels and
commodity price. In reviewing the cash flow forecast, we separately sensitised the commodity
price to determine the maximum the price of iodine could fall in order for the
Our review included: cash to be depleted to Nil by the end of the forecast period. Overall, the
price of Iodine would need to decrease by 27% in 2022 and 31% in 2023 in order
· Assessing the transparency, completeness and accuracy of the matters for EBITDA to be nil for both years of the forecast. Given the price of Iodine
covered in the going concern disclosure by evaluating management's cash flow has been increasing since 2018, this is not considered likely.
projections for the forecast period and the underlying assumptions;
The likelihood of this fall in Iodine prices lasting for the entire forecast
· Review of the cash flow forecasts, the methodology behind these and period is considered by the Directors to be remote and in such circumstances
ensuring they are arithmetically correct and challenging the assumptions by consider sufficient mitigating actions to be available to continue as a going
discussing them with management and corroborating them with our historical concern.
knowledge;
· Obtaining post year end management information and comparing these to
budget to assess whether budgeting is reasonable and results are in line with
expectations; and
· We completed a sensitivity analysis on the budgets provided to assess
the change in revenue and iodine prices that would need to occur to push the
Group into a cash negative position.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the entity's ability to continue
as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our approach to the audit
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
looked at where the directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed enough work to
be able to give an opinion on the financial statements as a whole, taking into
account an understanding of the structure of the Company and the Group, their
activities, the accounting processes and controls, and the industry in which
they operate. Our planned audit testing was directed accordingly and was
focused on areas where we assessed there to be the highest risk of material
misstatement.
Our Group audit scope includes all of the group companies, for which we have
instructed and reviewed component auditor procedures and results in relation
the existence and completeness of stock. At the Parent Company level, we also
tested the consolidation procedures. The audit team communicated regularly
throughout the audit with the CFO in order to ensure we had a good knowledge
of the business of the Group. During the audit we reassessed and re-evaluated
audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant transactions,
balances and disclosures, the extent of which was based on various factors
such as our overall assessment of the control environment, the effectiveness
of controls and the management of specific risk.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant findings,
including any significant deficiencies in internal control that we identify
during the audit.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matters How our audit addressed the key audit matters
Revenue Recognition Our audit work included, but was not restricted to:
· Documenting our understanding of management's process for evaluating
revenue recognition.
Under IFRS 15, the entity shall recognise revenue to depict the transfer of
goods or services to customers in an amount that reflects the consideration to · We tested the completeness of revenue by selecting a sample of items
which the entity expects to be entitled in exchange for those goods or from outside of the Group's accounting system and tracing them to inclusion
services. into the accounting system and agreeing the appropriate revenue recognition.
· We audited the occurrence of revenue by consideration of our testing
in trade receivables in conjunction with using data analytics software. This
The revenue stream for the group is derived from sale of iodine derivatives, was used to assist in identifying the correlation between trade receivables
iodine chemicals and ancillary products, all of which are fundamental to the and revenue journals being made and subsequently the receipt of cash for those
financial statements and a systematic error in the calculation could lead to a trade receivables and therefore whether any subsequent reversal of trade
material error. receivables should have impacted the recognition of the revenue.
· We considered the appropriateness of revenue cut-off by testing pre
and post year-end revenue items on a sample basis to assess whether the
We therefore identified the risk over the cut off of revenue as a significant revenue items were accounted for in the correct period.
risk and also considered completeness and occurrence assertions.
· Whilst performing our audit testing we assessed whether the treatment
of revenue was in accordance with the correct recognition criteria as per the
Group accounting policy.
· Assessing whether the Company's accounting policy for revenue
recognition are in accordance with the requirements of IFRS 15.
The Group's accounting policy on revenue recognition is shown in Principal
Accounting Policies for the consolidated financial statements and related
disclosures are included in note 1d.
Key observations
As a result of the audit procedures we performed and, after considering
management's disclosures of the judgements applied by them, we have concluded
that revenue recognition is materially complete, accurate, has occurred and
been recognised on an appropriate basis.
Valuation and Impairment review of property plant and equipment Our audit work included, but was not restricted to:
· We reviewed Management's assessment of forecasted cash flows and
challenged significant movements in forecasted cash flows compared to historic
Under International Accounting Standard 36 'Impairment of Assets' (IAS 36), performance.
companies are required to assess whether there is any indication that an asset
may be impaired at each reporting date. · We reviewed Management's forecasted cash flows that feed into the
discounted cash flow model and challenged significant assumptions with
Property, plant and equipment are a significant balance in the financial reference to historic results, market trends, appropriateness of discount
statements with a combined net book value of $19.1m (2020 - $18.8m). The rates and future expectations of commodity prices and sales growth.
balance is primarily comprised of the IOSorb plants, equipment and machinery
and exploration and evaluation assets. · We challenged management and gained an understanding of what is
considered a cash generating unit.
· We performed a downside sensitivity analysis and held discussions
The estimated recoverable amount of these balances is subjective due to the with Management to assess the likelihood of certain circumstances
inherent uncertainty involved in forecasting and probability of the related crystallising.
future cash flows.
The Group's accounting policy on Impairment is shown in Principal Accounting
At each reporting date, the Group considers any indication of impairment to Policies for the consolidated financial statements and related disclosures are
the carrying value of its assets. The assessment is based on expected future included in note 1m.
cash flows on the IOSorb plants.
Key observations
The directors are required to conduct impairment tests where there is an
indication of impairment of the asset. The assessment was based on the future As a result of the audit procedures we performed and, after considering
cash flows of each site using a discounted cash flow model (being the 'value management's disclosures of the judgements applied by them, we have concluded
in use'). The value in use was then compared to the carrying value of fixed that no impairments are required.
assets for that site.
Significant management judgement and estimation uncertainty is involved in
this area, where the primary inputs are: We have confirmed the estimates and judgements utilised within the models
applied in relation to the impairment of property, plant and equipment are
• Estimating cash flow forecasts; within acceptable ranges.
• Selecting appropriate assumptions such as growth rate and discount rate.
We therefore identified the risk over the valuation of property plant and
equipment as a significant risk.
Valuation of Inventory Our audit work included, but was not restricted to:
Inventory primarily consists of iodine and iodine derivatives. Inventory · We engaged component auditors to attend a stocktake at two of the
should be held at the lower of cost and net realisable value. Group's plant locations at the year end, where they observed an inventory
count and performed sample testing on inventory held.
The net realisable value is the estimated selling price in the ordinary course
of business less any applicable selling expenses. As at 31 December 2021, the · We discussed, understood and tested the Group's process for
inventory is valued at $6.3m (2020 - $9.7m). There is a risk that the carrying calculating the cost of the finished goods based on the absorption cost
value in the Group accounts is higher than the recoverable amount and it is including challenging the robustness of the key assumptions with management to
therefore materially misstated. Further, there is the added risk of the ensure they are appropriate.
complexity of the measurement of the costs of conversion of the inventory and
the estimates and judgements around this. · A sample of inventory items were tested to ensure the product was
held at the lower of cost and Net Realisable Value.
We therefore identified the valuation of inventory as a key audit matter,
which was one of the most significant assessed risks of material misstatement. The Group's accounting policy on Inventories is shown in Principal Accounting
Policies for the consolidated financial statements and related disclosures are
included in note 1o.
Key observations
As a result of the audit procedures we performed and, after considering
management's disclosures of the judgements applied by them, we have concluded
that the valuation of inventory is materially accurate and recognised on an
appropriate basis.
We have confirmed the estimates and judgements utilised within the models
applied in relation to the valuation of inventory are within acceptable
ranges.
Valuation and Impairment review of investments in subsidiaries and Our audit work included, but was not restricted to:
intercompany balances
· We utilised discounted cash flow forecasts to form an expectation of
the recoverable amount, and in addition considered the current performance of
the subsidiary entities.
Due to the material size of the investments in, and loans to, the subsidiaries
the directors should critically consider if any indicators of impairment exist · We performed a sensitivity analysis on the key inputs such as a
in relation to the balances. decline in iodine prices and sales growth and concluded that even with the
adverse movements mentioned above in the Group's key assumptions, no potential
The estimated recoverable amount of these balances is subjective due to the impairment was identified.
inherent uncertainty involved in forecasting the profitability of the
subsidiaries. · We obtained and reviewed the director's assessment of impairment with
regards to investment and loans due from its subsidiaries in support of the
Where indicators of impairment have been identified a robust review of the valuation and assessed whether this was in line with IAS 36.
investments held by the Parent Company and any amounts due from subsidiaries
to the Parent Company should be undertaken by the directors to confirm the · We reviewed the 2021 forecasts against actual results to determine
value in use of these amounts and that there are no indications, or the Directors historic forecasting accuracy.
requirements for, impairments of the amounts.
The Group's accounting policy on impairment is shown in Principal Accounting
Significant management judgement and estimation uncertainty is involved in Policies for the consolidated financial statements and related disclosures are
this area, where the primary inputs are: included in note 1m.
• Estimating cash flow forecasts;
• Selecting appropriate assumptions such as growth rate and discount rate. Key observations
As a result of the audit procedures we performed and, after considering
management's disclosures of the judgements applied by them, we have concluded
We therefore identified the valuation of investments in subsidiaries and that no impairments are required.
intercompany balances as a key audit matter, which was one of the most
significant assessed risks of material misstatement.
We have confirmed the estimates and judgements utilised within the models
applied in relation to the valuation and impairment of investments in
subsidiaries and intercompany balances are within acceptable ranges.
Our application of materiality
The scope and focus of our audit was influenced by our assessment and
application of materiality. We apply the concept of materiality both in
planning and performing our audit, and in evaluating the effect of
misstatements on our audit and on the financial statements.
We define financial statement materiality as the magnitude by which
misstatements, including omissions, could reasonably be expected to influence
the economic decisions taken on the basis of the financial statements by
reasonable users.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Materiality Measure Group Parent
Overall materiality We determined materiality for the financial statements as a whole to be We determined materiality for the financial statements as a whole to be
$389,000 (2020: $299,000). The increase being a result of the increase in $311,200 (2020: $239,000).
revenue of the Group
How we determine it Based on the main key indicator, being 1% of revenue for the Group. As the Parent is a holding company, materiality was initially based on 1% of
gross assets, however, this exceeded the Group level therefore this was capped
at 80% of Group materiality.
Rationale for benchmarks applied We believe 1% of revenue to be the most appropriate benchmark due to the size
and nature of the Company and Group. This is also considered a key performance
indicator for stakeholders.
Performance materiality On the basis of our risk assessment, together with our assessment of the Group
and Company's control environment, our judgement is that performance
materiality for the financial statements should be 75% of materiality for the
Group and Company:
$291,750 (2020: $224,250) $233,400 (2020: $179,400)
Specific materiality We also determine a lower level of specific materiality for certain areas such
as directors' remuneration and related party transactions of $1,000.
Reporting threshold We agreed with the Audit Committee that we would report to them all
misstatements over 5% of Group and Company materiality identified during the
audit, as well as differences below that threshold that, in our view, warrant
reporting on qualitative grounds. We also report to the Audit Committee on
disclosure matters that we identified when assessing the overall presentation
of the financial statements.
$19,450 (2020: $14,950) $15,560 (2020: $11,950)
Other information
The other information comprises the information included in the annual report
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from branches not
visited by us; or
· the Parent Company financial statements are not in agreement with the
accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of directors
As explained more fully in the statement of directors' responsibilities set
out on page 27, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the group or Parent Company or to cease operations, or have no
realistic alternative but to do so.
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 a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
Based on our understanding of the Group and the industry in which it operates,
we identified that the principal risks of non-compliance with laws and
regulations related to the use of regulated chemicals, tax legislation,
employment and health and safety regulations, anti-bribery, corruption and
fraud and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the preparation of the financial
statements such as the Companies Act 2006 and the Quoted Companies Alliance
Corporate Governance Code ("QCA Code"). We evaluated management's incentives
and opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the
principal risks were related to inflated revenue and profit.
Audit procedures performed included: review of the financial statement
disclosures to underlying supporting documentation, review of regulatory
inspections, review of correspondence with legal advisors, in so far as they
related to the financial statements, and testing of journals and evaluating
whether there was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
There are inherent limitations in the audit procedures described above and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we
would become aware of it. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a body, in
accordance with part 3 of Chapter 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the Parent Company's members
those matters we are required to state to them in an auditor's report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company and the Parent
Company's members as a body, for our audit work, for this report, or for the
opinions we have formed.
Daniel Hutson
(Senior Statutory Auditor)
For and on behalf of UHY Hacker Young
Chartered Accountants and Statutory Auditor
UHY Hacker Young
4 Thomas More Square
London E1W 1YW
6 May 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2021 2020
Note $'000 $,000
Revenue 3 39,039 29,688
Cost of sales 4 (28,307) (21,283)
Gross profit 10,732 8,405
Administrative expenses 4 (3,789) (3,686)
EBITDA - earnings before interest, tax, depreciation and amortisation 6,943 4,719
Depreciation and amortisation 4 (1,731) (1,793)
Operating profit 5,212 2,926
Paycheck Protection Program loans forgiven 21 1,090 -
Fair value loss on investments in equity instruments
designated as fair value through profit and loss 16 (900) -
Profit before finance expense 5,402 2,926
Finance income 7 17 15
Interest payable 6 (368) (1,114)
Interest swap derivative liability 20 69 (69)
Loan arrangement fees 6 - (480)
Profit before taxation 4 5,120 1,278
Taxation 8 4,066 -
Profit for the year attributable to owners of the parent $9,186 $1,278
Earnings per share attributable to owners of the parent:
- Basic 9 $0.048 $0.007
- Diluted 9 $0.048 $0.007
All activities are classed as continuing.
The accompanying notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET
31 December 31 December
2021 2020
Note $'000 $'000
Assets
Non-current assets
Intangible assets 10 463 643
Goodwill 11 3,087 3,087
Property, plant and equipment 12 19,113 18,782
Deferred tax 25 4,066 -
Total non-current assets 26,729 22,512
Current assets
Inventories 13 6,296 9,656
Trade and other receivables 15 6,158 3,285
Investments 16 - 900
Cash and cash equivalents 17 5,262 3,481
Total current assets 17,716 17,322
Total assets $44,445 $39,834
Equity and liabilities
Current liabilities
Trade and other payables 18 5,802 5,473
Term loan - due within one year 20 1,429 1,429
Government subsidies 21 - 1,090
Lease liabilities 19 58 141
Total current liabilities 7,289 8,133
Non-current liabilities
Term loan - due after one year 20 6,785 8,214
Revolving loan facility 20 - 2,718
Term loan - interest swap liability 20 - 69
Lease liabilities 19 410 45
Total non-current liabilities 7,195 11,046
Total liabilities $14,484 $19,179
Equity attributable to owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,007 2,136
Retained losses (29,896) (39,331)
Foreign currency reserve (5,944) (5,944)
Total equity $29,961 $20,655
Total equity and liabilities $44,445 $39,834
The financial statements on pages 47 to 82 were approved and authorised for
issue by the Board and were signed on its behalf on 6 May 2022.
Dr. Thomas M. Becker - Chief Executive Officer and President
The accompanying notes form part of these financial
statements. Company
number 05393357
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to owners of the parent
Share Share Share-based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2020 $3,107 $60,687 $1,988 $(40,609) $(5,944) $19,229
Transactions with owners
Share-based expense - - 148 - - 148
Total transactions with owners - - 148 - - 148
Profit for the year attributable to owners of the parent - - - 1,278 - 1,278
Total comprehensive income attributable to owners of the parent - - - 1,278 - 1,278
Balance at 31 December 2020 $3,107 $60,687 $2,136 $(39,331) $(5,944) $20,655
Transactions with owners
Share-based expense - - 120 - - 120
Share options lapsed and forfeited - - (249) 249 - -
Total transactions with owners - - (129) 249 - 120
Profit for the year attributable to owners of the parent - - - 9,186 - 9,186
Total comprehensive income attributable to owners of the parent - - - 9,186 - 9,186
Balance at 31 December 2021 $3,107 $60,687 $2,007 $(29,896) $(5,944) $29,961
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Cash flows from operating activities
Profit before taxation 5,120 1,278
Adjustments for:
Depreciation 1,551 1,613
Amortisation 180 180
Share-based payments 120 148
Paycheck Protection Program loans forgiven (1,090) -
Impairment of investment 900 -
Finance expense 299 1,663
Finance income (17) (15)
Operating cash inflow before changes 7,063 4,867
in working capital
Changes in working capital
(Increase)/decrease in trade and other receivables (2,873) 2,841
Decrease/(increase) in inventories 3,360 (3,579)
Increase/(decrease) in trade and other payables 342 (353)
Net cash inflow from operating activities 7,892 3,776
Cash flows from investing activities
Interest received 17 15
Acquisition of property, plant and equipment (1,485) (2,449)
Asset disposal proceeds - 5
Net cash outflow from investing activities (1,468) (2,429)
Cash flows from financing activities
Government loans received - 1,090
Term loan notes repaid - (18,177)
Term loan drawn - 10,000
Term loan repayments (1,429) (357)
Revolving loan facility drawn - 3,000
Revolving loan facility net payments (2,718) (283)
Refinancing and arrangement fees paid - (676)
Interest paid (386) (1,055)
Lease payments (110) (126)
Net cash outflow from financing activities (4,643) (6,584)
Net increase/(decrease) in cash and cash equivalents 1,781 (5,237)
Cash and cash equivalents at beginning of year 3,481 8,718
Cash and cash equivalents at end of year $5,262 $3,481
COMPANY BALANCE SHEET
31 December 31 December
2021 2020
Note $'000 $'000
Assets
Non-current assets
Investment in subsidiary undertakings 28 17,199 17,199
Total non-current assets 17,199 17,199
Current assets
Due from subsidiaries 28 20,792 21,712
Trade and other receivables 15 3 3
Cash and cash equivalents 17 163 60
Total current assets 20,958 21,775
Total assets $38,157 $38,974
Equity and liabilities
Current liabilities
Trade and other payables 18 137 202
Total current liabilities 137 202
Equity attributable to the owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,007 2,136
Retained losses (22,022) (21,398)
Foreign currency reserve (5,759) (5,759)
Total equity 38,020 38,773
Total equity and liabilities $38,157 $38,974
The loss for the financial year dealt with in the financial statements of the
parent company was $873k (2020 profit $3,379k).
The financial statements on pages 47 to 82 were approved and authorised for
issue by the Board and were signed on its behalf on 6 May 2022
Dr. Thomas M Becker
Chief Executive Officer and President
Company number: 05393357
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to equity holders of the parent
Share Share Share based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2020 $3,107 $60,687 $1,988 $(24,777) $(5,759) $35,246
Transactions with owners
Share-based expense - - 148 - - 148
Total transactions with owners - - 148 - - 148
Profit attributable to owners of the parent - - - 3,379 - 3,379
Total comprehensive income for the year - - - 3,379 - 3,379
Balance at 31 December 2020 $3,107 $60,687 $2,136 $(21,398) $(5,759) $38,773
Transactions with owners
Share-based expense - - 120 - - 120
Share options lapsed and forfeited - - (249) 249 - -
Total transactions with owners - - (129) 249 - 120
Loss attributable to owners of the parent - - - (873) - (873)
Total comprehensive income for the year - - - (873) - (873)
Balance at 31 December 2021 $3,107 $60,687 $2,007 $(22,022) $(5,759) $38,020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
The Company is a public limited company incorporated and domiciled in the
United Kingdom. The Company is listed on the AIM Market of the London Stock
Exchange.
The registered office is located at 48 Chancery Lane, London, WC2A 1JF. The
principal activities of the Company have been and continue to be investment in
subsidiaries engaged in the production of iodine and iodine derivatives,
including the arrangement of finance for and the provision of management
services to subsidiaries.
a) Statement of compliance
These consolidated financial statements have been prepared in accordance with
UK adopted International Financial Reporting Standards ('IFRS') and IFRS
Interpretations Committee ('IFRIC') and the Companies Act 2006 applicable to
companies reporting under IFRS.
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements.
b) New standards, interpretations and amendments
Management continues to evaluate standards, amendments and interpretations
which are effective for reporting periods beginning after the date of these
financial statements and have not been adopted early, including:
- IFRS1 (First-time Adoption of International Financial Reporting
Standards)
- IFRS9 (Financial Instruments)
- IFRS16 (Leases)
Implementation of the above is not expected to have a material effect on the
Group's financial statements.
c) Basis of preparation of financial statements
The financial statements have been prepared on the historical cost convention
as modified by the revaluation of financial liabilities at fair value through
profit and loss.
The financial statements are presented in US Dollars, which is also the
Group's functional currency.
Amounts are stated in thousands of US Dollars, unless otherwise stated.
As permitted by Section 408 of the Companies Act 2006, the parent company's
income statement has not been included in these financial statements.
d) Revenue recognition
Revenue is measured as the amount of consideration we expect to receive in
exchange for transferring goods or providing services, and is recognized when
performance obligations are satisfied under the terms of contracts with our
customers. A performance obligation is deemed to be satisfied when transfer of
benefit of the product or service is transferred to our customer. The
transaction price of a contract, or the amount we expect to receive upon
satisfaction of all performance obligations, is determined by reference to the
contract's terms and includes adjustments, if applicable, for any variable
consideration, such as customer rebates or commissions, although these
adjustments are generally not material. Costs incurred to obtain contracts
with customers are expensed immediately.
Revenue consists of sales of iodine derivatives, iodine, chemicals and
ancillary products. All of our revenue is derived from contracts with
customers, and almost all of our contracts with customers contain one
performance obligation for the transfer of goods where such performance
obligation is satisfied at a point in time. Transfer of benefit of a product
is deemed to be transferred to the customer upon shipment or delivery.
Significant portions of our sales are sold free on board shipping point or on
an equivalent basis, while delivery terms of other transactions are based upon
specific contractual arrangements. Our standard terms of delivery are
generally included in our contracts of sale, order confirmation documents and
invoices, while the timing between shipment and delivery generally ranges
between 1 and 45 days. Costs for shipping and handling activities, whether
performed before or after the customer obtains control of the goods, are
accounted for as fulfilment costs.
Trade receivables at December 31, 2021 of $5,419k (2020 $3,102k) represent all
balances arising from contracts with customers.
e) Research and development expenditures
Expenditure on research (or the research phase of an internal project) is
recognised as an expense in the period in which it is incurred. Costs that are
directly attributable to the development phase of a new customised chemical
manufacturing process or development of a new iodine project are recognised as
intangible assets provided they meet the following recognition requirements:
§ completion of the intangible asset is technically feasible so it will be
available for use or sale;
§ the Group intends to complete the intangible asset and use or sell it;
§ the Group has the ability to use or sell the intangible asset;
§ the intangible asset will generate probable future economic benefits;
§ there are adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
§ the expenditure attributable to the intangible asset during its development
can be measured reliably.
Among other things, this requires that there is a market for the output from
the intangible asset or for the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such benefits.
Development costs not meeting these criteria for capitalisation are expensed
as incurred. In 2021, all research and development expenditures were expensed
as incurred.
f) Going concern
The Group considers that it is now well placed financially in light of recent
reductions in debt, generation of profits and sustained upwards trends in
iodine pricing. On that basis the Group has prepared forecasts and projections
that indicate there are adequate resources to continue in operational
existence for the foreseeable future. However, the Group recognises that there
can be no certainty where these predictions are concerned. After due
consideration of the foregoing, the Directors consider it appropriate to
continue to adopt the going concern basis in preparing the financial
statements.
g) Basis of consolidation and investments in subsidiary undertakings
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries made up to 31 December 2021. Subsidiaries are
entities over which the Group has the power to control the financial and
operating policies so as to obtain benefits from their activities. The Group
obtains and exercises control through voting rights. The acquisition method of
accounting is used to account for the purchase of subsidiaries by the Group.
On acquisition, the subsidiary's assets and liabilities are recorded at fair
value, reflecting their condition at the date of acquisition.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date control commences until the date control
ceases.
Intra-Group balances and any unrealised gains and losses or income and
expenses arising from intra-Group transactions are eliminated in preparing the
consolidated financial statements, unless the losses provide an indication of
impairment of the assets transferred.
Amounts reported in the financial statements of the subsidiaries are adjusted
where necessary to ensure consistency with the accounting policies adopted by
the Group.
Investments in subsidiary undertakings are stated in the parent company
balance sheet at cost less provision for any impairment losses.
h) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The
acquisition method involves the recognition of the acquiree's identifiable
assets and liabilities, including contingent liabilities, regardless of
whether they were recorded in the financial statements prior to acquisition.
On initial recognition, the assets and liabilities of the acquired subsidiary
are included in the consolidated balance sheet at their fair values, which are
also used as the basis for subsequent measurement in accordance with the
Group's accounting policies. Acquisition costs are expensed as incurred.
Goodwill represents the excess of the fair value of consideration payable in a
business combination over the fair value of the Group's share of the
identifiable net assets of the acquiree at the date of acquisition. Any excess
of identifiable net assets over the fair value of consideration is recognised
in profit or loss immediately after acquisition.
As described in Note 1m) below, goodwill is tested for impairment at least
annually.
i) Foreign currency
The vast majority of the Group's business is denominated in U.S. Dollars,
which is the functional currency of the main operating subsidiaries. U.S.
Dollars is the presentational currency for the Group financial statements.
Transactions denominated in foreign currencies are translated at the rates of
exchange ruling at the date of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of exchange
ruling at the balance sheet date. Non-monetary items that are measured at
historical cost in a foreign currency are translated at the exchange rate at
the date of transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the date the
fair value was determined.
Any exchange differences arising on the settlement of monetary items or on
translating monetary items at rates different from those at which they were
initially recorded are recognised in profit and loss in the period in which
they arise. Exchange differences on non-monetary items are recognised in other
comprehensive income to the extent that they relate to a gain or loss on that
non-monetary item taken to the statement of changes in equity, otherwise such
gains and losses are recognised in profit and loss.
The results and financial position of foreign operations (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
• assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
• income and expenses for each statement of profit or loss and statement of
comprehensive income are translated at average exchange rates (unless this is
not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
• all resulting exchange differences are recognised in other comprehensive
income.
On disposal of a foreign operation for which the presentational and functional
currencies were different in previous periods, the cumulative translation
differences are transferred to profit and loss as part of the gain or loss on
disposal. The US Dollar/Pounds Sterling exchange rate averaged 1.3756 in 2021
(2020 1.284), and at 31 December 2021 was 1.351 (2020: 1.365).
j) Intangible assets
Undeveloped leasehold costs
Undeveloped leasehold costs relate to the costs of acquiring brine leases in
respect of the surface and mineral rights of landowners in areas of interest
outside of those currently connected to the Group's operating plants.
These costs are capitalised as exploration and evaluation assets and are
carried at historical cost less any impairment losses recognised. If areas
leased provide brine to operating plants, the related costs are transferred to
the relevant plants and amortized over the lives of those plants.
Other intangible assets
Other identifiable intangible assets arose from the acquisition of H&S
Chemical in 2009. These assets were valued by an external, independent
valuation firm. Based on the type of asset, the useful life of each asset was
estimated. The value of each identifiable intangible asset is amortised evenly
over its useful life. The following useful lives are applied:
§ WET® patent: 15 years
§ Customer relationships: 10 years
§ Patent portfolio: 8 years
§ EPA registrations: 2 years
Goodwill
Goodwill represents the excess of the fair value of consideration in a
business combination over the fair value of the Group's share of the
identifiable net assets acquired. Goodwill is carried at cost less accumulated
impairment losses.
k) Property, plant and equipment
Property, plant and equipment are stated at historical cost, net of
depreciation and any provision for impairment. Cost includes purchase price
and costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner intended
by management, such as costs relating to construction, site preparation,
installation and testing.
Costs relating to assets put into service at a later date are accumulated as
construction in progress, and depreciation only commences once such assets are
put into use.
Depreciation is provided at rates calculated to write off the depreciable
amount of each asset on a straight line basis over its expected useful life,
as follows:
§ Buildings: 2.5 percent per annum
§ Office lease: term of the lease (38 months)
§ Equipment and machinery:
o IOSorb plants - 5 percent per annum
o Other plant and equipment - 5 to 7 years
o Vehicles and office equipment - 20 percent per annum
o Computer equipment - 33 percent per
annum
Reviews of the estimated remaining lives and residual values of individual
assets are made at least semi-annually, and adjustments are made where
appropriate. Construction in progress is also reviewed for impairment.
Freehold land is not depreciated.
l) Financial instruments
Financial liabilities
Trade and other payables
Trade and other payables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest rate
method.
Loan notes
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Interest-bearing loans are recorded initially at their fair value, net of
direct transaction costs. Such instruments are subsequently carried at their
amortised cost and finance charges, including premiums payable on settlement,
redemption or conversion, are recognised in profit or loss over the term of
the instrument using the effective rate of interest.
Financial assets
Cash and cash equivalents represent short term, highly liquid investments with
an original maturity of fewer than three months that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of
changes in value. At the end of 2021 and 2020, all cash amounts were in 100
percent liquid accounts.
The Group uses the 'simplified method of expected credit losses'. Trade
receivables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest rate method, less provision for
expected credit losses. Expected credit losses are based on the Group's
historical credit losses experienced, then adjusted for current and forward
looking information on factors affecting the Group's customers.
m) Impairment
Whenever events or changes in circumstances indicate that the carrying value
of an asset may not be recoverable, that asset is reviewed for impairment. An
asset's carrying value is written down to its estimated recoverable amount
(being the higher of the fair value less costs to sell and value in use) if
that is less than the asset's carrying amount.
Goodwill is allocated to those cash-generating units that are expected to
benefit from synergies of the related business combinations and represent the
lowest level within the Group at which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for
impairment at least annually. An impairment loss is recognised for the amount
by which the asset's or cash generating unit's carrying amount exceeds its
recoverable amount, which is the higher of fair value less costs to sell and
value in use. To determine the value in use, management estimates expected
future cash flows from each cash-generating unit and determines a suitable
discount rate in order to calculate the present value of those cash flows. The
data used for impairment testing procedures are directly linked to the Group's
latest approved budget, adjusted as necessary to exclude the effects of future
reorganisations and asset enhancements. Discount factors are determined
individually for each cash-generating unit and reflect their respective risk
profiles as assessed by management.
Impairment losses for cash-generating units reduce first the carrying amount
of any goodwill allocated to that cash-generating unit. Any remaining
impairment loss is charged pro rata to the other assets in the cash-generating
unit. With the exception of goodwill, all assets are subsequently reassessed
for indications that an impairment loss previously recognised may no longer
exist. An impairment charge is reversed if the cash-generating unit's
recoverable amount exceeds its carrying amount.
The Group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk.
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables. Intercompany loans due to the parent company
from its subsidiaries are tested for impairment as part of the overall
investment in those subsidiaries, by reference to the present values of
estimated future cash flows of the subsidiaries, as further described in Note
2c.
n) Equity
Equity comprises the following:
§ "Share capital" represents the nominal value of equity shares.
§ "Share premium" represents the excess over nominal value of the fair value
of consideration received for equity shares, net of expenses for the share
issue.
§ "Share-based payment reserve" represents the cumulative fair value of
options and warrants issued by the Company and recognised in profit and loss.
§ "Retained losses" represents accumulated losses.
§ "Foreign currency reserve" represents the cumulative differences arising
from translation of foreign operations.
o) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes all expenses directly attributable to the manufacturing process as
well as suitable portions of related production overheads, based on normal
operating capacity. Costs of ordinarily interchangeable items are assigned
using the first in, first out cost formula. Cost excludes unrealised gains
arising from intra-Group transactions. Net realisable value is the estimated
selling price in the ordinary course of business less any applicable selling
expenses. When inventory is sold the cost is included in Cost of Sales on the
Statement of Comprehensive Income.
p) Taxation
Tax expense recognised in profit or loss is the tax currently payable based on
taxable profit for the year and deferred tax not recognised directly in
equity.
Deferred income taxes are calculated using the balance sheet liability method.
Deferred tax is generally provided on the difference between the carrying
amounts of assets and liabilities and their tax bases. However, deferred tax
is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries is not provided
if reversal of these temporary differences can be controlled by the Group and
it is probable that reversal will not occur in the foreseeable future. In
addition, tax losses available to be carried forward, as well as other income
tax credits to the Group, are assessed for recognition as deferred tax assets
according to the likelihood of their recoverability in the foreseeable future.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in profit or loss, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax
is also charged or credited directly to equity.
q) Leases
The Group assesses whether a contract is, or contains, a lease, at inception
of the contract. The Group recognises a right-of-use asset and a lease
liability on the balance sheet at the lease commencement date. The
right-of-use asset is initially measured at cost. This comprises the initial
amount of the lease liability adjusted for any lease payments made at or
before the commencement date and an estimate of any costs to restore the
underlying asset to the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the useful life
of the right-of-use-asset or the end of the lease term. Amounts relating to
such assets are disclosed separately in note 12. In addition, the Group assess
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the lease liability is initially measured at the
present value of the lease payments discounted using the Group's incremental
borrowing rate at the date of transition as the interest rate implicit in the
lease could not be readily determined. Interest is charged at the same
discount rate used to calculate the present value of the lease.
The lease liability is re-measured if the Group changes its assessment of
whether it will exercise a purchase, extension or termination option. When the
lease liability is re-measured in this way, a corresponding adjustment is made
to the carrying amount for the right-of-use asset, or is recorded in profit or
loss if the carrying amount of the right-of-use asset has been reduced to
zero.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months or less
and leases of low value operating value. These are charged to profit and loss
on a straight-line basis over the period of the lease. At 31 December 2021 the
Group had one lease, for office space.
r) Share-based payments
The cost of equity settled transactions is measured at fair value at the grant
date as measured by use of the Black Scholes model. If vesting periods or
other vesting conditions apply, the expense is allocated over the vesting
period, based on the best available estimate of the number of share options
expected to vest. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become exercisable. Estimates
are subsequently revised if there is any indication that the number of share
options expected to vest differs from previous estimates. Any cumulative
adjustment prior to vesting is recognised in the current period. No adjustment
is made to any expense recognised in prior periods if share options ultimately
exercised are different to those estimated on vesting.
Charges made to profit or loss, in respect to share-based payments, are
credited to the share-based payment reserve.
s) Segment reporting (Note 3)
In identifying its operating segments, management follows the Group's service
lines, which represent the main products provided by the Group and are based
on the information presented to the chief operating decision maker, which is
the Board.
2. Significant judgements and estimates
Judgements and estimates are regularly evaluated based on historical
experience, current circumstances and expectations of future events.
The critical estimates made in the preparation of the financial statements are
set out below. The resulting accounting estimate may not equal the related
actual result, and management must also make judgements about current
circumstances and expectations of future events. Significant judgements made
by management include:
a. Intangible and tangible assets are tested for impairment where there
is an indication that they may be impaired. In accordance with IAS 36 -
Impairment of Assets, an intangible or tangible asset is considered impaired
when its carrying amount exceeds its recoverable amount on an individual cash
generating unit basis. The recoverable amounts of relevant cash generating
units are based on value in use calculations using management's best estimate
of future business performance. For this purpose management regards all the
iodine production plants as a single cash generating unit given their mutual
dependence on centralised management, financial, maintenance and sales and
marketing functions. In carrying out impairment testing, management will make
a number of significant estimates in relation to the assumptions incorporated
into their calculations. These will include factors such as growth rates and
discount rates. Details and carrying values of intangible assets, goodwill and
property, plant and equipment are provided in notes 10, 11 and 12.
b. Management reviews the useful lives of depreciable and amortisable
assets at each reporting date. The carrying amounts are analysed in notes 10
and 12. Management's estimate of the useful lives of plant and equipment as
detailed in note 1k are common life expectancies for the industry. In
particular, the expected useful life attributed to each IOsorb® plant is 20
years. Changes in the expected level of usage or other technological
developments could impact the life and residual value of these assets.
c. The carrying amount of the parent company's investment in its
subsidiaries of $38.0m (2020: $38.9M) has been evaluated for impairment. For
this purpose the two operating subsidiaries have been treated as one unit,
given the vertical integration of the Group's operating activities. The
carrying amount of the parent company's investment of $38.0m (2020: $38.9M)
compares to carrying amounts of the subsidiaries' net assets, excluding loans
from the parent company, of $25.9m (2020: $20.8m). An assessment has been made
of the present values of the future cash flows related to the operating
activities of the subsidiaries to determine whether any impairment losses
should be recognised. The Group has concluded that it no impairment provision
is required.
d. Based on reports received from Organic Vines OP LLC management has
concluded that there is currently no basis for projecting any positive return
(see Note 16), and that therefore it is appropriate to impair the investment
of $900,000 to Nil.
e. In accordance with IAS12 and in light of the Group's recent much
improved profitability, and therefore its likely utilisation of its $19.4m
accumulated US Federal tax losses in the foreseeable future, a deferred tax
asset of $4.1m reflecting the value of those losses at a tax rate of 21% has
now been set up in the balance sheet and credited to tax in the profit and
loss account. This asset will be amortised to the profit and loss account in
line with future reductions in tax payable from utilisation of the losses.
3. Segment reporting
a. Business segments - The Group's operations comprise the exploration
and production of iodine with complete vertical integration into its specialty
chemical halogen derivatives business, and are therefore considered to fall
within one business segment. In November 2019 the Group made an investment of
$900,000 in Organic Vines OP LLC, which was engaged in the production of hemp
seeds. This investment has been impaired to Nil in 2021 (see Note 16), and
there was no trading activity during 2020 or 2021. Therefore segment reporting
below is limited to the separate recognition of the asset in 2020.
31 December 31 December
2021 2020
$ $
Assets
Halogen Derivatives and Iodine 40,379 38,934
Hemp seeds - 900
Total $40,379 $39,834
Liabilities
Halogen Derivatives and Iodine 14,484 19,179
Total $14,484 $19,179
b. Geographical segments - The Group reports by geographical segment.
The Group's activities are related to exploration for, and development of,
iodine in certain areas of the USA and the manufacturing of specialty
chemicals in the USA with support provided by the UK office. In presenting
information on the basis of geographical segments, segment assets and the cost
of acquiring them are based on the geographical location of the assets.
3. Segment reporting (continued)
31 December 31 December
2021 2020
$'000 $,000
Assets
UK 166 63
USA 40,213 39,771
Total $40,379 $39,834
Liabilities
UK 137 202
USA 14,347 18,977
Total $14,484 $19,179
Revenue
North America 19,858 13,843
Asia 15,851 13,524
South America 3,148 1,749
Europe 156 550
Other 26 22
Total $39,039 $29,688
c. Significant customers - in 2021 Iofina Chemical had five customers in
excess of 5% of sales (2020 three customers). 2021 percentages were 10%, 9%,
7%, 7%, 6% (2020 percentages were 15%, 9%, 6%).
4. Profit before taxation
Profit before taxation is stated after charging:
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Depreciation expense 1,551 1,613
Amortisation expense 180 180
Other:
Annual audit fees for audit of parent company and consolidated financial 82 79
statements
Fees payable to the company's auditor for other services 8 4
4. Profit before taxation (continued)
Cost of sales - analysis by nature
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Raw materials 14,912 9,711
Freight 782 891
Sales commission 359 257
Labour, manufacturing overhead and royalties 12,254 10,424
$28,307 $21,283
Administrative expenses - analysis by nature
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Remuneration and benefits 2,582 2,518
Share-based payments 120 148
Office expenses 257 197
Professional services 554 579
Travel 75 69
Rent (19) (36)
Other 220 211
$3,789 $3,686
Research and development expenses recognised during the period were $241k
(2020: $279k), and are included in administrative expenses above.
5. Staff numbers and costs
The average number of Group employees, including executive directors, and
their costs were:
Year ended Year ended
31 December 31 December
2021 2020
Number Number
Production 81 81
Administrative 14 14
Sales 1 1
Total staff 96 96
5. Staff numbers and costs (continued)
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Wages and salaries 6,454 6,227
Social security costs 1,057 903
$7,511 $7,130
Of the total staff costs above, $5,120k (2020: $4,800k) is included within
cost of sales and $2,391k (2020: $2,330k) is included within administrative
expenses.
Payments to executive directors and senior officers of subsidiaries
(considered to be key management personnel) for their services during the year
were as follows:
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Wages and salaries 941 907
Social security costs 108 96
Total directors' cost $1,049 $1,003
Included within wages and salaries above is $295k (2020: $286k) in respect of
the highest paid director. No options were exercised by a director in 2021
(2020 Nil).
6. Finance expense
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Bank facilities 16 September 2020
Term loan interest 345 114
Revolving loan facility interest 27 24
Interest swap liability (69) 69
Refinancing fees - 396
Debt restructure 29 March 2019
Term loan notes interest paid - 949
Arrangement fees - 84
Other interest payable - 9
IFRS16 lease interest (4) 18
Total finance expense $299 $1,663
7. Finance income
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Interest income 17 15
$17 $15
8. Taxation
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Current tax - -
Deferred tax (4,066) -
$(4,066) -
Tax reconciliation:
Profit on ordinary activities before tax 5,120 1,278
Tax at UK income tax rate of 19% (2020: 19.00%) 973 243
Effects of:
Temporary differences (110) 323
Permanent differences (32) 29
Losses not recognised for deferred tax purposes (831) (595)
Losses carried forward recognised as deferred tax asset (4,066) -
Total tax charge/(credit) $(4,066) -
As previously disclosed, the Group has accumulated US Federal tax losses that
are expected to be deductible from future US Federal taxable profits subject
to agreement with the relevant tax authorities. As of 31 December 2021 these
losses are estimated to be approximately $19.4 million (2020: $24.6 million).
To the extent US Federal tax losses are not utilised to offset current income
taxes they will begin to expire in 2035.
In accordance with IAS 12 and in light of the Group's recent much improved
profitability, and therefore its likely utilisation of its $19.4m accumulated
US Federal tax losses in the foreseeable future, a deferred tax asset of $4.1m
reflecting the value of those losses at a tax rate of 21% has now been set up
in the balance sheet and credited to tax in the profit and loss account. This
asset will be amortised to the profit and loss account in line with future
reductions in tax payable from utilisation of the losses.
9. Earnings per share
The calculation of earnings per ordinary share is based on the profit after
tax attributable to shareholders of $9,186k (2020 profit $1,278k) and the
weighted average number of ordinary shares outstanding of 191,858,408 (2020:
191,858,408). After including the weighted average effect of dilutive share
options of 1,232,450 (2020: 2,030,649) the diluted weighted average number of
ordinary shares outstanding was 193,090,858 (2020: 193,889,057).
10. Intangible assets (Group)
Exploration & Evaluation Assets
Montana Other intangible assets (see below) Total
Atlantis
Field
$'000 $'000 $'000
Cost
At 1 January 2020 3,358 3,844 7,202
Disposals (3,358) (25) (3,383)
At 31 December 2020 & 2021 - $3,819 $3,819
Accumulated amortization
At 1 January 2020 3,358 3,021 6,379
Charge for the year - 180 180
Disposals (3,358) (25) (3,383)
At 31 December 2020 - 3,176 3,176
Charge for the year - 180 180
At 31 December 2021 - $3,356 $3,356
Carrying amounts
At 31 December 2019 - $822 $822
At 31 December 2020 - $643 $643
At 31 December 2021 - $463 $463
10. Intangible assets (Group) (continued)
Details of Other intangible assets are set out below:
Other intangible assets WET® patent Customer relationships Patent portfolio EPA registrations Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2020 2,700 661 212 271 3,844
Disposals - - (25) - (25)
At 31 December 2020 & 2021 $2,700 $661 $187 $271 $3,819
Accumulated amortization
At 1 January 2020 1,877 661 212 271 3,021
Charge for the year 180 - - - 180
Disposals - - (25) - (25)
At 31 December 2020 2,057 661 187 271 3,176
Charge for the year 180 - - - 180
At 31 December 2021 $2,237 $661 $187 $271 $3,356
Carrying amounts
At 31 December 2019 $823 - - - $823
At 31 December 2020 $643 - - - $643
At 31 December 2021 $463 - - - $463
Other intangible assets were acquired in the acquisition of H&S Chemical
in 2009.
WET® Patent
The WET® Patent technology employs two different iodine extraction methods
depending on brine chemistry for optimal efficiency. We utilised a with and
without analysis, a variation of the discounted cash-flow method, to estimate
the fair value of a WET® Patent at date of acquisition. The methodology
compared the cash flow generating capacity of Iofina Chemical assuming it was
operating without the benefit of the WET® Patent to the projected cash flow
with the benefit of the patent. The contractual life of the patent is in
excess of 20 years; however, the useful life of the patent was estimated at 15
years based on the following:
§ Management's expectation for the expected viability of the technology
§ Management's expectations regarding the timing of significant substitute
technology
§ The lack of comparable substitute technologies as of the valuation date
§ The remaining amortization period is 2.5 years
11. Goodwill (Group)
Carrying amounts $'000
At 31 December 2019, 31 December 2020 and 31 December 2021 $3,087
Goodwill arose on the acquisition of H&S Chemical in 2009 and is wholly
allocated to the Iofina Chemical cash generating unit of the Group. Goodwill
impairment testing is conducted annually, based on projected cash flow to be
generated.
The Chemical business has been in operation for 35 years, and much of its
products and customer base are long established. For impairment testing, a
long term growth rate of 1.00% per annum was applied to budgeted cash flows
and a discount rate of 12.88% per annum was used. On this basis the net
present value of cash flow exceeded the goodwill amount of $3,087k.
Sensitivity analysis
Projections based on the above assumptions show headroom of $4.8m between the
value in use of the business net of other assets of $22.3m and the carrying
value of $17.5m, comprising goodwill of $3.1m, other intangible assets of
$0.5m, and net business trading assets of $13.9m. In order for the value in
use to equal the carrying value it would be necessary for the discount rate to
rise to 15.6% or the long term growth rate to be 5.7% negative or projected
EBITDA to be lower by 18.8%. Based on the results of this impairment testing
management are satisfied that a reasonably possible change in assumptions
would not lead to an impairment.
12. Property, plant and equipment (Group)
Exploration
and Evaluation
Assets
Montana Freehold Land Buildings Equipment and Machinery Construction in Progress Total
Atlantis
Field
Right of use
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2020 5,841 209 1,719 355 26,323 1,840 36,287
Transfers - - - - 3,466 (3,466) -
Additions - - 11 - 176 2,262 2,449
Disposals (5,605) - - - (4,901) - (10,506)
At 31 December 2020 236 209 1,730 355 25,064 636 28,230
Transfers (236) - 276 - 1,124 (1,164) -
Additions - - 38 415 168 1,279 1,900
Disposals - - - (18) (80) - (98)
At 31 December 2021 - $209 $2,044 $752 $26,276 $751 $30,032
Accumulated depreciation
At 1 January 2020 5,602 - 435 93 12,207 - 18,337
Charges for the year - - 57 112 1,444 - 1,613
Disposals (5,602) - - - (4,900) (10,502)
At 31 December 2020 - - 492 205 8,751 - 9,448
Charges for the year - - 57 96 1,398 - 1,551
Disposals - - - - (80) - (80)
At 31 December 2021 - - $549 $301 $10,069 - $10,919
Carrying amounts
At 31 December 2019 $239 $209 $1,284 $262 $14,116 $1,840 $17,950
At 31 December 2020 $236 $209 $1,238 $150 $16,313 $636 $18,782
At 31 December 2021 - $209 $1,495 $451 $16,207 $751 $19,113
Right-of-use assets
Right-of-use assets relate to the Group's lease on office premises in Denver,
Colorado. During 2021 the expiry date of the lease was extended from April
2022 to April 2026, and an amount of $415k has been capitalised as an addition
in respect of future rentals, in accordance with IFRS 16. Liabilities for
future payments are shown in Note 19.
13. Inventories
Group 31 December 31 December
2021 2020
$'000 $'000
Raw materials 4,487 6,588
Work in progress 1,753 2,813
Finished goods 56 255
$6,296 $9,656
At year end, there were no provisions against the carrying value of
inventories (2020: nil). During the year, the cost of inventories recognised
as expense and included in 'cost of sales' amounted to $27,165k (2020:
$20,135k).
14. Financial instruments
The Board of directors determines, as required, the degree to which it is
appropriate to use financial instruments to mitigate risks. The main risks for
which such instruments may be appropriate are interest rate risk, foreign
currency risk, credit risk, investment risk, liquidity risk and commodity
risk. The Group's principal financial asset is cash, which is invested with
major banks. The Group has a term loan and a revolving loan facility and no
other borrowings.
Financial assets and liabilities
Group Loans and receivables at amortised cost Financial liabilities at amortised cost Total
Investment and swap liability at fair value
2021 $'000 $'000 $'000 $'000
Cash and cash equivalents 5,262 5,262
Trade receivables 5,653 5,653
$10,915
Trade payables 1,521 1,521
Accrued liabilities 4,281 4,281
Lease liabilities 468 468
Term loan 8,214 8,214
$14,484
2020
Cash and cash equivalents 3,481 3,481
Trade receivables 3,102 3,102
Investment 900 900
$7,483
Trade payables 1,194 1,194
Accrued liabilities 4,279 4,279
Lease liabilities 186 186
Term loan 9,643 9,643
Revolving loan facility 2,718 2,718
Government subsidies 1,090 1,090
Interest rate swap liability 69 69
$19,179
14. Financial instruments (continued)
Company Loans and receivables at amortised cost Financial liabilities at amortised cost Total
2021 $'000 $'000 $'000
Cash and cash equivalents 163 163
Other receivables 3 3
Due from subsidiaries 20,792 20,792
$20,958
Accruals 137 137
$137
2020
Cash and cash equivalents 60 60
Other receivables 3 3
Due from subsidiaries 21,712 21,712
$21,775
Accruals 202 202
$202
The interest rate swap liability at fair value is valued on the basis of Level
2 inputs as defined in IFRS 13.
Interest rate risk
Surplus funds are held within the Group's checking and savings accounts. The
benefit of fixing rates for the longer term is kept under review, having
regard to forecast cash requirements and the levels of return available. Given
the short term nature of Iofina's surplus funds, the Group has limited
interest rate risk. As of 31 December 2021, all surplus funds were invested in
checking and savings accounts that had no terms and were 100% liquid. Bank
facilities have variable interest rate terms and therefore there is an
exposure to increases in interest rates. This is mitigated by the use of an
interest rate swap to fix the rate on the majority of the term loan. Also the
interest on the revolving credit facility is reduced by arrangements to sweep
surplus funds into that account.
Foreign currency risk
The Group has potential transactional currency exposure in respect of items
denominated in foreign currencies relating to the Group's administration in
the UK. The balance of cash held in foreign currency was $163k (GBP £120k) as
of year-end, and provides a hedge against GBP denominated UK expenses.
Sales transactions are denominated in US Dollars, which is the operating
currency. Other impacts of foreign currency risk are not deemed material to
these financial statements.
Credit risk
The maximum exposure is reflected by the carrying amount of financial assets.
Because the counterparties to Iofina's holdings of cash and cash equivalents
are prime financial institutions, Iofina
14. Financial instruments (continued)
does not expect any counterparty to fail to meet its obligations.
Additionally, the Group is exposed to marginal credit risk in the form of
receivables for product sales. Credit risk in this regard is mitigated through
long-term customer payment history, insurance of certain foreign
receivables, extensive credit analysis of large purchasers, use of letters of
credit, and the requirement for partial or total payment prior to shipment for
some customers.
Investment risk
There is a risk that short term investments may not realise their carrying
value.
Liquidity risk
The Group raises funds as required on the basis of forecast expenditure and
cash inflows over the next 12 months. When necessary, the scope and rate of
activity are adjusted to take account of the funds available. There is a risk
that the Group may not be able to raise sufficient funds to repay loans at
their maturity.
The following table sets out the contractual maturities (representing
undiscounted contractual cash flows) of financial liabilities:
Group Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 6 years
At 31 December 2021: $'000 $'000 $'000 $'000
Trade payables 1,521 - - -
Accrued liabilities 1,476 2,804 - -
Lease liabilities 2 56 102 309
Term loan 357 1,071 1,429 5,357
$3,356 $3,931 $1,531 $5,666
Group Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 7 years
At 31 December 2020: $'000 $'000 $'000 $'000
Trade payables 1,194 - - -
Accrued liabilities 1,235 3,045 - -
Lease liabilities - 141 45 -
Term loan 357 1,071 1,429 6,786
Revolving loan facility - - 2,718 -
$2,786 $4,257 $4,192 $6,786
14. Financial instruments (continued)
Commodity risk
The Group is exposed to movements in the price of raw iodine. Sales of iodine
based products were
$30,473k (2020: $18,507k). The effects of changes in the price of iodine on
2021 revenue and profits are set out in the Financial Review on pages 9 to 11.
Iodine is produced internally and is the most significant cost component for
iodine based products.
15. Trade and other receivables Group
31 December 31 December
2021 2020
$'000 $'000
Trade receivables 5,653 3,102
Prepayments and other receivables 505 183
$6,158 $3,285
Company
31 December 31 December
2021 2020
$'000 $'000
Prepayments and other receivables 3 3
$3 $3
All receivables and prepayments are short term in nature. The carrying values
are considered a reasonable approximation of fair value. There are no expected
credit losses.
The Group and the Company have not received a pledge of any assets as
collateral for any receivable or asset.
16. Investment
31 December 31 December
2021 2020
$'000 $'000
Investment in Organic Vines Op LLC - 900
- $900
The investment in Organic Vines Op LLC was made in November 2019 and related
to a single season's production of organically certified hemp seeds. The
market for these seeds has not developed as initially anticipated, and sales
to date have been negligible. The company considers it is unable to predict
any future income with any reasonable probability, and therefore the
investment has been impaired to Nil.
17. Cash and cash equivalents
Group
31 December 31 December
2021 2020
$'000 $'000
Cash in US Dollar accounts 5,099 3,421
Cash in GB Pound Sterling accounts 163 60
$5,262 $3,481
Company
31 December 31 December
2021 2020
$'000 $'000
Cash in GB Pound Sterling accounts 163 60
$163 $60
18. Trade and other payables
Group
31 December 31 December
2021 2020
$'000 $'000
Trade payables 1,521 1,194
Accrued expenses and deferred income 4,281 4,279
$5,802 $5,473
Company
31 December 31 December
2021 2020
$'000 $'000
Accrued expenses 137 202
$137 $202
All trade and other payables are considered short term. The carrying values
are considered to be a reasonable approximation of fair value.
Except as regards the term loan, the Group and Company have not pledged any
assets as collateral for any liabilities or contingent liabilities.
19. Lease liabilities
31 December 31 December
2021 2020
$'000 $'000
Lease liabilities - current 58 141
Lease liabilities - non-current 410 45
$468 $186
Movements: 2021 2020
$'000 $'000
Opening balance 186 294
Payments (110) (126)
Lease extension liabilities 405 -
Interest accrued (4) 18
Adjustments (9) -
$468 $186
Lease liabilities relate to the Group's lease on office premises in Denver,
Colorado, which was extended during 2021 to run till 30 April 2026.
Liabilities are measured at the present value of the contractual payments due
to the lessor over the lease term, with the discount rate determined by
reference to the Group's incremental borrowing rate on commencement of the
lease or the extension period. Lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
by lease payments made.
20. Term loans and Revolving loan facility
2019 Term loans 2020 Term loan 2020 Revolving loan facility
$'000 $'000 $'000
At 1 January 2020 $18,177 - -
Repaid 30 June 2020 (2,726) - -
Repaid 16 September 2020 (15,451) - -
First Financial Bank Facilities:
Term loan drawn 16 September 2020 - 10,000 -
Revolving loan facility drawn 16 September 2020 - - 3,000
Term loan instalment repayments - (357) -
Revolving loan facility net payments - - (282)
At 31 December 2020 - $9,643 $2,718
Term loan instalment repayments - (1,429) -
Revolving loan facility net payments - - (2,718)
At 31 December 2021 - $8,214 -
Due within one year - $1,429 -
Due after one year - $6,785 -
20. Term loans and Revolving loan facility (continued)
At the end of June 2020, the Group repaid 15% of debt outstanding, amounting
to $2.73 million. In September 2020, the Group completed the refinancing of
all its then outstanding debt of $15.45 million. Facilities of a 7-year $10
million term loan and a 2 year revolving line of credit of up to $8 million,
secured by a charge over the Group's assets, were provided by First Financial
Bank, Ohio. The total amount drawn on completion was $13 million, representing
the term loan of $10 million and $3 million relating to the revolving line of
credit. With the addition of $2.45 million from the Group's cash resources the
existing debt balance of $15.45 million was repaid in full, together with
accrued interest. The principal terms applying to the 2020 facilities are:
a) The $10 million term loan is repayable in full by equal monthly instalments
over the 7 years to 30 September 2027. There are accelerated repayments based
on 25% of 2021 and 2022 surpluses of EBITDA over the total of capital
expenditure and debt payments of principal and interest, payments to be made
on 30 June 2022 and 2023 respectively. The interest rate on $7 million of the
loan has been fixed to maturity by a swap contract at 3.99%, and the interest
rate on the balance is variable monthly at 2.50% above LIBOR, subject to a
minimum LIBOR rate of 1.00%, and is currently 3.50%. Repayment of all or part
of the loan may be made at any time, subject to the cost or benefit of
unwinding the swap contract. At 31 December 2021 the amount outstanding after
instalment payments was $8.2 million.
b) The $8 million revolving line of credit has a 2 year term and may be
drawn and repaid in variable amounts at the Group's discretion, with the
amount available at closing being fixed at $3 million. Amounts that may be
drawn are subject to a borrowing base of sufficient eligible discounted
monthly values of receivables and inventory, and compliance on a quarterly
basis with trailing 12 months financial covenant ratios of 1) a maximum
multiple of 2.5 total debt to EBITDA, and 2) a minimum multiple of 1.2 EBITDA
net of capital expenditure to the total of principal and interest payments on
the total debt. The interest rate is variable monthly at 2.25% above LIBOR,
subject to a minimum LIBOR rate of 1.00%, and is currently 3.25%. The amount
outstanding at 31 December 2020 of $2.72 million was reduced to Nil by
payments made during the year.
The derivative liability resulting from the swap contract described above has
been revalued by reference to market expectations for future LIBOR rates, and
the liability of $69k previously recognised and charged to finance expense has
been reduced to Nil (Note 6). The actual cost of the swap during the year was
$31k (2020 $10k).
21. Net debt
2021 2020
$'000 $'000
2020 Term loan 8,214 9,643
Revolving loan facility - 2,718
Total bank debt 8,214 12,361
Cash and cash equivalents 5,262 3,481
Net debt at 31 December $2,952 $8,880
22. Government subsidies - Paycheck Protection Program loans
In mid May 2020 the Group's operating subsidiaries, Iofina Chemical, Inc. and
Iofina Resources, Inc., received loans totalling US$1.09m under the US Small
Business Administration's Paycheck Protection Program ('PPP'), which is part
of the Coronavirus Aid Relief and Economic Security Act ('CARES Act'). PPP
loans, or a portion of the loan, may be forgivable if loan proceeds are used
for eligible purposes, including employee retention and payroll. The Group
received notice of 100% forgiveness from the US Small Business Administration,
as of 22 January 2021 as regards $552,500 in respect of iofina Resources,
Inc., and as of 27 January 2021 as regards $537,400 in respect of Iofina
Chemical, Inc. The amounts forgiven have been recognised as income.
23. Share capital
31 December 31 December
2021 2020
Authorised:
Ordinary shares of £0.01 each - number of shares 1,000,000,000 1,000,000,000
- nominal value £10,000,000 £10,000,000
Allotted, called up and fully paid:
Ordinary shares of £0.01 each - number of shares 191,858,408 191,858,408
- nominal value £1,918,584 £1,918,584
There was no change in share capital or share premium in 2021.
24. Share based payments
No options were granted or exercised during the year. A further 1,196,700
options were granted on 9 March 2022 at an exercise price of £0.176 ($0.23).
In 2021 a total of 1,378,250 options either lapsed or were forfeited. Total
options outstanding at 9 March 2022 were 5,000,400, representing 2.61% of
shares in issue.
Options granted to directors and key employees and outstanding at 31 December
2021 are as follows:
Date of Grant Number of Options Vesting Share Price Exercise Price Exercise Price 2021 Exercise Price 2020
Date
£ £ $ $
13 June 2018 880,000 13 June 2019 0.162 0.162 0.22 0.22
13 June 2018 880,000 13 June 2020 0.162 0.162 0.22 0.22
25 July 2019 451,000 25 July 2020 0.213 0.213 0.29 0.29
25 July 2019 451,000 25 July 2021 0.213 0.213 0.29 0.29
16 December 20 570,850 16 December 21 0.125 0.125 0.17 0.17
16 December 20 570,850 16 December 22 0.125 0.125 0.17 0.17
Weighted average 3,803,700 £0.16 £0.16 $0.22 $0.22
The weighted average contractual life of options outstanding at 31 December
2021 was 7.5 years (2020 6.9 years).
Exercise prices shown in USD are based on the US Dollar/Pounds Sterling
exchange rate at 31 December 2021 of 1.351 (2020 1.365). Options outstanding
at 31 December 2021 expire the earlier of ten years from grant date or 90 days
after the termination of service to the Company.
24. Share based payments (continued)
2021 Number of Options Weighted average exercise price 2020 Number of Options Weighted average exercise price
£ $ £ $
Options outstanding
At 1 January 5,181,950 £0.19 $0.26 3,949,500 £0.21 $0.28
Granted - - - 1,232,450 £0.125 $0.17
Lapsed (985,000) £0.30 $0.41 - - -
Forfeited (393,250) £0.16 $0.22 - - -
At 31 December 3,803,700 £0.16 $0.22 5,181,950 £0.19 $0.26
Options exercisable
At 1 January 3,457,250 £0.21 $0.28 1,975,000 £0.23 $0.31
Lapsed (985,000) £0.30 $0.41 - - -
Forfeited (261,250) £0.17 $0.23 - - -
Vested 1,021,850 £0.16 $0.22 1,482,250 £0.18 $0.24
At 31 December 3,232,850 £0.17 $0.23 3,457,250 £0.21 $0.28
Movements in the Share-based payment reserve were as follows:
31 December 31 December
2021 2020
$'000 $'000
Balance 1 January 2,136 1,988
Share-based payment charge 120 148
Lapsed and forfeited options (249) -
Balance 31 December $2,007 $2,136
25. Deferred tax
2021 2020
$'000 $'000
At 1 January - -
Prior years US Federal tax losses available for offset against future US 4,066 -
Federal taxable profits (see note 8)
At 31 December $4,066 -
26. Related party transactions
In November 2019 the Group made an investment of $900k in Organic Vines OP
LLC, a company which is controlled by Lance Baller, Iofina's chairman, and in
which he has a substantial personal investment. In 2021 this investment has
been impaired to Nil (Note 16).
There are intercompany transactions between the members of the Group. In both
2020 and 2021 all iodine produced by Iofina Resources was sold to Iofina
Chemical. Related party balances are as follows:
26. Related party transactions (continued)
31 December 31 December
2021 2020
$'000 $'000
Due to Due from Due to Due from
Iofina plc 20,792 - 21,712 -
Iofina Resources - 28,846 900 27,258
Iofina Chemical 8,125 71 5,586 40
IofinaEX - - - 900
Additional related party transactions with directors, who are considered to be
key management personnel, are set out in the Corporate Governance Statement on
page 29. Option grants as described in note 24 are to employees and Directors.
The Company has entered into a number of unsecured related party transactions
with its subsidiary undertakings. The most significant transactions carried
out between the Company and its subsidiary undertakings are financing.
27. Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, to provide returns for shareholders
and to maintain an optimal capital structure to reduce the cost of capital.
The Group defines capital as being share capital plus reserves as shown in the
balance sheet. The Directors continue to monitor the level of capital as
compared to the Group's commitments and adjust the level of capital as is
determined to be necessary by issuing new shares. Iofina plc is not subject to
any externally imposed capital requirements. The Directors consider the
capital of the Group to be the total equity attributable to the equity holders
of the parent of $30.0 million as at 31 December 2021 (2020: $20.6
million).
28. Subsidiary undertakings
Investment in subsidiaries
Investment in
subsidiaries
$'000
Cost
Balance at 31 December 2019, 2020 and 2021 $17,199
Due from subsidiaries
2021 2020
$'000 $'000
Cost
At 1 January 21,712 35,541
Finance expense paid by subsidiaries - (1,033)
Loans repaid - (18,177)
Management fees 100 100
Net funding from subsidiaries (1,020) (19)
Reversal of impairment of amount due from Iofina Resources - 5,300
At 31 December $20,792 $21,712
28. Subsidiary undertakings (continued)
The Group's debt arrangements are on a joint and several basis with all Group
companies excluding dormant subsidiaries. The principal beneficiary of these
arrangements is Iofina Resources, Inc., and therefore the debt is accounted
for in that company and the consolidated balance sheet, and does not appear in
the balance sheet of Iofina Plc.
Company Country of incorporation and operation Principal activity Interest in ordinary shares and voting rights
Iofina, Inc. United States/CO Holding company 100%
Iofina Resources, Inc. United States/CO Iodine production 100%
Iofina Chemical, Inc. United States/DE Specialty chemical 100%
IofinaEX, Inc. United States/KY Dormant 100%
Iofina Resources, LLC United States/CO Dormant 100%
Iofina Resources, LLC United States/TX Dormant 100%
Iofina, Inc. was established in February 2006 and is a wholly owned subsidiary
of Iofina plc. Iofina, Inc. owns the whole of the issued share capital of
Iofina Resources, Inc., Iofina Chemical, Inc. and IofinaEX, Inc. Other
entities are subsidiaries of Iofina Resources, Inc., the iodine production
company.
The registered offices of the above companies are as follows:
Company Registered office
Iofina, Inc. 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Resources, Inc. 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Chemical, Inc. 306 W. Main Street, Frankfort, KY 40601, USA
IofinaEX, Inc. 212 N 2nd St., Suite 100, Richmond, KY 40475
Iofina Resources, LLC (CO) 8480 East Orchard Road, Greenwood Village CO 80111, USA
Iofina Resources, LLC (TX) 815 Brazos Street, Austin TX 78701, USA
29. Capital commitments
At 31 December 2021 the Group had capital commitments amounting to $463k.
30. Post balance sheet events
1,196,700 share options were granted on 9 March 2022 at an exercise price of
£0.176 ($0.23). There were no other post balance sheet events.
31. Contingent liabilities
There are no contingent liabilities.
32. Ultimate controlling party
There is no ultimate controlling party of the Group.
Iofina and the environment
Iofina promotes, wherever possible, environmental sustainability in its
working practices and seeks to minimise, mitigate, or remedy any harmful
effects from the Group's operations on the environment at each of its
operational sites. To continue that effort through all aspects of business,
this report has been produced to minimise its effect on the environment by
using thinner paper, fewer pages, smaller type set, and non‐colour printing
as much as possible. As part of this effort Iofina is trying to move attention
to its online annual reports available at www.iofina.com. By being a better
steward of the environment, Iofina saves valuable shareholder funds instead of
producing glossy magazine pages throughout the whole document.
This page does not form part of the statutory financial statements.
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