TIDMIOF
RNS Number : 6388Z
Iofina PLC
25 May 2021
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act 2018
("MAR"), and is disclosed in accordance with the company's
obligations under Article 17 of MAR.
25 May 2021
Iofina plc
("Iofina", the "Company" or the "Group")
(LSE AIM: IOF)
AUDITED 2020 FINAL RESULTS
RECORD REVENUE, EBITDA and IODINE PRODUCTION
Iofina plc, specialists in the exploration and production of
iodine and manufacturers of specialty chemical products, announces
its audited final results for the 12 months to 31 December
2020.
2020 Sales and profits grow despite Covid-19 headwinds:
-- Revenue increased by 1.5% to $29.7m (2019: $29.2m)
-- Gross profit increased by 1.9% to $8.4m (2019: $8.2m)
-- EBITDA improved by 6.7% to $4.7m (2019: $4.4m)
-- Operating profit increased by 4.1% to $2.9m (2019: $2.8m)
-- Profit before tax increased by 131.3% to $1.28m (2019: $0.55m)
Debt refinanced and interest payments reduced:
-- Debt of $18.2m was refinanced by $5.2m repayments and $13.0m of bank facilities
-- Finance expense decreased by 37.7% to $1.7m (2019: $2.7m)
-- Cash of $3.5m at year end (2019: $8.2m) following $5.2m
repayments as part of debt refinancing
Increasing production and delivering on investment plan:
-- Iofina Resources produced 610 MT of crystalline IOflo(R)
iodine from Oklahoma based IOsorb(R) plants (2019: 602.7 MT)
-- Construction of IO#8 plant completed and production commenced April 2020
-- Capital investment into iodine and chemical plants was $2.4m (2019: $1.7m)
2021 so far:
-- Record revenues for Q1 2021 partially as a result of sales of excess inventory
-- Extreme February weather impacted Q1 crystalline iodine
production, producing 108MT (2020: 129.7 MT), but operations are
since normalised
-- Iodine prices have remained stable and recently lifted to $34-37/kg in Q2 2021
Commenting, President and CEO Dr. Tom Becker, stated:
"I am extremely pleased with the excellent progress that Iofina
has made in 2020, and we are proud to report that the Company has
had another record-breaking year, testament to the hard work and
dedication of our staff and the resilience of our business model
even in the face of a global pandemic.
"The Group's debt refinancing during the period was a key
highlight and has greatly strengthened the balance sheet, placing
us in an excellent position to continue to make operational
improvements and to expand our production and chemicals product
portfolio. In line with our expansion strategy, IO#8 was completed
on time and within budget during the period and we are now
carefully reviewing several promising locations for expanding
further, while carefully considering the timing around this.
"Following a brief slowdown in the second half of the year as a
result of the COVID-19 pandemic and its effects on the global
economy, we have been particularly encouraged to see the strong
state of the iodine market and its recovery in Q1'21, with prices
having bounced back to roughly where they were this time last year.
We are confident that this recovery will continue for the remainder
of 2021 and beyond and we are pleased to be on track to continue
our growth.
"I'd like to thank our staff for their dedication throughout
what was a challenging year and I'd like to thank shareholders for
their continued support. I look forward to updating the market
going forward as we continue to progress with our prudent growth
strategy."
Investor presentation
Thomas Becker, CEO and Malcolm Lewin, CFO will provide a live
presentation relating to the 2020 results and outlook for the
Company via the Investor Meet Company platform on 26 May 2021 at
3pm BST. The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via the Investor
Meet Company dashboard up until 9:00am today, or at any time during
the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet Iofina plc via:
https://www.investormeetcompany.com/iofina-plc/register-investor
Investors who already follow Iofina plc on the Investor Meet
Company platform will automatically be invited.
Annual General Meeting
The Company is posting its 2020 Financial Results and notice of
its AGM to shareholders today. The 2021 AGM of Iofina plc will be
held at 2:00 p.m. on 18 June 2021 at 4-6 Russell Street, London
WC2B 5HZ. In light of COVID-19 circumstances and due to continued
travel and meeting restrictions in place and other safety factors,
it will not be possible for shareholders to attend the meeting in
person. The AGM will be run as a closed meeting with the minimum
necessary quorum of two shareholders in accordance with Iofina's
articles of association.
To ensure shareholder votes are counted at the AGM, all
shareholders are asked to submit a Form of Proxy and are advised to
appoint the chairman of the meeting as your proxy to ensure your
vote is counted. The Company will provide any further relevant
information regarding AGM matters in future RNS releases.
Enquiries:
Dr. Tom Becker
CEO & President
Iofina plc
Tel: +1 859 356 8000
Christopher Raggett/Tim Harper (corporate finance)
Tim Redfern (ECM)
finnCap Ltd
Tel: +44 (0)20 7220 0500
Media Contact:
Charles Goodwin/Joe Burgess
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. As the second largest producer of
iodine in North America, it comprises three USA entities; Iofina
Resources, Iofina Chemical and IofinaEX.
LEI: 213800QDMFYVRJYYTQ84
ISIN: GB00B2QL5C79
Iofina Resources
Iofina Resources develops, builds, owns and operates iodine
extraction plants using Iofina's WET(R) IOsorb(R) technology.
Iofina currently operates five producing IOsorb(R) 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 speciality
chemicals derived from raw iodine, as well as non-iodine based
products for over 35 years.
IofinaEX
Iofina's newest subsidiary, IofinaEX, is fully licensed to
process hemp in the state of Kentucky and is currently managing a
hemp seed investment in this market.
www.iofina.com
Contents
COMPANY INFORMATION
.................................................................................................................................................
2
CHAIRMAN'S STATEMENT
.................................................................................................................................................
3
FINANCIAL REVIEW
............................................................................................................................................................
7
DIRECTORS'
BIOGRAPHIES...................................................................................................................................10
STRATEGIC REPORT
...........................................................................................................................................................
12
S172
STATEMENT............................................................................................................................................................20
CORPORATE
GOVERNANCE...........................................................................................................................................21
DIRECTORS' REPORT
.........................................................................................................................................................
22
CORPORATE GOVERNANCE STATEMENT
.......................................................................................................................
24
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA PLC
....................................................................
31
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME.
....................................................................................
41
CONSOLIDATED BALANCE SHEET.
..................................................................................................................................
42
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
.................................................................
43
CONSOLIDATED CASH FLOW STATEMENT.
...................................................................................................................
44
COMPANY BALANCE SHEET.
...........................................................................................................................................
45
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
..........................................................................
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
..........................................................................................
47
COMPANY INFORMATION
Directors L J Baller
T M Becker
W D Bellamy
M T Lewin
J F Mermoud
M C Fallin
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
We began 2020 with the business poised for further growth across
all business lines. We were experiencing strong growth in existing
products, and there was exciting new oilfield development that
would enhance our iodine production and new specialty chemical
product lines. The COVID-19 pandemic impacted our 2020 aspirations,
however I am extremely pleased with the way in which the Company
navigated the year.
Iofina took immediate steps to protect its workforce from the
spread of COVID-19, as well as precautions to enable continuity of
business operations. Chemical manufacturing was deemed an
'essential business' in the United States where Iofina operates,
and by creating the safest working environment our staff were able
to perform their duties throughout these unprecedented times. On
behalf of the Board, I would like to say a big thank you to our
staff for their commitment throughout, given how difficult the
pandemic has been for many people.
While Iofina and the iodine market was not as negatively
affected as many other sectors, there was a temporary slowdown in
iodine demand and a reduction in iodine price. We also saw oil
futures prices go negative on delivery, which had a significant
negative impact on our partners.
Despite the various headwinds of 2020, Iofina produced record
levels of Iodine and achieved record figures across all its key
Group financial reporting metrics. We also delivered record revenue
from non-iodine products (up 23%), completed the construction of
the IO#8 plant on time and on budget and successfully restructured
the Company's debt, which has helped to significantly strengthen
the balance sheet. Current total debt is now less than half of the
debt 24 months prior, with interest rates on debt considerably
reduced. The reduction in finance expense was a major factor in the
131% increase in profit before tax.
We began to see markets recover during the latter half of 2020,
and with this we got straight back on track with our targets.
Momentum has continued into 2021 and the progress we've seen in Q1
and early Q2 of the new year has been extremely pleasing.
We have built an excellent business with its diversified,
low-cost production across five IOsorb(R) plants and a specialty
chemicals business meeting the needs of its customers across a
number of end markets. With debt reduced and the balance sheet
strengthened, we are able to continue investing in the right areas
to deliver future growth and profitability. Our main goal remains
'continuous improvement' throughout the business, which can be
measured by financial results and production, as well as the
creation of new products and the wellbeing of our staff. The
management is committed to delivering improvements across the
business every year, which will ultimately drive shareholder
value.
Iofina Resources
Iofina Resources ("IR") produced a record 610 metric tonnes
('MT') of crystalline iodine during the period and continued to
execute its expansion plans, completing its latest IOsorb(R) plant
IO#8 in April while operating its four other plants in western
Oklahoma. IR's unique technology and business model allows the
Company to isolate a valuable resource, iodine, from brine waste
streams produced from current oil and gas operations. The Company
believes its iodine production costs are among the lowest in the
world.
Prior to restrictions and market changes caused by the COVID-19
pandemic, IR met its production expectations. As COVID-19
restrictions increased, IR and its workforce continued to operate
plants and produce iodine in a challenging environment.
Additionally, construction continued on IO#8 during this time. Oil
and gas production and demand in the USA changed significantly
during Q2 2020 and oil prices briefly turned negative. As a result,
many oil and gas operators made decisions to shut-in production
and/or spend less money on operations to conserve cash. As a result
of this knock-on effect, IO#8 saw its brine supply limited and
management took the prudent decision to temporarily shut down the
plant in early May. IR continued to focus on factors within its
control at that time. Its four other plants continued to produce
iodine and IR utilized federal programs to keep its personnel fully
employed. The IO#8 shut-in was short-lived, and operations resumed
in June.
It is a crucial part of IR's strategy to continue investing in
maintenance at our sites and to work closely with our brine
suppliers to maximize brine available to our plants. Lower brine
supply had some impact on iodine production at a few plants in H2
2020 as oil fields in our core area matured and less capital was
spent on oil production to conserve cash. However, Iofina has good
relations with its brine suppliers and together we continue to work
on projects to maximize brine availability to IOsorb(R) plants to
the benefit of both Iofina and its partners.
The achievement of building IO#8 on time and on budget is a
testament to the maturity of IR as a Company and its talented
employees. Exploration efforts remain a focus for IR and the
Company intends to continue its prudent growth strategy and expand
its iodine production, with the next expansion likely to start late
in 2021. The Company's main priority when looking to expand its
operations has always been to find locations that demonstrate the
highest potential for stable, long-term, and quality brine supply.
Given the events of 2020 this, along with ensuring we execute at a
time when growth will be best supported by the global iodine
market, are of even greater importance for Iofina. The Directors
are committed to production growth but prudently after risk factors
are fully evaluated for future sites.
For IR's next expansion, the Company is exploring traditional
IOsorb(R) sites, investigating alternative brine sources for
existing plants, considering locations outside Oklahoma, and
studying means to better control brine streams to both future and
current plants. The Company is well geared for expansion and, as
with IO#8, expansion can be accomplished with minimum SGA costs.
The Company believes at this time that expansion can be funded from
current company resources and credit lines.
Iofina Chemical
Iofina Chemical ("IC") and its employees, deemed an essential
business, maintained operations throughout the pandemic and
achieved record sales of $29.7m over the course of the period, all
in spite of challenging market conditions which saw iodine demand
decrease in H2.
One of the pillars of Iofina's business model is to diversify
the business within our technological expertise. This was
particularly important in 2020 where iodine-based product demand
slowed but IC's non-iodine products remained strong, seeing sales
increases of over 22% YOY. This diversification has allowed Iofina
to successfully navigate the difficult market conditions.
A major part of IC's strategy is to reinvest in existing
processes and to develop new products within its core expertise,
and this has continued throughout 2020. IC has been developing
other iodine derivatives to add to its portfolio, process
improvements to existing semi-conductor and disinfectant lines are
ongoing, and we continue to work with a major Fortune 100 company
on an iodine-based process which is expected to continue to grow.
Due to competitive reasons and confidentiality agreements more info
cannot be presented.
Iofina Chemical continues to cultivate relationships with
existing and new customers and strives to meet or exceed its
customer's expectations.
Iodine Prices
Since the iodine price lows of early 2017, prices steadily
increased through to early 2020, reaching $36-37/kg. During the
second half of 2020, as global economies contracted, so did the
demand for iodine, resulting in prices reducing slightly to
$33-35/kg during the second half of 2020. The Company's iodine
inventories were higher than normal at the end of 2020, due to this
reduced demand. However, they normalized in Q1 2021 as global
markets bounced back, resulting in a record sales quarter for the
Company. Iodine prices have recently moved higher to approximately
$34-37/kg, which is similar to where prices were in early 2020.
Currently iodine prices are trending higher and Iofina now expects
iodine prices to continue to slowly increase in 2021, assuming
global economies maintain their recoveries.
Debt Refinancing
In September 2020, the Group announced that it had refinanced
its entire debt with First Financial Bank of Ohio. The debt
refinance included a 7-year $10m term loan and a revolving line of
credit of up to $8m. Initially the company drew $3m on the line of
credit and currently minimizes the line of credit interest expense
by 'sweeping' any funds not required for operations. Interest rates
on Company debt have been lowered from 7.5% to below 4%.
The debt refinancing was a major accomplishment for the Group,
particularly doing so at a time when banks were particularly
cautious due to the level of uncertainty in the market.
Significantly, since March 2019, the Group has more than halved its
total debt, thus achieving substantial reductions in both debt and
interest outgoings moving forward. This allows the Group to utilize
more profits to reinvest in the Company's growth.
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 which 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(R) certified facility (recertified in 2019 and
currently active). 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 in the
wake of 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 24 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 skillsets that continue to grow and challenge the Company.
The Board was particularly pleased with the 2020 appointment of the
former Governor of the State of Oklahoma and former US
Congresswoman for Oklahoma in the United States. Mrs. Mary Fallin
has brought a strong set of unique experience that has enhanced the
Board of Iofina as it continues to deliver on its strategy.
Outlook
The next few years look to be transformational for Iofina. The
limits of the excessive debt to EBITDA ratio are of the past, as we
go into a debt to EBITDA range of 2-3x. Cashflow generation will
compound and allow the Group to continue paying off debt while
allowing for controlled growth, something that the Group has
struggled to achieve since 2013 and which has been a key goal for
the Board. We now have a highly attractive, profitable Company
story to present to institutional and retail investors worldwide
and we are looking forward to the return of investor roadshows and
new investor programs starting mid-year 2021.
In terms of our expansion, we are squarely focused on growing
our current iodine production and chemical compounds while moving
into new and exciting chemical compounds. We are also considering
strategies to reduce our reliance on our current oil and gas
partners.
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. In 2021, we plan to invest in a new
production line to improve our largest non-iodine process to
improve efficiencies, safety, and purity. We will continue to
explore new products and business relationships to ensure future
growth.
We continue to be prudent in our approach to growth and are
looking at all the data points we have available with regards to
the paradigm shift we've seen both politically and economically
from the low oil and natural gas prices experienced in 2020. This
data is enabling us to strategically select our next IOsorb(R)
plant locations in mid to late 2021 as we continue to grow.
We would like to thank all of our shareholders for their
continued support as we guided the business through a tough 2020
and we are looking forward to the excellent opportunities we are
seeing as we move forward into the next chapter for the
Company.
Lance J Baller
Non-Executive Chairman
Iofina plc
24 May 2021
FINANCIAL REVIEW
Summary 2020 v 2019
-- Sales slowed by COVID-19 pandemic but results still ahead of 2019
-- Revenue increased by 1.5% from $29.2m to $29.7m
-- Gross profit increased by 1.9% from $8.2m to $8.4m
-- EBITDA improved by 6.7% from $4.4m to $4.7m
-- Operating profit increased by 4.1% from $2.8m to $2.9m
-- Finance expense decreased by 37.7% from $2.7m to $1.7m
-- Profit before tax increased by 131.3% from $0.55m to $1.28m
-- Debt of $18.2m was refinanced by $5.2m repayments and $13.0m of bank facilities
-- Paycheck Protection Program loans of $1.09m were received, and forgiven in 2021
-- Capital investment into iodine and chemical plants was $2.4m (2019: $1.7m)
-- Construction of IO8 plant completed and production commenced April 2020
-- Inventories increased by $3.6m largely due to COVID-19 impact on sales
-- Cash reduced from $8.7m to $3.5m after debt repayments
Trading results
Total revenue increased by 1.5% from $29.2m to $29.7m. Demand
for Iofina's iodine related products fell due to the COVID-19
pandemic, but the effect on total revenue was offset by price
increases achieved and by an increase in sales revenue from
non-iodine products. Turnover of iodine related products declined
by 8% from $20.2m to $18.5m. Sales of crystallised iodine fell by
9%, with a 23% volume reduction from 422 metric tonnes to 324
metric tonnes offset by 18% price increases, with an average price
of $34.84 (2019 $29.42) per kilogram. Sales of iodine derivative
products showed a combined 34% volume decline mitigated by a 26%
overall price increase. Non-iodine products revenue increased by
23% from $9.1m to $11.2m, with volume increases of 23% and no
overall pricing change.
Gross profit improved overall by $0.2m (2%) to $8.4m (2019
$8.2m), remaining at 28% of sales as for 2019. Margins over costs
of materials were some 4% higher for all iodine products combined,
while for non-iodine products there was a 4% fall in margins. Costs
of the Iofina Chemical plant increased by $0.6m (18%) reflecting
higher maintenance costs and the strengthening of the production
management function. Production costs of iodine per kilogram at
Iofina Resources increased by 8% reflecting startup costs at the
new IO8 plant and lower output in relation to costs. The net result
of all the above factors was a similar gross profit to 2019.
Crystallised iodine production was 610 metric tonnes compared to
603 metric tonnes for 2019. A new plant IO8 was put into service in
April 2020. Sales of crystallised iodine, both as raw iodine and in
derivative compounds, fell by 28% from 665 metric tonnes to 476
metric tonnes. Sales of crystallised iodine were 68% of the total
(2019 64%), and sales of crystallised iodine in derivative products
were 32% of the total (2019 36%).
EBITDA improved by 6.7% from $4.4m to $4.7m after deducting
$3.7m SGA expenses (2019 $3.8m) from gross profit of $8.4m (2019
$8.2m).
Operating profit after depreciation and amortisation of $1.8m
(2019 $1.6m) was $2.9m compared to $2.8m for 2019.
Finance expense and derivative liability
Finance expense fell from $2.7m in 2019 to $1.7m in 2020, and
there was a non-cash derivative liability credit of $0.4m in 2019
(2020 Nil). The 2019 expense amount of $2.7m comprised principally
$1.6m interest payable, $0.2m arrangement fees, and a $0.8m
non-cash charge for discount amortisation on convertible loan
notes. The 2020 expense of $1.7m comprises principally $1.1m
interest payable and $0.5m refinancing and arrangement fees. The
reduction of $0.5m in interest payable reflects both loan
repayments of $5.2m made during 2020 and the reduction in interest
rates from 7.5% to 3.50% and 3.25% resulting from the debt
refinancing described in Note 20. The refinancing and arrangement
fees of $0.5m are expected to be a non-recurring item.
Profit before tax
Profit before tax improved from $0.6m (2019) to $1.3m (2020).
Given that 2020 trading results were on a par with 2019, the
improvement mainly reflects the reduction in finance expense
described above.
Debt refinancing
2019 term loan notes debt of $18.2m was refinanced during the
year by repayments of $5.2m and new bank facilities totalling
$13.0m. The facilities comprise a seven year term loan of $10.0m
repayable in monthly instalments, and a revolving line of credit of
$8.0m, of which $3.0m was drawn initially. The 2019 term loan notes
carried an interest rate of 7.5%, whereas the new facilities are at
2.5% over US LIBOR as regards the term loan and 2.25% over US LIBOR
as regards the revolving line of credit. Further details of these
facilities are given in Note 20.
Paycheck Protection Program loans
Paycheck Protection Program loans totalling $1.090m were
received during the year. Notification of forgiveness of these
loans was received from the Small Business Administration in
January 2021.
Investment
Progress towards a return on the Group's November 2019
investment of $0.9m in the hemp seed production undertaken by
Organic Vines OP LLC has been delayed, with the COVID-19 pandemic a
factor. See Note 16 for details.
Capital investment
The Group invested $2.4m in capital projects and equipment (2019
$1.7m), of which $0.6m relates to improvements and replacements at
the Iofina Chemical plant (2019 $0.4m), and $1.8m relates to the
Iofina Resources Oklahoma plants. Of this latter amount $1.7m was
spent on completing construction of IO8 plant, placed in service
April 2020, and together with the $1.2m spent in 2019 brings the
total cost of the plant to $2.9m.
Cash flow
Cash started the year at $8.7m and ended at $3.5m, a net cash
outflow of $5.2m. The major contributor to the outflow was the
$5.2m debt repayments made as part of the debt refinancing. There
was also an increase of $3.5m in inventories, offset by a $2.7m
decrease in receivables. These latter changes reflect the slowdown
in sales due to the COVID-19 pandemic, that became more pronounced
as the year progressed. However the Group is experiencing much more
favourable trading conditions so far in 2021, and it is expected
that working capital ratios will continue to normalise.
Malcolm Lewin
Chief Financial Officer
Iofina plc
24 May 2021
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
is the former managing partner of The Elevation Fund and Elevation
Capital Management. Mr. Baller is the former managing partner of
Shortline Equity Partners, Inc., a mid-market merger and
acquisitions consulting and investment company in the United
States. He has actively served on the investment, audit, corporate
governance and compensation committees, while on the board of
directors of companies in Asia and North America. Mr. Baller is
also a former vice president of mergers and acquisitions, financing
and corporate development at Integrated Biopharma, Inc., and prior
to this a vice president of the investment banking firms UBS AG and
Morgan Stanley. He has served as Chairman to various companies and
has led successful restructurings. Mr. Baller is on the board of
trustees of Index Funds and also serves as the chairman of the
audit committee and as the audit committee financial expert under
the Sarbanes-Oxley Act of the United States for Index Funds.
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, Non-Executive Director
Mary Fallin 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.
Brine water is 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(R) 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(R) iodine is sold directly to other
iodine end-users. IofinaEX Inc. is currently managing a hemp seed
investment and has explored cannabinoid production from hemp.
Iodine is a rare element that is produced only in a few
countries in the world, with approximately 90 percent produced from
Chile (60 percent) and Japan (30 percent, including recycled waste
streams). Iodine is a unique element with numerous applications.
Iodine and compounds made from iodine 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 Resources, Inc. is the Group's wholly owned subsidiary
which uses proprietary Wellhead Extraction Technology(R) (WET(R))
and WET(R) IOsorb(R) methods to produce iodine from brine. The
Directors of the Company believe that Iofina's unique business
model for the production of iodine by utilizing produced brine from
third party oil and gas production is advantageous for long term
raw material sourcing and 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 recent expansion of production and
opening of IOsorb(R) plants IO#7 and IO#8. Economically viable
iodide rich brine is not common and the Group's proprietary
geological model to locate and anticipate iodide rich sources is
unique.
The main 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(R) 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(R) 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 many
iodine-based products with applications in various industries
including agricultural, pharmaceutical, biocides and others.
Additional diversification is realised by the production of
non-iodine-based products at Iofina Chemical. 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. This was evident in 2020 where the global
economic slowdown during the COVID-19 pandemic severely damaged
many companies. However, through Iofina's business model which
includes diversification and low-cost production, the Group was
able to manage the business during a difficult time. 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 on
current systems, be at the forefront of new technologies, new
specialty chemical products and applications in our core
competencies.
Iodine prices are a key consideration for the Group. Over the
last decade, iodine price fluctuations have been rather dramatic
compared to iodine price changes before 2011. Market supply and
demand changes as well as manufacturing cost increases for iodine
are the major factors influencing the price of iodine. In 2011, the
combination of the Fukushima disaster in Japan and Chilean supply
disruptions resulted in a shortage of iodine and a spike in iodine
prices which resulted in iodine prices reaching all-time highs.
Since that time, iodine prices have fallen dramatically from these
highs as Chilean production increases caused over-supply in the
market for some time while iodine producers were aggressively
competing for market share. Iodine prices hit a low near the end of
2016 and into early 2017. From the beginning of 2017 through the
middle of 2020 iodine spot prices rose by approximately 75%. Iodine
prices retreated in H2 2020 as a result of lower global demand for
iodine and iodine-based products during the global COVID-19
pandemic. As an iodine manufacturer, iodine prices have a
significant impact on the Group's gross profit margins. Prices have
again begun to increase in Q2 2021 and, whilst not certain, the
Group expects iodine prices to continue to rise in 2021. Any
increase in iodine prices and the rate of increase will likely be
tied to the rate of reopening of global industries and economies as
COVID-19 vaccine rollout globally increases which should end this
pandemic in due course.
The Directors properly recognized that, as the Company erected
its IOsorb(R) 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
iodine production costs. Once a 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. Any
potential expansion of iodine production is not likely to occur
before Q4 2021. Uncertainties in expansion of oil and gas
production in our core areas in the USA, uncertainty of the
recovery rate of economies and iodine demand, as well as learnt
lessons of the past regarding locations of IOsorb(R) plants are all
factors for the Directors when considering the timing of expansion
projects. 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 current
IOsorb(R) plants. The Group is investigating the economics and the
technology to better control the iodide rich brine supply that feed
the current and future IOsorb(R) 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.
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
2020 2019
Revenue from sales of iodine and iodine derivatives $18,506,546 $20,094,135
Revenue from non-iodine products $11,181,004 $9,151,093
Total revenue $29,687,550 $29,245,228
Total pounds of product shipped 1,799,900 2,255,840
Metric tonnes of crystallised iodine produced 610 603
IOsorb(R) plants in operation (year-end) 5 4
Commentary on the above indicators is to be found in the
Chairman's Statement on pages 3 to 6.
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 7 to 9.
Objectives
At the end of 2020 the Group had five operating IOsorb(R) 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/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. Brine supply to our
IOsorb(R) plants can be affected by regulatory changes and
adjustments of our partner's 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 2020, 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 2021 is likely assuming the
effects of COVID-19 are short lived and do not impact the global
iodine markets or USA oil/gas production negatively long-term.
Iofina Chemical has continued to invest in current products
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 2020
included methyl fluoride capacity improvements, trichloromelamine
process improvements, addition of reactor capacity for iodide
products and other safety initiatives. 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. As Iofina Resources
has continued to increase iodine production, the sales team has
developed new outlets for this increased production of iodine
including direct sales of the Group's crystalline IOflo(R) iodine
directly to iodine 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.
IofinaEX has explored extraction of cannabinoid-based products
from hemp and is licensed in Kentucky. The market for cannabinoids
from hemp has fluctuated greatly since IofinaEX was formed. As a
result of many factors, including increased regulation uncertainty
and a significant price reduction of cannabinoids derived from hemp
biomass, IofinaEX is now solely focused in monetizing its seed
investment. This current hemp seed investment is a one-off
investment project with Organic Vines OP with the potential to
achieve up to a 2x's return on investment. Over 22 million
certified organic seeds were produced in this project. By obtaining
Organic certification for the seeds produced, we have obtained a
differentiation factor from most other hemp seed and provides
greater value. To date seed sales have been much slower than
expected with only thousands of seeds sold. The partnership is
confident that these high-quality seeds will be sold and realise
profit, however the timeframe for this realisation is unknown.
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(R) 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(R)
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(R) plants. The SWDs that our partners operate may have
temporary or permanent issues which would likely affect the brine
supply to IOsorb(R) plants. In the past year 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(R)
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. 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. These events could have a negative effect
on the markets we serve and on 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.
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. 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(R) facility.
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. This resulted in a slight decline on iodine prices that are
now rising again in Q2 2021.
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 2020, 15 percent
(2019; 15 percent) of revenue recognised was attributable to one
long term customer. Relations with this customer 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 and scheduled to become effective in the near
future, including but not limited to environmental, health and
safety and import/export regulations. These regulations are
complex, change frequently, can vary from country to country, 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 new federal administration in the
USA is more likely to increase regulations for the oil, gas and
chemical 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 has 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. One recent example is that demand for some
of the Group's products decreased in H2 2020 as the pandemic based
global economic slowdown accelerated which resulted in the Group
carrying abnormally high inventories. This inventory increase
negatively affects cash flow. Low inventories can negatively affect
sales volumes and customer relationships.
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 key
technical or senior management employees could negatively affect
the business.
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: 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 unlikely in the short term, interest rates
may rise significantly and negatively impact debt cost of the
Group.
Going concern
The Group's former Term Loan Notes of $18,177,209, due 1 July
2020, were repaid during the year. New financing totalling $13
million was arranged as set out in Note 20, of which $10 million is
repayable over seven years and $3 million has a two-year term. As
disclosed in Note 27 the loans totalling $1.09m received by the
Group under the Paycheck Protection Program were forgiven in full
in January 2021. The size and maturities of the Group's debt
obligations have therefore been greatly improved. Based on recent
experience and market trends the Group does not expect the COVID-19
virus to have a material negative financial effect going forward.
The Group also considers that recent shortfalls in brine supply
from oil and gas operators can be mitigated to a significant
extent. 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.
On behalf of the board
Lance J. Baller
Non-Executive Chairman
Iofina plc
24 May 2021
STATEMENT IN ACCORDANCE WITH SECTION 172 OF THE COMPANIES ACT
2006
The Directors are required to make a statement which describes
how they have behaved with regard to the matters set out in Section
172(1) of the Companies Act 2006, namely:
Duty to promote the success of the company
(a) the likely consequences of any decision in the long-term;
(b) the interests of the company's employees;
(c) the need to foster the company's business relationships with
suppliers, customers, and others;
(d) the impact of the company's operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for
high standard of business conduct;
(f) the need to act fairly between members of the company.
Section 172 Statement
The Directors insist on high operating standards and fiscal
discipline and routinely engage with management and employees of
the company 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 Company.
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 benefit packages and open dialogue between all
employees are just a few of the ways the Company 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, debt holders,
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 Company
as a whole. In order 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 Company is known for its commitment to
details to its customers. Communications with debt holders and
shareholders occur on an ongoing basis and as questions arise. The
company 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 the composition of the Board 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 ): 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 2020.
Strategic report
Included in the Strategic Report on pages 12 to 19 is the review
of the business and principal risks and uncertainties.
Post balance sheet events
Post balance sheet events are set out in note 27.
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 International Financial Reporting Standards ("IFRS"), as
adopted by the European Union ("EU"), and have elected under
company law to prepare the Company financial statements in
accordance with IFRS.
The financial statements are required by law and IFRS adopted by
the EU to present fairly the financial position of the Group and
the Company and the financial performance of the Group. The
Companies Act 2006 provides, in relation to such financial
statements, that references in the relevant part of that Act to
financial statements giving a true and fair view are references to
their achieving a fair presentation.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for that period.
In preparing the Group and Company financial statements, the
directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRS adopted by the EU; and
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Iofina
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, Non-Executive Director (appointed 1 April
2020)
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
24 May 2021
CORPORATE GOVERNANCE STATEMENT
The Board is accountable to the Company's shareholders for good
corporate governance and it is the objective of the Board to attain
a high standard of corporate governance. The Chairman has primary
responsibility to lead the Board effectively and to oversee the
adoption, delivery and communication of the Company's corporate
governance model.
The Company is listed on the AIM market of the London Stock
Exchange ("AIM") and is subject to the continuing requirements of
the AIM Rules for Companies. In April 2019, the Company adopted The
QCA Corporate Governance Code, as published by the Quoted Companies
Alliance (the "QCA Code"). On our website
(https://iofina.com/corporate-governance-2/) we set out how we
comply with the 10 principles of the QCA Code. The following
sections explain how the QCA Code is applied by the Company.
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(R) (WET(R)) IOsorb(R) 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(R). 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 of 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. In
addition, 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 16 to 19 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 10
and 11. 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. Both the Board and senior managers 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 entire 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, by video conference 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 27.
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 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, albeit in-person meetings have been
limited during the financial year under review due to the global
COVID-19 pandemic and the ensuing travel restrictions in place.
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 (who became a member on her appointment to
the Board). 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 with regard to the Annual Report. 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
29.
Attendance at meetings
The Board meets regularly 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 9 2 1
Dr Thomas Becker 9 - -
Malcolm Lewin 9 - -
Dr William Bellamy 9 2 1
J. Frank Mermoud 9 2 1
Mary Fallin 5 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/ ). 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 ).
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.
Details of the resolutions and explanations thereto are included
with the notice, including any special arrangements necessitated by
COVID-19.
Directors' remuneration
Remuneration provided to each Director was as follows:
2020 2019
------------------------------ ------------------------------
Total Total
Salary Bonus $ Salary Bonus $
----------------- --------- --------- --------
Lance Baller 109,620 - 109,620 109,620 - 109,620
Dr. Thomas
Becker 236,400 50,000 286,400 235,600 40,000 275,600
Malcolm Lewin 160,000 40,000 200,000 160,000 30,000 190,000
William Bellamy 30,000 - 30,000 30,000 - 30,000
Frank Mermoud 30,000 - 30,000 30,000 - 30,000
Mary Fallin 22,500 - 22,500 - - -
Total $588,520 $90,000 $678,520 $565,220 $70,000 $635,220
--------- ---------
No pension contributions were paid on behalf of the directors in
2019 or 2020.
Directors' and officers' insurance is in place on a Group-wide
basis.
The interests of the Directors in office as at 31 December 2020
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 2020 1 January 2020
L J Baller 4,812,500
4,812,500
Dr. T M Becker 93,750
-
W D Bellamy 46,875
-
M T Lewin 93,750
-
J F Mermoud 23,750
-
The Directors were granted options over shares on 16 December
2020 with an exercise price of 12.5 pence. All options granted to
Directors are set out in the table below. No Directors exercised
options in 2020.
Exercise Exercise Exercise
2018 price 2019 price price
Options per 2018 Lapse Options per 2019 Lapse 2020 Options per 2020 Lapse
Name granted Option date granted Option date granted Option 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 - - - - - - 82,500 12.5p 15/12/30
--------- ---------- ------- --------- ---------- ------- ------------ --------- --------
In addition to the above, Dr T Becker has 250,000 2011 Options
with an exercise price of 30p and a lapse date of 2 July 2021.
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
24 May 2021
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 2020 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 significant accounting
policies. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial
Reporting Standards (IFRSs), as adopted by the European Union.
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 2020 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 IFRSs as adopted by the
European Union; 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
directors' use of the going concern basis of accounting in the
preparation of the financial statement is appropriate.
Our evaluation of the directors' 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 The cash flow forecast demonstrates
consolidated cash flow forecasts that the Group will have a cash
incorporating all entities within flow surplus throughout the
the Group covering the period forecast period. These incorporated
to 31 December 2022. These are all budgeted and committed expenditure
based on their expectation of including the repayment of the
future costs, including budgeted term loan. We did note that
operating and capital expenditure the revolving credit loan, which
on all of the group's operating is due for repayment in September
plants licence areas and expectations 2022, was not included on the
of future iodine production projections provided. It was
levels and commodity price. noted, however, that in September
Our review included: 2022, when the facility matures,
* Assessing the transparency, completeness and accuracy the Company is expected to have
of the matters covered in the going concern sufficient cash reserves to
disclosure by evaluating management's cash flow repay the balance owed.
projections for the forecast period and the In reviewing the cash flow forecast,
underlying assumptions; we separately sensitised the
commodity price to determine
the maximum the price of iodine
* Review of the cash flow forecasts, the methodology could fall in order for the
behind these and ensuring they are arithmetically cash to be depleted to Nil.
correct and challenging the assumptions by discussing Overall, the price of Iodine
them with management and corroborating them with would need to decrease by 23%
historical knowledge; - 24% in 2021 and 2022 in order
for EBITDA to be nil for both
years of the forecast. Given
* Obtaining post year end management information and the price of Iodine has been
comparing these to budget to ensure budgeting is increasing since 2018, this
reasonable and results are in line with expectations; is not considered likely.
and The likelihood of this fall
in Iodine prices lasting for
the entire forecast period is
* We completed a sensitivity analysis on the budgets considered by the Directors
provided to assess the change in revenue and Iodine to be remote and in such circumstances
prices that would need to occur to push the Group consider sufficient mitigating
into a cash negative position. actions to be available to continue
as a going concern.
----------------------------------------
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. 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.
This is not a complete list of all risks identified during our
audit.
Key audit matters How our audit addressed the
key audit matters
Revenue Recognition Our audit work included, but
was not restricted to:
Under IFRS 15, the entity shall * Documenting our understanding of management's process
recognise revenue to depict for evaluating revenue recognition and assessing the
the transfer of goods or services design effectiveness of related key controls.
to customers in an amount that
reflects the consideration to
which the entity expects to * We tested the completeness of revenue by selecting a
be entitled in exchange for sample of items from outside of the Group's
those goods or services. accounting system and tracing them to inclusion into
the accounting system and agreeing the appropriate
The revenue stream for the group revenue recognition.
is derived from sale of iodine
derivatives, iodine chemicals
and ancillary products. All * We tested occurrence of revenue by consideration of
of which are fundamental to our testing in trade receivables in conjunction with
the financial statements and using AI software to assist by identifying the
a systematic error in the calculation correlation between trade receivables and revenue
could lead to a material error. journals being made and the whether any subsequent
reversal of trade receivables should have impacted
We therefore identified the the recognition of the revenue.
risk over the cut off of revenue
as a significant risk and also
considered completeness and * We audited revenue for cut-off by testing pre and
occurrence assertions. post year-end revenue items on a sample basis to
assess whether the revenue items were accounted for
in the correct period.
* 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 accurate
and recognised on an appropriate
basis.
Valuation and Impairment review Our audit work included, but
of property plant and equipment was not restricted to:
* We reviewed Management's assessment of forecasted
Under International Accounting cash flows and challenged significant movements in
Standard 36 'Impairment of Assets' forecasted cash flows compared to historic
(IAS 36), companies are required performance.
to assess whether there is any
indication that an asset may
be impaired at each reporting * We reviewed Management's forecasted cash flows that
date. feed into the discounted cash flow model and
Property, plant and equipment challenged significant assumptions with reference to
are a significant balance in historic results, market trends, appropriateness of
the financial statements with discount rates and future expectations of commodity
a combined net book value of prices and sales growth
GBP18.8m (2019 - GBP18.0m).
The balance is primarily comprised
of the IOSorb plants, equipment * We performed a downside sensitivity analysis and held
and machinery and exploration discussions with Management to assess the likelihood
and evaluation assets. of certain circumstances crystallising.
The estimated recoverable amount
of these balances is subjective
due to the inherent uncertainty The Group's accounting policy
involved in forecasting and on Impairment is shown in Principal
probability of the related future Accounting Policies for the
cash flows. consolidated financial statements
and related disclosures are
At each reporting date the Group included in note 1m.
considers any indication of
impairment to the carrying value Key observations
of its assets. The assessment As a result of the audit procedures
is based on expected future we performed and, after considering
cash flows and is carried out management's disclosures of
on each IOSorb plant. the judgements applied by them,
we have concluded that no impairments
The directors are required to are required.
conduct impairment tests where
there is an indication of impairment
of the asset. The assessment
was based on the future cash
flows of each site using a discounted
cash flow model (being the 'value
in use'). The value in use was
then compared to the carrying
value of fixed assets for that
site.
Significant management judgement
and estimation uncertainty is
involved in this area, where
the primary inputs are:
-- Estimating cash flow forecasts;
-- Selecting an 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, which was one of the most
significant risks of material
misstatement.
Valuation of Inventory Our audit work included, but
Inventory primarily consists was not restricted to:
of iodine and iodine derivatives. * We attended a stocktake at two of the Group's plant
Inventory should be held at locations at the year end, where we observed an
the lower of cost and net realisable inventory count and performed sample testing on
value. inventory held.
The net realisable value is
the estimated selling price
in the ordinary course of business * We discussed, understood and tested the Group's
less any applicable selling process for calculating the cost of the finished
expenses. As at 31 December goods based on the absorption cost including
2020 the inventory is valued challenging assumptions with management to ensure
at GBP9.7m (2019 - GBP6.1m). they are appropriate.
There is a risk that the carrying
value in the Group accounts
is higher than the recoverable * A sample of inventory items were tested to ensure the
amount and it is therefore materially product was held at the lower of cost and Net
misstated. Further, there is Realisable Value.
the added risk of the complexity
of the measurement of the costs
of conversion of the inventory
and the estimates and judgements
around this. The Group's accounting policy
on Inventories is shown in Principal
We therefore identified the Accounting Policies for the
valuation of inventory as a consolidated financial statements
key audit matter, which was and related disclosures are
one of the most significant included in note 1o.
assessed risks of material misstatement.
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.
------------------------------------------------------------------
Valuation and Impairment review Our audit work included, but
of investments in subsidiaries was not restricted to:
and intercompany balances * We performed a sensitivity analysis on the key inputs
such as a decline in iodine prices and sales growth
Due to the material size of and concluded that even with an adverse movement in
the investments in, and loans the Group's key assumptions, no potential impairment
to, the subsidiaries the directors was identified.
should critically consider if
any indicators of impairment
exist in relation to the balances. * We obtained and reviewed the director's assessment of
The estimated recoverable amount impairment with regards to investment and loans due
of these balances is subjective from its subsidiaries to ensure the treatment of the
due to the inherent uncertainty balances was in line with IAS 36.
involved in forecasting the
profitability of the subsidiaries.
Where indicators of impairment * We reviewed the 2020 forecasts against actuals to
have been identified a robust determine the Directors historic forecasting
review of the investments held accuracy.
by the Parent Company and any
amounts due from subsidiaries
to the Parent Company should
be undertaken by the directors The Group's accounting policy
to confirm the value in use on impairment is shown in Principal
of these amounts and that there Accounting Policies for the
are no indications, or requirements consolidated financial statements
for, impairments of the amounts. and related disclosures are
Significant management judgement included in note 1m.
and estimation uncertainty is
involved in this area, where Key observations
the primary inputs are: As a result of the audit procedures
-- Estimating cash flow forecasts; we performed and, after considering
-- Selecting an appropriate management's disclosures of
assumptions such as growth rate the judgements applied by them,
and discount rate. we have concluded that no impairments
are required.
We therefore identified the
valuation of investments in
subsidiaries and intercompany
balances as a key audit matter,
which was one of the most significant
assessed risks of material misstatement.
------------------------------------------------------------------
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 to be:
---------------------------------------------------------
$299,000 (2019: $298,000) $239,000 (2019: $238,000)
--------------------------- ----------------------------
How we determine Based on the main key As the Parent is a holding
it indicator, being 1% of company, materiality
revenue for the Group. was initially based
on 1% of gross assets,
however, this exceeded
the Group level therefore
this was capped at 80%
of Group materiality.
--------------------------- ----------------------------
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:
---------------------------------------------------------
$224,250 (2019: $223,500) $179,400 (2019: $178,800)
--------------------------- ----------------------------
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.
---------------------------------------------------------
$14,950 (2019: $14,900) $11,950 (2019: $11,920)
--------------------------- ----------------------------
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 22, 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.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. 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 regulation, 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. 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 correspondence with
and reports to the regulators, including correspondence with: SOCMA
(Society of Chemical Manufacturers and Affiliates), DEA (Drug
Enforcement Administration) and OSHA (Occupational Safety &
Health Administration), review of correspondence with legal
advisors, enquiries of management, 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 . 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
24 May 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2020 2019
Note $ $
Revenue 3 29,687,550 29,245,228
Cost of sales 4 (21,282,945) (20,999,775)
------------- -------------
Gross profit 8,404,695 8,245,453
Administrative expenses 4 (5,478,931) (5,435,492)
------------- -------------
Operating profit 2,925,674 2,809,961
Finance expense 6 (1,663,027) (2,668,426)
Finance income 7 15,145 18,055
Derivative liability - 392,835
------------- -------------
Profit before taxation 4 1,277,792 552,425
Taxation 8 - -
------------- -------------
Profit for the year attributable to owners of the parent $1,277,792 $552,425
------------- -------------
Earnings per share attributable to owners of the parent:
* Basic 9 $0.007 $0.003
* Diluted 9 $0.007 $0.003
------------- -------------
All activities are classed as continuing.
The accompanying notes form part of these financial
statements.
CONSOLIDATED BALANCE SHEET
31 December 31 December
2020 2019
Note $ $
Assets
Non-current assets
Intangible assets 10 642,596 822,596
Goodwill 11 3,087,251 3,087,251
Property, plant and equipment 12 18,781,803 17,950,874
------------- -------------
Total non-current assets 22,511,650 21,860,721
------------- -------------
Current assets
Inventories 13 9,656,019 6,077,270
Trade and other receivables 15 3,285,004 6,126,450
Investments 16 900,000 900,000
Cash and cash equivalents 17 3,481,332 8,717,890
------------- -------------
Total current assets 17,322,355 21,821,610
------------- -------------
Total assets $39,834,005 $43,682,331
------------- -------------
Equity and liabilities
Current liabilities
Trade and other payables 18 5,473,365 5,982,162
Term loan - due within one year 20 1,428,571 -
Government subsidies 27 1,089,900 -
Term loan notes 20 - 18,177,209
Lease liabilities 19 140,650 119,926
Total current liabilities 8,132,486 24,279,297
------------- -------------
Non-current liabilities
Term loan - due after one year 20 8,214,286 -
Revolving loan facility 20 2,717,581 -
Term loan - interest swap liability 20 69,314 -
Lease liabilities 19 45,501 174,167
Total non-current liabilities 11,046,682 174,167
------------- -------------
Total liabilities $19,179,168 $24,453,464
------------- -------------
Equity attributable to owners of the parent
Issued share capital 21 3,106,795 3,106,795
Share premium 21 60,686,595 60,686,595
Share-based payment reserve 2,136,539 1,988,361
Retained losses (39,330,770) (40,608,562)
Foreign currency reserve (5,944,322) (5,944,322)
------------- -------------
Total equity $20,654,837 $19,228,867
------------- -------------
Total equity and liabilities $39,834,005 $43,682,331
------------- -------------
The financial statements on pages 41 to 77 were approved and
authorised for issue by the Board and were signed on its behalf on
24 May 2021.
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
$ $ $ $ $ $
Balance at 1 January
2019 $2,292,683 $48,991,647 $1,768,693 $(41,160,987) $(5,944,322) $5,947,714
Transactions with
owners
Issue of shares 814,112 11,694,948 - - - 12,509,060
Share-based expense - - 219,668 - - 219,668
Total transactions
with owners 814,112 11,694,948 219,668 - - 12,728,728
Profit for the year
attributable to
owners of the parent - - - 552,425 - 552,425
----------- ------------ ------------ -------------- ------------- ------------
Total comprehensive
income attributable
to owners of the
parent - - - 552,425 - 552,425
----------- ------------ ------------ -------------
Balance at 31 December
2019 $3,106,795 $60,686,595 $1,988,361 $(40,608,562) $(5,944,322) $19,228,867
Transactions with
owners
Share-based expense - - 148,178 - - 148,178
Total transactions
with owners - - 148,178 - - 148,178
Profit for the year
attributable to
owners of the parent - - - 1,277,792 - 1,277,792
----------- ------------ ------------ -------------- ------------- ------------
Total comprehensive
income attributable
to owners of the
parent - - - 1,277,792 - 1,277,792
----------- ------------ ------------ -------------
Balance at 31 December
2020 $3,106,795 $60,686,595 $2,136,539 $(39,330,770) $(5,944,322) $20,654,837
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2020 2019
$ $
Cash flows from operating activities
Profit before taxation 1,277,792 552,425
Adjustments for:
Depreciation 1,613,249 1,370,014
Amortisation 180,000 242,046
Share-based payments 148,178 219,668
Finance expense 1,663,027 2,668,426
Finance income (15,144) (18,055)
Derivative liability - (392,835)
Operating cash inflow before changes
in working capital 4,867,102 4,641,689
Changes in working capital
Decrease/(Increase) in trade and other
receivables 2,841,446 (1,698,445)
(Increase) in inventories (3,578,752) (403,102)
(Decrease)/Increase in trade and other
payables (353,762) 813,579
------------- ------------
Net cash inflow from operating activities 3,776,034 3,353,721
------------- ------------
Cash flows from investing activities
Interest received 15,144 18,055
Acquisition of property, plant and equipment (2,448,642) (1,695,989)
Asset disposal proceeds 4,468 81,006
Investment - (900,000)
Net cash outflow from investing activities (2,429,030) (2,496,928)
------------- ------------
Cash flows from financing activities
Issue of shares - 8,314,320
Government loans received 1,089,900 -
Term loan notes repaid (18,177,209) (3,263,529)
Term loan drawn 10,000,000 -
Term loan repayments (357,143) -
Revolving loan facility drawn 3,000,000 -
Revolving loan facility net payments (282,419) -
Refinancing and arrangement fees paid (675,701) -
Interest paid (1,055,134) (1,628,227)
Lease payments (125,856) (81,362)
Net cash (outflow)/inflow from financing
activities (6,583,562) 3,341,202
------------- ------------
Net (decrease)/increase in cash and cash
equivalents (5,236,558) 4,197,995
Cash and cash equivalents at beginning
of year 8,717,890 4,519,895
------------- ------------
Cash and cash equivalents at end of year $3,481,332 $8,717,890
------------- ------------
COMPANY BALANCE SHEET
31 December 31 December
2020 2019
Note $ $
Assets
Non-current assets
Investment in subsidiary undertakings 25 17,199,362 17,199,362
Total non-current assets 17,199,362 17,199,362
------------- -------------
Current assets
Due from subsidiaries 25 21,712,095 35,541,091
Trade and other receivables 15 3,140 1,897
Cash and cash equivalents 17 59,983 822,748
------------- -------------
Total current assets 21,775,218 36,365,736
------------- -------------
Total assets $38,974,580 $53,565,098
------------- -------------
Equity and liabilities
Current liabilities
Trade and other payables 18 201,803 142,413
Term loan notes 20 - 18,177,209
------------- -------------
Total current liabilities 201,803 18,319,622
------------- -------------
Equity attributable to the
owners of the parent
Issued share capital 21 3,106,795 3,106,795
Share premium 21 60,686,595 60,686,595
Share-based payment reserve 2,136,539 1,988,361
Retained losses (21,397,811) (24,776,934)
Foreign currency reserve (5,759,341) (5,759,341)
------------- -------------
Total equity 38,772,777 35,245,476
------------- -------------
Total equity and liabilities $38,974,580 $53,565,098
------------- -------------
The profit for the financial year dealt with in the financial
statements of the parent company was $3,379,123 (2019 loss
$3,099,794).
The financial statements on pages 41 to 77 were approved and
authorised for issue by the Board and were signed on its behalf on
24 May 2021 .
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
$ $ $ $ $ $
Balance at 1 January
2019 $2,292,683 $48,991,647 $1,768,693 $(21,677,140) $(5,759,341) $25,616,542
Transactions with
owners
Issue of shares 814,112 11,694,948 - - - 12,509,060
Share-based expense - - 219,668 - - 219,668
Total transactions
with owners 814,112 11,694,948 219,668 - - 12,728,728
Loss attributable
to owners of the
parent - - - (3,099,794) - (3,099,794)
Total comprehensive
income for the
year - - - (3,099,794) - (3,099,794)
----------- ------------ ----------- -------------- ------------- ------------
Balance at 31
December 2019 $3,106,795 $60,686,595 $1,988,361 $(24,776,934) $(5,759,341) $35,245,476
Transactions with
owners
Share-based expense - - 148,178 - - 148,178
----------- ------------
Total transactions
with owners - - 148,178 - - 148,178
Profit attributable
to owners of the
parent - - - 3,379,123 - 3,379,123
Total comprehensive
income for the
year - - -
----------- ------------ ----------- -------------- ------------- ------------
Balance at 31
December 2020 $3,106,795 $60,686,595 $2,136,539 $(21,397,811) $(5,759,341) $38,772,777
----------- ------------ ----------- -------------- ------------- ------------
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 International Financial Reporting Standards
('IFRS') and IFRS Interpretations Committee ('IFRIC') as adopted by
the European Union ('EU') and the Companies Act 2006 applicable to
companies reporting under IFRS.
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
b) New standards and interpretations
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:
- Revised Conceptual Framework for Financial Reporting
- IAS1 and IAS8 (Amendment - Definition of Material)
- IFRS3 (Amendment - Definition of a Business)
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 rounded to the nearest US Dollar, 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
fulfillment costs.
Trade receivables at December 31, 2020 of $3,102,211 (2019
$5,491,493) 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 2020, all research and development
expenditures were expensed as incurred.
f) Going concern
The Group's former Term Loan Notes of $18,177,209, due 1 July
2020, were repaid during the year. New financing totalling $13
million was arranged as set out in Note 20, of which $10 million is
repayable over seven years and $3 million has a two year term. As
disclosed in Note 27 the loans totalling $1.09m received by the
Group under the Paycheck Protection Program were forgiven in full
in January 2021. The size and maturities of the Group's debt
obligations have therefore been greatly improved. Based on recent
experience and market trends the Group does not expect the COVID-19
virus to have a material negative financial effect going forward.
The Group also considers that recent shortfalls in brine supply
from oil and gas operators can be mitigated to a significant
extent. 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 2020. 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 desribed 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 1.284 in 2020 (2019 1.277), and at
31 December 2020 was 1.365 (2019: 1.318).
j) Intangible assets
Exploration and evaluation costs
All costs incurred prior to obtaining the legal right to
undertake exploration and evaluation activities on a project are
written off as incurred.
Once a legal right has been obtained, exploration and evaluation
costs are capitalised on a project-by-project basis, pending
determination of the technical feasibility and commercial viability
of the project. Costs incurred include appropriate technical and
administrative overheads.
Capitalised exploration costs are carried at historical cost
less any impairment losses recognised. If an exploration project is
successful, the related expenditures will be transferred to
development assets and amortised over the estimated life of the
reserves on a unit of production basis.
The recoverability of capitalised exploration and evaluation
costs is dependent upon the discovery of economically recoverable
reserves, the ability of the Group to obtain the necessary
financing to complete the development of reserves and future
profitable production or proceeds from the disposal thereof.
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(R) patent: 15 years
-- Customer relationships: 10 years
-- Patent portfolio: 8 years
-- EPA registrations: 2 years
Amortisation is included within administrative expenses.
Goodwill
Goodwill represents the excess of the fair value of
consideration in a business combination over the fair value of the
Group's share of the identifiable net assets acquired. Goodwill is
carried at cost less accumulated impairment losses.
k) Property, plant and equipment
Property, plant and equipment are stated at historical cost, net
of depreciation and any provision for impairment. Cost includes
purchase price and costs directly attributable to bringing the
asset to the location and condition necessary for it to be capable
of operating in the manner intended by management, such as 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.
Instruments where the holder has the option to redeem for cash
or convert into a pre-determined quantity of equity shares are
classified as compound instruments and presented partly as a
liability and partly as equity.
Instruments where the holder has the option to redeem for cash
or convert into a variable quantity of equity shares are classified
separately as a loan and a derivative liability.
Where conversion results in a fixed number of equity shares, the
fair value of the liability component at the date of issue is
estimated using the prevailing market interest rate for a similar
non-convertible instrument. The difference between the proceeds of
issue and the fair value assigned to the liability component,
representing the embedded option to convert the liability into
equity of the Group, is included in equity. Where conversion is
likely to result in a variable quantity of equity shares the
related derivative liability is valued and included in
liabilities.
The interest expense on the liability component is calculated by
applying the prevailing market interest rate for similar
nonconvertible debt to the instrument. The difference between this
amount and the interest paid is added to the carrying value of the
convertible loan note.
Derivative liabilities are revalued at fair value at the balance
sheet date, and changes in the valuation amounts are credited or
charged to the profit and loss account.
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
2020 and 2019, 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 recognised when there is objective
evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables.
m) Impairment
Whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable, that asset is
reviewed for impairment. An asset's carrying value is written down
to its estimated recoverable amount (being the higher of the fair
value less costs to sell and value in use) if that is less than the
asset's carrying amount.
Impairment reviews for exploration and evaluation costs are
carried out on a project by project basis, with each project
representing a potential single cash generating unit. An impairment
review is undertaken when indicators of impairment arise, typically
when one of the following circumstances applies:
i) unexpected geological occurrences that render the resource uneconomic;
ii) title to the asset is compromised;
iii) variations in prices that render the project uneconomic;
or
iv) variations in the currency of operation.
Goodwill is allocated to those cash-generating units that are
expected to benefit from synergies of the related business
combinations and represent the lowest level within the Group at
which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are
tested for impairment at least annually. An impairment loss is
recognised for the amount by which the asset's or cash generating
unit's carrying amount exceeds its recoverable amount, which is the
higher of fair value less costs to sell and value in use. To
determine the value in use, management estimates expected future
cash flows from each cash-generating unit and determines a suitable
discount rate in order to calculate the present value of those cash
flows. The data used for impairment testing procedures are directly
linked to the Group's latest approved budget, adjusted as necessary
to exclude the effects of future reorganisations and asset
enhancements. Discount factors are determined individually for each
cash-generating unit and reflect their respective risk profiles as
assessed by management.
Impairment losses for cash-generating units reduce first the
carrying amount of any goodwill allocated to that cash-generating
unit. Any remaining impairment loss is charged pro rata to the
other assets in the cash-generating unit. With the exception of
goodwill, all assets are subsequently reassessed for indications
that an impairment loss previously recognised may no longer exist.
An impairment charge is reversed if the cash-generating unit's
recoverable amount exceeds its carrying amount.
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
Effective 1 January 2019, IFRS 16 has replaced IAS 17 Leases.
Under this model, 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 2020 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. 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(R) 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 initial carrying amount of the parent company's
investment in its subsidiaries of $33.6m (2019: $52.7M), net of an
existing impairment provision of $5.3m, 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 $33.6m (2019: $52.7M) compares to carrying
amounts of the subsidiaries' net assets, excluding loans from the
parent company, of $20.8m (2019: $36.9m). 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 is appropriate to reverse the impairment provision of $5.3m
that was established in 2017.
d. Management receives periodic operational reports on the
progress of the production of hemp seeds by Organic Vines OP LLC.
Based on these reports management considers the appropriate fair
value of the investment to be the $900,000 invested.
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 (see Note 16), and also purchased hemp biomass that had
a carrying value of $113,965 in inventory at 31 December 2019 and
was impaired to Nil during 2020. There was no trading activity in
these items during 2019 or 2020, and therefore segment reporting
below is limited to the separate recognition of the assets.
31 December 31 December
2020 2019
$ $
Assets
Halogen Derivatives and Iodine 38,934,005 42,668,366
Hemp seeds 900,000 900,000
Hemp biomass - 113,965
------------ ------------
Total $39,834,005 $43,682,331
------------ ------------
Liabilities
Halogen Derivatives and Iodine 19,179,168 24,453,464
Total $19,179,168 $24,453,464
------------ ------------
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
2020 2019
$ $
Assets
UK 63,121 824,645
USA 39,809,474 42,857,686
------------ ------------
Total $39,834,005 $43,682,331
------------ ------------
Liabilities
UK 201,800 18,319,622
USA 18,977,368 6,133,842
------------ ------------
Total $19,179,168 $24,453,464
------------ ------------
Revenue
North America 13,842,558 14,024,475
Asia 13,523,580 12,919,398
South America 1,748,846 1,782,450
Europe 550,278 473,022
Other 22,288 45,883
------------ ------------
Total $29,687,550 $29,245,228
------------ ------------
c. Significant customers - Iofina Chemical had three customers
in excess of 5% of sales in 2020. One customer represented 15 per
cent of sales, one accounted for 9 per cent of sales, and another
for 6 percent of sales. In 2019, one customer represented 15
percent of sales and four others each accounted for 6 percent of
sales.
4. Profit before taxation
Profit before taxation is stated after charging:
Year ended Year ended
31 December 31 December
2020 2019
$ $
Depreciation expense 1,613,249 1,370,014
Amortisation expense 180,000 242,046
Other:
Annual audit fees for audit of parent
company and consolidated financial statements 79,233 73,256
Fees payable to the company's auditor
for other services 3,930 6,873
4. Profit before taxation (continued)
Cost of sales - analysis by nature
Year ended Year ended
31 December 31 December
2020 2019
$ $
Raw materials 9,710,869 9,649,838
Freight 891,002 819,183
Sales commission 256,719 226,339
Labour, manufacturing overhead and royalties 10,424,354 10,304,415
------------ ------------
$21,282,945 $20,999,775
------------ ------------
Administrative expenses - analysis by nature
Year ended Year ended
31 December 31 December
2020 2019
$ $
Remuneration and benefits 2,518,251 2,469,198
Share-based payments 148,178 219,668
Office expenses 196,589 192,741
Professional services 578,651 607,788
Travel 69,451 194,195
Rent (36,728) (23,032)
Other 211,290 162,874
Depreciation 1,613,249 1,370,014
Amortisation 180,000 242,046
$5,478,931 $5,435,492
------------ ------------
Research and development expenses recognised during the period
were $279,151 (2019: $265,827), 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
2020 2019
Number Number
Production 81 68
Administrative 14 13
Sales 1 1
------------ ------------
Total staff 96 82
------------ ------------
5. Staff numbers and costs (continued)
Year ended Year ended
31 December 31 December
2020 2019
$ $
Wages and salaries 6,227,343 5,363,252
Social security costs 902,723 932,117
------------ ------------
$7,130,066 $6,295,369
------------ ------------
Of the total staff costs above, $4,800,244 (2019: $3,992,101) is
included within cost of sales and $2,329,821 (2019: $2,303,268) 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
2020 2019
$ $
Wages and salaries 906,722 870,304
Social security costs 95,892 102,311
------------ ------------
Total directors' cost $1,002,614 $972,615
------------ ------------
Included within wages and salaries above is $286,400 (2019:
$275,600) in respect of the highest paid director. No options were
exercised by a director in 2020.
6. Finance expense
Year ended Year ended
31 December 31 December
2020 2019
$ $
Debt restructure 29 March 2019
Term loan notes interest paid 949,016 1,629,874
Arrangement fees 84,071 196,097
Bank facilities 16 September 2020
Term loan interest 113,840 -
Revolving loan facility interest 24,182 -
Interest swap liability 69,314 -
Refinancing fees 395,533 -
Other interest payable 9,155 -
IFRS16 lease interest 17,915 20,806
Amortisation of discount on September
2016 convertible loan notes - 821,649
Total finance expense $1,663,027 $2,668,426
------------ ------------
7. Finance income
Year ended Year ended
31 December 31 December
2020 2019
$ $
Interest income 15,145 18,055
$15,145 $18,055
------------ ------------
8. Taxation
Year ended Year ended
31 December 31 December
2020 2019
$ $
Tax reconciliation:
Profit on ordinary activities before
tax 1,277,792 552,425
Tax at UK income tax rate of 19.00%
(2019: 19.00%) 242,780 104,961
Effects of:
Temporary differences 323,480 176,308
Permanent differences 28,581 43,032
Losses not recognised for deferred tax
purposes (594,841) (324,301)
Total tax charge/(credit) - -
------------ ------------
The Group has accumulated US tax losses of approximately
$24,000,000 (2019: $27,000,000) that may be deductible from future
taxable profits subject to agreement with the relevant tax
authorities. To the extent tax losses are not utilised to offset
current income taxes they will begin to expire in 2029.
A deferred tax asset has not been recognised in respect of
losses due to uncertainty over the timing of the recovery of these
tax losses.
9. Earnings per share
The calculation of earnings per ordinary share is based on the
profit attributable to shareholders of $1,277,792 (2019 profit
$552,425) and the weighted average number of ordinary shares
outstanding of 191,858,408 (2019: 162,972,387). After including the
weighted average effect of dilutive share options of 2,030,649
(2019: 3,393,864) and convertible notes of Nil (2019: 15,812,487)
the diluted weighted average number of ordinary shares outstanding
was 193,889,057 (2019: 182,178,738).
10. Intangible assets (Group)
Exploration
& Evaluation
Assets
Montana Other intangible Total
Atlantis assets (see
Field below)
$ $ $
Cost
At 1 January 2019 3,358,405 3,843,671 7,202,076
Additions - - -
-------------- ----------------- ------------
At 31 December 2019 3,358,405 3,843,671 7,202,076
Disposals (3,358,405) (25,000) (3,383,407)
-------------- ----------------- ------------
At 31 December 2020 - $3,818,671 $3,818,671
-------------- ----------------- ------------
Accumulated amortization
At 1 January 2019 3,358,405 2,779,029 6,137,434
Charge for the year - 242,046 242,046
-------------- ----------------- ------------
At 31 December 2019 3,358,405 3,021,075 6,379,480
Charge for the year - 180,000 180,000
Disposals (3,358,405) (25,000) (3,383,407)
-------------- ----------------- ------------
At 31 December 2020 - $3,176,075 $3,176,075
-------------- ----------------- ------------
Carrying amounts
At 31 December 2018 - 1,064,642 1,064,642
At 31 December 2019 - $822,596 $822,596
At 31 December 2020 - $642,596 $642,596
-------------- ----------------- ------------
Details of other intangible assets are set out below.
Other intangible WET(R) Customer Patent EPA registrations Total
assets patent relationships portfolio
$ $ $ $ $
Cost
At 1 January 2019
and 31 December
2019 $2,700,000 $660,671 $212,000 $271,000 $3,843,671
Disposals - - (25,000) - (25,000)
----------- --------------- ----------- ------------------ -----------
At 31 December
2020 $2,700,000 $660,671 $187,000 $271,000 $3,818,671
----------- --------------- ----------- ------------------ -----------
Accumulated amortization
At 1 January 2019 1,697,404 623,625 187,000 271,000 2,779,029
Charge for the
year 180,000 37,046 25,000 - 242,046
----------- --------------- ----------- ------------------ -----------
At 31 December
2019 1,877,404 660,671 212,000 271,000 3,021,075
Charge for the
year 180,000 - - - 180,000
Disposals - - (25,000) - (25,000)
----------- --------------- ----------- ------------------ -----------
At 31 December
2020 $2,057,404 $660,671 $187,000 $271,000 $3,176,075
----------- --------------- ----------- ------------------ -----------
Carrying amounts
At 31 December
2018 1,002,596 37,046 25,000 - 1,064,642
At 31 December
2019 822,596 - - - 822,596
At 31 December
2020 $642,596 - - - $642,596
----------- --------------- ----------- ------------------ -----------
Other intangible assets were acquired in the acquisition of
H&S Chemical in 2009.
Montana Atlantis Field
Intangible assets with a cost of $3,358,405 relating to the
Montana Atlantis Field were 100% depreciated in prior years to a
net carrying amount of Nil. A disposal of these assets has now been
recorded as the abandonment of the Montana site was materially
completed in 2020.
WET(R) Patent
The WET(R) 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(R) 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(R) 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 3.5 years
Patent portfolio
This includes all patents held by Iofina Chemical related to the
production of its iodine derivatives, specifically IPBC. The fair
value of the general patent portfolio was estimated using the
relief from royalty cash-flow methodology of the income approach.
Based on our search for technology licensing agreements in the
marketplace, we determined that a royalty rate of 1.5 percent was
appropriate. An 8 year life was applied to the patent portfolio
based on the historical life of the portfolio as well as the
intended future use of the asset.
11. Goodwill (Group)
Carrying amounts
At 31 December 2018, 31 December 2019 and 31 December 2020 $3,087,251
-----------
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 10.71% per
annum was used. On this basis the net present value of cash flow
exceeded the goodwill amount of $3,087,251.
11. Goodwill (Group) (continued)
Sensitivity analysis
Projections based on the above assumptions show headroom of
$7.1m between the value in use of the business net of other assets
of $27.8m and the carrying value of $20.7m, comprising goodwill of
$3.1m, other intangible assets of $0.64m, and net business trading
assets of $16.9m. In order for the value in use to equal the
carrying value it would be necessary for the discount rate to rise
to 16.2% or the long term growth rate to be 5.4% negative or
projected EBITDA to be lower by 22.6%. Based on the results of this
impairment testing management are satisfied that a reasonably
possible change in assumption would not lead to an impairment.
12. Property, plant and equipment (Group)
Exploration
and Evaluation
Assets
----------------
Montana
Atlantis Equipment and Construction in
Field Freehold Land Buildings Machinery Progress Total
$ $ $ $ $ $
Cost
At 1 January 2019 5,841,415 209,000 1,665,909 26,141,813 378,973 34,237,110
Additions - - 407,670 181,891 1,461,075 2,050,636
At 31 December
2019 5,841,415 209,000 2,073,579 26,323,704 1,840,048 36,287,746
---------------- -------------- ----------- ----------------- ----------------- -------------
Transfers - - - 3,466,020 (3,466,020) -
Additions - - 10,770 175,704 2,262,168 2,448,642
Disposals (5,605,436) - - (4,901,010) - (10,506,446)
At 31 December
2020 $235,979 $209,000 $2,084,349 $25,064,418 $636,195 $28,229,940
---------------- -------------- ----------- ----------------- ----------------- -------------
Accumulated
depreciation and
impairment
At 1 January 2019 5,521,415 - 380,084 10,984,353 - 16,885,852
Impairment 81,006 - - - 81,006
Charges for the
year - - 147,992 1,222,022 - 1,370,014
At 31 December
2019 5,602,421 - 528,076 12,206,375 - 18,336,872
Charges for the
year - - 168,959 1,444,289 - 1,613,249
Disposals (5,602,421) - - (4,899,563) (10,501,984)
----------------
At 31 December
2020 - - $697,036 $8,751,101 - $9,448,137
---------------- -------------- ----------- ----------------- ----------------- -------------
Carrying amounts
At 31 December
2018 320,000 209,000 1,285,825 15,157,460 378,973 17,351,258
At 31 December
2019 238,994 209,000 1,545,503 14,117,329 1,840,048 17,950,874
At 31 December
2020 $235,979 $209,000 $1,387,313 $16,313,317 $636,195 $18,781,803
---------------- -------------- ----------- ----------------- ----------------- -------------
12. Property, plant and equipment (Group) (continued)
Right-of-use assets
With effect from 1 January 2019 the Group has appled IFRS 16
"Leases" to its lease on office premises in Denver, Colorado. The
lease runs from 1 March 2019 to 30 April 2022, and an amount of
$354,648 has been capitalised as a right-of-use asset in the
category of Buildings. The amount capitalised represents the amount
of rentals and associated payments over the term of the lease
discounted at a rate of 7.5%. Depreciation is charged on a straight
line basis at a rate of $111,994 per annum, and notional interest
is accrued based on a 7.5% amortisation rate. Depreciation charged
for 2020 was $111,994 (2019 $93,328) and interest accrued was
$17,915 (2019 $20,807). Lease liabilities due within and after one
year are shown in Note 19, and represent lease payments due over
those periods net of interest to be charged. There is an option to
extend the lease, but it is considered unlikely that the option
will be exercised.
Montana Atlantis Field
Tangible assets with a cost of $5,841,415 relating to the
Montana Atlantis Field have been depreciated to a net carrying
amount of $235,979, representing the estimated net sale value of a
residual property. A disposal of Montana Atlantis Field assets with
a cost of $5,602,421 and a net carrying value of Nil has now been
recorded as the abandonment of the Montana site was materially
completed in 2020. Since 31 December 2020 the property has been
disposed of for net proceeds of $255,308.
Equipment and Machinery
Assets of Iofina Resources, Inc. with a cost of $4,835,077 and a
carrying value of Nil, relating to sites that are no longer
operational, have been treated as disposals in 2020. These assets
had been fully depreciated in previous years.
13. Inventories
Group 31 December 31 December
2020 2019
$ $
Raw materials 6,588,439 4,360,028
Work in progress 2,813,011 1,414,766
Finished goods 254,569 302,476
------------ ------------
$9,656,019 $6,077,270
------------ ------------
At year end, there were no provisions against the carrying value
of inventories (2019: nil). During the year, the cost of
inventories recognised as expense and included in 'cost of sales'
amounted to $20,135,223 (2019: $19,954,253).
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.
14. Financial instruments (continued)
Financial assets and liabilities
Group
Investment and swap
Loans and receivables Financial liabilities liability at fair
at amortised cost at amortised cost value Total
2020 $ $ $ $
------------------------- ------------------------ ------------------------ ----------------------- ------------
Cash and cash
equivalents 3,481,332 3,481,332
Trade receivables 3,102,211 3,102,211
Investment 900,000 900,000
$7,483,543
------------
Trade payables 1,194,392 1,194,392
Accrued liabilities 4,278,973 4,278,973
Lease liabilities 186,151 186,151
Term loan 9,642,857 9,642,857
Revolving loan facility 2,717,581 2,717,581
Government subsidies 1,089,900 1,089,900
Interest rate swap
liability 69,314 69,314
$19,179,168
------------
2019
------------------------- ------------------------ ------------------------ ----------------------- ------------
Cash and cash
equivalents 8,717,890 8,717,890
Trade receivables 5,491,493 5,491,493
Investment 900,000 900,000
$15,109,383
------------
Trade payables 1,459,723 1,459,723
Accrued liabilities 4,522,439 4,522,439
Lease liabilities 294,093 294,093
Term loan notes 18,177,207 18,177,207
$24,453,462
------------
Company Loans and receivables at amortised Financial liabilities at amortised
cost cost Total
2020 $ $ $
--------------------------- ----------------------------------- ------------------------------------ ------------
Cash and cash equivalents 59,983 59,983
Other receivables 3,138 3,138
Due from subsidiaries 21,712,094 21,712,094
$21,775,216
------------
Accruals 201,803 201,803
$201,803
------------
2019
--------------------------- ----------------------------------- ------------------------------------ ------------
Cash and cash equivalents 822,748 822,748
Other receivables 1,897 1,897
Due from subsidiaries 35,541,091 35,541,091
$36,365,736
------------
Accruals 142,413 142,413
Term loan notes 18,177,209 18,177,209
$18,319,622
------------
14. Financial instruments (continued)
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 2020, 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 $59,983 (GBP 44,432) 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 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, 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. At 31 December 2020 the Group held an
investment of $900,000 as set out in Note 16. Recovery of this
investment is dependent on the returns generated by the underlying
project.
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 current situation in that regard is discussed in Note
1f.
14. Financial instruments (continued)
The following table sets out the contractual maturities
(representing undiscounted contractual cash flows) of financial
liabilities:
Up to
3 Between 3 and 12 Between 1 and 2
Group months months years Between 2 and 7 years
At 31 December 2020: $ $ $ $
Trade payables 1,194,392 - - -
Accrued liabilities 1,234,387 3,044,585 - -
Lease liabilities - 140,650 45,501 -
Term loan 357,143 1,071,429 1,428,571 6,785,714
Revolving loan - - -
facility 2,717,581
------------------------ --------------------- --------------------- ----------------------
$2,785,922 $4,256,664 $4,191,653 $6,785,714
------------------------ --------------------- --------------------- ----------------------
Up to
3 Between 3 and 12 Between 1 and 2
Group months months years Between 2 and 7 years
At 31 December 2019: $ $ $ $
Trade payables 1,459,723 - - -
Accrued liabilities 1,336,855 3,185,584 - -
Lease liabilities - 119,926 174,167 -
Term loan notes - 18,177,207 - -
------------------------ --------------------- --------------------- ----------------------
$2,796,578 $21,482,717 $174,167 -
------------------------ --------------------- --------------------- ----------------------
Commodity risk
The Group is exposed to movements in the price of raw iodine.
Sales of iodine based products were $18,506,546 (2019:
$20,094,135). The effects of changes in the price of iodine on 2020
revenue and profits are set out in the Financial Review on page 7.
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
2020 2019
$ $
Trade receivables 3,102,211 5,491,493
Prepayments and other receivables 182,793 634,957
------------
$3,285,004 $6,126,450
------------ ------------
Company
31 December 31 December
2020 2019
$ $
Prepayments and other receivables 3,140 1,897
------------ ------------
$3,140 $1,897
------------ ------------
15. Trade and other receivables (continued)
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
2020 2019
$ $
Investment in Organic Vines Op LLC 900,000 900,000
------------ ------------
$900,000 $900,000
------------ ------------
In November 2019 the Group invested $900,000 through its
subsidiary IofinaEX Inc. in 900,000 non-voting Class C Units of
Organic Vines OP LLC, a Limited Liability Company registered in
Colorado. The company is controlled by the Group's chairman Lance
Baller, and has produced over 22 million organically certified hemp
seeds. It is believed that these seeds will be sold for a profit,
but the timeframe for disposals is currently unkown. The Class C
Units have first call on the distribution of revenue up to a
maximum of three times the amount invested and no further
entitlement thereafter.
17 . Cash and cash equivalents
Group
31 December 31 December
2020 2019
$ $
Cash in US Dollar accounts 3,421,349 7,895,142
Cash in GB Pound Sterling accounts 59,983 822,748
------------ ------------
$3,481,332 $8,717,890
------------ ------------
Company
31 December 31 December
2020 2019
$ $
Cash in GB Pound Sterling accounts 59,983 822,748
------------ ------------
$59,983 $822,748
------------ ------------
18. Trade and other payables
Group
31 December 31 December
2020 2019
$ $
Trade payables 1,194,392 1,459,723
Accrued expenses and deferred income 4,278,973 4,522,439
------------ ------------
$5,473,365 $5,982,162
------------ ------------
Company
31 December 31 December
2020 2019
$ $
Accrued expenses 201,803 142,413
------------ ------------
$201,803 $142,413
------------ ------------
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 loans, the Group and Company have not
pledged any assets as collateral for any liabilities or contingent
liabilities.
19. Lease liabilities
31 December 31 December
2020 2019
$ $
Lease liabilities - current 140,650 119,926
Lease liabilities - non-current 45,501 174,167
------------ ------------
$186,151 $294,093
------------ ------------
Lease 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. Lease
liabilities increase as a result of interest charged at a constant
rate on the balance outstanding and are reduced for lease payments
made.
20. Term loans and Revolving loan facility
2019 Term 2020 Term 2020 Revolving
loans loan loan facility
$ $ $
At 1 January 2019 3,263,529
Convertible loan notes restructured
as term loans 22,371,946
------------- ----------- ---------------
At 29 March 2019 25,635,475
Debt for equity conversion 14
June 2019 (4,194,737)
Term loan repaid 20 June 2019 (3,263,529)
At 31 December 2019 $18,177,209
Repaid 30 June 2020 (2,726,581)
Repaid 16 September 2020 (15,450,628)
First Financial Bank Facilities:
Term loan drawn 16 September
2020 10,000,000
Revolving loan facility drawn
16 September 2020 3,000,000
Term loan instalment repayments (357,143)
Revolving loan facility net payments (282,419)
------------- ----------- ---------------
At 31 December 2020 - $9,642,857 $2,717,581
------------- ----------- ---------------
Due within one year - $1,428,571 -
Due after one year - $8,214,286 $2,717,581
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. Fully secured facilities of a 7-year $10 million
term loan and a 2 year revolving line of credit of up to $8 million
have been 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 new 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 2020 the amount outstanding after
instalment payments was $9.64 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
20. Term loans and Revolving loan facility (continued)
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%. At 31 December the
amount outstanding after net payments was $2.72 million.
The swap contract described above has been valued by reference
to market expectations for future LIBOR rates, and a liability of
$69,314 has been recognised and charged to finance expense (Note
6). The actual cost of the swap from its inception on 17 September
2020 to 31 December 2020 was $9,986.
21. Share capital
31 December 31 December
2020 2019
Authorised:
Ordinary shares of GBP0.01 each - number of shares 1,000,000,000 1,000,000,000
- nominal value GBP10,000,000 GBP10,000,000
Allotted, called up and fully paid:
Ordinary shares of GBP0.01 each - number of shares 191,858,408 191,858,408
- nominal value GBP1,918,584 GBP1,918,584
There was no change in share capital in 2020. Movements in share
capital during 2019 were as follows:
Shares issued Nominal value Share premium
$ $
At 1 January 2019 127,569,398 $2,292,683 $48,991,647
Issue of shares:
- for cash 43,839,655 551,941 8,279,119
-on conversion of loan
notes 20,449,355 262,171 3,932,569
Expenses of issue - - (516,740)
At 31 December 2019
& 2020 191,858,408 $3,106,795 $60,686,595
-------------- -------------- --------------
On 14 June 2019 43,839,655 ordinary shares of GBP0.01 each were
issued at a price of 16p per share for a total gross consideration
of GBP7,014,345 ($8,831,060). The shares issued comprised
33,804,375 placing shares, 570,625 directors' subscription shares,
and 9,464,655 open offer shares.
On 14 June 2019 20,449,355 ordinary shares of GBP0.01 each were
also issued at a price of 16p per share for a total gross
consideration of GBP3,271,897 ($4,194,737). These shares were
issued as consideration for the conversion of $4,194,737 term loan
into equity of the company.
22. Share based payments
On 16 December 2020 options over 1,232,450 ordinary shares of
the Company, representing 0.64% of the Company's issued share
capital at that date, were granted to directors and key management
personnel. The options are exercisable at the closing share price
on 16 December 2020 of 12.5p per share, with 50% vesting after one
year on 16 December 2021 and 50% vesting after two years on 16
December 2022. The options expire ten years from the date of
grant.
The above options were valued using the Black Scholes model and
the exercise price of 12.50p, an expected term of 5.75 years,
historical volatility of 88.11% and a risk free rate of 0.51%. The
resulting valuation of $148,218 is being amortised over the vesting
periods, and $4,568 has been charged as an expense in respect of
the period from 16 December to 31 December 2020.
Details of options outstanding at 31 December 2020 are as
follows:
Exercise Exercise
Number Vesting Share Exercise Price Price
Date of Grant of Options Date Price Price 2020 2019
GBP GBP $ $
2 July 2011 985,000 2 July 2012 0.300 0.300 0.41 0.40
13 June 2018 990,000 13 June 2019 0.162 0.162 0.22 0.21
13 June 2018 990,000 13 June 2020 0.162 0.162 0.22 0.21
25 July 2019 492,250 25 July 2020 0.213 0.213 0.29 0.28
25 July 2019 492,250 25 July 2021 0.213 0.213 0.29 0.28
16 December 16 December
20 616,225 21 0.125 0.125 0.17 -
16 December 16 December
20 616,225 22 0.125 0.125 0.17 -
Weighted average 5,181,950 GBP0.19 GBP0.19 $0.26 $0.28
The weighted average contractual life of options outstanding at
31 December 2020 was 6.9 years (2019 7.0 years).
Exercise prices shown in USD are based on the US Dollar/Pounds
Sterling exchange rate at 31 December 2020 of 1.365 (2019 1.318).
Options outstanding at 31 December 2020 expire the earlier of ten
years from grant date or 90 days after the termination of service
to the Company.
Weighted average exercise 2020 Number of Weighted average exercise 2019 Number of
price Options price Options
GBP $ GBP $
Options
outstanding
At 1 January GBP0.21 $0.28 3,949,500 GBP0.21 $0.27 2,965,000
Granted during
the year GBP0.125 $0.17 1,232,450 GBP0.21 $0.28 984,500
----------------- ------------ ---------------- -------------
At 31 December GBP0.19 $0.26 5,181,950 GBP0.21 $0.28 3,949,500
----------------- ------------ ---------------- ---------------- ------------- ----------------
Options
exercisable
At 1 January GBP0.23 $0.30 1,975,000 GBP0.30 $0.38 985,000
----------------- ------------ ---------------- ---------------- ------------- ----------------
At 31 December GBP0.21 $0.28 3,457,250 GBP0.23 $0.30 1,975,000
----------------- ------------ ---------------- ---------------- ------------- ----------------
No options lapsed or were forfeited or exercised during the
year.
23. Related party transactions
In September 2016 Iofina plc executed a convertible note in the
amount of $15,000,000 with Stena Investment S.à.r.l., who held in
excess of 5% of the outstanding common shares. On 14 June 2019 Rene
Nominees IOM Limited converted $4,194,737 debt into equity of
Iofina plc. On conclusion of this transaction Rene Nominees IOM
Limited held in excess of 10% of the outstanding common shares.
Both these transactions were deemed related party transactions
pursuant to AIM Rule 13.
In November 2019 the Group made an investment of $900,000 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.
There are intercompany transactions between the members of the
Group. In both 2019 and 2020 all iodine produced by Iofina
Resources was sold to Iofina Chemical. Related party balances are
as follows:
31 December 31 December
2020 2019
$ $
------------------------ ------------------------
Due to Due from Due to Due from
Iofina plc 21,712,094 - 40,820,284 -
Iofina Resources 900,000 27,257,881 900,000 44,925,964
Iofina Chemical 5,585,787 40,000 4,110,680 5,000
IofinaEX - 900,000 - 900,000
Additional related party transactions with directors, who are
considered to be key management personnel, are set out in the
Corporate Governance Statement on page 24. Option grants as
described in note 22 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.
24. 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 $20.69 million as at 31 December 2020 (2019: $19.23 million).
25. Subsidiary undertakings
Investment in subsidiaries
Investment in
subsidiaries
$
Cost
Balance at 31 December 2018, 2019 and 2020 $17,199,362
---------------
Due from subsidiaries
2020 2019
$ $
Cost
At 1 January 35,541,091 33,685,812
Finance expense paid by subsidiaries (1,033,087) (1,825,971)
Loans repaid (18,177,209) -
Plc management fees 100,000 100,000
Net funding to/(from) subsidiaries (18,699) 3,581,250
Reversal of impairment of amount due from Iofina Resources 5,300,000 -
-------------- -------------
At 31 December $21,712,095 $35,541,091
-------------- -------------
The new debt arrangements entered into during the year (see Note
20) were made 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.
An impairment of $5,300,000 in respect of amounts due from
Iofina Resources, Inc. has been reversed in 2020 (Note 2c).
Subsidiary undertakings
Interest in
Country of ordinary shares
incorporation and voting
Company and operation Principal activity 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 CBD development 100%
Iofina Resources,
LLC United States/CO Dormant 100%
Iofina Resources,
LLC United States/TX Dormant 100%
Iofina Resources,
LLC United States/OK Dormant 100%
Atlantis Water Solutions,
LLC United States/MT Dormant 100%
25. Subsidiary undertakings (continued)
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. and Iofina Chemical,
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
8480 East Orchard Road, Greenwood Village
Iofina, Inc. CO 80111, USA
Iofina Resources, 8480 East Orchard Road, Greenwood Village
Inc. 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, 8480 East Orchard Road, Greenwood Village
LLC (CO) CO 80111, USA
Iofina Resources,
LLC (TX) 815 Brazos Street, Austin TX 78701, USA
Iofina Resources,
LLC (OK) 26610 CR 500, Alva OK 73717, USA
Atlantis Water Solutions,
LLC 16192 Coastal Highway, Lewes DE 19958, USA
26. Capital commitments
At 31 December 2020 the Group had no capital commitments.
27. Post balance sheet events
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 has 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 will be recognised as income in 2021.
28. Contingent liabilities
All previous disclosed liabilities have been settled and are not
material events for the Group.
29. 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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END
FR SEMFILEFSEDI
(END) Dow Jones Newswires
May 25, 2021 02:00 ET (06:00 GMT)
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