TIDMIOF
RNS Number : 7422K
Iofina PLC
09 May 2022
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014
9 May 2022
Iofina plc
("Iofina", the "Company" or the "Group")
(LSE AIM: IOF)
2021 FULL YEAR RESULTS
FOURTH SUCCESSIVE YEAR OF RECORD REVENUE AND EBITDA
Iofina plc, specialists in the exploration and production of
iodine and manufacturers of specialty chemical products, announces
its audited full year results for the 12 months to 31 December 2021
(the "Period").
Bounce back in demand boosted sales and profits in 2021:
-- Revenue increased by 31% to $39.0m to (2020: $29.7m)
-- Gross profit increased by 28% to $10.7m (2020: $8.4m)
-- EBITDA improved by 47% to $6.9m (2020: $4.7m)
-- Operating profit increased by 78% to $5.2m (2020: $2.9m)
-- Profit before tax increased by 301% to $5.1m (2020: $1.3m)
Strong balance sheet and further reduction in net debt:
-- Cash flow generation of $5.9m reduced net debt from $8.9m to $3.0m
-- Finance expense decreased by 83% to $0.3m (2020: $1.7m)
Investing for growth:
-- Commenced site negotiation process for IO#9 construction in the Period.
-- Capital investment into projects and equipment was $1.5m
(2020: $2.4m) including process improvements and replacements at
the Iofina Chemical plant
2022 so far:
-- Current global iodine spot prices have reached $60/kg and
above, up 20% since the beginning of 2022
-- Production of 103.8 MT of crystalline iodine in Q1 from Iofina's five IOsorb(R) plants
-- Finalising terms with new brine supply partner for IO#9 plant
Commenting, President and CEO Dr. Tom Becker, stated:
"Today we are proud to announce that 2021 was our fourth
consecutive year of record revenues and EBITDA. By executing our
fundamental business plans coupled with a strong bounce back in
demand for iodine and its end-use products in the wake of the
COVID-19 pandemic, we were able to deliver enhanced revenues and
profits and significantly reduce our debt through strong cash
generation. Our margins have been bolstered by a strong iodine
price particularly over the last 6 months, and we expect these high
prices to continue during 2022.
"Whilst lower brine supply from our oil and gas partners
impacted iodine production in the Period, we are hopeful supply
will improve this year with oil and gas companies now reinvesting
in their assets to boost production. The delay to the construction
of our IO#9 plant has been frustrating, but we are now finalising
an agreement with a new brine supply partner and expect to have a
further update on this shortly.
"Iofina Chemical continued to perform well and was integral to
the Group's sales and earnings. We have been working on
enhancements to improve efficiencies and capacity for certain
iodine and non-iodine products, and we expect a laboratory upgrade
in Q2 2022 to improve the Company's R&D capabilities.
"With market fundamentals remaining favourable, a much-improved
balance sheet, and continued strategic investment in our growth,
the Board remains confident in the future success of the business
and looks forward to keeping shareholders updated on progress."
Investor Presentation
The Company plans to provide a presentation relating to the
Company's outlook and these 2021 results. Details will be provided
soon via a RNS Reach announcement.
Enquiries:
Dr. Tom Becker
CEO & President
Iofina plc
Tel: +44 (0)20 3006 3135
Christopher Raggett/Tim Harper (Corporate Finance)
Tim Redfern/Barney Hayward (ECM)
finnCap Ltd
Tel: +44 (0)20 7220 0500
Media Contact:
Charles Goodwin/Annabel Atkins
Yellow Jersey PR Limited
Tel: +44 (0)7747 788 221
About Iofina:
Iofina plc (AIM: IOF) is a vertically integrated Company that
specialises in the production of Iodine and the manufacturing of
specialty chemical products. Iofina is the second largest producer
of iodine in North America and operates the manufacturing entities
Iofina Resources and Iofina Chemical.
LEI: 213800QDMFYVRJYYTQ84
ISIN: GB00B2QL5C79
Iofina Resources
Iofina Resources develops, builds, owns and operates iodine
extraction plants using Iofina's WET(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 specialty
chemicals derived from raw iodine, as well as non-iodine based
products for over 38 years.
www.iofina.com
Iofina plc Annual Report & Accounts 2021
Contents
COMPANY
INFORMATION.......................................................................................................
..2
CHAIRMAN'S
STATEMENT........................................................................................................
..3
FINANCIAL
REVIEW..................................................................................................................
..9
DIRECTORS'
BIOGRAPHIES.........................................................................................................
12
STRATEGIC
REPORT..................................................................................................................
14
S172
STATEMENT....................................................................................................................................24
CORPORATE
GOVERNANCE..................................................................................................................26
DIRECTORS'
REPORT.................................................................................................................
27
CORPORATE GOVERNANCE
STATEMENT...................................................................................
29
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF IOFINA
PLC..................................... 36
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
..................................................... 47
CONSOLIDATED BALANCE SHEET
..............................................................................................
48
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY.................................... 49
CONSOLIDATED CASH FLOW STATEMENT
.................................................................................
50
COMPANY BALANCE SHEET
.....................................................................................................
51
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY............................................. 52
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS..........................................................
53
COMPANY INFORMATION
Directors L J Baller
T M Becker
W D Bellamy
M T Lewin
J F Mermoud
M C Fallin-Christensen
Secretary Simon Holden
Company number 05393357
Registered office 48 Chancery Lane
London WC2A 1JF
Auditor UHY Hacker Young LLP
Quadrant House
4 Thomas More Square
London E1W 1 YW
Nominated Adviser finnCap Ltd
1 Bartholomew Close
London EC1A 7BL
Brokers finnCap Ltd
1 Bartholomew Close
London EC1A 7BL
Solicitors Keystone Law Limited
48 Chancery Lane
London WC2A 1JF
Registrar Link Asset Services
34 Beckenham Road
Kent BR3 4TU
Financial PR Yellow Jersey PR Limited
70-71 Wells Street
London W1T 3QE
CHAIRMAN'S STATEMENT
Introduction
I am delighted to report our fourth consecutive year of record
revenue and EBITDA. Some of the 2021 financial highlights include
increased revenue by 31% from $29.7m to $39.0m and EBITDA
improvement by 47% from $4.7m to $6.9m. Additional highlights
include a bank debt to EBITDA ratio of 1.18 for year-end 2021
compared to 2.62 for year-end 2020, decreased finance expense by
83% from $1.7m to $0.3m, increased profit before tax by 301% from
$1.3m to $5.1m, increased shareholder equity from $20.7m to $29.9m
and cash flow generation of $5.9m which reduced net debt from $8.9m
to $3.0m. If one compares these financial reporting metrics to five
years ago, it will illustrate a Group struggling to survive which
has now been transformed to a thriving Company with reasonable
debt, growth, and strong cash flow. For 2022 we continue to see
positive trends in our specialty chemical business lines.
We have built an excellent business with diversified, low-cost
production across a diverse array of IOsorb(R) plants and a
specialty chemicals business supplying customers across a number of
end markets. We continue to develop new niche innovative products
and plan to invest approximately $2 million of CAPEX in 2022 into
Iofina Chemical. This will include a unique commercial process on
recycling iodine and other products from customers' chemical waste
streams, which is likely to come online in 2023. With debt reduced
for the third consecutive year and a healthy balance sheet, we can
continue investing in the right areas to deliver future growth and
profitability. Recently, we have seen more investment in our
specialty chemical business but we are close to completing a new
partner contract which will quickly lead to the construction of
IO#9. Our main goal remains 'continuous improvement' throughout the
business, which can be measured by financial results, as well as
the creation of new products and the wellbeing of our staff. The
management team is committed to delivering improvements across the
business every year, which will ultimately continue to drive
shareholder value.
Iofina Chemical
After reduced H2 2020 demand due to the pandemic, Iofina
Chemical ("IC") emerged in a great position for growth and ended
2021 with $39.0 million in sales.
Iofina's continued diversification of its iodine derivatives as
well as key other product lines allowed IC to grow at over 30% in
revenue year-over-year ("YOY"). Although there were supply
challenges in the iodine market in 2021, IC had 102% revenue growth
YOY in iodine derivatives due to the backward integration of iodine
through Iofina Resources. The unexpected rising price of iodine in
2021 also contributed to the overall success.
A key factor in the continued growth of IC was the successful
process upgrade of a major product produced. In addition, IC
received its first industry Performance Award for excellence in
EHS&S practices. I am pleased to report IC continues to achieve
excellence in safety performance finishing 2021 with no lost time
accidents. Additional derivative development in emerging products
has also been key in 2021 and is important for growth in future
years. IC is investing in a number of improvement projects in 2022
to achieve both short-term and long-term growth. These include
improvements to R&D facilities, new product research, expansion
of a non-iodine product and investments for a project involving
iodine recycling.
IC is poised for continued growth in 2022 and with the continued
global supply issues of iodine and with backward integrated iodine
supply, the Group will be ready to capitalize on new
opportunities.
Iodine Prices
Since the iodine price lows of early 2017, prices steadily
increased through early 2020, reaching $35-37/kg. During the second
half of 2020, as global economies contracted, so did the demand for
iodine, resulting in prices reducing slightly. Iodine prices began
2021 at approximately $32.5-36/kg, which was similar to where
prices were pre-pandemic in early 2020 and ended the year at $50/kg
after a significant increase in global demand for iodine. Leading
the increase for iodine were human health applications such as
povidone iodide (PVPI) and X-ray contrast imaging agents.
Additionally, the recent demand for potassium iodide (KI) pills,
following the Russian invasion of Ukraine, for the use of
protecting humans from radioactive exposure has been reported by
many news outlets. The Company believes this demand for KI will
only have a minor impact on the demand for iodine due to the low
amount of iodine needed for protection. Currently iodine prices are
trending higher in a tight supply market with spot pricing now at
$60/kg and above. The last time spot prices for iodine were above
$60/kg was June 2013. Iofina now expects iodine prices to remain
steady or slowly increase in 2022 due to strong global demand and
environmental and geopolitical risks in Chile.
Iofina Resources
Iofina Resources ("IR") achieved record sales in 2021, a highly
commendable feat against the backdrop of the ongoing impact of the
COVID-19 pandemic. Due to the diligent efforts of our operational
personnel and the dispersed locations of our 5 producing IOsorb(R)
plants, we were able to continuously produce iodine throughout the
year. Ensuring the safety of our employees and maximizing our
efficiency was our focus while also dealing with issues that
impacted the production of iodine.
In February 2021, there were unprecedented extreme freezing
weather conditions in Oklahoma. These conditions required IR to
suspend all iodine production operations for approximately two
weeks in February 2021. Our Operational personnel successfully
executed the plan to protect and ensure the safety of each person
and to winterize each IOsorb(R) plant to protect the equipment from
the damage imposed by the freezing conditions. Nearly all oil and
gas field production was shut-in. Once the thaw began IR was able
to resume production efficiently and safely.
The Company also experienced issues related to the supply chain
of our raw materials. The challenges were potential shortages of
these raw materials and unprecedented price increases and freight
surcharges. IR did not experience a single hour of downtime due to
lack of chemicals at the IOsorb(R) plants. IR has developed long
standing relationships with multiple suppliers for chemicals and
raw materials over the years. By working with our suppliers from
the boardrooms to the loading dock our supply chain did not break
as most companies had experienced and are currently experiencing.
IR continues to utilize long term supply contracts, open lines of
communication and excellent inventory management to work with our
suppliers to ensure continuity of supply and the best possible
prices.
The single largest major challenge IR faced in 2021 was the
decline in overall brine production by our partners, which directly
impacted our iodine production output. This brine decline was
caused by two factors. First, as previously reported, oil and gas
operators' budgets were curtailed significantly during the height
of the pandemic due to a sharp decline in global demand. Capital
budgets were slashed and routine maintenance on wells was deferred
wherever possible for producers to survive. Many wells were also
shut in. The second factor has been the dramatic change toward
fiscal discipline within the oil and gas sector due to the
tightness of capital markets and debt financing. In previous
commodity cycles the oil and gas industry would increase spending
in response to increases in commodity prices. Often this spending
would exceed the cash flow of these companies, resulting in
increased debt and a weakening of their balance sheet. In 2021
there was a fundamental shift in this historical business model due
to weak demand and negative prices. Oil and Gas operators have
adopted fiscal restraint in allocating capital. In previous cycles
the industry invested in production and reserves growth at all
costs. Today the focus is to maintain free cash flow, returning
capital to stakeholders and meeting aggressive ESG goals. The
publicly traded E&P companies are being rewarded with increased
share prices for their change in focus. Production growth in a
sustainable manner of less than 5% is the norm today. Free cash
flow is the mantra of the day. The impact on IR's business is less
brine available for iodine extraction. The Company's long-term
forecast indicated a slow decline curve over time but Covid factors
and change in business practices of the oil and gas industry caused
this decline to exceed our projections. This iodine rich brine has
not been lost but rather its production has been delayed. For
example, one of our operators highlighted in their year-end report
that their oil and gas assets in Oklahoma have a 15-year economic
life when prices were low. The life will be higher now due to the
increase in prices.
Oil and gas prices have continued to rise moving into 2022.
Global demand is the fundamental driver of these increases. In
addition, various geopolitical events are adding to the volatility
and continued price increase. As a result, many oil and gas
operators, including our partners, will have strong cash flows in
2022. This will translate into increased spending by the operators
to increase production sustainably and modestly through more
aggressive workover programs including drilling of new wells.
Having access to brine streams from different operators with
different balance sheets will minimize future declines and help to
level out overall brine production from existing IOsorb(R)
plants.
IR continues to diversify its access to iodine rich brine
streams through its exploration efforts. IR is actively collecting
brine samples and evaluating multiple geographic locations
continuously. The results of these efforts have led to discussions
with the several different operators and involve the potential for
multiple IOsorb(R) plant locations. These discussions with the
operators about the economics of iodine extraction also involve ESG
objectives and their role in the life cycle of produced water reuse
and disposal. IR is uniquely qualified to be a key partner with
these operators in achieving the goal of a more sustainable
produced water model. IR provides a depth of knowledge in water
quality and in various methods, both mechanically and chemically,
to treat water for reuse as well as the capturing of iodine from
what has heretofore been considered waste. IR welcomes this
transformation in the industry and looks forward to working with
the industry to realize value for all stakeholders in a safe and
sustainable manner. The opportunities to work on and develop
produced water reuse and recycling projects is exciting. The oil
and gas industry has always been a global force for ingenuity and
the challenges of produced water reuse and recycling will be no
different. We have chosen IO#9 to be in a new iodine rich area with
robust drilling activity. This will help diversify our
geographical risk and allow the Group to have additional oil and
gas partners. We continue to forge relationship with new partners
for multiple sites.
Change requires time and effort. IR believes that building these
working relationships will yield numerous opportunities to increase
the production of iodine and enhancements in the handling of
produced water in general. Coupled with strong commodity prices for
both Iodine and oil and gas and strong balance sheets sets the
stage for a period of smart expansion for Iofina. The experienced
team at Iofina has a proven track record and the expertise to take
advantage of this evolving market.
Environment, Health and Safety ("EHS")
Iofina is committed to operating in a safe, efficient, and
environmentally friendly manner. The Group is committed to the
highest standards of safety for our employees and our community.
Iofina's iodine production utilizes a produced brine stream which,
without Iofina, would simply be disposed of along with the
contained iodide. Isolation of this valued resource from a produced
stream is an extremely environmentally friendly method in contrast
to other major US based iodine production, which requires the
drilling of new brine wells that serve no other purpose than iodine
production.
The Group is constantly striving towards continuous improvements
in its EHS policies and programs. Iofina Chemical is a
Chemstewards(R) certified facility (recertified in 2019 and
currently active) and received a Chemstewards(R) award for resource
management and waste minimization. Additional improvements to
quality management systems are ongoing. Iofina Resources and Iofina
Chemical each have an EHS manager to oversee practices, and upper
management personnel are regularly updated on EHS performance
matrices. All Iofina employees are engaged in practices to
continually improve safety and reduce environmental impact.
Iofina has also implemented further safety initiatives
throughout the COVID-19 pandemic to protect its employees.
Strong Board and Governance
The Directors continue to acknowledge the importance of high
standards of corporate governance. The Group's Corporate Governance
Statement is found on page 26 of this report. Given the Group's
size and the constitution of the Board, the Directors decided to
adopt the principles set out in the QCA Corporate Governance Code
published in April 2018 (the "QCA Code") in advance of the
requirement to adopt a corporate governance code under AIM Rule 26
of the AIM Rules for Companies. In addition, we continue to operate
a robust framework of systems and controls to maintain high
standards throughout the Group, further details of which can be
found in the Corporate Governance Statement. The Board believes
that effective corporate governance assists us in the delivery of
our corporate strategy, the sustainable generation of shareholder
value and the safeguarding of our stakeholders' long-term
interests. We continue to strengthen the Board by adding
independent appointments that have the interest of all shareholders
at the forefront. Iofina will continue to seek a diverse Board with
strong skill sets that continue to grow and challenge the Company
while representing all shareholders.
Outlook
Last year I stated that "The next few years look to be
transformational for Iofina." We still believe this. We now have a
highly attractive, profitable Group to present to institutional
funds, family offices, and retail investors worldwide. We are
looking forward to the return of non-virtual investor roadshows and
investor programs. We are exploring options to allow better access
to investing in Iofina for potential shareholders outside of the
UK. The Board has also approved and will be requesting
shareholder's authority for the Group's first share buyback of up
to 15,000,000 shares of the Group in open market and privately
transacted purchases when available.
In terms of our expansion, we are squarely focused on growing
our current iodine production and specialty chemical businesses
including developing new and exciting chemical compounds. We are
also considering strategies to reduce our reliance on our current
oil and gas partners. We have and continue to explore potential
business partnerships and combinations that could be of benefit to
shareholders. Iofina is expanding our M&A efforts to possibly
include smaller niche products being divested from larger
companies. Iofina's niche products continue to propel the Company
and we feel that similar products will work in our model. As stated
previously, over the past several years we have been working to
diversify our product lines, recognizing the importance of product
diversification in our core chemical competencies. This
diversification was shown to be particularly important in 2020 as
many sectors contracted and in the coming years, we will continue
this diversification.
We continue to be wise and focused on calculated risks in our
approach to growth. The Group evaluates all the data points we have
available including the paradigm shift we have seen both
politically and economically from the low oil and natural gas
prices experienced in 2020. This has had an impact on our business.
This affected the Company in 2021 much more than we had anticipated
both at our current sites and caused delays on our plant expansion
selection in 2021. While we had hoped to begin construction on an
additional IOsorb(R) plant in 2021 we were regrettably not able to
do so.
Earlier I drew the parallel to the Iofina of five years ago when
we were operating in a higher leverage, lower price environment. We
navigated those years through prudent management of the variables
in our control. We know what these variables are and will only
expand the business where we can minimize the influence of those
which are uncontrollable. For example, we refused to go to our
second and third choice new plant locations in 2021 - there were
simply too many factors in each location that we could not control.
We continue to apply this rigour today and into the future.
As such, we are confident the optimal target locations will be
secured using the new market considerations, but we can never be
exact on the timing. The Company made mistakes in 2013 with large
cost overruns, delayed supplies of electric to the plants, subpar
location selections, and optimistic long term iodine pricing
forecasts which resulted in a large amount of debt and subpar
performance. It took a lot of hard work, dedication, improved
efficiencies, cost reductions, a little luck, and 7 years to fully
recover as a Company. We will not make the same mistakes again. We
need to always focus on being a low-cost producer and not let our
standards change as iodine prices may increase and decrease over
time, a variable we can't control. We can only control our
production cost; thus, we are committed to expanding at the best
suited sites which are ideal in all pricing environments.
We look forward to sharing our long-term growth plans highlights
to shareholders as our internal strategic plan continues to roll
out and be updated. Over last few years we have achieved our
previous financial goals which were keenly focused on reducing
debt, growing the business with restraint, and achieving banking
relationships. Now we are tasked on developing new financial goals
to match the Group's growth aspirations while maintaining a safe
and acceptable debt/EBDITA ratio and other metrics. We will also
update our key performance indicators ("KPIs") as laid out further
in this report to better align with our strategic plan during the
next calendar year.
I would like to thank all of our shareholders for their
continued support as we guide the business, and we are looking
forward to the excellent opportunities we are seeing as we move the
Company forward in setting more record years.
Lance J Baller
Non-Executive Chairman
Iofina plc
6 May 2022
FINANCIAL REVIEW
Summary 2021 v 2020
-- Fourth successive year of record revenue and EBITDA
-- Revenue increased by 31% from $29.7m to $39.0m
-- Gross profit increased by 28% from $8.4m to $10.7m
-- EBITDA improved by 47% from $4.7m to $6.9m
-- Operating profit increased by 78% from $2.9m to $5.2m
-- Finance expense decreased by 83% from $1.7m to $0.3m
-- Profit before tax increased by 301% from $1.3m to $5.1m
-- Cash flow generation of $5.9m reduced net debt from $8.9m to $3.0m
-- Paycheck Protection Program loans of $1.09m were forgiven and credited to income
-- Non-performing 2019 investment of $0.9m in Organic Vines was impaired
-- Exceptional deferred tax credit to profit of $4.1m for US accumulated tax losses
-- Capital investment into chemical and iodine plants was $1.5m (2020: $2.4m)
Trading results
Total revenue increased by 31% from $29.7m to $39.0m. After a
COVID related drop in sales in H2 2020 demand rebounded in 2021,
and sales were boosted by availability of inventory unsold as of
the 2020 year end. Turnover of iodine related products increased by
65% from $18.5m to $30.5m. Sales revenue from crystallised iodine
increased by 31%, with a 27% volume increase from 324 metric tonnes
to 411 metric tonnes. Iodine prices increased, with an average
price of $36.03 (2020: $34.84) per kilogram. The price acceleration
seen in Q4 2021 has continued, reaching $60 per kilogram and above
as of end Q1 2022. Sales revenue from iodine derivative products
increased by 102% and utilised 321 metric tonnes of production
(2020: 155 metric tonnes). Non-iodine products revenue fell by 23%
from $11.2m to $8.6m, with some forecast demand delayed.
Gross profit improved overall by $2.3m (28%) to $10.7m (2020:
$8.4m), in line with 2020 at 27% of sales (2020: 28%). Margins over
costs of materials were at similar percentage levels to 2020 across
product categories. Costs of the Iofina Chemical plant were at the
same level as for 2020. Production costs of iodine per kilogram at
Iofina Resources increased by 13%, reflecting similar overall costs
to 2020 applied to a lower production output.
Crystallised iodine production was 518 metric tonnes compared to
610 metric tonnes for 2020. Sales of crystallised iodine, both as
raw iodine and in derivative compounds, increased by 53% from 479
metric tonnes to 732 metric tonnes. Sales of crystallised iodine
were 56% of the total (2020: 68%), and sales of crystallised iodine
in derivative products were 44% of the total (2020: 32%).
EBITDA improved by 47% from $4.7m to $6.9m after deducting $3.8m
SGA expenses (2020: $3.7m) from gross profit of $10.7m (2020:
$8.4m). Operating profit after depreciation and amortisation of
$1.7m (2020: $1.8m) was $5.2m compared to $2.9m for 2020.
Finance expense
Finance expense fell by $1.4m from $1.7m in 2020 to $0.3m in
2021. The 2020 expense included $1.0m of interest and fees relating
to the borrowing arrangements prior to the refinancing concluded in
September 2020. There was also $0.4m of refinancing fees relating
to the September 2020 restructure itself. The terms of the Group's
current borrowing arrangements are set out in Note 20.
Profit before tax
Profit before tax improved by $3.8m from $1.3m (2020) to $5.1m
(2021). The improvement mainly reflects much stronger trading
driven by increased demand for iodine and an associated rise in
price, together with a step change reduction in finance costs
resulting from the 2020 refinancing.
Paycheck Protection Program loans
Paycheck Protection Program loans totalling $1.09m were received
during 2020. Notification of forgiveness of these loans was
received from the Small Business Administration in January 2021,
and the sums advanced have consequently been credited to
income.
Investment
The Group's November 2019 investment of $0.9m in the hemp seed
production undertaken by Organic Vines OP LLC has not provided any
of the returns forecast on the basis of market conditions at that
time, with COVID a significant factor. The Company cannot predict
any future income with any reasonable probability, and therefore
the investment has been impaired to Nil.
Deferred tax
In accordance with IAS 12 and in light of the Group's recent
much improved profitability, and therefore its likely utilisation
of its $19.4m accumulated US Federal tax losses in the foreseeable
future, a deferred tax asset of $4.1m reflecting the value of those
losses at a tax rate of 21% has now been set up in the balance
sheet and credited to tax in the statement of comprehensive income.
This asset will be amortised to the profit and loss account in line
with future reductions in tax payable from utilisation of the
losses.
Capital investment
The Group invested $1.5m in capital projects and equipment
(2020: $2.4m), most of which relates to new projects, process
improvements and replacements at the Iofina Chemical plant. In
accordance with IFRS 16 there is also an addition of $0.4m to
right-of-use assets and associated lease liabilities in respect of
a four-year extension to the Iofina Resources Denver office lease.
The related cash outlay will occur through monthly rental payments
over the period of the lease extension.
Cash flow
Cash started the year at $3.5m and ended $1.8m higher at $5.3m,
after paying off $1.4m of the bank term loan in accordance with the
borrowing schedule and also depositing $2.7m of funds to reduce the
bank line of credit to Nil, so avoiding interest charges. Total
cash generated was therefore the $5.9m reflected in the reduction
of net debt from $8.9m to $3.0m. The Group considers that these
levels of cash and borrowings make it well placed to fund further
expansion. As regards working capital, inventories reduced by $3.3m
and receivables increased by $2.6m, reflecting more normal ratios
after the drop in demand during 2020.
Malcolm Lewin
Chief Financial Officer
Iofina plc
6 May 2022
DIRECTORS' BIOGRAPHIES
Lance J. Baller, Non-Executive Chairman
Mr. Baller was co-founder, CEO and President of Iofina Plc prior
to his departure for health reasons in June 2013. Mr. Baller was
the Group's Finance Director from 2007 until his appointment as CEO
in 2010. Mr. Baller returned as Chairman in April 2014. Mr. Baller
currently serves as CEO of Selectis Health, Inc and as a director
and as sole or principal shareholder of several privately owned
businesses, including Baller Enterprises, Inc. (personal holding
company), Titan Au, Inc, Empire Leasing LLC, Valdez Au, Inc,
Extrac, Inc, (which all are in gold, sand, rock, and gravel
mining), Ultimate Investment (personal investment company) and
Baller Family Foundation, Inc. (personal family foundation). He is
the former managing partner of Shortline Equity Partners, Inc., a
mid-market merger and acquisitions consulting and investment
company. Mr. Baller is also the former Managing Partner of
Elevation Capital Management, LLC and is the former alternative
investment hedge fund manager of the Elevation Fund. He is also a
former Vice-President of Corporate Development and Communications
of Integrated Biopharma, Inc. and prior to that a vice-president of
the investment banking firms UBS and Morgan Stanley. Mr. Baller has
been a CEO, interim CEO, Chairman, CFO and secretary of various
private and public listed companies throughout his career. He has
served as Chairman to various companies and has led successful
restructurings. Mr. Baller has had extensive experience in all
aspects of corporate finance. Mr. Baller currently is on the board
of trustees of Index Fund and Digital Funds where he serves as the
chairman of the audit committee and as the audit committee
financial expert under Sarbanes-Oxley.
Dr. Thomas M. Becker, Chief Executive Officer
Dr. Becker has served as President/CEO of Iofina plc since 2014
and has led Iofina Chemical since March 2010. Previously, Dr.
Becker was the Vice President of Research and Development at
H&S/Iofina Chemical. Iofina bought H&S in July 2009. Dr.
Becker has conducted extensive research in both inorganic and
organic halogen-based chemistry. Dr. Becker has written a magnitude
of published technical papers in his career. Prior to H&S Dr.
Becker worked as an Oak Ridge Scholar on behalf of the US EPA and
for various other chemical manufacturing companies. Dr. Becker
earned a BS in Chemistry from Indiana University, and a PhD in
Chemistry from the University of Cincinnati. He has extensive
experience in scale-up of chemical processes from laboratory to
pilot to full scale production. Dr. Becker is a former member of
the Board of Governors of the Society of Chemical Manufacturers and
Affiliates ("SOCMA").
Dr. William D. Bellamy, Non-Executive Director
Dr. Bellamy is the former Senior Vice President of the Water
Business Group at CH2M HILL, Inc. ("CH2M"), a company he has worked
at for 30 years until his recent retirement. CH2M is one of the
largest consulting engineering companies in the world, providing
leadership and strategic direction for the water business and
application of technologies worldwide. Dr. Bellamy has participated
in energy and sustainability forums, including as a panellist at
the World Future Energy Conference in Abu Dhabi, the World Bank
Sustainable Cities Symposium and the Future of Water Economic
Forum. Dr. Bellamy serves as Professor of Practice at the
University of Wyoming, where he teaches graduate courses and is
responsible for securing grants and research funding in the areas
of water resources, water treatment and sustainable energy
development. Dr. Bellamy has a PhD in Civil Engineering from
Colorado State University, an MSc in Civil (Environmental)
Engineering from the University of Wyoming and a BSc in Electrical
(Bio-Medical) Engineering from the University of Wyoming.
Malcolm T. Lewin, Chief Financial Officer
Mr. Lewin was named CFO and a director of the Group in November
2016 after having joined Iofina as interim CFO in February 2016.
Mr. Lewin is based in the UK and has over 30 years of experience in
finance and accounting for both public and private companies. As
well as being a partner in a chartered accounting firm for 11
years, he has acted for various companies listed on AIM and other
exchanges. In particular, from 2000 to 2003 he was the Finance
Director of Oxford Metrics plc, an AIM company supplying motion
capture and visual geometry systems. From 2004 to 2006 he was the
Finance Director of Real Estate Investors plc, an AIM property
investment company with interests in quality commercial and
industrial properties. From 2006 to 2011 he was a Director and CFO
of Hunter Bay Minerals plc, a junior mining company listed on the
Toronto Venture Exchange with interests in South America and
Canada. From 2011 to 2014 he was CFO and Treasurer of VolitionRX
Limited, an OTC life sciences company focused on developing blood
tests for a broad range of cancer types and other conditions. Mr.
Lewin has an MA in Classics from Oxford University and qualified as
a chartered accountant with Coopers & Lybrand.
J. Frank Mermoud, Non-Executive Director
Mr. Mermoud has more than 30 years' experience in international
business, facilitating trade and investment in both the public and
private sectors. He has held senior international, economic and
commercial policy positions within the United States Government
having served as the Secretary of State's Special Representative
for Commercial and Business Affairs at U.S. Department of State
from 2002 to 2009. Mr. Mermoud is also a Non-Executive Director of
Cub Energy Inc. an oil and gas company headquartered in Houston,
Texas.
Mary C. Fallin-Christensen, Non-Executive Director
Mary Fallin-Christensen has served the State of Oklahoma for
over 30 years. She was elected the first female Governor of the
State in 2010, and was re-elected for a second term in 2014. Prior
to serving as Governor she held a number of state and federal
positions, including serving as US Congresswoman for Oklahoma's 5th
district between 2007-2011 and serving as Lieutenant Governor of
Oklahoma between 1995-2006. Mary has been a major contributor to
natural resources industries in Oklahoma, and implemented the
State's first comprehensive energy plan as well as its State-wide
water plan. She has held several positions, including Chair of the
Southern State Energy Board, Chair of the Interstate Oil & Gas
Compact Commission, and has served on the natural resource
committee of the National Governors Association (NGA). Previously,
she also served on the United States House of Representatives
Committee on Small Business, was Small Business Chairman on the
Republican Policy Committee, and was named the "Guardian of Small
Business" by the National Federation of Independent Business. Mary
has also served on numerous Boards of Directors for both commercial
organizations and non-profits.
STRATEGIC REPORT
Principal activities and review of the business
Iofina plc ("Iofina" or the "Company") is the holding company of
a group of companies (the "Group") involved in the exploration and
isolation of iodine and the production of specialty chemicals.
Large volumes of brine water are sourced from partnerships with oil
and gas operators and saltwater disposal ("SWD") operators in the
United States and is used as a raw material to produce iodine at
the Group's multiple IOsorb(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.
Iodine is a rare element that is produced only in a few
countries in the world, with approximately 90 percent of global
production coming from Chile (60 percent) and Japan (30 percent,
including recycled waste streams). The U.S., where the Group
operates, is responsible for approximately six percent of
production but is one of the world's largest consumers of iodine.
Iodine and its compounds have many human health related
applications, including x-ray contrast agents, pharmaceuticals,
antiseptics, thyroid function, and others. Additional high-volume
uses of iodine include LCD screen technology, material heat
stabilisation, animal feed additives, biocides, catalysts and more.
The Group produces iodine in the United States where the overall
global iodine production is only a small percentage of the world's
total production, but where there is a large consumption of the
world's iodine by various American users. Iofina believes it is the
second largest producer of iodine in North America.
Iofina Resources, Inc. is the Group's wholly owned subsidiary
which uses proprietary Wellhead Extraction Technology(R) (WET(R))
and WET(R) IOsorb(R) methods to produce iodine from brine. The
Directors of the Company believe that Iofina's production process,
which utilizes brine water from third party oil and gas production,
is advantageous for long term sourcing of the raw material as well
as minimised production and expansion costs.
The ability of the Group to expand its iodine production
quickly, at low cost, differentiates Iofina from other iodine
producers. This has been proven from the expansion of production
and opening of IOsorb(R) plants IO#7 and IO#8. Additionally, the
Directors believe that the Group's technology to produce iodine is
far more environmentally friendly compared to other producers. By
using a waste stream from the oil and gas industry to isolate
iodine versus isolating iodine from ores, Iofina's process is
ecologically efficient in obtaining a valuable product from a waste
stream versus environmentally intensive processes of mining iodine
from ores seen in Chile.
Economically viable iodide rich brine co-produced during oil and
gas production is not common, and the Group's proprietary
geological model to locate and anticipate iodide rich sources is
unique. The Directors of Iofina are committed to producing its
products in a sustainable and environmentally friendly manner, and
to improving communications regarding our long-term strategy in
respect of Iofina's sustainable practices and other ESG tenets.
The focus of Iofina's current business model is the production
of iodine from brine and the creation and sales of specialty
chemicals through Iofina Chemical. The Directors feel strongly that
diversification of the business while focusing on our core
expertise is important. Iofina Resources diversifies its iodine
production through multiple IOsorb(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 a wide range iodine-based products with
applications in various industries including agricultural,
pharmaceutical, biocides and others, whilst additional
diversification is realised by the production of non-iodine-based
products at Iofina Chemical. The end markets for various products
can change, and Iofina Chemical's ability to produce a variety of
products allows the Group to take advantage of growing markets
while not being as affected by temporarily depressed or declining
markets.
In 2021 iodine and iodine derivative sales increased while
non-iodine product sales declined versus 2020. Market conditions
for specialty chemicals can change. As an example, there was an
inventory build-up by Iofina's key customers of a key fluorinated
chemical in H2 2020 which resulted in increased sales of this
product in H2 2020 but lower sales in 2021. This same fluorinated
product, for Iofina, has recently seen stronger demand during late
Q1 of 2022. Conversely, iodine demand in H2 2020 was low as COVID
related economic downturns affected consumer demand for iodine
products particularly in human health and automotive sectors. As a
result, Iofina carried higher than normal inventories of iodine and
iodine derivatives into 2021. With the quicker than expected
economic recovery of iodine markets as countries began to reopen,
these inventories were sold down and had a positive impact on 2021
results. The overall result for Iofina was record revenue and
profit and is a testament to our business model of diversification
of business lines while keeping to our core technologies.
Additionally, creating strong, transparent, long-term, mutually
beneficial customer relationships are a fundamental tenet for
Iofina Chemical. Research and Development remain a top focus at
Iofina in order to improve current systems and be at the forefront
of new technologies, new specialty chemical products and
applications in our core competencies.
Iodine prices have risen significantly in the last 18 months,
reaching $60/kg and higher in some instances. This is a level not
experienced since 2011, when a combination of the Fukushima
disaster in Japan and Chilean supply disruptions resulted in a
shortage of iodine and a price spike. Supply and demand changes, as
well as manufacturing cost increases, are the major factors
influencing the iodine price. More recently, iodine prices slightly
retreated in H2 2020 as a result of lower global demand for iodine
and iodine-based products during the COVID-19 pandemic. As an
iodine manufacturer, iodine prices have a significant impact on the
Group's gross profit margins. Prices rose marginally in H1 2021 and
significantly in H2 2021 as demand outpaced supply as global
economies expanded as COVID impacts waned.
During 2021, demand for many human health related uses of iodine
increased significantly from 2020 levels. Currently, iodine prices
are high versus historical levels and the range of prices is larger
than typical historical prices. Spot prices began 2022 near $50/kg
and now are mostly at $60/kg and above while contracted iodine
prices for large customers are generally lower than spot prices.
Iofina expects demand for its products to remain strong in 2022
versus supply and foresees iodine prices to remain at high levels.
To the Group's knowledge, there is no indication of large-scale
greenfield iodine projects currently in development that would
significantly increase iodine supply in the short-term.
Additionally, inflation in H2 2021 and into 2022 has resulted in
higher costs for Iofina's raw materials, labour and energy, which
is likely to continue through much of 2022.
The Directors recognized that, as the Company erected its
IOsorb(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 production
costs. Once the majority of these process cost optimisation goals
were achieved, and iodine market conditions were positive, the
Directors executed the next phase of Iofina's business plan and
began a growth strategy. In early 2018 the Group's iodine plant,
IO#7, was completed. By expanding our operations and building IO#7,
the Group has successfully lowered overall iodine production costs
compared to the costs before IO#7. The Directors continued this
prudent growth strategy in 2019. In Q2 2019, the Company performed
an equity raise to reduce debt and provide working capital for
expansion projects. The result was the construction of IO#8 which
began in late 2019 and was completed in early April 2020.
The Group is committed to continued growth and is investigating
locations and partnerships to expand iodine production. The Group
announced its intention in 2021 to build IO#9. Lessons learned from
past expansion play a role in management's iodine plant growth.
Building of IOsorb(R) plants will be done in a prudent manner to
ensure to the best of our knowledge long-term, low-cost iodine
production. With an expanding iodine market and Iofina's improved
balance sheet it is likely that Iofina will embark on IO#10 soon
after IO#9's completion, if not before, although this will only be
done with proper prudent evaluations of potential future sites.
The Directors are aware of the risk of declining brine
availability if our partners do not maintain or increase their
hydrocarbon production in areas that supply the Group's IOsorb(R)
plants. The Group is investigating the economics and the technology
to better control the iodide rich brine supplies that feed the
current and future plants. Iofina Chemical continues to be
recognised as a world-renowned halogen specialty chemical producer.
Vertical integration of the Group's iodine into iodine derivatives
gives Iofina's customers stability of supply in addition to the
long-standing quality and technical support to Iofina's global
customers for the goods sold to them. Additionally, the
non-iodine-based halogen derivatives produced by Iofina Chemical
gives the Group further diversity. Iofina Chemical is investing in
Capital Expenditure projects in 2022 to improve its R&D
facilities, scale up production of a non-iodine product, and begin
a new iodine recycling operation.
Key Performance Indicators
The Directors review a range of financial indicators to assess
and manage the Group's performance, including the following
relating to revenue and iodine production:
Year ended Year ended
31 December 31 December
2021 2020
$'000 $,000
Revenue from sales of iodine and iodine derivatives $30,473 $18,507
Revenue from non-iodine products $8,566 $11,181
Total revenue $39,039 $29,688
Total pounds of product shipped (LBS '000) 2,580 1,800
Crystallised iodine produced (Metric Tonnes) 518 610
IOsorb(R) plants in operation (year-end) 5 5
Commentary on some of the above indicators is to be found in the
Chairman's Statement on pages 3 to 8.
Further commentary on the results for the year and the financial
position at the year-end is to be found in the Financial Review on
pages 9 to 11.
Objectives
At the end of 2021 the Group had five operating IOsorb(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 and gas production and quickly bring these
sites into production. The continued execution of this prudent
growth strategy was continued with the start of construction of
IO#8 in late 2019 which was completed in April 2020. While
technology and efficiency improvements at current facilities remain
an ongoing priority, the Company continues to explore new iodine
production opportunities. This objective of strategic expansion in
2020 and beyond is focused on sites that will continue to improve
Iofina's output with low production costs. In 2021, the Group
announced its intention to build IO#9, with this now expected to be
completed later in 2022. Brine supply to our IOsorb(R) plants can
be affected by regulatory changes and adjustments to our partners'
saltwater disposal systems and oil production programs. Iofina
continues to work with its partners to implement plans to maximize
brine input and iodine output at each of our existing sites. The
mutually beneficial relationship between Iofina and its brine
supply partners, which allows Iofina to create iodine and allows
the brine suppliers to realize value from a waste stream, is a key
component for existing projects and potentially for future sites.
Continued efforts by our business development and geological teams
have identified numerous other expansion opportunities that the
Company will continue to evaluate and potentially execute, with
current and other potential brine supply partners, when management
determines proper timing for new sites.
Timing of future iodine production growth will be dependent on
various factors including the stability or increase of iodine
prices, global iodine demand, availability and costs to produce
iodine at new sites, partnership agreements, oil prices and
production in areas with high iodide content brines, and the
regulatory landscape with respect to brine injection. With the
fluctuations in oil prices, which was evident in the last two
years, the Group is increasingly focused on evaluating alternative
brine sourcing opportunities which may allow the Group to better
control brine supply at future sites. The Directors are focused on
expansion in a prudent manner whilst properly managing the current
debt and cash flow of the organisation. Expansion in 2022 will
occur with the building of IO#9 and investigations into IO#10 are
ongoing. The Directors will evaluate market conditions and the
detailed information on potential future plant sites before
spending capital on new IOsorb(R) plants.
Iofina Chemical has continued to invest in current product
lines, safety improvements, and new product R&D. These include
investments in both iodine-based products and other non-iodine
specialty chemicals. Capital investment projects completed in 2021
at Iofina Chemical included methyl fluoride upgrades, building
containment improvements, and other safety initiatives. Increased
capital expenditures at Iofina Chemical are expected in 2022 as
discussed earlier in this report. The R&D and the sales groups
continue to investigate and research new opportunities for and
applications of our existing portfolio of products, as well as
identify and produce new halogen-based derivatives for the Group in
order to grow our halogen derivatives business. It is also expected
that Iofina Resources' expansion plans in 2022 will result in the
need for expansion of our customer base for our products. The sales
team at Iofina Chemical continues to develop new sales channels for
our products including direct sales of the Group's crystalline
IOflo(R) iodine to consumers. Managing existing and developing new
sales channels and relationships, as Iofina continues to grow, is a
high priority for the sales force at Iofina Chemical.
As previously communicated, IofinaEX is now solely focused on
monetizing its hemp seed investment project with Organic Vines OP
that resulted in the production of 22 million certified organic
seeds. To date seed sales are low and no significant sales were
made in 2021. While the Group believes these seeds are viable for
sales, the Company cannot predict any future income with any
reasonable probability, and therefore the investment has been
impaired to Nil.
Lastly, the Directors are committed to employee retention whilst
controlling costs. Employee safety and training are also key
objectives for the Group. A key component for the Group is the high
operational gearing whereby the Group's business model allows for
the control of administrative and fixed expenses whilst expanding
operations.
Principal risks and uncertainties
Iofina plc is subject to a number of risks and uncertainties,
which could have a material effect on its business, operations or
future performance, including but not limited to:
Raw Materials: Brine water produced from oil and gas operations
is the raw material source for Iofina's iodine production. The
Group continues to evaluate opportunities to integrate its
IOsorb(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 salt-water disposal wells (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 and a half there has been a reduction of capital spent by our
partners for new drilling and recompletion of wells in our core
area which has resulted in a decline in total amounts of brine
co-produced with oil and gas in our key areas. Iofina maintains
good relationships with our partners who provide the brine water to
our existing IOsorb(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. Global supply change disruptions and
logistic bottlenecks can adversely affect ability to obtain key raw
materials and may result in increased costs of these materials.
Iofina Chemical has long term relationships with many of its
suppliers. Additionally, when possible, Iofina Chemical sources
materials from multiple suppliers to reduce risk. Increased
regulations can adversely affect availability and cost of
materials. Prices of raw materials and energy can change and if
increases in these prices are not able to be passed on to our
customers, it would negatively affect margins for our products.
COVID-19 and Global Crises : Global crises, while rare, can
impact businesses significantly. The COVID-19 pandemic is an
example of such an event. Similar events could have a negative
effect on the markets we serve and on the Group's profits. COVID-19
resulted in a global economic slowdown and a reduced demand for
many of Iofina's products. These types of events can also result in
delays in shipping, worker limitations, business closures and other
challenges which may negatively affect the Group. The diversity of
Iofina's products along with the uses of products in areas like
human health applications make Iofina less susceptible than most
other businesses. Iofina quickly implemented many protocols to
minimize any negative impacts on the business, but these protocols
only reduce risk and cannot eliminate risk. COVID-19 or other
events such as political unrest, acts of aggression (wars), other
health crises, major weather events or others would likely have a
negative effect for the Group.
Currently, the Russian invasion of Ukraine has not directly
affected Iofina's operations negatively, however, a prolonged
invasion or an escalation of this conflict may cause negative
changes to international sales and supply. Additional political
sanctions or negative impacts to global economies as a result of
this invasion may adversely impact our business.
Environmental: The Group's operations are subject to the
environmental risks inherent in the exploration and chemical
industries. The Group is subject to environmental laws and
regulations in connection with all of its operations. Although the
Group intends to be in compliance in all material respects with all
applicable environmental laws and regulations, there are certain
risks inherent to its activities, such as accidental spills,
leakages or other circumstances that could expose the Group to
extensive liability. Accordingly, the Group promotes wherever
possible environmental sustainability in its working practices and
seeks to minimise, mitigate, or remedy any harmful effects from the
Group's operations on the environment at each of its operational
sites. Regulations on brine injections in the state of Oklahoma
into the Arbuckle geological formation in the Group's core area due
to seismic activity were implemented mainly in late 2015 to early
2016, and have affected Iofina's partners' brine disposal into this
formation near some of our sites. This reduced some brine
availability to Iofina at some sites. The Group and its partners
have implemented and continue to implement strategies to minimise
the effect on the availability of iodine rich brine to Iofina due
to these regulations. Moving forward the Group and its partners
will continue to monitor these risks and act accordingly. While the
frequency and intensity of earthquakes have significantly reduced
in Oklahoma, and this reduction is likely a result of regulated
changes in brine disposal into the Arbuckle formation, there is
still risk of additional earthquakes and regulation moving forward.
Changes in laws or regulation of brine streams could affect brine
availability or the cost to produce iodine. As a specialty chemical
manufacturer, new regulations based on chemical use, adverse human
health or environmental impact are a risk and may lead to higher
costs or controlled production. Recent Greenhouse Gas (GHG)
regulations in the USA have not impacted Iofina's ability to
produce products it currently manufactures, but changes to
production allocations may negatively affect Iofina's production
output in the future. Other environmental regulations that restrict
manufacturing of chemicals that Iofina produces would have a
negative impact on the Group. The Group has a robust Environmental,
Health and Safety program and strives for continual improvement in
this area. Additionally, Iofina Chemical is a certified
Chemstewards(R) facility.
Changes in Markets and Competition: Iofina is well diversified
in the markets we serve. As a result, small changes to these
markets generally will not materially affect our business. However,
major disruptions in key markets that use iodine or the other
specialty compounds we manufacture could have a material negative
effect on the Group. Additionally, increased competition in the
markets we serve could negatively impact prices or the ability to
sell our goods. In particular, large increases in iodine production
from competitors could negatively affect iodine prices and the
Group's market share. While we do not know of any planned, new,
large greenfield iodine projects in the near term, information is
limited.
Iodine Price volatility: The demand for, and prices of, iodine
are highly dependent on a variety of factors including
international supply and demand, the level of consumer product
demand, the price and availability of alternatives, actions taken
by governments and global economic and political developments.
Increases in current iodine producers' production capacities or new
iodine producers entering the market could negatively impact
prices. Fluctuations in iodine prices and, in particular, a
material decline in the price of iodine would have a material
adverse effect on the Group's business, financial condition and
operations. Since 2017, prices of iodine have been rising until
demand for iodine slowed as the global demand for many products
fell during the second half of 2020 as the COVID-19 pandemic
surged. Iodine prices recovered in H1 2021 and began to rise
significantly in H2 2021. During H1 2022 iodine prices have
remained high as demand is strong and is outpacing supply.
Key customers: There are a limited number of potential customers
who purchase many of the products of the Group's chemical business,
which makes relationships with these customers, as well as the
success of those customers' businesses, critical to the Group's
success. The loss of one or more major customers could harm the
business, operating results and financial condition of the Group.
Iofina is continuing to diversify its customer base in its Chemical
subsidiary. In addition, Iofina works closely with all of its
customers to develop strong relationships, with a significant focus
on ensuring that its products and services meet the needs of its
customers and are of the highest quality. In 2021, 10 percent of
revenue recognised was attributable to one long term customer and
four other customers each contributed to over 5% of sales.
Relations with these customers are good.
Key Partners: Iofina partners with third party oil and gas
producers and saltwater disposal operators to process iodine rich
brine they extract with oil and gas production. Fluctuations of oil
and gas prices in the US can affect the financial stability of oil
and gas producers. Any changes in operator status or the financial
strength of our partners is a risk to brine production and
availability. The Group has agreements with our partners to reduce
any risk of change in status. Material changes in these brine
supply contracts with our partners could negatively affect the
Group.
Regulation and Trade : The businesses are subject to various
significant international, federal, state and local regulations
currently in effect including but not limited to environmental,
health and safety and import/export regulations. These regulations
are complex, change frequently, can vary from country to country,
state to state and have generally increased over time. Iofina may
incur significant expense in order to comply with these regulations
or to remedy violations of them. The current federal administration
in the USA has increased regulations in our industries versus the
previous administration. Any new regulation that would increase
cost of raw materials the Group uses, reduces availability of these
raw materials or caps production of products the Group produces
would likely have a negative effect on margins.
Any failure by Iofina to comply with applicable government
regulations could result in non-compliant portions of our
operations being shut down, product recalls or impositions of civil
and criminal penalties and, in some cases, prohibition from
distributing our products or performing our services until the
products and services are brought into compliance, which could
significantly affect our operations.
IofinaEX is involved in the sale of hemp seeds, a highly
regulated industry. Laws and regulations for handling hemp seeds,
biomass and products produced from hemp continue to change and
evolve.
The Group closely monitors regulations across its businesses to
ensure that it complies with the relevant laws and regulations.
While Iofina does not believe that it is non-compliant with any
laws or regulations, any instances of non-compliance would be
brought to the attention of the appropriate authorities as soon as
possible.
Recently trade relationships between the USA and other areas of
the world have become more unstable. Increased tariffs implemented
by the USA and retaliatory tariffs imposed by other governments
against the USA have the potential to adversely affect both raw
material supply and final product sales for Iofina in certain areas
of the world. Iofina has been proactive in reducing the impact of
tariffs which directly impact the Company's supply and sales
lines.
Inventory Fluctuations: Inventory level changes can cause a
financial instability. High inventories negatively affect cash
flow, while low inventories can negatively affect sales volumes and
customer relationships. In 2021, the Group started the year with
larger than normal iodine inventories and ended the year with lower
than normal iodine inventories.
Insurance may not cover all material losses: The Group strives
to carry standard insurance for our industry that would minimise
loss when events occur. However, certain scenarios or events may
not be covered by insurance and could have a negative material
impact on the Group. For example, cyber-attacks have increased
globally and while the Group has increased measures to thwart
potential cyber-attacks, we cannot guarantee these measures will
prevent a cyber-attack for which we do not carry specific
insurance.
Personnel: As a small technical organisation, the loss of key
technical or senior management employees could negatively affect
the business. Additionally, the USA labour market remains tight.
This could result in increased labour costs and a risk of delays or
inability to produce product due to labour shortages.
Significant Shareholders: Significant shareholders may have the
ability to affect changes that result in a material adverse effect
to the organisation including a change in senior management or
control of the Group or its Board of Directors.
Interest Rates and Inflation: As a result of the 2020 debt
changes that served to significantly reduce both overall debt and
interest rates for the Group, a significant portion of the debt
carries variable interest rates. While overall debt has continued
to decline, interest rates are rising and may negatively impact
debt costs.
Inflation in the USA and globally has risen in late 2021 and
into 2022. This has resulted in higher costs for goods, energy and
labour. The ability to maintain margins in an increasing
inflationary environment is uncertain. Additionally, as prices
rise, there is a risk that some products the Group sells may be
replaced by cheaper alternatives which could result in an adverse
effect to the business.
Litigation: While the Group has no pending litigation matters,
there are possibilities that future judgements or settlements could
result in an adverse effect to our business.
Going concern
In September of 2020, the Group completed the refinancing of its
then outstanding debt. The size and maturities of the Group's debt
obligations have greatly improved and its operations are generating
cash, resulting in a much improved financial health of the Group.
In general, markets the Group supplies are healthy and continue to
experience strong demand for the Group's products. The Group has
prepared forecasts and projections that indicate there are adequate
resources to continue in operational existence for the foreseeable
future. The Directors consider it appropriate to continue to adopt
the going concern basis in preparing the financial statements.
On behalf of the board
Dr. Thomas M. Becker
Chief Executive Officer and President
6 May 2022
STATEMENT IN ACCORDANCE WITH SECTION 172 OF THE COMPANIES ACT
2006
As required by section 172 of the Companies Act 2006, a director
of a company must act in a way they consider, in good faith, would
most likely promote the success of the company for the benefit of
its shareholders. In doing this, the Director must have regard,
amongst other matters, to the:
(a) likely consequences of any decision in the long-term;
(b) interests of the company's employees;
(c) need to foster the company's business relationships with
suppliers, customers, and others;
(d) impact of the company's operations on the community and the environment;
(e) company's reputation for high standards of business conduct; and
(f) need to act fairly as between members of the company.
As a Board our aim is always to uphold the highest standards of
governance and business conduct, taking decisions in the interests
of the long-term sustainable success of the Group, generating value
for our shareholders and contributing to wider society. We
recognise that our business can only grow and prosper over the long
term by understanding the views and needs of our stakeholders.
Engaging with stakeholders is key to ensuring the Board has
informed discussions and factors stakeholder interests into
decision-making.
The Directors insist on high operating standards and fiscal
discipline and routinely engage with management and employees of
the Group to understand the underlying issues within the
organization. Additionally, the Board looks outside the
organization at macro factors affecting the business. The Directors
consider all known facts when developing strategic decisions and
long-term plans, taking into account their likely consequences for
the Group.
The Directors and management are committed to the interests and
well-being of Iofina's employees. Iofina is committed to the
highest levels of integrity and transparency possible with
employees and other stakeholders. Safety initiatives, consistent
training, strong benefits packages and open dialogue between all
employees are just some of the ways the Group ensures its employees
improve skill sets and work hand-in-hand with management to improve
all aspects of the Group's performance.
Other stakeholders include customers, suppliers, lenders,
industry associations, government and regulatory agencies, media,
local communities and shareholders. The Board, both individually
and together, consider that they have acted in the way they
consider would be most likely to promote the success of the Group
as a whole. To do this, there is a process of dialogue with
stakeholders to understand the issues that they might have. Iofina
believes that any supplier/customer relationship must be mutually
beneficial, and the Group is known for its commitment to details to
its customers. Communications with the Group's lenders and
shareholders occur on an ongoing basis and as questions arise. The
Group also communicates through media interviews and Twitter.
The Directors are committed to positive involvement in the local
communities where we operate. Part of this commitment is our
program 'Iofina Gives Back', where Iofina supports local charities
by donating time and goods. Additionally, Iofina adheres to
environmental regulations at its sites and supports sustainability
practices where possible.
Integrity is a key tenet for the Directors and the Company's
employees. The Company believes that any partnership must benefit
both parties. We strive to provide our stakeholders with timely and
informative responses and are always striving to meet or exceed
customers' needs.
The Board recognises its responsibilities under section 172 as
outlined above and has acted at all times in a way consistent with
promoting the success of the Company with regard to all
stakeholders.
CORPORATE GOVERNANCE
It is the Chairman's responsibility, working with Board
colleagues, to ensure that good standards of corporate governance
are embraced throughout the Group. As a Board, we set clear
expectations concerning the Group's culture, values and
behaviours.
In September 2018, the Board adopted the Quoted Companies
Alliance Corporate Governance Code (the "QCA Code"). On our website
(https://iofina.com/corporate-governance/) we set out how we seek
to comply with the 10 principles of the QCA Code. The following
sections of the Corporate Governance Statement explain how the QCA
Code is applied by the Company.
The Board comprises six Directors: the Non-Executive Chairman,
two full time Executive Directors and three Non-Executive Directors
(each of whom are considered by the Board to be independent),
reflecting a blend of different experiences and backgrounds. The
function of the Chairman is to supervise and manage the Board and
to ensure its effective control of the business. The Board believes
that its composition brings a desirable range of skills and
experience given the Group's challenges and opportunities as a
publicly quoted company, while at the same time ensuring that no
individual (or group of individuals) can dominate the Board's
decision-making.
The Board meets regularly to review, formulate and approve the
Group's strategy, budgets, corporate actions and oversee the
Group's progress towards its goals. The Board has established the
following committees to fulfil specific functions, each with
formally delegated duties and responsibilities (details of which
can be found on our website; see:
http://www.iofina.com/about/committees ): the Audit Committee and
the Remuneration Committee. These committees meet on a regular
basis and at least two times a year. The Board has elected not to
constitute a dedicated nomination committee, instead retaining such
decision making with the Board as a whole. This approach is
considered appropriate to enable all Board members to take an
active involvement in the consideration of Board candidates and to
support the Chair in matters of nomination and succession.
From time to time, separate committees may also be set up by the
Board to consider specific issues when the need arises.
DIRECTORS' REPORT
The Directors present their report and financial statements for
the Group for the year ended 31 December 2021.
Strategic report
Included in the Strategic Report on pages 14 to 23 is the review
of the business and principal risks and uncertainties.
Post balance sheet events
Post balance sheet events are set out in note 30.
Directors' responsibilities for the preparation of the financial
statements
The Directors are responsible for preparing the Strategic Report
and the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. The Directors are
required by the AIM Rules for Companies (as published by the London
Stock Exchange) to prepare Group financial statements in accordance
with UK adopted International Financial Reporting Standards
("IFRS"), and have elected under company law to prepare the Company
financial statements in accordance with IFRS.
The financial statements are required by law and UK adopted IFRS
to present fairly the financial position of the Group and the
Company and the financial performance of the Group. The Companies
Act 2006 provides, in relation to such financial statements, that
references in the relevant part of that Act to financial statements
giving a true and fair view are references to their achieving a
fair presentation.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for that period.
In preparing the Group and Company financial statements, the
directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with UK adopted IFRS; and
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Iofina
plc website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Results and dividends
The results for the year are set out in the consolidated
statement of comprehensive income and detailed in the Financial
Review.
The directors do not recommend payment of a dividend.
Financial instruments and risk management
Note 14 details the risk factors for the Group and how these
risks are managed, including the degree to which it is appropriate
to use financial instruments to mitigate risks.
Directors
The directors who served during the year and subsequently were
as follows:
Lance J. Baller, Non-Executive Chairman
Dr. William D. Bellamy, Non-Executive Director
J. Frank Mermoud, Non-Executive Director
Mary C. Fallin-Christensen, Non-Executive Director
Dr. Thomas M. Becker, Chief Executive Officer and President
Malcolm T. Lewin, Chief Financial Officer
Statement as to disclosure of information to the auditor
The directors who were in office on the date of approval of
these financial statements have confirmed that, as far as they are
aware, there is no relevant audit information of which the auditor
is unaware. Each of the directors has confirmed that they have
taken all the steps that they ought to have taken as directors in
order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the auditor.
Auditor
UHY Hacker Young were appointed as auditors to the Company and
in accordance with Section 485 of the Companies Act 2006 a
resolution proposing that they be reappointed will be put to the
next Annual General Meeting.
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
6 May 2022
CORPORATE GOVERNANCE STATEMENT
The Board ensures that the Group is managed for the long-term
benefit of all shareholders with corporate governance being an
essential element of this and has adopted the Quoted Companies
Alliance ("QCA") Corporate Governance Code which is considered
appropriate for an AIM quoted company. The Board is responsible for
the overall leadership, strategy, development and control of the
Group in order to achieve its strategic objectives.
The Group is led and controlled by the Board which currently
consists of two Executive Directors and four Non-Executive
Directors. Board meetings are held on a regular basis and no
significant decision is made other than by the Directors. All
Directors participate in the key areas of decision making.
Business model, strategy and approach to risk
The Group focuses on the exploration and production of iodine
and halogen-based specialty chemical derivatives. We identify,
develop, build, own and operate iodine extraction plants, currently
focused in North America, based on Iofina's Wellhead Extraction
Technology(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 the Group's activities involve an ongoing assessment of
risks, and the Group seeks to mitigate such risks where possible.
The Board has undertaken an assessment of the principal risks and
uncertainties facing the Group, including those that would threaten
its business model, future performance, solvency and liquidity.
Further, the Board has considered the longer-term viability of the
Group, including factors such as the prospects of the Group and its
ability to continue in operation for the foreseeable future. The
Board considers that the disclosures outlined in the Strategic
Report on pages 14 to 23 are appropriate. The Board considers that
these disclosures provide the information necessary for
shareholders and other stakeholders to assess the Group's future
viability and potential requirements for further capital to fund
its operations.
Having carried out a review of the level of risks that the Group
is taking in pursuit of its strategy, the Board is satisfied that
the level of retained risk is appropriate and commensurate with the
financial rewards that should result from achievement of its
strategy.
Board of Directors
As of the date of this Report the Board comprises six Directors
in total: the Non-Executive Chairman, two Executive Directors
(being the Chief Executive Officer ("CEO") and the Chief Financial
Officer ("CFO")) and three Non-Executive Directors (each of whom
are considered by the Board to be independent), reflecting a blend
of different experiences and backgrounds. The skills and experience
of the Board are set out in their biographical details on pages 12
and 13. The experience and knowledge of each of the Directors give
them the ability to challenge strategy constructively and to
scrutinize performance.
The Board is responsible to the shareholders for the proper
management of the Group. The Board and the Group's management team
are responsible for reviewing and evaluating risk and the Executive
Directors meet at least monthly to review ongoing trading
performance, discuss budgets and forecasts, and new risks
associated with ongoing trading. The full Board typically meets
quarterly to set the overall direction and strategy of the Group,
to review operational and financial performance, and to advise on
management appointments (if necessary). The Board has also
convened, when necessary, during the year to review the strategy
and activities of the business. All key operational and investment
decisions are subject to Board approval. The Company Secretary is
responsible for ensuring that Board procedures are followed, and
applicable rules and regulations are complied with. The number of
meetings attended by each Director can be found on page 32.
There is a clear separation of the roles of CEO and
Non-Executive Chairman. The Chairman is responsible for overseeing
the running of the Board, ensuring that no individual or group
dominates the Board's decision making and ensuring the
Non-Executive Directors are properly briefed on matters. The CEO
has the responsibility for implementing the strategy of the Board
and managing the day-to-day business activities of the Group.
Time commitment
On joining the Board, Non-Executive Directors receive a formal
appointment letter, which identifies the terms and conditions of
their appointment and, in particular, the time commitment expected
of them. A potential Director candidate (whether an Executive
Director or Non-Executive Director) is required to disclose all
significant outside commitments prior to their appointment. The
Board is satisfied that both the Chairman and the other
Non-Executive Directors are able to devote sufficient time to the
Group's business.
Independence of Directors
The Directors acknowledge the importance of the principles of
the QCA Code which recommends that a company should have at least
two independent Non-Executive Directors. The Board considers it has
sufficient independence on the Board and that all the Non-Executive
Directors are of sufficient competence and calibre to add strength
and objectivity to the Board, and bring considerable experience in
industry, operational and financial development of chemical
products and companies. Specifically, the Board has considered and
determined that since the date of their respective appointments
William Bellamy, J. Frank Mermoud and Mary Fallin-Christensen are
independent in character and judgement, specifically that they:
-- have not been employees of the Company within the last five years;
-- do not have a material business relationship with the Group;
-- have no close family ties with any of the Group's advisers, Directors or senior employees;
-- do not hold cross-directorships or have significant links
with other Directors through involvement in other companies or
bodies; and
-- do not represent any shareholder.
The Company Secretary maintains a register of outside interests
and any potential conflicts of interest are reported to the
Board.
If they so wish, the Non-Executive Directors have opportunities
to meet without Executive Directors being present (including after
Board and Committee meetings). Because the Board is spread out
geographically, the majority of communications between Directors is
conducted by video. However, the Board does convene in person at
least once a year, and this presents an opportunity (before, after
and between management and operational meetings) for the
Non-Executive Directors to meet in person without the Executive
Directors being present.
Professional development
Throughout their period in office, the Directors are continually
updated on the Group's business, the competitive and regulatory
environments in which it operates, corporate social responsibility
matters and other changes affecting the Group and the industry it
operates in as whole. The updates are usually provided by way of
written briefings and meetings with senior management. Directors
are also advised on appointment of their legal and other duties and
obligations as a director of an AIM quoted company both in writing
and in communications (being face-to-face meetings whenever
possible) with the Company's Nominated Adviser. The Directors also
have recourse to the Company Secretary, a qualified and practising
solicitor, who is a recognised practitioner within the AIM
community.
All the Directors are subject to election by shareholders at the
first Annual General Meeting of the Company ("AGM") after their
appointment to the Board. Each Director will continue to seek
re-election at least once every three years.
Board Committees
There are two committees - the Audit Committee and the
Remuneration Committee. Their full terms of reference are published
on the Company's website at https://iofina.com/committees/.
Audit Committee
During the financial period under review, the members of the
Audit Committee were Lance Baller, Dr William Bellamy, J. Frank
Mermoud and Mary Fallin-Christensen. Mr Baller is the Chairman of
the Audit Committee. The responsibilities of the committee include
the following:
-- ensuring that the financial performance of the Group is
properly monitored, controlled and reported on;
-- reviewing accounting policies, accounting treatment and disclosures in the financial reports;
-- meeting the auditors and reviewing reports from the auditors
relating to accounts and internal control systems; and
-- overseeing the Group's relationship with external auditors,
including making recommendations to the Board as to the appointment
or re-appointment of the external auditors, reviewing their terms
of engagement, and monitoring the external auditors' independence,
objectivity and effectiveness.
During the year, the committee met to review audit planning and
findings. In addition, it reviewed the appointment of auditors, and
agreed unanimously to re-elect UHY Hacker Young LLP.
Remuneration Committee
During the financial period under review, the members of the
Remuneration Committee were Dr William Bellamy, Lance Baller and J.
Frank Mermoud. Dr Bellamy is the Chairman of the Remuneration
Committee. The responsibilities of the committee include the
following:
-- reviewing the performance of the Executive Directors and
setting the scale and structure of their remuneration with due
regard to the interest of shareholders;
-- overseeing the evaluation of the Executive Directors; and
-- determining the vesting of awards, including the setting of
any performance criteria in relation to the exercise of share
options, granted under the Company's share option plan.
During the year, the committee met to discuss remuneration and
bonuses for the Executive Directors, and share option awards for
the Directors and senior management.
The Directors' remuneration information is presented on page
35.
Attendance at meetings
The Board meets regularly, typically on a quarterly basis,
together with further meetings as required. The Audit and
Remuneration Committees meet as required, and try to hold a minimum
of two meetings each year.
The Directors attended the following meetings during the
year:
Board Audit Remuneration
Lance Baller 3 1 2
Dr Thomas Becker 3 - -
Malcolm Lewin 3 - -
Dr William Bellamy 3 1 2
J. Frank Mermoud 3 1 2
Mary Fallin-Christensen 3 1 -
Risk management and internal control
The Board is responsible for the systems of internal controls
and for reviewing their effectiveness. The internal controls are
designed to manage rather than eliminate risk and provide
reasonable but not absolute assurance against material misstatement
or loss. The Board reviews the effectiveness of these systems
annually by considering the risks potentially affecting the
Group.
Iofina employs strong financial and management controls within
the business. Examples of control procedures include:
-- an annual budget set by the Board with regular review of progress;
-- regular meetings of Executive Directors and senior management
to review management information and follow up on operational
issues or investigate any exceptional circumstances;
-- clear levels of authority, delegation and management structure; and
-- Board review and approval of significant contracts and overall project spend.
The Company's system of internal control is designed to
safeguard the Company's assets and to ensure the reliability of
information used within the business. The system of controls
manages appropriately, rather than eliminates, the risk of failure
to achieve business objectives and provides reasonable, but not
absolute, assurance against material misstatement or loss. The
Group does not consider it necessary to have an internal audit
function due to the small size of the administrative function.
Instead, there is a detailed monthly review and authorisation of
transactions by the CFO and the CEO.
The independent auditors do not perform a comprehensive review
of internal control procedures, but do report to the Audit
Committee on the outcomes of its annual audit process. The Board
confirms that the effectiveness of the system of internal control,
covering all material controls including financial, operational and
compliance controls and risk management systems, has been reviewed
during the year under review and up to the date of approval of the
Annual Report.
The Group maintains appropriate insurance cover in respect of
actions taken against the Directors because of their roles, as well
as against material loss or claims against the Group. The insured
values and type of cover are comprehensively reviewed on a periodic
basis.
Board effectiveness and performance evaluation
The Board is mindful that it needs to continually monitor and
identify ways in which it might improve its performance and
recognises that board evaluation is useful for enhancing a board's
effectiveness.
The individual contributions of each of the members of the Board
are regularly assessed to ensure that: (i) their contribution is
relevant and effective; (ii) that they are committed; and (iii)
where relevant, they have maintained their independence. The Board
intends to review the performance of the team as a unit to ensure
that the members of the Board collectively function in an efficient
and productive manner. One-third of the Directors must stand for
re-election by shareholders annually in rotation and all Directors
must stand for re-election at least once every three years.
The Company considers that the Board and its individual members
continue to perform effectively, that the Chairman performs his
role appropriately and that the process for evaluation of his
performance has been conducted in a professional and rigorous
manner.
Corporate Social Responsibility
The Board recognises the growing awareness of social,
environmental and ethical matters and it endeavours to take into
account the interest of the Group's stakeholders, including its
investors, employees, suppliers and business partners, when
operating the business.
Employment
The Group endeavours to appoint employees with appropriate
skills, knowledge and experience for the roles they undertake and
thereafter to develop and incentivise staff. The Board recognises
its legal responsibility to ensure the wellbeing, safety and
welfare of its employees and maintain a safe and healthy working
environment for them and for its visitors.
Investor Relations
The Board recognises the importance of communication with the
Company's shareholders to ensure that its strategy and performance
is understood and that it remains accountable to shareholders. Our
website has a section dedicated to investor matters and provides
useful information for the Company's shareholders (see:
http://iofina.com/investors/ ). 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.
Directors' remuneration
Remuneration provided to each Director was as follows:
2021 2020
Total Total
Salary Bonus $ Salary Bonus $
Lance Baller 109,620 - 109,620 109,620 - 109,620
Dr. Thomas Becker 260,000 35,000 295,000 236,400 50,000 286,400
Malcolm Lewin 191,208 27,315 218,523 160,000 40,000 200,000
William Bellamy 30,000 - 30,000 30,000 - 30,000
Frank Mermoud 30,000 - 30,000 30,000 - 30,000
Mary Fallin-Christensen 30,000 - 30,000 22,500 - 22,500
Total $650,828 $62,315 $713,143 $588,520 $90,000 $678,520
No pension contributions were paid on behalf of the directors in
2020 or 2021.
Directors' and officers' insurance is in place on a Group-wide
basis.
The interests of the Directors in office as at 31 December 2021
in the shares of the Company at the end of the financial year and
the beginning of the financial year or date of appointment, if
later, were as follows:
31 December 2021 1 January 2021
L J Baller 5,175,000 4,812,500
Dr. T M Becker 124,430 93,750
W D Bellamy 46,875 46,875
M T Lewin 93,750 93,750
J F Mermoud 23,750 23,750
All outstanding options over shares granted to Directors up to
31 December 2021 are set out in the table below. No Directors
exercised options in 2021.
Exercise Exercise Exercise
2018 price 2019 price 2020 price
Options per 2018 Lapse Options per 2019 Lapse 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-Christensen - - - - - - 82,500 12.5p 15/12/30
On 9 March 2022 a further 860,200 share options were granted to
directors, with an exercise price of 17.6p.
On behalf of the Board
Dr. Thomas M. Becker
Chief Executive Officer and President
6 May 2022
Independent auditor's report to the members of Iofina PLC
Opinion
We have audited the financial statements of Iofina PLC (the
'Parent Company') and its subsidiaries (the 'Group') for the year
ended 31 December 2021 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated Balance Sheet, the
Consolidated Statement of Changes in Shareholders' Equity, the
Consolidated Cash Flow Statement, the Company Balance Sheet, the
Company Statement of Changes in Shareholders' Equity and notes to
the financial statements, including the significant accounting
policies. The financial reporting framework that has been applied
in their preparation is applicable law and UK-adopted International
Financial Reporting Standards (IFRSs).
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2021 and of the Group's profit for the year then
ended;
-- the Group and Parent Company financial statements have been
properly prepared in accordance with UK adopted IFRSs; and
-- the Group financial statements have been prepared in
accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
and Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statement is appropriate.
Our evaluation of the director's assessment of the entity's
ability to continue to adopt the going concern basis of accounting
included:
Evaluation of management assessment Key observations
Management have prepared detailed 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 2023. These are all budgeted and committed expenditure,
based on their expectation of the schedule of repayment for
future costs, including budgeted the term loan and movements
operating and capital expenditure in working capital.
on all of the group's operating In reviewing the cash flow forecast,
plants licence areas and expectations we separately sensitised the
of future iodine production commodity price to determine
levels and commodity price. the maximum the price of iodine
Our review included: could fall in order for the
-- Assessing the transparency, cash to be depleted to Nil by
completeness and accuracy of the end of the forecast period.
the matters covered in the going Overall, the price of Iodine
concern disclosure by evaluating would need to decrease by 27%
management's cash flow projections in 2022 and 31% in 2023 in order
for the forecast period and for EBITDA to be nil for both
the underlying assumptions; years of the forecast. Given
-- Review of the cash flow forecasts, the price of Iodine has been
the methodology behind these increasing since 2018, this
and ensuring they are arithmetically is not considered likely.
correct and challenging the The likelihood of this fall
assumptions by discussing them in Iodine prices lasting for
with management and corroborating the entire forecast period is
them with our historical knowledge; considered by the Directors
-- Obtaining post year end management to be remote and in such circumstances
information and comparing these consider sufficient mitigating
to budget to assess whether actions to be available to continue
budgeting is reasonable and as a going concern.
results are in line with expectations;
and
-- We completed a sensitivity
analysis on the budgets provided
to assess the change in revenue
and iodine prices that would
need to occur to push the Group
into a cash negative position.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
entity's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our approach to the audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account an understanding of the
structure of the Company and the Group, their activities, the
accounting processes and controls, and the industry in which they
operate. Our planned audit testing was directed accordingly and was
focused on areas where we assessed there to be the highest risk of
material misstatement.
Our Group audit scope includes all of the group companies, for
which we have instructed and reviewed component auditor procedures
and results in relation the existence and completeness of stock. At
the Parent Company level, we also tested the consolidation
procedures. The audit team communicated regularly throughout the
audit with the CFO in order to ensure we had a good knowledge of
the business of the Group. During the audit we reassessed and
re-evaluated audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant
transactions, balances and disclosures, the extent of which was
based on various factors such as our overall assessment of the
control environment, the effectiveness of controls and the
management of specific risk.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant findings, including any significant deficiencies in
internal control that we identify during the audit.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Key audit matters How our audit addressed the
key audit matters
Revenue Recognition Our audit work included, but
was not restricted to:
Under IFRS 15, the entity shall -- Documenting our understanding
recognise revenue to depict of management's process for
the transfer of goods or services evaluating revenue recognition.
to customers in an amount that -- We tested the completeness
reflects the consideration to of revenue by selecting a sample
which the entity expects to of items from outside of the
be entitled in exchange for Group's accounting system and
those goods or services. tracing them to inclusion into
the accounting system and agreeing
The revenue stream for the group the appropriate revenue recognition.
is derived from sale of iodine -- We audited the occurrence
derivatives, iodine chemicals of revenue by consideration
and ancillary products, all of our testing in trade receivables
of which are fundamental to in conjunction with using data
the financial statements and analytics software. This was
a systematic error in the calculation used to assist in identifying
could lead to a material error. the correlation between trade
receivables and revenue journals
We therefore identified the being made and subsequently
risk over the cut off of revenue the receipt of cash for those
as a significant risk and also trade receivables and therefore
considered completeness and whether any subsequent reversal
occurrence assertions. of trade receivables should
have impacted the recognition
of the revenue.
-- We considered the appropriateness
of revenue cut-off by testing
pre and post year-end revenue
items on a sample basis to assess
whether the 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 complete,
accurate, has occurred and been
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
Under International Accounting assessment of forecasted cash
Standard 36 'Impairment of Assets' flows and challenged significant
(IAS 36), companies are required movements in forecasted cash
to assess whether there is any flows compared to historic performance.
indication that an asset may -- We reviewed Management's
be impaired at each reporting forecasted cash flows that feed
date. into the discounted cash flow
Property, plant and equipment model and challenged significant
are a significant balance in assumptions with reference to
the financial statements with historic results, market trends,
a combined net book value of appropriateness of discount
$19.1m (2020 - $18.8m). The rates and future expectations
balance is primarily comprised of commodity prices and sales
of the IOSorb plants, equipment growth.
and machinery and exploration -- We challenged management
and evaluation assets. and gained an understanding
of what is considered a cash
The estimated recoverable amount generating unit.
of these balances is subjective -- We performed a downside sensitivity
due to the inherent uncertainty analysis and held discussions
involved in forecasting and with Management to assess the
probability of the related future likelihood of certain circumstances
cash flows. crystallising.
At each reporting date, the The Group's accounting policy
Group considers any indication on Impairment is shown in Principal
of impairment to the carrying Accounting Policies for the
value of its assets. The assessment consolidated financial statements
is based on expected future and related disclosures are
cash flows on the IOSorb plants. included in note 1m.
The directors are required to Key observations
conduct impairment tests where As a result of the audit procedures
there is an indication of impairment we performed and, after considering
of the asset. The assessment management's disclosures of
was based on the future cash the judgements applied by them,
flows of each site using a discounted we have concluded that no impairments
cash flow model (being the 'value are required.
in use'). The value in use was
then compared to the carrying We have confirmed the estimates
value of fixed assets for that and judgements utilised within
site. the models applied in relation
Significant management judgement to the impairment of property,
and estimation uncertainty is plant and equipment are within
involved in this area, where acceptable ranges.
the primary inputs are:
-- Estimating cash flow forecasts;
-- Selecting appropriate assumptions
such as growth rate and discount
rate.
We therefore identified the
risk over the valuation of property
plant and equipment as a significant
risk.
Valuation of Inventory Our audit work included, but
Inventory primarily consists was not restricted to:
of iodine and iodine derivatives. -- We engaged component auditors
Inventory should be held at to attend a stocktake at two
the lower of cost and net realisable of the Group's plant locations
value. at the year end, where they
The net realisable value is observed an inventory count
the estimated selling price and performed sample testing
in the ordinary course of business on inventory held.
less any applicable selling -- We discussed, understood
expenses. As at 31 December and tested the Group's process
2021, the inventory is valued for calculating the cost of
at $6.3m (2020 - $9.7m). There the finished goods based on
is a risk that the carrying the absorption cost including
value in the Group accounts challenging the robustness of
is higher than the recoverable the key assumptions with management
amount and it is therefore materially to ensure they are appropriate.
misstated. Further, there is -- A sample of inventory items
the added risk of the complexity were tested to ensure the product
of the measurement of the costs was held at the lower of cost
of conversion of the inventory and Net Realisable Value.
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.
We have confirmed the estimates
and judgements utilised within
the models applied in relation
to the valuation of inventory
are within acceptable ranges.
Valuation and Impairment review Our audit work included, but
of investments in subsidiaries was not restricted to:
and intercompany balances -- We utilised discounted cash
flow forecasts to form an expectation
Due to the material size of of the recoverable amount, and
the investments in, and loans in addition considered the current
to, the subsidiaries the directors performance of the subsidiary
should critically consider if entities.
any indicators of impairment -- We performed a sensitivity
exist in relation to the balances. analysis on the key inputs such
The estimated recoverable amount as a decline in iodine prices
of these balances is subjective and sales growth and concluded
due to the inherent uncertainty that even with the adverse movements
involved in forecasting the mentioned above in the Group's
profitability of the subsidiaries. key assumptions, no potential
Where indicators of impairment impairment was identified.
have been identified a robust -- We obtained and reviewed
review of the investments held the director's assessment of
by the Parent Company and any impairment with regards to investment
amounts due from subsidiaries and loans due from its subsidiaries
to the Parent Company should in support of the valuation
be undertaken by the directors and assessed whether this was
to confirm the value in use in line with IAS 36.
of these amounts and that there -- We reviewed the 2021 forecasts
are no indications, or requirements against actual results to determine
for, impairments of the amounts. the Directors historic forecasting
Significant management judgement accuracy.
and estimation uncertainty is The Group's accounting policy
involved in this area, where on impairment is shown in Principal
the primary inputs are: Accounting Policies for the
-- Estimating cash flow forecasts; consolidated financial statements
-- Selecting appropriate assumptions and related disclosures are
such as growth rate and discount included in note 1m.
rate.
Key observations
We therefore identified the As a result of the audit procedures
valuation of investments in we performed and, after considering
subsidiaries and intercompany management's disclosures of
balances as a key audit matter, the judgements applied by them,
which was one of the most significant we have concluded that no impairments
assessed risks of material misstatement. are required.
We have confirmed the estimates
and judgements utilised within
the models applied in relation
to the valuation and impairment
of investments in subsidiaries
and intercompany balances are
within acceptable ranges.
Our application of materiality
The scope and focus of our audit was influenced by our
assessment and application of materiality. We apply the concept of
materiality both in planning and performing our audit, and in
evaluating the effect of misstatements on our audit and on the
financial statements.
We define financial statement materiality as the magnitude by
which misstatements, including omissions, could reasonably be
expected to influence the economic decisions taken on the basis of
the financial statements by reasonable users.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Materiality Group Parent
Measure
Overall materiality We determined materiality We determined materiality
for the financial statements for the financial statements
as a whole to be $389,000 as a whole to be $311,200
(2020: $299,000). The (2020: $239,000).
increase being a result
of the increase in revenue
of the Group
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.
Rationale for We believe 1% of revenue to be the most appropriate
benchmarks applied benchmark due to the size and nature of the
Company and Group. This is also considered
a key performance indicator for stakeholders.
Performance materiality On the basis of our risk assessment, together
with our assessment of the Group and Company's
control environment, our judgement is that
performance materiality for the financial statements
should be 75% of materiality for the Group
and Company:
$291,750 (2020: $224,250) $233,400 (2020: $179,400)
Specific materiality We also determine a lower level of specific
materiality for certain areas such as directors'
remuneration and related party transactions
of $1,000.
Reporting threshold We agreed with the Audit Committee that we
would report to them all misstatements over
5% of Group and Company materiality identified
during the audit, as well as differences below
that threshold that, in our view, warrant reporting
on qualitative grounds. We also report to the
Audit Committee on disclosure matters that
we identified when assessing the overall presentation
of the financial statements.
$19,450 (2020: $14,950) $15,560 (2020: $11,950)
Other information
The other information comprises the information included in the
annual report other than the financial statements and our auditor's
report thereon. The directors are responsible for the other
information contained within the annual report. Our opinion on the
financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and
Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the Parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities set out on page 27, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
Based on our understanding of the Group and the industry in
which it operates, we identified that the principal risks of
non-compliance with laws and regulations related to the use of
regulated chemicals, tax legislation, employment and health and
safety regulations, anti-bribery, corruption and fraud and we
considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws
and regulations that have a direct impact on the preparation of the
financial statements such as the Companies Act 2006 and the Quoted
Companies Alliance Corporate Governance Code ("QCA Code"). We
evaluated management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were
related to inflated revenue and profit.
Audit procedures performed included: review of the financial
statement disclosures to underlying supporting documentation,
review of regulatory inspections, review of correspondence with
legal advisors, in so far as they related to the financial
statements, and testing of journals and evaluating whether there
was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of it.
Also, the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at www.frc.org.uk/auditorsresponsibilities . This
description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with part 3 of Chapter 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Daniel Hutson
(Senior Statutory Auditor)
For and on behalf of UHY Hacker Young
Chartered Accountants and Statutory Auditor
UHY Hacker Young
4 Thomas More Square
London E1W 1YW
6 May 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2021 2020
Note $'000 $,000
Revenue 3 39,039 29,688
Cost of sales 4 (28,307) (21,283)
Gross profit 10,732 8,405
Administrative expenses 4 (3,789) (3,686)
EBITDA - earnings before interest, tax, depreciation and amortisation 6,943 4,719
Depreciation and amortisation 4 (1,731) (1,793)
Operating profit 5,212 2,926
Paycheck Protection Program loans forgiven 21 1,090 -
Fair value loss on investments in equity instruments
d esignated as fair value through profit and loss 16 (900) -
Profit before finance expense 5,402 2,926
Finance income 7 17 15
Interest payable 6 (368) (1,114)
Interest swap derivative liability 20 69 (69)
Loan arrangement fees 6 - (480)
Profit before taxation 4 5,120 1,278
Taxation 8 4,066 -
Profit for the year attributable to owners of the parent $9,186 $1,278
Earnings per share attributable to owners of the parent:
- Basic 9 $0.048 $0.007
- Diluted 9 $0.048 $0.007
All activities are classed as continuing.
The accompanying notes form part of these financial
statements.
CONSOLIDATED BALANCE SHEET
31 December 31 December
2021 2020
Note $'000 $'000
Assets
Non-current assets
Intangible assets 10 463 643
Goodwill 11 3,087 3,087
Property, plant and equipment 12 19,113 18,782
Deferred tax 25 4,066 -
Total non-current assets 26,729 22,512
Current assets
Inventories 13 6,296 9,656
Trade and other receivables 15 6,158 3,285
Investments 16 - 900
Cash and cash equivalents 17 5,262 3,481
Total current assets 17,716 17,322
Total assets $44,445 $39,834
Equity and liabilities
Current liabilities
Trade and other payables 18 5,802 5,473
Term loan - due within one year 20 1,429 1,429
Government subsidies 21 - 1,090
Lease liabilities 19 58 141
Total current liabilities 7,289 8,133
Non-current liabilities
Term loan - due after one year 20 6,785 8,214
Revolving loan facility 20 - 2,718
Term loan - interest swap liability 20 - 69
Lease liabilities 19 410 45
Total non-current liabilities 7,195 11,046
Total liabilities $14,484 $19,179
Equity attributable to owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,007 2,136
Retained losses (29,896) (39,331)
Foreign currency reserve (5,944) (5,944)
Total equity $29,961 $20,655
Total equity and liabilities $44,445 $39,834
The financial statements on pages 47 to 82 were approved and
authorised for issue by the Board and were signed on its behalf on
6 May 2022.
Dr. Thomas M. Becker - Chief Executive Officer and President
The accompanying notes form part of these financial statements.
Company number 05393357
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to owners of the parent
Share Share Share-based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January
2020 $3,107 $60,687 $1,988 $(40,609) $(5,944) $19,229
Transactions with
owners
Share-based expense - - 148 - - 148
Total transactions
with owners - - 148 - - 148
Profit for the
year attributable
to owners of the
parent - - - 1,278 - 1,278
Total comprehensive
income attributable
to owners of the
parent - - - 1,278 - 1,278
Balance at 31 December
2020 $3,107 $60,687 $2,136 $(39,331) $(5,944) $20,655
Transactions with
owners
Share-based expense - - 120 - - 120
Share options lapsed
and forfeited - - (249) 249 - -
Total transactions
with owners - - (129) 249 - 120
Profit for the
year attributable
to owners of the
parent - - - 9,186 - 9,186
Total comprehensive
income attributable
to owners of the
parent - - - 9,186 - 9,186
Balance at 31 December
2021 $3,107 $60,687 $2,007 $(29,896) $(5,944) $29,961
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Cash flows from operating activities
Profit before taxation 5,120 1,278
Adjustments for:
Depreciation 1,551 1,613
Amortisation 180 180
Share-based payments 120 148
Paycheck Protection Program loans forgiven (1,090) -
Impairment of investment 900 -
Finance expense 299 1,663
Finance income (17) (15)
Operating cash inflow before changes
in working capital 7,063 4,867
Changes in working capital
(Increase)/decrease in trade and other
receivables (2,873) 2,841
Decrease/(increase) in inventories 3,360 (3,579)
Increase/(decrease) in trade and other
payables 342 (353)
Net cash inflow from operating activities 7,892 3,776
Cash flows from investing activities
Interest received 17 15
Acquisition of property, plant and equipment (1,485) (2,449)
Asset disposal proceeds - 5
Net cash outflow from investing activities (1,468) (2,429)
Cash flows from financing activities
Government loans received - 1,090
Term loan notes repaid - (18,177)
Term loan drawn - 10,000
Term loan repayments (1,429) (357)
Revolving loan facility drawn - 3,000
Revolving loan facility net payments (2,718) (283)
Refinancing and arrangement fees paid - (676)
Interest paid (386) (1,055)
Lease payments (110) (126)
Net cash outflow from financing activities (4,643) (6,584)
Net increase/(decrease) in cash and cash
equivalents 1,781 (5,237)
Cash and cash equivalents at beginning
of year 3,481 8,718
Cash and cash equivalents at end of year $5,262 $3,481
COMPANY BALANCE SHEET
31 December 31 December
2021 2020
Note $'000 $'000
Assets
Non-current assets
Investment in subsidiary undertakings 28 17,199 17,199
Total non-current assets 17,199 17,199
Current assets
Due from subsidiaries 28 20,792 21,712
Trade and other receivables 15 3 3
Cash and cash equivalents 17 163 60
Total current assets 20,958 21,775
Total assets $38,157 $38,974
Equity and liabilities
Current liabilities
Trade and other payables 18 137 202
Total current liabilities 137 202
Equity attributable to the
owners of the parent
Issued share capital 23 3,107 3,107
Share premium 60,687 60,687
Share-based payment reserve 24 2,007 2,136
Retained losses (22,022) (21,398)
Foreign currency reserve (5,759) (5,759)
Total equity 38,020 38,773
Total equity and liabilities $38,157 $38,974
The loss for the financial year dealt with in the financial
statements of the parent company was $873k (2020 profit
$3,379k).
The financial statements on pages 47 to 82 were approved and
authorised for issue by the Board and were signed on its behalf on
6 May 2022
Dr. Thomas M Becker
Chief Executive Officer and President
Company number: 05393357
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to equity holders of the parent
Share
Share Share based Retained Foreign Total
capital premium payment losses currency equity
reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1
January 2020 $3,107 $60,687 $1,988 $(24,777) $(5,759) $35,246
Transactions
with owners
Share-based expense - - 148 - - 148
Total transactions
with owners - - 148 - - 148
Profit attributable
to owners of the
parent - - - 3,379 - 3,379
Total comprehensive
income for the
year - - - 3,379 - 3,379
Balance at 31
December 2020 $3,107 $60,687 $2,136 $(21,398) $(5,759) $38,773
Transactions
with owners
Share-based expense - - 120 - - 120
Share options
lapsed and forfeited - - (249) 249 - -
Total transactions
with owners - - (129) 249 - 120
Loss attributable
to owners of the
parent - - - (873) - (873)
Total comprehensive
income for the
year - - - (873) - (873)
Balance at 31
December 2021 $3,107 $60,687 $2,007 $(22,022) $(5,759) $38,020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
The Company is a public limited company incorporated and
domiciled in the United Kingdom. The Company is listed on the AIM
Market of the London Stock Exchange.
The registered office is located at 48 Chancery Lane, London,
WC2A 1JF. The principal activities of the Company have been and
continue to be investment in subsidiaries engaged in the production
of iodine and iodine derivatives, including the arrangement of
finance for and the provision of management services to
subsidiaries.
a) Statement of compliance
These consolidated financial statements have been prepared in
accordance with UK adopted International Financial Reporting
Standards ('IFRS') and IFRS Interpretations Committee ('IFRIC') and
the Companies Act 2006 applicable to companies reporting under
IFRS.
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
b) New standards, interpretations and amendments
Management continues to evaluate standards, amendments and
interpretations which are effective for reporting periods beginning
after the date of these financial statements and have not been
adopted early, including:
- IFRS1 (First-time Adoption of International Financial Reporting Standards)
- IFRS9 (Financial Instruments)
- IFRS16 (Leases)
Implementation of the above is not expected to have a material
effect on the Group's financial statements.
c) Basis of preparation of financial statements
The financial statements have been prepared on the historical
cost convention as modified by the revaluation of financial
liabilities at fair value through profit and loss.
The financial statements are presented in US Dollars, which is
also the Group's functional currency.
Amounts are stated in thousands of US Dollars, unless otherwise
stated.
As permitted by Section 408 of the Companies Act 2006, the
parent company's income statement has not been included in these
financial statements.
d) Revenue recognition
Revenue is measured as the amount of consideration we expect to
receive in exchange for transferring goods or providing services,
and is recognized when performance obligations are satisfied under
the terms of contracts with our customers. A performance obligation
is deemed to be satisfied when transfer of benefit of the product
or service is transferred to our customer. The transaction price of
a contract, or the amount we expect to receive upon satisfaction of
all performance obligations, is determined by reference to the
contract's terms and includes adjustments, if applicable, for any
variable consideration, such as customer rebates or commissions,
although these adjustments are generally not material. Costs
incurred to obtain contracts with customers are expensed
immediately.
Revenue consists of sales of iodine derivatives, iodine,
chemicals and ancillary products. All of our revenue is derived
from contracts with customers, and almost all of our contracts with
customers contain one performance obligation for the transfer of
goods where such performance obligation is satisfied at a point in
time. Transfer of benefit of a product is deemed to be transferred
to the customer upon shipment or delivery. Significant portions of
our sales are sold free on board shipping point or on an equivalent
basis, while delivery terms of other transactions are based upon
specific contractual arrangements. Our standard terms of delivery
are generally included in our contracts of sale, order confirmation
documents and invoices, while the timing between shipment and
delivery generally ranges between 1 and 45 days. Costs for shipping
and handling activities, whether performed before or after the
customer obtains control of the goods, are accounted for as
fulfilment costs.
Trade receivables at December 31, 2021 of $5,419k (2020 $3,102k)
represent all balances arising from contracts with customers.
e) Research and development expenditures
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred. Costs that are directly attributable to the development
phase of a new customised chemical manufacturing process or
development of a new iodine project are recognised as intangible
assets provided they meet the following recognition
requirements:
-- completion of the intangible asset is technically feasible so
it will be available for use or sale;
-- the Group intends to complete the intangible asset and use or
sell it;
-- the Group has the ability to use or sell the intangible
asset;
-- the intangible asset will generate probable future economic
benefits;
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset; and
-- the expenditure attributable to the intangible asset during
its development can be measured reliably.
Among other things, this requires that there is a market for the
output from the intangible asset or for the intangible asset
itself, or, if it is to be used internally, the asset will be used
in generating such benefits.
Development costs not meeting these criteria for capitalisation
are expensed as incurred. In 2021, all research and development
expenditures were expensed as incurred.
f) Going concern
The Group considers that it is now well placed financially in
light of recent reductions in debt, generation of profits and
sustained upwards trends in iodine pricing. On that basis the Group
has prepared forecasts and projections that indicate there are
adequate resources to continue in operational existence for the
foreseeable future. However, the Group recognises that there can be
no certainty where these predictions are concerned. After due
consideration of the foregoing, the Directors consider it
appropriate to continue to adopt the going concern basis in
preparing the financial statements.
g) Basis of consolidation and investments in subsidiary
undertakings
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries made up to 31
December 2021. Subsidiaries are entities over which the Group has
the power to control the financial and operating policies so as to
obtain benefits from their activities. The Group obtains and
exercises control through voting rights. The acquisition method of
accounting is used to account for the purchase of subsidiaries by
the Group. On acquisition, the subsidiary's assets and liabilities
are recorded at fair value, reflecting their condition at the date
of acquisition.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date control commences
until the date control ceases.
Intra-Group balances and any unrealised gains and losses or
income and expenses arising from intra-Group transactions are
eliminated in preparing the consolidated financial statements,
unless the losses provide an indication of impairment of the assets
transferred.
Amounts reported in the financial statements of the subsidiaries
are adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Investments in subsidiary undertakings are stated in the parent
company balance sheet at cost less provision for any impairment
losses.
h) Business combinations and goodwill
Business combinations are accounted for using the acquisition
method. The acquisition method involves the recognition of the
acquiree's identifiable assets and liabilities, including
contingent liabilities, regardless of whether they were recorded in
the financial statements prior to acquisition. On initial
recognition, the assets and liabilities of the acquired subsidiary
are included in the consolidated balance sheet at their fair
values, which are also used as the basis for subsequent measurement
in accordance with the Group's accounting policies. Acquisition
costs are expensed as incurred.
Goodwill represents the excess of the fair value of
consideration payable in a business combination over the fair value
of the Group's share of the identifiable net assets of the acquiree
at the date of acquisition. Any excess of identifiable net assets
over the fair value of consideration is recognised in profit or
loss immediately after acquisition.
As described in Note 1m) below, goodwill is tested for
impairment at least annually.
i) Foreign currency
The vast majority of the Group's business is denominated in U.S.
Dollars, which is the functional currency of the main operating
subsidiaries. U.S. Dollars is the presentational currency for the
Group financial statements.
Transactions denominated in foreign currencies are translated at
the rates of exchange ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated at the rates of exchange ruling at the balance sheet
date. Non-monetary items that are measured at historical cost in a
foreign currency are translated at the exchange rate at the date of
transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the
date the fair value was determined.
Any exchange differences arising on the settlement of monetary
items or on translating monetary items at rates different from
those at which they were initially recorded are recognised in
profit and loss in the period in which they arise. Exchange
differences on non-monetary items are recognised in other
comprehensive income to the extent that they relate to a gain or
loss on that non-monetary item taken to the statement of changes in
equity, otherwise such gains and losses are recognised in profit
and loss.
The results and financial position of foreign operations (none
of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
-- income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the
dates of the transactions); and
-- all resulting exchange differences are recognised in other
comprehensive income.
On disposal of a foreign operation for which the presentational
and functional currencies were different in previous periods, the
cumulative translation differences are transferred to profit and
loss as part of the gain or loss on disposal. The US Dollar/Pounds
Sterling exchange rate averaged 1.3756 in 2021 (2020 1.284), and at
31 December 2021 was 1.351 (2020: 1.365).
j) Intangible assets
Undeveloped leasehold costs
Undeveloped leasehold costs relate to the costs of acquiring
brine leases in respect of the surface and mineral rights of
landowners in areas of interest outside of those currently
connected to the Group's operating plants.
These costs are capitalised as exploration and evaluation assets
and are carried at historical cost less any impairment losses
recognised. If areas leased provide brine to operating plants, the
related costs are transferred to the relevant plants and amortized
over the lives of those plants.
Other intangible assets
Other identifiable intangible assets arose from the acquisition
of H&S Chemical in 2009. These assets were valued by an
external, independent valuation firm. Based on the type of asset,
the useful life of each asset was estimated. The value of each
identifiable intangible asset is amortised evenly over its useful
life. The following useful lives are applied:
-- WET(R) patent: 15 years
-- Customer relationships: 10 years
-- Patent portfolio: 8 years
-- EPA registrations: 2 years
Goodwill
Goodwill represents the excess of the fair value of
consideration in a business combination over the fair value of the
Group's share of the identifiable net assets acquired. Goodwill is
carried at cost less accumulated impairment losses.
k) Property, plant and equipment
Property, plant and equipment are stated at historical cost, net
of depreciation and any provision for impairment. Cost includes
purchase price and costs directly attributable to bringing the
asset to the location and condition necessary for it to be capable
of operating in the manner intended by management, such as costs
relating to construction, site preparation, installation and
testing.
Costs relating to assets put into service at a later date are
accumulated as construction in progress, and depreciation only
commences once such assets are put into use.
Depreciation is provided at rates calculated to write off the
depreciable amount of each asset on a straight line basis over its
expected useful life, as follows:
-- Buildings: 2.5 percent per annum
-- Office lease: term of the lease (38 months)
-- Equipment and machinery:
o IOSorb plants - 5 percent per annum
o Other plant and equipment - 5 to 7 years
o Vehicles and office equipment - 20 percent per annum
o Computer equipment - 33 percent per annum
Reviews of the estimated remaining lives and residual values of
individual assets are made at least semi-annually, and adjustments
are made where appropriate. Construction in progress is also
reviewed for impairment.
Freehold land is not depreciated.
l) Financial instruments
Financial liabilities
Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently measured at amortised cost using the effective
interest rate method.
Loan notes
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Interest-bearing loans are recorded initially at their fair
value, net of direct transaction costs. Such instruments are
subsequently carried at their amortised cost and finance charges,
including premiums payable on settlement, redemption or conversion,
are recognised in profit or loss over the term of the instrument
using the effective rate of interest.
Financial assets
Cash and cash equivalents represent short term, highly liquid
investments with an original maturity of fewer than three months
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. At the end of
2021 and 2020, all cash amounts were in 100 percent liquid
accounts.
The Group uses the 'simplified method of expected credit
losses'. Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest rate method, less provision for expected credit losses.
Expected credit losses are based on the Group's historical credit
losses experienced, then adjusted for current and forward looking
information on factors affecting the Group's customers.
m) Impairment
Whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable, that asset is
reviewed for impairment. An asset's carrying value is written down
to its estimated recoverable amount (being the higher of the fair
value less costs to sell and value in use) if that is less than the
asset's carrying amount.
Goodwill is allocated to those cash-generating units that are
expected to benefit from synergies of the related business
combinations and represent the lowest level within the Group at
which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are
tested for impairment at least annually. An impairment loss is
recognised for the amount by which the asset's or cash generating
unit's carrying amount exceeds its recoverable amount, which is the
higher of fair value less costs to sell and value in use. To
determine the value in use, management estimates expected future
cash flows from each cash-generating unit and determines a suitable
discount rate in order to calculate the present value of those cash
flows. The data used for impairment testing procedures are directly
linked to the Group's latest approved budget, adjusted as necessary
to exclude the effects of future reorganisations and asset
enhancements. Discount factors are determined individually for each
cash-generating unit and reflect their respective risk profiles as
assessed by management.
Impairment losses for cash-generating units reduce first the
carrying amount of any goodwill allocated to that cash-generating
unit. Any remaining impairment loss is charged pro rata to the
other assets in the cash-generating unit. With the exception of
goodwill, all assets are subsequently reassessed for indications
that an impairment loss previously recognised may no longer exist.
An impairment charge is reversed if the cash-generating unit's
recoverable amount exceeds its carrying amount.
The Group assesses on a forward-looking basis the expected
credit losses associated with its debt instruments carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
Intercompany loans due to the parent company from its subsidiaries
are tested for impairment as part of the overall investment in
those subsidiaries, by reference to the present values of estimated
future cash flows of the subsidiaries, as further described in Note
2c.
n) Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of equity
shares.
-- "Share premium" represents the excess over nominal value of
the fair value of consideration received for equity shares, net of
expenses for the share issue.
-- "Share-based payment reserve" represents the cumulative fair
value of options and warrants issued by the Company and recognised
in profit and loss.
-- "Retained losses" represents accumulated losses.
-- "Foreign currency reserve" represents the cumulative
differences arising from translation of foreign operations.
o) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes all expenses directly attributable to the
manufacturing process as well as suitable portions of related
production overheads, based on normal operating capacity. Costs of
ordinarily interchangeable items are assigned using the first in,
first out cost formula. Cost excludes unrealised gains arising from
intra-Group transactions. Net realisable value is the estimated
selling price in the ordinary course of business less any
applicable selling expenses. When inventory is sold the cost is
included in Cost of Sales on the Statement of Comprehensive
Income.
p) Taxation
Tax expense recognised in profit or loss is the tax currently
payable based on taxable profit for the year and deferred tax not
recognised directly in equity.
Deferred income taxes are calculated using the balance sheet
liability method. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of
an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries is not
provided if reversal of these temporary differences can be
controlled by the Group and it is probable that reversal will not
occur in the foreseeable future. In addition, tax losses available
to be carried forward, as well as other income tax credits to the
Group, are assessed for recognition as deferred tax assets
according to the likelihood of their recoverability in the
foreseeable future.
Deferred tax liabilities are provided in full, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in profit or loss, except where they
relate to items that are charged or credited directly to equity in
which case the related deferred tax is also charged or credited
directly to equity.
q) Leases
The Group assesses whether a contract is, or contains, a lease,
at inception of the contract. The Group recognises a right-of-use
asset and a lease liability on the balance sheet at the lease
commencement date. The right-of-use asset is initially measured at
cost. This comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement
date and an estimate of any costs to restore the underlying asset
to the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use-asset or the end of
the lease term. Amounts relating to such assets are disclosed
separately in note 12. In addition, the Group assess the
right-of-use asset for impairment when such indicators exist.
At the commencement date, the lease liability is initially
measured at the present value of the lease payments discounted
using the Group's incremental borrowing rate at the date of
transition as the interest rate implicit in the lease could not be
readily determined. Interest is charged at the same discount rate
used to calculate the present value of the lease.
The lease liability is re-measured if the Group changes its
assessment of whether it will exercise a purchase, extension or
termination option. When the lease liability is re-measured in this
way, a corresponding adjustment is made to the carrying amount for
the right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to
zero.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases that have a lease term of
12 months or less and leases of low value operating value. These
are charged to profit and loss on a straight-line basis over the
period of the lease. At 31 December 2021 the Group had one lease,
for office space.
r) Share-based payments
The cost of equity settled transactions is measured at fair
value at the grant date as measured by use of the Black Scholes
model. If vesting periods or other vesting conditions apply, the
expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable.
Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognised
in the current period. No adjustment is made to any expense
recognised in prior periods if share options ultimately exercised
are different to those estimated on vesting.
Charges made to profit or loss, in respect to share-based
payments, are credited to the share-based payment reserve.
s) Segment reporting (Note 3)
In identifying its operating segments, management follows the
Group's service lines, which represent the main products provided
by the Group and are based on the information presented to the
chief operating decision maker, which is the Board.
2. Significant judgements and estimates
Judgements and estimates are regularly evaluated based on
historical experience, current circumstances and expectations of
future events.
The critical estimates made in the preparation of the financial
statements are set out below. The resulting accounting estimate may
not equal the related actual result, and management must also make
judgements about current circumstances and expectations of future
events. Significant judgements made by management include:
a. Intangible and tangible assets are tested for impairment
where there is an indication that they may be impaired. In
accordance with IAS 36 - Impairment of Assets, an intangible or
tangible asset is considered impaired when its carrying amount
exceeds its recoverable amount on an individual cash generating
unit basis. The recoverable amounts of relevant cash generating
units are based on value in use calculations using management's
best estimate of future business performance. For this purpose
management regards all the iodine production plants as a single
cash generating unit given their mutual dependence on centralised
management, financial, maintenance and sales and marketing
functions. In carrying out impairment testing, management will make
a number of significant estimates in relation to the assumptions
incorporated into their calculations. These will include factors
such as growth rates and discount rates. Details and carrying
values of intangible assets, goodwill and property, plant and
equipment are provided in notes 10, 11 and 12.
b. Management reviews the useful lives of depreciable and
amortisable assets at each reporting date. The carrying amounts are
analysed in notes 10 and 12. Management's estimate of the useful
lives of plant and equipment as detailed in note 1k are common life
expectancies for the industry. In particular, the expected useful
life attributed to each IOsorb(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 carrying amount of the parent company's investment in its
subsidiaries of $38.0m (2020: $38.9M) has been evaluated for
impairment. For this purpose the two operating subsidiaries have
been treated as one unit, given the vertical integration of the
Group's operating activities. The carrying amount of the parent
company's investment of $38.0m (2020: $38.9M) compares to carrying
amounts of the subsidiaries' net assets, excluding loans from the
parent company, of $25.9m (2020: $20.8m). An assessment has been
made of the present values of the future cash flows related to the
operating activities of the subsidiaries to determine whether any
impairment losses should be recognised. The Group has concluded
that it no impairment provision is required.
d. Based on reports received from Organic Vines OP LLC
management has concluded that there is currently no basis for
projecting any positive return (see Note 16), and that therefore it
is appropriate to impair the investment of $900,000 to Nil.
e. In accordance with IAS12 and in light of the Group's recent
much improved profitability, and therefore its likely utilisation
of its $19.4m accumulated US Federal tax losses in the foreseeable
future, a deferred tax asset of $4.1m reflecting the value of those
losses at a tax rate of 21% has now been set up in the balance
sheet and credited to tax in the profit and loss account. This
asset will be amortised to the profit and loss account in line with
future reductions in tax payable from utilisation of the
losses.
3. Segment reporting
a. Business segments - The Group's operations comprise the
exploration and production of iodine with complete vertical
integration into its specialty chemical halogen derivatives
business, and are therefore considered to fall within one business
segment. In November 2019 the Group made an investment of $900,000
in Organic Vines OP LLC, which was engaged in the production of
hemp seeds. This investment has been impaired to Nil in 2021 (see
Note 16), and there was no trading activity during 2020 or 2021.
Therefore segment reporting below is limited to the separate
recognition of the asset in 2020.
31 December 31 December
2021 2020
$ $
Assets
Halogen Derivatives and Iodine 40,379 38,934
Hemp seeds - 900
Total $40,379 $39,834
Liabilities
Halogen Derivatives and Iodine 14,484 19,179
Total $14,484 $19,179
b. Geographical segments - The Group reports by geographical
segment. The Group's activities are related to exploration for, and
development of, iodine in certain areas of the USA and the
manufacturing of specialty chemicals in the USA with support
provided by the UK office. In presenting information on the basis
of geographical segments, segment assets and the cost of acquiring
them are based on the geographical location of the assets.
3. Segment reporting (continued)
31 December 31 December
2021 2020
$'000 $,000
Assets
UK 166 63
USA 40,213 39,771
Total $40,379 $39,834
Liabilities
UK 137 202
USA 14,347 18,977
Total $14,484 $19,179
Revenue
North America 19,858 13,843
Asia 15,851 13,524
South America 3,148 1,749
Europe 156 550
Other 26 22
Total $39,039 $29,688
c. Significant customers - in 2021 Iofina Chemical had five
customers in excess of 5% of sales (2020 three customers). 2021
percentages were 10%, 9%, 7%, 7%, 6% (2020 percentages were 15%,
9%, 6%).
4. Profit before taxation
Profit before taxation is stated after charging:
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Depreciation expense 1,551 1,613
Amortisation expense 180 180
Other:
Annual audit fees for audit of parent
company and consolidated financial statements 82 79
Fees payable to the company's auditor
for other services 8 4
4. Profit before taxation (continued)
Cost of sales - analysis by nature
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Raw materials 14,912 9,711
Freight 782 891
Sales commission 359 257
Labour, manufacturing overhead and royalties 12,254 10,424
$28,307 $21,283
Administrative expenses - analysis by nature
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Remuneration and benefits 2,582 2,518
Share-based payments 120 148
Office expenses 257 197
Professional services 554 579
Travel 75 69
Rent (19) (36)
Other 220 211
$3,789 $3,686
Research and development expenses recognised during the period
were $241k (2020: $279k), and are included in administrative
expenses above.
5. Staff numbers and costs
The average number of Group employees, including executive
directors, and their costs were:
Year ended Year ended
31 December 31 December
2021 2020
Number Number
Production 81 81
Administrative 14 14
Sales 1 1
Total staff 96 96
5. Staff numbers and costs (continued)
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Wages and salaries 6,454 6,227
Social security costs 1,057 903
$7,511 $7,130
Of the total staff costs above, $5,120k (2020: $4,800k) is
included within cost of sales and $2,391k (2020: $2,330k) is
included within administrative expenses.
Payments to executive directors and senior officers of
subsidiaries (considered to be key management personnel) for their
services during the year were as follows:
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Wages and salaries 941 907
Social security costs 108 96
Total directors' cost $1,049 $1,003
Included within wages and salaries above is $295k (2020: $286k)
in respect of the highest paid director. No options were exercised
by a director in 2021 (2020 Nil).
6. Finance expense
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Bank facilities 16 September 2020
Term loan interest 345 114
Revolving loan facility interest 27 24
Interest swap liability (69) 69
Refinancing fees - 396
Debt restructure 29 March 2019
Term loan notes interest paid - 949
Arrangement fees - 84
Other interest payable - 9
IFRS16 lease interest (4) 18
Total finance expense $299 $1,663
7. Finance income
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Interest income 17 15
$17 $15
8. Taxation
Year ended Year ended
31 December 31 December
2021 2020
$'000 $'000
Current tax - -
Deferred tax (4,066) -
$(4,066) -
Tax reconciliation:
Profit on ordinary activities before
tax 5,120 1,278
Tax at UK income tax rate of 19% (2020:
19.00%) 973 243
Effects of:
Temporary differences (110) 323
Permanent differences (32) 29
Losses not recognised for deferred tax
purposes (831) (595)
Losses carried forward recognised as
deferred tax asset (4,066) -
Total tax charge/(credit) $(4,066) -
As previously disclosed, the Group has accumulated US Federal
tax losses that are expected to be deductible from future US
Federal taxable profits subject to agreement with the relevant tax
authorities. As of 31 December 2021 these losses are estimated to
be approximately $19.4 million (2020: $24.6 million). To the extent
US Federal tax losses are not utilised to offset current income
taxes they will begin to expire in 2035.
In accordance with IAS 12 and in light of the Group's recent
much improved profitability, and therefore its likely utilisation
of its $19.4m accumulated US Federal tax losses in the foreseeable
future, a deferred tax asset of $4.1m reflecting the value of those
losses at a tax rate of 21% has now been set up in the balance
sheet and credited to tax in the profit and loss account. This
asset will be amortised to the profit and loss account in line with
future reductions in tax payable from utilisation of the
losses.
9. Earnings per share
The calculation of earnings per ordinary share is based on the
profit after tax attributable to shareholders of $9,186k (2020
profit $1,278k) and the weighted average number of ordinary shares
outstanding of 191,858,408 (2020: 191,858,408). After including the
weighted average effect of dilutive share options of 1,232,450
(2020: 2,030,649) the diluted weighted average number of ordinary
shares outstanding was 193,090,858 (2020: 193,889,057).
10. Intangible assets (Group)
Exploration
& Evaluation
Assets
Montana Other intangible Total
Atlantis assets (see
Field below)
$'000 $'000 $'000
Cost
At 1 January 2020 3,358 3,844 7,202
Disposals (3,358) (25) (3,383)
At 31 December
2020 & 2021 - $3,819 $3,819
Accumulated amortization
At 1 January 2020 3,358 3,021 6,379
Charge for the year - 180 180
Disposals (3,358) (25) (3,383)
At 31 December
2020 - 3,176 3,176
Charge for the year - 180 180
At 31 December
2021 - $3,356 $3,356
Carrying amounts
At 31 December 2019 - $822 $822
At 31 December 2020 - $643 $643
At 31 December
2021 - $463 $463
10. Intangible assets (Group) (continued)
Details of Other intangible assets are set out below:
Other intangible WET(R) Customer Patent EPA registrations Total
assets patent relationships portfolio
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2020 2,700 661 212 271 3,844
Disposals - - (25) - (25)
At 31 December
2020 & 2021 $2,700 $661 $187 $271 $3,819
Accumulated amortization
At 1 January 2020 1,877 661 212 271 3,021
Charge for the
year 180 - - - 180
Disposals - - (25) - (25)
At 31 December
2020 2,057 661 187 271 3,176
Charge for the
year 180 - - - 180
At 31 December
2021 $2,237 $661 $187 $271 $3,356
Carrying amounts
At 31 December
2019 $823 - - - $823
At 31 December
2020 $643 - - - $643
At 31 December
2021 $463 - - - $463
Other intangible assets were acquired in the acquisition of
H&S Chemical in 2009.
WET(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 2.5 years
11. Goodwill (Group)
Carrying amounts $'000
At 31 December 2019, 31 December 2020 and 31 December 2021 $3,087
Goodwill arose on the acquisition of H&S Chemical in 2009
and is wholly allocated to the Iofina Chemical cash generating unit
of the Group. Goodwill impairment testing is conducted annually,
based on projected cash flow to be generated.
The Chemical business has been in operation for 35 years, and
much of its products and customer base are long established. For
impairment testing, a long term growth rate of 1.00% per annum was
applied to budgeted cash flows and a discount rate of 12.88% per
annum was used. On this basis the net present value of cash flow
exceeded the goodwill amount of $3,087k.
Sensitivity analysis
Projections based on the above assumptions show headroom of
$4.8m between the value in use of the business net of other assets
of $22.3m and the carrying value of $17.5m, comprising goodwill of
$3.1m, other intangible assets of $0.5m, and net business trading
assets of $13.9m. In order for the value in use to equal the
carrying value it would be necessary for the discount rate to rise
to 15.6% or the long term growth rate to be 5.7% negative or
projected EBITDA to be lower by 18.8%. Based on the results of this
impairment testing management are satisfied that a reasonably
possible change in assumptions would not lead to an impairment.
12. Property, plant and equipment (Group)
Exploration
and Evaluation
Assets
Montana Right of use
Atlantis Equipment and Construction in
Field Freehold Land Buildings Machinery Progress Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January
2020 5,841 209 1,719 355 26,323 1,840 36,287
Transfers - - - - 3,466 (3,466) -
Additions - - 11 - 176 2,262 2,449
Disposals (5,605) - - - (4,901) - (10,506)
At 31 December
2020 236 209 1,730 355 25,064 636 28,230
Transfers (236) - 276 - 1,124 (1,164) -
Additions - - 38 415 168 1,279 1,900
Disposals - - - (18) (80) - (98)
At 31 December
2021 - $209 $2,044 $752 $26,276 $751 $30,032
Accumulated
depreciation
At 1 January
2020 5,602 - 435 93 12,207 - 18,337
Charges for the
year - - 57 112 1,444 - 1,613
Disposals (5,602) - - - (4,900) (10,502)
At 31 December
2020 - - 492 205 8,751 - 9,448
Charges for the
year - - 57 96 1,398 - 1,551
Disposals - - - - (80) - (80)
At 31 December
2021 - - $549 $301 $10,069 - $10,919
Carrying amounts
At 31 December
2019 $239 $209 $1,284 $262 $14,116 $1,840 $17,950
At 31 December
2020 $236 $209 $1,238 $150 $16,313 $636 $18,782
At 31 December
2021 - $209 $1,495 $451 $16,207 $751 $19,113
Right-of-use assets
Right-of-use assets relate to the Group's lease on office
premises in Denver, Colorado. During 2021 the expiry date of the
lease was extended from April 2022 to April 2026, and an amount of
$415k has been capitalised as an addition in respect of future
rentals, in accordance with IFRS 16. Liabilities for future
payments are shown in Note 19.
13. Inventories
Group 31 December 31 December
2021 2020
$'000 $'000
Raw materials 4,487 6,588
Work in progress 1,753 2,813
Finished goods 56 255
$6,296 $9,656
At year end, there were no provisions against the carrying value
of inventories (2020: nil). During the year, the cost of
inventories recognised as expense and included in 'cost of sales'
amounted to $27,165k (2020: $20,135k).
14. Financial instruments
The Board of directors determines, as required, the degree to
which it is appropriate to use financial instruments to mitigate
risks. The main risks for which such instruments may be appropriate
are interest rate risk, foreign currency risk, credit risk,
investment risk, liquidity risk and commodity risk. The Group's
principal financial asset is cash, which is invested with major
banks. The Group has a term loan and a revolving loan facility and
no other borrowings.
Financial assets and liabilities
Group
Loans and receivables at Financial liabilities at Investment and swap
amortised cost amortised cost liability at fair value Total
2021 $'000 $'000 $'000 $'000
Cash and cash equivalents 5,262 5,262
Trade receivables 5,653 5,653
$10,915
Trade payables 1,521 1,521
Accrued liabilities 4,281 4,281
Lease liabilities 468 468
Term loan 8,214 8,214
$14,484
2020
Cash and cash equivalents 3,481 3,481
Trade receivables 3,102 3,102
Investment 900 900
$7,483
Trade payables 1,194 1,194
Accrued liabilities 4,279 4,279
Lease liabilities 186 186
Term loan 9,643 9,643
Revolving loan facility 2,718 2,718
Government subsidies 1,090 1,090
Interest rate swap
liability 69 69
$19,179
14. Financial instruments (continued)
Company Loans and receivables at amortised cost Financial liabilities at amortised cost Total
2021 $'000 $'000 $'000
Cash and cash equivalents 163 163
Other receivables 3 3
Due from subsidiaries 20,792 20,792
$20,958
Accruals 137 137
$137
2020
Cash and cash equivalents 60 60
Other receivables 3 3
Due from subsidiaries 21,712 21,712
$21,775
Accruals 202 202
$202
The interest rate swap liability at fair value is valued on the
basis of Level 2 inputs as defined in IFRS 13.
Interest rate risk
Surplus funds are held within the Group's checking and savings
accounts. The benefit of fixing rates for the longer term is kept
under review, having regard to forecast cash requirements and the
levels of return available. Given the short term nature of Iofina's
surplus funds, the Group has limited interest rate risk. As of 31
December 2021, all surplus funds were invested in checking and
savings accounts that had no terms and were 100% liquid. Bank
facilities have variable interest rate terms and therefore there is
an exposure to increases in interest rates. This is mitigated by
the use of an interest rate swap to fix the rate on the majority of
the term loan. Also the interest on the revolving credit facility
is reduced by arrangements to sweep surplus funds into that
account.
Foreign currency risk
The Group has potential transactional currency exposure in
respect of items denominated in foreign currencies relating to the
Group's administration in the UK. The balance of cash held in
foreign currency was $163k (GBP GBP120k) as of year-end, and
provides a hedge against GBP denominated UK expenses.
Sales transactions are denominated in US Dollars, which is the
operating currency. Other impacts of foreign currency risk are not
deemed material to these financial statements.
Credit risk
The maximum exposure is reflected by the carrying amount of
financial assets. Because the counterparties to Iofina's holdings
of cash and cash equivalents are prime financial institutions,
Iofina
14. Financial instruments (continued)
does not expect any counterparty to fail to meet its
obligations. Additionally, the Group is exposed to marginal credit
risk in the form of receivables for product sales. Credit risk in
this regard is mitigated through long-term customer payment
history, insurance of certain foreign receivables, extensive credit
analysis of large purchasers, use of letters of credit, and the
requirement for partial or total payment prior to shipment for some
customers.
Investment risk
There is a risk that short term investments may not realise
their carrying value.
Liquidity risk
The Group raises funds as required on the basis of forecast
expenditure and cash inflows over the next 12 months. When
necessary, the scope and rate of activity are adjusted to take
account of the funds available. There is a risk that the Group may
not be able to raise sufficient funds to repay loans at their
maturity.
The following table sets out the contractual maturities
(representing undiscounted contractual cash flows) of financial
liabilities:
Up to 3
Group months Between 3 and 12 months Between 1 and 2 years Between 2 and 6 years
At 31 December 2021: $'000 $'000 $'000 $'000
Trade payables 1,521 - - -
Accrued liabilities 1,476 2,804 - -
Lease liabilities 2 56 102 309
Term loan 357 1,071 1,429 5,357
$3,356 $3,931 $1,531 $5,666
Up to
3 Between 3 and 12
Group months months Between 1 and 2 years Between 2 and 7 years
At 31 December 2020: $'000 $'000 $'000 $'000
Trade payables 1,194 - - -
Accrued liabilities 1,235 3,045 - -
Lease liabilities - 141 45 -
Term loan 357 1,071 1,429 6,786
Revolving loan facility - - 2,718 -
$2,786 $4,257 $4,192 $6,786
14. Financial instruments (continued)
Commodity risk
The Group is exposed to movements in the price of raw iodine.
Sales of iodine based products were
$30,473k (2020: $18,507k). The effects of changes in the price
of iodine on 2021 revenue and profits are set out in the Financial
Review on pages 9 to 11. Iodine is produced internally and is the
most significant cost component for iodine based products.
15. Trade and other receivables Group
31 December 31 December
2021 2020
$'000 $'000
Trade receivables 5,653 3,102
Prepayments and other receivables 505 183
$6,158 $3,285
Company
31 December 31 December
2021 2020
$'000 $'000
Prepayments and other receivables 3 3
$3 $3
All receivables and prepayments are short term in nature. The
carrying values are considered a reasonable approximation of fair
value. There are no expected credit losses.
The Group and the Company have not received a pledge of any
assets as collateral for any receivable or asset.
16. Investment
31 December 31 December
2021 2020
$'000 $'000
Investment in Organic Vines Op LLC - 900
- $900
The investment in Organic Vines Op LLC was made in November 2019
and related to a single season's production of organically
certified hemp seeds. The market for these seeds has not developed
as initially anticipated, and sales to date have been negligible.
The company considers it is unable to predict any future income
with any reasonable probability, and therefore the investment has
been impaired to Nil.
17 . Cash and cash equivalents
Group
31 December 31 December
2021 2020
$'000 $'000
Cash in US Dollar accounts 5,099 3,421
Cash in GB Pound Sterling accounts 163 60
$5,262 $3,481
Company
31 December 31 December
2021 2020
$'000 $'000
Cash in GB Pound Sterling accounts 163 60
$163 $60
18. Trade and other payables
Group
31 December 31 December
2021 2020
$'000 $'000
Trade payables 1,521 1,194
Accrued expenses and deferred income 4,281 4,279
$5,802 $5,473
Company
31 December 31 December
2021 2020
$'000 $'000
Accrued expenses 137 202
$137 $202
All trade and other payables are considered short term. The
carrying values are considered to be a reasonable approximation of
fair value.
Except as regards the term loan, the Group and Company have not
pledged any assets as collateral for any liabilities or contingent
liabilities.
19. Lease liabilities
31 December 31 December
2021 2020
$'000 $'000
Lease liabilities - current 58 141
Lease liabilities - non-current 410 45
$468 $186
Movements: 2021 2020
$'000 $'000
Opening balance 186 294
Payments (110) (126)
Lease extension liabilities 405 -
Interest accrued (4) 18
Adjustments (9) -
$468 $186
Lease liabilities relate to the Group's lease on office premises
in Denver, Colorado, which was extended during 2021 to run till 30
April 2026. Liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the Group's
incremental borrowing rate on commencement of the lease or the
extension period. Lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and
are reduced by lease payments made.
20. Term loans and Revolving loan facility
2019 Term 2020 Term 2020 Revolving
loans loan loan facility
$'000 $'000 $'000
At 1 January 2020 $18,177 - -
Repaid 30 June 2020 (2,726) - -
Repaid 16 September 2020 (15,451) - -
First Financial Bank Facilities:
Term loan drawn 16 September
2020 - 10,000 -
Revolving loan facility drawn
16 September 2020 - - 3,000
Term loan instalment repayments - (357) -
Revolving loan facility net payments - - (282)
At 31 December 2020 - $9,643 $2,718
Term loan instalment repayments - (1,429) -
Revolving loan facility net payments - - (2,718)
At 31 December 2021 - $8,214 -
Due within one year - $1,429 -
Due after one year - $6,785 -
20. Term loans and Revolving loan facility (continued)
At the end of June 2020, the Group repaid 15% of debt
outstanding, amounting to $2.73 million. In September 2020, the
Group completed the refinancing of all its then outstanding debt of
$15.45 million. Facilities of a 7-year $10 million term loan and a
2 year revolving line of credit of up to $8 million, secured by a
charge over the Group's assets, were provided by First Financial
Bank, Ohio. The total amount drawn on completion was $13 million,
representing the term loan of $10 million and $3 million relating
to the revolving line of credit. With the addition of $2.45 million
from the Group's cash resources the existing debt balance of $15.45
million was repaid in full, together with accrued interest. The
principal terms applying to the 2020 facilities are:
a) The $10 million term loan is repayable in full by equal
monthly instalments over the 7 years to 30 September 2027. There
are accelerated repayments based on 25% of 2021 and 2022 surpluses
of EBITDA over the total of capital expenditure and debt payments
of principal and interest, payments to be made on 30 June 2022 and
2023 respectively. The interest rate on $7 million of the loan has
been fixed to maturity by a swap contract at 3.99%, and the
interest rate on the balance is variable monthly at 2.50% above
LIBOR, subject to a minimum LIBOR rate of 1.00%, and is currently
3.50%. Repayment of all or part of the loan may be made at any
time, subject to the cost or benefit of unwinding the swap
contract. At 31 December 2021 the amount outstanding after
instalment payments was $8.2 million.
b) The $8 million revolving line of credit has a 2 year term and
may be drawn and repaid in variable amounts at the Group's
discretion, with the amount available at closing being fixed at $3
million. Amounts that may be drawn are subject to a borrowing base
of sufficient eligible discounted monthly values of receivables and
inventory, and compliance on a quarterly basis with trailing 12
months financial covenant ratios of 1) a maximum multiple of 2.5
total debt to EBITDA, and 2) a minimum multiple of 1.2 EBITDA net
of capital expenditure to the total of principal and interest
payments on the total debt. The interest rate is variable monthly
at 2.25% above LIBOR, subject to a minimum LIBOR rate of 1.00%, and
is currently 3.25%. The amount outstanding at 31 December 2020 of
$2.72 million was reduced to Nil by payments made during the
year.
The derivative liability resulting from the swap contract
described above has been revalued by reference to market
expectations for future LIBOR rates, and the liability of $69k
previously recognised and charged to finance expense has been
reduced to Nil (Note 6). The actual cost of the swap during the
year was $31k (2020 $10k).
21. Net debt
2021 2020
$'000 $'000
2020 Term loan 8,214 9,643
Revolving loan facility - 2,718
Total bank debt 8,214 12,361
Cash and cash equivalents 5,262 3,481
Net debt at 31 December $2,952 $8,880
22. Government subsidies - Paycheck Protection Program loans
In mid May 2020 the Group's operating subsidiaries, Iofina
Chemical, Inc. and Iofina Resources, Inc., received loans totalling
US$1.09m under the US Small Business Administration's Paycheck
Protection Program ('PPP'), which is part of the Coronavirus Aid
Relief and Economic Security Act ('CARES Act'). PPP loans, or a
portion of the loan, may be forgivable if loan proceeds are used
for eligible purposes, including employee retention and payroll.
The Group received notice of 100% forgiveness from the US Small
Business Administration, as of 22 January 2021 as regards $552,500
in respect of iofina Resources, Inc., and as of 27 January 2021 as
regards $537,400 in respect of Iofina Chemical, Inc. The amounts
forgiven have been recognised as income.
23. Share capital
31 December 31 December
2021 2020
Authorised:
Ordinary shares of 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 or share premium in
2021.
24. Share based payments
No options were granted or exercised during the year. A further
1,196,700 options were granted on 9 March 2022 at an exercise price
of GBP0.176 ($0.23). In 2021 a total of 1,378,250 options either
lapsed or were forfeited. Total options outstanding at 9 March 2022
were 5,000,400, representing 2.61% of shares in issue.
Options granted to directors and key employees and outstanding
at 31 December 2021 are as follows:
Exercise Exercise
Number Vesting Share Exercise Price Price
Date of Grant of Options Date Price Price 2021 2020
GBP GBP $ $
13 June 2018 880,000 13 June 2019 0.162 0.162 0.22 0.22
13 June 2018 880,000 13 June 2020 0.162 0.162 0.22 0.22
25 July 2019 451,000 25 July 2020 0.213 0.213 0.29 0.29
25 July 2019 451,000 25 July 2021 0.213 0.213 0.29 0.29
16 December 16 December
20 570,850 21 0.125 0.125 0.17 0.17
16 December 16 December
20 570,850 22 0.125 0.125 0.17 0.17
Weighted average 3,803,700 GBP0.16 GBP0.16 $0.22 $0.22
The weighted average contractual life of options outstanding at
31 December 2021 was 7.5 years (2020 6.9 years).
Exercise prices shown in USD are based on the US Dollar/Pounds
Sterling exchange rate at 31 December 2021 of 1.351 (2020 1.365).
Options outstanding at 31 December 2021 expire the earlier of ten
years from grant date or 90 days after the termination of service
to the Company.
24. Share based payments (continued)
2021 Number of Weighted average exercise price 2020 Number of Weighted average exercise
Options Options price
GBP $ GBP $
Options
outstanding
At 1 January 5,181,950 GBP0.19 $0.26 3,949,500 GBP0.21 $0.28
Granted - - - 1,232,450 GBP0.125 $0.17
Lapsed (985,000) GBP0.30 $0.41 - - -
Forfeited (393,250) GBP0.16 $0.22 - - -
At 31 December 3,803,700 GBP0.16 $0.22 5,181,950 GBP0.19 $0.26
Options
exercisable
At 1 January 3,457,250 GBP0.21 $0.28 1,975,000 GBP0.23 $0.31
Lapsed (985,000) GBP0.30 $0.41 - - -
Forfeited (261,250) GBP0.17 $0.23 - - -
Vested 1,021,850 GBP0.16 $0.22 1,482,250 GBP0.18 $0.24
At 31 December 3,232,850 GBP0.17 $0.23 3,457,250 GBP0.21 $0.28
Movements in the Share-based payment reserve were as
follows:
31 December 31 December
2021 2020
$'000 $'000
Balance 1 January 2,136 1,988
Share-based payment charge 120 148
Lapsed and forfeited options (249) -
Balance 31 December $2,007 $2,136
25. Deferred tax
2021 2020
$'000 $'000
At 1 January - -
Prior years US Federal tax losses available for offset against future US Federal taxable profits
(see note 8) 4,066 -
At 31 December $4,066 -
26. Related party transactions
In November 2019 the Group made an investment of $900k in
Organic Vines OP LLC, a company which is controlled by Lance
Baller, Iofina's chairman, and in which he has a substantial
personal investment. In 2021 this investment has been impaired to
Nil (Note 16).
There are intercompany transactions between the members of the
Group. In both 2020 and 2021 all iodine produced by Iofina
Resources was sold to Iofina Chemical. Related party balances are
as follows:
26. Related party transactions (continued)
31 December 31 December
2021 2020
$'000 $'000
Due to Due from Due to Due from
Iofina plc 20,792 - 21,712 -
Iofina Resources - 28,846 900 27,258
Iofina Chemical 8,125 71 5,586 40
IofinaEX - - - 900
Additional related party transactions with directors, who are
considered to be key management personnel, are set out in the
Corporate Governance Statement on page 29. Option grants as
described in note 24 are to employees and Directors.
The Company has entered into a number of unsecured related party
transactions with its subsidiary undertakings. The most significant
transactions carried out between the Company and its subsidiary
undertakings are financing.
27. Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, to provide
returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital. The Group defines capital
as being share capital plus reserves as shown in the balance sheet.
The Directors continue to monitor the level of capital as compared
to the Group's commitments and adjust the level of capital as is
determined to be necessary by issuing new shares. Iofina plc is not
subject to any externally imposed capital requirements. The
Directors consider the capital of the Group to be the total equity
attributable to the
equity holders of the parent of $30.0 million as at 31 December 2021 (2020: $20.6 million).
28. Subsidiary undertakings
Investment in subsidiaries
Investment in
subsidiaries
$'000
Cost
Balance at 31 December 2019, 2020 and 2021 $17,199
Due from subsidiaries
2021 2020
$'000 $'000
Cost
At 1 January 21,712 35,541
Finance expense paid by subsidiaries - (1,033)
Loans repaid - (18,177)
Management fees 100 100
Net funding from subsidiaries (1,020) (19)
Reversal of impairment of amount due from Iofina Resources - 5,300
At 31 December $20,792 $21,712
28. Subsidiary undertakings (continued)
The Group's debt arrangements are on a joint and several basis
with all Group companies excluding dormant subsidiaries. The
principal beneficiary of these arrangements is Iofina Resources,
Inc., and therefore the debt is accounted for in that company and
the consolidated balance sheet, and does not appear in the balance
sheet of Iofina Plc.
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 Dormant 100%
Iofina Resources,
LLC United States/CO Dormant 100%
Iofina Resources,
LLC United States/TX Dormant 100%
Iofina, Inc. was established in February 2006 and is a wholly
owned subsidiary of Iofina plc. Iofina, Inc. owns the whole of the
issued share capital of Iofina Resources, Inc., Iofina Chemical,
Inc. and IofinaEX, Inc. Other entities are subsidiaries of Iofina
Resources, Inc., the iodine production company.
The registered offices of the above companies are as
follows:
Company Registered office
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
29. Capital commitments
At 31 December 2021 the Group had capital commitments amounting
to $463k.
30. Post balance sheet events
1,196,700 share options were granted on 9 March 2022 at an
exercise price of GBP0.176 ($0.23). There were no other post
balance sheet events.
31. Contingent liabilities
There are no contingent liabilities.
32. Ultimate controlling party
There is no ultimate controlling party of the Group.
Iofina and the environment
Iofina promotes, wherever possible, environmental sustainability
in its working practices and seeks to minimise, mitigate, or remedy
any harmful effects from the Group's operations on the environment
at each of its operational sites. To continue that effort through
all aspects of business, this report has been produced to minimise
its effect on the environment by using thinner paper, fewer pages,
smaller type set, and non--colour printing as much as possible. As
part of this effort Iofina is trying to move attention to its
online annual reports available at www.iofina.com. By being a
better steward of the environment, Iofina saves valuable
shareholder funds instead of producing glossy magazine pages
throughout the whole document.
This page does not form part of the statutory financial
statements.
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END
FR SSMSIUEESEDI
(END) Dow Jones Newswires
May 09, 2022 13:10 ET (17:10 GMT)
Grafico Azioni Iofina (AQSE:IOF.GB)
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