TIDMEDEN
RNS Number : 7602U
Eden Research plc
02 April 2019
This announcement contains information which, prior to its
disclosure, was considered inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014 (MAR).
Eden Research Plc
("Eden" or "Company")
Financial Results for Year Ended 31 December 2018
Eden Research plc (AIM: EDEN), the AIM listed company that
provides breakthrough natural microencapsulation technologies to
the global agrochemicals, animal health and consumer products
industries, announces its preliminary results for the year ended 31
December 2018.
Financial highlights:
-- Revenue of GBP2.8m (2017: GBP1.9m)
-- Operating loss of GBP0.5m (2017: GBP0.8m)
-- Loss before tax of GBP0.5m (2017: GBP0.8m)
-- Loss per share of 0.16p (2017: 0.33p)
-- Net cash of GBP2.5m (2017: GBP3.7m)
-- Operating profit, before non-cash items (share-based payment
charge and amortisation), and one-time items (licence renewal fee
and royalties refund) of GBP0.02m (2017: loss GBP0.4m)
-- Product sales increased 112% to GBP1.6m (2017: GBP0.8m)
-- Upfront and milestone payments of GBP1.2m (2017: GBP1.1m)
Commercial highlights:
-- Multiple distribution agreements signed with Sipcam SpA
("Sipcam") for Mevalone in ten new territories, for which a fee of
EUR0.9m (GBP0.8m) was paid to Eden
-- Exclusive distribution agreement signed with Sipcam for its
fungicide product Novellus to be sold in Australia and New
Zealand
-- Successful positioning of Mevalone as an early-season
treatment contributing to product sales growth of 112%
-- A healthy pipeline of collaborations progressing with majors in Eden's distributor network
Operational highlights:
-- Lykele van der Broek, former COO of Bayer Crop Science and
former Head of the Animal Health division of Bayer Health Care,
appointed as Chairman with effect from 1 January 2018
-- Regulatory applications submitted in new countries for
Mevalone and Cedroz, including the US which is currently undergoing
scientific review by the United States Environmental Protection
Agency ("EPA")
-- Regulatory clearance received for head lice treatment product
by TerpeneTech to be sold in the European Economic Area
Lykele van der Broek, Chairman commented: "We have undergone a
year of significant growth at Eden in 2018, with a boost to revenue
from product sales and the contribution of Sipcam SpA exercising
it's option for new distribution agreements in ten additional
territories.
"Behind the scenes, significant regulatory activity has been
progressing with promising potential to unlock future product sales
expansion for the business. The Board is currently prioritising the
long-term viability and growth potential of the Company and is
looking forward to making further commercial progress in 2019."
For further information contact:
Eden Research plc www.edenresearch.com
Sean Smith
Alex Abrey 01285 359 555
Shore Capital (Nomad) 020 7408 4090
Stephane Auton / Patrick Castle
Powerscourt (Financial PR) 020 7250 1446
Nick Dibden / Jana Tsiligiannis
Notes:
Eden Research is a technology development and commercialisation
company with intellectual property and expertise in encapsulation,
terpenes and environmentally friendly technologies to provide
naturally occurring solutions for the global agrochemicals, animal
health, and consumer product industries.
Eden's encapsulation technology harnesses the biocidal efficacy
of naturally occurring chemicals produced by plants (terpenes) and
can also be used with both natural and synthetic compounds to
enhance their performance and ease-of-use. The technology uses
yeast cells that are a by-product of numerous commercial production
processes to deliver a slow release of natural compounds for
agricultural and non-agricultural uses. Terpenes are already widely
used in the food flavouring, cosmetics and pharmaceutical
industries.
Historically, terpenes have had limited commercial use in the
agrochemical sector due to their volatility, phytotoxicity and poor
solubility. Eden's platform encapsulation technology provides a
unique, environmentally friendly solution to these problems and
enables terpenes to be used as effective, low-risk
agrochemicals.
Eden is developing these technologies through innovative
research and a series of commercial production, marketing and
distribution partnerships.
The Company has a number of patents and a pipeline of products
at differing stages of development targeting specific areas of the
global agrochemicals industry. To date, the Company has invested in
the region of GBP13m in developing and protecting its intellectual
property and seeking regulatory approval for products that rely
upon the Company's technologies. Revenues earned by the Company to
date have been modest whilst the Company has concentrated on
securing patent protection for its intellectual property, gaining
regulatory approvals, identifying suitable industrial partners, and
entering into commercial agreements.
In May 2013, the three actives that comprise Eden's first
commercial product, 3AEY, were approved as new ingredients for use
in plant protection products. This represented a major milestone in
the commercialisation of Eden's technology and is a significant
accomplishment for any company. To illustrate this point, it should
be noted that in all of 2013 Eden's approvals represented 3 of only
10 new active ingredients approved by the EC.
3AEY has been authorised for sale in Kenya, Malta, Greece,
Bulgaria, Spain, Italy, France, Cyprus, Albania, Portugal and the
Republic of Macedonia.
Eden was admitted to trading on AIM on 11 May 2012 and trades
under the symbol EDEN.
For more information about Eden, please visit:
www.edenresearch.com.
CHAIRMAN'S REPORT
Introduction
I'm pleased to report that 2018 has been a year of further
growth for Eden, building on the firm foundations laid by the
Company over a number of years. Overall revenue and, importantly,
product sales have seen significant growth and, in the background,
regulatory activity, which is key to future product sales
expansion, has also increased.
Whilst the financial results for 2018 are again pleasing, there
is a lot of upside potential which the Company aims to realise.
There are a number of products, in addition to Mevalone and Cedroz
which Eden is in the advanced stages of developing. The new
products in the Group's pipeline aim to address markets which are
potentially bigger than those already covered by its existing
products and are creating a healthy pipeline of growth opportunties
for Eden.
There is potential for an even greater opportunity around the
use of Eden's proprietary, natural micro-encapsulation technology,
SustaineĆ, which is being tested by a number of third parties,
including some of the major agchem companies.
All of these opportunities are being progressed as quickly as
possible and are, as a whole, showing promising potential.
Commercial
During the year some important commercial milestones were
achieved by the Company.
In June, we announced that the submission for Mevalone, Cedroz
and three active ingredients had been made to the Environmental
Protection Agency to seek marketing authorisation in the USA. The
agchem market in the US is a large part of the global agchem market
and, as such, presents a potentially valuable opportunity to Eden
for Mevalone and Cedroz, as well as future products.
In October, TerpeneTech, Eden's associate company, received
regulatory clearance to sell its head lice product in the European
Economic Area. The commercial launch of this product is expected in
2019 and shows the diversity of Eden's Sustaine technology.
A further significant milestone for Eden was realised in
December when it was announced that Sipcam had exercised its option
to become the exclusive distributor for Mevalone in ten additional
countries, for which it paid a fee of EUR0.9m. Sipcam has proven
itself to be a reliable partner in Spain and Italy and so we are
very pleased to see our relationship grow.
Board Composition
During the year, the Board of Directors comprised:
Alex Abrey - Chief Financial Officer
Robin Cridland - Non-executive Director
Sean Smith - Chief Executive Officer
Lykele van der Broek - Non-executive Chairman
Outlook
From my time at Bayer CropScience, I know that the development
of new chemistries and products takes time.
Not only do you have to ensure the formulations are the best
they can be, having spent years identifying possible active
ingredients, you then have to confirm the expected activity of
those formulations through laboratory, greenhouse and then field
trials to ensure that the efficacy is satisfactory. If this is so,
you can then move onto the regulatory approval process and,
finally, the production and commercialisation stage, assuming
approval has been granted.
This is a simplistic overview of what is, in reality, a very
complex, detailed and, at times, challenging process that agchem
companies have to go through all of the time.
Although the same is true for Eden, I can assure our
shareholders that we are a long way down that path with a number of
new, competitive bio-pesticide products in a market which is
growing considerably, year-on-year.
Due to the positive safety profiles of the active ingredients we
use, with Maximum Residue Level ("MRL") exemption status for all
three of our active ingredients in the European Union and our
natural Sustaine technology, we are able to move relatively quickly
to commercialisation based on the significant amount of work that
has been done thus far.
Expediting the commercialisation of our products and those which
will benefit from Sustaine is now our main priority.
In line with the current commercial and regulatory status of the
business, we aim to ensure the long-term viability and growth of
the Company is duly achieved. I personally believe that Eden will
continue to grow as a leader in its fields and will become a global
success story in the industry.
L J van der Broek
Chairman
1 April 2019
CHIEF EXECUTIVE OFFICER'S REPORT
Financial Results
Revenue for the year was GBP2.8m compared to GBP1.9m in 2017
with product sales increasing by 112% to GBP1.6m from GBP0.8m in
2017.
Overheads were GBP1.5m, compared to GBP1.4m in 2017 and
Operating Loss was GBP0.5m compared to GBP0.8m in 2017. As a result
of a change agreed with our auditors in the amortisation schedule
for intellectual property from 6 years to 12 years, loss before tax
and operating loss have both been reduced by c.GBP0.5m from the
previously announced figure.
Overview
Eden continues to make good progress in both the development of
product sales and overall revenue growth. Product sales more than
doubled in the period, whilst overall revenue grew by nearly 50%.
Product sales growth was driven by increases in market share as
well as improvements to product positioning in key countries. This
was achieved despite the fact that 2018 was not a year that
favoured the use of fungicides across Southern Europe due to the
dry weather conditions.
In 2018, the Company realised the benefits of a number of
collaborations initiated over the past four years, with the
highlight being Sipcam's election to exercise its full rights to
Mevalone under the 2017 Evaluation and Option Agreement. Progress
with Eden's second product, Cedroz, which will be marketed by
Eastman in nearly 30 countries globally, continues apace, as
exemplified by the Company's recent announcement that this
important new product has cleared its first meaningful regulatory
hurdle.
In 2019, growth is expected to continue from our existing
commercial and regulatory platform, whilst we anticipate that new
territories will be added to the list of countries in which Eden
products are authorised for sale and use. Furthermore, we expect
the further growth of our distributor network and increasing
collaboration around the use of Sustaine, Eden's patented
micro-encapsulation system to continue.
Sales and Market Development
Eden saw strong growth of its first product, Mevalone, across
Southern Europe where the product is authorised for marketing and
use on grapes and a list of other high value fruits and vegetables.
Mevalone was initially developed for use on table and wine grapes
for the treatment of botrytis, a fungal disease which can have
devasting effects on crop production and quality, and in recent
years our partners have been working to broaden the number of crops
on which Mevalone can be used. Year-on-year sales growth was strong
despite growing conditions during the season not favouring the use
of fungicides. This growth, in part, reflected an optimisation of
product positioning by our partners in several countries.
The early part of the growing season is important in
establishing the potential for botrytis to develop during the peak
risk period (typically in September) when cooler and wetter weather
is prevalent. However, until this year, and since the first launch
of Mevalone in late 2016, Mevalone has been positioned mainly as a
late season botryticide based upon its favourable risk profile,
performance, exemption from maximum residue levels and low
pre-harvest intervals. This means that, unless there is an outbreak
of this disease late in the season, sales are likely to be modest
as growers are reluctant to apply products that they perceive as
unnecessary (as would be the case in the absence of disease).
However, in conjunction with our partners, we are pleased with our
first efforts to position Mevalone in the early part of the season
this year as a treatment that is effective in reducing the
potential for the later stage development of botrytis.
Early season applications act as an insurance policy for growers
and provide for more predictable sales for Eden and our partners.
This positioning is backed by data which has been developed by our
partners working with leading academic experts in the field of
plant pathology. This has been translated into strong early season
sales in the territories in which this positioning was initiated in
2018. We anticipate a broadening of this product positioning in
2019 and beyond, as we are able to support early season
applications with territory specific performance data.
Mevalone is also approved for use in Kenya, where it is marketed
as "Hawk" for the treatment of botrytis on flowers and a number of
additional crops. Market conditions in Kenya remain challenging,
but there is an opportunity to improve our market share in the
country and to explore how we might grow our business in the
region. Furthermore, we believe that there is the opportunity to
commercialise Eden's nematicide in Kenya, and efforts are underway
to realise this potential.
Given the current footprint of approvals for Eden's products,
which is currently limited to the treatment of botrytis on grapes
and a variety of additional crops in the EU's Southern Zone and in
Kenya, sales progress has met our expectations during the year. We
expect to see an increase in product sales volumes in the years to
come as our market share grows and changes in product positioning
ensures more frequent treatments using Mevalone. The full extent of
this increase will be closely linked to the end-of-season weather
patterns and their impact on the emergence of botrytis in the late
pre-harvest period.
As authorisations in new territories are granted, we expect a
further strengthening of Mevalone sales and a reduced dependency
upon regional weather patterns and the seasonality associated with
sales being limited to the northern hemisphere. Similarly, further
sales gains are expected as we expand the "label" for Mevalone to
include major new disease and crop targets. Applications for
authorisation and use are pending in an increasing number of
countries with notable applications submitted in the United States
of America and Australia during the course of 2018.
Commercial Partnerships
Eastman
In partnership with Eastman, we have been busy preparing for the
commercial launch of our second product, a nematicide for use in
open field and greenhouse agriculture across a range of fruit and
vegetable crops. This product will be marketed by Eastman as
"Cedroz(TM)" in 29 countries, including the US and multiple
European countries. As recently announced, Eastman has now received
authorisation for Cedroz from the Regulatory Affairs Directorate in
Malta. Malta is acting as the zonal rapporteur Member State
("zRMS") for the Southern EU agricultural zone and on behalf of a
number of additional EU countries for indoor uses. This represents
the successful completion of the first stage in the authorisation
process in the EU.
Following the authorisation by Malta, the concerned Member
States ("cMS") are allocated time to grant authorisation for the
sale and use of Cedroz within their jurisdictions. Once ratified by
each cMS, the approvals are expected to cover Spain, Italy,
Portugal and Greece for outdoor uses and, in addition to these
Member States, France, Belgium, the Netherlands and the United
Kingdom for professional greenhouse uses.
In addition to these important new territories for Eden's
products, Malta has authorised the use of Cedroz on a wide range of
crops, including cucumbers, courgettes, melons, aubergine, peppers,
tomatoes and strawberries. Nematodes are known to cause severe
damage to crops globally for both open field and greenhouse growers
resulting in yield losses and driving up costs.
The market is eagerly awaiting the arrival of Cedroz as a
sustainable solution for nematode control. It is now expected that
the cMS will grant authorisation for use with no pre-harvest
interval and with an exemption from maximum residue levels
providing reduced risks for growers and the food chain, alike.
Sipcam-Oxon
In December, the Company's commercial partner, Sipcam Oxon SpA
("Sipcam"), exercised its option over the exclusive distribution
rights in ten new countries covered under the 2017 Evaluation and
Option Agreement, for which a fee of EUR0.9m (GBP0.8m) was paid to
Eden. As a result, Sipcam will be the exclusive distributor of
Eden's fungicide product, known as Mevalone, in twelve countries
including Italy, Spain, USA, China, Brazil and Japan. It is
important to note that this means that Sipcam has elected to take
up their complete set of rights for the distribution of Mevalone.
This adds ten new countries to Eden's "commercial footprint",
including major grape producers such as China, the US, Argentina,
Australia, New Zealand and South Africa.
TerpeneTech
TerpeneTech secured a CE mark for its head-lice treatment
product in European Economic Area ("EEA") in 2018. This is the
first step in the marketing and sales of such products. TerpeneTech
has also established its first channel distribution partner who
will target the U.K. market. The first product launch in the U.K.
is expected to coincide with the back-to-school schedule in the
autumn of 2019. Sales will commence in other countries in the EEA
once arrangements with additional distribution partners have been
finalised. This is expected to take place during 2019.
Eden plans to supply a concentrate of encapsulated active
ingredients (based upon Eden's microencapsulation technology) to
TerpeneTech who will then formulate the finished product, which
will initially be sold by its distribution partner into the
discount retail market in the U.K.
The development, efficacy testing, and Medical Device regulatory
dossier of this head-lice treatment product has been in drafting
for approximately three years, and it should be noted that the
launch of any consumer product into a regulated market, such as the
head-lice treatment products market, is significantly more
complicated, time consuming and costly than launching products into
unregulated markets.
Bayer Animal Health
As previously announced, the launch of animal health products in
the USA by Eden's partner, Bayer Animal Health ("Bayer"), has been
delayed. This is due to the need for additional formulation work on
one of the three initial products Bayer has developed. It is now
anticipated that the launch of these products will take place in
2019, subject to successful completion of the additional
formulation work. Bayer and Eden are working closely together to
expedite matters, and both partners consider the launch of these
products to be of high priority.
Investing in Regulatory Approvals
As announced on 14 June 2018, Eden has submitted an application
for the authorisation of its three active ingredients and first two
products, Mevalone and Cedroz, in the United States. The US
Environmental Protection Agency (EPA) has confirmed the initiation
of its technical review. Upon approval, these authorisations will
give Eden and our partners the ability to sell Mevalone and Cedroz
in the US and also ease the way for the approval of future products
based upon any of the same three active ingredients. We anticipate
that authorisation will be gramted in time for the 2020 growing
season. However, we caution that the precise timelines for
authorisation are controlled by various regulatory agencies and
therefore subject to change.
We are currently pursuing registrations in a number of
additional key territories for Mevalone, and we are supporting
Eastman in seeking authorisation in nearly 30 territories for
Cedroz. Further announcements on regulatory progress will be made
as and when appropriate.
Brexit
The impact of Brexit is still largely uncertain for many UK
companies, which is the case with Eden. However, the Company
understands that the ownership of its EU approvals of Mevalone and
its constituent active substances should not be impacted by Brexit
as guidance has been published stating that the owner of such
approvals can continue to be a UK resident company. However,
seeking regulatory approval in the U.K. for Eden products has
become somewhat more challenging, and the Company is now weighing
up market opportunities and costs under the various Brexit
scenarios.
It should be noted that TerpeneTech has taken steps through the
establishment of an Irish subsidiary to ensure that it can remain a
notified supplier of geraniol in the EU after Brexit, as the
guidance for authorisation holders under the Biocidal Products
Regulation requires holders to be based in the EU.
Dividend
There was no dividend paid or proposed in respect of 2018. The
Board continues to monitor its dividend policy.
Outlook
Overall, we are pleased with the sales, market, regulatory and
product-related developments over the past year. It is particularly
satisfying to see, despite the 2018 growing season's
weather-related challenges, strong sales growth for Mevalone which
reflects increases in market share and improved product
positioning. With an expanding footprint of regulatory approvals
for Mevalone and the anticipated entry of Eden's second product
onto the market, we believe this will drive ongoing sales growth
through ongoing market share gains and an expanding list of
countries in which we are authorised to sell Eden's products.
Our Research and Development efforts are showing real promise
for the development and registration of new product categories.
Assuming continued success, we believe we will be in a position to
submit applications for regulatory approval for a new class of
product in the during the next few years. Also, SustaineƤ, Eden's
patented, natural micro-encapsulation technology, is being
evaluated by an increasing number of parties, including Sipcam, on
a large and growing number of active ingredients used in crop
protection. This technology represents significant medium-term
potential for the Company, and we are pleased with the attention it
is receiving in the hands of current and new collaborators.
Finally, in 2019 we will increase our focus on the growth of
in-house capabilities. Eden has long relied upon out-sourced
expertise for a variety of functions, and our management team has
been stretched and largely focused on supporting nearer-term
objectives. In 2019, we aim to add in-house capabilities with a
view to accelerating our growth and capitalising upon existing and
new opportunities.
I look forward to working with the Board, our team and our
partners to fully realise our ambitions in 2019 and in the
future.
S M Smith
Chief Executive Officer
1 April 2019
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For The Year Ended 31 December 2018
2018 2017
Notes GBP GBP
Revenue 2 2,774,272 1,877,187
Cost of sales (1,237,151) (831,499)
------------ ------------
GROSS PROFIT 1,537,121 1,045,688
Amortisation of intangible
assets (429,871) (750,210)
Other administrative
expenses (1,518,914) (1,428,028)
Exceptional Royalties
Refund 12 - 566,703
Licence renewal fee 12 - (187,781)
Share based payments (85,372) (27,210)
------------ ------------
OPERATING LOSS (497,036) (780,838)
Finance costs 4 (23,581) (1,239)
Finance income 4 1,684 25,437
Share of profit/(loss)
of equity
accounted investee, net
of tax (14,137) (6,289)
------------ ------------
LOSS BEFORE INCOME TAX 5 (533,070) (762,929)
Income tax 6 198,119 123,836
------------ ------------
LOSS FOR THE YEAR (334,951) (639,093)
OTHER COMPREHENSIVE INCOME - -
------------ ------------
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR (334,951) (639,093)
------------ ------------
Earnings per share expressed
in pence per share: 7
Basic (0.16) (0.33)
Diluted (0.16) (0.34)
------------ ------------
STATEMENT OF FINANCIAL POSITION
31 December 2018
2018 2017
Notes GBP GBP
ASSETS
NON-CURRENT ASSETS
Intangible assets 8 5,016,508 4,933,761
Investments in equity-
accounted investee 9 790,739 804,876
------------- -------------
5,807,247 5,738,637
------------- -------------
CURRENT ASSETS
Stock 14,656 206,814
Trade and other receivables 10 919,526 962,044
Cash and cash equivalents 11 2,478,740 3,678,383
------------- -------------
3,412,922 4,847,241
------------- -------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 12 875,404 2,004,501
------------- -------------
NET CURRENT ASSETS 2,537,518 2,842,740
------------- -------------
NON-CURRENT LIABILITIES
Trade and other payables 12 67,462 67,462
------------- -------------
NET ASSETS 8,277,303 8,513,915
------------- -------------
SHAREHOLDERS' EQUITY
Called up share capital 15 2,071,893 2,070,643
Share premium 16 31,289,915 31,278,196
Merger reserve 16 10,209,673 10,209,673
Warrant reserve 16 653,446 592,495
Retained loss 16 (35,947,624) (35,637,092)
------------- -------------
TOTAL EQUITY 8,277,303 8,513,915
------------- -------------
STATEMENT OF CHANGES IN EQUITY
For The Year Ended 31 December 2018
Called
up
share Retained Share
capital loss premium
GBP GBP GBP
Balance at 1 January 2017 1,846,542 (35,047,427) 29,139,654
----------- ------------- -----------
Changes in equity
Issue of share capital 224,101 - 2,138,542
Total comprehensive income - (639,093) -
Options exercised/lapsed - 49,428 -
----------- ------------- -----------
Balance at 31 December 2017 2,070,643 (35,637,092) 31,278,196
----------- ------------- -----------
Changes in equity
Issue of share capital 1,250 - 11,719
Total comprehensive income - (334,951) -
Options exercised/lapsed - 24,419 -
----------- ------------- -----------
Balance at 31 December 2018 2,071,893 (35,947,624) 31,289,915
----------- ------------- -----------
Merger Warrant Total
reserve reserve Equity
GBP GBP GBP
Balance at 1 January 2017 10,209,673 614,713 6,763,155
----------- ------------- -----------
Changes in equity
Issue of share capital - - 2,362,643
Total comprehensive income - - (639,093)
Options granted - 27,210 27,210
Options exercised/lapsed - (49,428) -
----------- ------------- -----------
Balance at 31 December 2017 10,209,673 592,495 8,513,915
----------- ------------- -----------
Changes in equity
Issue of share capital - - 12,969
Total comprehensive income - - (334,951)
Options granted - 60,951 60,951
Options exercised/lapsed - - 24,419
----------- ------------- -----------
Balance at 31 December 2018 10,209,673 653,446 8,277,303
----------- ------------- -----------
STATEMENT OF CASH FLOWS
For The Year Ended 31 December 2018
2018 2017
GBP GBP
Cash flows from operating activities
Cash (used by)/from operations 17 (797,608) 222,950
Finance costs paid (551) (1,239)
Foreign exchange losses (23,030) -
Tax credit received 119,511 8,330
------------ ----------
Net cash from/(used by) operating
activities (701,678) 230,041
------------ ----------
Cash flows from investing activities
Capitalisation of development expenditure
and intellectual property costs (429,736) (324,077)
Capitalisation of patents (82,882) (148,002)
Finance income 1,684 2,526
Foreign exchange gains - 22,911
Net cash used by investing activities (510,934) (446,642)
------------ ----------
Cash flows from financing activities
Issue of equity shares 12,969 2,397,893
Share issue costs - (35,250)
------------ ----------
Net cash from/(used by) financing
activities 12,969 2,362,643
------------ ----------
Increase/(decrease) in cash and
cash equivalents (1,199,643) 2,146,042
Cash and cash equivalents at beginning
of year 3,678,383 1,532,341
------------ ----------
Cash and cash equivalents at end
of year 2,478,740 3,678,383
------------ ----------
NOTES TO THE ACCOUNTS
For The Year Ended 31 December 2018
1. ACCOUNTING POLICIES
General information
Eden Research Plc is a public company limited by shares
registered, incorporated and domiciled in England in the United
Kingdom under the Companies Act 2006. The address of the registered
office is 6 Priory Court, Priory Court Business Park, Poulton,
Cirencester, GL7 5JB, UK. The nature of the Company's operations
and its principal activities are set out in the Chairman's Report.
The Company is quoted on the AIM Market in London.
These financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Company operates.
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards, as adopted by the
European Union, and IFRIC interpretations and with those parts of
the Companies Act 2006 applicable to companies reporting under
IFRS. The financial statements have been prepared under the
historical cost convention.
The Company does not have any subsidiary undertakings.
Associates
Associates are those entities in which the Company has
significant influence, but not control, over the financial and
operating policies. Significant influence is presumed to exist when
the Company holds between 20 and 50 percent of the voting power of
another entity, or where the Company has a lower interest but the
right to appoint a director. The company acquired 29.9% of
TerpeneTech Limited ("TerpeneTech") during 2015; TerpeneTech is an
associated undertaking.
Application of the equity method to associates
The investment in TerpeneTech is accounted for using the equity
method. The investment was initially recognised at cost. The
Company's investment includes goodwill identified on acquisition,
net of any accumulated impairment losses and any separable
intangible assets. The financial statements include the Company's
share of the total comprehensive income and equity movements of
TerpeneTech, from the date that significant influence
commenced.
Standards, amendments and interpretations adopted in the current
financial year ended
31 December 2018
The adoption of the following mentioned standards, amendments
and interpretations in the current year have not had a material
impact on the Company's financial statements.
EU effective IASB effective
date: date:
Periods beginning Periods beginning
on or after on or after
IAS 40 Investment Property: Amendment 1 January 2018 1 January 2018
in relation to transfers of investment
property
------------------- -------------------
IFRS 2 Share-based Payment: Amendment 1 January 2018 1 January 2018
in relation to classification and measurement
of share-based payment transactions
------------------- -------------------
IFRS 4 Insurance Contracts: Amendment 1 January 2018 1 January 2018
in relation to applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts
------------------- -------------------
IFRS 9 Financial Instruments 1 January 2018 1 January 2018
------------------- -------------------
IFRS 15 Revenue from Contracts with 1 January 2018 1 January 2018
Customers
------------------- -------------------
Annual Improvements to IFRSs (2014 - 1 January 2018 1 January 2018
2016)
------------------- -------------------
IFRIC 22 Foreign Currency Transactions 1 January 2018 1 January 2018
and Advance Consideration
------------------- -------------------
Standards, amendments and interpretations in issue but not yet
effective
The adoption of the following mentioned standards, amendments
and interpretations in future years are not expected to have a
material impact on the Company's financial statements.
The Company is however continuing to assess the full impact that
adopting will have on future financial statements, and therefore
the full effect is yet to be determined.
EU effective IASB effective
date: Periods date:
beginning Periods beginning
on or after on or after
Amendments to IAS 1 and IAS 8: Definition 1 January 1 January 2020
of Material 2020 *
--------------- -------------------
Amendment to IFRS 3 Business Combinations: 1 January 1 January 2020
Definition of a Business 2020 *
--------------- -------------------
IAS 19 Employee Benefits: Amendment 1 January 1 January 2019
in relation to plan amendment, curtailment 2019 *
or settlement
--------------- -------------------
IAS 28 Investments in Associates and 1 January 1 January 2019
Joint Ventures: Amendment in relation 2019 *
to Long-term interests in Associates
and Joint Ventures
--------------- -------------------
IFRS 9 Financial Instruments: Amendment 1 January 1 January 2019
in relation to Prepayment features 2019
with negative compensation
--------------- -------------------
IFRS 16 Leases 1 January 1 January 2019
2019
--------------- -------------------
IFRS 17 Insurance Contracts ** 1 January 2021
--------------- -------------------
Annual Improvements to IFRSs (2015 1 January 1 January 2019
- 2017) 2019 *
--------------- -------------------
Conceptual Framework (Revised) and 1 January 1 January 2020
amendments to related references in 2020 *^
IFRS Standards
--------------- -------------------
IFRIC 23 Uncertainty over Income Tax 1 January 1 January 2019
Treatments 2019
--------------- -------------------
Standards, amendments and interpretations cannot be adopted
in the EU until they have been EU-endorsed.
Pending endorsement
* Expected to be endorsed by the IASB effective date.
** Not expected to be endorsed by the IASB effective date.
^ Scope of endorsement limited to related references in IFRS
Standards.
IFRS 16, the new standard on leases, removes the distinction
between operating and finance leases, meaning that the company will
have higher lease liabilities, and correspondingly higher assets,
on the statement of financial position. The expense relating to
arrangements previously classified as operating leases will be a
combination of finance costs on the newly recognised asset. The
directors have assessed the impact and noted no material changes to
be made.
Going Concern
The financial statements have been prepared on a going concern
basis which contemplates the realisation of assets and the
settlement of liabilities in the ordinary course of business.
The Company has reported a loss for the year after taxation of
GBP334,951 (2017: GBP639,093). Net current assets at that date
amounted to GBP2,537,518 (2017: GBP2,842,740).
The directors have prepared budgets and projected cash flow
forecasts, based in part on forecasts provided by Eden's commercial
partners, for a period of two years from 31 December 2018 and they
consider that the Company will be able to operate with the cash
resources that are available to it for this period. The ability of
the Company to continue as a going concern is ultimately dependent
upon the amounts and timing of cash flows from the exploitation of
the Company's intellectual property and the availability of
existing and/or additional funding to meet the short-term needs of
the business until the commercialisation of the Company's portfolio
is reached.
The forecasts adopted include only revenue derived from existing
contracts and, while there is a risk these payments might be
delayed if milestones are not reached, there is potential upside
from on-going discussions and negotiations with other parties not
yet contracted, as well as other "blue sky" opportunities.
In addition, the Company has relatively low fixed running costs
and has a demonstrable ability to delay certain other costs, such
as Research and Development expenditure, in the event of unforeseen
cash constraints.
The directors have also considered a scenario whereby the
Company receives no revenue from the date of this Report. On this
basis, the directors believe that the Company has sufficient cash
to cover a period of at least 12 months from the date of this
Report.
The directors are closely monitoring performance against cash
flow projections that have been prepared for the period to 31
December 2019 and beyond, and reasonably believe that the Company
will deliver cash flows at least in line with these.
Taking all these factors into consideration, the directors
consider it appropriate to prepare the financial statements on the
going concern basis. The financial statements do not include any
adjustments that would result from a failure by the Company to meet
these forecasts.
Revenue recognition
Revenue is recognised only when it is probable that the economic
benefits associated with the transaction will flow to the Company
and the amount of revenue can be reliably estimated.
Revenue represents amounts receivable by the Company in respect
of services rendered during the year in accordance with the
underlying contract or licence, stated net of value added tax.
Sales-based royalty income arising from licences of the
Company's intellectual property is recognised in accordance with
the terms of the underlying contract and is based on net sales
value of product sold by Eden's licensees. It is recognised when
the subsequent sales occurs.
Upfront and annual payments made by customers at commencement
and for renewal of distribution and other agreements are recognised
in accordance with the terms of the agreement. Where there is no
ongoing obligation on the Company under the agreement, the payment
is recognised in full in the period in which it is made. Where
there is an ongoing obligation on the Company, the separate
performance obligations under the agreement are identified and
revenue allocated to each performance obligation. Revenue is then
recognised when a corresponding performance obligation has been
met.
Each sale of a licence by the Company is assessed to determine
whether the licence is distinct from the sale of other goods and
services, and whether the licence granted provides use of the
Company's intellectual property as it exists at that point in time,
with no ongoing obligation on the Company, or alternatively
provides access to the intellectual property as it develops over
time. Where the Company has discharged all of its on-going
obligations associated with the licence granted, revenue is
recognised on receipt of the licence fee payment. Where there is an
ongoing obligation on the Company, revenue is recognised in the
periods to which the obligations pertain.
Product sales are recorded once product is made available to the
partner to collect, or, if the Company is responsible for the
shipping, the product has been shipped to the customer, at which
point the ownership and related rights and responsibilities pass to
the customer.
Intangible assets
Intellectual property, including development costs, is
capitalised and amortised on a straight-line basis over its
remaining estimated useful economic life of 12 years in line with
the remaining life of the Company's master patent, which was
originally 20 years, with additional Supplementary Protection
Certificates having been granted in the majority of the countries
in the EU in which Eden is selling Mevalone. The useful economic
life of intangible assets is reviewed on an annual basis.
Impairment of non-financial assets
The directors regularly review the intangible assets for
impairment and provision is made if necessary. Assets that are
subject to amortisation are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating
units). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at
each reporting date.
Research and development
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally generated intangible asset arising from the
Company's development activities is recognised only if all the
following conditions are met:
- the project is technically and commercially feasible;
- an asset is created that can be identified;
- the Company intends to complete the asset and use or sell it
and has the ability to do so;
- it is probable that the asset created will generate future
economic benefits;
- the development cost of the asset can be measured reliably;
and
- there are sufficient resources available to complete the
project.
Internally-generated intangible assets are amortised on a
straight-line basis over their useful lives. Where no
internally-generated intangible asset can be recognised,
development expenditure is recognised as an expense in the period
in which it is incurred.
Financial instruments
The Company uses certain financial instruments in its operating
and investing activities that are deemed appropriate for its
strategy and circumstances.
Financial assets and liabilities are recognised in the Statement
of Financial Position when the Company has become a party to the
contractual provisions of the instrument.
Financial instruments recognised in the Statement of Financial
Position include cash and cash equivalents, trade receivables,
trade payables and borrowings and fixed interest convertible
debt.
Cash and cash equivalents comprise cash on hand and on demand
deposits, and other short term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Interest bearing loans and overdrafts are recorded at the fair
value received less any transaction costs. Subsequent to initial
recognition such instruments are measured at amortised cost, using
the effective interest method.
Financial assets
Trade receivables, loans and other receivables that have fixed
or determinable payments are classified as "Loans and receivables"
and are measured initially at fair value plus transaction costs and
subsequently at amortised cost using the effective interest method
less impairment. Interest is recognised by applying the effective
interest rate, except for short term receivables when the
recognition of interest would be immaterial.
Financial assets are assessed for impairment at each reporting
date by considering the recoverable amount of the asset in
comparison to its carrying value and any impairment recognised in
the Statement of Profit or Loss and Other Comprehensive Income.
Trade receivables are assessed for collectability and where
appropriate the carrying amount is reduced through the use of an
allowance account. When a trade receivable is uncollectible it is
written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance
account and changes in the carrying amount of the allowance account
are recognised in the Statement of Profit or Loss and Other
Comprehensive Income.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities such as trade payables and loans are
classified as "Other financial liabilities" and are measured
initially at fair value less transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method, except for short term payables when the
recognition of interest would be immaterial.
Non-executory contracts are recognised when all obligations due
to the Company under the terms of the contract have been met, but
the Company retains a financial liability. This financial liability
is measured in accordance with the Company's accounting policy for
the measurement of financial liabilities.
Stock
Stock is stated at the lower of cost and net realisable value.
Cost is based on the first-in first-out principle and includes
expenditure incurred in acquiring the inventories, production or
conversion costs and other costs in bringing them to their existing
location and condition.
Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the Company. All other leases are classified as
operating leases.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease. Benefits
received and receivable as an incentive to enter into an operating
lease are also spread on a straight-line basis over the lease
term.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange prevailing at the balance sheet
date. Transactions in foreign currencies are translated into
sterling at the rate of exchange prevailing at the date of
transaction. Exchange differences are taken into account in
arriving at the operating result.
Whilst the majority of the Company's revenue is in Euros, the
Company also incurs a significant level of expenditure in that
currency. As such, the Company does not currently use any hedging
facilities and instead choses to keep some of its cash at the bank
in Euros.
Share-based payments
The Company has applied the requirements of IFRS2 Share-Based
Payments.
Unapproved share option scheme
The Company has operated an unapproved share option scheme for
executive directors, senior management and certain employees. This
scheme was used for any options awarded prior to 28 September
2017.
Long-Term Incentive Plan ("LTIP")
In 2017, the Company established a LTIP to incentivise the
Executives to deliver long-term value creation for shareholders and
ensure alignment with shareholder interests. Awards are made
annually and are subject to continued service and challenging
performance conditions usually over a three year period. The
performance conditions are reviewed on an annual basis to ensure
they remain appropriate and are currently based on increasing
shareholder value. Awards are generally structured as nil cost
options with a seven year life after vesting.
Other than in exceptional circumstances, an award to an
Executive would be up to 100% of salary in any one year and would
be granted subject to achieving challenging performance conditions
set at the date of the grant. A percentage of the award will vest
for "Threshold" performance with full vesting taking place for
equalling or exceeding the performance "Target". In between the
Threshold and Target there may be pro rata vesting. The
Remuneration Committee retains the ability to amend the performance
conditions for future grants to ensure that such grants achieve the
stated purpose.
The LTIP was adopted by the board of directors of Eden on 28
September 2017.
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to the Statement of
Profit or Loss and Other Comprehensive Income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that ultimately the cumulative amount recognised
over the vesting period is based on the number of options that
eventually vest. Market vesting conditions are factored into the
fair value of the options granted, as long as other vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in fair value of the options, measured
immediately before and after the modification is also charged to
the Statement of Profit or Loss and Other Comprehensive Income over
the remaining vesting period.
Defined contribution plan
A defined contribution plan is a post-employment benefit plan
under which the company pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution pension plans are recognised as an expense in the
income statement in the periods during which services are rendered
by employees.
Financial risk management
The Company's activities expose it to a variety of financial
risks: market risk (including currency risk and interest rate
risks), credit risk and liquidity risk. Risk management focuses on
minimising any potential adverse effect on the Company's financial
performance and is carried out under policies approved by the Board
of Directors. Further detail is given in note 22 to the financial
statements.
Current and deferred income tax
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
Statement of Profit or Loss and Other Comprehensive Income because
it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Company's liability for current
tax is calculated using tax rates that have been enacted or
substantively enacted as at the reporting date. The current tax
charge includes any research and development tax credits claimed by
the Company.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interest in joint ventures, except where the Company is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realized based on the tax rates that have been enacted or
substantively enacted by the end of the reporting period. Deferred
tax is charged or credited to profit or loss, except when it
relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Company intends to settle
its current tax assets and liabilities on a net basis.
Critical accounting estimates and areas of judgement
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk to the carrying amounts of
assets and liabilities within the next financial year are discussed
below:
Capitalised development costs and intellectual property
The directors have considered the recoverability of an
internally generated intangible asset, being development costs,
which has a carrying value of GBP2.3m (2017: GBP2.0m) and
intellectual property which has a carrying value of GBP2.7m (2017:
GBP2.9m). The projects relating to these items continue to progress
in a satisfactory manner and the directors are confident that the
carrying amount of the asset will be recovered in full. This
situation will be closely monitored and adjustments made in future
periods if future market activity indicates that such adjustments
are appropriate.
The key factors which could impact upon whether it remains
appropriate to continue to capitalise intangible assets or on the
impairment considerations include:
- The availability of the necessary financial resources and
hence the ability of the Company to continue as a going
concern.
- The assumptions surrounding the perceived market sizes for the
products and the achievable market share for the Company.
- The successful conclusion of commercial arrangements, which
serves as an indicator as to the likely success of the projects
and, as such, any need for potential impairment.
- The level of upfront, milestone and royalty receipts, which
also serves as a guide as to the net present value of the assets
and whether any impairment is required.
Impairment of assets
The directors have considered the progress of the business in
the current year, including a review of the potential market for
its products, the progress the Company has made in registering its
products and other key commercial factors to determine whether any
indicators of impairment exist. Based upon the review management
have carried out they are satisfied that no such factors exist and
therefore a full impairment review on the Company's intangible
assets and investments has not been carried out.
Further details on impairment review can be found in note 8 and
9 to the accounts.
Going concern
The directors have considered the ability of the Company to
continue as a going concern and this is considered to be the most
significant judgement made by the directors in preparing the
financial statements.
The ability of the Company to continue as a going concern is
ultimately dependent upon the amount and timing of cash flows
arising from the exploitation of the Company's intellectual
property and the availability of existing and/or additional funding
to meet the short-term needs of the business until the
commercialisation of the Company's portfolio is reached. The
directors consider it is appropriate for the financial statements
to be prepared on a going concern basis based on the estimates they
have made.
2. SEGMENTAL REPORTING AND REVENUE
IFRS 8 requires operating segments to be reported in a manner
consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who
is responsible for the resource allocation and assessing
performance of the operating segments has been identified as the
Executive Directors as they are primarily responsible for the
allocation of the resources to segments and the assessment of
performance of the segments.
The Executive Directors monitor and then assess the performance
of segments based on product type and geographical area using a
measure of adjusted EBITDA. This is the result of the segment after
excluding the share-based payment charges, other operating income
and the amortisation of intangibles. These items, together with
interest income and expense are not allocated to a specific
segment.
The segmental information for the year ended 31 December 2018 is
as follows:
Licensing Milestone R&D charges Royalties Grant Product Un-allocated Total
Fees Payments Funding Sales
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
GBP GBP GBP GBP GBP GBP GBP GBP
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Human health
and biocides - - - 48,113 - - - 48,113
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Animal - - - - - - - -
health
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Agrochemicals - 956,123 112,540 36,193 - 1,621,303 - 2,726,159
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
TOTAL - 956,123 112,540 84,306 - 1,621,303 - 2,774,272
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Adjusted
EBITDA - - - - - - 18,207 18,207
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Amortisation - - - - - - (429,871) (429,871)
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Depreciation - - - - - - - -
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Share Based
Payments - - - - - - (85,372) (85,372)
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Net Finance
Costs - - - - - - (21,897) (21,897)
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Income
Tax - - - - - - 198,119 198,119
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Share of
Associate's
loss - - - - - - (14,137) (14,137)
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Loss for
the Year - - - - - - (334,951) (334,951)
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Total Assets - - - - - - 9,220,169 9,220,169
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Total assets
includes:
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Additions
to Non-Current
Assets - - - - - - 512,618 512,618
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
Total
Liabilities - - - - - - (942,866) (942,866)
----------- ---------- ------------ ---------- --------- ---------- ------------- ----------
The segmental information for the year ended 31 December 2017 is
as follows:
Licensing Milestone Evaluation Royalties Grant Product Un-allocated Total
Fees Payments Fees Funding Sales
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
GBP GBP GBP GBP GBP GBP GBP GBP
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Human health
and biocides 14,750 - - 13,274 - - - 28,024
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Animal - - - - - - - -
health
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Agrochemicals - 967,686 - 116,405 - 765,072 - 1,849,163
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
TOTAL 14,750 967,686 - 129,679 - 765,072 - 1,877,187
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Adjusted
EBITDA - - - - - - (3,418) (3,418)
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Amortisation - - - - - - (750,210) (750,210)
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Depreciation - - - - - - - -
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Share Based
Payments - - - - - - (27,210) (27,210)
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Net Finance
Costs - - - - - - 24,198 24,198
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Income
Tax - - - - - - 123,836 123,836
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Share of
Associate's
loss - - - - - - (6,289) (6,289)
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Loss for
the Year - - - - - - (639,093) (639,093)
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Total Assets - - - - - - 10,585,878 10,585,878
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Total assets
includes:
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Additions
to Non-Current
Assets - - - - - - 472,079 472,079
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
Total Liabilities - - - - - - (2,071,963) (2,071,963)
---------- ---------- ----------- ---------- --------- -------- ------------- ------------
GEOGRAPHICAL REPORTING
2018 2017
GBP GBP
UK 160,653 28,024
Europe 2,613,619 1,849,163
---------- ----------
2,774,272 1,877,187
---------- ----------
The revenue derived from Milestone Payments and Licensing Fees
relates to agreements which cover a number of countries both in the
EU and throughout the rest of the world.
All of the non-current assets are in the UK.
REVENUE
Accounting policy
The Company's accounting policy for revenue is detailed in note
1.
Nature of goods and services
The following is a description of the principal activites from
which the Company generates its revenue.
1. Licensing fees
The Company receives licensing fees from partners who have taken
a licence to use Eden's intellectual property, usually defined by
field of use and territory.
When a licence agreement is signed with a partner, the rights
conferred are immediately passed on from Eden and an invoice is
raised, which is generally payable immediately.
2. Milestone payments
The Company receives milestone payments from other commercial
arrangements, including any fees it has charged to partners for
rights granted in respect of distribution agreements.
When such an agreement is signed with a partner, the rights
conferred are immediately passed on from Eden and an invoice is
raised, which is generally payable immediately.
Also, in some cases, there are certain commercial or other
milestones which are to be met by a commercial partner which, once
met, give rise to a responsibility by that partner to pay a fee to
Eden, which is generally payable immediately.
3. R&D charges
The Company sometimes charges its partners for R&D costs
that it has incurred which usually relate to specific projects and
which it has incurred through a third party.
Upon agreement with a partner, or if some specific milestone is
met, then Eden will raise an invoice which is usually payable
between 30 and 120 days.
4. Royalties
The Company receives royalties from partners who have entered
into a licence arrangement with Eden to use its intellectual
property and who have sold products, which then gives rise to an
obligation to pay Eden a royalty on those sales.
Generally, royalties relate to specific time periods, such as
quarterly or annual dates, in which product sales have been
made.
Once an invoice is raised by Eden, following the period to which
the royalties relate, payment is due to the Company in 30 to 60
days.
5. Product sales
Generally, where the Company has entered into a distribution
agreement with a partner, Eden is responsible for supplying product
to that partner once a sales order has been signed.
At that point, Eden has the product manufactured through a
third-party, toll manufacturer. At the point at which the product
is finished and is made available to the partner to collect, or, if
the Company is responsible for the shipping, the product has been
shipped, the partner is liable for the product and obliged to pay
Eden. Normal terms for product sales are 90 to 120 days. Returns
are not accepted and refunds are only made when product supplied is
notified as defective within 60 days.
Contract balances
Included within prepayments and accrued income (see note 10) is
accrued income of GBP36,193 (2017: GBP22,242) arising from
contracts with customers.
3. EMPLOYEES AND DIRECTORS
2018 2017
GBP GBP
Wages and salaries 631,183 511,647
Pension costs 15,618 10,804
Social security costs 89,595 71,572
-------- --------
736,396 594,023
-------- --------
The average monthly number of employees, including directors,
during the year was as follows:
2018 2017
Management 5 5
----- -----
Staff costs, including executive directors' remuneration, are
included within administrative expenditure in the Statement of
Profit or Loss and Other Comprehensive Income. The Executive
Directors are considered to also be the key management personnel of
the Company.
2018 2017
GBP GBP
Directors' remuneration 532,784 436,647
Company contributions to defined contribution
pension schemes 13,600 10,804
-------- --------
546,384 447,451
-------- --------
Non-executive director's fees 75,000 75,000
-------- --------
Total directors' emoluments 621,384 522,451
-------- --------
Share based payment charge relating to
all directors 85,372 27,210
-------- --------
During the year the remuneration of the highest paid director
was GBP353,086 (2017: GBP258,408).
2018 Salary Bonus Fees Pension Share
based Total
payments
GBP GBP GBP GBP GBP GBP
A Abrey 150,000 85,050 - 6,000 37,620 278,670
S Smith 190,000 107,734 - 7,600 47,752 353,086
R Cridland - - 35,000 - - 35,000
L van Der
Broek - - 40,000 - - 40,000
340,000 192,784 75,000 13,600 85,372 706,756
-------- -------- -------- -------- ---------- --------
2017 Salary Bonus Fees Pension Share
based Total
payments
GBP GBP GBP GBP GBP GBP
A Abrey 123,000 75,854 - 4,920 12,479 216,253
S Smith 147,088 90,705 - 5,884 14,731 258,408
T Lupton - - 35,000 - - 35,000
R Cridland - - 30,000 - - 30,000
L van der
Broek - - 10,000 - - 10,000
-------- -------- ------- -------- ---------- --------
270,088 166,559 75,000 10,804 27,210 549,661
-------- -------- ------- -------- ---------- --------
4. NET FINANCE COSTS
2018 2017
GBP GBP
Finance income - 22,911
Foreign exchange gains 1,684 2,526
--------- ---------
Deposit account interest 1,684 25,437
--------- ---------
Finance costs:
Foreign exchange losses 23,030 -
Finance fees 551 1,239
--------- ---------
23,581 1,239
--------- ---------
Net finance costs (21,897) (24,198)
--------- ---------
5. LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
2018 2017
GBP GBP
Licences and trademarks amortisation 7,099 20,446
Development costs amortisation 177,349 290,276
Intellectual property amortisation 239,754 439,488
Auditors' remuneration:
- Audit of these financial statements 27,000 22,500
- All other services - 20,779
Equity share based payment charge 85,372 27,210
Foreign exchange differences 23,030 (22,911)
-------- ---------
6. INCOME TAX
Analysis of tax income
2018 2017
GBP GBP
Current tax credit:
Current year 156,865 78,259
Adjustments in respect of prior periods 41,254 45,577
Total tax income in statement of profit
or loss and other comprehensive income 198,119 123,836
-------- --------
Corporation tax
No tax charge arises on the results for the year (2017: GBPnil).
Tax losses carried forward, for which no deferred tax asset has
been recognised, amount to approximately GBP22,291,281 (2017:
GBP22,247,515). The tax credit represents the research and
development tax credit receivable for the year ended 31 December
2018.
Factors affecting the tax charge
The UK standard rate of corporation tax is 19% (2017: 19.25%).
Current tax assessed for the financial year as a percentage of the
loss before taxation is (51.8)% (2017: (16.2)%)
The differences are explained below:
2018 2018 2017 2017
GBP % GBP %
Standard rate of corporation
tax in the UK (19.0) (19.25)
Loss before tax at
standard rate of tax (101,283) (146,863)
Effects of
71,071 13.3 55,981 7.4
Fixed asset differences
Losses carried forward/surrendered 48,682 9.1 - -
Difference in effective
tax rate of equity
accounted associate
Other expenses not - 642 0.1
deductible for tax
purposes 19,836 3.7 9,413 1.2
Research and development
tax relief
Adjustment to prior
year tax charge (116,179) (86,322) (6.0)
Temporary differences
not recognised in (41,254) (21.8) (45,577) (7.5)
the computation
Adjust closing deferred 69,431 (7.7) - -
tax to average rate
of 19.00% (148,423) 13.0 - -
Deferred tax not recognised
To be analysed - (27.8) 88,890 11.7
----------- ---------- -------
Total current tax
credit and tax rate (123,836) (16.3)
% (198,119) (51.8)
----------- -------- ---------- -------
Deferred tax
Un-provided deferred
tax liability (513,138) (237,330)
Un-provided deferred
tax asset 3,789,518 3,782,077
--------- ---------
Net un-provided deferred
tax asset 3,276,380 3,544,747
--------- ---------
The adjustment to the prior year tax charge of GBP41,254 relates
to increased submitted R&D tax credit claims compared to that
provided for in the 2017 financial statements.
The un-provided for deferred tax asset arises principally in
respect of trading losses, together with other minor timing
differences at 17% (2017: 17%) and has not been recognised due to
the uncertainty of timing of future profits against which it may be
realised.
Reductions in the UK corporation tax rate to 19% (effective from
1 April 2017) and to 18% (effective 1 April 2020) were
substantively enacted on 26 October 2015, and an additional
reduction to 17% (effective 1 April 2020) was substantively enacted
on 6 September 2016. This will reduce the company's future current
tax charge accordingly.
7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares.
Reconciliations are set out below:
2018 Weighted
average
number Per-share
Earnings of shares amount
GBP pence
Basic EPS
Earnings attributable to ordinary
shareholders (334,951) 207,115,707 (0.16)
Effect of dilutive securities - 160,422 -
Diluted EPS
----------- -------------- ------------
Adjusted earnings (334,951) 207,276,129 (0.16)
----------- -------------- ------------
2017 Weighted
average
number Per-share
Earnings of shares amount
GBP pence
Basic EPS
Earnings attributable to ordinary
shareholders (639,093) 195,705,733 (0.33)
Effect of dilutive securities - (5,019,101) -
Diluted EPS
----------- -------------- ------------
Adjusted earnings (639,093) 190,686,632 (0.34)
----------- -------------- ------------
Due to the loss for the year there is no dilution of the loss
per share arising from options in existence.
8. INTANGIBLE ASSETS
Licences
and trademarks Development Intellectual
costs property Totals
GBP GBP GBP GBP
COST
At 1 January 2018 447,351 3,779,353 8,887,745 13,114,449
Additions - 429,736 82,882 512,618
At 31 December 2018 447,351 4,209,089 8,970,627 13,627,067
--------------- ------------- -------------- ----------
AMORTISATION
At 1 January 2018 404,756 1,765,236 6,010,696 8,180,688
Amortisation for year 7,099 183,018 239,754 429,871
At 31 December 2018 411,855 1,948,254 6,250,450 8,610,559
--------------- ------------- -------------- ----------
NET BOOK VALUE
At 31 December 2018 35,496 2,260,835 2,720,177 5,016,508
--------------- ------------- -------------- ----------
Licences
and trademarks Development Intellectual
costs property Totals
GBP GBP GBP GBP
COST
At 1 January 2017 447,351 3,455,276 8,739,743 12,642,370
Additions - 324,077 148,002 472,079
At 31 December 2017 447,351 3,779,353 8,887,745 13,114,449
--------------- ------------- -------------- ----------
AMORTISATION
At 1 January 2017 384,310 1,474,960 5,571,208 7,430,478
Amortisation for year 20,446 290,276 439,488 750,210
At 31 December 2017 404,756 1,765,236 6,010,696 8,180,688
--------------- ------------- -------------- ----------
NET BOOK VALUE
At 31 December 2017 42,595 2,014,117 2,877,049 4,933,761
--------------- ------------- -------------- ----------
The amortisation charge is included within administration
expenses. Intellectual property represents intellectual property in
relation to use of encapsulated terpenes in agrochemicals. The
remaining useful economic life of that asset is twelve years.
An annual impairment review is undertaken by the Board of
Directors. The directors have considered the progress of the
business in the current year, including a review of the potential
market for its products, the progress the Company has made in
registering its products and other key commercial factors to
determine whether any indicators of impairment exist.
The directors have used discounted cash-flow forecasts, based on
product sales forecasts including those provided by the Company's
commercial partners, and have taken into account the market
potential for Eden's products and technologies using third party
market data that Eden has acquired licences to.
The discount rate and the forecast cashflows are two key
assumptions used. The discount rate is estimated using pre-tax
rates that reflect current market assessments of the time value of
money and the risk specific to the asset. The rate used was 10%
(2017: 10%).
The forecast cash-flows are derived from discussions with the
Company's commercial partners, as described below.
Based on the review management has carried out, it is satisfied
that the Intangible Assets are not impaired in respect of their
carrying value.
As set out in the Strategic Report the business is in a critical
phase of its development as the research and development of
products is transitioned to revenue generation. The value of the
intangible assets is supported by management's forecasts of
continued revenue growth of existing products and the successful
growth of future product sales. Management has used cash-flow
forecasts for the next seven years which include average annual
growth of 29% over this period, followed by a further three year
period in which no growth is assumed. This is considered to be
reasonably prudent based on information from and discussion with
strategic partners. However there is a risk that if those forecasts
are not achieved then the associated intangible assets could be
impaired. Average annual growth in cash-flows would need to fall
below 9% for this to be the case. In the event that there were no
further growth over and above the revenue achieved in the year to
December 2018, there would be an impairment of intangible assets of
approximately GBP2.9m.
All revenues have been projected to come from the cash
generating units identified in the segmental reporting and
Chairman's Report, namely the key product lines of the Company.
9. INVESTMENTS IN ASSOCIATES
2017 2017
Percentage ownership interest and proportion
of voting rights 29.9% 29.9%
GBP GBP
Non-current assets 647,137 584,338
Current assets 222,572 134,034
Non-current liabilities (44,493) (44,493)
Current liabilities (177,829) (27,932)
--------- --------
Net assets (100%) 647,387 645,947
Company's share of net assets 193,568 193,138
Separable intangible assets 184,521 199,089
Goodwill 412,649 412,649
--------- --------
Carrying amount of interest in associate 790,739 804,876
Revenue 308,864 225,187
Profit/(loss) from continuing operations 1,441 27,687
100% of total post-tax profits 1,441 27,687
29.9% of total post-tax profits 431 8,278
Amortisation of separable intangible assets (14,568) (14,568)
Company's share of profit/(loss) including amortisation
of
separable intangible assets (14,137) (6,289)
Other comprehensive income
100% - -
29.9% - -
Company's share of other comprehensive income - -
Total comprehensive income (100%) 1,441 27,687
Company's share of total comprehensive income
including
amortisation of separable intangible asset (14,137) (6,289)
Dividends received by the Company - -
TerpeneTech's registered office is Kemp House, 152 City Road,
London, EC1V 2NX and its principal place of business is 3 rue de
Commandant Charcot, 22410, St Quay Portrieux, France.
An impairment review of the investment in TerpeneTech was
undertaken by the Board of Directors. The directors have considered
the progress of the business in the current year, including a
review of the potential market for its products, the progress
TerpeneTech has made in registering its products and other key
commercial factors to determine whether any indicators of
impairment exist.
The directors have used discounted cash-flow forecasts, based on
product sales forecasts provided by TerpeneTech, and have taken
into account the market potential for those products.
The discount rate and the expected growth rate are two key
assumptions used. The discount rate is estimated using pre-tax
rates that reflect current market assessments of the time value of
money and the risk specific to the asset. The rate used was 20%
(2017: 20%). The growth rates are derived from discussions with the
Company's commercial partner, TerpeneTech, as described above.
Based on the review management has carried out, it is satisfied
that the Investment is not impaired in respect of its carrying
value.
The directors have also considered whether any reasonable change
in assumptions would lead to an impairment and are satisfied that
this is not the case.
10. TRADE AND OTHER RECEIVABLES
2018 2017
GBP GBP
Current:
Trade and other receivables 515,279 731,968
Prepayments and accrued income 76,064 42,949
Other debtors - 16,992
Other taxes and social security 194,461 115,506
VAT recoverable 133,722 54,629
--------- -------
919,526 962,044
--------- -------
The directors consider that the carrying value of trade and
other receivables approximates to the fair value. Trade debtors are
included net of a provision of GBPnil (2017: GBPnil). Details of
debts past due but not impaired are given in note 22.
11. CASH AND CASH EQUIVALENTS
2018 2017
GBP GBP
Short term bank deposits 2,478,740 3,678,383
--------- ---------
The carrying amount of these short-term bank deposits
approximates to their fair value.
12. TRADE AND OTHER PAYABLES
2018 2017
GBP GBP
Current:
Trade payables 499,186 1,558,279
Other payables 47,706 66,389
Other taxes and social security 15,085 11,836
Accruals and deferred income 313,427 367,997
-------- ----------
875,404 2,004,501
-------- ----------
2018 2017
GBP GBP
Non-current:
Other creditors 67,462 67,462
-------- ----------
Aggregate amounts 942,866 2,071,963
-------- ----------
The directors consider that the carrying value of trade and
other payables approximates to their fair value. See note 22 for
disclosure of the amount of trade payables denominated in foreign
currency. See Directors' Report for disclosure of the average
credit period taken.
13. LEASING AGREEMENTS
Minimum lease payments under non-cancellable operating leases
fall due as follows:
2018 2017
GBP GBP
Between one and five years 53,268 35,000
------ ------
14. FINANCIAL ASSETS AND LIABILITIES
Note 2018 2017
GBP GBP
Financial assets at amortised
cost
Other receivables 10 919,526 962,044
Cash and cash equivalents 11 2,478,740 3,678,383
---------- ----------
3,398,266 4,640,427
---------- ----------
Financial liabilities measured
at amortised cost
Current:
Trade and other payables 12 499,186 1,558,279
---------- ----------
499,186 1,558,279
---------- ----------
15. CALLED UP SHARE CAPITAL
Number: Class: Nominal 2018 2017
value: GBP GBP
207,189,337
(2017: 207,064,337) Ordinary 0.01 2,071,893 2,070,643
---------- ----------
Alloted,issued and
fully paid
Number: Class: Nominal 2018 2017
value: GBP GBP
207,189,337
(2017: 207,064,337) Ordinary 0.01 2,071,893 2,070,643
---------- ----------
On 4 May 2018, the Company issued 125,000 ordinary shares at
10.375p each for a total consideration of GBP12,969. Share issue
costs of GBPnil were incurred and have been charged to the share
premium account as detailed in note 16.
Date Number of Aggregate Issue Premium Total share
ordinary shares nominal value Price on issue premium
GBP GBP GBP GBP
4/5/2018 125,000 1,250 0.104 0.094 11,719
--------------- ------------
1,250 11,719
--------------- ------------
16. RESERVES
Retained Share premium Merger Warrant Totals
losses GBP reserve reserve GBP
GBP GBP GBP
At 1 January 2018 (35,637,092) 31,278,196 10,209,673 592,495 6,443,272
Deficit for the year (334,951) - - - (334,951)
Cash share issue - 11,719 - - 11,719
Share issue costs - - - - -
Transfer to
other reserves - - - - -
Options granted - - - 60,951 60,951
Options exercised/lapsed 24,419 - - - 24,419
------------- -------------- ----------- --------- ----------
At 31 December 2018 (35,947,624) 31,289,915 10,209,673 653,446 6,205,410
============= ============== =========== ========= ==========
The merger reserve arose on the acquisition of a subsidiary
undertaking in a prior year for which merger relief was permitted
under the Companies Act 2006. The warrant reserve represents the
fair value of share options and warrants granted, and not exercised
or lapsed, in accordance with the requirements of IFRS 2 Share
Based Payments.
17. RECONCILIATION OF LOSS FOR THE YEAR TO CASH FROM/USED BY OPERATIONS
2018 2017
GBP GBP
Loss for the year (334,951) (639,093)
Share of associate's losses 14,137 6,289
Depreciation charges 429,871 750,210
Share based payment charge 85,372 27,210
Finance costs 23,581 1,239
Finance income (1,684) (25,437)
Tax credit (198,119) (123,836)
18,207 (3,418)
Decrease/(increase) in trade and other
receivables 149,114 (606,033)
(Decrease)/increase in trade and other
payables (1,157,087) 1,039,215
Decrease/(increase) in stock 192,158 (206,814)
------------ ----------
Cash from/(used by) operations (797,608) 222,950
------------ ----------
18. CAPITAL COMMITMENTS
The Company had no capital commitments at 31 December 2018
(2017: GBPnil).
19. CONTINGENT LIABILITY
In September 2015, the Company entered into a Collaboration and
Licence agreement with Invention Development Management Company LLC
(part of Intellectual Ventures, now called Xinova LLC). As part of
this agreement, upon successful completion of a number of different
tasks, Xinova will be entitled to a payment which is calculated
using a percentage of the value of the Company at a future date.
This has been accounted for as a cash-settled share-based payment
under IFRS 2.
An amount of GBP67,462, being the estimated fair value of the
liability due to Xinova, was recognised during 2016 and included as
a non-current liability, as disclosed in note 12 to the accounts.
It is not believed that the value of the services provided by
Xinova can be reliably measured, and so this amount was calculated
based on the Company's market capitalisation at 31 December 2016,
adjusted to reflect the percentage of work completed by Xinova at
that date based on a pre-determined schedule of tasks.
No further charge was made during the year as no services were
rendered by Xinova which would give rise to a further payment
becoming due.
The fair value of the liability has been reviewed at the balance
sheet date, given the change in the Company's market
capitalisation, and it is deemed that no adjustment is required.
Therefore, the liability of GBP67,462 continues to be
recognised.
20. RELATED PARTY DISCLOSURES
Disclosures required in respect of IAS 24 regarding remuneration
of key management personnel are covered by the disclosure of
directors' remuneration included within note 3.
Transactions with other related parties are set out below:
During the year, Eden invoiced its associate, TerpeneTech,
GBPnil for licence fees (2017: GBP14,750), GBP112,540 for R & D
charges (2017: GBPnil) and GBP48,113 for royalties due (2017:
GBPnil).
Also, during the year Eden made net payments to TerpeneTech
totalling GBP11,440 (2017: net receipts of GBP71,302).
At the year end, a net amount of GBP135,392 was due from
TerpeneTech (2017: GBP36,597 owed to TerpeneTech). This amount is
included within Trade Receivables and Other Payables.
21. SHARE-BASED PAYMENT TRANSACTIONS
Share Options
Unapproved option scheme
Eden Research Plc operates an unapproved option scheme for
executive directors, senior management and certain employees.
2018
Weighted 2017
average Weighted
exercise average
price (pence) exercise
Number price (pence) Number
Outstanding at the
beginning of the
year 11 5,025,000 11 5,025,000
Granted during the - - - -
year
Exercised during
the year 10 (125,000) - -
Lapsed during the
year 8 1,500,000 - -
11 3,400,000 11 5,025,000
-------------- ----------- -------------- ----------
The exercise price of options outstanding at the end of the year
ranged between 10p and 16p (2017: 8p and 16p) and their weighted
average contractual life was 0.9 years (2017: 1.5 years). None of
the options have vesting conditions.
The share-based payment charge in respect of the unapproved
option scheme for the year was GBPnil (2017: GBPnil). The weighted
average fair value of each option granted during 2018 was GBPnil
(2017: GBPnil).
Long-Term Incentive Plan ("LTIP")
Eden Research Plc operates an unapproved option scheme for
executive directors, senior management and certain employees under
a LTIP which it adopted in 2017.
During the prior year, the following options were granted under
the LTIP:
Description Date of Number Fair Total
grant of awards value fair
granted per award value
GBP GBP
2015 awards 28/09/2017 1,908,680 0.0601 114,712
2016 awards 28/09/2017 2,108,000 0.0461 97,179
----------- --------
4,016,680 211,891
----------- --------
No additional options were granted in the year ended 31 December
2018.
The share-based payment charge for the year ended 31 December
2017 and subsequent years is set out as follows:
Financial year ended Share based
31 December payment
charge GBP
2017 27,210
2018 85,372
2019 75,108
2020 24,201
------------
211,891
------------
The following information is relevant in the determination of
the fair value of options granted during the year under the
unapproved options scheme under the LTIP operated by Eden Research
Plc.
2015 Award 2016 Award
Grant date 28/09/17 28/09/17
Number of awards 1,908,680 2,108,000
Share price GBP0.125 GBP0.125
Exercise price GBPnil GBPnil
Expected dividend yield -% -%
Expected volatility 73.20% 73.20%
Risk free rate 0.80% 0.80%
Vesting period 2 years 3 years
Expected Life (from date of grant) 10 years 10 years
For those options and warrants which were not granted under the
Company's LTIP, fair value is measured using the Black-Scholes
model. The expected life used in the model has been adjusted, based
on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
conditions.
For those options which were granted under the Company's LTIP,
Monte Carlo techniques were used to simulate future share price
movements of the Company to assess the likelihood of the
performance criteria being met and the fair value of the awards
upon vesting. The modelling calculates many scenarios in order to
estimate the overall fair value based on the average value where
awards vest.
Warrants
2018 2017
Weighted
average Weighted
exercise average
price exercise
(pence) Number price (pence) Number
Outstanding
at the beginning
of the year 14 3,350,000 14 5,497,867
Granted during
the year - - - -
Exercised during
the year - - - -
Lapsed during
the
year 16 (950,000) - (2,147,867)
---------- ---------- --------------- ------------
20 2,400,000 - 3,350,000
---------- ---------- --------------- ------------
The exercise price of warrants outstanding at the end of the
year ranged between 11p and 30p (2017: 11p and 30p) and their
weighted average contractual life was 2.6 years (2017: 1.9 years).
None of the warrants have vesting conditions.
The share-based payment charge for the year was GBPnil (2017:
GBPnil). The weighted average fair value of each warrant granted
during the year was GBPnil (2017: GBPnil).
22. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES
Credit risk
2018 2017
GBP GBP
Cash and cash equivalents 2,478,740 3,678,383
Trade receivables 515,279 731,968
---------- ----------
2,994,019 4,410,351
---------- ----------
The average credit period for sales of goods and services is 36
days. No interest is charged on overdue trade receivables. At 31
December 2018 trade receivables of GBP56,706 (2017: GBP195,404)
were past due. During the year the Company wrote off bad debts in
the amount of GBP47,984 (2017: GBPnil).
Trade receivables of GBP398,447 (2017: GBP683,984) at the
reporting date are held in Euros and GBP112,656 (2017: GBP47,984)
were held in USD.
The Company's policy is to provide for doubtful debts based on
estimated irrecoverable amounts determined by reference to specific
circumstances and past default experience. At the balance sheet
date the directors consider that no provision for doubtful debts is
required and that there is no further credit risk.
Financial liabilities
2018 2017
GBP GBP
Trade payables 499,186 1,558,279
Other payables 115,168 66,389
Other taxes and social security 15,085 11,836
Accruals and deferred income 313,427 367,997
-------- ----------
942,866 2,004,501
-------- ----------
The carrying amount of trade payables approximates to fair
value.
The average credit period on purchases of goods is 59 days. No
interest is charged on trade payables. The Company has policies in
place to ensure that trade payables are paid within the credit
timeframe or as otherwise agreed.
Credit risk
As explained above, the directors consider that there is no
material exposure to credit risk at the reporting date.
Currency risk
The Company publishes its financial statements in pounds
sterling and conducts some of its business in US dollars, Swiss
Francs and Euros. As a result, it is subject to foreign currency
exchange risk due to exchange movements, which will affect the
Company's transaction costs and translation of the results. No
financial instruments are utilised to manage risk and currency
gains, and losses are charged to the Statement of Profit or Loss
and Other Comprehensive Income as incurred. At the year end, the
Company had the following net foreign currency balances in
liabilities.
2018 2017
GBP GBP
US dollars 85,111 448,609
Euros 115,807 916,887
Australian Dollars 73,591 -
-------- ----------
274,509 1,365,496
-------- ----------
Liquidity risk
The interest rate profile of the Company's financial liabilities
at 31 December 2018 was:-
Fixed rate Financial liabilities
Total financial liabilities on which no interest
is paid
GBP GBP GBP
Sterling
2018 668,357 - 668,357
2017 706,467 - 706,467
Euro
2018 115,807 - 115,807
2017 916,887 - 916,887
US Dollar
2018 85,111 - 85,111
2017 448,609 - 448,609
Australian Dollar
2018 73,591 - 73,591
2017 - - -
All the Euro, Australian Dollar and US Dollar liabilities are
held within trade creditors and are non-interest bearing.
Maturity of financial liabilities
The maturity profile of the Company's financial liabilities at
31 December 2018 was as follows:-
2018 2017
GBP GBP
In one year or less, or on demand 875,404 2,004,501
Over one year 67,462 67,462
942,866 2,071,963
Liquidity risk is managed by regular monitoring of the Company's
levels of cash and cash equivalents, debtor and creditor management
and expected future cash flows. See note 1 for further details on
the going concern position of the Company.
Market price risk
The Company's exposure to market price risk comprises interest
rate and currency risk exposures. It monitors these exposures
primarily through a process known as sensitivity analysis. This
involves estimating the effect on results before tax over various
periods of a range of possible changes in interest rates and
exchange rates. The sensitivity analysis model used for this
purpose makes no assumptions about any interrelationships between
such rates or about the way in which such changes may affect the
economies involved. As a consequence, figures derived from the
Company's sensitivity analysis model should be used in conjunction
with other information about the Company's risk profile.
The Company's policy towards currency risk is to eliminate all
exposures that will impact on reported results as soon as they
arise. This is reflected in the sensitivity analysis, which
estimates that five and ten percentage point increases in the value
of sterling against all other currencies would have had minimal
impact on results before tax.
On the other hand, the Company's policy is to accept a degree of
interest rate risk as long as the effects of various changes in
rates remain within certain prescribed ranges. On the basis of the
Company's analysis, the only financial liabilities held by the
Company are loans which are subject to a fixed rate of interest. As
such it is considered that any increases in interest rates would
not have had an impact on the Company's loss before tax for the
year.
Capital risk management
The primary objective of the Company's capital management is to
ensure that it maintains healthy capital ratios in order to support
its business and maximise shareholder value.
The Company seeks to enhance shareholder value by capturing
business opportunities as they develop. To achieve this goal, the
Company maintains sufficient capital to support its business.
The Company manages its capital structure and makes adjustments
to it in light of changes in economic conditions.
The Company looks to maintain a reasonable debt position by
repaying debt or issuing equity, as and when it is deemed to be
required.
No changes were made in the objectives, policies or processes
for managing capital during the years ended 31 December 2018 and 31
December 2017.
The Company monitors capital using a gearing ratio, which is net
debt divided by total capital plus net debt. The Company's policy
is to keep the gearing ratio below 10% (2017: below 10%).The
Company includes within net debt, interest bearing loans and
borrowings, a loan from a venture partner, trade and other
payables, less cash and cash equivalents.
23. DEFINED CONTRIBUTION PLANS
The Company operates a defined contribution pension plan.
The total expense relating to these plans in the current year
was GBP15,618 (2017: GBP10,804).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DGGDSBSGBGCB
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