REG - Eden Research plc - Final Results <Origin Href="QuoteRef">EDENE.L</Origin> - Part 2
22/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSV7449Fa
considered the ability of the Company to continue as a
going concern and this is considered to be the most significant estimate 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
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.
Convertible loans
Due to the nature of the arrangements management are required to make
significant judgements in order to determine whether conversion of loans has
taken place in accordance with the original terms of the underlying
agreement.
Application of equity method to associates
In the prior year financial statements the Company did not equity account for
its interest in TerpeneTech; in the current year the Board has decided to
adopt equity accounting as a new accounting policy and, as a result, the
comparative figures have been restated as disclosed in note 2 of the
accounts.
Accounting for TerpeneTech
In August 2015 the Company sold a licence to TerpeneTech Limited
("TerpeneTech") for £0.6m in order for TerpeneTech to use the Company's
Intellectual Property in head lice products; this was reflected as revenue as
the Company had no significant on-going obligations in respect of the
transaction.
Following this transaction, the Company issued 4,615,385 ordinary shares at
20p each (the market value at the time of issue) in exchange for 29.9% of the
equity shares in TerpeneTech.
This transaction was treated as a separate transaction. The Board is satisfied
that these transactions were at arm's length and that there were no reciprocal
arrangements or reacquisition of rights. TerpeneTech was not an associated
undertaking at the time the licence was sold. TerpeneTech had sold its
interest in the Company by 31 December 2015, as disclosed in note 11.
2. PRIOR PERIOD RESTATEMENT
In the prior year financial statements, the Board concluded that, since the
Company had no subsidiary undertakings and consequently was not required to
prepare consolidated accounts, the Company was not required to equity account
for its interest in TerpeneTech Limited.
During 2016, the Company received a number of queries from the FRC's Corporate
Reporting Review Committee under the Conduct Committee's operating procedures
for reviewing corporate reporting regarding its report and accounts for the
year ended 31 December 2015. The principal matter discussed was the accounting
for the Company's 29.9% investment in TerpeneTech Limited. Following those
discussions, the Company acknowledged that this investment should have been
classified as an associate. In order to present accounts that comply with
IFRS, the Company has equity accounted for its investment in TerpeneTech
Limited in these accounts and provided all relevant disclosures in respect of
that investment. The comparative figures have been restated accordingly.
Following changes in the Companies Act 2006 effective from 1 January 2016, the
Board has concluded that there is no requirement to include separate financial
statements accounting for the investment in TerpeneTech Limited at cost.
In addition, the Company has provided additional explanation justifying why
there was substance to the transaction involving the granting of rights to
TerpeneTech Limited to use the Company's intellectual property and supporting
the recognition of revenue of £0.6m within the 2015 accounts.
The Company also discussed with the FRC the treatment of the settlement of a
loan repaid in 2014. The Company acknowledges that clearer information on the
cost of the settlement should have been provided in its strategic report for
the year ended 31 December 2015 and has therefore included additional
disclosure in these accounts (see note 3 below).
The FRC has confirmed that it has completed its enquiries with regard to these
matters and does not expect to require any further action by the Company in
respect of these matters.
The impacts of the restatement are:
i. Increase in the loss for the year by £99,494 by including the Company's
share of TerpeneTech Limited's loss for the period following the Company's
investment.
ii. A reduction in investments and net assets/total equity of £99,494.
iii. Increase in the earnings per share from a loss of 0.68p to a loss of
0.74p.
Further disclosure is provided in notes 1 and 11.
There was no impact on the results or financial position at 1 January 2015 or
prior and accordingly, the Company has not included a third statement of
financial position as at the beginning of the preceding period.
3. PRIOR YEAR ACCOUNTING FOR FINANCIAL LIABILITIES
In the year ended 31 December 2014, the Company converted £2,295,192 of debt
owed to Oxford Capital Limited into 20,865,382 new ordinary shares. Of the
total amount converted, charges of £1,142,592 were incurred, excluding Share
Based Payment charge, as detailed below.
A breakdown of the total debt which was converted and the finance charges
incurred is as follows:
£ £
Loans advanced 1,110,000
Cost of advancing the loans:
Finance charges* 492,500 492,500
Loan fees 76,200 76,200
568,700
1,678,700
Interest accrued 42,694 94
Carrying value of debt at conversion 1,721,394
Cost of conversion 573,798 573,798
2,295,192 1,142,592 **
Share Based Payment charge (see below) 106,686
Total finance charges (as restated) 1,249,278
*calculated at a discount to the share price at the time of the loan advance
or conversion.
**total finance charges incurred in 2014, per 2014 and 2015 accounts.
As part of the overall settlement of the outstanding loan amounts due, the
Company granted to Oxford Capital 2,000,000 warrants at 11p which expire on 10
December 2019.
A share based payment charge of £106,686 was made in respect of the warrants
granted.
4. SEGMENTAL REPORTING
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 2016 is as follows:
Licensing fees Milestone payments Evaluation fees Royalties Grant funding Product sales Unallocated Total
£ £ £ £ £ £ £ £
Biocides - 14,368 - - - - - 14,368
Agrochemicals 128,204 31,008 30,580 122,814 123 64,861 - 377,590
TOTAL 128,204 45,376 30,580 122,814 123 64,861 - 391,958
Adjusted EBITDA - - - - - - (1,076,272) (1,076,272)
Amortisation - - - - - - (680,385) (680,385)
Depreciation - - - - - - - -
Share Based Payments - - - - - - (129,707) (129,707)
Net Finance costs - - - - - - (14,205) (14,205)
Income tax - - - - - - 81,895 81,895
Share of Associate's loss - - - - - - (12,418) (12,418)
Loss for the Year - - - - - - (1,831,092) (1,831,092)
Total Assets - - - - - - 7,799,175 7,799,175
Total Assets includes:
Additions to Non-Current Assets - - - - - - 349,149 349,149
Total Liabilities - - - - - - (1,032,748) (1,032,748)
The segmental information for the year ended 31 December 2015 is as follows:
Licensing fees Milestone payments Evaluation fees Royalties Grant funding Product sales Unallocated Total
£ £ £ £ £ £ £ £
Biocides - 12,346- - 3,031- - - - 15,377
Human Health 600,000 - - - - - - 600,000
Agrochemicals 138,068 50,676 45,214 3,345 531 30,101 - 267,935
TOTAL 738,068 63,022 45,214 6,376 531 30,101 - 883,312
Adjusted EBITDA - - - - - - (235,353) (235,353)
Amortisation - - - - - - (655,304) (655,304)
Depreciation - - - - - - - -
Share Based Payments - - - - - - (247,973) (247,973)
Net Finance costs - - - - - - (20,239) (20,239)
Income tax - - - - - - 101,260 101,260
Share of Associate's loss - - - - - - (99,494) (99,494)
Loss for the Year - - - - - - (1,157,103) (1,157,103)
Total Assets - - - - - - 6,679,451 6,679,451
Total Assets includes:
Additions to non-current assets - - - - - - 274,656 274,656
Total Liabilities - - - - - - (752,552) (752,552)
5. EMPLOYEES AND DIRECTORS
2016 2015
£ £
Wages and salariesPension costs 447,0754,218 385,471-
Social security costs 32,334 33,074
483,627 418,545
The average monthly number of employees during the year was as follows:
2015 2014
Management 4 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.
2015 2015
£ £
Director's remuneration 382,075 308,616
Non-executive directors' fees 65,000 76,855
Total directors' emoluments 447,075 385,471
Share based payment charge relating to all directors 129,707 142,959
During the year the remuneration of the highest paid director was £266,780
(2015: £317,526).
2016 Share based payments
Salary Bonus Fees Pension Total
£ £ £ £ £ £
A Abrey 120,000 54,000 - 1,920 73,300 249,220
T Lupton - - 35,000 - - 35,000
S Smith 143,500 64,575 - 2,298 56,407 266,780
R Cridland - - 30,000 - - 30,000
263,500 118,575 65,000 4,218 129,707 581,000
2015 Salary Bonus Fees Share based payments Total
£ £ £ £ £
A Abrey 86,250 31,050 - 4,884 122,184
K Brooks 7,500 - 22,500 - 30,000
C Newitt 4,365 - - - 4,365
T Lupton - - 35,000 - 35,000
S Smith 137,335 42,116 - 138,075 317,526
R Cridland - - 19,355 - 19,355
235,450 73,166 76,855 142,959 528,430
6. NET FINANCE COSTS
2016 2015
£ £
Finance income:
Deposit account interest 1,278 247
Finance costs:
Bank interest
Exchange variances 14,999 20,064
Finance fees 484 422
15,483 20,486
Net finance costs 14,205 20,239
7. LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
2016 2015
£ £
Licences and trademarks amortisation 15,720 15,723
Development costs amortisation 225,141 200,093
Intellectual property amortisation 439,488 439,488
Auditors' remuneration 21,800 16,000
Equity share based payment charge 129,707 247,073
Foreign exchange differences 14,999 20,064
8. INCOME TAX
Analysis of tax income
2016 2015
£ £
Current tax:
Tax (81,895) (101,260)
Total tax income in statement of profit or loss and other comprehensive income (81,895) (101,260)
Corporation tax
No tax charge arises on the results for the year (2015: £nil). Tax losses
carried forward amount to approximately £23,800,466 (2015: £21,287,596). The
tax credit represents the research and development tax credit receivable for
the year ended 31 December 2016.
Factors affecting the tax charge
The UK standard rate of corporation tax is 20.00% (2015: 20.25%). Current tax
assessed for the financial year as a percentage of the loss before taxation is
(4.3)% (2015: (8.0)%)
The differences are explained below:
2016 2016 2015 2015
As restated As restated
£ % £ %
Standard rate of corporation tax in the UK (20.00) (20.25)
Loss before tax at standard rate of tax (382,597) (254,819)
Effects of Losses carried forward 335,081 17.5 260,904 20.73
Difference in effective tax rate of equity accounted associate (2,484) (0.1) (20,147) (1.60)
Other expenses not deductible for tax purposes 50,000 2.6 14,062 1.12
Research and development tax relief (81,895) (4.3) (101,260) (8.0)
Total current tax credit and tax rate % (81,895) (4.3) (101,260) (8.0)
Deferred tax
Un-provided deferred tax asset 4,046,079 3,500,613
The un-provided for deferred tax asset arises principally in respect of
trading losses, together with other minor timing differences at 17% (2015:
18%) and has not been recognised due to the uncertainty of timing of future
profits against which it may be realised.
9. 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:
Earnings£ 2016Weighted average number of shares Per-share amount pence
Basic EPS
Earnings attributable to ordinary shareholders (1,831,092) 178,441,431 -1.03
Effect of dilutive securities - - -
Diluted EPS
Adjusted earnings (1,831,092) 178,441,431 -1.03
Earnings(as restated)£ 2015Weighted average number of shares Per-share amount pence
Basic EPS
Earnings attributable to ordinary shareholders (1,157,103) 155,685,557 -0.74
Effect of dilutive securities - - -
Diluted EPS
Adjusted earnings (1,157,103) 155,685,557 -0.74
Due to the loss for the year there is no dilution of the loss per share
arising from options in existence.
10. INTANGIBLE ASSETS
Licences and trademarks Development costs Intellectual property Totals
£ £ £ £
COST
At 1 January 2016 447,351 3,188,498 8,657,372 12,293,221
Additions - 266,778 82,371 349,149
At 31 December 2016 447,351 3,455,276 8,739,743 12,642,370
AMORTISATION
At 1 January 2016 368,590 1,249,819 5,131,720 6,750,129
Amortisation for year 15,720 225,141 439,488 680,349
At 31 December 2016 384,310 1,474,960 5,571,208 7,430,478
NET BOOK VALUE
At 31 December 2016 63,041 1,980,316 3,168,535 5,211,892
Licences and trademarks Development costs Intellectual property Totals
£ £ £ £
COST
At 1 January 2015 447,351 2,979,440 8,591,774 12,018,565
Additions - 209,058 65,598 274,656
At 31 December 2015 447,351 3,188,498 8,657,372 12,293,221
AMORTISATION
At 1 January 2015 352,867 1,049,726 4,692,232 6,094,825
Amortisation for year 15,723 200,093 439,488 655,304
At 31 December 2015 368,590 1,249,819 5,131,720 6,750,129
NET BOOK VALUE
At 31 December 2015 78,761 1,938,679 3,525,652 5,543,092
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 eight 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 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 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 10% (2015: 10%).
The growth rates are derived from discussions with the Company's commercial
partners, as described above.
Based on the review management have carried out, they are satisfied that the
Intellectual Property 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.
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.
11. INVESTMENTS IN ASSOCIATES
2016 2015
Percentage ownership interest and proportion of voting rights 29.9% 29.9%
£ £
Non-current assets 632,158 679,979
Current assets 92,343 64,784
Non-current liabilities (78,537) (108,150)
Current liabilities (27,705) (25,547)
Net assets (100%) 618,259 611,066
Company's share of net assets 184,859 182,709
Separable intangible assets 213,657 228,225
Goodwill 412,649 412,649
Carrying amount of interest in associate 811,165 823,583
Revenue 144,760 44,223
Profit/(loss) from continuing operations 7,193 (316,515)
Post tax profit from discontinued operations - -
100% of total post-tax profits 7,193 (316,515)
29.9% of total post-tax profits 2,150 (94,638)
Amortisation of separable intangible assets (14,568) (4,856)
Company's share of profit/(loss) including amortisation of separable intangible assets (12,418) (99,494)
Other comprehensive income - -
100% - -
29.9% - -
Company's share of other comprehensive income - -
Total comprehensive income (100%) 7,193 (316,515)
Company's share of total comprehensive income including amortisation of separable intangible asset (12,418) (99,494)
Dividends received by the Company - -
The investment in associates relates to the Company's interest in TerpeneTech
Limited. As discussed in Note 2 above, the Company did not equity account for
the interest in the prior year financial statements; the prior year figures
have been restated in order to comply with IAS 28.
The Company acquired 29.9% of TerpeneTech's share capital in 2015 by issuing
shares in the Company. The fair value of the share was deemed to be £923,077.
In August 2015, the Company signed a licence agreement with TerpeneTech
Limited, a company registered in England and Wales, granting it the exclusive,
global rights to use Eden's technology and know-how to develop and market
head-lice products (the head-lice agreement).
Eden had previously signed a licence agreement in 2011 with TerpeneTech
granting it the exclusive, global rights to use Eden's technology and know-how
to develop and market biocide products, the rights to which are separate to
those described above.
For the rights granted to TerpeneTech in 2015, under the head-lice agreement,
Eden received an upfront licence fee of £600,000. This amount was paid in cash
upon signature of the agreement and was a non-refundable fee with
insignificant on-going performance obligations on Eden under the licence.
Subsequent to discussions regarding the then potential head-lice licence
agreement and following successful clinical trials undertaken by TerpeneTech
on the head-lice product, Eden contemplated taking a shareholding in
TerpeneTech in order to, amongst other things, provide Eden with a greater
potential return on the intellectual property that TerpeneTech was exploiting
(both its own and that licensed from Eden) and to provide Eden with a degree
of influence over TerpeneTech.
Shortly after the completion of the head-lice licence agreement, Eden took a
shareholding in TerpeneTech through a share-swap arrangement (the share-swap),
whereby Eden issued 4,615,385 of its shares in exchange for new shares in
TerpeneTech totalling 29.9% of the enlarged, issued share capital. The value
of the shares issued to TerpeneTech, and the value at which Eden recorded its
investment in TerpeneTech, was £923,077.
Prior to the year ended 31 December 2015, TerpeneTech disposed of its
investment in Eden at a loss of £0.3m.
The share-swap and the head-lice licence agreement were negotiated and
completed on arm's length commercial terms.
TerpeneTech's 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% (2015: 20%). The growth rates are derived from discussions
with the Company's commercial partner, TerpeneTech, as described above.
Based on the review management have carried out, they are 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.
12. TRADE AND OTHER RECEIVABLES
2015 2015
£ £
Current:
Trade and other receivables 236,098 144,997
VAT recoverable 4,407 19,419
240,505 164,416
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 £nil (2015: £nil). Details of debts past due but not impaired are given in
note 26.
13. CASH AND CASH EQUIVALENTS
2016 2015
£ £
Short term bank deposits 1,532,341 148,360
The carrying amount of these short term bank deposits approximates to the fair
value.
14. TRADE AND OTHER PAYABLES
2016 2015
£ £
Current:
Trade payables 120,758 326,940
Other payables 40,894 25,668
Accruals and deferred income 803,634 399,944
965,286 752,552
Included in accruals is an amount of £570,462, being minimum royalties due to
University of Massachusetts Medical School ("UMMS") under the licence
agreement Eden signed with UMMS in 2011. Eden is currently re-negotiating some
of the terms of the licence with UMMS and, as such, the Company has taken the
view that, whilst it is unlikely that the full accrued amount will be paid, it
is prudent to accrue the full amount due, per the licence agreement.
Non-current:
Other creditors 67,462 -
Aggregate amounts 1,032,748 752,552
15. LEASING AGREEMENTS
Minimum lease payments under non-cancellable operating leases fall due as
follows:
2016 2015
£ £
Between one and five years - 11,958
- 11,958
16.FINANCIAL ASSETS AND LIABILITIES
Note 2016 2015
£ £
Financial assets at amortised cost
Other receivables 12 240,505 164,416
Cash and cash equivalents 13 1,532,341 148,360
1,772,846 312,776
Financial liabilities measured at amortised cost 2016 2015
Current: £ £
Trade and other payables 14 1,032,748 752,552
1,032,748 752,552
17.CALLED UP SHARE CAPITAL
Number: Class: Nominal 2016 2015
value: £ £
184,654,119 Ordinary 0.01 1,846,542 1,587,583
(2015: 158,758,265)
Alloted, issued and fully paid
Number: Class: Nominal 2016 2015
value: £ £
184,654,119 Ordinary 0.01 1,846,542 1,587,583
(2015: 158,758,265)
On 20 January 2016 the Company issued 350,000 ordinary shares at 13p each for
a consideration of £45,500 and 180,000 ordinary shares at 12.80p each for a
consideration of £23,040 in respect of share options and warrants exercised.
On 20 June 2016, the Company issued a further 25,365,854 ordinary shares at
10.25p each for consideration of £2,600,000. Share issue costs of £130,899
were incurred and have been charged to the share premium account as detailed
in note 18.
The number of £0.01 ordinary shares issued in the year totalled 25,895,854
(2015: 4,615,385).
Date Number of ordinary shares Aggregate nominal value Issue Price Premium on issue Total share premium
£ £ £ £
20/01/2016 350,000 3,500 0.1300 0.1200 42,000
20/01/2016 180,000 1,800 0.1300 0.1180 21,240
30/03/2016 25,365,854 253,659 0.1025 0.0925 2,346,341
258,959 2,409,581
18.RESERVES
Retained losses (As restated) Share premium Merger reserve Warrant reserve Totals(As restated)
£ £ £ £ £
At 1 January 2016 (33,466,782) 26,860,972 10,209,673 735,453 4,339,316
Deficit for the year (1,831,092) - - - (1,831,092)
Cash share issue - 2,409,581 - - 2,409,581
Transfer to other reserves - (130,899) - - (130,899)
Options granted - - - 129,707 129,707
Options exercised/lapsed 250,447 - - (250,447) -
At 31 December 2016 (35,047,427) 29,139,654 10,209,673 614,713 4,916,613
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 Payment.
19. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH USED BY OPERATIONS
2016 2015
(as restated) *
£ £
Loss before income tax (1,912,987) (1,258,363)
Share of associate's losses 12,418 99,494
Depreciation charges 680,349 655,304
Share based payment charge 129,707 247,973
Finance costs 15,483 20,486
Finance income (1,278) (247)
(1,076,308) (235,353)
Increase in trade and other receivables (76,089) (101,882)
Increase in trade and other payables 169,033 151,600
Cash used by operations (983,364) (185,635)
* The restatement relates to the correction of the figures for the increase in
trade and other receivables and the increase in trade and other payables as
£142,650 relating to development costs accrued but unpaid was adjusted in the
movement in trade and other receivables in error. It should have been deducted
from the increase in trade and other payables.
20. CASH AND CASH EQUIVALENTS
The amounts disclosed on the Statement of Cash Flows in respect of cash and
cash equivalents are in respect of these Statement of Financial Position
amounts:
Year ended 31 December 2016
31.12.16 1.1.16
£ £
Cash and cash equivalents 1,532,341 148,360
Year ended 31 December 2015
31.12.15 1.1.15
£ £
Cash and cash equivalents 148,360 414,980
21. MAJOR NON-CASH TRANSACTIONS
During the year ended 31 December 2015, the company acquired 29.9% of share
capital of TerpeneTech for £923,077. The consideration was paid via the issue
of shares as disclosed per note 11 and was a major non-cash transaction. Share
issue costs of £30,000 were incurred.
22. CAPITAL COMMITMENTS
The Company had no capital commitments at 31 December 2016 (2015: £nil).
23. 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 the value of the Company at a future
date. As at 31 December 2015, no contingent liability had been realised.
During the year, an amount of £67,462, being the amount estimated as due to
Xinova had been realised and is included as a non-current liability, as
disclosed in note 14 to the accounts.
24. 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 5.
Transactions with other related parties are set out below:
During the year, Ricewood Limited, of which A Abrey is a director and
shareholder, supplied consultancy services to Eden Research Plc in the amount
of £nil (2015: £15,000).
During the year, Eden invoiced its associate, TerpeneTech, £14,368 for licence
fees (2015: £612,261).
Also during the year, Eden made payments on behalf of TerpeneTech totalling
£13,923 (2015: £3,500).
At the year end, an amount of £2,490 was owed to TerpeneTech (2015: £16,413).
This amount is included within Other Payables.
The directors regard all the transactions disclosed above as being in the
normal course of business and the transactions were enacted at arms' length.
25. SHARE-BASED PAYMENT TRANSACTIONS
Share Options
Eden Research Plc operates an unapproved option scheme for executive
directors, senior management and certain employees.
2016 2015
Weighted average exercise price (pence) Number Weighted average exercise price (pence) Number
Outstanding at the beginning of the year 11 6,075,000 12 4,650,000
Granted during the year 13 2,050,000 18 1,625,000
Exercised during the year 13 (350,000) -
Lapsed during the year 13 (2,750,000) 18 (200,000)
11 5,025,000 11 6,075,000
The exercise price of options outstanding at the end of the year ranged
between 8p and 16p (2015: 8p and 18p) and their weighted average contractual
life was 2.1 years (2015: 1.5 years). None of the options have vesting
conditions.
The share based payment charge for the year was £129,707 (2015: £142,959). The
weighted average fair value of each option granted during 2016 was 13p (2015:
9p).
The following information is relevant in the determination of the fair value
of options granted during the year under the unapproved options scheme
operated by Eden Research Plc.
Equity-settled
Option price model used Black Scholes
Weighted average share price at grant date (pence) 12
Exercise price (pence) 15
Weighted average contractual life (days) 1,095
Expected volatility 64.4%
Expected dividend growth rate -
Risk-free interest rate 0.95%
Expected volatility is calculated based on historic share price movements.
Warrants
2016 2015
Weighted average exercise price (pence) Number Weighted average exercise price (pence) Number
Outstanding at the beginning of the year 14 5,677,867 13 3,340,000
Granted during the year - - 15 2,337,867
Exercised during the year 13 (180,000) -
Lapsed during the year - - - -
14 5,497,867 14 5,677,867
The exercise price of warrants outstanding at the end of the year ranged
between 11p and 30p (2015: 11p and 30p) and their weighted average contractual
life was 2.6 years (2015: 3 years). None of the warrants have vesting
conditions.
The share based payment charge for the year was £nil (2015: £105,014). The
weighted average fair value of each warrant granted during the year was £nil
(2015: 5p).
26. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES
Credit risk
2016£ 2015£
Cash and cash equivalents 1,532,341 148,360
Trade receivables 236,098 144,997
1,768,439 293,357
The average credit period for sales of goods and services is 83 days. No
interest is charged on overdue trade receivables. At 31 December 2016 trade
receivables of £74,340 (2015: £28,899) were past due. During the year the
Company wrote off bad debts in the amount of £34,138 (2015: £nil).
Trade receivables of £40,724 (2015: £28,900) at the reporting date are held in
Euros and £47,984 (2015: £84,122) 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
2016£ 2015£
Trade payables 120,758 326,940
Other payables 40,894 25,668
Accruals and deferred income 871,096 399,944
1,032,748 752,552
The carrying amount of trade payables approximates to fair value.
The average credit period on purchases of goods is 27 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 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.
2016 2015(As restated)
£ £
US dollars 681,054 404,968
Euro 18,660 12,117
Swiss Francs 1,274 -
700,988 417,085
Liquidity risk
The interest rate profile and maturity profile of financial liabilities is set
out below:-
The interest rate profile of the Company's financial liabilities at 31
December 2016 was:-
Total Fixed rate financial liabilities Financial liabilities on which no interest is paid
£ £ £
Sterling
2016 325,247 - 325,247
2015 335,467 * - 335,467
Euro
2016 18,660 - 18,660
2015 12,117 - 12,117
US Dollars
2016 681,054 - 681,054
2015 404,968 * - 404,968
Swiss Francs
2016 1,274 - 1,274
2015 - - -
All the Euro, Swiss Franc and US Dollar liabilities are held within trade
creditors and are non interest bearing.
*The restatement relates to the correction of financial liabilities
denominated in US Dollars in 2015 which had previously been shown as
denominated in Sterling. The total amount adjusted is £267,396.
Maturity of financial liabilities
The maturity profile of the Company's financial liabilities at 31 December
2016 was as follows:-
2016 2015
£ £
In one year or less, or on demand 965,286 752,552
Over one year 67,462 -
1,032,748 752,552
Liquidity risk is managed by regular monitoring of the Company's undrawn
borrowing facilities, levels of cash and cash equivalents, and expected future
cash flows, and availability of loans from shareholders. 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,
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