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R E S E A R C H P L C
T H E N A T U R A L S O L U T I O N
ANNUAL REPORT & ACCOUNTS 2013
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R E S E AR C H P L C
T H E NA T U R A L S O L U T I ON
R E S E AR C H P L C
T H E NA T U R A L S O L U T I ON
ANNUAL REPOR T & ACCOUNTS 2012
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R E S E AR C H P L C
T H E NA T U R A L S O L U T I ON
CONTENTS
Company Information
Chairman’s Report
Report of the Directors
Strategic Report
Report of the Independent Auditors
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Statement of Cash Flows
Notes to the Financial Statements
Page
2
3
6
9
11
12
13
14
15
16
17
ANNUAL REPOR T & ACCOUNTS 2010
1
FINANCIAL STATEMENTS 2013
COMPANY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2013
DIRECTORS:
SECRETARIES:
REGISTERED OFFICE:
K W Brooks
A J Abrey
C R Newitt
A B N Gill (deceased 8th May 2014)
T G Lupton
R E Sims
Oxford Corporate Services Limited
The Hawk Creative Business Park
The Hawkhills Estate
Easingwold
York
North Yorkshire
YO61 3FE
REGISTERED NUMBER:
03071324 (England and Wales)
INDEPENDENT AUDITORS: UHY Hacker Young
BANKERS:
SOLICITORS:
130 Aztec
Aztec West
Bristol
BS32 4UB
The Royal Bank of Scotland Plc
Southern Corporate Office
P O Box 391
40 Islington High Street
London
N1 8JX
Gowlings (UK) LLP
15th Floor
125 Old Broad Street
London
EC2N 1AR
CORPORATE ADVISORS: WH Ireland
24 Martin Lane
London
EC4R 0DR
2
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
One such example is Eden’s licensee, TerpeneTech, where
the first product using Eden’s GO-E™ encapsulation
technology has been launched. TerpeneTech has
developed an odour neutraliser product which is being
distributed initially in France. TerpeneTech expects to be
selling a further six or more GO-E™ based products by
the end of 2014.
It is very pleasing to see the first products being sold
which use Eden’s GO-E™ based technologies and we
look forward to many more to come.
I shall now provide you with a brief update on Eden’s
various commercial activities.
EU approval process
As already mentioned, in May 2013 the three active
substances used in the Company’s lead product, 3AEY,
were approved for use in plant protection products by
the European Commission under Regulation (EC) No.
1107/2009 within the EU and this approval came into
effect on 1st December 2013.
Whilst the EU granted approval for Eden’s three active
substances, certain additional confirmatory data were
requested to be submitted and this will lead to further
investment of around £500k over the next 12 months.
In October 2013, Eden applied to have 3AEY approved
in the southern zone within the EU. It is expected that
the first country approval will be granted at the end of
2014, with the remaining countries within the southern
zone granting approval in spring 2015, as previously
reported.
Once approval has been granted, it is expected that
sales of 3AEY will commence in the EU southern zone
through Eden’s licensees shortly thereafter.
CHAIRMAN’S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2013
Introduction
I would like to start my Report by remembering our
previous Chairman, Sir Ben Gill, who sadly passed
away on 8th May 2014. Sir Ben was instrumental in
overseeing Eden’s development since his appointment
in 2009 and shall be greatly missed by the rest of the
Board. We are very grateful for all of the work that he
did for our Company.
Since the last Chairman’s Report, I am pleased to inform
you that your Company has met a number of key
milestones as part of its evolution from a research and
development company to a commercial business.
The most significant of these milestones was the
approval by the European Commission of the three
active substances used in Eden’s first agrochemical
product, 3AEY – a fungicidal product which is primarily
used to protect crops against botrytis. This is the
culmination of seven years’ work and an investment
of more than £5 million which provides Eden with a
valuable Intellectual Property (“IP”) platform from which
to generate revenues.
The Company has already licensed 3AEY to a number
of companies and this approval paves the way for its
successful commercialisation and further development.
There are a number of new products that Eden has been
working on which use some, or all, of the same three
active substances, in other combinations, for different
applications. These new product opportunities should
benefit from a shorter regulatory approval process as the
active substances have already been approved.
In addition to this exciting development, the
Company has progressed with the development and
commercialisation of products through its licensees
and partners in other business sectors including human
health, cosmetics, flavours and fragrances and animal
health.
Over the past two years, Eden has been positioning itself
as a platform technology company with expertise in
encapsulation and terpene technologies. The rationale
being to try and maximise the exploitation of its IP base
by partnering with other companies whose molecules
and market access would benefit from access to Eden’s
proprietary technology. As part of this strategy, the
company is implementing a branding campaign to
provide recognition of where its enabling technology
is being used by the use of the “GO-E™” concept and
trademark, a similar strategy to “Intel Inside”.
3
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013 Earlier stage Products
Eden is continuing to try to exploit early stage leads
identified for the control of insect pests, such as Whitefly
and Spider mites together with fungicidal applications
to minimise Post-harvest losses from spoilage organisms.
Since the approval of its core three active substances,
there have been renewed discussions with various
parties to license these rights.
Animal Health – Bayer
During 2013, the team developing Eden’s products went
through significant personnel changes, following the
acquisition of TEVA Animal Health by Bayer HealthCare
(“Bayer”) in January 2013. As previously announced,
this has led to some inevitable delays in the launch of
products by Bayer, but, progress is still being made and
it is expected that products will be commercialised in the
next year.
Biocides
Since the year end, TerpeneTech announced that it
had successfully launched its first product, an odour
neutraliser initially into the French market. TerpeneTech
has made significant advances in the development and
commercialisation of “GO-E™” products since it signed
its licence agreement with Eden and is expected to
launch a number of further products this year in Europe
and the USA.
Human health
In June 2013, Eden signed an agreement with
NeoPharma Innovations Limited (“Neo”) providing
them with the exclusive rights to head-lice products.
Since then, Neo has been very busy pursuing regulatory
approval in both the European Union (“EU”) and India,
as well as progressing talks with interested distributors.
CHAIRMAN’S REPORT
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
3AEY
3AEY, Eden’s lead product; a terpene based fungicide,
has been out-licensed to a number of parties for a
variety of applications throughout the world.
Redestos is currently undertaking field trials to gain label
extensions (for additional crops) for 3AEY in Greece and
the Balkans.
Cheminova is awaiting EU approval, expected in spring
2015, before selling 3AEY.
Lachlan has received approval for 3AEY, however, the
Pesticide Control Board stipulated that it should be
subject to one national EU approval of 3AEY. This was
is a significant bureaucratic variation from the original
process that was started. Once this approval has been
granted, Lachlan will be able to start selling 3AEY in
Kenya and they are geared to launch in November 2014.
Due to the high regulatory barriers that have been
created by certain EU authorities, registration of a
diluted version of 3AEY for amateur gardening use has
proved to be uneconomic for the territories originally
licensed to ECOstyle. Both parties have mutually agreed
to terminate their agreement and we are in discussions
with a pan-European gardening business to exploit this
opportunity.
Eden has also ended its agreement with Environmental
Solutions North Africa Limited, following the tragic
death of Ian Redford, Managing Director and majority
shareholder.
Eden is in advanced negotiations with other interested
parties to step-in as a replacement.
Nematodes
Eden continues to develop its nematicide product with
partners throughout the world and validation and
spectrum testing is still underway in order to progress to
licensing arrangements.
We expect to see movement on this shortly and will
update shareholders accordingly.
4
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013 The Senior Management
During 2013 the management committee comprised:
Sir Ben Gill - Non-Executive Chairman (deceased 8th
May 2014)
Tom Lupton - Non-Executive Director (Chairman with
effect from 19th May 2014)
Ken Brooks - Executive Deputy Chairman
Clive Newitt - Managing Director
Alex Abrey - Chief Financial Officer
Outlook
With the significant EU regulatory hurdle having been
surmounted, national product approvals just around the
corner and product sales already underway, I am very
optimistic that Eden has a bright future and that all of
the hard work and significant investment is now coming
to fruition.
The Board is confident that it will be able to deliver
against the shareholders’ high expectations. In addition
to new licence agreements being signed and royalties
being received within the next twelve months, it is the
Board’s intention to re-organise the business so as to
further protect its IP and maximise shareholder value
from each business sector where GO-E™ is applicable.
This, we believe, will clarify Eden’s valuable business
proposition to investors and also strategically place Eden
in the sights of larger companies who are interested in
adopting our various technologies for their particular
market sector.
I think that 2014 will prove to be a pivotal year for Eden
and am excited by the prospects that lie ahead.
T G Lupton
Chairman
2nd June 2014
CHAIRMAN’S REPORT
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
Encapsulation
The interest in using Eden’s GO-E™ system continues
to increase and a number of on-going encapsulation
projects are underway, primarily in the agrochemicals
sector, but, also in cosmetics, fragrances and human
health.
During the past twelve months, the Eden team has
attended various industry conferences and taken
the opportunity to present its Platform technology
capabilities to a worldwide audience.
Intellectual Property (“IP”)
2013 saw the granting of the Eden’s master
encapsulation patent in both Europe and the African
Regional Intellectual Property Organization (“ARIPO”)
region, both of which are key areas for the use of
agrochemicals covering the wine, vegetable, fruit and
ornamental flowers industries. The master encapsulation
patent was also granted in the Philippines.
Also during the year, one of Eden’s insecticide
formulation patents was granted in the ARIPO region.
Every time a patent is granted to Eden, the inherent
value of the business increases while at the same time it
validates the technologies and, therefore, products that
Eden has to offer, which is why events such as these are
important to the success of the company and also to
shareholders.
The company now holds a total of forty five granted
technology and product related patents throughout the
world.
The granting of EU approval for its three active
substances has also led to a number of unsolicited
approaches by third parties seeking “Letters of Access”
in return for financial compensation. This is an accepted
system throughout the regulated industries, such as
Agrochemical and Biocides, whereby the data holder
issues such Letters of Access to third parties in order
to expedite product registrations and eliminate the
unnecessary duplication of testing of substances
on vertebrate species. A recent example of this was
announced concerning the Spanish company DAYMSA.
5
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013 REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2013
The directors present their report with the financial statements of the Company for the year ended 31 December 2013.
PRINCIPAL ACTIVITY
The principal activity of the Company in the year under review was that of the development and marketing of
intellectual property, particularly in the area of terpenes and other health-related projects.
DIVIDENDS
The loss for the year after taxation amounted to £1,587,909 (2012: £2,260,717 as restated). The directors are
unable to recommend any dividend (2012: £nil).
RESEARCH AND DEVELOPMENT
An indication of research and development activities is included within the Chairman’s Review.
FUTURE DEVELOPMENTS
An indication of future developments is included within the Chairman’s Review.
DIRECTORS
The directors during the year under review were:
K W Brooks
A J Abrey
C Newitt
A B N Gill (deceased 8th May 2014)
T G Lupton
At 31 December 2013 the directors had the following interests in share option schemes:
Date of
grant
Expiry date
Exercise
price
Number at
1 January
2013
Granted in
year
Exercised in
year
Lapsed in
year
Number at
31 December
2013
KW Brooks
19/05/2009
19/05/2014
17/01/2011
16/01/2016
A J Abrey
19/05/2009
19/05/2014
17/01/2011
16/01/2016
C Newitt
19/05/2009
19/05/2014
17/01/2011
16/01/2016
A B N Gill
19/05/2009
19/05/2014
17/01/2011
16/01/2016
6
£
0.26
0.13
0.26
0.13
0.26
0.13
0.26
0.13
900,000
1,100,000
2,000,000
450,000
1,050,000
1,500,000
150,000
450,000
600,000
100,000
500,000
600,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
900,000
1,100,000
2,000,000
450,000
1,050,000
1,500,000
150,000
450,000
600,000
100,000
500,000
600,000
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013 REPORT OF THE DIRECTORS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
CORPORATE GOVERNANCE
The directors acknowledge the importance of the principles set out in the Corporate Governance Code. Although
the Corporate Governance Code is not compulsory for AIM quoted companies, the directors have applied the
principles as far as practicable and appropriate for a relatively small public company as follows:
The Board currently comprises three executive directors and one non-executive director. The Board meets regularly to
consider strategy, performance and the framework of internal controls. To enable the Board to discharge its duties,
all directors receive appropriate and timely information. Briefing papers are distributed to all directors in advance
of Board meetings. All directors have access to the advice and services of the Company Secretary and the Chief
Financial Officer, who are responsible for ensuring that the Board procedures are followed and that applicable rules
and regulations are complied with. In addition, procedures are in place to enable the directors to obtain independent
professional advice in the furtherance of their duties, if necessary, at the Company’s expense.
The directors have established Audit, Nomination, Remuneration and AIM Compliance Committees; the Audit
Committee has Tom Lupton as Chairman following the death of Sir Ben Gill, and has primary responsibility for
monitoring the quality of internal controls ensuring that the financial performance of the Company is properly
measured and reported on and reviewing reports from the Company’s auditors relating to the Company’s accounting
and internal controls, in all cases having due regard to the interests of Shareholders. The Audit Committee meets at
least twice a year. Ken Brooks is the other member of the Audit Committee; the Nomination Committee has Tom
Lupton as Chairman following the death of Sir Ben Gill, and will identify and nominate for the approval of the Board,
candidates to fill board vacancies as and when they arise.
The Nomination Committee meets at least twice a year. Ken Brooks is the other member of the Nomination
Committee; the Remuneration Committee has Tom Lupton as Chairman following the death of Sir Ben Gill, and will
review the performance of the executive directors and determine their terms and conditions of service, including
their remuneration and the grant of options, having due regard to the interests of Shareholders. The Remuneration
Committee meets at least twice a year. Ken Brooks is the other member of the Remuneration Committee; the AIM
Compliance Committee has Tom Lupton as Chairman following the death of Sir Ben Gill and liaises with the NOMAD
to discuss AIM compliance and related issues. The other member of the committee is Alex Abrey; and the directors
comply with Rule 21 of the AIM Rules relating to directors’ dealings and there are procedures in place to ensure
compliance by the Company’s applicable employees. The Company has adopted a share dealing code which is
appropriate for an AIM quoted company.
Revised Total Holdings
% of Enlarged Share Capital
Ken Brooks
Estate of Ben Gill
Clive Newitt
Alex Abrey
Tom Lupton
1,985,936
952,477
323,947
528,160
70,000
1.61%
0.77%
0.26%
0.43%
0.06%
7
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
STATEMENT AS TO DISCLOSURE OF
INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant
audit information (as defined by Section 418 of the
Companies Act 2006) of which the Company’s auditors
are unaware, and each director has taken all the steps
that he ought to have taken as a director in order to
make himself aware of any relevant audit information
and to establish that the Company’s auditors are aware
of that information.
AUDITORS
The auditors, UHY Hacker Young, were appointed as
auditors by the directors during the year; a resolution to
reappoint UHY Hacker Young will be proposed at the
forthcoming Annual General Meeting.
ON BEHALF OF THE BOARD:
REPORT OF THE DIRECTORS
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law
the directors have elected to prepare the financial
statements in accordance with International Financial
Reporting Standards as adopted by the European Union.
Under company law the directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for
that period. In preparing these financial statements, the
directors are required to:
-
select suitable accounting policies and then apply
them consistently;
- make judgements and accounting estimates that
are reasonable and prudent;
-
prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
A J Abrey - Director
2nd June 2014
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and
other irregularities.
8
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2013
REVIEW OF BUSINESS
The review of this year’s business activities is as set out in
the Chairman’s Review.
The key performance indicators of the business are that
of the development of the Company’s products and the
management of its cash position.
The registration of the Company’s first product, 3AEY,
for use as a pesticide in Europe will not only be a key
milestone in terms of its commercialisation but also of
future products as the three active substances that are
being registered are the basis of Eden’s future product
portfolio.
Further commercialisation of Eden’s products and
encapsulation technologies through licensing and
option agreements also serve as a key indicator to the
Company’s performance.
Successful trial results are also significant in the showing
the commerciality of the intellectual property.
KEY FINANCIAL PERFORMANCE INDICATORS
Revenue in 2013 consisted of charges made for
samples and consultancy to other existing and potential
licensees. Revenue in 2013 was £0.08 million in
comparison to £0.04 million in 2012. The operating loss
for the year was £1.6 million compared to £1.6 million
for the previous year. The loss before tax for 2013
was £1.6 million, a reduction from £2.3 million in the
previous year (as restated) due principally to a reduction
in finance costs to £0.04m (2012: £0.7m).
Administrative expenses for the year (excluding the
amortisation of intangible assets and share based
payments charge) were £1.0 million (2012: £0.9
million). Aside from additional costs relating to external
consultants, the Company maintains a policy of keeping
a low head count in order to maintain a low level of
overheads.
The loss per share for 2013 was 1.30 pence compared
to 2.11 pence in 2012 (as restated).
Intellectual property, including development expenditure,
is written off over eleven years in line with the remaining
life of the Company’s master patent.
The Company has capitalised £0.2m (2012: £0.1m)
of development expenditure in the year which is
a reflection of the continued development of the
Company’s products.
During the year, the Company received net loans from
shareholders of £0.36 million (2012: £1.7 million). Debt
totalling £nil (2012: £2.3million) was converted into
equity.
Cash is managed by tightly controlling the Company’s
creditor position and through the provision of
convertible shareholder loans.
OTHER KEY FINANCIAL PERFORMANCE
INDICATORS
The decrease in the shareholder loans during the year
reflects the on-going management of the Company’s
cash position.
The progress of the development of the Company’s
products is measured against internally set timescales as
well as against the regulatory process which will result
in the registration of products. The Chairman’s Review
contains an update regarding this progress.
The company does not currently monitor any non-
financial performance indicators.
PRINCIPAL RISKS AND UNCERTAINTIES
The Company’s prime risk is the on-going
commercialisation of the Company’s intellectual
property, which involves testing of the Company’s
products, obtaining regulatory approval and reaching
a commercially beneficial agreement for each product
to be taken to market. This is measured by comparing
actual results with forecasts that have been agreed by
the Company’s Board of directors.
9
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013 STRATEGIC REPORT
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
The Company’s credit risk is primarily attributable to
its trade receivables. Credit risk is managed by running
credit checks on customers and by monitoring payments
against contractual agreements.
The Company monitors cash flow as part of its day to
day control procedures. The board considers cash flow
projections at its meetings and ensures that appropriate
facilities are available to be drawn down upon as
necessary.
Due to the nature of the business, there is inherent risk
of infringement of Eden’s intellectual property rights by
third parties. The risk of infringement is managed by
taking the relevant legal advice as and when required.
EMPLOYEE DIVERSITY AND INCLUSION
The Board remains committed to developing further a
culture that encourages the inclusion and diversity of
all of the Company’s employees through respecting and
appreciating their differences and to promoting the
continuous development of employees through skills
enhancement and training programmes. The Company’s
employment policies are designed to attract, retain,
train and motivate the very best people, recognising
that this can be achieved only through offering equal
opportunities regardless of gender, race, religion, age,
disability, sexual orientation or any other aspect of
diversity. Applications from disabled persons are always
fully considered, bearing in mind the aptitudes of the
applicant concerned. It is the policy of the Company
that the training, career development and promotion
of disabled persons (including those who become
disabled whilst employees of the Company) should, as
far as reasonably possible, be identical to that of other
employees.
INDEMNITY COVER
The Company purchases insurance cover for Directors
and Officers to protect the directors from third party
claims.
ENVIRONMENT
The Company has an environment policy and
acknowledges that environmental considerations form
an integral part of its corporate social responsibility.
The Board meets to discuss ways in which the business
can contribute more to their local environments by
getting involved in local initiatives and also to look at
ways of promoting environmental well being amongst
the staff. Employees are actively encouraged to ensure
conservation of energy and resource through awareness
campaigns and positive action.
COMPANY’S POLICY ON PAYMENT OF
CREDITORS
It is the Company’s policy to endeavour to pay suppliers
within an acceptable period of allowed creditor days in
accordance with the agreed terms. The Company acted
in accordance with this policy throughout the year where
possible, though restricted cash flow meant that the
Company made various arrangements with creditors
to pay outside normal credit terms. The Company
had 90 days’ purchases outstanding at 31 December
2013 (2012: 43 days) based on the average daily
amount invoiced by suppliers during the year ended 31
December 2013.
FINANCIAL INSTRUMENTS
Details of the use of financial instruments by the
Company are contained in note 20 to the financial
statements.
ON BEHALF OF THE BOARD:
A J Abrey - Director
2nd June 2014
10
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS
OF EDEN RESEARCH PLC
We have audited the financial statements of Eden Research Plc for the year ended 31 December 2013 on pages
twelve to forty three. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on pages eight and nine, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/
apb/scope/UKP.cfm.
Opinion on financial statements
In our opinion the financial statements:
- give a true and fair view of the state of the Company’s affairs as at 31 December 2013 and of its loss for the year
then ended;
- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the Directors for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
-adequate accounting records have not been kept, or returns adequate for our audit have not been received from
branches not visited by us; or
-
-
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.
John Griffiths FCA (Senior Statutory Auditor)
for and on behalf of UHY Hacker Young
Statutory Auditor, Chartered Accountants
Bristol
2nd June 2014
11
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
CONTINUING OPERATIONS
Revenue
Amortisation of intangible assets
Other administrative expenses
Share based payments
OPERATING LOSS
Finance costs
Finance income
LOSS BEFORE INCOME TAX
Income Tax
LOSS FOR THE YEAR
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Prior year adjustment
TOTAL COMPREHENSIVE INCOME
SINCE LAST ANNUAL REPORT
Earnings per share expressed in pence per share:
Basic
Diluted
Note
2013
£
2012
as restated
£
2
4
4
5
6
8
7
80,223
43,590
(630,269)
(1,034,878)
-
(663,302)
(890,378)
(91,816)
(1,,584,924)
(1,601,906)
(43,590)
(675,747)
316
393
(1,628,198)
(2,277,260)
40,289
16,543
(1,587,909)
(2,260,717)
-
-
(1,587,909)
(2,260,717)
712,044
(875,865)
-1.30
-1.30
-2.11
-2.11
12
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2013
ASSETS
NON-CURRENT ASSETS
Intangible assets
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Financial liabilities - borrowings
Interest bearing loans and
borrowings
Note
9
10
11
12
13
2013
£
2012
as restated
£
2012
opening
as restated
£
6,092,586
6,532,136
7,084,206
129,768
311,347
441,115
60,332
340,277
400,609
95,014
388,547
483,561
451,493
712,679
875,195
402,600
854,093
-
651,717
712,679
1,526,912
NET CURRENT LIABILITIES
(412,978)
(312,070)
(1,043,351)
NET ASSETS
5,679,608
6,220,066
6,040,855
SHAREHOLDERS’ EQUITY
Called up share capital
Share premium
Merger reserve
Warrant reserve
Retained earnings
15
16
16
16
16
1,232,776
23,277,511
10,209,673
779,485
(29,819,837)
1,110,442
22,352,394
10,209,673
1,433,506
(28,885,949)
993,037
20,121,687
10,209,673
1,434,476
(26,718,018)
TOTAL EQUITY
5,679,608
6,220,066
6,040,855
The financial statements were approved by the Board of Directors on 2nd June 2014 and were signed on its behalf
by:
K W Brooks - Director
13
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Called up
Share
share capital premium
Merger Warrant
reserve
reserve
Retained
earnings
Total
£
£
£
£
£
£
993,037 20,121,687 10,209,673 1,434,476 (27,373,645) 5,385,228
Balance at 1 January 2012
(as previously reported)
Prior year adjustments
-
-
-
-
655,627
655,627
Balance at 1 January 2012
(as previously reported)
993,037 20,121,687 10,209,673 1,434,476 (26,718,018) 6,040,855
Loss and total comprehensive income
-
-
Transactions with owners
- Issue of shares
- Options granted
- Options exercised/lapsed
117,405 2,230,707
-
-
-
-
Transactions with owners
117,405 2,230,707
-
-
-
-
-
-
(2,260,717) (2,260,717)
-
91,816
(92,786)
- 2,348,112
91,816
-
-
92,786
(970)
92,786 2,439,928
Balance at 31 December 2012
(as restated)
Balance at 1 January 2013
(as restated)
1,110,442 22,352,394 10,209,673 1,433,506 (28,885,949) 6,220,066
1,110,442 22,352,394 10,209,673 1,433,506 (28,885,949) 6,220,066
Loss and total comprehensive income
-
-
Transactions with owners
- Issue of shares
- Options granted
- Options exercised/lapsed
122,334
-
-
925,117
-
-
Transactions with owners
122,334
925,117
-
-
-
-
-
-
(1,587,909) (1,587,909)
-
-
(654,021)
- 1,047,451
-
-
-
654,021
(654,021)
654,021 1,047,451
Balance at 31 December 2013
1,232,776 23,277,511 10,209,673
779,485 (29,819,837) 5,679,608
14
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
STATEMENT OF CASH FLOWS
AS AT 31 DECEMBER 2013
Note
1
Cash flows from operating activities
Cash generated from operations
Finance costs paid
Tax credit received
Net cash from operating activities
Cash flows from investing activities
Capitalisation of development expenditure
Interest received
Net cash from investing activities
Cash flows from financing activities
Shareholders’ loan - drawdown
Issue of equity shares
Net cash from financing activities
2013
£
2012
£
(1,285,277)
(989)
40,289
(974,150)
(663,898)
16,543
(1,245,977)
(1,621,505)
(190,719)
316
(111,232)
393
(190,403)
(110,839)
360,000
1,047,450
1,684,074
-
1,407,450
1,684,074
Decrease in cash and cash equivalents
(28,930)
48,270
Cash and cash equivalents at
beginning of year
Cash and cash equivalents at
end of year
2
2
340,277
388,547
311,347
340,277
15
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM
OPERATIONS
Loss before income tax
Amortisation charges
Equity share based payment charge
Finance costs
Finance income
2013
2012
as restated
£
£
(1,628,198)
630,269
-
43,590
(316)
(2,277,260)
663,302
91,816
675,747
(393)
(954,655)
(846,788)
(Increase)/decrease in trade and other receivables
(69,435)
34,682
Increase/(decrease) in trade and other payables
(261,187)
(162,044)
Cash generated from operations
(1,285,277)
(974,150)
2.
CASH AND CASH EQUIVALENTS
The amounts disclosed on the statement of cash flow in respect of cash and cash equivalents are in
respect of these statement of financial position amounts:
Year ended 31 December 2013
Cash and cash equivalents
Year ended 31 December 2012
Cash and cash equivalents
31.12.13
£
311,347
1.1.13
£
340,277
31.12.12
£
340,277
1.1.12
as restated
£
388,547
16
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
ACCOUNTING POLICIES
Basis of preparation
These financial statements have been
prepared in accordance with International
Financial Reporting Standards 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.
General information
Eden Research Plc is a company incorporated
and domiciled in the United Kingdom under
the Companies Act 2006. The address of
the registered office is given on page 2.
The nature of the Company’s operations
and its principal activities are set out in the
Chairman’s Review on page 3. 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.
The Company has adopted the following
revisions and amendments to IFRS issued by
the International Accounting Standards Board,
which are relevant to and effective for the
Company’s financial statements for the year
beginning 1 January 2013.
IFRS 10 Consolidated Financial Statements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 19 (Revised) Employee Benefits
IAS 27 (Revised) Separate Financial Statements
Presentation of Items of Other Comprehensive
Income - Amendments to IAS 1
Disclosures - Offsetting Financial Assets and
Financial Liabilities - Amendments to IFRS 7
Annual Improvements to IFRSs 2009-2011
Cycle
The directors have assessed that the adoption
of these revisions and amendments did not
have an impact on the financial position or
performance of the Company.
At the date of authorisation of these financial
statements, the following Standards and
Interpretations which have not been applied
in these financial statements were in issue but
not yet effective:-
IFRS 9 Financial Instruments (effective 1
January 2017)
IAS 32 Offsetting Financial Assets and
Financial Liabilities (effective 1 January 2014)
IAS 36 Recoverable Amount Disclosures for
Non-Financial Assets (effective 1 January
2014)
IAS 39 Novation of Derivatives and
Continuation of Hedge Accounting (effective
1 January 2014)
Investment Entities - Amendments to IFRS 10,
IFRS 12 and IAS 27 (effective 1 January 2014)
IFRIC 21 Levies (effective 1 January 2014)
All the above Standards and Interpretations
are effective for periods commencing on or
after 1 January 2014.
The directors anticipate that the adoption of
these Standards and Interpretations in future
periods will have no material impact on the
financial statements of the Company.
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 £1,587,909 (2012:
£2,260,717 restated). Net current liabilities as
at that date amounted to £412,978 (2012:
£312,070 restated).
17
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
ACCOUNTING POLICIES (continued)
The directors have prepared budgets and projected cash flow forecasts for a period of two years from
31 December 2013 and they consider that the Company will be able to operate within the cash facilities
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 additional funding to meet the short term needs of the business
until the commercialisation of the Company’s portfolio is reached. Since the year end, Eden has received
further loans of £600,000.
The forecasts adopted only include revenue derived from existing contracts and, while there is a risk these
payments might be delayed if milestones are not reached, there is the significant potential upside from
on-going discussions and negotiations with other parties 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 the forecast Research and Development expenditure, in the event of
unforeseen cash restraints.
The directors are closely monitoring performance against cash flow projections that have been prepared
for the period to 31 December 2014 and beyond and are confident that the Company will be able to
generate the necessary cash resources over and above those referred to above.
On this basis 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.
Royalty income and upfront payments are recognised as the royalties accrue in accordance with the terms
of the underlying contract.
Amounts receivable under milestone agreements are recognised in accordance with the terms of the
underlying agreement and are typically recognised upon the completion of the significant acts within
the agreements. Revenue is specifically only recognised when the terms of any milestone are reasonably
expected to be met and the relevant act has been completed as the Company has no contractual rights to
the revenue until this point.
Licence fee revenue is recognised up-front as a sale of the Company if the Company has discharged all of
its on-going obligations.
Intangible assets
Intellectual property, including development costs, is capitalised and amortised on a straight line basis
over its estimated useful economic life of 11 years in line with the remaining life of the Company’s master
patent, which was originally 20 years. The useful economic life of intangible assets is reviewed on an
annual basis.
18
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
ACCOUNTING POLICIES (continued)
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 on the Statement of Financial Position when the Company
has become a party to the contractual provisions of the instrument.
Financial instruments recognised on 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.
19
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
ACCOUNTING POLICIES (continued)
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 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 profit or loss in the Statement of Comprehensive Income.
Debt and equity instruments issued by the Company
Loan notes
Where loans that were previously convertible have been converted to equity in accordance with the
original terms of the contract as a result of an agreement between the note holder and the Company, the
value of the loan and any associated accrued interest is transferred to equity at nil gain, nil loss.
The Company also enters into agreements to convert loans and creditors into equity which were not
convertible under the original terms of the agreement. Where this is the case the Company applies the
requirements of IFRIC 19 and recognises the issue of equity at the fair value of the instruments issues. Any
profit or loss arising on the extinguishment of the liability is taken to profit or loss.
Convertible loans
Due to the nature of the arrangements management are required to make significant judgments in order
to determine whether the conversion of loans has taken place in accordance with the original terms of the
underlying agreement. Each conversion is considered individually. During the current year all conversions
were deemed to have been made in accordance with the original terms of the agreements.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
20
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
ACCOUNTING POLICIES (continued)
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.
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 ruling at the
balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange
ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating
result.
Share-based payments
The Company has applied the requirements of IFRS2 Share-Based Payment.
The Company operates an unapproved share option scheme for executive directors, senior management
and certain employees.
Where share options are awarded to employees, the fair value of the options at the date of grant is
charged to the Statement of 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
Comprehensive Income over the remaining vesting period.
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.
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 20 to the financial statements.
21
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
ACCOUNTING POLICIES (continued)
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 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 by the reporting date.
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.
22
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
1.
ACCOUNTING POLICIES (continued)
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 of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below:
Capitalised development costs
The directors have considered the recoverability of the internally generated intangible asset which has
a carrying value of £1.6m. The projects 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 finance 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 licensing arrangements will serve 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 will also serve 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 has not been carried out.
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 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 capitalisation of the Company’s intellectual property. 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, which are summarised on page 18.
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.
23
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
2.
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
Board of Executive Directors as it is primarily responsible for the allocation of the resources to segments
and the assessment of performance of the segments.
The Executive Board of Directors monitor and then assess the performance of segments based on
product type and geographical area using a measure of adjusted EBITDA (earnings before interest, tax,
depreciation and amortisation). 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 2013 is as follows:
Nematodes
3AEY
Biocides
Data-sharing
USA
£
Africa
£
Unallocated
£
Europe
£
Europe
£
Total
£
Total segment revenue
5,927
54,274
1,248
14,124
4,650
80,223
Inter segment revenue
-
-
-
-
-
-
Revenue from
external customers
Adjusted EBITDA
Amortisation
Depreciation
Share based payments
Other operating income
Net Finance costs
Income tax
Loss for the year
Total assets
Total assets includes:
Additions to
non-current assets
Total liabilities
5,927
54,274
1,248
14,124
4,650
80,223
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(954,655)
(630,269)
-
-
-
(43,274)
40,289
(1,587,909)
6,533,701
190,719
854,093
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(954,655)
(630,269)
-
-
-
(43,274)
40,289
(1,587,909)
6,533,701
190,719
854,093
24
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
2.
SEGMENTAL REPORTING (continued)
The segmental information for the year ended 31 December 2012 (as restated) is as follows:
3AEY
Biocides
Data-sharing
Total segment revenue
Inter segment revenue
Revenue from external
customers
Adjusted EBITDA
Amortisation
Depreciation
Share based payments
Other operating income
Net Finance costs
Income tax
Loss for the year
Total assets
Total assets includes:
Additions to non-current
assets
Total liabilities
Africa
£
1,451
-
1,451
-
-
-
-
-
-
-
-
-
-
-
Unallocated
£
1,516
-
1,516
(846,395)
(663,302)
-
(91,816)
-
(675,747)
16,543
(2,260,717)
6,932,745
111,232
712,679
Europe
£
13,123
-
Europe
£
27,500
-
Total
£
43,590
-
13,123
27,500
43,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(846,395)
(663,302)
-
(91,816)
-
(675,747)
16,543
(2,260,717)
6,932,745
111,232
712,679
Revenues of £54,274 (2012: £nil) are derived from a single external customer, EcoStyle, from within the 3AEY.
Revenues of £14,124 (2012: £13,123) are derived from a single external customer, TerpenTech, from
within the Biocides segment.
Revenues of £nil (2012: £20,000) are derived from a single external customer, Neo-Pharma, from within
the Data Sharing segment.
Revenues of £4,650 (2012: £nil) are derived from a single external customer, Certis, from within the
Encapsulation segment.
Revenues of £5,927 (2012: £nil) are derived from a single external customer, FMC, from within the
Nematodes segment.
There were no revenues derived from the Data-Sharing segment in 2013.
The Company’s platform technology, yeast glucan encapsulation, is another business segment for which
the Company is currently negotiating with a number of potential licensing partners.
3.
EMPLOYEES AND DIRECTORS
Wages and salaries
Social security costs
2013
£
283,333
27,310
2012
as restated
£
263,923
14,601
25
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
3.
EMPLOYEES AND DIRECTORS (continued)
The average monthly number of employees during the year was as follows:
Management
2013
2012
as restated
6
5
Staff costs, including executive directors’ remuneration, are included within administrative expenditure
in the Statement of Comprehensive Income. The executive directors are considered to also be the key
management personnel of the Company.
Directors’ remuneration
Non-executive directors’ fees
Total directors’ emoluments
2013
£
2012
as restated
£
233,333
202,000
233,333
50,000
202,000
61,923
283,333
263,923
Share based payment charge relating to all directors
-
-
During the year the remuneration of the highest paid director was £95,000 (2012: £90,000).
2013
Salary
Bonus
Fees
Share based
payments
Total
A Abrey
K Brooks
C Newitt
B Gill
T Lupton
2012
as restated
A Abrey
K Brooks
C Newitt
B Gill
T Lupton
£
75,000
60,000
33,333
-
25,000
193,333
£
20,000
10,000
10,000
-
-
£
-
-
-
50,000
-
40,000
50,000
£
-
-
-
-
-
-
95,000
70,000
43,333
50,000
25,000
283,333
Salary
Bonus
Fees
Share based
payments
Total
£
75,000
60,000
33,333
-
-
£
15,000
12,000
6,667
-
-
£
-
-
-
60,000
-
168,333
33,667
61,923
£
-
-
-
-
-
-
90,000
72,000
40,000
60,000
1,923
263,923
26
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
4.
NET FINANCE COSTS
Finance income:
Deposit account interest
Finance costs:
Bank Interest
Exchange variances
Finance fees
Interest on shareholders’ loan
Net finance costs
5.
LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
Licences and trademarks amortisation
Development costs amortisation
Intellectual property amortisation
Auditors’ remuneration
Directors’ emoluments
Equity share based payment charge
Foreign exchange differences
2013
£
2012
£
316
393
24
966
42,600
-
43,590
43,274
-
(6,756)
670,181
12,322
675,747
675,354
2013
£
2012
as restated
£
36,273
154,511
439,485
22,631
283,333
-
966
30,273
193,544
439,485
21,000
263,923
91,816
(7,346)
Within auditors’ remuneration, £6,631 is in relation to audit services provided by Grant Thornton LLP. In
the year Grant Thornton LLP were replaced as auditors by UHY Hacker Young. £16,000 of costs in relation
to audit services provided by UHY Hacker Young are also included within auditors remuneration.
6.
INCOME TAX
Analysis of tax income
Current tax:
Research and development tax credit
Total tax income in statement of comprehensive income
2013
£
2012
as restated
£
(40,289)
(40,289)
(16,543)
(16,543)
27
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
6.
INCOME TAX (continued)
Corporation tax
No tax charge arises on the results for the year (2012: £nil). Tax losses carried forward amount to
approximately £18,612,249 (2012: £18,260,000). The tax credit represents the research and development
tax credit receivable for the year ended 31 December 2013.
Factors affecting the tax charge
The UK standard rate of corporation tax is 23.25% (2012: 24.50%). Current tax assessed for the financial
year as a percentage of the loss before taxation is nil (2012: nil)
The differences are explained below:
Standard rate of corporation tax in the UK
2013
£
2013
%
(23.25)
2012
£
2012
%
(24.5)
Loss before tax at standard rate of tax
(378,556)
(571,779)
Effects of Losses carried forward
Other expenses not deductible for tax
purposes
Research and development tax relief
342,291
36,265
(40,289)
22.0
2.0
(2.0)
327,956
243,823
(16,543)
Total current tax credit and tax rate %
(40,289)
(2.0)
(16,543)
14.0
11.0
(7.0)
(7.0)
Deferred tax
Unprovided deferred tax asset
3,739,438
4,219,033
The unprovided deferred tax asset arises principally in respect of trading losses, together with other minor
timing differences at 23% (2012: 23%) and has not been recognised due to the uncertainty of timing of
future profits against which it may be realised.
28
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013 NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
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.
Earnings
£
2013
Weighted
average
number of
shares
Per-share
amount
pence
Basic EPS
Earnings attributable to ordinary shareholders
(1,587,909)
121,970,374
-1.30
Effect of dilutive securities
-
-
-
Diluted EPS
Adjusted earnings
Basic EPS
(1,587,909)
121,970,374
-1.30
Earnings
£
2012
Weighted
average
number of
shares
Per-share
amount
pence
Earnings attributable to ordinary shareholders
(2,260,717)
107,312,913
-2.11
Effect of dilutive securities
-
-
-
Diluted EPS
Adjusted earnings
(2,260,717)
107,312,913
-2.11
Due to the loss for the year there is no dilution of the loss per share arising from options in existence.
29
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013 NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
8.
PRIOR YEAR ADJUSTMENT
Following the acquisition of the Company’s master patent, the Board, acting on advice, has reconsidered
the substance of the arrangement and have formed the view that the obligation to pay future liabilities is
an executory contract. This judgement arises from an obligation for the significant on-going involvement
of the vendor, through to commercialisation of the product.
In prior years the arrangement was considered to be non-executory and accounted for in line with the
Company’s accounting policy. At the time of the acquisition the Board estimated the present value of all
future payments under the agreement and included this value in the acquisition cost of the asset. The
liability was then subsequently remeasured at each reporting date to its present value, with movements
included in finance expense for the period.
The impact of the change is that the estimated future liability in respect of this contract is not recognised
either as a liability or in the cost of the underlying asset. The only amounts included in the cost of the
asset relate to the initial consideration paid on acquisition of the asset. When the contract ceases to be
executory the liability and the related expense will be recognised in the financial statements.
The result of this is a reduction in other payables, the cost of the related intangible assets, the annual
amortisation charge arising on those assets and the annual finance charge in relation to the unwinding of
the other payables. This has resulted in an increase in the Retained
9.
INTANGIBLE ASSETS (as restated)
COST
At 1 January 2013
Additions
Licences and
trademarks
£
Development Intellectual
costs
£
property
£
Total
£
447,351
-
2,322,532
190,719
8,591,774 11,361,657
-
190,719
At 31 December 2013
447,351
2,513,251
8,591,774 11,552,376
AMORTISATION
At 1 January 2013
Amortisation for year
At 31 December 2013
NET BOOK VALUE
300,871
36,273
337,144
715,391
154,511
3,813,259
439,485
4,829,521
630,269
869,902
4,252,744
5,459,790
At 31 December 2013
110,207
1,643,349
,339,030
6,092,586
30
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
9.
INTANGIBLE ASSETS (as restated)
COST
At 1 January 2012
Additions
Licences and
trademarks
£
Development Intellectual
costs
£
property
£
Total
£
419,150
28,201
2,239,501
83,031
8,591,774 11,250,425
-
111,232
At 31 December 2012
447,351
2,322,532
8,591,774 11,361,657
AMORTISATION
At 1 January 2012
Amortisation for year
270,598
30,273
521,847
193,544
3,373,774
439,485
4,166,219
663,302
At 31 December 2012
300,871
715,391
3,813,259
4,829,521
NET BOOK VALUE
At 31 December 2012
146,480
1,607,141
4,778,515
6,532,136
31
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
9.
INTANGIBLE ASSETS (continued)
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 fourteen years.
An annual impairment review is undertaken by the Board of Directors only where there are indicators
that an impairment may exist. 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 on the review management have carried out they are satisfied that no such
factors exist and as such a full impairment review on the Company’s intangible assets has not been carried
out.
A full impairment review was carried out using discounted cashflow forecasts. The result of this review
was that the conclusion that the Intellectual Property is not impaired in respect of its carrying value.
An independent valuation was undertaken by PharmaVentures Limited in 2010 on a number of the
Company’s product programmes and the estimated future value exceeds the current carrying value.
The valuers used an industry-standard methodology that combines discounted cash flow projections
with decision tree analysis to allow explicitly for development risk. For each programme an expected net
present value was derived, which provides a measure of the programme’s current economic value.
The valuation was carried out on Eden’s botrytis, powdery mildew and nematode products using third
party information on the market sizes and based on assumptions with regard to the potential market
share achievable.
The Estimated Net Present Value of 3AEY, Eden’s lead botryticide product, alone exceeded the current
carrying value of the Company’s intellectual property.
The key assumptions used in completion of the valuation included:
•
•
•
The projected market sizes for the key products which the Company is developing. These include a
projected market of $214m for 3AEY, $100m for Powdery Mildew, and $296m for nematodes.
The projected market share attainable by the Company. In preparing the valuation, a base
projected market share growing to 5% of the relevant markets has been assumed.
As the nature of the Company’s revenue streams are a mixture of milestone payments, licence
income and royalties, there are no specific projected growth rates used - the timing of the
attainment of the milestones which are attainable on project by project basis is a key assumption
in the forecasts.
•
The discounted cash flows have assumed a discount factor of 9%.
All revenues have been projected to come from the cash generating units identified in the segmental
reporting and Chairman’s review, namely the key product lines of the Company.
During the current year the Company entered into an agreement to acquire an updated version of
the Company’s core underlying technology under similar terms to the existing agreement. Whilst the
technology and liability are legally distinct from the superseded versions, management are of the opinion
that in substance they are the same.
32
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
10.
TRADE AND OTHER RECEIVABLES
Current:
Trade and other receivables
VAT recoverable
2013
£
2012
as restated
£
117,474
12,294
54,445
5,887
129,768
60,332
The directors consider that the carrying value of trade and other receivables approximates to the fair value.
There are no debts impaired at 31 December 2013 or 2012. Details of debts past due but not impaired are
given in note 20.
11.
CASH AND CASH EQUIVALENTS
Short term bank deposits
2013
£
2012
as restated
£
311,347
340,277
The carrying amount of these short term bank deposits approximates to the fair value.
12.
TRADE AND OTHER PAYABLES
Current:
Trade payables
Other payables
Accruals and deferred income
2013
£
2012
as restated
£
291,190
5,779
154,524
125,143
292,236
295,300
451,493
712,679
The directors consider that the carrying value of trade and other payables approximates to their fair
value. See note 20 for disclosure of the amount of trade payables denominated in foreign currency. See
Directors’ Report for disclosure of the average credit period taken.
13.
FINANCIAL LIABILITIES - BORROWINGS
2013
£
2012
as restated
£
Current:
Loan notes
402,600
-
33
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
14.
FINANCIAL ASSETS AND LIABILITIES
Note
Financial assets at amortised cost
Other receivables
Cash and cash equivalents
10
11
Financial liabilities measured at amortised cost
Other loan
Trade and other payables
13
12
2013
£
2012
as restated
£
129,768
311,347
60,332
340,277
411,115
400,609
402,600
451,493
-
712,679
854,093
712,679
Other loans are non-interest bearing and there are no fixed terms for repayment.
The loan balances were secured by a fixed and floating charge over the Company’s assets. More details in
relation to this charge are included within note 20.
Other loans
Loan balance as at 1 January 2012
Interest charged in the year
Loan notes repaid in the year
Loan notes converted in the year
Loan balance as at 31 December 2012
New loans issued in the year
Finance costs in the year
Loan notes repaid in the year
Loan notes converted in the year
Loan balance as at 31 December 2013
£
651,717
12,321
-
(2,348,112)
-
360,000
42,600
-
-
402,600
The loans converted during 2012 were converted into ordinary shares. In accordance with the Company’s
accounting policy these were converted at nil gain/nil loss.
34
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
15.
CALLED UP SHARE CAPITAL
Authorised
Number:
Class:
Nominal
value:
2013
£
2012
£
123,277,577
Ordinary
0.01
1,232,776 1,110,442
Alloted,issued and fully paid
Number:
Class:
Nominal
value:
2013
£
2012
£
123,277,577
Ordinary
0.01
1,232,776 1,110,442
(2012: 111,044,161)
During the year the Company issued 12,233,337 £0.01 ordinary shares for a consideration of £0.09 per
share, giving a total consideration of £1,101,000. Share issue costs of £53,500 have been deducted from
the share premium on the share issue in the year.
The number of £0.01 ordinary shares issued in the year totalled 12,233,337 (2012: 11,740,565).
Number of
ordinary
shares
£
Aggregate
nominal
value
£
Date
Issue Price
£
Premium on
issue
£
Total share
premium
£
08.02.2013
12,233,337
122,333
0.09
0.08
978,667
122,333
978,667
During 2012 the Company converted £2,219,081 of long term debt and £129,031 of short term debt into
11,740,565 ordinary shares in the Company at an average price of 20p.
During 2012 the following ordinary shares were issued by Eden Research Plc:
Number of
ordinary
shares
£
Aggregate
nominal
value
£
Date
Issue Price
£
Premium on
issue
£
Total share
premium
£
25.04.2012
11,740,565
117,405
0.20
0.19
2,230,707
117,405
2,230,707
35
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
16.
RESERVES
At 1 January 2013
Retained
earnings
£
(29,597,993)
Share
premium
£
22,352,394
Merger
reserve
£
10,209,673
Warrant
reserve
£
1,433,506
Prior year adjustment
(712,044)
28,885,949
Deficit for the year
(1,587,909)
Cash share issue
-
925,117
Options exercised/lapsed
654,021
-
-
-
-
Totals
£
4,397,580
(712,044)
5,109,624
(1,587,909)
925,117
-
-
(654,021)
-
At 31 December 2013
(29,819,837)
23,277,511
10,209,673
779,485
4,446,832
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.
17.
CAPITAL COMMITMENTS
The Company had no capital commitments at 31 December 2013 (2012: £nil).
36
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013 NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
18.
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, the Company traded with A H Brooks, of which K W Brooks, a director, is a partner. The
transactions in aggregate were as follows:-
Rent
Provision of consulting services
Trade payables due at the year end
2013
£
30,000
25,000
8,588
2012
£
30,000
25,000
-
During the year, the Company traded with Ricewood Limited, of which A Abrey, a director, is a director and
shareholder, in respect of consultancy services, as follows:-
Provision of consultancy services
Trade payables due at the year end
2013
£
18,333
2,590
2012
£
18,333
-
During the year, the Company traded with Hawkhills Consultancy Limited, of which B Gill, a director, was a
director and shareholder, in respect of director’s fees, as follows:-
Director’s fees
Trade payables due at the year end
2013
£
50,000
15,000
2012
£
50,000
30,000
The directors regard all the transactions disclosed above as being in the normal course of business and the
transactions were enacted at arms length.
Liabilities include the following loans advanced by the shareholders of the Company:-
Oxford Capital Limited
2013
£
402,600
402,600
2012
£
-
-
During the prior year £2,348,112 was converted into equity. Full details of the conversion are included
within note 15.
The loan is non-interest bearing and there were no fixed terms for repayment.
The Company was party to a guarantee and debenture entered into on 29 December 2008 whereby all
sums due to Oxford Capital Limited were secured by a first fixed and floating charge over the assets of the
Company.
37
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
19.
SHARE-BASED PAYMENT TRANSACTIONS
Share Options
Eden Research Plc operates an unapproved option scheme for executive directors, senior management and
certain employees.
Outstanding at the beginning of
the year
Granted during the year
Exercised during the year
Lapsed during the year
2013
Weighted
average
exercise price
(pence)
19
-
-
58
17
Number
6,770,000
-
-
(420,000)
6,350,000
2012
Weighted
average
exercise price
(pence)
20
-
-
43
19
Number
6,845,000
4,200,000
-
(75,000)
6,770,000
The exercise price of options outstanding at the end of the year ranged between 10p and 26p (2012: 10p
and 60p) and their weighted average contractual life was 1.8 years (2012: 2.1 years). None of the options
have vesting conditions.
No share options were granted during the current or previous year. The weighted average fair value of
each option granted during 2011 was 14p.
The share based payment charge for the year was £nil (2012: £91,816).
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
Weighted average share price at grant date (pence)
Exercise price (pence)
Weighted average contractual life (days)
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Expected volatility is calculated based on historic share price movements.
Black Scholes
14
20
1,147
64.4%
-
4.43%
38
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
19.
SHARE-BASED PAYMENT TRANSACTIONS (continued)
Warrants
2013
Weighted
average
exercise price
(pence)
Number
2012
Weighted
average
exercise price
(pence)
Outstanding at the beginning of
the year
14
6,681,875
Granted during the year
Exercised during the year
Lapsed during the year
-
-
-
-
-
-
(5,450,000)
1,231,875
15
9
-
20
14
Number
6,096,875
985,000
-
(400,000)
6,681,875
The exercise price of warrants outstanding at the end of the year ranged between 13p and 30p (2012:13p
and 21p) and their weighted average contractual life was 0.1 years (2012: 0.5 years). None of the
warrants have vesting conditions.
The weighted average fair value of each warrant granted during the year was nil (2012: 25p).
20.
POST BALANCE SHEET EVENTS
Since the year end, Eden Research Plc has received loans totalling £600,000.
39
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
21.
FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES
Credit Risk
Cash and cash equivalents
Trade receivables
2013
2012
as restated
£
£
311,347 340,277
47,275
50,107
361,454 387,552
The average credit period for sales of goods and services is 30 days. No interest is charged on overdue
trade receivables. At 31 December 2013 trade receivables of £50,107 (31 December 2012: £47,275) were
past due but are considered by the directors to be recoverable in full.
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
Trade payables
Other payables
Accruals and defferred income
Other loans
2013
2012
as restated
£
£
291,190 125,143
5,779 292,236
154,524 295,300
-
402,600
854,093 712,679
The carrying amount of trade payables approximates to fair value.
The average credit period on purchases of goods is 30 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.
Details of the loans are disclosed in note 13 to the financial statements. The Company currently finances
their operations partly through these borrowings. The Company borrow in pounds sterling generally at
fixed interest rates.
Credit risk
As explained above, the directors consider there is no material exposure to credit risk at the reporting
date.
40
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
22.
FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (continued)
Currency risk
The Company publishes its financial statements in pounds sterling and conducts some of its business in US
dollars 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 Comprehensive
Income as incurred. At the year end, the Company had the following net foreign currency balances in
liabilities.
US dollars
Euro
Liquidity risk
2013
£
61,937
6,139
2012
£
1,556
29,003
68,076
30,569
Short-term flexibility is achieved by shareholder loans. 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 2013 was:-
Fixed rate
financial
liabilities
£
Financial
liabilities on
which no
interest is paid
£
-
-
-
-
-
-
786,017
682,110
6,139
29,003
61,937
1,556
Total
£
786,017
682,110
6,139
29,003
61,937
1,556
Weighted average
interest rate
%
Weighted average
period for which
rate is fixed
Years
Weighted average
period until
maturity
Years
7.5
7.5
1.0
1.0
1.0
1.0
Sterling
2013
2012 as restated
Euro
2013
2012 as restated
US Dollars
2013
2012 as restated
Sterling
2013
2012
All the Euro and US Dollar liabilities are held within trade creditors and are non interest bearing.
41
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
22.
FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (continued)
Maturity of financial liabilities
The maturity profile of the Company’s financial liabilities at 31 December was as follows:-
In one year or less, or on demand
2013
£
854,093
854,093
2012
as restated
£
712,679
712,679
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, 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 2013 and 31 December 2012.
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% (2012: 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.
42
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2013
22.
FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (continued)
Borrowings
Less : Cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
2013
£
402,600
2012
£
-
(311,347)
(340,227)
91,253
(340,227)
5,679,608
6,220,066
5,770,861
5,879,789
2%
-6%
The increase in gearing ratio at 31 December 2013 resulted from the increased borrowings.
43
ANNUAL REPORT & ACCOUNTS 2013FINANCIAL STATEMENTS 2013
44
REGISTERED NUMBER: 3071324 (England and Wales)FINANCIAL STATEMENTS 2013 Inside Cover IDEAS_Aug10:Inside Cover IDEAS 14/9/10 18:26 Page 4
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