TIDMEDEN
RNS Number : 1952M
Eden Research plc
07 May 2020
This announcement contains information which, prior to its
disclosure, was considered inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014 (MAR).
Eden Research Plc
("Eden" or "Company")
Financial Results for Year Ended 31 December 2019
Eden Research plc (AIM: EDEN), the AIM-quoted company focused on
sustainable biopesticides for use in global crop protection, animal
health and consumer products industries, announces its preliminary
results for the year ended 31 December 2019.
Financial highlights
-- Revenue of GBP2.0m (2018: GBP2.8m)
-- Operating loss of GBP1.4m (2018: GBP0.5m)
-- Loss before tax of GBP1.5m (2018: GBP0.5m)
-- Loss per share of 0.54p (2018: 0.16p)
-- Net cash of GBP0.5m (2018: GBP2.5m); net cash of GBP9.3m as at 4 May 2020
-- Product sales increased 3% to GBP1.7m (2018: GBP1.6m)
-- Upfront and milestone payments of GBP0.4m (2018: GBP1.2m)
Commercial and operational highlights:
-- Eden's post-planting nematicide product, Cedroz(TM), received
zonal authorisation under the EU process for the registration of
plant protection products in April 2019. Malta, acting as zonal
Rapporteur Member State, granted its authorisation at the zonal
level covering both the Southern EU zone and the indoor zone, which
is pan-European. This is the first stage in receiving full
authorisations by the relevant member states.
-- Sales of Cedroz commenced in Italy following the grant of
emergency use authorisation in April 2019. In Italy, Cedroz(TM) is
being used primarily on bell peppers, tomatoes, and melons to
reduce gall damage caused by root knot nematodes and has increased
total crop yield for farmers in the region. Emergency authorisation
allows Eastman to launch Cedroz into the important Italian market
and gain commercial-use experience with the product supporting
accelerated sales development following the receipt of full
authorisation.
-- In October 2019, Eastman Chemical Company received full
authorisation for Cedroz(TM) from the Belgian Ministry of
Agriculture to be used on a wide range of crops including
cucumbers, courgettes, melons, aubergine, peppers, tomatoes and
strawberries.
-- Cedroz ä gained entry into the important US agricultural
import market as a result of the first marketing authorisation for
the product in Mexico. Initial approvals cover a wide range of
crops, including tomatoes, potatoes, peppers, eggplants, melons,
chili peppers, pepinos and squash.
-- Exclusive distribution agreement signed in December 2019 with
SumiAgro Europe for Eden's first product, Mevalone ä , in five new
markets across central Europe, including Germany and Poland, for
use as a fungicide on grapes as well as a treatment to prevent
storage diseases on apples.
-- Exclusive distribution agreement signed in December 2019 with
Sipcam Oxon for Mevalone in Portugal and Benelux for use as a
fungicide on grapes and several minor crops. Marketing
authorisation has been received in Portugal for Mevalone to be used
during the 2020 growing season.
-- Eden made progress towards its plans for building a
high-calibre team around the core functions within the business
with the appointment of a Commerical Director and Product &
Market Manager during the period
Post period end
-- A significant opportunity was grasped through Eden's
exclusive evaluation agreement with Corteva Agriscience in January
2020, which moves the business into a key, new area of seed
treatments, presenting significant revenue potential.
-- Eden successfully completed a GBP10.4m (gross) fundraise in
March 2020 which puts the Company in a good position to capitalise
on the work it has done to date and to move forward expeditiously
with its new, effective insecticide products and pursue other key
opportunities in its pipeline.
-- Appointment of Dr. Michael Carroll as Director of Regulatory Affairs in April 2020.
Current trading and COVID-19 update
Our overriding objective in the current crisis has been to
ensure the safety of our employees. Following the governmental
advice, the team has been working remotely and delivering largely
uninterrupted services to customers. The Group already has a lean
cost base with a number of its activities outsourced and has
therefore made no material cost cutting to date but will keep this
under review. The Group's cash position remains strong with GBP9.3m
of cash available.
In the first part of the year, the Company has continued to
trade in line with the management's expectations, although it
should be noted that this is not the key growing season for its
products. However, management has also started to see some
disruption during this period from COVID-19; in particular there
have been some issues with the export of product and it is clear
that some regulatory authorities are working at reduced capacity.
The latter has the potential to impact the Group's on-going product
approvals with regulators around the world, which are required for
it to sell its products in a broader range of markets to generate
new revenues.
Thus far, the Company has not seen a significant change on its
toll manufacturing operations. In addition, at this point in time
our existing customers are not seeing a significant impact on sales
of agrochemicals. However, and for example, social distancing and
other travel restrictions will undoubtedly impact the ability of
our distributors to interact with customers, and growers' reduced
ability to harvest crops due to the lack of appropriate labour may
impact on their investment in agrochemicals.
Given the uncertainty regarding the level and duration of any
disruption in each of the markets in which the Group operates or
plans to operate, it is difficult at this stage to assess what, if
any, commercial and financial impact there may be. We will continue
to provide updates as appropriate.
Lykele van der Broek, Chairman commented: "2019 was a pleasing
year as we made progress in many areas of the business and gained
multiple first registrations and sales of our sustainable
post-planting nematicide product, Cedroz(TM).
We signed exciting new agreements with partners such as
Sumi-Agro Europe which opened our business up to new and important
markets. The solid year of development has set us up for the
current period in which we have already achieved some important
milestones and gained further momentum in our growth plans.
Eden is poised to capitalise on new product and market
opportunities in 2020 as the future of sustainable agriculture
continues to align with the technology and innovation that Eden can
offer growers around the world."
For further information contact:
Eden Research plc www.edenresearch.com
Sean Smith
Alex Abrey 01285 359 555
Cenkos Securities (Nominated advisor
and broker) 020 7397 8900
Giles Balleny / Cameron MacRitchie
(corporate finance)
Michael Johnson (sales)
Hawthorn Advisors
Lorna Cobett 020 3745 4960
Jana Tsiligiannis eden@hawthornadvisors.com
Ed Curtis
Notes:
Eden Research is an AIM-quoted company that develops and
supplies breakthrough biopesticide products and natural
microencapsulation technologies to the global crop protection,
animal health and consumer products industries.
Eden's Sustaine ä encapsulation technology harnesses the
biocidal efficacy of naturally occurring chemicals produced by
plants (terpenes) and can be used with both natural and synthetic
compounds to enhance their performance and ease-of-use.
Sustaine microcapsules are naturally derived, plastic-free,
biodegradable micro-spheres derived from yeast extract. They
produce stabilised aqueous suspensions which are easy to mix and
apply, have phased release patterns, are safer for the environment
and the crops themselves.
The European Chemicals Agency (ECHA) has proposed an EU-wide
restriction on the placing on the market or use of
"intentionally-added" microplastic particles. The proposed
restriction includes the use of microplastics for agricultural and
horticultural purposes, including polymers utilized for
controlled-release fertilizers, encapsulated plant protection
products (PPP's), seed coatings, and biocides.
By 2025 in the EU, pesticides containing synthetic polymer
microplastics are likely to be banned or removed from the market.
The only acceptable alternative is the substitution with
biodegradable formulations. Reformulated products will need to be
evaluated and registered within the five-year transition
period.
Sustaine is one of the only viable, proven and immediately
registerable solutions to the microplastics problem in formulations
requiring encapsulation.
Historically, terpenes have had limited commercial use in the
agrochemical sector due to their volatility, phytotoxicity and poor
solubility. Sustaine provides a unique, environmentally friendly
solution to these problems and enables terpenes to be used as
effective, low-risk agrochemicals.
Eden is developing these technologies through innovative
research and a series of commercial production, marketing and
distribution partnerships.
The Company has a number of patents and a pipeline of products
at differing stages of development targeting specific areas of the
global agrochemicals industry. To date, the Company has invested in
the region of GBP14m in developing and protecting its intellectual
property and seeking regulatory approval for products that rely
upon the Company's technologies. Revenues earned by the Company
have been modest whilst the Company has concentrated on securing
patent protection for its intellectual property, gaining regulatory
approvals, identifying suitable industrial partners, and entering
into commercial agreements.
In May 2013, the three actives that comprise Eden's first
commercial product, Mevalone, were approved as new ingredients for
use in plant protection products by the European Commission ("EC").
This represented a major milestone in the commercialisation of
Eden's technology and is a significant accomplishment for any
company. To illustrate this point, one should note that in 2013,
Eden's approvals represented 3 of only 10 new active ingredients
approved by the EC.
Mevalone ä is a foliar fungicide which has been authorised for
sale in Kenya, Malta, Greece,
Bulgaria, Spain, Italy, France, Cyprus, Albania , Portugal and Macedonia.
Cedroz(TM) ä is a nematicide which has been authorised for sale
in Malta, Belgium and Mexico.
Eden was admitted to trading on AIM on 11 May 2012 and trades
under the symbol EDEN.
For more information about Eden, please visit:
www.edenresearch.com.
Chairman's Statement
Introduction
It has been another pleasing year for Eden characterised by
product development and pursuit of new opportunities. We find
ourselves in an energised crop protection industry which is
undergoing significant changes through fast-paced innovation. This
is driven by macro-economic factors including an increasing global
population and demand for food, set against a backdrop of
increasing regulatory scrutiny of long-established pest and disease
control solutions. Current regulatory pressures stem from empowered
global consumers who are increasingly concerned and vocal about the
pesticide residues in their food, associated health concerns, and
demand to live in a more sustainable society. Most recently,
agriculture has been identified as a key global industry during the
Coronavirus COVID-19 pandemic. All together these factors favour
Eden's business proposition.
Market opportunity
It is evident that the agriculture industry has been forced to
shift to new, sustainable solutions including the new products and
technologies that Eden offers.
Eden is a pioneer in an industry where being able to react and
respond to fast changing dynamics is a clear strength and one that
Eden possesses. The biopesticides sector of the crop protection
market is currently enjoying a 15% compound annual growth rate and
is expected to have a market value of over $10 billion by 2025.
This is a significant leap for a market that barely existed twenty
years ago.
In anticipation of the market opportunity that Eden's management
has identified, it has developed, registered and built an
ever-expanding portfolio of sustainable, biopesticide products
based on the three active ingredients that are registered in
Europe. Eden's first two products, Mevalone(TM) and Cedroz(R), have
been proven to have high efficacy and the added benefits of maximum
residue level exemption, short pre-harvest intervals, competitive
pricing, and strong alignment with current regulatory
developments.
Eden's Sustaine(TM) microencapsulation system is also receiving
inbound interest from external parties. Sustaine can add value to
other products by offering an effective encapsulation system, with
high loading capacity, versatility, stability and sustained
delivery. Eden had already identified that third party active
ingredients could also benefit from using Sustaine for a variety of
reasons such as dose reduction, resistance management and patent
protection expansion. One key application for Sustaine, which has
evolved in tune with the changing market dynamics, is its role in
helping to solve the microplastics issue.
Microplastics have been well-publicised as causing problems for
the environment and the European Union recently announced its
intention to publish new regulations which could ban the use of
polymers in certain industries, including crop protection, where
polymers are widely used to formulate active ingredients. Such bans
could come into force within five years which, in crop protection
terms, is rapid change. Since this announcement, Eden has seen a
significant increase in the number of enquiries from some of the
major players in the crop protection industry looking for more
sustainable solutions for their existing (and often largest
selling) products.
Recent product expansion
In January 2020, Eden announced that it had partnered with
Corteva Agriscience, the fourth largest agriculture input company
in the world, to develop a product for a specific use in the seed
treatment market which has, as yet, been a known, yet untapped
opportunity for Eden. If successful, the product could generate
revenues for the Company of up to c.EUR40m. There are many
additional opportunities in seed treatments, and we are actively
pursuing these both alone, and in partnership.
Eden's successful fundraise of GBP10.4m (gross) in March 2020
will allow it to bolster its existing product offering, with part
of the proceeds to be used for the development of its first
insecticide product. Eden's effective bio-insecticide targeting a
range of key insect pests across numerous crops, is in the early
stages of being registered and commercialised on a global basis,
allowing Eden to enter into a significant new market. This is an
opportunity where the addressable market in the EU and US alone is
over EUR850 million.
Looking ahead
While the COVID-19 pandemic has introduced uncertainty in a
number of areas, in particular the timing of approvals, the team at
Eden has worked hard to ensure that it is well placed to capitalise
on the opportunities that exist for the Company across what we
acknowledge is a fast growing and dynamic industry.
Eden has a wealth of relevant experience; disruptive, innovative
platform technologies; a strong patent portfolio; a strong balance
sheet; a diverse and growing portfolio of efficacious, sustainable
products; and an expanding, capable, enthusiastic team.
For the benefit of all our stakeholders, we shall continue to
focus on delivering sustainable performance and long-term value,
which are the primary areas of focus for the Board and executive
leadership team.
Lykele van der Broek
Non-Executive Chairman
6 May 2020
Chief Executive Officer's Review
"We are determined to build a company that will prosper in the
long term. After a successful capital raise in March 2020, it is
clear our shareholders (existing and new) agree that now is the
right time to invest in and capitalise on the opportunities in our
pipeline. We have a clear ambition to be a global leader in
sustainable chemistry, and we are poised to enter new and
significant markets from a position of strength." Sean Smith, Chief
Executive
Throughout the year, we have made consistent commercial progress
and significantly advanced our position in the rapidly growing
biopesticides market. The wheels are in motion across many areas of
our business to expand our footprint, both geographically and
through new product development, which should in turn generate
growing future revenue from product sales. I am very proud of the
company we are building and our contribution to more sustainable
agriculture practices around the world where we make and sell our
products.
Creating value
The global economy is facing a time of extreme volatility
following the outbreak of the COVID-19 pandemic, with significant
challenges to international trade and the institutions that have
underpinned prosperity for many decades. Our business will not be
immune to the disruption, but the strength and relevance of our
current portfolio of products and projects, as well as the vital
role of agriculture at this time, gives us confidence in our
resilience as we support our partners and farmers across the
world.
Eden is currently the only UK-quoted company focused on
biopesticides for sustainable agriculture, and we are
well-positioned to capitalise on this rapidly growing biopesticides
market, which is projected to be worth over GBP10 billion by
2025.
Our strategy remains unchanged. Our near-term focus is to
maximize the opportunity for sales of our two approved products,
Mevalone and Cedroz, further the use of Sustaine with third party
active ingredients, develop seed treatment opportunities with
Corteva Agriscience (and others) and advance development of our
first insecticide products. The Company continues to explore
additional business line diversification including ongoing work
with Bayer Animal Health, as well as the potential for consumer
product launches. In addition, the Company will seek to expand the
crops, diseases and pests treated by its products and will look to
undertake further geographic diversification which will ultimately
help to minimise the effect of regional weather, pest and disease
pressure variations.
We have continued to improve the quality and pace of execution
in every part of our business. The successful capital raise in
March 2020 has placed us well to deliver increased value for our
shareholders.
Performance
Fiscal year 2019 has been another year of pleasing performance,
and the Company is well funded. Eden remains debt-free and has a
strengthened balance sheet allowing us to pursue our exciting
plans. Our outsourced manufacturing model means that we retain
maximum flexibility over our choice of manufacturing locations with
a low fixed cost base.
-- Operating loss for the year of GBP1.4m is in line with market expectations
-- The majority of the GBP2.0m of revenue was derived from
product sales of GBP1.7m (2018: GBP1.6m), achieved despite
unfavourable growing conditions in the Southern EU, with milestone
and upfront payments making up the balance
-- First marketing authorisations received for Cedroz, the
Company's second commercial product which is being marketed by
Eastman Chemical
-- Cedroz ä gained entry into the important US agricultural
import market as a result of the first marketing authorisation for
the product in Mexico.
-- Exclusive distribution agreement signed with SumiAgro Europe
for Mevalone ä in five new markets across central Europe, including
Germany and Poland, for use as a fungicide on grapes as well as
treatment to prevent storage diseases on apples.
-- One-year exclusive Evaluation Agreement signed with Corteva
(NYSE: CTVA), the fourth largest agriculture input company in the
world, covering seed treatments (post year-end)
-- Attainment of organic status for our three active ingredients
in Europe with subsequent organic product status certificates in
key countries (post year-end)
-- Successful fund-raise of GBP10.4m (gross) from a combination
of a placing, open offer and subscription. Key current shareholders
Sipcam Oxon SpA, Gresham House and others participated, and we
welcome 12 new institutional shareholders to the register,
including the Business Growth Fund (BGF), Canaccord Genuity, Amati,
and Rathbones (post year-end).
In 2020, the Company expects to build on the sales achieved in
the territories where it received approvals during 2019 and early
2020, including the acceptance of Mevalone for organic agriculture
in key countries. Moreover, the Company expects to see sales
arising from new approvals for Cedroz in Spain, Italy, France,
Belgium, the Netherlands and the United Kingdom where the
applications for registrations have now been outstanding from the
early part of 2019 and the constituent active ingredients are
already approved.
With the recent appointment of an experienced Director of
Regulatory Affairs, we are better placed than ever to expand our
regulatory and commercial footprints (and consequently, our
addressable market) with increasing speed, however, we do expect
that the current COVID-19 pandemic will slow the progress of many
regulatory agencies, and we are keeping a careful eye on
developments in this area to help ensure we are able to accurately
forecast developing sales in new territories. As normal, the pace
of regulatory clearances controls the commencement of new revenues
in this highly regulated industry. With the current restrictions on
travel, there may be an impact on face to face sales meetings which
could also impact revenue.
The Company continues to expect the US EPA to approve the sale
of Mevalone and Cedroz in the United States during 2020. However,
there is little doubt that the current situation with COVID-19 and
the consequential shut-down of certain services coupled with a
fundamentally changed working dynamic, will have an impact on
operations at EPA and, subsequently, the pace of approvals.
Although the Company might expect to see some level of channel
stocking, the overall levels of sales in 2020 will depend largely
upon the timing of approvals relative to the growing season.
Making an impact
"Plant protection products play a fundamental role in
agricultural production. The biopesticides market outlook remains
undoubtedly positive, with a clear demand from consumers for
sustainably grown produce and in response, a notable shift towards
more sustainable farming practices. As we step into the 'new
normal' post the COVID-19 pandemic, consumer demand for a
chemical-free supply chain will only be more prevalent."
Our core business proposition is more relevant than ever. The
growing demands of consumers are driving increased transparency
around agricultural practices, with clear emphasis on improving
sustainability from the bottom up. Our current portfolio of
products is helping farmers across southern Europe integrate
greener processes which not only benefit consumers, but also
protect agricultural ecosystems.
As we develop our portfolio by expanding the uses of our
products, we will be able to help a broader range of growers in
more regions implement more sustainable processes in their
production. Additionally, we are particularly excited by the
potential of the Company's patented microencapsulation technology,
Sustaine(TM), a naturally sourced, plastic-free, biodegradable
formulation technology derived from yeast, which has applications
beyond agriculture. We will continue to assess how the technology
can be applied to the animal and consumer product sectors to help
these industries reduce their use of microplastics.
Financial Review
Revenue for the year decreased to GBP2.0m (2018: GBP2.8m)
primarily due to the reduction in one-off receipts to GBP0.4m
(2018: GBP1.2m) following the exercise of an option by Sipcam Oxon
SpA in 2018 which was not repeated in 2019.
Going forward, the focus for the business remains to grow
revenue through product sales which will ultimately provide a
sustainable, consistent source of income for the Company. This was
the case in 2019 with product sales increasing to GBP1.7m (2018:
GBP1.6m).
The cash position at the year-end was GBP0.5m (2018: GBP2.5m),
though this was significantly increased after the year end
following the successful fundraise in March 2020 with gross
proceeds of GBP10.4m.
Administrative expenses in the year were similar to last year at
GBP1.5m (2018: GBP1.5m) though operating loss increased to GBP1.4m
(2018: GBP0.5m). Despite the similar overhead cost base and the
increase in product sales, the increase in operating loss is due to
the aforementioned reduction in one-off receipts, as well as
increased share-based payment charges of GBP0.2m (2018: GBP0.1m)
and amortisation of GBP0.5m (2018: GBP0.4m).
Throughout the year, the Company remained debt free with no
long-term debt or lending facilities in place or expected to be
required.
Following the fundraise in March 2020, the Company is well
funded and well placed to execute its business plan which involves
investing in product trials and marketing authorisations which are
required to increase product sales revenue and the geographical
footprint in which Eden can operate, in addition to growing the
team which should enable the Company to meet its ambitious growth
targets.
BREXIT
The impact of Brexit is still somewhat uncertain for many UK
companies and this is now complicated further by what are likely to
be delays to key trade negotiations with the EU, in particular due
to the COVID-19 pandemic and its impact on Government operations
and priorities. However, the Company understands that the ownership
of its EU approvals of Mevalone and its constituent active
substances should not be impacted by Brexit, since guidance has
been published stating that the owner of such approvals can
continue to be a UK resident company. However, seeking regulatory
approval in the UK for Eden products has become somewhat more
challenging, and the Company is now weighing up market
opportunities and costs under the various Brexit scenarios. We are
now better placed than before to navigate what are likely to be
complex regulatory challenges.
From an operational perspective, the Company does not foresee
any significant issues with continuing to have toll-manufacturing
facilities in mainland Europe, though it is monitoring this
situation. The Company also has manufacturing capabilities in the
UK as well as the US which provide some flexibility. In addition,
it is feasible for Eden to manage some of its operations through
its Irish subsidiary, should this be necessary.
Raw materials are currently sourced from outside of the EU and
so there is expected to be minimal impact on this part of the
supply chain.
COVID-19
During this difficult time, the agriculture industry requires a
unified effort from all involved in the provenance of fresh food
and produce. Eden is committed to continuing to provide
biopesticide products and natural microencapsulation technologies
to the global crop protection industry through its network of
partners across the world. Whilst trading in the first part of the
year have been in line with management's expectations, with low
direct operation impact from COVID-19 at this time, there remains
significant uncertainties regarding the severity and duration of
the pandemic and the measures required to combat it. However, we
want to make Eden's current position clear to our stakeholders.
We Are Funded for Future Growth
In March 2020, we raised GBP10.4 million (gross) from investors,
a feat that the whole team is proud of given the volatility and
uncertainty in the markets at the time. The resounding vote of
confidence from our shareholders (both existing and new) will help
us capitalise on the global shift towards more environmentally
friendly methods of crop protection, driving us to become a leading
provider of sustainable solutions for global agriculture. Though
the coming months will certainly present challenges for the
Company, our employees and our partners, Eden remains debt-free and
has a strengthened balance sheet allowing us to execute on our
exciting plans. Our out-sourced manufacturing model means that we
retain maximum flexibility over our choice of manufacturing
locations with a low fixed cost base.
Our Industry Has a Pivotal Role to Play
As demand soars for food supply during the lockdown periods
across the UK and beyond, the agriculture industry has a vital role
to play in feeding the world through the crisis and minimising the
economic fallout.
"Plant protection products play a fundamental role in
agricultural production - without them, we would not be able to
cope adequately with global emergencies such as COVID-19. The
biopesticides market outlook remains undoubtedly positive, with a
clear demand from consumers for sustainably grown produce and in
response, a notable shift from growers towards greener farming
practices. As we step into the 'new normal', consumer demand for a
chemical-free supply chain journey will only be more
prevalent."
Not only do people need food to survive, they remain conscious
of where it comes from and care about the supply chain journey. The
choices people are making to put healthy food on the table are
driving what farmers grow in their fields and how they grow them
with an increasing emphasis on sustainable practices and produce
that is free from pesticide residues. This is the future of
farming, and Eden is at the forefront of the movement towards
sustainable farming practices.
Supporting Our Employees and Partners
As always, we are working closely with our partners as they
continue to maintain their business of supplying our product to
growers in an increasing number of countries. Our team is reviewing
the situation every day so that we can adapt to any changes that
may be experienced by our partners and ensure the health and safety
of their workers is paramount. Closer to home, Eden's team are
avoiding unnecessary travel and working remotely during the
crisis.
I want to thank our partners and, of course, the farmers who
cannot carry out their work remotely and who are working hard each
day to ensure that we have enough to eat now and in the future.
Their work cannot not stop, and we are grateful now more than ever
for all that they do to feed us. We hope you stay safe and
well.
TerpeneTech (UK)
TerpeneTech secured a CE mark for its head-lice treatment
product in European Economic Area ("EEA") in 2018, which is the
first step in the marketing and sales of such products. TerpeneTech
has also established its first channel distribution partner who
will target the UK market. The first product launch in the UK is
currently expected to coincide with the back-to-school schedule in
the autumn of 2020. Sales will commence in other countries in the
EEA once arrangements with additional distribution partners have
been finalised.
Dividends
There is no dividend to be paid or proposed in respect of 2019.
The Board continues to monitor its dividend policy.
Summary
Today, Eden is a stronger, more established business than it has
ever been, and this trend continues as we move ahead with a robust
financial position, an expanding regulatory and commercial
footprint, a strong and growing network of partners, and a growing
product portfolio, all allowing us to significantly increase the
size of our addressable market. We have embedded a culture of
efficiency and reduced complexity, and we seek continuously to
strengthen and improve our operations. We are increasingly able to
anticipate and adapt to changing consumer and regulatory trends as
well as global economic conditions, and we benefit from the strong
alignment of our sustainable business model with ongoing regulatory
changes in our industry - an industry in which regulation is
creating tremendous disruption and opportunities that we are
well-placed to respond to.
Eden remains the UK's only quoted company focussed upon
sustainable chemistry for the biopesticides industry, and we are
excited to be contributing to the growth of our industry and
supporting the all-important work of farmers and our partners.
Sean Smith
Chief Executive Officer
6 May 2020
Strategic Report
Review of business
The review of this year's business activities is as set out in
the Chairman's Report and Chief Executive Officer's Report.
An update on TerpeneTech, Eden's associate company, is also
included in the Chief Executive Officer's Report.
Key financial performance indicators
The key performance indicators of the business are the
development and commercialisation of the Company's products and the
management of its cash position.
Revenue derived from product sales, licence fees and milestone
payments are all considered to be key financial performance
indicators. Maintaining a low overhead base and progress towards
profitability are also key indicators.
Revenue in 2019 consisted of upfront and milestone payments in
relation to new and existing agreements, royalties and product
sales. Revenue in 2019 was GBP2.0 million in comparison to GBP2.8
million in 2018. The operating loss for the year was GBP1.4 million
compared to GBP0.5 million for the previous year. The loss before
tax for 2019 was GBP1.5 million, up from GBP0.5 million in the
previous year.
The loss per share for 2019 was 0.54 pence (2018: 0.16
pence).
Administrative expenses for the year were GBP1.5 million (2018:
GBP1.5 million).
Intellectual property, including development expenditure, is
written off over eleven years in line with the remaining life of
the Company's key patents, taking into account additional
protection provided by granted Supplementary Protection
Certificates.
The Company has capitalised GBP0.9m (2018: GBP0.4m) of
development expenditure in the year which is a reflection of the
continued development of the Company's products.
Cash is safeguarded by close working capital management,
including tightly controlling the Company's creditor position. The
cash position at the year-end was GBP0.5m (2018: GBP2.5m), though
this was significantly increased after the year end following the
successful fundraise in March 2020 with gross proceeds of
GBP10.4m.
Other key non-financial performance indicators
The regulatory approval of products and milestones related to
such processes are deemed to be key non-financial performance
indicators.
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 Chief Executive Officer's Report contains an update
regarding this progress.
The registration of the Company's first product, Mevalone, for
use as a pesticide in Europe is not only a key milestone in terms
of its commercialisation, but also indicative of future products as
the three active substances that are registered in the EU are the
basis of Eden's future product portfolio. Thus far, Mevalone has
been approved for use in in Kenya, Malta, Greece, Bulgaria, Spain,
Italy, France, Cyprus, Albania, Portugal and Macedonia.
Eden's second product, Cedroz ä , is a nematicide which has been
authorised for sale in Malta, Belgium and Mexico in 2019.
Further commercialisation of Eden's products and Sustaine
encapsulation technology through supply, licensing, evaluation and
option agreements also serve as a key indicator of the Company's
performance.
Successful trial results are also significant in showing the
technical and commercial viability of our intellectual
property.
Principal risks and uncertainties
The Company's prime risk is the on-going commercialisation of
its intellectual property, which involves testing of the Company's
products, obtaining regulatory approvals and reaching a
commercially beneficial arrangement 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.
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 the Company has sufficient cash resources
to meet its on-going cash flow requirements.
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 (and acting
on) the relevant legal advice as and when required.
There is also inherent uncertainty surrounding the regulatory
approval of products in terms of both timing and outcome. This risk
is managed by retaining appropriately experienced staff and
contracting with expert consultants as needed.
COVID-19
Whilst, to date, the Board has not seen a significant, direct
operational impact on the business from COVID-19, clearly the full
extent of the effects is not yet known and, as such, there is an
inherent risk that the Company is negatively affected.
The Company has not seen a significant change, thus far, on its
toll manufacturing operations. In addition, our customers are not
expecting any significant impact on sales of agrochemicals.
We have, however, seen regulatory authorities working at reduced
capacity, which is expected to impact on-going product approvals
that we have around the world, though it is difficult at this stage
to assess what, if any, commercial and financial impact there may
be.
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
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 offer protection 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 Company's environment committee meets to
discuss ways in which the business can contribute more to its local
environments by getting involved in local initiatives and also to
look at ways of promoting environmental wellbeing amongst the
staff. Employees are actively encouraged to ensure conservation of
energy and resource through awareness campaigns and positive
action.
Section 172 statement
The directors are fully aware of their responsibilities to
promote the success of the Company in accordance with s172 of the
Companies Act and have acted in accordance with these
responsibilities during the year. The Board has identified that its
key stakeholders are:
-- our workforce
-- shareholders
-- customers
-- regulators
Eden's core values, which are professionalism, integrity,
effectiveness and dynamism, reflect the company's commitment to do
the right thing simply because it is the right thing to do. The
requirement to adhere to this principle is embedded within all job
descriptions across the group.
Throughout the year, the Board considered the wider impact of
strategic and operational decisions on the company's
stakeholders.
Our workforce
Our workforce is fundamental to the long-term success of the
company. We have various engagement mechanisms many of which have
been in place for a number of years. The team at Eden generally
meets every Monday morning to review the various on-going projects
and plan the week ahead. Annual employee reviews are undertaken and
regular communication takes place between management and staff to
ensure that any concerns or issues are identified and appropriately
addressed. The Company provides training to employees as well as
arranging social occasions to promote the well-being and
connectivity of the team.
Shareholders
The support and engagement of our shareholders is imperative to
the future success of our business. In all of its decision making,
the Board ensures that it acts fairly with regard to members of the
company. We have productive ongoing dialogue with a number of our
investors. We are also in touch with all of our shareholders at
least three times per annum with information about shareholder
meetings and the company's financial results. We have regular
meetings with institutional investors and analysts to understand
their views and address any concerns.
Customers
The commercial team at Eden is in regular contact with our
customers to ensure that they are satisfied with the products that
Eden is selling to them or that any projects that are taking place
with them are on track and without issue. Face to face meetings
take place, as well as other communication such as emails or video
or phone conferences, which allow for an on-going dialogue with the
objective of reducing any potential issues or concerns. A project
management system is operated by Eden to ensure that all customers
are communicated with on a regular basis to keep customers
satisfied as much as possible.
Regulators
The regulatory team at Eden, which includes both employees and
expert consultants, communicates directly with regulators around
the world to allow an efficient and successful process to take
place. Clearly, regulation is a key factor in Eden's industries and
so it is important for the team at Eden to be in regular contact
with regulators to promote the long-term success of the business
through the approval of product marketing authorisations. The
regulatory team also keeps itself up to date on regulatory matters
through training and relevant publications.
On behalf of the board:
Sean Smith
Director
6 May 2020
Corporate Governance Statement - Board of Directors
Lykele van der Broek , Non-Executive Chairman
Appointed Independent Full-time (FT) or part-time (PT)
October 2017 (Board) Yes PT - 10 days per year
January 2018 (Chairman)
Background and experience
Lykele retired as a Member of the Board of Management of
Bayer CropScience, a division of Bayer AG, in 2014, having
been responsible for the commercialisation of innovative
agricultural products and services globally. Prior to this,
he held senior international roles including the Head of
Bayer CropScience's BioScience division and President of
the Bayer HealthCare Animal Health division.
Committee membership
AIM Compliance Committee (Chairman)
Nominations Committee (Chairman)
Remuneration Committee (Chairman)
Audit Committee
External appointments
Genus plc (Non-Executive Director)
Sean Smith , Chief Executive Officer
Appointed Independent Full-time (FT) or part-time (PT)
September 2014 No FT
Background and experience
Sean has a bachelors degree in microbiology and over 25
years of experience in the speciality chemicals and industrial
biotechnology industries. He has held senior commercial
leadership roles ranging from sales and marketing to business
management and intellectual property licensing in blue chip
companies such as Ciba (now BASF) and Honeywell. In recent
years, Sean has focussed on technology commercialization
through licensing and company formation working with Intellectual
Ventures and several start-ups.
Committee membership
None
External appointments
None
Alex Abrey , Chief Financial Officer
Appointed Independent Full-time (FT) or part-time (PT)
September 2007 No FT
Background and experience
Alex, a Chartered Certified Accountant, joined the Board
in September 2007, having been Chief Accountant to Eden
for the previous four years. He has acted as Financial Director
to a diverse range of businesses including a financial and
management consultancy business based in Oxfordshire, a
medical waste management company and an intellectual property
licensee involved in plastics manufacturing. Alex has eighteen
years' experience in both practice and industry.
Committee membership
None
External appointments
Ricewood Ltd (Director)
-------------------------------------------------------------------
Robin Cridland , Non-Executive Director
Appointed Independent Full-time (FT) or part-time (PT)
May 2015 Yes PT - 10 days per year
Background and experience
Rob served as Chief Financial Officer and Company Secretary
of Itaconix plc until September 2018. He joined Itaconix
in September 2008 from Renovo Group plc where he spent seven
years as Executive Director of Finance and Business Development.
He began his career at Coopers & Lybrand Deloitte, before
moving on to senior transactional roles at Enskilda Securities
and senior finance and transactional roles at GlaxoWellcome
and GlaxoSmithKline. He was also a Governor and a Non-Executive
Director of Cheadle Hulme School, Cheshire.
Committee membership
Audit Committee (Chairman)
Nominations Committee
AIM Compliance Committee
Remuneration Committee
External appointments
None
-------------------------------------------------------------------
Attend ance at Board and Committee meetings
Board and Committee meetings are scheduled in advance for each
calendar year. Additional meetings are arranged as necessary to
review strategic and annual plans.
The scheduled Board and Committee meetings and attendance during
the year ended 31 December 2019 were as follows:
Remuneration
Board AIM Compliance & Nominations Audit
Director Role (6 meetings) (1 meeting) (10 meetings) (6 meetings)
A Abrey Chief Financial ------------ -- - -
Officer
R Cridland Non-Executive ------------ -- -------------------- ------------
Director
L van der Chairman ------------ -- -------------------- ------------
Broek
S Smith Chief Executive ------------ -- - -
Officer
Professional development and training
Alex Abrey is a Chartered Certified Accountant. As part of his
professional development, he attends relevant courses and maintains
his qualification through Continuing Professional Development under
the Association of Chartered Certified Accountants.
Robin Cridland is a Chartered Accountant. As part of his
professional development, he attends relevant courses and maintains
his qualification through Continuing Professional Development under
the Institute of Chartered Accountants in England and Wales.
Sean Smith is a member of the Institute of Directors with access
to online tools and courses and attends industry conferences
including the Association of Biocontrol Industry Manufacturers.
Lykele van der Broek keeps up-to-date by regularly reading
economic and management literature, by being briefed by external
advisors on matters such as remuneration, corporate governance, and
liaising with consultants who inform the board of changes in
legislation, best practice or public perception.
External advisors
The Company uses external advisors, where necessary, as
follows:
Advisor Role
Nominated Advisor Provides advice on AIM Compliance
Commercial lawyer Provides advice on legal issues such as
commercial agreements
Regulatory lawyer Provides advice on regulatory aspects of the
business
The Company Secretary is the only internal advisor the Company
currently has. The Secretary is responsible for the efficient
administration of the company, particularly with regard to ensuring
compliance with statutory and regulatory requirements and for
ensuring that decisions of the board of directors are
implemented.
Corporate Governance Statement - Chairman's Letter
Dear shareholder,
The Directors have adopted the principles set out in the Quoted
Companies Alliance Governance Code. The Directors have applied
these principles, as far as practicable and appropriate for a
relatively small public company, as follows:
The Board currently comprises two Executive Directors and two
Non-Executive Directors.
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 is
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 of Eden champion openness and accountability at
every level. This involves focusing on how this takes place
throughout the company and by those who act on its behalf.
The quality of our governance is evident in the way we conduct
business and how we treat our workforce, customers and
suppliers.
The Board sets the framework of values within which the desired
corporate culture can evolve and thrive.
Ownership of the values is strengthened by a collaborative
approach by both the leadership and the workforce being involved in
a two-way process to define the company's values.
Clear messages are given through decisions, strategies and
conduct. Directors reinforce values through their own behaviour and
decisions. To increase the effectiveness executive and
non-executive directors have increased visibility.
The Board demonstrates ethical leadership and displays the
behaviours they expect from others and communicate what they
consider to be acceptable business practice and they consider
chosen behaviours when setting strategy and financial targets.
The Company seeks to keep its strategy consistent with its
purpose and values and its responsibilities for long-term success
and to contribute to wider society.
Values are embedded at every level of the organisation and the
Board seeks assurance from management that it has effectively
embedded the Company's purpose and values in operational policies
and practices including aligning incentives, rewards and promotion
decisions to values.
Values and expected behaviours are reinforced through our
recruitment, promotion, reward, performance management and
policies, processes and practices.
Our reward structures produce appropriate incentives to
encourage desired behaviours and responsible risk-taking and
management consistently communicate values and expected behaviours
widely and clearly across the company and ensure that they are
understood by the workforce.
Management also encourage suppliers to meet the expected
standards of behaviour.
Values and expected behaviours include:-
Honesty
Openness
Transparency
Respect
Adaptability
Reliability
Recognition
Acceptance of challenge
Accountability
A sense of shared purpose
The Board is alert to signs of possible cultural problems and
recognises that the workforce is a vital source of insight into the
culture of the company.
Monitoring of effectiveness
Monitoring efforts are focused on existing internal capabilities
and information:-
-- Training data
-- Recruitment, reward and promotion decisions
-- Use of non-disclosure agreements
-- Whistleblowing, grievance and 'speak-up' data
-- Board interaction with senior management and workforce
-- Health and safety data, including near misses
-- Promptness of payments to suppliers
-- Attitudes to regulators, internal audit and employees
Areas including human resources, audit & risk and compliance
offer an integrated approach to aid understanding of how behaviours
and culture impact performance and offer analysis and advice the
Board.
The Board identifies areas of good practice and excellence that
are used to drive up standards across the business which reinforces
the value that a healthy culture adds.
Lykele van der Broek
Non-Executive Chairman
Corporate Governance Statement - Business Model and Strategy
The Company's business model can be found on the Company's
website www.edenresearch.com and in the Company Overview section,
at the front of the Annual Report.
Key challenges
Our vision is to be the leader in sustainable products enabled
or enhanced by our novel Sustaine encapsulation and delivery
technology in crop protection, animal health and consumer
products.
Key challenges We will address these by:
Stable financial base and revenue
growth * Continuing to evolve our business model to focus
primarily on product sales
* Signing further agreements with industry partners to
commercialise products
* Ensuring a well-funded balance sheet
Product development
* Further development of the encapsulation technology
Growing a diverse product development for new applications
pipeline
* Investing in patents for new market opportunities
* Building our internal technical resources in terms of
capability and capacity
Geographic expansion
* Extending registrations for product authorisation
Targeting new geographies where into new territories
there is a demand for sustainable
solutions
* Investing in patent protection for our intellectual
property in new territories
* Identifying suitable industrial partners with access
to new geographies and customers
Corporate Governance Statement - QCA Corporate Governance
Code
In accordance with Aim Rule 26 of the AIM rules for companies,
the corporate governance code that the board of directors have
chosen to apply and benchmark against is The QCA Corporate
Governance Code.
The QCA Corporate Governance page on the Company's website
contains links to the required compliance documents and published
disclosures which explain how Eden Research 'complies with or
explains against' the code.
Published Disclosures:
Principle Principle Location Disclosure Detail Required Disclosure Explanation Link
No. of status
disclosure
1 Establish a ANNUAL DISCLOSURE:Explain the company's Compliant The Company Business model
strategy REPORT business model and strategy, seeks to and strategy
and business & ACCOUNTS including key challenges in keep its
model WEBSITE their execution (and how those strategy
which promote will be addressed). consistent
long-term with its purpose
value for and
shareholders values and its
responsibilities
for long-term
success
and to
contribute to
wider society.
------------------ ----------- ------------------------------------------------------------- ------------- ----------------- ----------------------
2 Seek to ANNUAL DISCLOSURE:Explain the ways Compliant The CEO + CFO Shareholder
understand REPORT in which the company seeks communicate engagement
and meet & ACCOUNTS to engage with shareholders regularly with
shareholder WEBSITE and how successful this has shareholders,
needs and been. investors and
expectations This should include information analysts,
on those responsible for shareholder including at our
liaison or specification of half
the point of contact for such yearly results
matters. roadshows.
The full Board
is available
at the Annual
General
Meeting (AGM) to
communicate
with
shareholders.
------------------ ----------- ------------------------------------------------------------- ------------- ----------------- ----------------------
3 Take into account WEBSITE DISCLOSURE: Explain how the Compliant The Board has Stakeholder
wider stakeholder business model identifies the identified engagement and
and social key resources and relationships the main social
responsibilities on which the business relies. stakeholders responsibility
and their -- Explain how the company obtains feedback from in the business
implications stakeholders and the actions that have been generated and
for long-term as a result of this feedback (e.g. changes to inputs regularly
success or improvements in products). discusses
how its
workforce,
customers,
shareholders and
others
might be
affected by
decisions and
developments
in the business.
We constantly
strive
to enhance our
environmental
and social
credentials.
In order to
obtain
feedback from
stakeholders,
management meets
regularly
with them. The
Company's
website, email
footers
and business
cards all
provide contact
details
of the relevant
person
at the Company
that
they can use,
should
they need to get
in
touch.
------------------ ----------- ------------------------------------------------------------- ------------- ----------------- ----------------------
4 Embed effective ANNUAL DISCLOSURE: Describe how the Compliant Both the Board and Effective risk
risk management, REPORT board has embedded effective Audit Committee management
considering both & ACCOUNTS risk management in order to regularly
opportunities and WEBSITE execute and deliver strategy. review risks,
threats, This should include a description including
throughout of what the board does to identify, new threats and the
the organisation assess and manage risk and processes to
how it gets assurance that mitigate
the risk management and related and contain them.
control systems in place are Whilst the Board is
effective. responsible for
risk,
our culture seeks to
encourage all
colleagues
to manage risk
effectively.
------------------ ----------- ------------------------------------------------------------- ----------- --------------------- ----------------------
5 Maintain the ANNUAL DISCLOSURE: Identify those Compliant The Board works well Board composition,
board REPORT directors who are considered together as a team. Board culture,
as a & ACCOUNTS to be independent; where there Meetings are dynamics and
well-functioning, WEBSITE are grounds to question the characterised contribution
balanced team led independence of a director, by lively discussion
by the chair through length of service or and active idea
otherwise, this must be explained. generation
-- Describe the time commitment required from directors and management are
(including non- executive directors as well as rigorously
part-time executive directors). challenged and held
to account.
-- Include the number of meetings of the board (and any
committees) during the year, together with the
attendance record of each director.
------------------ ----------- ------------------------------------------------------------- ----------- --------------------- ----------------------
6 Ensure that ANNUAL DISCLOSURE: Identify each Compliant We assess adequacy Professional
between REPORT director. of the Boards development and
them the & ACCOUNTS -- Describe the relevant experience, skills and personal collective training
directors WEBSITE qualities and capabilities that each director brings skills and
have the to the board (a simple list of current and past roles experience
necessary is insufficient); the statement should demonstrate and directors'
up-to-date how the board as a whole contains (or will contain) individual
experience, the necessary mix of experience, skills, personal development needs
skills and qualities (including gender balance) and capabilities are
capabilities to deliver the strategy of the company for the bene t discussed annually
of the shareholders over the medium to long-term. with
the Chairman.
-- Explain how each director keeps his/her skillset
up-to-date.
-- Where the board or any committee has sought external
advice on a significant matter, this must be
described and explained.
-- Where external advisers to the board or any of its
committees have been engaged, explain their role.
-- Describe any internal advisory responsibilities, such
as the roles performed by the Company Secretary and
the senior independent director, in advising and
supporting the board.
------------------ ----------- ------------------------------------------------------------- ----------- --------------------- ----------------------
7 Evaluate board WEBSITE DISCLOSURE: Include a high-level Compliant The Board regularly Board performance
performance explanation of the board performance considers the
based on clear effectiveness process. effectiveness
and -- Where a board performance evaluation has taken place and relevance of its
relevant in the year, provide a brief overview of it, how it contributions. Any
objectives, was conducted and its results and recommendations. learning
seeking Progress against previous recommendations should also and development
continuous be addressed. needs
improvement are reviewed and
continual
DISCLOSURE: Include a more improvement
detailed description of the implemented.
board performance evaluation
process/cycle adopted by the
company. This should include
a summary of:
-- The criteria against which board, committee, and
individual effectiveness is considered;
-- How evaluation procedures have evolved from previous
years, the results of the evaluation process and
action taken or planned as a result; and how often
board evaluations take place.
-- Explain how the company approaches succession
planning and the processes by which it determines
board and other senior management appointments,
including any links to the board evaluation process.
------------------ ----------- ------------------------------------------------------------- ----------- --------------------- ----------------------
8 Promote a ANNUAL DISCLOSURE: Include in the Compliant The Board sets the Corporate culture
corporate REPORT Chair's corporate governance framework of values
culture that is & ACCOUNTS statement how the culture is within which the
based See consistent with the company's desired
on ethical values Chairman's objectives, strategy and business corporate culture
and behaviours Letter model in the strategic report can
and with the description of evolve and thrive.
principal risks and uncertainties.
WEBSITE The statement should explain Ownership of the
what the board does to monitor values
and promote a healthy corporate is strengthened by a
culture and how the board assesses collaborative
the state of the culture at approach
present. by both the
leadership
DISCLOSURE: Explain how the and the workforce
board ensures that the company being
has the means to determine involved in a
that ethical values and behaviours two-way
are recognised and respected. process to define
the
company's values.
------------------ ----------- ------------------------------------------------------------- ----------- --------------------- ----------------------
9 Maintain WEBSITE DISCLOSURE: In addition to Compliant The Board is Corporate governance
governance the high level explanation responsible structure
structures and of the application of the QCA for the company's
processes Code set out in the chair's overall
that are fit for corporate governance statement: strategic direction
purpose and -- Describe the roles and responsibilities of the chair, and management and
support chief executive and any other directors who have for
good specific individual responsibilities or remits (e.g. the establishment
decision-making for engagement with shareholders or other stakeholder and
by the board groups). maintenance of a
framework
-- Describe the roles of any committees (e.g. audit, of delegated
remuneration and nomination committees) setting out authorities
any terms of reference and matters reserved by the and controls to
board for its consideration. ensure
the efficient and
-- Describe which matters are reserved for the board. effective
management of the
-- Describe any plans for evolution of the governance company's
framework in line with the company's plans for operations.
growth.
------------------ ----------- ------------------------------------------------------------- ----------- --------------------- ----------------------
10 Communicate how ANNUAL DISCLOSURE: Describe the work Compliant The Investors Audit committee
the company is REPORT of any board committees undertaken section terms of reference
governed & ACCOUNTS during the year. of our website
and is performing -- Include an audit committee report (or equivalent includes Audit committee
by maintaining a report if such committee is not in place). our results, report
dialogue with presentations
shareholders -- Include a remuneration committee report (or and communications Remuneration
and other equivalent report if such committee is not in place). to committee report
relevant shareholders. We
stakeholders WEBSITE -- If the company has not published one or more of the release Remuneration
disclosures set out under Principles 1-9, the omitted the results of committee terms
disclosures must be identified and the reason for general of reference
their omission explained meetings through a
regulatory AGM Voting outcomes
news services and
WEBSITE DISCLOSURE: Disclose also Annual reports
the outcomes of all votes in on the Regulatory Notices of general
a clear and transparent manner. News meetings
-- Where a significant proportion of votes (e.g. 20% of Section of our
independent votes) have been cast against a website.
resolution at any general meeting, the company should
include, on a timely basis, an explanation of what
actions it intends to take to understand the reasons
behind that vote result, and, where appropriate, any
different action it has taken, or will take, as a
result of the vote
-- Include historical annual reports and other
governance-related material, including notices of all
general meetings over the last five years.
------------------ ----------- ------------------------------------------------------------- ----------- --------------------- ----------------------
Remuneration Policy
Introduction
The Remuneration Policy for Eden Research plc includes the three
main elements of remuneration; salary, cash bonus and equity
incentive.
The Policy is based on market facing structures, precedented in
other AIM listed companies. The policy has been prepared for the
Executive Directors, however it is intended that the principles
should apply to all staff.
An important principle is that the elements of remuneration
should not overlap (to ensure that an Executive is not rewarded
more than once for the same achievement).
Salary is a reward for the day to day execution of a role (which
is documented in a job description).
The cash bonus is a reward for the achievement of challenging
milestones in a year over and above the day to day role and linked
to an increase in the value of the business through the achievement
of significant commercial progress.
The equity incentive should deliver value to the Executive in
the medium to long term, based on a sustainable increase in the
share price over the corresponding period of time, and of a
magnitude related to the actual increase in share price, in order
to align management's incentive with the interests of
shareholders.
The Remuneration Committee has absolute discretion in the
application of these principles and may make adjustments, where
appropriate, and acting reasonably.
Salary
A salary review usually occurs in Q4 each year, to take effect
from 1 January in the following year, unless a market adjustment is
required at a different time.
Generally, salaries should be benchmarked and comparable to
similar positions in similar sized AIM listed companies in similar
industry segments.
Cash bonus
Bonuses are paid to the extent their payment does not shorten
the funded runway of the business to less than eighteen months,
based upon an up-to-date forecast using reasonable assumptions, as
agreed by the Board. This figure may be adjusted by the
Remuneration Committee.
The Target bonus levels are a percentage of salary.
The Target bonus is generally made up of, and released
incrementally by, the achievement of:
-- new commercial partnership deals and other commercial
milestones (e.g. regulatory approvals)
-- the return received on such agreements
-- contribution and profit earned.
As the business matures, the balance between deal value, other
commercial milestones and contribution / profit is expected to
transition in weighting (i.e. from deals through other milestones
towards profit).
Bonus payments are calculated prior to completion of (and
included in) the annual report and paid out after the Annual Report
has been approved by the auditors and the Board.
Equity incentive
Unapproved share option scheme
The Company operated an unapproved share option scheme for
executive directors, senior management and certain employees. This
scheme was used for any options awarded prior to 28 September
2017.
Long-Term Incentive Plan ("LTIP")
In 2017, the Company established a LTIP to incentivise the
Executives to deliver long-term value creation for shareholders and
ensure alignment with shareholder interests. Awards have been made
annually and are subject to continued service and challenging
performance conditions over a three year period. The performance
conditions have been reviewed on an annual basis to ensure they
remain appropriate and are based on increasing shareholder value.
Awards have been structured as nil cost options with a seven year
life after vesting.
Other than in exceptional circumstances, awards have been up to
100% of salary in any one year and granted subject to achieving
challenging performance conditions set at the date of the grant. A
percentage of the award vests for "Threshold" performance with full
vesting taking place for equalling or exceeding the performance
"Target". In between the Threshold and Target there may be pro rata
vesting. The Remuneration Committee retains the ability to amend
the performance conditions for future grants to ensure that such
grants achieve the stated purpose.
After the year end, as part of the financing completed in March
2020, the Board reviewed the LTIP with a view to making adjustments
to align further the interests of management with shareholders, as
summarised below.
Application of the Policy
Emoluments
Details of the remuneration of those who served as directors
during the year are set out below.
Base salary Base salary
2019 2018
GBP GBP
Executive Directors
S Smith 211,500 190,000
A Abrey 165,000 150,000
Non-Executive Directors
L van der Broek 40,000 40,000
R Cridland 35,000 35,000
The Company also operates an annual, discretionary cash bonus
scheme.
For 2019, the target bonus levels and actual bonus achieved for
Executive Directors on meeting all of these objectives were:
Sean Smith 70% of base salary, achieved 28.88%, (2018: 70% of
base salary, achieved 56.7%)
Alex Abrey 70% of base salary, achieved 28.88%, (2018: 70% of
base salary, achieved 56.7%)
The Committee considers that the performance metrics
underpinning the annual, discretionary cash bonus scheme are in
line with shareholders' expectations.
Pensions
For the Executive Directors and certain employees, the Company
makes contributions to a defined contribution pension scheme. The
Company contributes a maximum of 7% provided that the director
makes a minimum 4% contribution. Below this, the Company
contributes the same percentage as the director
Share-based payments
The share options granted to individual Directors to date are
detailed below and include grants made in prior years.
Non-Executive Directors
Non-Executive Directors receive a fee only with no additional
benefits, bonuses or option grants.
Directors' contracts
The Executive Directors have a service contract of indefinite
term with a notice period of no more than six months.
Non-Executive Directors have Letters of Appointment which are
terminable by the Director or the Company with three months'
notice.
Share option scheme grants
In 2017, the Remuneration Committee implemented a Long-Term
Incentive Plan ("LTIP"). The awards are in respect of management
performance for each financial year ending 31 December.
Further details of the awards are set out in the table
below.
All of the following nil-priced options only become exercisable
if the following share price performance conditions are met: 50% of
the options become exercisable if the weighted average Ordinary
Share price in the 45 day period ending on the vesting date is at
the minimum price (as shown in the table) or above.
Between the weighted average ordinary share prices of the
minimum and maximum prices, vesting shall be pro-rata and on a
straight-line basis between 50% and 100%. Below the minimum price,
the options are not exercisable and lapse in full.
A Abrey
Minimum weighted Maximum weighted
Number of shares average share average share
Year under option Vesting date price (p) price (p)
2015 810,000 30/9/2019 20 50
----------------- ------------- ----------------- -----------------
2016 960,000 30/9/2020 24 36
----------------- ------------- ----------------- -----------------
2017 1,093,333 30/6/2021 23 34.5
----------------- ------------- ----------------- -----------------
2018 1,333,333 30/6/2022 25 37.5
----------------- ------------- ----------------- -----------------
S Smith
Minimum weighted Maximum weighted
Number of shares average share average share
Year under option Vesting date price (p) price (p)
2015 1,098,680 30/9/2019 20 50
----------------- ------------- ----------------- -----------------
2016 1,148,000 30/9/2020 24 36
----------------- ------------- ----------------- -----------------
2017 1,775,556 30/6/2021 23 34.5
----------------- ------------- ----------------- -----------------
2018 1,688,889 30/6/2022 25 37.5
----------------- ------------- ----------------- -----------------
At 31 December 2019, the directors had the following interests
in share option schemes:
Number Number
Date from at 1 at 31
which Expiry Exercise January Granted Exercised Lapsed December
exercisable Date price 2019 in year in year in year 2019
GBP
A J Abrey
14/08/2014 19/05/2019 0.10 450,000 - - 450,000 -
17/01/2016 16/01/2021 0.13 1,050,000 - - - 1,050,000
30/09/2019 29/09/2027 Nil 810,000 - - 810,000 -
30/09/2020 29/09/2027 Nil 960,000 - - - 960,000
30/06/2021 29/06/2029 Nil - 1,093,333 - - 1,093,333
30/06/2022 29/06/2029 Nil - 1,333,333 - - 1,333,333
3,270,000 2,426,666 - 1,260,000 4,436,666
---------- ------------ --------- ----------- ---------- ----------
S M Smith
01/09/2016 31/08/2019 0.16 1,000,000 - - 1,000,000 -
30/09/2019 29/09/2027 Nil 1,098,680 - - 1,098,680 -
30/09/2020 29/09/2027 Nil 1,148,000 - - - 1,148,000
30/06/2021 29/06/2029 Nil - 1,775,556 - - 1,775,556
30/06/2022 29/06/2029 Nil - 1,688,889 - - 1,688,889
3,246,680 3,464,445 - 2,098,680 4,612,445
---------- ------------ --------- ----------- ---------- ----------
LTIP option awards in respect of the year ended 31 December 2019
will be made during 2020, as described below.
Following the recent fundraise in March 2020, the Company will
implement a new long term incentive plan to award the performance
of the executive management team. The new plan will replace the
Company's existing LTIP, and is deemed a more appropriate scheme to
incentivise management given the Company's stage of
development.
Pursuant to the new plan, the Company will grant options over
10.5 million new Ordinary Shares, at a strike price of 6p each, in
the amounts of 6 million awarded to Sean Smith and 4.5 million
awarded to Alex Abrey. The options will vest immediately and will
lapse in three equal tranches in June 2022, June 2023 and June
2024. For the first five years following grant, no shares arising
from the exercise of these options may be sold unless the Company's
prevailing share price is equal to or in excess of 10p.
The new plan will include a net cashless mechanism whereby a
number of shares may be deducted from the participant's option pool
upon exercise, equivalent to half the exercise cost based on the
prevailing market price of the Company's Ordinary Shares, and
provided the remaining exercise cost is paid in cash. The shares
arising from exercise of options shall be subject to a one-year
lock-in restriction, followed by a one-year orderly market
restriction.
Further details of the LTIP will be announced following First
Admission and Second Admission once formally implemented.
Lykele van der Broek
Remuneration Committee Chairman
Audit Committee Report
On behalf of the Audit Committee, I am pleased to present this
report to shareholders. The purpose of the report is to highlight
the areas that the Committee has reviewed and how we have
discharged our responsibilities effectively during the year.
Responsibilities
The key responsibility of the Committee is to provide effective
governance over the Company's financial reporting to ensure its
appropriateness. Under its terms of reference, the Committee is
required, amongst other things, to:
-- monitor the integrity of the financial statements of the
Company including the appropriateness of the accounting policies
adopted and whether the Annual Report is fair, balanced and
understandable;
-- review, understand and evaluate the effectiveness of the
Company's internal controls and risk management systems,
particularly but not exclusively as they pertain to financial
matters;
-- appraise the Board on how the Company's prospects are
assessed;
-- oversee the relationship with the external auditors, making
recommendations to the Board in relation to their appointment,
remuneration and terms of engagement;
-- monitor and review the effectiveness of the external audit
including the external auditors' independence, objectivity and
effectiveness and to approve the policy on the engagement of the
external auditors to supply non-audit services; and
-- monitor and review the internal audit activities in the
Company.
The Committee's terms of reference can be found on the Company's
website www.edenresearch.com.
Composition of Committee and meetings
The Audit Committee comprises the two Non-Executive Directors,
Robin Cridland, who is Chairman of the Committee, and Lykele van
der Broek. The Chairman of the Committee has recent and relevant
financial experience and collectively the members of the Committee
have experience of the chemical, agricultural and animal health
industries. Details of Committee members' qualifications can be
found on the Company's website. The Audit Committee met six times
during the year, and has a rolling agenda linked to the Company's
financial calendar. It invites the Chief Executive Officer, the
Chief Financial Officer and the external auditors to attend its
meetings. The Committee met with the external auditors at the
conclusion of the audit without the Executive Directors being
present. The Committee has met once since the end of the financial
year to consider the results and the Annual Report for the year
ended 31 December 2019.
Main activities during the year
Set out below is a summary of the key areas considered by the
Committee during the year and up to the date of this report.
Financial reporting
During the year, the Audit Committee reviewed reports and
information provided by both the Chief Financial Officer and the
external auditors in respect of the half year and annual financial
report. An important responsibility of the Audit Committee is to
review and agree significant estimates and judgements made by
management. To satisfy this responsibility, the Committee reviewed
a written formal update from the Chief Financial Officer on such
issues at the two meetings that reviewed the half year and year end
results, as well as reports from the external auditors. The
Committee carefully considered the content of these reports in
evaluating the significant issues and areas of judgement across the
Company.
The key areas of review, including those requiring significant
judgements to be made, in the year were as follows:
-- Revenue recognition
-- Potential impairment of intangible assets including
intellectual property and investments
-- Management override of controls
Other areas reviewed in the year were as follows:
-- Going concern
-- Consolidation
-- Share based payments
-- Accruals and provisions
-- Related party transactions
Since the year end, the Audit Committee has considered the
impact of COVID-19 on areas such as going concern in
particular.
Internal control and risk management
During the year the Committee continued to review the
effectiveness of the Company's internal control and risk management
systems. The Committee reported to the Board that it had reviewed,
and was satisfied with, the effectiveness of these systems.
External audit
KPMG LLP has been the external auditor for the Company since
2017. The Audit Committee annually assesses the qualification,
expertise and independence of the auditors and the effectiveness of
the audit process. KPMG's current engagement partner is Andrew
Campbell-Orde, and he has been in place since being appointed for
the Company's 2017 year end.
Following approval by shareholders to re-appoint KPMG at last
year's AGM, the Audit Committee reviewed and approved the terms of
engagement and remuneration of the external auditors for the 2019
financial year.
Audit and Committee effectiveness
The effectiveness of the external audit process is dependent on
appropriate audit risk identification at the start of the audit
cycle. KPMG present their detailed audit plan to the Audit
Committee each year, identifying their assessment of these key
risks. The Committee's assessment of the effectiveness and quality
of the external audit process and addressing these key risks is
informed by, amongst other things, the reporting from the auditors.
In addition, each year, the Audit Committee's performance and the
effectiveness of the external auditor is assessed through
discussions between the Audit Committee members, the Board, the
external auditor and members of the Company's senior finance team
(in particular the Chief Financial Officer). In respect of 2019,
the Board was satisfied with the review process, the performance of
the Committee and the effectiveness of the external auditor.
Auditor independence
The Company meets its obligations for maintaining an appropriate
relationship with the external auditors through the Audit
Committee, whose terms of reference include an obligation to
consider and keep under review the degree of work undertaken by the
external auditor other than the statutory audit, to ensure the
auditor's objectivity and independence is safeguarded.
In accordance with the Auditing Practices Board Ethical
Standards, the Company's external auditor must implement rules and
requirements which include that none of their employees working on
our audit can hold any shares in Eden.
The external auditor is also required to tell the Company about
any significant facts and matters that may reasonably be thought to
bear on their independence or on the objectivity of the lead
partner and the audit team. The lead partner in the audit team must
change every five years.
The Audit Committee reviewed and approved the non-audit services
policy, the objective of which is to ensure that the provision of
such services does not impair, or is not perceived to impair, the
external auditors' independence or objectivity. The policy imposes
guidance on the areas of work that the external auditors may be
asked to undertake and those assignments where the external
auditors should not be involved. There is a further category of
services for which a case-by-case decision is necessary. The policy
can be viewed on the Company's website www.edenresearch.com. In
order to ensure that the policy is effective and the level of
non-audit fees is kept under review, major work to be awarded to
the audit firm must be agreed in advance by the Audit Committee
Chairman. For the 2019 financial year end, there was no non-audit
work undertaken by the Company's auditors, who continue to be
considered independent.
Internal audit
Due to the size of the business, the Company does not currently
have a separate internal audit function. The Company's Risk
Management Team takes this into account when deciding how to
mitigate risks associated with not having an internal audit
function and manages the situation accordingly. Every year the
Audit Committee reviews the appropriateness of this arrangement and
specifically whether an internal audit function is necessary,
including requesting input from the external auditor. At the date
of this report the Audit Committee does not recommend that an
internal audit function is required.
Other activities
The Committee also reviewed its terms of reference, the
Company's policies on whistleblowing, business ethics and on the
prevention of bribery and modern slavery.
Robin Cridland
Audit Committee Chairman
Directors' Report
The directors present their report with the financial statements
of the Company for the year ended 31 December 2019.
Dividends
The loss for the year after taxation amounted to GBP1,132,337
(2018: GBP334,951). The directors are unable to recommend any
dividend (2018: GBPnil).
Research and development
An indication of research and development activities is included
within the Chief Executive Officer's Report.
Future Developments
An indication of future developments is included within the
Chief Executive Officer's Report.
Directors
The directors during the year under review were:
A J Abrey
R J S Cridland
S M Smith
L J van der Broek
Details of the directors who had interests in share option
schemes can be found in the Remuneration Report.
Corporate Governance
In accordance with Aim Rule 26 of the AIM rules for companies,
the corporate governance code that the board of directors have
chosen to apply and benchmark against is The QCA Corporate
Governance Code. The directors have applied the principles as far
as practicable and appropriate for a relatively small public
company as follows:
The Board currently comprises two executive directors and two
non-executive directors. 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 is 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, Nominations, Remuneration
and AIM Compliance Committees.
The Audit Committee has Robin Cridland as Chairman 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.
Lykele van der Broek was the other member of the Audit Committee
during the year.
The Nominations Committee had Lykele van der Broek as Chairman
during the year and identifies and nominates for the approval of
the Board, candidates to fill Board vacancies as and when they
arise. The Nominations Committee meets at least twice a year. Robin
Cridland was the other member of the Nominations Committee during
the year.
The Remuneration Committee had Lykele van der Broek as Chairman
during the year and reviews the performance of the executive
directors and determines 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. Robin Cridland was the other member of
the Remuneration Committee during the year.
The AIM Compliance Committee had Lykele van der Broek as
Chairman during the year and meets twice a year with the NOMAD to
discuss AIM compliance and related issues. The other member of the
committee is Robin Cridland. 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.
The shareholdings of the directors of the Company are as
follows:
Total Holdings % of share
capital
Alex Abrey 1,302,824 0.34%
Lykele van der Broek 929,500 0.24%
Sean Smith 731,039 0.19%
Robin Cridland 130,167 0.03%
The Company has been notified that the following are substantial
shareholders of Eden, each holding more than 3% of the Company's
issued share capital, as at 31 December 2019:
Entity Total Holdings % of Share Capital
Sipcam SpA 20,494,330 9.89%
Livingbridge VC LLP 19,512,195 9.42%
HSBC Nominees 14,007,734 6.76%
JM Finn & Co 12,332,961 5.95%
Artemis Investment Management 9,645,000 4.66%
Hargreaves Lansdown Asset Management 7,816,905 3.77%
Barclays Personal Investment
Management 7,485,329 3.61%
Bank of New York (Nominees) 6,972,500 3.37%
Interactive Investor
Services 6,824,382 3.29%
Suppliers
The Company agrees terms and conditions for business
transactions with its suppliers. Payment is then made on these
terms, subject to the terms and conditions being met by the
supplier.
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, they have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law.
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 its profit or
loss 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 estimates that are reasonable, relevant and
reliable;
- state whether they have been prepared in accordance with IFRSs
as adopted by the EU;
- assess the Company's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend
to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
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 responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and a Directors'
Report that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Statement as to disclose 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.
Auditor
In accordance with Section 489 of the Companies Act 2006, a
resolution for the re-appointment of KPMG LLP as auditor of the
Company is to be proposed at the forthcoming Annual General
Meeting.
Post balance sheet events
In January 2020, the Company signed a one year, exclusive
Evaluation Agreement with Corteva Agriscience.
The agreement allows Corteva time to evaluate Eden's Sustaine ä
encapsulation technology and several formulations in specific
biological seed treatment applications in certain major territories
and, if successful, will lead to Corteva being granted exclusive
distribution rights.
In March 2020, the Company concluded a successful fund-raise
raising a total of approximately GBP10.4 million (before expenses)
through the Placing, Subscription and Open Offer through the issue
and allotment of 173,150,892 new Ordinary Shares, bringing on board
new institutional shareholders, as well as providing existing
shareholders with the ability to partake in the same funding round.
In considering going concern, as discussed in note 1.3, the
directors have taken into account this post balance sheet
fund-raise.
On behalf of the board:
S M Smith - Director
6 May 2020
6 Priory Court
Priory Court Business Park
Poulton
Cirencester
Gloucestershire
GL7 5JB
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF EDEN RESEARCH
PLC
1 Our opinion is unmodified
We have audited the financial statements of Eden Research plc
("the Company") for the year ended 31 December 2019 which comprise
the consolidated statement of comprehensive income, consolidated
statement of financial position, company statement of financial
position, consolidated statement of changes in equity, company
statement of changes in equity, consolidated statement of
cashflows, company statement of cashflows, and the related notes,
including the accounting policies in note 1.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the parent Company's affairs as at 31
December 2019 and of the Group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
-- the parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provision of the Companies Act 2006;
and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
Overview
-----------------------------------------------------------------------------
Materiality: Group financial statements GBP62,500 (2018:
as a whole GBP73,000)
0.71% (2018: 0.8%)
of Group total assets
-------------------------------------------------- -------------------------
Key audit matters Vs 2018
-----------------------
Recurring risks for the Group and the parent
Company
-----------------------
The impact of uncertainties due to the UK exiting ï
the Europe Union on our audit ð
-----------------------
Going concern ï
ð
-----------------------
Recoverability of intangible assets ï
ð
-----------------------
Revenue ï
ð
-----------------------
2 Key audit matters: including our assessment of risks of
material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key audit matters (unchanged from 2018), in arriving at our
audit opinion above. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
The impact of uncertainties due to the UK exiting the European
Union on our audit
Refer to Chief Executive Officer's report
The risk - Unprecedented levels of uncertainty
All audits assess and challenge the reasonableness of estimates,
in particular as described in the recoverability of intangible
assets below, and related disclosures and the appropriateness of
the going concern basis of preparation of the financial statements
(see below). All of these depend on assessments of the future
economic environment and the Group's future prospects and
performance.
Brexit is one of the most significant economic events for the UK
and its effects are subject to unprecedented levels of uncertainty
of consequences, with the full range of possible effects
unknown.
Our response
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in planning
and performing our audits. Our procedures included:
-- Our Brexit knowledge: We considered the directors' assessment
of Brexit-related sources of risk for the Group's business and
financial resources compared with our own understanding of the
risks. We considered the directors' plans to take action to
mitigate the risks.
-- Sensitivity analysis: When addressing the recoverability of
intangible assets, going concern and other areas that depend on
forecasts, we compared the directors' analysis to our assessment of
the full range of reasonably possible scenarios resulting from
Brexit uncertainty and, where forecast cash flows are required to
be discounted, considered adjustments to discount rates for the
level of remaining uncertainty.
-- Assessing transparency: As well as assessing individual
disclosures as part of our procedures on intangible assets and
going concern we considered all of the Brexit related disclosures
together, including those in the strategic report, comparing the
overall picture against our understanding of the risks.
However, no audit should be expected to predict the unknowable
factors or all possible future implications for a company and this
is particularly the case in relation to Brexit.
Going concern
Refer to Audit Committee report and note 1.3 (accounting
policy)
The risk - Disclosure quality
The financial statements explain how the Board has formed a
judgement that it is appropriate to adopt the going concern basis
of preparation for the Group and the parent Company.
That judgement is based on an evaluation of the inherent risks
to the Group's and the parent Company's business model and how
those risks might affect the Group's and the parent Company's
financial resources or ability to continue operations over a period
of at least a year from the date of approval of the financial
statements.
The risks most likely to adversely affect the Group and the
parent Company's available financial resources over this period are
the impact of Brexit on the Group's and parent Company's supply
chain and any unforeseen reductions in revenue or increases in cost
resulting from the 2019 coronavirus disease (COVID-19)
pandemic.
There are also less predictable but realistic second order
impacts, such as the impact of Brexit on the industry specific
regulations underlying the Group and the parent Company's and its
suppliers operations, or the wider economic impacts of the COVID-19
pandemic which could result in a rapid reduction of available
financial resources.
The risk for our audit was whether or not those risks were such
that they amounted to a material uncertainty that may have cast
significant doubt about the ability to continue as a going concern.
Had they been such, then that fact would have been required to have
been disclosed.
Clear and full disclosure of the assessment undertaken by the
directors and the rationale for the use of the going concern
assumption, represents a key financial statement disclosure
requirement.
There is a risk that insufficient details are disclosed to allow
a full understanding of the assessment undertaken by the
directors.
Our response
Our procedures included:
-- Historical comparisons: We compared previously forecast cash
flows against actual cash flows to assess the historical accuracy
of forecasting;
-- Sensitivity analysis: We considered sensitivities over the
level of available financial resources indicated by the Group's
financial forecasts, taking account of reasonably possible (but not
unrealistic) adverse effects that could arise if the Group's
forecast future sales do not materialise;
-- Evaluating directors' intent: We evaluated the achievability
of the actions the directors consider they would take to improve
the position should the identified risks to the Group materialise;
and
-- Assessing transparency: We assessed the completeness and
accuracy of the matters covered in the going concern disclosure by
comparing it to our knowledge and understanding of the business and
the industry in which it operates.
Recoverability of intangible assets
(Group GBP5,581,005, 2018: GBP5,016,508 and parent Company
GBP5,448,262, 2018: GBP5,016,508)
Refer to notes 1.5 and 1.6 (accounting policy) and note 12
(financial disclosures)
The risk - Forecast-based valuation
All intangible assets, including development costs, are reviewed
annually for indicators of impairment.
The assessment of impairment indicators includes forecasting and
discounting future cash flows (based on assumptions such as
discount rates and rates of growth in revenue), which are
inherently highly judgemental. In particular, due to uncertainty
over the size of the potential market for the Group's products,
there is a risk that the recoverable amount forecast for the
intangible assets may not be supported by potential future sales.
The effect of these matters is that, as part of our risk
assessment, we determined that recoverable amounts estimated the
for the Group's intangible assets has a high degree of estimation
uncertainty, with a potential range of reasonable outcomes greater
than our materiality for the financial statements as a whole, and
possibly many times that amount. The financial statements (note 12)
disclose the sensitivity estimated by the Group.
Our response
Our procedures included:
-- Our sector experience: we challenged the Group's and the
parent Company's selection of discount rates and rates of growth by
using our own judgement and experience to determine an appropriate
range and comparing the actual rate used to that range;
-- Assessing forecasts: we assessed whether the cash flow
forecasts are consistent with current business strategies in
place;
-- Comparing valuations: we compared the market capitalisation
of the Group to the carrying value of the net assets to assess
whether this provides an indicator of possible impairment of the
intangible assets;
-- Historical comparisons: we compared the previously forecast
cash flows to actuals to assess the historical accuracy of
forecasting;
-- Sensitivity analysis: we performed breakeven analysis to
assess the sensitivity of the impairment reviews to changes in the
key assumptions noted above; and
-- Assessing transparency: we assessed whether the Group's
disclosures about the sensitivity of the outcome of the impairment
assessment to changes in key assumptions reflected the risks
inherent in the recoverable amount forecast for intangible
assets.
Revenue
Group (GBP2,048,075, 2017: GBP2,774,272)
Refer to Chief Executive Officer's Report, note 1.4 (accounting
policy) and note 4 (financial disclosures)
The risk - Revenue recognition
The Group's and the parent Company's agreements with its
customers are often bespoke and vary from customer to customer in
terms of ongoing performance obligations, timing, quantities and
payment profiles. The directors are required to make judgements
about the nature of these agreements to determine the appropriate
timing of revenue recognition. The current focus of the Group and
the Company is on sales growth, and the directors are incentivised
on performance through a share option scheme. This and the lack of
segregation of duty gives rise to the risk that revenue recognised
in the year may be recognised in an inappropriate financial year.
In light of this, revenue is susceptible to financial reporting
being manipulated.
Our response
Our procedures included:
Test of details:
-- for a sample of revenue transactions recognised in the
current financial year, we agreed the amounts to bank statements
(when already received) and (where relevant) to the underlying sale
agreements to determine whether revenue arose and was recognised in
the appropriate period;
-- for a sample of product sales invoices raised either side of
the balance sheet date, we inspected the documentation supporting
the dispatch of goods to determine whether revenue was recognised
in the appropriate financial year ; and
-- we obtained 100% of the journals posted in respect of revenue
and analysed these to identify and investigate any entries which
appeared unusual based upon the specific characteristics of the
journal, considering in particular whether the non-revenue side of
the journal entry was as expected, based on our business
understanding.
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the Group financial statements as a whole was
set at GBP62,500 (2018: GBP73,000), determined with reference to a
benchmark of total assets of GBP8,864,769 (2018: GBP9,220,169), of
which it represents 0.71% (2018: 0.8%). We consider a benchmark of
total assets to be appropriate as the Group is in the early stages
of development.
Materiality for the parent Company financial statements as a
whole was set at GBP62,000 (2018: GBP73,000), determined with
reference to a benchmark of total parent Company assets of
GBP8,732,026 (2018: GBP9,220,169), of which it represents 0.71%
(2018: 0.8%). We consider a benchmark of total assets to be
appropriate as the parent Company is in the early stages of
development.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP3,000 (2018:
GBP3,650), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
We subject all of the Group's three (2018: one) components to
full scope audits for group purposes. The Group audit team
performed work on all the components.
4 We have nothing to report on going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the parent
Company or the Group or to cease their operations, and as they have
concluded that the parent Company's and the Group's financial
position means that this is realistic. They have also concluded
that there are no material uncertainties that could have cast
significant doubt over its ability to continue as a going concern
for at least a year from the date of approval of the financial
statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the
directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Group or the
parent Company will continue in operation.
We identified going concern as a key audit matter (see section 2
of this report). Based on the work described in our response to
that key audit matter, we are required to report to you if we have
concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that
may cast significant doubt over the use of that basis for a period
of at least a year from the date of approval of the financial
statements.
We have nothing to report in these respects.
5 We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic report and directors' report
Based solely on our work on the other information:
-- we have not identified material misstatements in the
strategic report and the directors' report;
-- in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
-- in our opinion those reports have been prepared in accordance with the Companies Act 2006.
6 We have nothing to report on the other matters on which we are
required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement, the directors are
responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and parent Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities .
8 The purpose of our audit work and to whom we owe our
responsibilities
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
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
Andrew Campbell-Orde (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
66 Queen Square
Bristol
BS1 4BE
Date: 6 May 2020
Consolidated Statement of Comprehensive Income
2019 2018
Notes GBP GBP
Revenue 4 2,048,075 2,774,272
Cost of sales (1,164,214) (1,237,151)
Gross profit 883,861 1,537,121
Amortisation of intangible assets (496,732) (429,871)
Other administrative expenses (1,535,450) (1,518,914)
Share based payments (209,295) (85,372)
Operating loss 5 (1,357,616) (497,036)
Investment revenues 8 807 1,684
( 81,563
Finance costs 9 ) (23,581)
Share of profit/(loss) of equity
accounted Investee, net of tax 13 (41,001) (14,137)
( 1,479,373
Loss before taxation ) (533,070)
Income tax (expense)/income 10 347,036 198,119
Loss and total comprehensive
income for the year (1,132,337) (334,951)
Attributable to:-
Equity holder of the company (1,144,703) (334,951)
)
Non-controlling interest 12,366 -
Loss and total comprehensive income for
the year (1,132,337) (334,951)
Earnings per share 11
Basic (0.54) (0.16)
Diluted (0.54) (0.16)
The income statement has been prepared on the basis that all operations
are continuing operations.
Consolidated Statement of Financial Position
2019 2018
Notes GBP GBP
Non-current assets
Intangible assets 12 5,581,005 5,016,508
Investments 13 749,738 790,739
Property, plant & equipment 26 61,750 -
6,392,493 5,807,247
Current assets
Inventories 15 68,423 14,656
Trade and other receivables 16 1,901,869 919,526
Cash and cash equivalents 501,984 2,478,740
2,472,276 3,412,922
Total assets 8,864,769 9,220,169
Current liabilities
Trade and other payables 17 1,371,400 875,404
Net current assets 1,100,876 2,537,518
Non-current liabilities
Trade and other payables 17 145,695 67,462
Total liabilities 1,517,095 942,866
Net assets 7,347,674 8,277,303
Equity
Called up share capital 20 2,071,893 2,071,893
Share premium account 21 31,289,915 31,289,915
Warrant reserve 22 335,739 653,446
Merger reserve 23 10,209,673 10,209,673
Retained earnings (36,571,912) (35,947,624)
Non-controlling interest 24 12,366 -
Total equity 7,347,674 8,277,303
The financial statements were approved by the board of directors
and authorised for issue on 6 May 2020 and are signed on its behalf
by:
..............................
S Smith - Director
Company Registration No. 03071324
Company Statement of Financial Position
2019 2018
Notes GBP GBP
Non-current assets
Intangible assets 12 5,448,262 5,016,508
Investments 13 749,738 790,739
Property, plant and equipment 26 61,750 -
6,259,750 5,807,247
Current assets
Inventories 15 68,423 14,656
Trade and other receivables 16 1,901,869 919,526
Cash and cash equivalents 501,984 2,478,740
2,472,276 3,412,922
Total assets 8,732,026 9,220,169
Current liabilities
Trade and other payables 17 1,263,388 875,404
Net current assets 1,208,888 2,537,518
Non-current liabilities
Trade and other payables 17 145,695 67,462
Total liabilities 1,409,083 942,866
Net assets 7,322,943 8,277,303
Equity
Called up share capital 20 2,071,893 2,071,893
Share premium account 21 31,289,915 31,289,915
Warrant reserves 22 335,739 653,446
Merger reserve 23 10,209,673 10,209,673
Retained earnings (36,584,277) (35,947,624)
Total equity 7,322,943 8,277,303
The company has taken advantage of the exemption contained in S408
of the Companies Act 2006 and has not presented a separate income
statement for the company. The company recorded a loss of GBP1,157,068
(2018: GBP334,951) for the year ended 31 December 2019.
The financial statements were approved by the board of directors
and authorised for issue on 6 May 2020 and are signed on its behalf
by:
..............................
S Smith - Director
Company Registration No. 03071324
Consolidated Statement of Changes in Equity
Share Share Merger Warrant Retained Non-controlling Total
capital premium reserve reserve earnings interest
account
Notes GBP GBP GBP GBP GBP GBP GBP
Balance at 1
January 2018 2,070,643 31,278,196 10,209,673 592,495 (35,637,092) - 8,513,915
Year ended 31
December 2018:
Loss for the year - - - - (334,951) - (334,951)
Other
comprehensive
income:
Total
comprehensive
income for the
year - - - - (334,951) - (334,951)
Issue of share
capital 20 1,250 11,719 - - - 12,969
Options granted - - - 85,370 - - 85,370
Options
exercised/lapsed - - - (24,419) 24,419 - -
Balances at 31
December 2018 2,071,893 31,289,915 10,209,673 653,446 (35,947,624) - 8,277,303
Year ended 31
December 2019:
Adjustment on
initial
application of
IFRS 16 (net of
tax) - - - - (6,587) - (6,587)
Adjusted balances
at 31 December
2018 2,071,893 31,289,915 10,209,673 653,446 (35,954,211) - 8,270,716
Loss for the year - - - - (1,144,703) 12,366 (1,132,337)
Other
comprehensive
income:
Total
comprehensive
income for the
year - - - - (1,144,703) 12,366 (1,132,337)
Options granted - - - 209,295 - - 209,295
Options lapsed - - - (527,002) 527,002 - -
Balances at 31 December
2019 2,071,893 31,289,915 10,209,673 335,739 (36,571,912) 12,366 7,347,674
Company Statement of Changes in Equity
Share Share Merger Warrant Retained Total
capital premium reserve reserve earnings
account
Notes GBP GBP GBP GBP GBP GBP
Balance at 1
January 2018 2,070,643 31,278,196 10,209,673 592,495 (35,637,092) 8,513,915
Year ended 31
December 2018:
Loss and total
comprehensive
income for the
year - - - - (334,951) (334,951)
Issue of share
capital 20 1,250 11,719 - - - 12,969
Options granted - - - 85,370 - 85,370
Options
exercised/lapsed - - - (24,419) 24,419 -
Balances at 31
December 2018 2,071,893 31,289,915 10,209,673 653,446 (35,947,624) 8,277,303
Year ended 31
December 2019:
Adjustment on
initial
application of
IFRS 16
(net of tax) - - - - (6,587) (6,587)
Adjusted balances
at 31 December
2018 2,071,893 31,289,915 10,209,673 653,446 (35,954,211) (8,270,716)
Loss and total
comprehensive
income for the
year - - - - (1,157,068) (1,157,068)
Options granted 209,295 - 209,295
Options lapsed 22 - - - (527,002) 527,002 -
Balances at 31 December
2019 2,071,893 31,289,915 10,209,673 335,739 (36,584,277) 7,322,943
Consolidated Statement of Cashflows
2019 2018
Notes GBP GBP GBP GBP
Cash flows from operating activities
Cash (used by)/from operations 29 (1,233,954) (797,608)
Finance costs paid (1,344) (551)
Payment of interest element
of lease liabilities (7,053) -
Foreign exchange losses (44,475) (23,030)
Tax refunded 272,720 119,511
Net cash outflow from operating
activities (1,014,106) (701,678)
Investing activities
Capitalisation of development
expenditure
and intellectual property
costs (835,896) (429,736)
Capitalisation of patents (77,954) (82,882)
Interest received 807 1,684
Net cash used in investing
activities (913,043) (510,934)
Financing activities
Proceeds from issue of shares - 12,969
Payment of principal element
of lease liabilities (20,916) -
Net cash (used in)/generated
from financing activities (20,916) 12,969
Net decrease in cash and cash
equivalents (1,948,065) (1,199,643)
Cash and cash equivalents at beginning
of year 2,478,740 3,678,383
Effect of exchange rate fluctuations
on cash held (28,691) -
Cash and cash equivalents
at end of year 501,984 2,478,740
Company Statement of Cashflows
2019 2018
Notes GBP GBP GBP GBP
Cash flows from operating activities
Cash (used by)/from operations 29 (1,233,954) (797,608)
Finance costs paid (1,344) (551)
Payment of interest element
of lease liabilities (7,053) -
Foreign exchange losses (44,475) (23,030)
Tax refunded 272,720 119,511
Net cash outflow from operating
activities (1,014,106) (701,678)
Investing activities
Capitalisation of development
expenditure and intellectual
property costs (835,896) (429,736)
Capitalisation of patents (77,954) (82,882)
Interest received 807 1,684
Net cash used in investing
activities (913,043) (510,934)
Financing activities
Proceeds from issue of shares - 12,969
Payment of principal element
of lease liabilities (20,916) -
Net cash (used in)/generated
from financing activities (20,916) 12,969
Net decrease in cash and cash
equivalents (1,948,065) (1,199,643)
Cash and cash equivalents at
beginning of year 2,478,740 3,678,383
Effect of exchange rate fluctuations
on cash held (28,691) -
Cash and cash equivalents
at end of year 501,984 2,478,740
Notes to the Financial Statements
1 Accounting policies
Company information
Eden Research plc is a public company limited by shares registered,
incorporated and domiciled in England and Wales. The registered
office is 6 Priory Court, Priory Court Business Park, Poulton,
Cirencester, Gloucestershire, GL7 5JB.
1.1 Accounting convention
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted
for use in the European Union and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS, (except
as otherwise stated).
The financial statements are prepared in sterling, which is the
functional currency of the company. Monetary amounts in these
financial statements are rounded to the nearest GBP1.
The financial statements have been prepared on the historical
cost basis. The principal accounting policies adopted are set
out below.
Associates
Associates are those entities in which the Company has significant
influence, but not control, over the financial and operating
policies. Significant influence is presumed to exist when the
Company holds between 20 and 50 percent of the voting power of
another entity, or where the Company has a lower interest but
the right to appoint a Director. The company acquired 29.9% of
TerpeneTech Limited ('TerpeneTech') during 2015; TerpeneTech
is an associated undertaking.
Application of the equity method to associates
The investment in TerpeneTech is accounted for using the equity
method. The investment was initially recognised at cost. The
company's investment includes goodwill identified on acquisition,
net of any accumulated impairment losses and any separable intangible
assets. The financial statements include the Company's share
of the total comprehensive income and equity movements of TerpeneTech,
from the date that significant influence commenced.
1.2 Basis of consolidation
The Group financial statements consolidate the financial statements
of the company and its subsidiary undertakings up to 31 December
2019. The profits and losses of the company and its subsidiaries
are consolidated from the date from which control is achieved.
All members of the group have the same reporting period.
Subsidiaries are entities controlled by the Company. The Group
controls an entity when it is exposed to, or has right to, variable
returned from its involvement with the entity and has the ability
to affect those returned through its power over the entity.
1.3 Going concern
The financial statements have been prepared on a going concern
basis.
The Group has reported a loss for the year after taxation of
GBP1,132,337 (2018: GBP334,951). Net current assets at that date
amounted to GBP1,100,876 (2018: GBP2,537,518).
The Directors have prepared budgets and projected cash flow forecasts,
based in part on forecasts provided by Eden's commercial partners,
for a period of two years from 31 December 2019 and they consider
that the Company will be able to operate with the cash resources
that are available to it for this period. The ability of the
Company to continue as a going concern is ultimately dependent
upon the amounts and timing of cash flows from the exploitation
of the Company's intellectual property and the availability of
existing and/or additional funding to meet the short term needs
of the business until the commercialisation of the Company's
portfolio is reached.
The forecasts adopted include only revenue derived from existing
contracts and, while there is a risk these payments might be
delayed if milestones are not reached, there is potential upside
from on-going discussions and negotiations with other parties
not yet contracted, as well as other 'blue sky' opportunities.
In addition, the Company has relatively low fixed running costs
and has a demonstrable ability to delay certain other costs,
such as Research and Development expenditure, in the event of
unforeseen cash constraints.
The Directors have also considered a scenario whereby the Company
receives no revenue from the date of this Report. On this basis,
the Directors believe that the Company has sufficient cash to
cover a period of at least 12 months from the date of this Report.
The Directors are closely monitoring performance against cash
flow projections that have been prepared for the period to 31
December 2020 and beyond, and reasonably believe that the Company
will deliver cash flows at least in line with these.
In March 2020, the Company concluded a successful fund-raise
raising a total of approximately GBP10.4 million (before expenses)
through the Placing, Subscription and Open Offer through the
issue and allotment of 173,150,892 new Ordinary Shares.
The impact of COVID-19 has been reviewed as part of the going
concern assessment and on the basis that the Company is well
funded and our industry has a pivotal role to play in supporting
agriculture, which is a basic requirement, the Board is satisfied
that there is not a significant impact on going concern.
Taking all these factors into consideration, the Directors consider
it appropriate to prepare the financial statements on the going
concern basis. The financial statements do not include any adjustments
that would result from a failure by the Company to meet these
forecasts.
1.4 Revenue
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 of licence, stated net of value added tax.
Sales-based royalty income arising from licences of the Company's
intellectual property is recognised in accordance with the terms
of the underlying contract and is based on net sales value of
product sold by Eden's licensees. It is recognised when the subsequent
sales occur.
Upfront and annual payments made by customers at commencement
and for renewal of distribution and other agreements are recognised
in accordance with the terms of the agreement. Where there is
no ongoing obligation on the Company under the agreement, the
payment is recognised in full in the period is which it is made.
Where there is an ongoing obligation on the Company, the separate
performance obligations under the agreement are identified and
revenue allocated to each performance obligation. Revenue is
then recognised when a corresponding performance obligation has
been met.
Each sale of a licence by the Company is assessed to determine
whether the licence is distinct from the sale of other goods
and services, and whether the licence granted provides use of
the Company's intellectual property as it exists at that point
in time, with no ongoing obligation on the Company, or alternatively
provides access to the intellectual property as it develops over
time. Where the Company has discharged all of its ongoing obligations
associated with the licence granted, revenue is recognised on
receipt of the licence fee payment. Where there is an ongoing
obligation on the Company, revenue is recognised in the periods
to which the obligations pertain. In addition, the Company considers
whether a licence is a "right to use" or a "right to access"
the underlying intellectual property, the former being where
the licensee for the most part acts as if it is the owner of
the intellectual property of the rights granted.
Product sales are recorded once product is made available to
the partner to collect, or, if the Company is responsible for
the shipping, the product has been shipped to the customer, at
which point the ownership and related rights are responsibilities
pass to the customer.
The following is a description of the principal activities from
which the Company generates its revenue.
Licensing fees
The Company receives licensing fees from partners who have taken
a licence to use Eden's intellectual property, usually defined
by field of use and territory.
When a licence agreement is signed with a partner, the rights
conferred are immediately passed on from Eden and an invoice
is raised, which is generally payable immediately.
Milestone payments
The Company receives milestone payments from other commercial
arrangements, including any fees it has charged to partners for
rights granted in respect of distribution agreements.
1.4 Revenue (continued)
When such an agreement is signed with a partner, the rights conferred
are immediately passed on from Eden and an invoice is raised,
which is generally payable immediately.
Also, in some cases, there are certain commercial or other milestones
which are to be met by a commercial partner which, once met,
give rise to a responsibility by that partner to pay a fee to
Eden, which is generally payable immediately.
R&D charges
The Company sometimes charges its partners for R&D costs that
it has incurred which usually relate to specific projects and
which it has incurred through a third party.
Upon agreement with a partner, or if some specific milestone
is met, then Eden will raise an invoice which is usually payable
between 30 and 120 days.
Royalties
The Company receives royalties from partners who have entered
into a licence arrangement with Eden to use its intellectual
property and who have sold products, which then gives rise to
an obligation to pay Eden a royalty on those sales.
Generally, royalties relate to specific time periods, such as
quarterly or annual dates, in which product sales have been made.
Once an invoice is raised by Eden, following the period to which
the royalties relate, payment is due to the Company is 30 to
60 days.
Product sales
Generally, where the Company has entered into a distribution
agreement with a partner, Eden is responsible for supplying product
to that partner once a sales order has been signed.
At that point, Eden has the product manufactured through a third-party,
toll manufacturer. At the point at which the product is finished
and is made available to the partner to collect, or, if the Company
is responsible for the shipping, the product has been shipped,
the partner is liable for the product and obliged to pay Eden.
Normal terms for product sales are 90 to 120 days. Returns are
not accepted and refunds are only made when product supplied
is notified as defective within 60 days.
1.5 Intangible assets other than goodwill
Intellectual property, including development costs, is capitalised
and amortised on a straight-line basis over its remaining estimated
useful economic life of 11 years in line with the remaining life
of the Company's master patent, which was originally 20 years,
with additional Supplementary Protection Certificates having
been granted in the majority of the countries in the EU in which
Eden is selling Mevalone. The useful economic life of intangible
assets is reviewed on an annual basis.
1.6 Impairment of tangible and intangible 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 as 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.
1.7 Inventories
Inventories are stated at the lower of cost and estimated selling
price less costs to complete and sell. Cost is based on the first-in-first-out
principle. Cost comprises direct materials and, where applicable,
direct labour costs and those overheads that have been incurred
in bringing the inventories to their present location and condition.
1.8 Financial instruments
(i) Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised
when they are originated. All other financial assets and financial
liabilities are initially recognised when the Company becomes
a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a
significant financing component) or financial liability is initially
measured at fair value plus, for an item not at fair value through
profit or loss ("FVTPL"), transaction costs that are directly
attributable to its acquisition or issue. A trade receivable
without a significant financing component is initially measured
at the transaction price.
(ii) Classification and subsequent measurement Financial assets
(a) Classification
On initial recognition, a financial asset is classified as measured
at: amortised cost; FVOCI - debt investment; FVOCI - equity investment;
or FVTPL.
Financial assets are not reclassified subsequent to their initial
recognition unless the Company changes its business model for
managing financial assets in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
(i) Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised
when they are originated. All other financial assets and financial
liabilities are initially recognised when the Company becomes
a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a
significant financing component) or financial liability is initially
measured at fair value plus, for an item not at fair value through
profit or loss ("FVTPL"), transaction costs that are directly
attributable to its acquisition or issue. A trade receivable
without a significant financing component is initially measured
at the transaction price.
(ii) Classification and subsequent measurement Financial assets
(a) Classification
On initial recognition, a financial asset is classified as measured
at: amortised cost; FVOCI - debt investment; FVOCI - equity investment;
or FVTPL.
Financial assets are not reclassified subsequent to their initial
recognition unless the Company changes its business model for
managing financial assets in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if it meets both
of the following conditions:
* it is held within a business model whose objective is
to hold assets to collect contractual cash flows; and
* its contractual terms give rise on specified dates to
cash flows that are solely payments of principal and
interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the
following conditions:
* it is held within a business model whose objective is
achieved by both collecting contractual cash flows
and selling financial assets; and
* its contractual terms give rise on specified dates to
cash flows that are solely payments of principal and
interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held
for trading, the Company may irrevocably elect to present subsequent
changes in the investment's fair value in OCI. This election
is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised
cost or FVOCI as described above are measured at FVTPL. This
includes all derivative financial assets. On initial recognition,
the Company may irrevocably designate a financial asset that
otherwise meets the requirements to be measured at amortised
cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
Investments in associates accounted for using the equity method
and subsidiaries are carried at cost less impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Bank overdrafts that are repayable on demand and form an integral
part of the Company's cash management are included as a component
of cash and cash equivalents for the purpose only of the cash
flow statement.
(b) Subsequent measurement and gains and losses
Financial assets at FVTPL - these assets (other than derivatives
designated as hedging instruments) are subsequently measured
at fair value. Net gains and losses, including any interest or
dividend income, are recognised in profit or loss.
Financial assets at amortised cost - These assets are subsequently
measured at amortised cost using the effective interest method.
The amortised cost is reduced by impairment losses. Interest
income, foreign exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on derecognition
is recognised in profit or loss.
Debt investments at FVOCI - these assets are subsequently measured
at fair value. Interest income calculated using the effective
interest method, foreign exchange gains and losses and impairment
are recognised in profit or loss. Other net gains and losses
are recognised in OCI. On derecognition, gains and losses accumulated
in OCI are reclassified to profit or loss.
Equity investments at FVOCI - these assets are subsequently
measured at fair value. Dividends are recognised as income in
profit or loss unless the dividend clearly represents a recovery
of part of the cost of the investment. Other net gains and losses
are recognised in OCI and are never reclassified to profit or
loss.
Financial liabilities and equity
Financial instruments issued by the Company are treated as equity
only to the extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Company
to deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the company; and
(b) where the instrument will or may be settled in the Company's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company's own
equity instruments or is a derivative that will be settled by
the Company's exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Company's own shares,
the amounts presented in these financial statements for called
up share capital and share premium account exclude amounts in
relation to those shares.
Financial liabilities are classified as measured at amortised
cost or FVTPL. A financial liability is classified as at FVTPL
if it is classified as held-for-trading, it is a derivative or
it is designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised
cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or
loss. Any gain or loss on derecognition is also recognised in
profit or loss.
Where a financial instrument that contains both equity and financial
liability components exists these components are separated and
accounted for individually under the above policy.
Intra-group financial instruments
Where the Company enters into financial guarantee contracts to
guarantee the indebtedness of other companies within its group,
the Company considers these to be insurance arrangements and
accounts for them as such. In this respect, the Company treats
the guarantee contract as a contingent liability until such time
as it becomes probable that the Company will be required to make
a payment under the guarantee.
(iii) Impairment
The Group recognises loss allowances for expected credit losses
(ECLs) on financial assets measured at amortised cost, debt investments
measured at FVOCI and contract assets (as defined in IFRS 15).
The Group measures loss allowances at an amount equal to lifetime
ECL, except for other debt securities and bank balances for which
credit risk (i.e. the risk of default occurring over the expected
life of the financial instrument) has not increased significantly
since initial recognition, which are measured as 12-month ECL.
Loss allowances for trade receivables and contract assets are
always measured at an amount equal to lifetime ECL. Trade receivables
and contract assets with significant financing component are
measured using the general model described above.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating ECL, the Group considers reasonable and supportable
information that is relevant and available without undue cost
or effort. This includes both quantitative and qualitative information
and analysis, based on the company's historical experience and
informed credit assessment and including forward-looking information.
The Group assumes that the credit risk on a financial asset has
increased significantly if it is more than 60 days past due.
The Group considers a financial asset to be in default when:
* the borrower is unlikely to pay its credit
obligations to the company in full, without recourse
by the company to actions such as realising security
(if any is held); or
* the financial asset is more than 120 days past due.
The Group considers a debt security to have low credit risk when
its credit risk rating is equivalent to the globally understood
definition of 'investment grade'.
Lifetime ECLs are the ECLs that result from all possible default
events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default
events that are possible within the 12 months after the reporting
date (or a shorter period if the expected life of the instrument
is less than 12 months).
The maximum period considered when estimating ECLs is the maximum
contractual period over which the Group is exposed to credit
risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit
losses are measured as the present value of all cash shortfalls
(i.e. the difference between the cash flows due to the entity
in accordance with the contract and the cash flows that the Group
expects to receive). ECLs are discounted at the effective interest
rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost and debt securities at FVOCI
are credit-impaired. A financial asset is 'credit-impaired' when
one or more events that have a detrimental impact on the estimated
future cash flows of the financial asset have occurred.
Write-offs
The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no
realistic prospect of recovery.
1.9 Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement 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 end
date. The current tax charge includes any research and development
tax credits claimed by the Company.
Deferred tax
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 goodwill or from the initial recognition 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 end 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 realised 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 the company
has a legally enforceable right to offset 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.
1.10 Employee benefits
The costs of short-term employee benefits are recognised as a
liability and an expense, unless those costs are required to
be recognised as part of the cost of inventories or non-current
assets.
The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are received.
A termination benefit liability is recognised at the earlier
of when the entity can no longer withdraw the offer of the termination
benefit and when the entity recognises any related restructuring
costs.
1.11 Share-based payments
The Company has applied the requirements of IFRS 2 Share-Based
Payments.
Unapproved share option scheme
The Company has operated an unapproved share option scheme for
executive Directors, senior management and certain employees.
This scheme was used for any options awarded prior to 28 September
2017.
Long-Term Incentive Plan ('LTIP')
In 2017, the Company established a LTIP to incentivise the Executives
to deliver long-term value creation for shareholders and ensure
alignment with shareholder interest. Awards are made annually
and are subject to continued service and challenging performance
conditions usually over a three year period. The performance
conditions are reviewed on an annual basis to ensure they remain
appropriate and are currently based on increasing shareholder
value. Awards are generally structured as nil cost options with
a seven year lift after vesting.
Other than in exceptional circumstances, an award to an Executive
would be up to 100% of salary in any one year and would be granted
subject to achieving challenging performance conditions set at
the date of the grant. A percentage of the award will vest for
'Threshold' performance with full vesting taking place for equalling
or exceeding the performance 'Target'. In between the Threshold
and Target there may be pro rata vesting. The Remuneration Committee
retains the ability to amend the performance conditions for future
grants to ensure that such grants achieve the stated purpose.
The LTIP was adopted by the Board of Directors of Eden on 28
September 2017.
Where share options are awarded to employees, the fair value
of the options at the date of grant is charged to the Statement
of Profit or Loss and Other Comprehensive Income over the vesting
period. Non-market vesting conditions are taken into account
by adjusting the number of equity instruments expected to vest
at each reporting date so that ultimately the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Market vesting conditions are factored
into the fair value of the options granted, as long as other
vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in fair value of the options, measured
immediately before and after the modification is also charged
to the Statement of Profit or Loss and Other Comprehensive Income
over the remaining vesting period.
1.12 Leases (policy applicable from 1 January 2019)
At inception, the company assesses whether a contract is, or
contains, a lease within the scope of IFRS 16. A contract is,
or contains, a lease if the contract conveys the right to control
the use of an identified asset for a period of time in exchange
for consideration. Where a tangible asset is acquired through
a lease, the company recognises a right-of-use asset and a lease
liability at the lease commencement date. Right-of-use assets
are included within property, plant and equipment, apart from
those that meet the definition of investment property.
The right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date plus any initial
direct costs. Right-of-use assets are depreciated over the term
of the lease.
The lease liability is initially measured at the present value
of the lease payments that are unpaid at the commencement date,
discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the company's incremental
borrowing rate.
The company has elected not to recognise right-of-use assets
and lease liabilities for short-term leases of machinery that
have a lease term of 12 months or less, or for leases of low-value
assets including IT equipment. The payments associated with these
leases are recognised in profit or loss on a straight-line basis
over the lease term.
1.13 Foreign exchange
Transactions in currencies other than pounds sterling are recorded
at the rates of exchange prevailing at the dates of the transactions.
At each reporting end date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the
rates prevailing on the reporting end date. Gains and losses
arising on translation are included in the income statement for
the period.
Whilst the majority of the Company's revenue is in Euros, the
Company also incurs a significant level of expenditure in that
currency. As such, the Company does not currently use any hedging
facilities and instead chooses to keep some of its cash at the
bank in Euros.
1.14 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 is 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.
1.15 Defined contribution plan
A defined contribution plan is a post-employment benefit plan
under which the company pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined contribution
pension plans are recognised as an expense in the income statement
in the periods during which services are rendered by employees.
1.16 Financial risk management
The Company's activities expose it to a variety of financial
risks: market risks (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.
2 Adoption of new and revised standards and changes in accounting
policies
In the current year, the following new and revised Standards
and Interpretations have been adopted by the company and have
an effect on the current period or a prior period or may have
an effect on future periods:
IFRS 16 Leases Establishes principles for the
recognition, measurement, presentation
and disclosure of leases for leasees.
IFRIC Interpretation 23 Uncertainty Clarifies how to apply the recognition
over Income Tax Treatments and measurement requirements in
IAS 12 when there is uncertainty
over income tax requirements.
Amendments to IFRS 9 - Prepayment Clarifies that prepayment features
features with Negative Compensation which give rise to negative compensation
do not necessarily prevent a financial
asset from being measured at amortised
cost.
Amendments to IAS 28 - Long-term Clarifies how IAS 28 interacts
Interest in Associates and Joint with IFRS 9 when the investor
Ventures applies equity accounting.
Annual Improvements to IFRS Minor amendments to IFRS 3, IFRS
Standards 2015-201 Cycle 11, IAS 12 and IAS 23.
Amendments to IAS 19 - Plan Clarifies that updated actuarial
Amendment, Curtailment or Settlement assumptions must be used for the
remainder of the reporting period
after a plan amendment, curtailment
or settlement.
With the exception of IFRS 16, adoption of the above standards
has not impacted either the reported position or performance
of the group or company.
The group adopted IFRS 16 Leases in accordance with the modified
retrospective approach. This does not restate prior year figures,
instead recognising the impact of transition in equity. The
accounting policy adopted is outlined in note 1 of the financial
statements.
2 Adoption of new and revised standards and changes in accounting
policies (continued)
The opening balance of lease liabilities as at 1 January 2019
can be reconciled to the lease obligations note as at 31 December
2018 as follows:
GBP
Operating lease obligation at 31 December 2018 106,642
Effect of discounting (16,228)
Lease liabilities at 1 January 2019 90,414
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements,
the following Standards and Interpretations, which have not
yet been applied in these financial statements, were in issue
but not yet effective (and in some cases had not yet been adopted
by the EU). These new standards are not anticipated to have
a material impact on the financial statements.
IFRS 3 Amendments to definition of a business
IAS 1 and IAS 8 Amendments to definition of material
Conceptual Framework (Revised) and amendments to related references
in IFRS Standards
All of the above are effective from periods commencing 1 January
2020. None are expected to have a material effect on the financial
position or performance of the group.
3 Critical accounting judgements and key sources of estimation
uncertainty
The Company makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk to the carrying amounts of assets
and liabilities within the next financial year are discussed
below:
Capitalisation of development costs
The Directors have exercised a judgement that the development
costs incurred meet the criteria in IAS 38 Intangible Assets
for capitalisation. In making this judgement, the directors considered
the following key factors:
* The availability of the necessary financial resources
and hence the ability of the Company to continue as a
going concern.
* The assumptions surrounding the perceived market
sizes for the products and the achievable market
share for the Company.
* The successful conclusion of commercial arrangements,
which serves as an indicator as to the likely success
of the projects and, as such, any need to potential
impairment.
* The level of upfront, milestone and royalty receipts,
which also serves as a guide to the net present value
of the assets and whether any impairment is required.
Impairment of intangible 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.
Further details on impairment review can be found in note 12
and 13 to the accounts.
3 Critical accounting judgements and key sources of estimation
uncertainty (continued)
Going concern
The Directors have considered the ability of the Company to continue
as a going concern and this is considered to be the most significant
judgement made by the Directors in preparing the financial statements.
The ability of the Company to continue as a going concern is ultimately
dependent upon the amount and timing of cash flows arising from
the exploitation of the Company's intellectual property and the
availability of existing and/or additional funding to meet the
short term needs of the business until the commercialisation of
the Company's portfolio is reached. The Directors consider it
is appropriate for the financial statements to be prepared on
a going concern basis based on the estimates they have made.
Subsidiary and associate
A judgement has been made that Eden exerts significant influence
on TerpeneTech (UK) such that it is an associate company and,
as such, adoption of equity accounting is appropriate. A judgement
has also been made that Eden controls TerpeneTech (Ireland) and
that it is, therefore, appropriate for it to be consolidated as
a subsidiary. For further information, see notes 13 and 14.
COVID-19
The Company has made accounting judgements and estimates based
on there being minimal impact of COVID-19 on the business in the
long term. Clearly, this is still a degree of uncertainty as to
exactly how and if the business could be impacted and the Directors
will continue to monitor the situation closely.
4 Revenue
IFRS 8 requires operating segments to be reported in a manner consistent
with the internal reporting provided to the chief operating
decision-maker.
The chief operating decision-maker, who is responsible for the
resource allocation and assessing performance of the operating
segments has been identified as the Executive Directors as they
are primarily responsible for the allocation of the resources to
segments and the assessment of performance of the segments.
The Executive Directors monitor and then assess the performance
of segments based on product type and geographical area using a
measure of adjusted EBITDA. This is the result of the segment after
excluding the share-based payment charges, other operating income
and the amortisation of intangibles. These items, together with
interest income and expense are not allocated to a specific segment.
The segment information for the year ended 31 December 2019 is
as follows:
Milestone R&D Charges Royalties Product Total
Payments Sales
GBP GBP GBP GBP GBP
Human health
and biocides - 6,089 - 247,304 253,393
Animal health - - - - -
Agrochemicals 348,260 - 17,241 1,429,181 1,794,682
Total 348,260 6,089 17,241 1,676,485 2,048,075
The segment information for the year ended 31 December 2018 is
as follows:
Milestone R&D Charges Royalties Product Total
Payments Sales
GBP GBP GBP GBP GBP
Human health
and biocides - - 48,113 - 48,113
Animal health - - - - -
Agrochemicals 956,123 112,540 36,193 1,621,303 2,726,159
Total 956,123 112,540 84,306 1,621,303 2,774,272
2019 2018
GBP GBP
Revenue analysed by geographical market
UK 6,089 160,653
Europe 2,041,986 2,613,619
2,048,075 2,774,272
5 Operating loss
2019 2018
GBP GBP
Operating loss for the year is stated after charging/(crediting):
Fees payable to the company's auditor for the
audit of the company's financial statements 28,976 27,000
Fees payable to the company's auditor for the
audit of the subsidiary's financial statements - -
Licences and trademarks amortisation 25,896 7,099
Development costs amortisation 231,077 183,018
Intellectual property amortisation 239,759 239,754
Depreciation of right-of-use assets 22,077 -
Equity based share-based payment charge 209,295 85,370
6 Employees
The average monthly number of persons (including directors) employed
by the company during the year was:
2019 2018
Number Number
Management 7 5
Their aggregate remuneration comprised:
2019 2018
GBP GBP
Wages and salaries 969,487 631,183
Social security costs 68,994 89,595
Pension costs 27,151 15,618
1,065,632 736,396
7 Directors' remuneration
The Executive Directors are considered to also be the key management
personnel of the company and group.
Details of directors' share options can be found in the Remuneration
Report.
On 7 May 2018, A Abrey exercised an option over 125,000 shares
at 10.375p. The share price at the time of exercise was 15.75p,
providing a gain of 5.375p per share, or GBP6,719 in total.
2019 2018
GBP GBP
Directors' remuneration 485,215 532,784
Company pension contributions to defined contribution
schemes 26,355 13,600
Non-executive Directors' fees 75,000 75,000
Share based payment charge relating to all
Directors 110,743 85,372
697,313 706,756
Remuneration disclosed above include the following
amounts paid to the highest paid director:
Remuneration for qualifying services 287,376 305,334
2019 Salary Bonus Fees Pension Share Based Total
Payments
GBP GBP GBP GBP GBP GBP
A Abrey 165,000 47,644 - 11,550 48,751 272,945
S Smith 211,500 61,071 - 14,805 61,992 349,368
R Cridland - - 35,000 - - 35,000
L van Der
Broek - - 40,000 - - 40,000
376,500 108,715 75,000 26,355 110,743 697,313
2018 Salary Bonus Fees Pension Share Based Total
Payments
GBP GBP GBP GBP GBP GBP
A Abrey 150,000 85,050 - 6,000 37,620 278,670
S Smith 190,000 107,734 - 7,600 47,752 353,086
R Cridland - - 35,000 - - 35,000
L van Der
Broek - - 40,000 - - 40,000
340,000 192,784 75,000 13,600 85,372 706,756
8 Investment income
2019 2018
GBP GBP
Interest income
Bank deposits 807 1,684
Total interest income for financial assets that are not held
at fair value through profit or loss is GBP807 (2018 - GBP1,684).
9 Finance costs
2019 2018
GBP GBP
Interest on bank overdrafts and loans 1,344 551
Exchange differences on financing transactions 44,475 23,030
Effect of exchange rate fluctuations on cash 28,691 -
Interest on lease liabilities 7,053 -
81,563 23,581
10 Income tax expense
2019 2018
GBP GBP
Current tax
UK corporation tax on profits for the current
period (268,777) (156,865)
Adjustments in respect of prior periods (78,259) (41,254)
Total UK current tax (347,036) (198,119)
The charge for the year can be reconciled to the loss per the
income statement as follows:
2019 2018
GBP GBP
Loss before taxation (1,479,373) (533,070)
Expected tax credit based on a corporation tax
rate of 19.00% (281,081) (101,283)
Effect of expenses not deductible in determining
taxable profit 55,868 19,836
Unutilised tax losses carried forward 83,414 48,682
Adjustment in respect of prior years (78,259) (41,254)
Adjustments in respect of financial assets 83,217 71,071
Research and development tax credit (199,065) (116,179)
Deferred tax not recognised (11,130) (78,992)
Taxation credit for the year (347,036) (198,119)
Tax charged in the financial statements (347,036) (198,119)
A reduction in the UK corporation tax rate from 19% to 17% (effective
1 April 2020) was substantively enacted on 6 September 2016.
The March 2020 Budget announced that a rate of 19% would continue
to apply with effect from 1 April 2020, and this change was substantively
enacted on 17 March 2020.
This will increase the company's future current tax charge accordingly.
The tax credit represents the research and development tax credit
for the year ended 31 December 2019.
Tax losses carried forward, for which no deferred tax asset has
been recognised, amount to approximately GBP23,088,756 (2018:
GBP22,291,281).
The unprovided deferred tax asset arises principally in respect
of trading losses, together with other minor temporary differences
at 17% (2018:17%) and has not been recognised due to the uncertainty
of timing of future profits against which it may be realised.
11 Earnings per share 2019 2018
GBP GBP
Number of shares
Weighted average number of ordinary shares
for basic earnings per share 208,244,677 208,244,677
Effect of dilutive securities - -
Weighted average number of ordinary shares
for diluted earnings per share 208,244,677 208,244,677
Earnings
Loss for the period (1,132,337) (334,951)
Earnings for basic and diluted earnings per
share being net profit attributable to equity
shareholders of the company (1,132,337) (334,951)
Earnings per share
Basic earnings per share (0.54)
) (0.16)
Diluted earnings per share (0.54) (0.16)
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the number of ordinary
shares outstanding during the period.
Diluted earnings per share is calculated using the current number
of shares adjusted to assume the conversion of all dilutive
potential ordinary shares.
12 Intangible assets
Consolidated
Licences and Development Intellectual Total
trademarks costs property
GBP GBP GBP GBP
Cost
At 1 January 2018 447,351 3,779,353 8,887,745 13,114,449
Additions - 429,736 82,882 512,618
At 31 December 2018 447,351 4,209,089 8,970,627 13,627,067
Additions - purchased - 850,532 210,697 1,061,229
At 31 December 2019 447,351 5,059,621 9,181,324 14,688,296
Amortisation and impairment
At 1 January 2018 404,756 1,765,236 6,010,696 8,180,688
Charge for the year 7,099 183,018 239,754 429,871
At 31 December 2018 411,855 1,948,254 6,250,450 8,610,559
Charge for the year 25,896 231,077 239,759 496,732
At 31 December 2019 437,751 2,179,331 6,490,209 9,107,291
Carrying amount
At 31 December 2019 9,600 2,880,290 2,691,115 5,581,005
At 31 December 2018 35,496 2,260,835 2,720,177 5,016,508
Company
Licences and Development costs Intellectual Total
trademarks property
GBP GBP GBP GBP
Cost
At 1 January 2018 447,351 3,779,353 8,887,745 13,114,449
Additions - 429,736 82,882 512,618
At 31 December 2018 447,351 4,209,089 8,970,627 13,627,067
Additions - purchased - 850,532 77,954 928,486
At 31 December 2019 447,351 5,059,621 9,048,581 14,555,553
Amortisation and impairment
At 1 January 2018 404,756 1,765,236 6,010,696 8,180,688
Charge for the year 7,099 183,018 239,754 429,871
At 31 December 2018 411,855 1,948,254 6,250,450 8,610,559
Charge for the year 25,896 231,077 239,759 496,732
At 31 December 2019 437,751 2,179,331 6,490,209 9,107,291
Carrying amount
At 31 December 2019 9,600 2,880,290 2,558,372 5,448,262
At 31 December 2018 35,496 2,260,835 2,720,177 5,016,508
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 11 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. No adjustment has been made
in respect of the potential impact of COVID-19 as the current expectation
is that the impact to the business will not be significant in the
long term.
The Directors have used discounted cash-flow forecasts, based
on product sales forecasts including those provided by the Company's
commercial partners, and have taken into account the market potential
for Eden's products and technologies using third party market
data that Eden has acquired licences to.
The discount rate had the forecast cash-flows 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% (2018:
10%)
The forecast cash-flows are derived from discussions with the
Company's commercial partners, as described below.
Based on the review management has carried out, it is satisfied
that the Intangible Assets are not impaired in respect of their
carrying value.
As set out in the Strategic Report the business is in a critical
phase of its development as the research and development of products
is transitioned to revenue generation. The value of the intangible
assets is supported by management's forecasts of continued revenue
growth of existing products and the successful growth of future
product sales. Management has used cash-flow forecasts for the
next six years, which coincides with the expiration of the Group's
core patents, not taking into account additional patent protection
which is afforded through supplementary protection certificates.
Management's forecasts include growth rates ranging from 101%
in year one to 21% in year six, with an average annual growth
rate of 64%. This is considered to be reasonable based on information
from and discussion with strategic partners and the stage in
growth that the Company is at, with a number of new products
being introduced over the coming years, as well as significant
new geographical markets being entered into or the first time.
However, there is a risk that if those forecasts are not achieved
then the associated intangible assets could be impaired. Average
annual growth in revenue would need to fall below 15% for this
to be the case. In the event that there was no further growth
over and above the revenue achieved in the year to December 2019,
there would be an impairment of intangible assets of approximately
GBP1.5m.
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.
13 Investments in associates
Current Non-current
2019 2018 2019 2018
GBP GBP GBP GBP
Investments in associates - - 749,738 790,739
Details of the company's associates at 31 December 2019 are as
follows:
Name of Country of Ownership Voting power Nature of business
undertaking incorporation interest held (%)
(%)
TerpeneTech Research and experimental
Limited United Kingdom 29.90 29.90 development on biotechnology
2019 2018
GBP GBP
Non-current assets 565,306 627,232
Current assets 209,880 222,572
Non-current liabilities (98,806) (100,397)
Current liabilities (195,415) (182,953)
-------------- -------------
Net assets (100%) 480,965 566,454
Company's share of net assets 167,136 193,569
Separable intangible assets 169,953 184,521
Goodwill 412,649 412,649
-------------- -------------
Carrying value of interest in associate 749,738 790,739
Revenue 130,521 308,864
100% of (loss)/profit after tax (88,404) 1,441
29.9% of (loss)/profit after tax (26,433) 431
Amortisation of separable intangible (14,568) (14,568)
-------------- -------------
Company's share of profit/(loss) including
amortisation of separable intangible
asset (41,001) (14,137)
The company has not designated any financial assets that are not
classified as held for trading as financial assets at fair value
through profit or loss.
TerpeneTech's registered office is Kemp House, 152 City Road, London,
EC1V 2NX and its principal place of business is 3 rue de Commandant
Charcot, 22410, St Quay Portrieux, France.
An impairment review of the investment in TerpeneTech was undertaken
by the Board of Directors. The Directors have considered the progress
of the business in the current year, including a review of the
potential market for its products, the progress TerpeneTech has
made in registering its products and other key commercial factors
to determine whether any indicators of impairment exist.
The Directors have used discounted cash-flow forecasts, based on
product sales forecasts provided by TerpeneTech, and have taken
into account the market potential for those products.
The discount rate and the expected growth rate are two key assumptions
used. The discount rate is estimated using pre-tax rates that reflect
current market assessments of the time value of money and the risk
specific to the asset. The rate used was 20% (2018: 20%). The growth
rates are derived from discussions with the Company's commercial
partner, TerpeneTech, as described above.
Based on the review management has carried out, it is satisfied
that the Investment is not impaired in respect of its carrying
value.
The Directors have also considered whether any reasonable change
in assumptions would lead to an impairment and are satisfied that
this is not the case.
Fair value of financial assets carried at amortised cost
The directors consider that the carrying amounts of financial assets
carried at amortised cost in the financial statements approximate
to their fair values.
14 Subsidiaries
Details of the company's subsidiaries at 31 December 2019 are as
follows:
Name of Country of Ownership interest Voting power Nature of
undertaking incorporation (%) held (%) business
Sale of
TerpeneTech Republic of biocide
Limited Ireland 50.00 50.00 products
TerpeneTech Limited (Ireland), whose registered office is 108
Q House, Furze Road, Sandyford, Dublin, Ireland was incorporated
on 15 January 2019 and was jointly owned by both Eden Research
Plc and TerpeneTech Limited (UK), the company's associate.
The company has effective control over the entity through the
significant influence it exerts over the other shareholder, TerpeneTech
Limited (UK).
Eden owns 500 ordinary shares in TerpeneTech Limited (Ireland).
Non-controlling interests
The following table summarises the information relating to the
Group's subsidiary with material non-controlling interest, before
intra-group eliminations:
NCI percentage
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Carrying amount of NCI
Revenue
Profit/(loss)
OCI
Total comprehensive income
Profit/(loss) allocated to NCI
OCI allocated to NCI
Cash flows from operating activities
Cash flows from investment activities
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Dividends paid to non-controlling interests
15 Inventories Group and company
2019 2018
GBP GBP
Finished goods 68,423 14,656
16 Trade and other receivables
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Trade receivables 1,345,648 515,279 1,345,648 515,279
Other receivables 4,694 - 4,694 -
Corporation tax receivable 268,777 194,461 268,777 194,461
VAT recoverable 127,089 133,722 127,089 133,722
Prepayments 155,661 76,064 155,661 76,064
1,901,869 919,526 1,901,869 919,526
Trade and other receivables disclosed above are classified as
measured at amortised cost. The directors consider that the carrying
amount of trade and other receivables approximate their fair
value.
17 Trade and other payables
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Current
Trade payables 870,563 499,186 870,563 499,186
Accruals 283,380 313,427 283,380 313,427
Social security and other
taxation 26,399 15,085 26,399 15,085
Lease liabilities (note 26) 22,812 - 22,812 -
Other payables 168,246 47,706 60,234 47,706
1,371,400 875,404 1,263,388 875,404
Non-current
Provisions (note 25) 99,008 67,462 99,008 67,462
Lease liabilities (note 26) 46,687 - 46,687 -
145,695 67,462 145,695 67,462
Trade and other payables disclosed above are classified as measured
at amortised cost. The directors consider that the carrying amount
of trade and other payables approximate their fair value.
18 Retirement benefit schemes
Defined contribution schemes
The company operates a defined contribution pension scheme for
all qualifying employees. The assets of the scheme are held
separately from those of the company in an independently
administered
fund.
The total costs charged to income in respect of defined
contribution
plans is GBP27,151 (2018 - GBP15,618).
19 Share-based payment transactions
Unapproved option scheme
Eden Research Plc operates an unapproved option scheme for
executive
directors, senior management and certain employees.
Number of share Weighted average
options exercise price (pence)
2019 2018 2019 2018
Outstanding at
1 January 2019 3,400,000 5,025,000 11 11
Granted during
the year - - - -
Exercised
during the
year - (125,000) - 10
Lapsed during
the year (2,350,000) (1,500,000) 13 8
Exercisable at
31 December
2019 1,050,000 3,400,000 13 11
The options outstanding at 31 December 2019 had an exercise
price of 13p (2018: ranging from 10p and 16p) and their weighted
average contractual life was 1.6 years (2018: 0.9 years). None
of the options have vesting conditions.
The share-based payment charge in respect of the unapproved
option scheme for the year was GBPnil (2018: GBPnil). The
weighted
average fair value of each option granted during 2019 was GBPnil
(2018: GBPnil).
Long-Term Incentive Plan ("LTIP")
Eden Research Plc operates an unapproved option scheme for
executive
directors, senior management and certain employees under a LTIP
which it adopted in 2017. On 28 June 2019, 5,891,111 shares
under the LTIP scheme were awarded to the Chief Executive Officer
and the Chief Financial Officer.
Details of the existing LTIP can be found in the Remuneration
Report. A new LTIP scheme is expected to be put in place in
2020 of which further details can also be found in the
Remuneration
Report.
The share-based payment charge for the year ended 31 December
2017 and subsequent years is set out as follows:
Financial year ended 31 Share based payment charge GBP
December
2017 27,210
2018 85,370
2019 110,743
2020 94,176
2021 51,909
2022 16,959
386,367
The following information is relevant in the determination of
the fair value of options granted during the year under the
unapproved options scheme under the LTIP operated by Eden
Research
Plc.
2015 Award 2016 Award 2017 Award 2018 Award
Grant date 28/09/2017 28/09/2017 28/06/2019 28/06/2019
Number of
awards 1,908,680 2,108,000 2,868,889 3,022,222
Share price 0.125 0.125 0.115 0.115
Exercise price GBPnil GBPnil GBPnil GBPnil
Expected -% -% -% -%
dividend yield
Expected
volatility 73.20% 73.20% 50.82% 50.82%
Risk free rate 0.80% 0.80% 0.614% 0.614%
80 80 80 80
Vesting period 2 years 3 years 2 years 3 years
Expected Life 10 years 10 years 2 years 3 years
(from date
of grant)
For those options and warrants which were not granted under
the Company's LTIP, fair value is measured using the
Black-Scholes
model. The expected life used in the model has been adjusted,
based on management's best estimate, for the effects of
non-transferability,
exercise restrictions and behavioural conditions.
For those options which were granted under the Company's LTIP,
Monte Carlo techniques were used to simulate future share price
movements of the Company to assess the likelihood of the
performance
criteria being met and the fair value of the awards upon vesting.
The modelling calculates many scenarios in order to estimate
the overall fair value based on the average value where awards
vest.
Warrants
Number of warrants Weighted average
exercise price (pence)
2019 2018 2019 2018
Outstanding at
1 January 2019 2,400,000 3,350,000 20 14
Granted during
the year 2,589,865 - 18 -
Exercised - - - -
during the
year
Lapsed during
the year (2,000,000) (950,000) 11 16
2,989,865 2,400,000 19 20
The exercise price of warrants outstanding at the end of the
year ranged between 12p and 30p (2018: 11p and 30p) and their
weighted average contractual life was 2.5 years (2018: 2.6
years.)
None of the warrants have vesting conditions.
The share based payment charge for the year, in respect of
warrants,
was GBP98,553 (2018: GBPnil). The weighted average fair value
of each warrant granted during the year was 18p (2018: GBPnil).
20 Share capital 2019 2018
GBP GBP
Ordinary share capital
Issued and fully paid
207,189,337 Ordinary shares
of 1p each 2,071,893 2,071,893
2,071,893 2,071,893
On 4 May 2018, the Company issued 125,000 ordinary shares at
10.375p each for a total consideration of GBP12,969.
The number of GBP0.01 ordinary shares issued in the year totalled
nil (2018: 125,000).
In March 2020, the Company issued 173,150,892 ordinary shares
at 6p each for a total consideration of GBP10,389,054.
21 Share premium account
2019 2018
GBP GBP
At beginning and end of year 31,289,915 31,289,915
22 Warrant reserves
GBP
Balance at 1 January 2018 653,446
Options lapsed (527,002)
Options granted 209,295
Balance at 31 December 2019 335,739
The warrant reserve represents the fair value if share options
and warrants granted, and not exercised or lapsed, in accordance
with the requirements of IFRS 2 Share Based Payments.
23 Merger reserve
2019 2018
GBP GBP
At beginning and end of year 10,209,673 10,209,673
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.
24 Non-controlling interest
2019 2018
GBP GBP
Non-controlling interest 12,366 -
The non-controlling interest arose from Eden Research Plc's
50% share in TerpeneTech Limited (UK).
25 Contingent liabilities
In September 2015, the Company entered into a Collaboration
and
licence agreement with Invention Development Management
Company
LLC (part of Intellectual Ventures, now called Xinova LLC). As
part of this agreement, upon successful completion of a number
of different tasks, Xinova will be entitled to a payment which
is calculated using a percentage (3.17%) of the value of the
Company at a future date. This has been accounted for as a
cash-settled
share-based payment under IFRS 2.
An amount of GBP67,462, being the estimated fair value of the
liability due to Xinova, was recognised during 2016 and
included
as a non-current liability, as disclosed in note 18 to the
accounts.
It is not believed that the value of the services provided by
Xinova can be reliably measured, and so this amount was
calculated
based on the Company's market capitalisation at 31 December
2016,
adjusted to reflect the percentage of work completed by Xinova
at that date (10% of the 3.17%) based on a pre-determined
schedule
of tasks.
No further charge was made during the year, or since 2016, in
respect of services rendered by Xinova which would give rise
to a further payment becoming due.
The fair value of the liability has been reviewed at the
balance
sheet date and given the change in the Company's market
capitalisation,
it is deemed that a further provision of GBP31,546 was
required,
bringing the overall liability to GBP99,008.
There is a possibility of further amounts being owed by the
Company,
the amounts of which are currently uncertain, and therefore
this
matter is disclosed as a contingent liability.
26 Property, plant & equipment
Group and company
Land and Vehicles Total
buildings
GBP GBP GBP
Cost
At 1 January and 31 December 2018 - - -
Recognition of right-of-use asset on
initial
application of IFRS 16 78,668 35,865 114,533
At 31 December 2019 78,668 35,865 114,533
Accumulated depreciation
At 1 January and 31 December 2018 - - -
Recognition of right-of-use asset on
initial
application of IFRS 16 26,223 4,483 30,706
Charge for the year 13,111 8,966 22,077
At 31 December 2019 39,334 13,449 52,783
Land and Vehicles Total
buildings
GBP GBP GBP
Net book value
At 1 January and 31 December 2018 - - -
At 31 December 2019 39,334 22,416 61,750
At 31 December 2019, all property, plant & equipment was
represented solely by right-of-use assets recognised in accordance
with the requirements of IFRS 16.
Leases - amounts recognised in profit or loss
The following amounts have been recognised in profit or loss for
leases in which the Group is a lessee:
2019 2018
GBP GBP
Interest on lease liabilities under IFRS
16 7,053 -
Operating lease expense under IAS 17 - 26,363
7,053 26,363
The group holds two leases, for a property and a vehicle. Both
leases have fixed lease repayments and remaining terms of 3 years
and 2 years respectively.
The incremental borrowing rate applied to lease liabilities
recognised in the statement of financial position at the date of
initial application of IFRS 16 was 8.71%.
27 Capital risk management
The company is not subject to any externally imposed capital
requirements.
28 Related party transactions
Disclosures required in respect of IAS 24 regarding remuneration
of key management personnel are covered by the disclosure of
Directors' remuneration included within note 7.
Transactions with other related parties are set out below:
Group
During the year, Eden invoiced its associate, TerpeneTech (UK),
GBP6,089 for R&D charges (2018: GBP112,540) and GBPnil for royalties
due (2018: GBP48,113).
Also, during the year Eden received GBP12,731 from TerpeneTech
(UK) (2018: paid GBP11,440).
At the year end, a net amount of GBP122,661 was due from TerpeneTech
(UK) (2018: GBP135,392). This amount is included within Trade
and Other Receivables.
During the year, TerpeneTech (UK) sold an intangible asset to
TerpeneTech (Ireland) for GBP132,743.
Also, during the year, TerpeneTech (Ireland) invoiced TerpeneTech
(UK) GBP247,304 (2018: GBPnil) for sales of geraniol and incurred
costs of GBP222,574 from TerpeneTech (UK) (2018: GBPnil).
At the year end, a net amount of GBP108,012 (2018: GBPnil) was
due from TerpeneTech (Ireland) to TerpeneTech (UK).
Company
During the year, Eden invoiced its associate, TerpeneTech (UK),
GBP6,089 for R&D charges (2018: GBP112,540) and GBPnil for royalties
due (2018: GBP48,113).
Also, during the year Eden received GBP12,731 from TerpeneTech
(UK) (2018: paid GBP11,440).
At the year end, a net amount of GBP122,661 was due from TerpeneTech
(UK) (2018: GBP135,392). This amount is included within Trade
and Other Receivables.
29 Cash flows from operating activities
Group
2019 2018
GBP GBP
Loss for the year after tax (1,132,337) (334,951)
Adjustments for:
Taxation credited (347,036) (198,119)
Finance costs 81,563 23,581
Investment income (807) (1,684)
Depreciation of right-of-use assets 22,078 -
Amortisation and impairment of intangible
assets 496,732 429,871
Share of associate's losses 41,001 14,137
Equity settled share based payment
expense 209,295 85,372
Movements in working capital:
(Increase)/decrease in inventories (53,767) 192,158
(Increase)/decrease in trade and
other receivables (908,027) 149,114
Increase/(decrease) in trade and
other payables 357,351 (1,157,087)
Cash used by operations (1,233,954) (797,608)
Company
2019 2018
GBP GBP
Loss for the year after tax (1,157,068) (334,951)
Adjustments for:
Taxation credited (347,036) (198,119)
Finance costs 81,563 23,581
Investment income (807) (1,684)
Amortisation and impairment of
intangible assets 496,732 429,871
Depreciation of right-of-use assets 22,078 -
Share of associates losses 41,001 14,137
Equity settled share based payment
expense 209,295 85,372
Movements in working capital:
(Increase)/decrease in inventories (53,767) 192,158
(Increase)/decrease in trade and
other receivables (908,027) 149,114
Increase/(decrease) in trade and
other payables 382,082 (1,157,087)
Cash used by operations (1,233,954) (797,608)
30 Financial Risk Management
Credit risk
2019 2018
GBP GBP
Cash and cash equivalents 501,984 2,478,740
Trade receivables 1,345,648 515,279
1,847,632 2,994,019
The average credit period for sales of goods and services is
240 days. No interest is charged on overdue trade receivables.
At 31 December 2019 trade receivables of GBP523,967 (2018: GBP56,706)
were past due. During the year the Company wrote off bad debts
in the amount of GBPnil (2018: GBP47,984).
Trade receivables of GBP1,002,763 (2018: GBP398,447) at the
reporting date are held in Euros and GBP112,540 (2018: GBP112,656)
were held in USD.
The Group's policy is to recognise loss allowances for expected
credit losses (ECLs) on financial assets measured at amortised
cost. The Group measures loss allowances for trade receivables
at an amount equal to lifetime ECL. When determining whether
the credit risk of a financial asset has increased significantly
since initial recognition and when estimating ECL, the Group
considers reasonable and supportable information that is relevant
and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based
on the Group's historical experience and informed credit assessment
and including forward-looking information.
The largest trade debtor at the year end is a well-established,
profitable business and long-term customer of the Company with
whom Eden has had no issue of collecting debts due before and
does not expect to have any going forward. In addition, TerpeneTech
(UK), Eden's associate company, owed GBP122,761 net to Eden
at the year-end.
TerpeneTech (UK), is a cash-positive business, albeit in its
infancy, with good shareholder support and, again, Eden has
had no issue of collecting debts due from TerpeneTech (UK) before
and does not expect to have any going forward.
Considering these factors, the directors' consider the ECL to
be immaterial.
Financial liabilities
2019 2018
GBP GBP
Trade payables 870,563 499,186
Other payables 168,246 115,168
Other taxes and social security 26,399 15,085
Lease liabilities 22,812 -
Accruals and deferred income 283,380 313,427
1,371,400 942,866
The carrying amount of trade payables approximates to fair value.
30 Financial Risk Management (continued)
The average credit period on purchases of goods is 67 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.
Maturity of financial liabilities
The maturity profile of the group's financial liabilities at
31 December 2019 was as follows:-
2019 2018
In one year or less, or on demand 1,348,588 875,404
Over one year 145,695 67,462
1,494,283 942,866
Liquidity risk is managed by regular monitoring of the Company's
levels of cash and cash equivalents, debtor and creditor management
and expected future cash flows. See note 1 for further details
on the going concern position of the Company.
Market price risk
The company's exposure to market price risk comprises interest
rate and currency risk exposures. It monitors these exposures
primarily through a process known as sensitivity analysis. This
involves estimating the effect on results before tax over various
periods of a range of possible changes in interest rates and
exchange rates. The sensitivity analysis model used for this
purpose makes no assumptions about any interrelationships between
such rates or about the way in which such changes may affect
the economies involved. As a consequence, figures derived from
the Company's sensitivity analysis model should be used in conjunction
with other information about the Company's risk profile.
The Company's policy towards currency risk is to eliminate all
exposures that will impact on reported results as soon as they
arise. This is reflected in the sensitivity analysis, which
estimates that five and ten percentage point increases in the
value of sterling against all other currencies would have had
minimal impact on results before tax. This is primarily due
to the fact that the majority of the Company's income and cost
of goods sold is in the same currency.
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
the Company does not rely on interest received from loans or
investments and does not have any borrowings, it is considered
that any increase 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.
30 Financial Risk Management (continued)
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 2019
and 31 December 2018.
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% (2018: 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.
31 Post balance sheet events
In January 2020, the Company signed a one year, exclusive Evaluation
Agreement with Corteva Agriscience.
The agreement allows Corteva time to evaluate Eden's Sustaine ä
encapsulation technology and several formulations in specific biological
seed treatment applications in certain major territories and, if successful,
will lead to Corteva being granted exclusive distribution rights.
In March 2020, the Company concluded a successful fund-raise raising
a total of approximately GBP10.4 million (before expenses) through
the Placing, Subscription and Open Offer through the issue and allotment
of 173,150,892 new Ordinary Shares, bringing on board new institutional
shareholders, as well as providing existing shareholders with the
ability to partake in the same funding round.
COVID-19 has also occurred since the balance sheet date, though this
is deemed to be a non-adjusting event.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DGGDUBXGDGGL
(END) Dow Jones Newswires
May 07, 2020 02:00 ET (06:00 GMT)
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