Preliminary results

RNS Number : 3520B

Eden Research plc

16 April 2012

 



GB0001646941/GBP/PLUS-exn

EDEN RESEARCH PLC

("Eden" or the "Company")

Preliminary results

Eden Research plc, the agrochemical and encapsulation development company, announces its preliminary results for the year ended 31 December 2011. Eden has developed a terpene-based encapsulation technology which uses yeast cells to deliver a slow release of natural compounds for agricultural and non-agricultural uses.

Terpenes are natural compounds which function as defence mechanisms in many plant groups and are released in response to infection, attack by pests, stress or mechanical injury. Terpenes are already widely used in the food flavouring, cosmetic and pharmaceutical industries.

Financial highlights

·     Revenue of £0.09m (2010: £0.17m)

·     Operating loss reduced to £1.83m (2010: £2.26m) - due to reduced administrative expenses

·     Loss before tax of £3.29m (2010: £3.28m)

·     Loss per share 3.66p (2010: 5.21p)

·     Debt reduced to £0.65m (2010: £2.95m)

·     Cash and cash equivalents of £0.39m (2010: nil)

-     An additional £0.95m was raised via convertible loans from existing investors post balance sheet

·     Tax losses carried forward of £17.00m (2010: £13.50m)

Operational highlights

·     Licence agreements signed for 3AEY, Eden's flagship fungicide product (highly effective against botrytis)

·     EU registration for the active compounds in 3AEY continues to progress

·     Increased interest in encapsulation technology outside of agrochemical applications

-     Including health and beauty, cosmetics, animal health, human health and biocide markets

·     Existing and potential products currently being evaluated are hoped to benefit 2012

-     Potential agrochemical products to target nematodes, spider mites and whitefly

·     AIM listing process is progressing well and trading on AIM is expected to commence in mid May 2012

Commenting on Outlook, Sir Ben Gill, Non-Executive Chairman, said, "The number of enquiries made about Eden's technologies and products continues to grow at a significant rate, ranging from interest in sharing Eden's valuable registration data, to encapsulation of active substances in both agrochemical and non-agrochemical areas. The Board will continue to out-licence existing agrochemical products for new product areas as well as look to exploit the full potential of the next-generation UMMS technology in areas such as cosmetics, human health and biocide markets."

Eden Research plc	www.edenresearch.com
Clive Newitt, Managing Director	Tel: [phone]
Alex Abrey, Chief Financial Officer
Zeus Capital Limited	Tel: [phone]
Ross Andrews, Andrew Jones, Brian Stockbridge
Walbrook PR Ltd	Tel: [phone]
Paul McManus (Media Relations)	Mob: [phone] or [e-mail]
Paul Cornelius (Investor Relations)	Mob: [phone] or [e-mail]

CHAIRMAN'S REVIEW

FOR THE YEAR ENDED 31 DECEMBER 2011

Introduction

Eden Research has continued to exploit its terpene encapsulation technologies this year by progressing a number of opportunities alongside its focus on agrochemicals. This has ensured that we have strengthened our position to be able to generate significant value and maximise this across several fronts.

Following our increasing profile around the world as a result of various presentations at international events we have received a number of new and un-solicited approaches by significant parties interested in applying Eden's technologies to the cosmetics, human health and biocide markets, which the management of Eden are actively pursuing.

The progression of the EU registration of the active compounds in Eden's first agrochemical product, 3AEY, while frustratingly slow, has also led to interest by significant names within the agrochemicals' industry. Existing and potential Eden products, as well as the co-encapsulation of existing agrochemicals using the encapsulation system to provide a number of benefits, are currently being evaluated and it is hoped that there will be a favourable outcome to report in the coming year.

Products and licensees

3AEY

3AEY, Eden's lead product; a terpene based fungicide, has been out-licensed to a number of parties for a variety of applications throughout the world.

Ecostyle is progressing trials for registration of products within the amateur gardening market and is currently formulating Ready to Use products for garden centres.

Redestos is awaiting the European approval process, as detailed below, to enable them to start the registration of 3AEY in Greece and the Balkans.

Cheminova is also awaiting EU approval before progressing product registrations.

Lachlan has submitted an application to register 3AEY in Kenya and is awaiting the outcome of that application to enable them to sell product in that territory. This is expected to happen shortly.

Nematodes

In 2011, Eden and Certis Europe undertook a number of field trials to show the efficacy of Eden's nematode product to enable Certis to decide whether to exercise the option that they have for the product to enter into an exclusive licence agreement.

The trials showed that Eden's product performed in line with a leading traditional chemical product and negotiations are on-going with Certis to conclude an exclusive licensing deal.

Since the year end, Eden substituted its licensing deal with Stockton Agrimor AG for nematodes in Latin America, by signing a memorandum of understanding with FMC Corporation to enter into an exclusive licensing deal.

In 2012, Eden also expects to conclude licensing arrangements for North America.

Spider Mites and Whitefly

Eden is continuing discussions with various parties to license the rights for Spider Mites and Whitefly, the rights for which are currently available worldwide, excluding a small number of territories already covered in existing licences.

Trial work already done by Eden has shown good efficacy for these products and the intention is for prospective partners to take on the responsibility of further trials and registration.

Animal Health

Just after the year end, Eden announced that Teva Animal Health had exercised its option to enter into an exclusive licence for Eden's products and technologies in the animal health sector. This follows two years of trial and formulation work under the option agreement.

Teva recently announced that it will be re-commencing manufacturing at its facilities in Missouri, USA and are keen to start producing and marketing over the counter 'Eden' products, which the Directors believe should result in sales of products later this year. An over the counter product range in the USA does not have the same regulatory process as a prescription product range and, hence, should be quicker to market.

In addition, the company is currently in discussions with Teva to roll-out these products on a global basis.

Biocides

In September 2011, Eden entered into marketing and licensing agreements with TerpeneTech Limited for various applications in the biocide sector. TerpeneTech is progressing with trial work and registration in both USA and Europe.

Encapsulation

In 2010 and 2011, Eden announced that it had signed co-encapsulation development agreements with SBM Developpement SA, of France, and Tagros Chemicals India PVT Limited, of India.

Eden is awaiting results of the work that has been done and will update shareholders accordingly.

Another partner is investigating the possibility of encapsulating existing agrochemical active substances. Eden will update shareholders on this as and when appropriate.

Product Registration

In March 2011, the European Commission confirmed the completeness of the dossiers for the three active substances submitted by Eden, under Directive 91/414/EEC.

The European Food Safety Authority (EFSA) is expected to complete its review shortly at which point EFSA should then recommend inclusion of the three active substances used in 3AEY to the European Commission who will then vote for its inclusion onto the list of approved active substances.

Intellectual Property ("IP")

2011 has seen the conclusion of two inward licensing agreements which have seen valuable IP added to Eden's portfolio.

In September 2011, Eden signed an agreement with Cornell University of USA which provides Eden with the exclusive rights to commercialise and sub-licence terpene based formulations relating to certain insecticidal applications.

In October 2011, Eden acquired the exclusive, global rights to a next-generation encapsulation delivery system based on scientific research at the University of Massachusetts Medical School in Worcester, USA ("UMMS").

The next-generation encapsulation technology licensed from UMMS provides significant additional benefits to the original system as it allows release to be controlled by environmental factors rather than relying solely upon the chemistry of the substances used. This means that there is more control over the timing of the release of the active compound being carried allowing for further reduction in chemicals applied whilst ensuring maximum effectiveness.

The UMMS license also significantly expands the potential use of the Eden technology in non-agricultural applications such as health and beauty, cosmetics and animal health.

The Senior Management

The management committee comprises:

Sir Ben Gill          Non-Executive Chairman

Ken Brooks         Executive Deputy Chairman

Clive Newitt      Managing Director

Alex Abrey         Chief Financial Officer

Outlook

The number of enquiries made about Eden's technologies and products continues to grow at a significant rate, ranging from interest in sharing Eden's valuable registration data, as already acknowledged in 2012 with the agreement signed with Xeda International, to encapsulation of active substances in both agrochemical and non-agrochemical areas.

The Board will continue to out-licence existing agrochemical products for new product areas as well as look to exploit the full potential of the next-generation UMMS technology in areas such as cosmetics, human health and biocide markets.

In addition, the move to AIM should provide the Company with a more transparent market in its shares, as well as access to institutional investors.

Sir A B N Gill

Chairman

13 April 2012

EDEN RESEARCH PLC

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2011

			2011		2010
	Note		£		£
CONTINUING OPERATIONS
Revenue			91,200		172,529
GROSS PROFIT			91,200		172,529
Administrative expenses
- other			(849,159)		(1,335,117)
- amortisation of intangible assets			(696,593)		(664,097)
- share based payments			(375,919)		(436,084)
Total administrative expenses			(1,921,671)		(2,435,298)
OPERATING LOSS	4		(1,830,471)		(2,262,769)
Finance costs	3		(1,458,706)		(1,018,928)
Finance income	3		306		14
LOSS BEFORE TAX			(3,288,871)		(3,281,683)
Tax	5		5,130		30,709
LOSS FOR THE YEAR and total
comprehensive income
			(3,283,741)		(3,250,974)
LOSS PER SHARE
- basic and diluted	6		(3.66)p		(5.21)p

EDEN RESEARCH PLC

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

	Share	Share	Merger	Warrant	Retained
	capital	premium	reserve	reserve	earnings	Total
	£	£	£	£	£	£
Balance at 1 January 2010	617,324	14,145,753	10,209,673	2,186,273	(22,402,730)	4,756,293
Loss and total comprehensive income	-	-	-	-	(3,250,974)	(3,250,974)
Transactions with owners
-       Issue of share	52,960	609,035	-	-	-	661,995
-      Options granted	-	-	-	436,084	-	436,084
-      Options exercised/lapsed	-	-	-	(1,368,824)	1,368,824	-
Transactions with owners	52,960	609,035	-	(932,740)	1,368,824	1,098,079
Balance at 31 December 2010	670,284	14,754,788	10,209,673	1,253,533	(24,284,880)	2,603,398
Balance at 1 January 2011	670,284	14,754,788	10,209,673	1,253,533	(24,284,880)	2,603,398
Loss and total comprehensive income	-	-	-	-	(3,283,741)	(3,283,741)
Transactions with owners
-       Issue of shares	322,753	5,366,899	-	-	-	5,689,652
-      Options granted	-	-	-	375,919	-	375,919
-      Options exercised/lapsed	-	-	-	(194,976)	194,976	-
Transactions with owners	322,753	5,366,899	-	180,943	194,976	6,065,571
Balance at 31 December 2011	993,037	20,121,687	10,209,673	1,434,476	(27,373,645)	5,385,228

EDEN RESEARCH PLC

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2011

				2011		2010
		Note		£		£
ASSETS
NON-CURRENT ASSETS
Intangible assets		7		7,809,951		8,198,319
Investments		8		-		100
				7,809,951		8,198,419
CURRENT ASSETS
Trade and other receivables		9		95,014		75,324
Cash and cash equivalents		10		388,547		6,123
				483,561		81,447
TOTAL ASSETS				8,293,512		8,279,866
LIABILITIES
CURRENT LIABILITIES
Trade and other payables		11		875,195		1,597,440
Financial liabilities - borrowings
Loan notes		13		651,717		2,947,502
				1,526,912		4,544,942
NON CURRENT LIABILITIES
Other payables		12		1,381,372		1,131,526
TOTAL LIABILITIES				2,908,282		5,676,468
EQUITY
Called up share capital				993,037		670,284
Share premium account				20,121,687		14,754,788
Merger reserve		15		10,209,673		10,209,673
Warrant reserve		15		1,434,476		1,253,533
Retained earnings		16		(27,373,645)		(24,284,880)
TOTAL EQUITY attributable to
owners of the parent				5,385,228		2,603,398
TOTAL EQUITY AND LIABILITIES				8,293,512		8,279,866

EDEN RESEARCH PLC

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2011

			2011		2010
	Note		£		£
Cash flows from operating activities
Cash outflow from operations	1		(1,499,794)		(1,017,257)
Tax credit received			5,130		29,320
Net finance charges paid			(1,133,087)		(763,068)
Net cash used in operating activities			(2,627,751)		(1,751,005)
Cash flows from investing activities
Capitalisation of development expenditure			(308,225)		(104,674)
Finance income			306		14
Net cash used in investing activities			(307,919)		(104,660)
Cash flows from financing activities
Shareholders' loan - repayment			(20,795)		(898,322)
Shareholders' loan - drawdown			2,278,372		2,016,388
Issue of equity shares			1,060,517		661,994
Net cash from financing activities			3,318,094		1,780,060
Increase/(decrease) in cash and cash equivalents			382,424		(75,605)
Cash and cash equivalents at
beginning of year			6,123		81,728
Cash and cash equivalents at
end of year			388,547		6,123

EDEN RESEARCH PLC

NOTES TO THE STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2011

1.	Cash outflow from operations
			2011		2010
			£		£
	Loss before tax		(3,288,871)		(3,281,683)
	Equity share based payment charge		375,919		436,084
	Amortisation of trademarks and intellectual property		696,593		664,097
	Finance income		(306)		(14)
	Finance costs		1,458,706		1,018,928
	Impairment of fixed asset investment		100		-
	Operating cash flows before movement in working capital		(757,859)		(1,162,588)
	Increase in trade and other receivables		(19,690)		(39,244)
	Increase/(decrease) in trade and other payables		(722,245)		184,575
	Cash outflow from operations		(1,499,794)		(1,017,257)

2.       ACCOUNTING POLICIES

           General information

           Eden Research plc is a Company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The address of the registered office is given on page 3. The nature of the Company's operations and its principal activities are set out in the Chairman's Review on page four. The Company is quoted on the PLUS Market in London.

           These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates.

           The Company has adopted the following revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Company's financial statements for the year beginning 1 January 2011.

IAS 24 - Related Party Disclosures (Amendment)                                                                         

IAS 32 - Financial Instruments: Presentation - Classification of Rights Issues                                 

IFRIC 14 - Prepayments of a minimum funding requirement                                                            

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments                                              

Improvements to IFRSs (May 2010)                                                                                              

           The directors have assessed that the adoption of these revisions and amendments did not have an impact on the financial position or performance of the Company.

           At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:-

		Effective date:
		Periods commencing on or after
IFRS 11 Joint Arrangements		1 January 2013
IFRS 12 Disclosure of Interests in Other Entities		1 January 2013
IFRS 13 Fair Value Measurement		1 January 2013
IAS 19 Employee Benefits (Amendment)		1 January 2013
IAS 27 Separate Financial Statements		1 January 2013
IAS 28 Investments in Associate and Joint Ventures		1 January 2013

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Company.        

           Basis of preparation

           These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.          

           Going concern

           The financial statements have been prepared on a going concern basis which contemplates the realisation of assets and the settlement of liabilities in the ordinary course of business.

The Company has reported a loss for the year after taxation of £3,283,741 (2010: £3,250,974). Net current liabilities as at that date amounted to £1,043,351 (2010: £4,463,395).

The directors have prepared budgets and projected cash flow forecasts for a period of two years from 31 December 2011 and they consider that the Company will be able to operate within the cash facilities that are available to it for this period. The ability of the Company to continue as a going concern is ultimately dependent upon the amounts and timing of cash flows from the exploitation of the Company's intellectual property and the availability of additional funding to meet the short term needs of the business until the commercialisation of the company's portfolio is reached.

The company has raised additional funding post year end which, together with the cash balance carried over from the year end, means the company has a strong cash balance at the present moment. A further £500,000 of convertible debt has been made available to the company. This debt, together with all outstanding convertible loans, will be converted into equity as part of the AIM admission process.

The forecasts adopted only include revenue derived from existing contracts and, while there is a risk these payments might be delayed if milestones are not reached, there is the significant potential upside from on-going discussions and negotiations with other parties as well as other "blue sky" opportunities.

In addition, the Company has relatively low fixed running costs and has a demonstrable ability to delay certain other costs, such as the forecast Research and Development expenditure, in the event of unforeseen cash restraints.

The directors are closely monitoring performance against cash flow projections that have been prepared for the period to 31 December 2013 and beyond and are confident that the Company will be able to generate the necessary cash resources over and above those referred to above.

 On this basis the directors consider it appropriate to prepare the financial statements on the going concern basis. The financial statements do not include any adjustments that would result from a failure by the Company to meet these forecasts. 

Revenue recognition

Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of revenue can be reliably estimated.

Revenue represents amounts receivable by the Company in respect of services rendered during the year in accordance with the underlying contract or licence, stated net of value added tax.

Royalty income and upfront payments are recognised as the royalties accrue in accordance with the terms of the underlying contract.

Amounts receivable under milestone agreements are recognised in accordance with the terms of the underlying agreement and are typically recognised upon the completion of the significant acts within the agreements. Revenue is specifically only recognised when the terms of any milestone are reasonably expected to be met and the relevant act has been completed as the Company has no contractual rights to the revenue until this point.

Licence fee revenue is recognised up-front as a sale of the Company if the Company has discharged all of its on-going obligations.

Intangible assets

Intellectual property, including development costs, is capitalised and amortised on a straight line basis over its estimated useful economic life of 14 years in line with the remaining life of the Company's master patent, which was originally 20 years. The useful economic life of intangible assets is reviewed on an annual basis.

Impairment of non-financial assets

The directors regularly review the intangible assets for impairment and provision is made if necessary. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Research and development

           Expenditure on research activities is recognised as an expense in the period in which it is incurred.

           An internally generated intangible asset arising from the Company's development activities is recognised only if all the following conditions are met:-

·      the project is technically and commercial feasible;

·      an asset is created that can be identified;

·      the Company intends to complete the asset and use or sell it and has the ability to do so;

·      it is probable that the asset created will generate future economic benefits;

·      the development cost of the asset can be measured reliably; and

·      there are sufficient resources available to complete the project.

           Internally-generated intangible assets are amortised on a straight line basis over their useful lives. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Financial instruments

The Company uses certain financial instruments in its operating and investing activities that are deemed appropriate for its strategy and circumstances.

Financial assets and liabilities are recognised on the Statement of Financial Position when the Company has become a party to the contractual provisions of the instrument.

Financial instruments recognised on the Statement of Financial Position include cash and cash equivalents, trade receivables, trade payables and borrowings and fixed interest convertible debt.

Cash and cash equivalents comprise cash on hand and on demand deposits, and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Interest bearing loans and overdrafts are recorded at the fair value received less any transaction costs. Subsequent to initial recognition such instruments are measured at amortised cost, using the effective interest method.

          Financial assets

          Trade receivables, loans and other receivables that have fixed or determinable payments are classified as "Loans and receivables" and are measured initially at fair value plus transaction costs and subsequently at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate, except for short term receivables when the recognition of interest would be immaterial.

          Financial assets are assessed for impairment at each reporting date by considering the recoverable amount of the asset in comparison to its carrying value and any impairment recognised in the Statement of Comprehensive Income. Trade receivables are assessed for collectability and where appropriate the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account and changes in the carrying amount of the allowance account are recognised in the profit or loss in the Statement of Comprehensive Income.

          Debt and equity instruments issued by the Company

Loan notes

Where loans that were previously convertible have been converted to equity in accordance with the original terms of the contract as a result of an agreement between the note holder and the Company, the value of the loan and any associated accrued interest is transferred to equity at nil gain, nil loss.

The Company also enters into agreements to convert loans and creditors into equity which were not convertible under the original terms of the agreement. Where this is the case the Company applies the requirements of IFRIC 19 and recognises the issue of equity at the fair value of the instruments issues. Any profit or loss arising on the extinguishment of the liability is taken to profit or loss.

Convertible loans

Due to the nature of the arrangements management are required to make significant judgments in order to determine whether the conversion of loans has taken place in accordance with the original terms of the underlying agreement. Each conversion is considered individually. During the current year all conversions were deemed to have been made in accordance with the original terms of the agreements.

          Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

          Financial liabilities

          Financial liabilities such as trade payables and loans are classified as "Other financial liabilities" and are measured initially at fair value less transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, except for short term payables when the recognition of interest would be immaterial.

          Non-executory contracts are recognised when all obligations due to the Company under the terms of the contract have been met, but the Company retains a financial liability. This financial liability is measured in accordance with the Company's accounting policy for the measurement of financial liabilities.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the Company. All other leases are classified as operating leases.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Current and deferred income tax

            The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interest in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realized based on the tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Foreign currencies

          In preparing the financial statements of the Company, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

          Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the Statement of Comprehensive Income for the period.

Share based payments

The Company has applied the requirements of IFRS2 Share-Based Payment.

The Company operates an unapproved share option scheme for executive directors, senior management and certain employees.

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that ultimately the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted, as long as other vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in fair value of the options, measured immediately before and after the modification is also charged to the Statement of Comprehensive Income over the remaining vesting period.

Fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural conditions.

Financial risk management

          The Company's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risks), credit risk and liquidity risk. Risk management focuses on minimising any potential adverse effect on the Company's financial performance and is carried out under policies approved by the Board of Directors.

          Critical accounting estimates and areas of judgement

          The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:-

Capitalised development costs

          The directors have considered the recoverability of the internally generated intangible asset which has a carrying value of £1.7m. The projects continue to progress in a satisfactory manner and the directors are confident that the carrying amount of the asset will be recovered in full. This situation will be closely monitored and adjustments made in future periods if future market activity indicates that such adjustments are appropriate.

The key factors which could impact on whether it remains appropriate to continue to capitalise intangible assets or on the impairment considerations include:

·      The availability of the necessary finance and hence the ability of the Company to continue to capitalise as a going concern.

·      The assumptions surrounding the perceived market sizes for the products and the achievable market share for the Company.

·      The successful conclusion of licensing arrangements will serve as an indicator as to the likely success of the projects and, as such, any need for potential impairment.

·      The level of upfront, milestone and royalty receipts will also serve as a guide as to the net present value of the assets and whether any impairment is required.

Impairment of assets

The directors have considered the progress of the business in the current year, including a review of the potential market for its products, the progress the Company has made in registering its products and other key commercial factors to determine whether any indicators of impairment exist. Based on the review management have carried out they are satisfied that no such factors exist and as such a full impairment review on the Company's intangible assets has not been carried out.

Fair value of royalty liabilities

The royalty liability is calculated using the royalty rate inherent in the original agreement the Company signed with the licensor when they acquired the Company's main patent. This agreement requires the Company to pay a royalty of 2.5% on all future sales that incorporate the main patent to the licensor. The liability has been calculated based on the projected sales forecasts for all products incorporating the main patent over the license period, discounted to their present value. Management have made significant estimates in determining the fair value of this liability. The most significant of these estimates management have made relate to the Company's forecast market share and the weighted average cost of capital.

Going concern

           The directors have considered the ability of the Company to continue as a going concern and this is considered to be the most significant estimate made by the directors in preparing the financial statements.

The ability of the Company to continue as a going concern is ultimately dependent upon the amount and timing of cash flows arising from the capitalisation of the Company's intellectual property. The directors consider it is appropriate for the financial statements to be prepared on a going concern basis based on the estimates they have made, which are summarised above.

3.       NET FINANCE COSTS

		2011		2010
Finance income:		£		£
Bank interest received		306		14
		2011		2010
Finance costs:		£		£
Exchange Variance		(1,013)		(3,241)
Finance Fees		(1,179,956)		(759,829)
Interest on shareholders' loans		(75,016)		(185,037)
Other payables - unwinding on discount		(202,721)		(70,821)
		(1,458,706)		(1,018,928)
Net finance costs		(1,458,400)		(1,018,914)

4.       OPERATING LOSS

The operating loss is stated after charging:
	2011		2010
	£		£
Other operating leases	-		8,877
Amortisation of trademarks, intellectual property, and development costs	696,593		664,097
Auditors' remuneration	20,000		20,000
Previous auditors' remuneration for non audit work
- taxation and corporate finance	-		31,145
Foreign exchange differences	1,013		3,241
Research and development costs	-		25,171
Directors' emoluments	377,000		345,665
Equity share based payment charge	375,919		436,084
	2011		2010
	£		£
Grant Thornton LLP fees in respect of the audit of the parent
and consolidated accounts	20,000		20,000

5.       TAX

Analysis of the tax credit
	2011		2010
	£		£
Current tax:
Research and development credit	5,130		30,709
Total tax credit in income statement	5,130		30,709

           Corporation tax

          No tax charge arises on the results for the year. Tax losses carried forward amount to approximately £17,000,000 (2010: £13,500,000). The tax credit represents the research and development tax credit receivable for the year ended 31 December 2011.

. 

          Factors affecting the tax charge

The UK standard rate of corporation tax is 26.50% (2010: 28%).  Current tax assessed for the financial year as a percentage of the loss before taxation is nil (2010: nil)

The differences are explained below:

	2011		2011		2010		2010
	£		%		£		%
Standard rate of corporation tax in the UK			(26.5)				(28.0)
Loss before tax at standard rate of tax	(871,551)				(918,871)
Effects of:
Losses carried forward	642,491		20.0		756,426		23.0
Other expenses not deductible for tax purposes	229,060		7.0		162,445		5.0
Research and development tax relief	(5,130)		(1.0)		(30,709)		(1.0)
Total current tax credit and tax rate %	(5,130)		(1.0)		(30,709)		(1.0)
Deferred tax
Unprovided deferred tax asset	4,257,721				3,842,431

The unprovided deferred tax asset arises principally in respect of trading losses, together with other minor timing differences at 25% (2010: 26.5%) and has not been recognised due to the uncertainty of timing of future profits against which it may be realised.

6.       LOSS PER SHARE

	2011		2010
Loss per ordinary share (pence) - basic and diluted	(3.66)		(5.21)

Loss per share has been calculated on the net basis on the loss after tax of £3,283,741 (2010: loss £3,250,974) using the weighted average number of ordinary shares in issue of 89,641,547 (2010: 62,457,872).

          Due to the loss for the year there is no dilution of the loss per share arising from options in existence. 

7.       INTANGIBLE ASSETS

				Licences
		Intellectual		and		Development
		property		trademarks		Costs		Total
		£		£		£		£
COST
At 1 January 2010		9,652,479		290,118		1,955,534		11,898,131
Additions		-		-		104,774		104,774
At 1 January 2011		9,652,479		290,118		2,060,308		12,002,905
Additions		-		129,032		179,193		308,225
At 31 December 2011		9,652,479		419,150		2,239,501		12,311,130
AMORTISATION
At 1 January 2010		2,718,110		212,574		209,805		3,140,489
Charge for the year		495,312		29,012		139,773		664,097
At 1 January 2011		3,213,422		241,586		349,578		3,804,586
Charge for the year		495,312		29,012		172,269		696,593
At 31 December 2011		3,708,734		270,598		521,847		4,501,179
CARRYING AMOUNT
At 31 December 2011		5,943,745		148,552		1,717,654		7,809,951
At 31 December 2010		6,439,057		48,532		1,710,730		8,198,319

The amortisation charge is included within administration expenses. Intellectual property represents intellectual property in relation to use of encapsulated terpenes in agrochemicals. The remaining useful economic life of that asset is fourteen years.

An annual impairment review is undertaken by the Board of Directors only where there are indicators that an impairment may exist. The directors have considered the progress of the business in the current year, including a review of the potential market for its products, the progress the Company has made in registering its products and other key commercial factors to determine whether any indicators of impairment exist. Based on the review management have carried out they are satisfied that no such factors exist and as such a full impairment review on the Company's intangible assets has not been carried out.

Due to the prior year adjustment made in the prior year a full impairment review was carried out using discounted cashflow forecasts.  The result of this review was that the Intellectual Property is not impaired in respect of its carrying value.

An independent valuation was undertaken by PharmaVentures Limited in 2010 on a number of the Company's product programmes and the estimated future value exceeds the current carrying value.

The valuers used an industry-standard methodology that combines discounted cash flow projections with decision tree analysis to allow explicitly for development risk.  For each programme an expected net present value was derived, which provides a measure of the programme's current economic value.

The valuation was carried out on Eden's botrytis, powdery mildew and nematode products using third party information on the market sizes and based on assumptions with regard to the potential market share achievable. 

The Estimated Net Present Value of 3AEY, Eden's lead botryticide product, alone exceeded the current carrying value of the Company's intellectual property.

            The key assumptions used in completion of the valuation included:

·      The projected market sizes for the key products which the Company is developing. These include a projected market of $214m for 3AEY, $100m for Powdery Mildew, and $296m for nematodes.

·      The projected market share attainable by the Company. In preparing the valuation, a base projected market share growing to 5% of the relevant markets has been assumed.

·      As the nature of the Company's revenue streams are a mixture of milestone payments, licence income and royalties, there are no specific projected growth rates used - the timing of the attainment of the milestones which are attainable on project by project basis is a key assumption in the forecasts.

·      The discounted cash flows have assumed a discount factor of 9%.

All revenues have been projected to come from the cash generating units identified in the segmental reporting and Chairman's review, namely the key product lines of the Company.

During the current year the Company entered into an agreement to acquire an updated version of the company's core underlying technology under similar terms to the existing agreement. Whilst the technology and liability are legally distinct from the superseded versions, management are of the opinion that in substance they are the same.

8.        INVESTMENTS  

	2011		2010
	£		£
CARRYING AMOUNT
At 1 January 2011	100		100
Impairment	(100)		-
At 31 December 2011	-		100

           The investment in subsidiary companies at book value comprises the following:-

	2011		2010
	£		£
Eden Research Europe Limited	-		100
	-		100

The Company's investment in the capital of unlisted subsidiary and associated undertakings is as follows:-

Company                                                  

Associated undertakings

Bioclinical Services Limited

Dormant

30%

England

Bioclinical Services Limited is dormant and had no revenue or assets or liabilities at 31 December 2011 or 31 December 2010.

On 29 March 2011 Eden Research Europe Limited was dissolved. An impairment charge of £100 has been recognised in the financial statements.

9.        TRADE AND OTHER RECEIVABLES

	2011		2010
	£		£
Current:
Trade and other receivables	63,965		58,946
VAT recoverable	31,049		16,378
	95,014		75,324

The directors consider that the carrying value of trade and other receivables approximates to the fair value.    There are no debts impaired at 31 December 2011 or 2010.

10.      CASH AND CASH EQUIVALENTS

	2011		2010
	£		£
Short term bank deposits	388,547		6,123

           The carrying amount of these short term bank deposits approximates to the fair value.

11.      TRADE AND OTHER PAYABLES

	2011		2010
	£		£
Current:
Trade payables	472,557		805,814
Other payables	66,951		652,661
Accruals and deferred income	335,687		138,965
	875,195		1,597,440

The directors consider that the carrying value of trade and other payables approximates to their fair value.

12.      NON CURRENT LIABILITIES

	2011		2010
	£		£
Other payables	1,381,372		1,131,526

Other payables relate to a non-executory contract which commits the Company to make royalty payments of 2.5% on all future sales that incorporate the main patent to the licensor. The liability has been calculated based on the projected sales forecasts for all products incorporating the main patent discounted to their present value.

13.      FINANCIAL ASSETS AND LIABILITIES

	Note		2011		2010
			£		£
Financial assets at amortised cost
Other receivables	9		95,014		75,324
Cash and cash equivalents	10		388,547		6,123
			483,561		81,447
Financial liabilities
Financial liabilities measured at fair value through the profit and loss account
Non current:
Other payables	12		1,381,372		1,131,526
Financial liabilities measured at amortised cost
Current:
Loan notes	13.1		651,717		2,947,502
Trade and other payables	11		875,195		1,597,340
			1,526,912		4,544,842

13.1.     Loan Notes

	2011		2010
	£		£
Current:
Loan notes (note 13)	651,717		2,947,502
	651,717		2,947,502

The debt carries an interest rate of 7.5% and there are no fixed terms for repayment.            

The loan balance includes £651,717 (2010: £2,947,502) which is secured by a fixed and floating charge over the Company's assets.

Loan Notes

£

Loan balance as at 1 January 2010		2,049,235
New loans issued in the year	1,623,410
Interest charged in the year		173,179
Loan notes repaid in the year		(898,322)
Loan balance as at 31 December 2010		2,947,502
New loans issued in the year		2,278,372
Interest charged in the year		75,773
Loan notes repaid in the year		(20,795)
Loan notes converted in the year		(4,629,135)
Loan balance as at 31 December 2011		651,717

The loans converted during 2011 were converted into ordinary shares. In accordance with the Company's accounting policy these were converted at nil gain/ nil loss.

14.      LEASING AGREEMENTS

          Minimum lease payments under operating leases recognised as an expense in the year:

	2011		2010
	£		£
Property	-		38,877

15.     RESERVES

	Merger		Warrant
	reserve		Reserve
	£		£
At 1 January 2010	10,209,673		2,186,273
Increase
- warrants/options granted	-		436,084
Transfer to retained earnings
- warrants exercised or lapsed	-		(1,368,824)
At 1 January 2011	10,209,673		1,253,533
Increase
- warrants/options granted	-		375,919
Transfer to retained earnings
- warrants exercised or lapsed	-		(194,976)
At 31 December 2011	10,209,673		1,434,476

           The merger reserve arose on the acquisition of a subsidiary undertaking in a prior year for which merger relief was permitted under the Companies Act 2006. The warrant reserve represents the fair value of share options and warrants granted, and not exercised or lapsed, in accordance with the requirements of IFRS 2 Share Based Payment.

16.      RETAINED EARNINGS

	2011		2010
	£		£
At 1 January	(24,284,880)		(22,402,730)
Loss for the year	(3,283,741)		(3,250,974)
Transfer from warrant reserve	194,976		1,368,824
At 31 December	(27,373,645)		(24,284,880)

17.      POST BALANCE SHEET EVENTS

Subsequent to the year end the Company raised an additional £950,000 of funding from existing investors in the form of convertible loans in order to fund the short to medium term working capital requirements of the business.

18.      Publication of Non-Statutory Accounts

The above does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. It is an extract from the full accounts for the year ended 31 December 2011 on which the auditor has expressed an unqualified opinion.

 
The accounts will be posted to shareholders and subsequently filed at Companies House.

 

END

 

 

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