STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For The Year Ended 31 December 2017

 

 

				2017		2016
		Notes		£		£
CONTINUING OPERATIONS
Revenue		2		1,877,187		391,958
Cost of sales				(831,499)		(28,560)
GROSS PROFIT				1,045,688		363,398
Amortisation of intangible assets				(750,210)		(680,385)
Other administrative expenses Exceptional Royalties Refund Licence Amendment Fee		12 12		(1,431,787)             570,462 (187,781)		(1,439,670) - -
Share based payments				(27,210)		(129,707)
OPERATING LOSS				(780,838)		(1,886,364)
Finance costs		4		(1,239)		(15,483)
Finance income		4		25,437		1,278
Share of profit/(loss) of equity accounted investee, net of tax				(6,289)		(12,418)
LOSS BEFORE INCOME TAX		5		(762,929)		(1,912,987)
Income tax		6		123,836		81,895
LOSS FOR THE YEAR				(639,093)		(1,831,092)
OTHER COMPREHENSIVE INCOME				-		-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR				(639,093)		(1,831,092)
Earnings per share expressed in pence per share:		7
Basic				(0.33)		(1.03)
Diluted				(0.34)		(1.03)

 

 

 

             STATEMENT OF FINANCIAL POSITION

31 December 2017

 

 

				2017		2016
		Notes		£		£
ASSETS
NON-CURRENT ASSETS
Intangible assets		8		4,933,761		5,211,892
Investments in equity- accounted investee		9		804,876		811,165
				5,738,637		6,023,057
CURRENT ASSETS
Stock				206,814		-
Trade and other receivables		10		962,044		240,505
Cash and cash equivalents		11		3,678,383		1,532,341
				4,847,241		1,772,846
LIABILITIES
CURRENT LIABILITIES
Trade and other payables		12		2,004,501		965,286
NET CURRENT ASSETS				2,842,740		807,560
NON-CURRENT LIABILITIES
Trade and other payables		12		67,462		67,462
NET ASSETS				8,513,195		6,763,155
SHAREHOLDERS' EQUITY
Called up share capital		15		2,070,643		1,846,542
Share premium		16		31,278,196		29,139,654
Merger reserve		16		10,209,673		10,209,673
Warrant reserve		16		592,495		614,713
Retained loss		16		(35,637,092)		(35,047,427)
TOTAL EQUITY				8,513,195		6,763,155

 

                                                               

 

STATEMENT OF CHANGES IN EQUITY

For The Year Ended 31 December 2017

 

 

		Called up share capital		Retained loss		Share premium
		£		£		£
Balance at 1 January 2016		1,587,583		(33,466,782)		26,860,972
Changes in equity
Issue of share capital		258,959		-		2,278,682
Total comprehensive income		-		(1,831,092)		-
Options exercised/lapsed		-		250,447		-
Balance at 31 December 2016		1,846,542		(35,047,427)		29,139,654
Changes in equity
Issue of share capital		224,101		-		2,138,542
Total comprehensive income		-		(639,093)		-
Options exercised/lapsed		-		49,428		-
Balance at 31 December 2017		2,070,643		(35,449,311)		31,278,196
		Merger reserve		Warrant reserve		Total Equity
		£		£		£
Balance at 1 January 2016		10,209,673		735,453		5,926,899
Changes in equity
Issue of share capital		-		-		2,537,641
Total comprehensive income		-		-		(1,831,092)
Options granted		-		129,707		129,707
Options exercised/lapsed		-		(250,447)		-
Balance at 31 December 2016		10,209,673		614,713		6,763,155
Changes in equity
Issue of share capital		-		-		2,362,643
Total comprehensive income		-		-		(639,093)
Options granted		-		27,210		27,210
Options exercised/lapsed		-		(49,428)		-
Balance at 31 December 2017		10,209,673		592,495		8,513,195

 

 

STATEMENT OF CASH FLOWS

For The Year Ended 31 December 2017

 

 

			2017		2016
			£		£
Cash flows from operating activities
Cash from/(used by) operations		17	222,950		(872,201)
Finance costs paid Foreign exchange losses			(1,239) -		(484) 14,999
Tax credit received			8,330		81,895
Net cash from/(used by) operating activities			230,041		(805,789)
Cash flows from investing activities
Capitalisation of development expenditure and intellectual property costs			(324,077)		(349,149)
Capitalisation of patents			(148,002)		-
Finance income Foreign exchange gains			2,526 22,911		1,278 -
Net cash used by investing activities			(446,642)		(347,871)
Cash flows from financing activities
Issue of equity shares			2,397,893		2,668,541
Share issue costs			(35,250)		(130,900)
Net cash from/(used by) financing activities			2,362,643		2,537,641
Increase/(decrease) in cash and cash equivalents			2,146,042		1,383,981
Cash and cash equivalents at beginning of year			1,532,341		148,360
Cash and cash equivalents at end of year			3,678,383		1,532,341

 

 

 

NOTES TO THE ACCOUNTS

For The Year Ended 31 December 2017

 

 

1.       ACCOUNTING POLICIES

 

          General information

Eden Research Plc is a public company limited by shares incorporated and domiciled in England in the United Kingdom under the Companies Act 2006. The address of the registered office is given on page 1. The nature of the Company's operations and its principal activities are set out in the Chairman's Report on page 2. The Company is quoted on the AIM Market in London.

 

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

 

          Basis of preparation

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

 

The Company does not have any subsidiary undertakings.

Associates

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity, or where the Company has a lower interest but the right to appoint a director. The company acquired 29.9% of TerpeneTech Limited ("TerpeneTech") during 2015; TerpeneTech is an associated undertaking.

 

Application of the equity method to associates

The investment in TerpeneTech is accounted for using the equity method. The investment was initially recognised at cost. The Company's investment includes goodwill identified on acquisition, net of any accumulated impairment losses and any separable intangible assets. The financial statements include the Company's share of the total comprehensive income and equity movements of TerpeneTech, from the date that significant influence commenced.

 

Adopted IFRS not yet applied

 

The following Adopted IFRSs have been issued but have not yet been applied in these financial statements:

 

·      IFRS 9 Financial Instruments (effective date 1 January 2018)

·      Amendments to IFRS 2 Share-based Payment: Classification and measurement of share-based payment transactions (effective date 1 January 2018)

·      IFRS 15 Revenue from Contracts with Customers (effective date 1 January 2018)

·      Clarifications to IFRS 15 Revenue from Contracts with Customers (effective date 1 January 2018)

·      IFRS 16 Leases (effective date 1 January 2019)

 

The directors are currently undertaking an exercise to assess the likely impact on the financial statements of the application of the above new standards.

 

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 £639,093 (2016: £1,831,092). Net current assets at that date amounted to £2,842,740 (2016: £807,560).

 

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 2017 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 additional funding to meet the short term needs of the business until the commercialisation of the Company's portfolio is reached.

 

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 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 2018 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 is recognised as accrued in accordance with the terms of the underlying contract and is based on net sales value of product sold by Eden's licensees.

 

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 revenue in full in the period in which it is made.  Where there is an ongoing obligation on the Company, revenue is recognised over the periods to which the obligation pertains.

 

Licence fee payments are recognised on receipt if the Company has discharged all of its on-going obligations associated with the licence granted.  Where there is an ongoing obligation on the Company, revenue is recognised in the periods to which the obligations pertain.

 

Product sales are recorded once product has been shipped to the customer, at which point the ownership and related rights and responsibilities pass to the customer.

 

          Intangible assets

Intellectual property, including development costs, is capitalised and amortised on a straight-line basis over its remaining estimated useful economic life of 7 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 commercially feasible;

- an asset is created that can be identified;

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

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

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

- there are sufficient resources available to complete the project.

 

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

 

Financial instruments

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

 

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

 

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

 

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

 

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

 

Financial assets

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

 

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

 

Equity instruments

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

 

Financial liabilities

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

 

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

 

Leasing

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

 

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

 

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date.  Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

 

Whilst the majority of the Company's revenue is in Euros, the Company also incurs a significant level of expenditure in that currency. As such, the Company does not currently use any hedging facilities and instead choses to keep some of its cash at the bank in Euros.

 

Share-based payments

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

 

Unapproved share option scheme

 

The Company has operated an unapproved share option scheme for executive directors, senior management and certain employees. This scheme was used for any options awarded prior to 28 September 2017.

 

Long-Term Incentive Plan ("LTIP")

 

In 2017, the Company established a LTIP to incentivise the Executives to deliver long-term value creation for shareholders and ensure alignment with shareholder interests. Awards are made annually and are subject to continued service and challenging performance conditions usually over a three year period. The performance conditions are reviewed on an annual basis to ensure they remain appropriate and are currently based on increasing shareholder value. Awards are generally structured as nil cost options with a seven year life after vesting.

 

Other than in exceptional circumstances, an award to an Executive would be up to 100% of salary in any one year and would be granted subject to achieving challenging performance conditions set at the date of the grant. A percentage of the award will vest for "Threshold" performance with full vesting taking place for equalling or exceeding the performance "Target". In between the Threshold and Target there may be pro rata vesting. The Remuneration Committee retains the ability to amend the performance conditions for future grants to ensure that such grants achieve the stated purpose.

 

The LTIP was adopted by the board of directors of Eden on 28 September 2017.

 

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

 

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

 

Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement in the periods during which services are rendered by employees.

 

 

 

Financial risk management

The Company's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risks), credit risk and liquidity risk. Risk management focuses on minimising any potential adverse effect on the Company's financial performance and is carried out under policies approved by the Board of Directors. Further detail is given in note 22 to the financial statements.

 

          Current and deferred income tax

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

          Critical accounting estimates and areas of judgement

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

 

Capitalised development costs and intellectual property

The directors have considered the recoverability of an internally generated intangible asset, being development costs, which has a carrying value of £2.0m (2016: £2.0m) and intellectual property which has a carrying value of £2.9m (2016: £3.2m). The projects relating to these items continue to progress in a satisfactory manner and the directors are confident that the carrying amount of the asset will be recovered in full. This situation will be closely monitored and adjustments made in future periods if future market activity indicates that such adjustments are appropriate.

 

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

 

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

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

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

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

 

Impairment of assets

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

 

Further details on impairment review can be found in note 8 and 9 to the accounts.

 

Going concern

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

 

The ability of the Company to continue as a going concern is ultimately dependent upon the amount and timing of cash flows arising from the exploitation of the Company's intellectual property and the availability of additional funding to meet the short term needs of the business until the commercialisation of the Company's portfolio is reached. The directors consider it is appropriate for the financial statements to be prepared on a going concern basis based on the estimates they have made.

 

 

             2.       SEGMENTAL REPORTING

 

IFRS 8 requires operating segments to be reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for the resource allocation and assessing performance of the operating segments has been identified as the Executive Directors as they are primarily responsible for the allocation of the resources to segments and the assessment of performance of the segments.

 

The Executive Directors monitor and then assess the performance of segments based on product type and geographical area using a measure of adjusted EBITDA. This is the result of the segment after excluding the share based payment charges, other operating income and the amortisation of intangibles. These items, together with interest income and expense are not allocated to a specific segment.

 

 

The segmental information for the year ended 31 December 2017 is as follows:

 

	Licencing Fees	Milestone Payments	Evaluation Fees	Royalties	Grant Funding	Product Sales	Un-allocated	Total
	£	£	£	£	£	£	£	£
Human health and biocides	14,750	-	-	13,274	-	-	-	28,024
Animal health	-	-	-	-	-	-	-	-
Agrochemicals	-	967,686	-	116,405	-	765,072	-	1,849,163
TOTAL	14,750	967,686	-	129,679	-	765,072	-	1,877,187
Adjusted EBITDA	-	-	-	-	-	-	(3,418)	(3,418)
Amortisation	-	-	-	-	-	-	(750,210)	(750,210)
Depreciation	-	-	-	-	-	-	-	-
Share Based Payments	-	-	-	-	-	-	(27,210)	(27,210)
Net Finance Costs	-	-	-	-	-	-	24,198	24,198
Income Tax	-	-	-	-	-	-	123,836	123,836
Share of Associate's loss	-	-	-	-	-	-	(6,289)	(6,289)
Loss for the Year	-	-	-	-	-	-	(639,093)	(639,093)
Total Assets	-	-	-	-	-	-	10,585,878	10,585,878
Total assets includes:
Additions to Non-Current Assets	-	-	-	-	-	-	472,079	472,079
Total Liabilities	-	-	-	-	-	-	(2,071,963)	(2,071,963)

 

 

 

The segmental information for the year ended 31 December 2016 is as follows:

 

	Licencing Fees	Milestone Payments	Evaluation Fees	Royalties	Grant Funding	Product Sales	Un-allocated	Total
	£	£	£	£	£	£	£	£
Human health and biocides	-	14,368	-	-	-	-	-	14,368
Animal health	-	-	-	-	-	-	-	-
Agrochemicals	128,204	31,008	30,580	122,814	123	64,861	-	377,590
TOTAL	128,204	45,376	30,580	122,814	123	64,861	-	391,958
Adjusted EBITDA	-	-	-	-	-	-	(1,076,308)	(1,076,308)
Amortisation	-	-	-	-	-	-	(680,349)	(680,349)
Depreciation	-	-	-	-	-	-	-	-
Share Based Payments	-	-	-	-	-	-	(129,707)	(129,707)
Net Finance Costs	-	-	-	-	-	-	(14,205)	(14,205)
Income Tax	-	-	-	-	-	-	81,895	81,895
Share of Associate's loss	-	-	-	-	-	-	(12,418)	(12,418)
Loss for the Year	-	-	-	-	-	-	(1,831,092)	(1,831,092)
Total Assets	-	-	-	-	-	-	7,795,503	7,795,503
Total assets includes:
Additions to Non-Current Assets	-	-	-	-	-	-	349,149	349,149
Total Liabilities	-	-	-	-	-	-	(1,032,748)	(1,032,748)

 

 

 

 

          GEOGRAPHICAL REPORTING

 

	2017		2016
	£		£
UK	28,024		14,368
Europe	1,849,163		377,590
	1,877,187		391,958

 

The revenue derived from Milestone Payments and Licensing Fees relates to agreements which cover a number of countries both in the EU and throughout the rest of the world.

 

          All of the non-current assets are in the UK.

 

 

3.       EMPLOYEES AND DIRECTORS

 

 

	2017		2016
	£		£
Wages and salaries	511,647		447,075
Pension costs	10,804		4,218
Social security costs	71,572		32,334
	594,023		483,627

 

 

The average monthly number of employees, including directors, during the year was as follows:

 

	2017		2016
Management	5		4

 

Staff costs, including executive directors' remuneration, are included within administrative expenditure in the Statement of Profit or Loss and Other Comprehensive Income. The executive directors are considered to also be the key management personnel of the Company.

 

	2017		2016
	£		£
Directors' remuneration	436,647		382,075
Company contributions to defined contribution pension schemes	10,804		4,218
	447,451		386,293
Non-executive director's fees	75,000		65,000
Total directors' emoluments	522,451		461,293
Share based payment charge relating to all directors	27,210		129,707

 

During the year the remuneration of the highest paid director was £258,408 (2016: £266,780).

 

 

2017						Share based payments
	Salary	Bonus	Fees		Pension		Total
	£	£	£		£	£	£
A Abrey	123,000	75,854	-		4,920	12,479	216,253
T Lupton	-	-	35,000		-	-	35,000
S Smith	147,088	90,705	-		5,884	14,731	258,408
R Cridland	-	-	30,000		-	-	30,000
L Van Der Broek	-	-	10,000		-	-	10,000
	270,088	166,559	75,000		10,804	27,210	549,661

 

 

2016						Share based payments
	Salary	Bonus	Fees		Pension		Total
	£	£	£		£	£	£
A Abrey	120,000	54,000	-		1,920	73,300	249,220
T Lupton	-	-	35,000		-	-	35,000
S Smith	143,500	64,575	-		2,298	56,407	266,780
R Cridland	-	-	30,000		-	-	30,000
	263,500	118,575	65,000		4,218	129,707	581,000

 

 

4.       NET FINANCE COSTS

 

	2017		2016
	£		£
Finance income	22,911		-
Foreign exchange gains	2,526		1,278
Deposit account interest	25,437		1,278
Finance costs:
Foreign exchange losses	-		14,999
Finance fees	1,239		484
	1,239		15,483
Net finance costs	(24,198)		14,205

         

         

5.       LOSS BEFORE INCOME TAX

 

          The loss before income tax is stated after charging:

 

 

	2017		2016
	£		£
Licences and trademarks amortisation	20,446		15,720
Development costs amortisation	290,276		225,141
Intellectual property amortisation	439,488		439,488
Auditors' remuneration:
-   Audit of these financial statements	22,500		21,800
-   All other services	20,779		-
Equity share based payment charge	27,210		129,707
Foreign exchange differences	(22,911)		14,999

 

 

         

6.       INCOME TAX

 

          Analysis of tax income

 

	2017		2016
	£		£
Current tax credit:
Current year	123,836		81,895
Total tax income in statement of profit or loss and other comprehensive income	123,836		81,895

 

Corporation tax

 

No tax charge arises on the results for the year (2016: £nil). Tax losses carried forward, for which no deferred tax asset has been recognised, amount to approximately £22,247,515 (2016: £23,800,466). The tax credit represents the research and development tax credit receivable for the year ended 31 December 2017.

 

Factors affecting the tax charge

 

The UK standard rate of corporation tax is 19.25% (2016: 20.00%).  Current tax assessed for the financial year as a percentage of the loss before taxation is (1.3)% (2016: (4.3)%)

 

The differences are explained below:

 

		2017		2017		2016		2016
		£		%		£		%
Standard rate of corporation tax in the UK				(19.25)				(20.00)
Loss before tax at standard rate of tax		(146,863)				(382,597)
Effects of Losses carried forward/surrendered		55,981		7.4		335,081		17.5
Difference in effective tax rate of equity accounted associate		642		0.1		(2,484)		(0.1)
Other expenses not deductible for tax purposes		9,413		1.2		50,000		2.6
Research and development tax relief		(86,322)		(11.3)		(81,895)		(4.3)
Adjustment to prior year tax charge		(45,577)		(6.0)		-		-
Deferred tax not recognised		88,890		11.7		-		-
Total current tax credit and tax rate %		(123,836)		(16.2)		(81,895)		(4.3)
Deferred tax Un-provided deferred tax liability Un-provided deferred tax asset		(237,330)   3,782,077				-   4,046,079
Un-provided deferred tax asset		3,544,747				4,046,079

 

The adjustment to the prior year tax charge of £45,577 relates to increased submitted R&D tax credit claims compared to that provided for in the 2016 financial statements.

 

The un-provided for deferred tax asset arises principally in respect of trading losses, together with other minor timing differences at 17% (2016: 17%) and has not been recognised due to the uncertainty of timing of future profits against which it may be realised.

 

Reductions in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the company's future current tax charge accordingly.

 

 

7.       EARNINGS PER SHARE

 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

 

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

 

Reconciliations are set out below:

 

 

	Earnings £		2017 Weighted average number of shares		Per-share amount pence
Basic EPS
Earnings attributable to ordinary shareholders	(639,093)		195,705,733		(0.33)
Effect of dilutive securities	-		(5,019,101)		-
Diluted EPS
Adjusted earnings	(639,093)		190,686,632		(0.34)

                                                                                                                                

         

	Earnings £		2016 Weighted average number of shares		Per-share amount pence
Basic EPS
Earnings attributable to ordinary shareholders	(1,831,092)		178,441,431		(1.03)
Effect of dilutive securities	-		-		-
Diluted EPS
Adjusted earnings	(1,831,092)		178,441,431		(1.03)

 

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

 

 

             8.       INTANGIBLE ASSETS

 

	Licences and trademarks		Development costs		Intellectual property		Totals
	£		£		£		£
COST
At 1 January 2017	447,351		3,455,276		8,739,743		12,642,370
Additions	-		324,077		148,002		472,079
At 31 December 2017	447,351		3,779,353		8,887,745		13,114,449
AMORTISATION
At 1 January 2017	384,310		1,474,960		5,571,208		7,430,478
Amortisation for year	20,446		290,276		439,488		750,210
At 31 December 2017	404,756		1,765,236		6,010,696		8,180,688
NET BOOK VALUE
At 31 December 2017	42,595		2,014,117		2,877,049		4,933,761

 

         

	Licences and trademarks		Development costs		Intellectual property		Totals
	£		£		£		£
COST
At 1 January 2016	447,351		3,188,498		8,657,372		12,293,221
Additions	-		266,778		82,371		349,149
At 31 December 2016	447,351		3,455,276		8,739,743		12,642,370
AMORTISATION
At 1 January 2016	368,590		1,249,819		5,131,720		6,750,129
Amortisation for year	15,720		225,141		439,488		680,349
At 31 December 2016	384,310		1,474,960		5,571,208		7,430,478
NET BOOK VALUE
At 31 December 2017	63,041		1,980,316		3,168,535		5,211,892

 

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 seven years.

 

An annual impairment review is undertaken by the Board of Directors. The directors have considered the progress of the business in the current year, including a review of the potential market for its products, the progress the Company has made in registering its products and other key commercial factors to determine whether any indicators of impairment exist.

 

The directors have used discounted cash-flow forecasts, based on product sales forecasts provided by the Company's commercial partners, and have taken into account the market potential for Eden's products and technologies using third party market data that Eden has acquired licences to.  

 

The discount rate and the expected growth rate are two key assumptions used. The discount rate is estimated using pre-tax rates that reflect current market assessments of the time value of money and the risk specific to the asset. The rate used was 10% (2016: 10%).

 

The growth rates are derived from discussions with the Company's commercial partners, as described above.

 

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 over the next 2-5 years.  Management has used what it considers to be reasonably prudent assumptions for that growth based on information from and discussion with strategic partners, however there is a risk that if those forecasts are not achieved then the associated tangible assets could be impaired. 

 

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

 

 

             9.        INVESTMENTS IN ASSOCIATES

		2017		2016
Percentage ownership interest and proportion of voting rights		29.9%		29.9%
		£		£
Non-current assets		584,338		632,158
Current assets		134,034		92,343
Non-current liabilities		(44,493)		(78,537)
Current liabilities		(27,932)		(27,705)
Net assets (100%)		645,947		618,259
Company's share of net assets		193,138		184,859
Separable intangible assets		199,089		213,657
Goodwill		412,649		412,649
Carrying amount of interest in associate		804,876		811,165
Revenue		225,187		144,760
Profit/(loss) from continuing operations		27,687		7,193
Post tax profit from discontinued operations		-		-
100% of total post-tax profits		27,687		7,193
29.9% of total post-tax profits		8,278		2,150
Amortisation of separable intangible assets		(14,568)		(14,568)
Company's share of profit/(loss) including amortisation of separable intangible assets		(6,289)		(12,418)
Other comprehensive income
100%		-		-
29.9%		-		-
Company's share of other comprehensive income		-		-
Total comprehensive income (100%)		27,687		7,193
Company's share of total comprehensive income including amortisation of separable intangible asset		(6,289)		(12,418)
Dividends received by the Company		-		-

 

 

TerpeneTech's registered office is Kemp House, 152 City Road, London, EC1V 2NX and its principal place of business is 3 rue de Commandant Charcot, 22410, St Quay Portrieux, France.

 

An impairment review of the investment in TerpeneTech was undertaken by the Board of Directors. The directors have considered the progress of the business in the current year, including a review of the potential market for its products, the progress TerpeneTech has made in registering its products and other key commercial factors to determine whether any indicators of impairment exist.

 

The directors have used discounted cash-flow forecasts, based on product sales forecasts provided by TerpeneTech, and have taken into account the market potential for those products.

 

The discount rate and the expected growth rate are two key assumptions used. The discount rate is estimated using pre-tax rates that reflect current market assessments of the time value of money and the risk specific to the asset. The rate used was 20% (2016: 20%). The growth rates are derived from discussions with the Company's commercial partner, TerpeneTech, as described above.

 

Based on the review management has carried out, it is satisfied that the Investment is not impaired in respect of its carrying value.

 

The directors have also considered whether any reasonable change in assumptions would lead to an impairment and are satisfied that this is not the case.

 

 

 

10.      TRADE AND OTHER RECEIVABLES

 

		2017		2016
		£		£
Current:
Trade and other receivables		731,968		86,426
Prepayments and accrued income		42,949		14,939
Other debtors		16,992		52,838
Other taxes and social security		115,506		81.895
VAT recoverable		54,629			4,407
		962,044			240,505

 

The directors consider that the carrying value of trade and other receivables approximates to the fair value. Trade debtors are included net of a provision of £nil (2016: £nil). Details of debts past due but not impaired are given in note 22.

 

 

 

11.      CASH AND CASH EQUIVALENTS

 

		2017		2016
		£		£
Short term bank deposits		3,678,383		1,532,341

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

 

 

 

12.      TRADE AND OTHER PAYABLES

 

 

	2017		2016
	£		£
Current:
Trade payables	1,558,279		120,758
Other payables	66,389		40,894
Other taxes and social security	11,836		-
Accruals and deferred income	367,997		803,634
	2,004,501		965,286

 

Included in accruals is an amount of £nil (2016: £570,462), being minimum royalties due to University of Massachusetts Medical School ("UMMS") under the licence agreement Eden signed with UMMS in 2011. In 2017, the Company successfully re-negotiated certain terms of the licence agreement and, as such, the full amount previously accrued was written off. Future royalty amounts will be accrued for as they become payable.  The Company paid a licence amendment fee of £187,781 to UMMS in respect of the renegotiation which is shown on the Income Statement as a Licence Amendment Fee.  The release of the accrual is shown on the Income Statement as an Exceptional Royalties Refund of £570,462.

 

 

 

                                                                                                                                    

	2017		2016
	£		£
Non-current:
Other creditors	67,462		67,462
Aggregate amounts	2,071,963		1,032,748

 

The directors consider that the carrying value of trade and other payables approximates to their fair value. See note 22 for disclosure of the amount of trade payables denominated in foreign currency. See Directors' Report for disclosure of the average credit period taken.

 

 

 

13.      LEASING AGREEMENTS

 

Minimum lease payments under non-cancellable operating leases fall due as follows:

 

		2017		2016
		£		£
Between one and five years		35,000		-

 

 

 

14.      FINANCIAL ASSETS AND LIABILITIES

 

		Note		2017		2016
				£		£
Financial assets at amortised cost
Other receivables		10		962,044		240,505
Cash and cash equivalents		11		3,678,383		1,532,341
				4,640,427		1,772,846

 

Financial liabilities measured at amortised cost

 

Current:

 

Trade and other payables		12		1,558,279			1,032,748
				1,558,279			1,032,748

 

 

15.      CALLED UP SHARE CAPITAL

 

Number:		Class:		Nominal		2017		2016
				value:		£		£
207,064,337
(2016: 184,654,119)		Ordinary		0.01		2,070,643		1,846,542
Alloted,issued and fully paid
Number:		Class:		Nominal		2017		2016
				value:		£		£
207,064,337
(2016: 184,654,119)		Ordinary		0.01		2,070,643		1,846,542

 

 

On 30 September 2017, the Company issued 22,410,218 ordinary shares at 10.7p each for a total consideration of £2,397,893. Share issue costs of £35,250 were incurred and have been charged to the share premium account as detailed in note 16.

 

The number of £0.01 ordinary shares issued in the year totalled 22,410,218 (2016: 25,895,854).

 

 

 

Date		Number of ordinary shares		Aggregate nominal value		Issue Price		Premium on issue		Total share premium
				£		£		£		£
30/06/2017		22,410,218		224,101		0.107		0.097		2,173,792
				224,101						2,173,792

 

 

 

16.      RESERVES

 

	Retained losses £		Share premium £		Merger reserve £		Warrant reserve £		Totals £
At 1 January 2017	(35,047,427)		29,139,654		10,209,673		614,713		4,916,613
Deficit for the year	(639,093)		-		-		-		(639,093)
Cash share issue	-		2,173,792		-		-		2,173,792
Share issue costs	-		(35,250)		-		-		(35,250)
Transfer to other reserves	-		-		-		-		-
Options granted	-		-		-		27,210		27,210
Options exercised/lapsed	49,428		-		-		(49,428)		-
At 31 December 2017	(35,637,092)		31,278,196		10,209,673		592,495		6,443,272

 

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

 

 

17.        RECONCILIATION OF LOSS FOR THE YEAR TO CASH FROM/USED BY OPERATIONS

 

	2017		2016
	£		£
Loss for the year	(639,093)		(1,912,987)
Share of associate's losses	6,289		12,418
Depreciation charges	750,210		680,349
Share based payment charge	27,210		129,707
Finance costs	1,239		15,483
Finance income	(25,437)		(1,278)
Tax credit	(123,836)		(81,895)
	(3,418)		(1,076,308)
Increase in trade and other receivables	(606,033)		(76,089)
Increase in trade and other payables	1,039,215		280,196
Increase in stock	(206,814)		-
Cash from/(used by) operations	222,950		(872,201)

 

18.      CAPITAL COMMITMENTS

 

The Company had no capital commitments at 31 December 2017 (2016: £nil).

 

 

19.      CONTINGENT LIABILITY

 

In September 2015, the Company entered into a Collaboration and Licence agreement with Invention Development Management Company LLC (part of Intellectual Ventures, now called Xinova LLC). As part of this agreement, upon successful completion of a number of different tasks, Xinova will be entitled to a payment which is calculated using a percentage of the value of the Company at a future date. This has been accounted for as a cash-settled share-based payment under IFRS 2.

 

An amount of £67,462, being the estimated fair value of the liability due to Xinova, was recognised during 2016 and included as a non-current liability, as disclosed in note 12 to the accounts. It is not believed that the value of the services provided by Xinova can be reliably measured, and so this amount was calculated based on the Company's market capitalisation at 31 December 2016, adjusted to reflect the percentage of work completed by Xinova at that date based on a pre-determined schedule of tasks.

 

No further charge was made during the year as no services were rendered by Xinova which would give rise to a further payment becoming due.

 

The fair value of the liability has been reviewed at the balance sheet date, given the change in the Company's market capitalisation, and it is deemed that no adjustment is required.  Therefore, the liability of £67,462 continues to be recognised.

 

 

20.      RELATED PARTY DISCLOSURES

 

Disclosures required in respect of IAS 24 regarding remuneration of key management personnel are covered by the disclosure of directors' remuneration included within note 3.

 

Transactions with other related parties are set out below:

 

During the year, Eden invoiced its associate, TerpeneTech, £14,750 for licence fees (2016: £14,368).

 

Also during the year, Eden received net amounts on behalf of TerpeneTech totalling £71,302 (2016: made net payments of £13,923).

 

At the year end, an amount of £36,597 was owed to TerpeneTech (2016: £2,490). This amount is included within Other Payables.

 

 

21.      SHARE-BASED PAYMENT TRANSACTIONS

 

Share Options

 

Unapproved option scheme

 

Eden Research Plc operates an unapproved option scheme for executive directors, senior management and certain employees.

 

		2017
		Weighted average exercise price (pence)			Number			2016 Weighted average exercise price (pence)			Number
Outstanding at the beginning of the year		11			5,025,000			11			6,075,000
Granted during the year		-			-			13			2,050,000
Exercised during the year		-			-			13			(350,000)
Lapsed during the year		-			-			13			(2,750,000)
		11			5,025,000			11			5,025,000

 

The exercise price of options outstanding at the end of the year ranged between 8p and 16p (2016: 8p and 16p) and their weighted average contractual life was 1.5 years (2016: 2.1 years). None of the options have vesting conditions.

 

The share-based payment charge in respect of the unapproved option scheme for the year was £nil (2016: £129,707). The weighted average fair value of each option granted during 2017 was £nil (2016: 13p).

 

           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 the year.

 

During the year, the following options were granted under the LTIP:

 

Description		Date of grant		Number of awards granted		Fair value per award £		Total fair value £
2015 awards		28/09/2017		1,908,680		0.0601		114,712
2016 awards		28/09/2017		2,108,000		0.0461		97,179
				4,016,680				211,891

The share-based payment charge for the year ended 31 December 2017 and subsequent years is set out as follows:

 

Financial year ended 31 December		Share based payment charge £
2017		27,210
2018		85,372
2019		75,108
2020		24,201
		211,891

                                                

The following information is relevant in the determination of the fair value of options granted during the year under the unapproved options scheme under the LTIP operated by Eden Research Plc.

 

		2015 Award		2016 Award
Grant date		28/09/17		28/09/17
Number of awards		1,908,680		2,108,000
Share price		£0.125		£0.125
Exercise price		£nil		£nil
Expected dividend yield		-%		-%
Expected volatility		73.20%		73.20%
Risk free rate		0.80%		0.80%
Vesting period		2 years		3 years
Expected Life (from date of grant)		10 years		10 years

 

For those options and warrants which were not granted under the Company's LTIP, fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural conditions.

 

For those options which were granted under the Company's LTIP, Monte Carlo techniques were used to simulate future share price movements of the Company to assess the likelihood of the performance criteria being met and the fair value of the awards upon vesting. The modelling calculates many scenarios in order to estimate the overall fair value based on the average value where awards vest.

 

 

Warrants

 

		2017				2016
		Weighted average exercise price (pence)		Number		Weighted average exercise price (pence)	Number
Outstanding at the beginning of the year		14		5,497,867		14	5,677,867
Granted during the year		-		-		-	-
Exercised during the year		-		-		13	(180,000)
Lapsed during the year		-		(2,147,867)		-	-
		14		3,350,000		14	5,497,867

 

The exercise price of warrants outstanding at the end of the year ranged between 11p and 30p (2016: 11p and 30p) and their weighted average contractual life was 1.9 years (2016: 2.6 years). None of the warrants have vesting conditions.

 

The share based payment charge for the year was £nil (2016: £nil). The weighted average fair value of each warrant granted during the year was £nil (2016: £nil).

 

 

             22.      FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES

 

Credit risk

 

	2017		2016
	£		£
Cash and cash equivalents	3,678,383		1,532,341
Trade receivables	731,968		86,426
	4,410,351		1,618,767

 

The average credit period for sales of goods and services is 145 days. No interest is charged on overdue trade receivables. At 31 December 2017 trade receivables of £195,404 (2016: £74,340) were past due.  During the year the Company wrote off bad debts in the amount of £nil (2016: £34,138).

 

Trade receivables of £683,984 (2016: £40,724) at the reporting date are held in Euros and £47,984 (2016: £47,984) were held in USD.

 

The Company's policy is to provide for doubtful debts based on estimated irrecoverable amounts determined by reference to specific circumstances and past default experience. At the balance sheet date the directors consider that no provision for doubtful debts is required and that there is no further credit risk.

 

Financial liabilities

 

	2017		2016
	£		£
Trade payables	1,558,279		120,758
Other payables	66,389		40,894
Other taxes and social security	11,836		-
Accruals and deferred income	367,997		871,096
	2,004,501		1,032,748

 

The carrying amount of trade payables approximates to fair value.

 

 

The average credit period on purchases of goods is 173 days. No interest is charged on trade payables. The Company has policies in place to ensure that trade payables are paid within the credit timeframe or as otherwise agreed.

 

Credit risk

As explained above, the directors consider that there is no material exposure to credit risk at the reporting date.

 

Currency risk

The Company publishes its financial statements in pounds sterling and conducts some of its business in US dollars, Swiss Francs and Euros. As a result, it is subject to foreign currency exchange risk due to exchange movements, which will affect the Company's transaction costs and translation of the results. No financial instruments are utilised to manage risk and currency gains, and losses are charged to the Statement of Profit or Loss and Other Comprehensive Income as incurred. At the year end, the Company had the following net foreign currency balances in liabilities.

 

	2017		2016
	£		£
US dollars	448,609		681,054
Euros	916,887		18,660
Swiss Francs	-		1,274
	1,365,496		700,988

 

 

Liquidity risk

 

The interest rate profile of the Company's financial liabilities at 31 December 2017 was:-

 

	Total	Fixed rate financial liabilities	Financial liabilities on which no interest is paid
	£	£	£
Sterling
2017	706,467	-	706,467
2016	331,760	-	331,760
Euro
2017	916,887	-	916,887
2016	18,660	-	18,660
US Dollar
2017	448,609	-	448,609
2016	681,054	-	681,054
Swiss Franc
2017	-	-	-
2016	1,274	-	1,274

 

 

All the Euro, Swiss Franc and US Dollar liabilities are held within trade creditors and are non-interest bearing.

 

Maturity of financial liabilities

 

The maturity profile of the Company's financial liabilities at 31 December 2017 was as follows:-

 

 

	2017		2016
	£		£
In one year or less, or on demand Over one year	2,004,501 67,462		965,286 67,462
	2,071,963		1,032,748

 

 

Liquidity risk is managed by regular monitoring of the Company's levels of cash and cash equivalents, debtor and creditor management and expected future cash flows. See note 1 for further details on the going concern position of the Company.

 

Market price risk

The Company's exposure to market price risk comprises interest rate and currency risk exposures. It monitors these exposures primarily through a process known as sensitivity analysis. This involves estimating the effect on results before tax over various periods of a range of possible changes in interest rates and exchange rates. The sensitivity analysis model used for this purpose makes no assumptions about any interrelationships between such rates or about the way in which such changes may affect the economies involved. As a consequence, figures derived from the Company's sensitivity analysis model should be used in conjunction with other information about the Company's risk profile.

 

The Company's policy towards currency risk is to eliminate all exposures that will impact on reported results as soon as they arise. This is reflected in the sensitivity analysis, which estimates that five and ten percentage point increases in the value of sterling against all other currencies would have had minimal impact on results before tax.

 

On the other hand, the Company's policy is to accept a degree of interest rate risk as long as the effects of various changes in rates remain within certain prescribed ranges. On the basis of the Company's analysis, the only financial liabilities held by the Company are loans which are subject to a fixed rate of interest. As such it is considered that any increases in interest rates would not have had an impact on the Company's loss before tax for the year.

 

Capital risk management

The primary objective of the Company's capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholder value.

 

The Company seeks to enhance shareholder value by capturing business opportunities as they develop. To achieve this goal, the Company maintains sufficient capital to support its business.

 

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions.

 

The Company looks to maintain a reasonable debt position by repaying debt or issuing equity, as and when it is deemed to be required.

 

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2017 and 31 December 2016.

 

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% (2016: below 10%).The Company includes within net debt, interest bearing loans and borrowings, a loan from a venture partner, trade and other payables, less cash and cash equivalents.

 

23.        DEFINED CONTRIBUTION PLANS

The Company operates a defined contribution pension plan.

The total expense relating to these plans in the current year was £10,804 (2016: £4,218).