By Tom Winnifrith, The Sheriff of AIM | Wednesday 17 February 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
I have today written to my good friends at the Financial Reporting Council asking for a full formal investigation into the audited accounts of Eden Research PLC (EDEN) for 2011, 2012, 2013 & 2014 which are all fraudulent and - ahead of schedule - for the 2015 accounts which will be fraudulent. The letter follows.
Formal Resquest for investigation into accounts of Eden Research PLC for 2011, 2012, 2013, 2014 & 2015
Eden Research is a publicly listed company which has misled its investors with fraudulent accounts for calendars 2011, 2012, 2013 & 2014 and which will mislead in 2015 if you do not take action. I therefore ask you to launch a formal enquiry.
The issue is Terpenetech Ltd and how this related party company has been used to book bogus revenue for Eden. On 23 June 2011 Eden announced:
Eden Research plc, a leading UK agrochemical and encapsulation development company, is pleased to announce that it has signed a MOU for both a marketing and licence agreement with TerpeneTech Limited.
The licence agreement will grant TerpeneTech the right to use Eden's terpene encapsulation system, for specific applications initially, within the consumer and agro-industrial biocide areas. A licence fee of €100,000 will be payable to Eden, as well as on-going royalties on net sales of products.
Herb Friend, Director, is CEO of FASST Products LLC, an American company specializing in the development, manufacture, marketing and distribution of safe, non-toxic, and ecologically friendly insect repellent products based on Geraniol, one of the terpenes used by Eden in its own range of products.
That announcement was made on 23 June 2011. But Terpenetech did not actually exist at that point. Companies House records HERE show that it was incorporated on 13 July 2011 and that Herb joined the board on 27 July 2011.
The next problem is that 100,000 Euro, Here are the Terpenetech accounts for the years to 31 July 2012 (HERE), 2013 (HERE) and 2014 (HERE). You will see the intangible asset (that is the license fee) is gradually being amortised. It is the company's only asset other than the original £100 share capital. What you will also see is the amounts owed within a year and after a year gradually increasing. That would be the same 100,000 Euro owed to Eden plus other bills picked up along the way.
Eden booked this as revenue but also a trade receivable (within 12 months) in the 2011 accounts. It remained a receivable in 2012, 2013 and 2014. Since throughout this period Terpenetech was controlled by a 50% shareholder who was also a consultant to Eden (Mr Livingston-Campbell) not only should this have been noted as a related party in the accounts but also the revenue and trade receivable should have been written off. It was not.
It gets worse. On 25 August 2015 Terpenetech (still with no money) agreed to buy another license off Eden for £600,000. At the same time Eden bought 29% of Terpenetech by issuing to Terpenetech £920,000 of Eden sghares which were then sold to mug investors on AIM so allowing Terpenetech to repay the £600,000 as well as the 100,000 Euro from 2011.
The 2015 accounts whe published will show the £600,000 as revenue but is it real revenue or just a panama pump securities fraud? It is clearly the latter. Moreover they will value 29% of Terpenetech - a patently worthless business as its accounts demonstrate - at £928,000. How can that be justified? What independent review justifies the valuation?
I urge you to launch a formal investigation into the accounts of Eden Research 2011 (for overstating revenue) and 2011, 2012, 2013 & 20114 for overstating trade receivables and to put Eden on notice regarding its 2015 accounts and the treatment of its shares in Terpenetech.
I remain,Your obedient servant,
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