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Eden Research - how long can it hide the Terpenetech Panama Pump fraud? most

By Tom Winnifrith | Monday 1 May 2017

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.

The unravel at AIM listed fraud Eden Research may be just days away. Because, its partner in crime, Terpenetech has until April 30 to file its accounts for the year to 31 July. Normally it files on deadline day. Any delays will be telling. But then so too will the numbers. Its a lose lose for the fraudsters. You will remember how this fraud worked....

Eden and Terpenetech have been joined at the hip for years. The first transaction took place in 2011 when Eden sold something to Tepenetech (a near dormant company with no money). Eden booked that as revenue and "an amount falling due within one year" - a current asset. Hmmm. It stayed as a current asset in Eden's accounts for 2011, 2012, 2013 and 2014. The bill was finally paid in 2015. But how was it paid?

In August 2015 Eden sold another asset to Tepenetech, for £600,000. Of course Terpenetech had no cash at all. But luckily Eden invested £920,000 to take a 29.9% stake in Terpenetech and ( since it had no cash) paid for that in shares. Quite why 29,9% of a company with no assets, trivial sales and no prospect of generating cash was worth £972,000 is a tad confusing. handily those shares that Tepenetech picked up left it holding just under 3% of Eden so it had no need to declare any share sales.

Thus it dumped the lot ( at well below the 20p nominal issue price as this was a hurried exercise) and that gave it enough cash to pay the £600,000 and that bill from 2011. This is what is termed a panama pump fraud.

Now the trouble is that when Terpenetech's accounts for the year to July 31 2016 finally come out we will again see that it is a worthless company and that this massive licensing deal signed with Eden has not changed anything. That begs the question of whether Eden's hapless auditors will force it to write down the carrying value of its stake in Terpenetech. The bigger question is whether the FRC is going to force Eden to restate historic accounts for 2015 since that £600,000 sale was clearly bogus?

Eyes peeled ... we await the companies house filing.

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