REG - OptiBiotix Health - Final Results
28/06/2023 07:00
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RNS Number : 0841E OptiBiotix Health PLC 28 June 2023
OptiBiotix Health plc
('OptiBiotix' or the 'Company' or the 'Group')
Final results
Notice of Annual General Meeting
OptiBiotix Health plc (AIM: OPTI), a life sciences business developing
compounds to tackle obesity, high cholesterol, diabetes and skin care
announces its audited results for the 12 months ended 31 December 2022. The
Group's results reflect its new structure following the listing of ProBiotix
Health plc (PBX) on the AQSE Growth Market on 31 March 2022 with its costs and
revenues not included in the accounts post listing. This makes meaningful
comparisons with previous years difficult.
Highlights
á Admission of ProBiotix Health plc to the AQSE Growth Market on 31
March 2022 raising £2.5m for the further development of our former Probiotic
subsidiary and providing OptiBiotix shareholders with a dividend in specie of
over £10m
á Launch of LeanBiome® in The Hut Groups ('THG') impact lean product
range and product range extension with a breakfast smoothie with excellent
customer reviews
á Launch of GoFigure® products in India with Apollo Hospitals &
Pharmacies in September 2022
á Launch of GoFigure® products containing SlimBiome® in China on
Tmall.com with over 500 million monthly active users
á Regulatory approval by the Saudi Food & Drug Authority (SFDA) for
the sale by our exclusive distributor Nahdi Medical Co (Nahdi) of GoFigure®
shakes and bars containing SlimBiome® and subsequent launch in January 2023
á Registration of four new on pack health claims in Australia and New
Zealand for SlimBiome® for feelings of fullness, reduction of hunger, and
improvement of the gut microbiome and improving digestive health
á British Retail Consortium accreditation, confirming our compliance
with the Global Food Safety Initiative ('GFSI') benchmark
á A joint development agreement with Firmenich, the world's largest
privately owned taste and fragrance company, to develop new products
containing SweetBiotix®
á Publication of a peer-reviewed scientific study of one of our
second-generation SweetBiotix® products, confirming its suitability as a
healthy replacement for sugar
á Significant scientific and commercial progress in the development of
our microbiome modulators
á No debt with valuable assets in SkinBiotherapeutics and ProBiotix
Health providing a strong balance sheet
Post period
á Strong sales growth of own brand products on e-commerce. The listing
of SlimBiome® Medical and Gofigure® products on Amazon UK in February 2023,
and Slimbiome® Medical on Amazon Germany and Walmart USA in May 2023. We
anticipate further international listings on Amazon throughout 2023 including
Amazon India, the Gulf States, and Amazon USA. This is all part of the
internationalisation of our own brand products online
á New orders from both The Hut Group (THG) and Holland & Barrett in
the UK
á Three new partners in Asia who have all placed initial orders for
SlimBiome®
á Published the results of a third human study on SlimBiome®
demonstrating statistically significant benefits to appetite and hunger
regulation with a single dose (3g) of SlimBiome®
á Good progress from both partners in the commercial scale up of our
second-generation SweetBiotix® family of products and microbiome modulators
offering exciting potential for future growth
The Report & Accounts which will be shortly posted to shareholders contain
a Notice of Annual General Meeting ('AGM') which will be at 11:00am on 26 July
2023 at Walbrook PR Ltd, 75 King William Street, London, EC3V 9HD. Stephen
Hammond and Chris Brinsmead will not put themselves for re-election as
directors of the Company and will therefore cease to be directors following
the conclusion of the AGM.
Stephen O'Hara, CEO of OptiBiotix Health plc said: "2022 has been a
challenging year with high stock levels accumulated from the large amount or
orders placed in Q4 2021 by two large partners and low sales in H1 2022
(£118K) caused by the global downturn. As anticipated, sales improved in H2
(£339k) but were insufficient to make up the H1 deficit with full year
revenues from customer contracts of £457K. A further ten metric tonnes of
SlimBiome, approximating to £300k was taken from stock held by distributors
for our two largest partners, and not included in these accounts. Once this
stock overhang is clear this should have a material impact on reportable
revenue.
"Our focus in 2023 is on looking forward with the aim of each business unit
reaching profitability by the end of the year. We believe this can be achieved
by a reduction in costs, a focus on existing partners returning to forecast,
bringing in new partners particularly in the USA and Asia, and expanding
e-commerce channels to reduce partner dependency. With our products winning
awards in Europe, Asia, and the USA and an increasing number of large
companies like The Hut Group, Holland and Barrett, Apollo Hospitals, and Nahdi
Medical using our products, we believe we are in strong position for further
growth.
"Despite a challenging 2022 the group has no debt, a strong balance sheet,
products with excellent customer reviews, second generation products close to
commercialisation, and retains significant exposure to the considerable growth
potential of the microbiome through its shareholdings in ProBiotix Health plc
and SkinBiotherapeutics plc".
This announcement contains information which, prior to its disclosure, was
considered inside information for the purposes of the UK Market Abuse
Regulation and the Directors of the Company are responsible for the release of
this announcement.
Forward-Looking Statements
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.
For further information, please contact:
OptiBiotix Health plc www.optibiotix.com (http://www.optibiotix.com/)
Neil Davidson, Chairman Contact via Walbrook below
Stephen O'Hara, Chief Executive
Cairn Financial Advisers LLP (NOMAD) Tel: 020 7213 0880
Liam Murray / Jo Turner / Ludovico Lazzaretti
Peterhouse Capital Limited (Broker) Tel: 020 7220 9797
Duncan Vasey / Lucy Williams
Walbrook PR Ltd Mob: 07876 741 001
Anna Dunphy
About OptiBiotix - www.optibiotix.com (http://www.optibiotix.com/)
OptiBiotix Health plc (AIM: OPTI), which was formed in March 2012, brings
science to the development of compounds which modify the human microbiome -
the collective genome of the microbes in the body - in order to prevent and
manage human disease and promote wellness.
OptiBiotix has an extensive R&D programme working with leading academics
in the development of microbial strains, compounds, and formulations which are
used as active ingredients and supplements. More than twenty international
food and healthcare supplement companies have signed agreements with
OptiBiotix to incorporate their human microbiome modulators into a wide range
of food products and drinks.
OptiBiotix is also developing its own range of consumer supplements and health
products. The Company's current areas of focus include obesity, cardiovascular
health, and diabetes.
Chairman and CEO report
The Group addresses a very large and fast-growing market with a unique
portfolio of proven ingredients and finished products. The year has seen
progress in both scientific human studies and regulatory approvals in key
international markets demonstrating our products effectiveness and global
acceptability. After strong sales growth through 2019 (£745K), 2020(£1.5m)
and 2021 (£2.2m) the Company expanded its team in 2021 including the
appointment of CEO, Rene Kamminga to run the prebiotic business, to meet
growth demands post Covid but as with many companies in the industry suffered
from lower sales in 2022 caused by the global economic uncertainty that
followed the Russian invasion of Ukraine.
This was compounded by the large amount of orders placed in Q4 2021 resulting
in high stock levels held by customers accompanied by delays in launching new
products and re-ordering due to the global economic down turn in 2022. The
Company are pleased that its products have begun to be commercialised by a
number of large and well known commercial partners. Agreements with these
partners are time consuming with extensive due diligence and consumer testing
prior to launch. Launch of products with these partners is a significant
endorsement of our products which we believe in the absence of recent global
economic events (COVID and Ukraine) would have led to strong revenue growth.
Post period the Company has responded to these changes in the external
environment by a reduction in costs, a focus on sales and partners delivering
to forecast, and building up operational resilience by broadening its partner
base and building its ecommerce channels to reduce partner dependency. The
Company believes subject to no significant change to the external environment
these measures will return the business to the high levels of growth and
EBITDA profitability achieved in 2020 and 2021. The Group remains financially
robust with no debt, and valuable assets in SkinBiotherapeutics and ProBiotix
Health providing a strong balance sheet, with commercialisation of our
second-generation technologies affording potential for future growth and
shareholder value.
Strategic overview
OptiBiotix Health is a life sciences business founded on the development of
prebiotic and probiotic compounds to tackle obesity, cardiovascular disease,
diabetes and skincare: all markets offering strong growth potential in every
part of the world. The Company has built a broad portfolio of microbiome
assets in this field including prebiotic products like SlimBiome®,
WellBiome®, SweetBiotix®, and Microbiome modulators within its core business
and skincare through SkinBiotherapeutics and probiotics through ProBiotix
Health plc. These create a diverse portfolio of opportunities in an emerging
area of healthcare.
The first phase of the Company's two-stage growth strategy was to establish
the credibility of our science and financial sustainability of each business
through an initial focus on building sales of our first-generation products
(principally SlimBiome® in prebiotics and LP(LDL)® in probiotics) though
business-to-business deals with partners in multiple territories around the
world, starting in Europe, while at the same time pursuing the development of
our more innovative second-generation products that offer potentially larger
future returns. This was achieved in 2020 and 2021 with combined revenues of
£2.2m and both the Probiotic (now ProBiotix Health plc) and Prebiotic trading
businesses being EBITDA profitable in both years and the Group showing a
£5.8m profit in 2020 and £6.2m in 2021, albeit largely due to the gain in
the value of its investments.
With SlimBiome® and LP(LDL)® winning international awards, gaining excellent
customer reviews, and becoming established ingredient brands with a number of
key national and international partners in 2019 we started to move towards
developing and testing market acceptance of our own label branded products
(e.g GoFigure, SlimBiome Medical, and CholBiomeX3) on our online store. The
aim was to use the online store as a display window to attract B2B partners
and major retailers and assess the potential of selling final products direct
to consumers. With positive customer feedback on our own products and more
consumers buying online as a result of the COVID pandemic (Mintel, Vitamins
and Supplements: Inc Impact of COVID-19 - US, August 2020) a decision was made
in 2021 to develop this into a business unit with the appointment of a
E-commerce director. This was one of a number of changes made in 2022 to allow
the Company to respond to changes in the external environment. These also
included:-
á Gradually moving from ingredient sales to the sale of finished own
brand SlimBiome Medical or private label products, both through larger
partners and direct-to-consumer through our own online store, Amazon, and
other outlets such as Tmall.com in Asia. This increases margins and reduces
partner dependency.
á Shifting the focus from Europe to large partners in key strategic
markets, particularly the USA and Asia. This broadens the partner base and
reduces revenue dependency on a small number of partners whilst accessing
larger markets with substantially higher sales volumes.
á Expanding our first-generation product portfolio of functional
ingredients by extending our technology into new channels such as sports
nutrition with LeanBiome® and new product areas such as WellBiome®, and
á Progressing the commercialisation of our second-generation products,
SweetBiotix® and Microbiome Modulators.
This was accompanied by a number of new appointments throughout 2022 in
marketing, business development in the USA, and e-commerce to support growth
of the business. Whilst global economic conditions temporarily impacted on
progress during 2022 we believe the changes made in 2022 increase the
Company's resilience to volatility in the external environment and are seeing
sales slowly returning to previous forecast levels as market conditions
improve. The other key point is that now we have established the SlimBiome¨
brand and OptiBiotix's market credibility customers are starting to place
orders without having to go through a complex negotiation process.
Commercial and scientific overview
Key developments during the financial year and their impact on potential sales
growth in 2023 include:
á The achievement in January 2022 of British Retail Consortium
accreditation, confirming our compliance with the Global Food Safety
Initiative (GFSI) benchmark. This certification by one of the leading
international food safety standards, accepted by most large retailers and
their suppliers worldwide, is an important support to our commercial strategy
of increasing our sales of final product solutions to retail partners and will
enhance opportunities in other retail channels both within the UK and
international markets.
á Our entry into the sports nutrition market with the launch of
LeanBiome®, a patented blend of dietary and prebiotic fibres and a trace
mineral, developed to support athletes increase lean muscle mass and to
improve metabolism, gut health and satiety. Our distribution agreement with
leading e-commerce retailer The Hut Group PLC ('THG'), signed in December
2021, saw LeanBiome® launched in January 2022 in a small number of products
including its Impact Diet Lean product as part of its My Protein range in the
UK and at the end of H1 2022 a product extension with a breakfast smoothie.
Both products are receiving excellent customer reviews. High inflation in
2022 led to consumers becoming more price-conscious leading to a trading down
of high protein products which reduced the forecast demand for protein powder
shakes across the industry and a lower than forecast sales from THG. With
protein prices slowly returning to previous levels we are seeing a gradual
return to sales growth in this area.
á Prior to ProBiotix's separate listing, publication in January 2022 of
a third human volunteer study on the clinical efficacy of LP(LDL)®,
demonstrating through a placebo-controlled trial that LP(LDL)® delivered
large and statistically significant reductions in total cholesterol, LDL-C
(bad) cholesterol and Apolipoprotein B (widely accepted as the most important
causal agent of atherosclerotic cardiovascular disease), with no compliance,
tolerance or safety issues. The results of this and other studies suggest
efficacy similar to low level statins and other treatments more typically
associated with pharmaceuticals, suggesting potential in high value
pharmaceutical consumer markets for the use of LP(LDL)® in individuals who
are unwilling or unable to tolerate other treatments.
á Admission of ProBiotix Health plc to the AQSE Growth Market on 31
March 2022, raising £2.5m for the further development of our former Probiotic
subsidiary through a placing and subscription of new shares, while giving our
own shareholders a dividend in specie of 0.554673 ProBiotix share for every
OptiBiotix Health share held. The Group retained a 44% shareholding in
ProBiotix Health, valued at circa £11.2m at the end of 2022. An impairment
provision (see note 11) has been made to take account of the reduction in PBX
share price from 31(st) March 2022 and the release of these accounts.
á Good progress in the development of OptiBiotix Health India. Its
formation has allowed us to reduce the administrative and tax burden of
manufacturing and selling ingredients and finished products in India. We see
the lower manufacturing and transport costs with geographical proximity to the
countries in the region a driver of future growth in the Asia Pacific region.
á Certification in June 2022 of LeanBiome® as an Informed Ingredient
for Sports Nutrition: an important industry certification demonstrating
through rigorous independent testing by an authorised body that it is free
from substances that are banned in sport. This is a significant step in
attracting major sports nutrition companies to incorporate LeanBiome® in
their products.
á The appointment in September 2022 of Nutraconnect Pte Ltd, a
nutraceutical business growth acceleration service headquartered in Singapore,
as a new commercialisation partner for SlimBiome® and LeanBiome® in the Asia
Pacific region. This has led to a number of new partners signing agreements
and placing first orders for products in 2023
á The launch in September 2022 of our GoFigure range of weight
management products containing SlimBiome¨ in several pharmacies across India
owned by Apollo Hospitals & Pharmacies. This number has doubled in 2023
with the aim of having products in more than 1000 stores by the end of 2023
á Regulatory approval in October 2022 by the Saudi Food & Drug
Authority (SFDA) for the sale by our exclusive distributor Nahdi Medical Co
(Nahdi) of GoFigure shakes and bars containing SlimBiome®. This has allowed
the launch in January 2023 of the GoFigure range of weight management products
through Nahdi's pharmacy network and e-commerce platform. The registration
process also provides approval in the other five countries that are members of
the Gulf Cooperation Council.
á Completion in October 2022 of a systematic review of the scientific
literature relating to SlimBiome®, in accordance with the Australia New
Zealand Food Standards Code (FSANZ), that enables us to make four new health
claims for SlimBiome® on product packaging and in advertising; these relate
to feelings of fullness, reduction of hunger, and improvement of the gut
microbiome and improving digestive health. These help us to differentiate
SlimBiome® from competitors.
á Launch in late November 2022 of an online shop for GoFigure products
containing SlimBiome® on a leading e-commerce platform in China, Tmall.com,
allowing us to sell direct to consumers in this huge and growing market. We
are seeing steady sales growth in this market in 2023, particularly of our
fruit gummies.
á Publication of a peer-reviewed study (see Prebiotic Potential of a New
Sweetener Based on Galactooligosaccharides and Modified Mogrosides - PubMed
(nih.gov) (https://pubmed.ncbi.nlm.nih.gov/35830712/) ) of one of our
SweetBiotix® products confirming its sweetness, bulking and prebiotic fibre
properties and concluding it could be an innovative, healthy substitute for
sugar in a range of everyday products. Independent scientific confirmation
of SweetBiotix® by leading scientists in the field is key to creating
interest and industry credibility and provides important marketing materials
for commercial launches.
á Significant progress by one of our US partners in the commercial scale
production of SweetBiotix®, with final product tested and accepted and now
awaiting further structural analysis and formal taste testing to determine the
regulatory pathway before progressing to a launch.
á Conclusion of a new joint development agreement, announced in July
2022, with Firmenich, the world's largest privately owned taste and fragrance
company, and one of the world's largest supplier of Stevia, to develop new
products containing our second generation SweetBiotix® compound, in return
for sales-based milestone and royalty payments. This agreement with one of the
leaders in the field after years of due diligence is a substantial validation
of the SweetBiotix science. This continues to progress at pace in 2023. We
believe that the recent scientific publication and the deal with Firmenich,
which is merging with DSM, the world's largest ingredients supplier, to create
a NewCo with a US $11.4bn turnover, are major steps forward in bringing
SweetBiotix® to market. Firmenich is now making substantial progress in
producing SweetBiotix® and in optimising the manufacturing process, and we
see significant opportunity here in 2023.
á Significant scientific and commercial progress in the development of
our microbiome modulators: a range of second-generation products which
selectively enhance the growth rate of specific types of bacteria and create
the potential for targeted treatment of a range of human diseases. The
manufacturing scale up process was delayed during COVID but completed in late
2022. Structural and functional analysis has been taking place during 2023 to
determine novelty and the regulatory pathway.
Results
The Group's results reflect its new structure following the listing of
ProBiotix Health ('PBX') on the AQSE Growth Market on 31 March 2022. The
timing of the listing means that the accounts include the results of PBX for
the three months to the end of March 2022 when it became a plc, after which
PBX has been treated as an associate for accounting purposes with its revenues
and costs removed and only OptiBiotix's (44%) proportion of its profit and
loss included in the Group's accounts. This makes comparisons with previous
years difficult.
The results show revenue from continuing operations for the year of £457K
(2021: combined sales of £2.2m), reflecting both the separate flotation of
ProBiotix Health plc and delays in the placement of orders by our new larger
partners, which entered the year with substantial stocks from orders placed in
late 2021, and then delayed re-ordering because of the global economic
uncertainty created by the Russian invasion of Ukraine.
Administrative expenses (excluding non-cash items such as share-based payments
and amortisation) were £2.5m (2021: £2.1m), including ProBiotix costs to the
end of March and a number of one-off pre-listing and recruitment expenses.
This includes a one off bad debt provision of £492K reflecting a more
conservative approach to debtors and stock considering the volatility of the
external environment. We continue to pursue outstanding debtors and believe
a proportion of this provision will be recovered in 2023.
The listing of PBX on AQSE materialised a previously unrecognised asset
allowing the Group to report a profit of £2.59m largely from the gain on this
investment offset by a loss on revaluation of the SkinBioTherapeutics plc
('SBTX') shares. The Group retains a healthy balance sheet with gross assets
of £11.6m (2021: £20.1m) and net cash at the year-end of £1.1m (2021:
£2.0m).
Post period end the Group sold 1,211,567 SBTX shares through Cenkos, SBTX's
broker in February 2023 at an average price of 20.4p, generating gross
proceeds of £247K.
The Board senior management and advisers
We have taken decisive action in December 2022 and in 2023 to reflect the
separate listing of PBX and reduce Board, management and advisory costs in
order to ensure each part of the business and subsequently the Group return to
operational profitability as soon as possible. These actions include:-
á On 28 December 2022 the Company served three months' notice to
terminate the joint brokership of Cenkos Securities plc. Peterhouse Capital
Limited continue as the Company's sole broker.
á Rene Kamminga, who was appointed CEO of OptiBiotix Ltd in March 2021
left the business on 28 February 2023 and Group CEO Stephen O'Hara, who led
the ProBiotix business in 2022, resumed the role of CEO of OptiBiotix Ltd.
á All directors volunteered to accept a 20% reduction in their
remuneration from 1 January 2023.
á With the departure of Rene the Company has twice as many
non-executive directors as executive directors. As a result Stephen Hammond
and Chris Brinsmead have agreed to step down at the Company's upcoming Annual
General Meeting in July 2023.
We anticipate further restructuring of the board and management team of
OptiBiotix as ProBiotix Health plc develops its independence and we reduce the
number of senior employees currently shared with ProBiotix Health plc under
shared service agreements.
Looking ahead, the focus of the Company will be on investing in areas that
offer the highest return. To support that process and ensure a focus on
profitability the Company is developing profit and loss metrics for each part
of the business with the aim of each area (USA, India, Ecommerce, B2B)
reaching operational profitability, at least on a monthly basis by the end of
the calendar year.
Outlook
Our focus in 2023 is on looking forward and moving the Company to operational
profitability. We believe we will achieve this by a reduction in central costs
and by the promotion of sales, both direct to consumers via ecommerce channels
and through our existing partners delivering on forecasts and bringing in new
customers, particularly in the USA and Asian markets. There has been progress
in each of these areas as outlined below which highlights some of the changes
made since the beginning of 2023 year and provides a progress update on each
of the business units. In the first part of 2023 we have:-
á Invested significantly in new e-commerce channels, including Amazon
in the UK, and Walmart in the USA, as well Tmall.com in China. This has led
to rapid sales growth (see E-commerce report) which with continued investment
we anticipate will continue throughout 2023 and beyond.
á Shifted our commercial focus to selling SlimBiome® Medical sachets in
Europe and SlimBiome shots in India and the Gulf states. These are designed
to be consumed before meals and help users manage their weight by making
consumers feel fuller for longer and reducing cravings for sweet and savoury
snacks. This is a highly differentiated product which leverages growing market
interest in injectable appetite control drugs like semaglutide. SlimBiome®
Medical can be used with any weight management plan or calorie restriction
plan and complements rather than competes in a crowded marketplace. The
product enjoys high margins and became a top-selling line on Amazon UK in
2023.
á Re-engaged with major partners that underperformed against our sales
expectations in 2022, leading to:
- A significant new investment in marketing by Optipharm in
Australia, coupled with the launch online of their Optislim and Optiman ranges
containing our OptiBiome prebiotic fibre;
- New orders from both The Hut Group and Holland & Barrett in
the UK and
- A substantial increase in the number of Apollo pharmacies and
Holland and Barret shops in India selling GoFigure products accompanied by a
launch of products on Amazon India on 16(th) May 2023.
We anticipate further orders from all these partners in the second half of the
current year.
á Successfully launched new products, including our reformulated
WellBiome® functional fibre and mineral blend, which has been made available
via our own online store and on Amazon UK in recent weeks.
á In the last two months recruited three new partners in Asia who have
all placed initial orders for SlimBiome and a major US weight management
brand, with which we will be launching during the second half of 2023,
initially in Europe and later in the USA.
á Published the results of a third human study on SlimBiome® which
demonstrated statistically significant benefits to appetite and hunger
regulation, with no safety, compliance or tolerance issues reported by the
participating volunteers. This study underlines the effectiveness of a single
dose of SlimBiome¨ in delivering hunger-free weight loss by non-invasive
means. This study was timely given the growing consumer, media and
pharmaceutical company interest in this field following NICE's approval of the
injectable drug semaglutide.
North America Sales and Business Development
The Company has received a number of orders from US partners who are owners of
leading weight management or sports nutrition brands in the USA. This is a
major endorsement of the products and is the result of presentations at
conferences and exhibitions and numerous customer visits by our US Business
development Director, Zac Sniderman. These will show in 2023 H1 accounts if
manufactured and delivered by the end of June or more likely H2 2023.
Discussions are advancing with a number of international Multilevel Marketing
(MLM) companies based in the USA with possible sales in H2 2023 for Asian
markets. Discussions with an e-commerce brand have continued at a steady
pace in 2023 for a possible end of the year launch. In addition to above we
have late-stage discussion with a number of e-commerce brands in both the US
and Canada with potential sales in H2 2023.
During the first half of 2023 we have seen strong sales growth of Dietworks
Appetite Control gummies in the USA in both e-commerce channels and
traditional retailers and we foresee increased sales in H2 2023 with the
possibility of line extensions.
We are in discussions with two US partners who are interested in purchasing
WellBiome® with a potential US launch planned for Q4 2023. The new projects
would incorporate WellBiome in a final product for healthy aging and
hydration.
Consumer Health and Ecommerce sales
The OptiBiotix online website has been transitioned from a shop window used to
demonstrate product possibilities to partners to a commercial website and
optimised to improve the customer experience. The ecommerce business has
opened up a number of new channels to market including Amazon UK and Walmart
USA to allow customers from different locations/sites to have greater
accessibility to our products. Increasing awareness on platforms such as
Amazon UK have allowed brands such as SlimBiome to become a best seller within
their respective categories. Since the end of 2022 through to April 2023 we
have focused more on promoting SlimBiome® Medical as a unique product which
reduces hunger and cravings which can be used as part of any calorie
restriction weight management plan. This has led to rapid growth with the
ecommerce business reaching operational profitability in April and May 2023
with the highest monthly sales on record and a sales increase of 1,200%
(Figure 1). We are seeing good growth on the e-commerce platform, T-Mall, in
China, particularly with sale of our fruit gummies.
In 2023 we plan to grow our brands presence and securing listings on various
channels including Amazon Europe and Amazon India whilst pushing hard for
sales and customer loyalty. The addition of WellBiome® to the online store
in May 2023 is part of a strategy to enhance the range of different product
offerings and products on the website throughout 2023. Current product line
extensions planned for SlimBiome® include a tomato and herb soup, a chicken
soup, a Golden Syrup porridge, high protein chocolate bars and an indulgent
range.
As we add more products, open up channels to new markets, and bring on new
applications we should see continued growth within the Ecommerce business in
2023 and beyond.
Slimbiome Medical online sales growth
Our medical device registration for SlimBiome® Medical runs out in May 2024.
Brexit has added complexity and additional cost in reregistering a CE mark
medical device with a £100k cost to renew the registration and an annual
maintenance cost of £20-30K per annum per device (unflavoured and flavoured
SlimBiome Medical). Given the CE mark is only applicable in Europe and we have
similar products non CE marked in India and the Gulf states we are seeing this
as an opportunity to rebrand and broaden the offering with different flavours
to a wider customer group who may be dissuaded from purchasing a product with
a medical connotation.
OptiBiotix Health India
OptiBiotix Health India (OHI) was formed in November 2021 as a mid to long
term strategic investment in the world's most populous nation and forecast to
have the highest population of medium to high level income customers in the
world. Currently most middle-class consumers live in the European Union (EU)
and the United States, but over the next decade, the majority will shift
heavily toward India, with one in four global middle-class consumers
expected to reside in India by 2035
https://www.asianstudies.org/publications/eaa/archives/the-middle-class-in-india-from-1947-to-the-present-and-beyond/
(https://www.asianstudies.org/publications/eaa/archives/the-middle-class-in-india-from-1947-to-the-present-and-beyond/)
.
The formation of OHI has helped OptiBiotix avoid high import taxes and control
the purchase and sale of ingredients (SlimBiome®) and final product
(GoFigure®) manufactured and sold in India. This has increased profit
margins and given us a manufacturing base to export to other countries in Asia
with lower manufacturing and transport costs than exporting from the UK. This
will support future expansion and sales growth in the region. The lower
costs and the 'created in UK and made in India' tag helps penetrate the market
and makes the product viable commercially.
We had two small customers and a large national player (Apollo Hospitals) in
India in 2022. During 2023 we have had orders from a number of new
customers and the launch of a new product range called Slim-Pro by Health Bae,
an emerging name in the multilevel marketing channel (see
https://health-bae.com (https://health-bae.com) ). Whilst these are small
first orders they are part of building the customer base and product profile
across India allowing us to build the business.
After a slow start following the launch of products with Apollo's in September
2022 we are now seeing momentum increase with the number of stores selling
GoFigure products increase month on month with sales in April double that of
March and continued strong growth in May 2023, with a high returning customer
rate. Apollo have agreed to extend the product range in H2 2023. We are
also pleased to be developing a product for the Indian Market with a
multinational consumer goods company for launch later in the year.
The fundamentals of our marketplace remain very exciting, with modulation of
the human microbiome attracting ever-increasing interest as the potential
solution to a wide and growing range of life-style related health challenges.
Unique, innovative products take time to gain market acceptance and our
first-generation products are no exception. We believe their strong science,
clinical studies, and broad IP portfolio together with the industry awards and
great customer reviews are starting to attract growing international
recognition and with this more sales opportunities.
After strong sales growth through 2019 (£745K), 2020(£1.5m) and 2021
(£2.2m) we believe 2022 was an unusual year for the industry and the Company
and that the actions we are taking to reduce costs and grow sales will move
the Group to operational profitability, while broadening our product and
partner base, and increasing sales of final products direct to consumers.
These actions will reduce the risks of revenues in future periods being
impacted by timing differences in restocking or delays in individual product
launches or regulatory approvals.
Our expansion into USA and Asia, the proven credibility of our science, the
growing number of large partners, and a return on our investment in 2023 from
our sales teams give us continued confidence in the long-term growth potential
of the Group.
Whilst the Board are optimistic about the opportunities for the business in
2023, we remain alert to the threats posed by the risks described in the
'principal risks and uncertainties' section of the Strategic Report and we
note that future trading may be affected by these external factors. The
Group's mitigation strategies for these principal risks are also set out in
this section.
We are confident that our strategy will continue to deliver sales growth in
2023 whilst the approaching commercialisation of our second-generation
SweetBiotix® family of products and microbiome modulators offer exciting
potential for future growth. This is in addition to the Company having a
continued exposure to the considerable growth potential in probiotics and
skincare through the Group's shareholdings in ProBiotix Health plc and
SkinBiotherapeutics plc.
N Davidson
Stephen O'Hara
Chairman
Chief Executive
23 June
2023
23 June 2023
Consolidated Statement of Comprehensive Income
Notes Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Revenue from contracts with customers 457 2,213
Cost of sales (213) (1,090)
─────── ───────
Gross profit 244 1,123
Share based payments (11) (60)
Depreciation and amortisation (224) (288)
Other administrative costs (2,498) (2,140)
Total administrative expenses 6 (2,733) (2,488)
─────── ───────
Operating loss (2,489) (1,365)
Finance cost 5 - (48)
Finance income 5 - -
─────── ───────
- (48)
Share of loss from associate 11 (83) -
(Loss)/Gain on investments 11 (8,620) 7,502
Profit on disposal of investments 11 16 88
Profit on disposal of subsidiary 11 21,647 -
Provision against associate valuation 11 (8,030) -
─────── ───────
Profit/(Loss) before tax 2,441 6,177
Taxation 7 146 84
─────── ───────
Total comprehensive income for the period 2,587 6,261
═══════ ═══════
Total comprehensive income attributable to:
Owners of the company 2.587 6,261
Non-controlling interests - -
─────── ───────
2,587 6,261
═══════ ═══════
Earnings per share from continued operations
Basic profit/(loss) per share 8 2.93p 7.15p
Diluted profit/(loss) per share 8 2.78p 6.55p
═══════ ═══════
Consolidated Statement of Financial Position
Notes As at As at
31 December 2022 31 December 2021
ASSETS £'000 £'000
Non-current assets
Intangibles 9 1,540 2,641
Investments 11 5,022 13,651
Investment in associate 11 3,129 -
─────── ───────
9,691 16,292
─────── ───────
CURRENT ASSETS
Inventories 12 178 102
Trade and other receivables 13 521 1,553
Current tax asset 7 106 191
Cash and cash equivalents 14 1,052 2,007
─────── ───────
1,857 3,853
─────── ───────
TOTAL ASSETS 11,548 20,145
═══════ ═══════
EQUITY
Shareholders' Equity
Called up share capital 15 1,824 1,759
Share premium 16 2,958 2,537
Share based payment reserve 16 939 928
Merger relief reserve 16 1,500 1,500
Convertible debt - reserve 16 - 93
Retained Earnings 16 3,684 11,320
─────── ───────
10,905 18,137
Non-controlling interest 16 - 35
─────── ───────
Total Equity 10,905 18,172
─────── ───────
LIABILITIES
Current liabilities
Trade and other payables 17 278 602
─────── ───────
278 602
─────── ───────
Non - current liabilities
Deferred tax liability 18 365 552
Convertible loan notes 19 - 819
─────── ───────
365 1,371
─────── ───────
TOTAL LIABILITIES 643 1,973
─────── ───────
TOTAL EQUITY AND LIABILITIES 11,548 20,145
═══════ ═══════
These financial statements were approved and authorised for issue by the Board
of Directors on 23 June 2023 and were signed on its behalf by:
S P O'Hara
Director
Company Registration no. 05880755
Consolidated Statement of Changes in Equity
Share-based Non- Controlling Interest
Called up Payment reserve Convertible Merger Relief Reserve
Share capital Retained Earnings Share Debt Total
Premium Reserve equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2020 1,759 5,059 2,537 868 93 1,500 35 11,851
Profit for the year - 6,261 - - - - - 6,261
Share options and warrants - - - 60 - - - 60
────── ─────── ────── ────── ───── ────── ────── ───────
Balance at 31 December 2021 1,759 11,320 2,537 928 93 1,500 35 18,172
Profit for the year - 2,587 - - - - - 2,588
Dividends - (10,258) - - - - - (10,258)
Transfer on loss of control - - - - (93) - - (93)
Transfer within reserves - 35 - - - - (35) -
Issue of shares during the year 65 - 445 - - - - 510
Fundraising commission - - (24) - - - - (24)
Share Options and warrants - - - 11 - - - 11
────── ─────── ────── ────── ───── ────── ────── ───────
Balance at 31 December 2022 1,824 3,684 2,958 939 - 1,500 - 10,905
══════ ═══════ ══════ ══════ ═════ ══════ ══════ ═══════
Notes to the Consolidated Statement of Cash Flows
Notes Year ended Year ended
31 December 2022 31 December 2021
£'000 £'000
Opening Cash 2,007 865
Operating activities
Operating loss (2,489) (1,365)
Amortisation 224 288
Share based payments 11 60
Movement on inventory (76) 82
Decrease/(increase) on receivables 1,116 (906)
(Decrease)/increase on payables (19) 82
Tax received 124 194
────── ──────
Net Proceeds for operating activities (1,109) (1,565)
Investing activities
Additions to intangibles (168) (194)
Cash disposed on loss of subsidiary (188) -
Proceeds on disposal of investments 25 2,901
────── ──────
Net (331) 2,707
Financing activities
Net proceeds on Share issues 485 -
────── ──────
Net cash inflow from financing activities 485 -
────── ──────
Total movement (955) 1,142
────── ──────
Cash and cash equivalents at end of period 2 1,052 2,007
══════ ══════
Notes to the Consolidated Statement of Cash Flows
1. Cash and Cash Equivalents
Year ended
31 December Year ended
2022 31 December 2021
£'000 £'000
Cash and cash equivalents 1,052 2,007
═══════ ════════
Company Statement of Financial Position
Notes As at As at
31 December 2022 31 December 2021
ASSETS £'000 £'000
Non-current assets
Investments 11 7,008 15,732
Investment in associate 11 3,212 -
Other receivables 13 - 318
─────── ───────
10,220 16,050
─────── ───────
CURRENT ASSETS
Trade and other receivables 13 25 66
Cash and cash equivalents 14 865 1,705
─────── ───────
890 1,771
─────── ───────
TOTAL ASSETS 11,110 17,821
═══════ ═══════
EQUITY
Shareholders' Equity
Called up share capital 15 1,824 1,759
Share premium 16 2,958 2,537
Merger relief reserve 16 1,500 1,500
Share based payment reserve 16 939 928
Accumulated profit 16 3,806 11,056
─────── ───────
Total Equity 11,027 17,780
─────── ───────
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 17 83 41
─────── ───────
TOTAL LIABILITIES 83 41
─────── ───────
TOTAL EQUITY AND LIABILITIES 11,110 17,821
═══════ ═══════
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 not to present the Company income statement .
The profit for the Company for the year was £3.008 (2021: £5.788m).
These financial statements were approved and authorised for issue by the Board
of Directors on 23 June 2023 and were signed on its behalf by:
S P O'Hara
Director
Company Registration no. 05880755
Company Statement of Changes in Equity
Share-based
Called up Merger Relief Reserve Payment reserve
Share capital Share Retained Earnings Total
Premium equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2020 1,759 2,537 1,500 868 5,268 11,932
Profit for the year - - - - 5,788 5,788
Share options and warrants
- - - 60 - 60
────── ─────── ────── ────── ─────── ───────
Balance at 31 December 2021 1,759 2,537 1,500 928 11,056 17,780
Profit for the year - - - - 3,008 3,008
Dividends - - - - (10,258) (10,258)
Share options and warrants - - - 11 - 11
Fundraising Commission - (24) (24)
Issue of shares during the year 65 445 - - - 510
────── ─────── ────── ────── ─────── ───────
Balance at 31 December 2022 1,824 2,958 1,500 939 3,806 11,027
══════ ═══════ ══════ ══════ ═══════ ═══════
Company Statement of Cash Flows
Notes Year ended Year ended
31 December 2022 31 December 2021
£'000 £'000
Opening Cash 1.705 533
Operating activities
Operating loss (1,482) (2,749)
Share based payments 11 60
Decrease/(increase) on receivables 416 24
Impairment of investment in subsidiary 50 -
(Decrease)/increase on payables 42 (22)
Release of loan to subsidiary 756 932
────── ──────
Net Proceeds for operating activities (207) (1,755)
Investing activities
Net cash advances to subsidiary (1,143) 26
Proceeds on disposal of investments 25 2,901
────── ──────
Net (1,118) 2,927
Financing activities
Net proceeds on Share issues 485 -
────── ──────
Net cash inflow from financing activities 485 -
────── ──────
Total movement (840) 1,172
────── ──────
Cash and cash equivalents at end of period 1 865 1,705
══════ ══════
Notes to the Company Statement of Cash Flows
1. Cash and Cash Equivalents
As at As at
31 December 31 December 2021
2022
£'000 £'000
Cash and cash equivalents 865 1,705
══════ ═══════
Notes to financial statements
1. General Information
OptiBiotix Health plc is a Public Limited Company limited by shares,
incorporated and domiciled in England and Wales. Details of the registered
office, the officers and advisers to the Company are presented on the company
information page at the start of this report. The Company's offices are at
Innovation Centre, Innovation Way, Heslington, York, YO10 5DG. The Company is
listed on the AIM market of the London Stock Exchange (ticker: OPTI).
The principal activity is that of identifying and developing microbial
strains, compounds, and formulations for use in food ingredients, supplements
and active compounds that can impact on human physiology, deriving potential
health benefits.
These financial statements present the results and balances of the Company and
its subsidiaries (together, the 'Group') for the year ended 31 December 2022.
2. Accounting Policies
Statement of compliance
The consolidated and parent company financial statements of Optibiotix Health
Plc have been prepared in accordance with UK adopted international accounting
standards (IFRSs), IFRIC interpretations and the Companies Act 2006 applicable
to companies reporting under IFRS.
Basis of preparation
The financial statements have been prepared under the historical cost
convention. The functional currency is GBP.
The principal accounting policies are summarised below. They have all been
applied consistently throughout the period under review. The results are
rounded to the nearest thousand.
Going concern
The financial statements have been prepared on the assumption that
the Group is a going concern. When assessing the foreseeable future, the
Directors have looked at the budget for the next 12 months from the date of
this report, the cash at bank available as at the date of approval of these
financial statements and are satisfied that the group should be able to cover
its forecast maintenance costs, other administrative expenses and its ongoing
research and development expenditure.
As part of the Group going concern assessment the Directors have
also reviewed a range of scenarios including those reflecting conditions less
favourable than the base case scenario. In such scenarios the Directors have
had regard to cash generation and preservation options including further cost
mitigation, further sale of the Group's investment assets and share issues
where market conditions allow. Through one or a combination of these
measures, the Board are satisfied that the Group can continue as a going
concern in base case and downside
Management have considered its forecast of the group's cash requirements
reflecting contracted and anticipated future revenue and the resulting net
cash outflows. Management have not seen a material disruption to the business
as a result of the current political crises in Eastern Europe. Management
will keep events under constant review, and remedial action will be taken if
the situation demands it.
After making enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt a going concern basis
in preparing the annual report and financial statements.
Standards, amendments and interpretations effective and adopted in 2022
New Standards and interpretations The following IFRS or IFRIC interpretations
which are effective for the first time in the Group's accounting period to 31
December 2022 have been
considered by the Directors. Their adoption is not expected to, and will not,
have any material impact on the disclosures or on the amounts reported in this
financial information.
Standards/interpretations Application
Effective for annual
Standard or periods beginning
Interpretation Title on or after
IFRS 3 amendments Business Combinations 1 January 2022
IAS 16 amendments Provisions, Contingent Liabilities and Contingent Assets 1 January 2022
IFRS 9 amendments Annual Improvements to IFRS 1 January 2022
Standards 2018Ð2020 (fees in the 10 percent test for
derecognition of financial liabilities).
IAS 1 amendments Presentation of Financial Statements 1 January 2022
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the Group.
The Directors anticipate that the adoption of these standards and the
interpretations in future period will have no material impact on the financial
statements of the company.
2.1 Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 December each year. The group controls an investee when it is
exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over
the investee.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Changes in the Group's ownership interests in subsidiaries that do not result
in the Group losing control over the subsidiaries are accounted for as equity
transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed
to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal
is calculated as the difference between (i) the aggregate of the fair value of
the consideration received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including goodwill), and
liabilities of the subsidiary and any non-controlling interests. Where certain
assets of the subsidiary are measured at revalued amounts or fair values and
the related cumulative gain or loss has been recognised in other comprehensive
income and accumulated in equity, the amounts previously recognised in other
comprehensive income and accumulated in equity are accounted for as if the
Company had directly disposed of the related assets (i.e. reclassified to
profit or loss or transferred directly to retained earnings).
The fair value of any investment retained in the former subsidiary at the date
when control is lost is regarded as the fair value on initial recognition for
subsequent accounting under IFRS 9 'Financial Instruments: Recognition and
Measurement' or, when applicable, the cost on initial recognition of an
investment in an associate or a jointly controlled entity.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value,
which is calculated as the sum of the acquisition-date fair values of the
assets transferred by the Group, liabilities incurred by the group to the
former owners of the acquiree and the equity interests issued by the group in
exchange for control of the acquiree. Acquisition-related costs are recognised
in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value at the acquisition date, except
that:
- deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised and measured in
accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
- liabilities or equity instruments related to share-based
payment transactions of the acquiree or the replacement of an acquiree's
share-based payment transactions with share-based payment transactions of the
group are measured in accordance with IFRS 2 Share-based Payment at the
acquisition date; and
- assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer's previously held equity interest
in the acquiree (if any) over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed. If, after
assessment, the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and
the fair value of the acquirer's previously held interest in the acquiree (if
any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
2.2 Revenue recognition
Revenue is measured at the fair value of sales of goods and services less
returns and sales taxes. The Group has analysed its business activities and
applied the five-step model prescribed by IFRS 15 to each material line of
business, as outlined below:
2.2.1 Sale of products
The contract to provide a product is established when the customer places a
purchase order. The performance obligation is to provide the product requested
by an agreed date, and the transaction price is the value of the product as
stated in our order acknowledgement. The performance obligation is typically
met when the product is dispatched and so revenue is primarily recognised for
each product when dispatching takes place. In some limited situations when the
product is complete but the customer is unable to take delivery the
performance obligation is met when the customer formally accepts transfer of
risk and control even though the product has not been dispatched.
2.2.2 License arrangements
Revenue is recognised when the customer obtains control of the rights to use
the IP. The performance obligations are considered to be distinct from any
ongoing distribution arrangements which are treated in line with sales of
products.
2.2.3 Milestone payments
Where the transaction price includes consideration that is contingent upon a
future event or circumstance, the contingent amount is allocated entirely to
that performance obligation if certain criteria are met. Revenue is recognised
at the point of time of the performance obligation being satisfied.
2.3 Investments in associates
Associates are those entities in which the Group has significant influence,
but not control or joint control over the financial and operating policies.
Significant influence is presumed to exist when the Group holds between 20 and
50 percent of the voting power of another entity. Investments in associates
are accounted for under the equity method and are recognised initially at
cost. The cost of the investment includes transaction costs.
The consolidated financial statements include the Group's share of profit or
loss and other comprehensive income of equity-accounted investees, after
adjustments to align the accounting policies with those of the Group, from the
date that significant influence commences until the date that significant
influence ceases.
When the Group's share of losses exceeds its interest in an equity-accounted
investee, the carrying amount of the investment, including any long-term
interests that form part thereof, is reduced to zero, and the recognition of
further losses is discontinued except to the extent that the Group has an
obligation or has made payments on behalf of the investee.
2.4 Investments at fair value
Equity investments are held at fair value at the balance sheet date with any
profit or loss for the year being taken to the Income statement. The value of
listed investments being calculated at the closing price on the balance sheet
date.
2.5 Employee Benefits
The Group operates a defined contribution pension scheme. Contributions
payable by the Group's pension scheme are charged to the income statement in
the period in which they relate.
2.6 Taxation
Income tax expense represents the sum of the tax currently payable
and deferred tax.
(i) Current tax
Current taxes are based on the results shown in the
financial statements and are calculated according to local tax rules using tax
rates enacted or substantially enacted by the statement of financial position
date.
Income tax is recognised in the income statement or in
equity if it relates to items that are recognised in the same or a different
period, directly in equity.
Current tax assets and liabilities for the current and
prior periods are measured at the amount expected to be recovered from or paid
to the taxation authorities.
(ii) Deferred tax
Deferred tax is provided, using the liability method,
on temporary differences at the statement of financial position date between
the tax base of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary
differences.
Deferred tax assets are recognised for all deductible
temporary differences, carry forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differenced and the carrying
forward or unused tax assets and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part
of the deferred tax assets to be utilised. Conversely, previously unrecognised
deferred tax assets are recognised to the extent that it is probable that
sufficient taxable profit that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on the tax rates and tax laws that have been
enacted or substantively enacted at the balance sheet date.
2.7 Financial instruments
Financial assets and financial liabilities are recognised when the
group becomes a party to the contractual provisions of the instrument.
2.8 Loans and receivables are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate
method.
2.9 Equity investments comprise investments which do have a fixed maturity and
are classified as non current assets if they are intended to be held for the
medium to long term. They are measured at fair value through profit or
loss.
2.10 Trade receivables are initially measured at fair value and are
subsequently measured at amortised cost less appropriate provisions for credit
losses. Such provisions are recognised in the income statement.
2.11 Cash and cash equivalents comprise cash in hand and demand deposits and
other short-term highly liquid investments with maturities of three months or
less at inception that are readily convertible to a known amount of cash and
are subject to an insignificant risk of changes in value.
2.12 Trade payables are not interest-bearing and are initially valued at their
fair value and are subsequently measured at amortised cost.
2.13 Equity instruments are recorded at fair value, being the proceeds
received, net of direct issue costs.
2.14 Share Capital - Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of taxation, from the proceeds.
2.15 Financial instruments require classification of fair value as determined
by reference to the source of inputs used to derive the fair value. This
classification uses the following three-level hierarchy:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices);
Level 3 - inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
2.16 Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the first-in, first-out (FIFO) method. Net realisable value
is the estimated selling price in the ordinary course of business, less
applicable variable selling expenses.
2.17 Impairment of non-financial assets
At each statement of financial position date, the Group reviews the carrying
amounts of its investments to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for impairment
annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately, unless the relevant asset is
carried at a re-valued amount, in which case the impairment loss is treated as
a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (cash-generating unit) in prior years. A
reversal of an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
2.18 Capital management
Capital is made up of stated capital, premium, other reserves and
retained earnings. The objective of the Group's capital management is to
ensure that it maintains strong credit ratings and capital ratios. This will
ensure that the business is correctly supported and shareholder value is
maximised.
The Group manages its capital structure through adjustments that
are dependent on economic conditions. In order to maintain or adjust the
capital structure, the Company may choose to change or amend dividend payments
to shareholders or issue new share capital to shareholders. There were no
changes to the objectives, policies or processes during the period ended 31
December 2022.
2.19 Convertible Loans
Compound financial instruments issued by the Group comprise convertible notes
that can be converted to share capital at the option of the holder, and the
number of shares to be issued does not vary with changes in their fair value.
The liability component of a compound financial instrument is recognised
initially at the fair value of a similar liability that does not have an
equity conversion option. The equity component is recognised initially at the
difference between the fair value of the compound financial instrument as a
whole and the fair value of the liability component. Any directly attributable
transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amount.
2.20 Convertible debt reserve
The convertible debt reserve is the equity component of the convertible loan
notes that have been issued.
2.21 Share-based compensation
The fair value of the employee and suppliers services received in exchange for
the grant of the options is recognised as an expense. The total amount to be
expensed over the vesting year is determined by reference to the fair value of
the options granted, excluding the impact of any non-market vesting conditions
(for example, profitability and sales growth targets). Non-market vesting
conditions are included in assumptions about the number of options that are
expected to vest. At each statement of financial position date, the entity
revises its estimates of the number of options that are expected to vest. It
recognises the impact of the revision to original estimates, if any, in the
income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when the options
are exercised.
The fair value of share-based payments recognised in the income statement is
measured by use of the Black Scholes model, which takes into account
conditions attached to the vesting and exercise of the equity instruments. The
expected life used in the model is adjusted; based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future share
price behaviour and is selected based on past experience, future expectations
and benchmarked against peer companies in the industry.
2.22 Property, plant and equipment
Property, plant and equipment are stated at historical cost less subsequent
accumulated depreciation and accumulated impairment losses, if any. Historical
cost includes expenditure that is directly attributable to the acquisition of
the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance are
charged to profit or loss during the financial period in which they are
incurred.
Depreciation on property, plant and equipment is calculated using the
straight-line method to write off their cost over their estimated useful
lives at the following annual rates:
Computer
equipment
30%
Useful lives and depreciation method are reviewed and adjusted if appropriate,
at the end of each reporting period.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on the disposal or retirement of an item
of property, plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the relevant asset and is recognised
in profit or loss in the year in which the asset is derecognised.
2.23 Intangibles - Patents
Separately acquired patents are shown at historical cost. Patents have a
finite useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight line method to allocate the cost
of the patents over their estimated useful life of twenty years once the
patents have been granted.
2.24 Research and Development
Research expenditure is written off to the statement of comprehensive income
in the year in which it is incurred. Development expenditure is written off in
the same way unless the Directors are satisfied as to the technical,
commercial and financial viability of individual projects. In this situation,
the expenditure is deferred and amortised over the 10 years during which the
Company is expected to benefit.
2.25 Merger relief reserve
The merger relief reserve arises from the 100% acquisition of OptiBiotix
Limited whereby the excess of the fair value of the issued ordinary share
capital issued over the nominal value of these shares is transferred to this
reserve in accordance with section 612 of the Companies Act 2006.
2.26 Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements requires management to make
estimates and assumptions concerning the future that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods.
The resulting accounting estimates will, by definition, differ from the
related actual results.
á Share based payments
The fair value of share based payments recognised in the income statement is
measured by use of the Black Scholes model, which takes into account
conditions attached to the vesting and exercise of the equity instruments. The
expected life used in the model is adjusted; based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future share
price behaviour and is selected based on past experience, future expectations
and benchmarked against peer companies in the industry.
á Useful life of intangible assets
Management have estimated that the useful life of the fair value of the
patents acquired on the acquisition of Optibiotix Limited in 2013 to be 20
years. Development costs that have been capitalized in line with the
recognition criteria of IAS38 have been estimated to have a useful economic
life of 10 years. These estimates will be reviewed annually and revised if the
useful life is deemed to be lower based on the trading business or any changes
to patent law. The net book value of intangible assets at the year- end was
£1.540m (£2.641m)
á Impairment reviews
IFRS requires management to undertake an annual test for impairment of
indefinite lived assets and, for finite lived assets to test for impairment if
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Impairment testing is an area involving
management judgement, requiring assessment as to whether the carrying value of
assets can be supported by the net present value of future cash flows derived
from such assets using cash flow projections which have been discounted at an
appropriate rate. In calculating the net present value of the future cash
flows, certain assumptions are required to be made in respect of highly
uncertain matters. The board looked at the current order book going forward,
the ongoing discussions with current customers and the recent new customers
and concluded that an impairment of the intangible assets was not applicable
for the year to 31 December 2022. The net book value of the intangible
assets held at 31 December was £1.54m and an adjustment was made of £0.922m
to reflect the transfer of 2 patent families to Probiotix Health PLC as per
note 9
á Recognition and measurement of the investment in Probiotix Health
plc
Management have reviewed the nature of the relationship with Probiotix Health
plc in line of the Group's interest moving from 100% to 44% by 31 March
2022. Management have had regard to the requirements of IFRS 10 to consider
the facts and circumstances of the relationship between Optibiotix and
Probiotix and not just the shareholding interest. In taking account of a
range of factors, including Optibiotix's minority representation on the
Probiotix board and the terms of a relationship agreement entered into between
the parties, management have concluded that Optibiotix have significant
influence over Probiotix but not control. This remains under continuing
review as facts and circumstances change.
As a result of the recognition of the Group's remaining 44% interest at 31
March
2022 at fair value the Group and Company balance sheet report material
investment holdings in Probiotix Health plc.
The Directors have had regard to potential impairment of this asset. After
taking account of share price movements subsequent to the year end, and in
particular after the end of the post-IPO lock-in period, the Directors
concluded that an impairment should be recorded to reflect the movement in
share price from 21p at the time of IPO in March 2022 to 6p which was the
traded price on AQSE Growth after the lock-in period ended.
Whilst the Directors believe the share price of 6p is reflective of wider
economic uncertainties and a difficult equities market rather than any adverse
impact in the group's trading prospects, the impairment has been recorded on
the basis of a prudent approach reflective of market conditions which the
Board believe are short term in nature. The Board consider that recently
depressed share valuations across various international markets reflect
significant underpricing and are not reflective of asset values.
3. Segmental Reporting
In the opinion of the directors, the Group has one class of business, in four
geographical areas being that of identifying and developing microbial strains,
compounds and formulations for use in the nutraceutical industry. The Group
sells into to four highly interconnected markets, all costs assets and
liabilities are derived from the UK location.
Revenue analysed by market
Year ended Year ended
31 December 31 December 2021
2022
£'000 £'000
Probiotics 24 1,100
Functional Fibres 433 1,113
────── ──────
457 2,213
══════ ══════
Following the loss of control of Probiotix Health plc on 31 March 2022, all
group revenues have been derived from functional fibres.
Revenue analysed by geographical market
Year ended Year ended
31 December 31 December 2021
2022
£'000 £'000
UK 136 648
US 100 827
India 61 -
Rest of world 160 738
────── ──────
457 2,213
══════ ══════
During the reporting period one customer represented £100k (21.9%) of Group
revenues. (2021: one customer generated £727k representing 32.9% of Group
revenues)
4. Employees and Directors
Year ended Year ended
31 December 31 December 2021
2022
£'000 £'000
Wages and salaries 522 636
Directors' remuneration 354 494
Social security costs 66 83
Pension costs 35 44
────── ──────
977 1,257
══════ ══════
Year ended Year ended
31 December 31 December 2021
2022
No. No.
The average monthly number of employees during the period for was as
follows:
Group
Directors 6 6
Research and development 3 3
────── ──────
9 9
══════ ══════
Company
Directors 6 6
───── ──────
6 6
══════ ══════
Directors' remuneration was as follows:
Year ended Year ended
31 December 31 December 2021
2022
£'000 £'000
Directors' remuneration 354 507
Directors' share based payments 12 33
Benefits in kind 5 5
Bonus - 70
Pension 10 17
────── ──────
Total emoluments 381 632
══════ ══════
Emoluments paid to the highest paid director 151 262
══════ ══════
Directors' remuneration
Details of emoluments received by Directors and key management of the Company
for the year ended 31 December 2022 are as follows:
Directors
Remuneration Share based Pension Costs Benefits in Kind Total Total
and fees payments 2021
£'000 £'000 £'000 £'000 £'000 £'000
S P O'Hara 143 - 4 4 151 262
S Christie 25 - - - 25 33
R Davidson 55 - - - 55 72
S Kolyda 81 - 6 1 88 128
C Brinsmead 25 6 - - 31 25
S Hammond 25 6 - - 31 21
Total 354 12 10 5 381 541
Benefits in kind relate to medical insurance. The number of directors to
whom retirement benefits were accruing was 2 (2021: 2).
5. Net Finance Income / (Costs)
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Finance Income:
Bank Interest - -
Finance Cost:
Loan note interest - (48)
────── ──────
Net Finance Income / (Costs) - (48)
══════ ══════
6. Expenses Ð analysis by nature
Year ended Year ended
31 December 31 December
2022 2021
£'000 £'000
Research and development 68 64
Directors' fees & remuneration (Note 4) 354 469
Salaries, pension and social security 623 599
Auditor remuneration Ð Group and Company audit fees 25 23
Auditor remuneration-Audit of subsidiaries 15 22
Auditor remuneration Ð non audit fees:tax compliance 8 7
Auditor remuneration Ð non audit fees: other assurance 2 3
Brokers & Advisors 122 209
Advertising & marketing 84 42
Share based payments charge 12 60
Bad debt provision 458
Amortisation of patents and development costs 224 288
Patent and IP costs 88 115
Consultancy fees 378 262
Legal and professional fees 12 28
Public Relations costs 80 68
Travel costs 102 16
Other expenses 78 213
────── ──────
Total administrative expenses 2,733 2,488
══════ ══════
7. Corporation Tax
Corporation Tax
Year ended Year ended
31 December 31 December 2021
2022
£'000 £'000
Corporation tax credit (38) (75)
Deferred tax movement (108) (9)
────── ──────
Total taxation (146) (84)
══════ ══════
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities for
the year ended 31 December 2022 nor for the year ended 31 December 2021.
Year ended Year ended
31 December 2022 31 December 2021
£'000 £'000
Profit (Loss) on ordinary activities before income tax 2,442 6,177
═══════ ═══════
Loss on ordinary activities multiplied by the standard rate of corporation tax 466 1,174
in UK of 19% (2021 Ð 19%)
Effects of:
Disallowables 166 14
Income not taxable (1,068) (1,546)
Accelerated depreciation - -
R&D tax credit claimed (38) (75)
Amortisation 28 33
Revenue items capitalised - (37)
Other timing differences - 19
Unused tax losses carried forward 408 343
────── ──────
Tax credit (38) (75)
══════ ══════
The group has estimated losses of £10.8m (2021: £8.41m) in respect of which
a deferred tax asset of £2.7m (2021: £2.1m) has not been recognised due to
the uncertainty of future taxable profits. The unrecognised deferred tax
asset has been assessed by reference to a rate of 25% which is the UK headline
corporation tax rate from 1 April 2023.
The Group submits claims for R&D tax credits in respect of its research
and development activities in respect of microbiome modulators and similar
products relating to the exploitation of its patent portfolio and potential
new patents arising from scientific research performed by group employees and
its partners. Whilst the Board are confident of recovery of the estimated
R&D tax credit, there is no certainty that the receivable will be
recoverable until HMRC have approved the claim and the enquiry window is
closed. However, based on the group's history of successful claims over a
number of years, the Board are satisfied that the tax receivable is
recoverable and appropriately recorded.
2022 2021
Current tax asset - Group £ £
Balance brought forward 191,249 310,435
Received during the year (123,663) (194,663)
Prior year adjustment - 477
Research & development tax credit claimed 37,500 75,000
────── ──────
105,086 191,249
8. Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable shareholders by the weighted average number of ordinary shares
outstanding during the period.
Reconciliations are set out below:
2022
Weighted average
Basic and diluted EPS Earnings Number of shares Profit per-share
£'000 No. Pence
Basic EPS 2,587 88,279,952 2.93
Diluted EPS 2,587 93,213,179 2.78
══════ ════════ ══════
2021
Weighted average
Earnings Number of shares Profit per-share
£'000 £ Pence
Basic EPS 6,261 87,574,152 7.15
Diluted EPS 6,261 95,536,395 6.55
══════ ════════ ══════
As at 31 December 2022 there were 7,182,907 (2021: 7,632,907)
outstanding share options and NIL (2021: 329,336) outstanding share warrants.
9. Intangible assets
Group Development Costs and Patents
£'000
Cost
At 31 December 2020 3,672
Additions 193
Disposals -
───────
At 31 December 2021 3,865
Additions 46
Disposals (1,370)
───────
At 31 December 2022 2,541
═══════
Amortisation
At 31 December 2020 937
Amortisation charge for the year 288
───────
At 31 December 2021 1,225
Amortisation charge for the year 224
Disposals (448)
───────
At 31 December 2022 1,001
═══════
Carrying amount
At 31 December 2022 1,540
At 31 December 2021 2,640
═══════
The company had no intangible assets during the reporting period.
Development costs and patents represent cost capitalised in respect of the
Group's intellectual property portfolio and includes the costs of registering
and maintaining patents as well as capitalised development costs. All
intangible assets relate to the Group's principal activities.
Disposals in the year relate to two patent families relating to probiotic
patents owned by Probiotix Limited and therefore which were derecognised upon
the group's loss of control of Probiotix Health plc. This disposal has
formed part of the gain on loss on disposal reported in the income statement.
10. Property, plant and equipment
Group
£
Cost
At 31 December 2020 8,461
Additions -
Disposals -
───────
At 31 December 2021 8,461
Additions -
Disposals -
───────
At 31 December 2022 8,461
═══════
Depreciation
At 31 December 2020 8,461
Charge for the year -
───────
At 31 December 2021 8,461
Charge for the year -
───────
At 31 December 2022 8,461
═══════
Carrying amount
At 31 December 2022 -
At 31 December 2021 -
═══════
The company had no fixed assets during the reporting period.
11. Investments
Group
Set out below is the investment in Skinbiotherapeutics PLC. The investment was
treated as an associate of the group until 2 November 2020, after which time
the shareholding dropped to 24.65% and recalculated as an equity investment.
The Group records its investment in Skinbiotheraputics plc at fair value and
is remeasured by reference to its closing price on AIM at each reporting
date. The share price at 31 December 2022 was 15.5p.
During the year, a small holding of shares was disposed to generate proceeds
of £25k with original cost of £9k.
2022 2021
£'000 £'000
Investments
At the beginning of the period 13,651 8,962
Revaluations (8,620) 7,501
Disposal of shares during year (9) (2,812)
At 31 December 5,022 13,651
Investment in Associate
On 31 March 2022, ProBiotix Health Plc ( 'PBX') the parent company of
ProBiotix Limited listed on the AQSE Growth Market. The listing of PBX on
AQSE, together with the issue of a dividend in specie and issue of new shares,
means that PBX is now considered an associate for accounting purposes with its
revenues and costs removed post listing and only OptiBiotix's (44%) proportion
of its profit and loss included in the Group's accounts under the equity
method of accounting. The step-down from being a subsidiary to an associate
resulted in the revaluation of the remaining interest held in PBX at the
listing price and a gain on disposal of a subsidiary recognised in the income
statement. A gain of £21.647m was recorded in the income statement.
An assessment was undertaken to assess whether the Company had defacto
control over PBX during the period considering Board representation, financing
arrangements, the Relationship agreement and the other shareholdings in PBX.
Based on the assessment it was concluded that the Company only had significant
influence and that PBX was an associate in the period. The Relationship
agreement sets out costs that are being incurred by the Group that are being
recharged to PBX.
At 31 March 2022 the Group held 53,533,333 shares in Probiotix Health plc,
valued at the IPO price of 21p resulting in a deemed cost of investment in
associate of £11.24m. As an associate, the Group's investment is equity
accounted and the Group's 44% share of loss was deducted from this carrying
value.
Investment in Associate
2022 2021
£'000 £'000
Investments
At the beginning of the period - -
Additions
Deemed cost on reclassification from subsidiary 11,242 -
Impairment in the period (8,030) -
Share of result for the period (see below) (83) -
At 31 December 3,129 -
PBX is registered in United Kingdom and is in the Health food sector.
Set out below is financial information on PBX set out in its IFRS financial
statements for the period from incorporation on 4 November 2021 to 31
December 2022.
2022
£'000
Revenue 1,308
Loss from continuing operations (237)
Total comprehensive loss (189)
Current assets 2,311
Current Liabilities (307)
Non-current liabilities (89)
44% share of total comprehensive loss (83)
Company Investments
2022 2021
£'000 £'000
Listed Investments
At the beginning of the period 13,651 8,962
Additions - -
Revaluations (8,620) 7,501
Disposal of shares during year (9) (2,812)
───── ─────
5,022 13,651
Investment in subsidiaries
At the beginning of the period 2,081 2,081
Additions 16 -
Impairment (50) -
Disposals (61) -
───── ─────
1,986 2,081
At 31 December 7,008 15,732
Company Investment in Associate
2022 2021
£'000 £'000
At the beginning of the period 60 -
Reclassification to associate 11,182 -
Provision against value of associate (8,030) -
At 31 December 3,212 -
The Company holds listed investments at fair value, and investments in
subsidiaries and associates at cost less impairment. The fair value of the
Company's investment in Probiotix Health plc upon losing control was set as
deemed cost.
The Directors have had regard to potential impairment of this group's
investment in Probiotix. After taking account of share price movements
subsequent to the year end, and in particular after the end of the post-IPO
lock-in period, the Directors concluded that an impairment should be recorded
to reflect the movement in share price from 21p at the time of IPO in March
2022 to 6p which is an approximation to the traded price on AQSE Growth after
the lock-in period ended.
Whilst the Directors believe the share price of 6p is reflective of wider
economic uncertainties and a difficult equities market rather than any adverse
impact in the group's trading prospects, the impairment has been recorded on
the basis of a prudent approach reflective of market conditions which the
Board believe are short term in nature. The Board consider that recently
depressed share valuations across various international markets reflect
significant under pricing and are not reflective of asset values.
An impairment charge of £8.03m has been recorded in the income statement as a
separate line item. The impairment assessment was made by reference to fair
values using Level 1 inputs on the Fair Value Hierarchy, being observable
traded prices on the AQSE Growth exchange.
During the period an impairment of £50,000 was raised against the Company's
investment in The Healthy Weight Loss Company Limited as the board intend to
wind up this company which has minimal assets and no trading activity.
The entities listed below have share capital consisting solely of ordinary
shares, which are held by the Group. The country of incorporation is also the
principal place of business and the proportion of ownership interest is the
same as the proportion of voting rights held.
As at 31 December 2022 the Company directly held the following subsidiaries:
Name and Principal Country of incorporation Proportion of
Registered office address of company activities and place of business equity interest
OptiBiotix Limited Research & Development United Kingdom 100% of ordinary shares
Innovation Centre Innovation Way, Heslington, York, YO10 5DG
Optibiotix Health India Private Limited Health foods India 100% of ordinary shares
House NO.243, Mcd Colony, Vivekanand Puri Sarai
Rohilla City, Delhi CITY, DELHI, North Delhi, Delhi, India, 110007
The Healthy Weight Loss Company Limited Health foods United Kingdom 68% of ordinary shares
Office 7 35/37ludgate Hill, London, England, EC4M 7JN
12. Inventories
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Finished goods 178 102 - -
══════ ══════ ══════ ══════
During the period £213k (2021: £1,090k) has been expensed to the
income statement.
13. Trade and other Receivables
Group Company
2022 2021 2022 2021
Non- current £'000 £'000 £'000 £'000
Amounts owed by group undertakings - - - 318
───── ───── ───── ─────
- - - 318
═════ ═════ ═════ ═════
Current
Accounts receivable 379 1,415 - -
Other receivables 131 82 17 40
Prepayments and accrued income 11 56 8 26
───── ───── ───── ─────
521 1,553 25 66
During the period 1 January 2022 to 31 March 2022 Optibiotix Health PLC loaned
Probiotix Limited £150,000, to finance working capital costs in the period up
to the listing of Probiotix Health Group plc. During the year £203,835 was
repaid. The balance due to Probiotix Limited at 31 December 2022 of
£10,137 (2021 owing: £53,835) was repaid post year end. There was no
interest charged during the year.
During the year Optibiotix Health PLC loaned Optibiotix Limited £1,220,000 to
finance working capital costs. Optibiotix Limited recharged Optibiotix
Health PLC £373,426 for salary costs. The balance at the yearend of £846,574
(2021, £931,903) was cancelled. There was no interest charged during the
year. This does not impact on the consolidated Group accounts.
During the year Optibiotix Limited recharged Probiotix Health PLC £23,139 for
directors' fees. Optibiotix Limited received a a recharge from Probiotix
Health PLc for admin costs of £148. The balance at the year end of £22,991
was received after the year end. There was no interest charged during the
year.
During the year Optibiotix Limited transactions with Probiotix Limited were as
follows:-
¥ £440,663 for salaries and administration costs;
¥ £60,676 income received on behalf of Probiotix
limited; and
¥ £544,177 repayments received.
There was no interest charged during the year. The remaining balance of
£30,146 was received after the year end.
14. Cash and Cash Equivalents
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash and bank balances 1,052 2,007 865 1,705
══════ ══════ ══════ ══════
All cash is held in demand deposits with large UK banks.
15. Called Up Share Capital
2022 2021
Issued share capital comprises: £'000 £'000
Ordinary shares of 2p each Ð 91,190,661 (2021: 87,940,601) 1,824 1,759
────── ──────
1,824 1,759
────── ──────
During the period the Company issued ordinary shares of £0.02 each listed
below:-
Date Number
Exercise of warrants at exercise price of £0.08 27/01/2022 125,000
Exercise of warrants at exercise price of £0.08 09/03/2022 60
Issue of equity via subscription at a price of £0.16 05/12/2022 3,125,000
──────
3,250,060
──────
16. Reserves
Share capital is the amount subscribed for shares at nominal value. Share
premium represents amounts subscribed for share capital in excess of nominal
value, net of expenses.
The convertible debt reserve is the equity component of the convertible loan
notes that have been issued.
Merger relief reserve arises from the 100% acquisition of OptiBiotix Limited
on 5 August 2014 whereby the excess of the fair value of the issued ordinary
share capital issued over the nominal value of these shares is transferred to
this reserve in accordance with section 612 of the Companies Act 2006.
Retained earnings represents the cumulative profits and losses of the group
attributable to the owners of the company net of distributions paid.
Share based payment reserve represents the cumulative amounts charged in
respect of unsettled warrants and options issued.
17. Trade and other payables
Current:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Accounts Payable 191 424 34 18
- Accrued expenses 70 175 39 23
- Other payables 17 3 10 -
- ─────── ─────── ─────── ───────
Total trade and other payables 278 602 83 41
─────── ─────── ─────── ───────
18. Deferred Tax
Deferred tax is provided, using the liability method, on temporary differences
at the statement of financial position date between the tax base of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 25% (2021: 25%).
The movement on the deferred tax account is as shown below:
2022 2021
£'000 £'000
At 31 December 552 561
Movement in the period (187) (9)
────── ──────
At 31 December 365 552
══════ ══════
Deferred tax assets have not been recognised in respect of tax losses and
other temporary differences giving rise to deferred tax assets as the
directors believe there is uncertainty over the timing of future taxable
profits. Further details of available losses are set out in note 7.
19. Convertible Loan Notes
The Company's former subsidiary Probiotix Health Plc issued 1,025,000 floating
rate convertible loan notes (CLN) for £1,025,000 on 11 December 2018. The
notes were convertible into ordinary shares of the Company and converted into
shares immediately prior to the occurrence of a listing of the company, or
repayable on December 2023. The conversion rate is 1 share for each note held
at an amount which is equal to 50% of the listing price.
OptiBiotix Health Plc had subscribed 250,000 of the CLN for £250,000
The loan notes were converted as part of the listing process for Probiotix
Health PLC on 31 March 2022.
20. Related Party Disclosures
Transactions and balances with Probiotix Group are set out in note 13.
21. Ultimate Controlling Party
The Board consider that there is no overall controlling party.
22. Share Based payment Transactions
(i) Share options
The Company had introduced a share option programme to
grant share options as an incentive for employees of the subsidiaries.
Each share option converts into one ordinary share of the Company on
exercise. No amounts are paid or payable by the recipient on receipt of the
option and the Company has no legal obligation to repurchase or settle the
options in cash. The options carry neither rights to dividends nor voting
rights prior to the date on which the options are exercised. Options may be
exercised at any time from the date of vesting to the date of expiry.
Movements in the number of share options outstanding and their related
weighted average exercise prices are as follows:
Number of options Average exercise price
2022 2021 2022 2021
No. No. £ £
Outstanding at the beginning of the period 7,632,907 8,032,907 0.18 0.21
- Granted during the period 500,000 - 0.02 -
- Forfeited/cancelled during the year (950,000) (400,000) 0.70 0.785
- Exercised during the period - - - -
- ─────── ─────── ────── ──────
Outstanding at the end of the period 7,182,907 7,632,907 0.092 0.17
─────── ─────── ────── ──────
For the share options issued in 2014 vesting conditions dictate that half will
vest if the middle market quotation of an existing Ordinary share is 16p or
more on each day during any period of at least 30 consecutive Dealing days and
half will vest when a commercial contract is signed. The two conditions are
not dependent on each other and will vest separately.
For the share options issued in 2015 vesting conditions dictate that some of
the options will vest if the middle market quotation of an existing Ordinary
share is 40p or more on each day during any period of at least 30 consecutive
Dealing days and some will vest if certain revenue targets are met or if
certain scientific studies are completed. The conditions are not dependent on
each other and will vest separately.
For the share options issues in 2017 vesting conditions dictate that the
options will vest if certain revenue conditions are met.
For the share options issues in 2020 vesting conditions dictate that the
options will vest if certain revenue conditions are met.
For share options issued in 2022 The Company has agreed with a number of
option holders to surrender their existing options in return for Nominal Value
Options over half the number of shares of their existing options, which will
be subject to a combination of performance and time-based vesting criteria.
This ensures a continued focus on commercial revenues and shareholder value
creation. New options will be granted on a similar basis going forward.
Options granted to non-executive directors will be subject to time-based
vesting.
The share options outstanding at the period end had a weighted average
remaining contractual life of 830 days (2021: 1,241 days) and the maximum term
is 10 years.
The share price per share at 31/12/22 was £0.13 (31/12/2021: £0.46)
Where share options were cancelled in the period and replaced with share
options with revised terms, the Board have considered this set of transactions
as a modification of share based payment arrangements and have therefore
considered whether any incremental value arises as a result of the grant of
modified awards. Having performed an assessment the Board have concluded
that no incremental value fair is required and therefore no charge has been
recognised. In respect of replacement options which include market based
vesting conditions in respect of revenue targets, the Board have determined
that the value of this proportion of shares have immaterial value in light of
the Group's results for the 2022 accounting period in which they were granted.
(i) Warrants
On 20 February 2014, an open offer was made to the potential investors to
subscribe for 203,380,942 new ordinary shares of £0.0001 each at £0.0001
each. On a 1:1 basis, warrants attach to any shares issued under the open
offer convertible at any time to 30 November 2018 at £0.0004 per shares.
On 4 August 2014, the warrants in issue were consolidated in the ratio of
200:1 as part of the share reorganisation.
At a meeting of warrant holders on 24 January 2017 it was agreed to extend the
exercise period for all remaining warrants to 28 January 2022 and 19 February
2022
Movements in the number of share warrants outstanding and their related
weighted average exercise prices are as follows:
Number of warrants Average exercise price
2022 2021 2022 2021
No. No. £ £
Outstanding at the beginning of the period 329,336 329,386 0.08 0.08
- Exercised (125,060) - 0.08 0.08
- Cancelled 204,276 - -
- ─────── ─────── ─────── ───────
Outstanding at the end of the period - 329,336 - 0.08
─────── ─────── ─────── ───────
There were no warrants in issue at 31 December 2022.
A charge of £Nil (2021: £60,288) has been recognised during the year for the
share based payments over the vesting period.
23. Financial Risk Management Objectives and Policies
The Group's financial instruments comprise cash balances and
receivables and payables that arise directly from its operations.
The main risks the Group faces in respect of its financial
statements are liquidity risk and credit risk.
The Board regularly reviews and agrees policies for managing each of
these risks. The Group's policies for managing these risks are summarised
below and have been applied throughout the period.
Interest risk
The Group is not exposed to significant interest rate risk as it
has limited interest bearing liabilities at the year end.
The group's financial assets do not bear interest.
Credit Risk
The Group try to limit the credit risk by dealing with larger
companies and also asking new smaller customers to provide a deposit
with the purchase order.
Management have regard to credit exposures when entering into new
contracts and seek to agree settlement terms on all contracts. Credit
exposure is regularly monitored by management and any overdue debts are
followed up as part of the group's credit control procedures. Where a debt
becomes significantly overdue, management have regard to credit loss
provisions to reflect the existence of expected credit losses, taking account
of forward looking information as well as the pattern of cash collections for
that category of customer.
At 31 December 2022 one material debt is overdue, however
management have negotiated revised terms and expect to resolve the outstanding
amount within 2023.
Having taken account of the nature of the relationship with the
customer and the pattern of repayments since the receivable was raised, the
Directors expect the amount to be recovered in full, however a credit loss
provision of £60,000 has been created to reflect the impact of wider economic
uncertainties over the projected collection period.
The Board consider a default to have occurred when a receivable
passes 60 days beyond agreed credit terms, at which point regard is had to the
specific characteristics of the debtor in assessing exposure to material
credit risk and therefore the requirement to create a loss provision.
Liquidity risk
Liquidity risk is the risk that Group will encounter difficulty in
meeting these obligations associated with financial liabilities.
The responsibility for liquidity risks management rest with the Board
of Directors, which has established appropriate liquidity risk management
framework for the management of the Group's short term and long-term funding
risks management requirements.
During the period under review, the Group has not utilised any
borrowing facilities.
The Group manages liquidity risks by maintaining adequate reserves
by continuously monitoring forecast and actual cash flows, and by matching the
maturity profiles of financial assets and liabilities.
Capital risk
The Group's objectives when managing capital are to safeguard the ability to
continue as a going concern in order to provide returns for shareholders and
benefits to other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
24. Post Balance Sheet Events
Subsequent to the period end, the share price of the group's
associate Probiotix Health plc was trading in the region of 5-7p, representing
a material reduction since the IPO price of 21p at 31 March 2022. The
Directors have had regard to the financial reporting impacts and further
detail is given in Note 11.
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