Final Results
27/09/2018 07:10
RNS Number : 0907C
Provexis PLC
27 September 2018
27 September 2018 Provexis plc
("Provexis" or the "Company")
PRELIMINARY RESULTS for the YEAR ended 31 MARCH 2018
Provexis plc ('Provexis' or the 'Company'), the business that develops, licenses and sells the proprietary, scientifically-proven Fruitflow® heart-health functional food ingredient, announces its audited preliminary results for the year ended 31 March 2018.
Key highlights
· Total revenue for the year £236k (2017: £228k). Strong start to the 2018/19 financial year, with first quarter revenues ahead of first half revenues in 2017/18.
· Planned launch by BY-HEALTH of a number of Fruitflow® based products in the Chinese market progressing well, with two studies successfully completed, one study currently ongoing at a clinical site and three further planned human studies confirmed by BY-HEALTH. The two completed studies (a human study and an animal study) showed excellent results in use for Fruitflow®.
The six studies outlined are being conducted at BY-HEALTH's sole expense, a substantial investment in the Fruitflow® based products which BY-HEALTH plans to launch in China. Studies conducted in China are needed to obtain 'blue cap' health claim status for dietary supplements, as required by the China Food and Drug Administration (CFDA), with BY-HEALTH intending to make the relevant submission to the CFDA by the end of 2018.
· The MOU for a research and collaboration agreement for Fruitflow® between the Company and BY-HEALTH, a £3bn listed Chinese dietary supplement business, remains on track with the research project now scheduled to take place in the first half of 2019, effectively being a seventh BY-HEALTH study.
· The Company and its commercial partner DSM have seen an encouraging increase in brand awareness and customer interest in Fruitflow® over the last two years, with the total projected annual sales value of the prospective sales pipeline for Fruitflow now standing at a substantial multiple of existing annual sales.
· Fruitflow®+ Omega-3 launched in Holland & Barrett in August 2018, with a listing in more than 660 Holland & Barrett stores across the UK and Ireland giving Fruitflow®+ Omega-3 widespread consumer exposure. Holland & Barrett's loyalty programme, Rewards for Life, has over 10 million members in the UK and it is intended that Fruitflow®+ Omega-3 will be promoted by email to Holland & Barrett's online customers.
· Further encouraging progress from the Company's Fruitflow® + Omega-3 dietary supplement product which was launched in 2016, with a listing with Amazon secured in June 2017. Total revenues for Fruitflow® + Omega-3 grew by 149% year on year to £73k, compared to £29k in its initial nine month launch period from June 2016 to 31 March 2017. Further UK and international sales channel opportunities are currently being progressed.
· The filing of a patent application, announced in December 2017, relating to the use of Fruitflow® in protecting against the adverse effects of air pollution on the body's cardiovascular system, with laboratory work showing that Fruitflow® can reduce the platelet activation caused by airborne particulate matter by approximately one third. In 2016, 91% of the world's population lived in places where air quality levels exceed WHO limits.
· Planned formulation and launch of a Fruitflow® + nitrates dietary supplement product is progressing well, with the involvement of third party manufacturers, and interest from brand owners. Strong patent position for this formulation, with further interest in the role of Fruitflow® in exercise generated by Team Sunweb Pro Cycling's use of Fruitflow® in the 2018 Tour de France.
· Fruitflow® blood pressure study published in the International Journal of Food Sciences and Nutrition, indicating that Fruitflow® significantly lowered blood pressure in the study subjects.
· The Company raised a gross £672k through a two stage placing of new ordinary shares at 0.50p per share in May and August 2017, and it has raised a further £395k from a placing announced today with new and existing investors at 0.40p per new ordinary share.
· Underlying operating loss* £362k (2017: £368k), a record low for the Group.
· Cash £315k at 31 March 2018 (2017: £12k) with cash of £395k raised from the placing announced today.
· Change of registered office with immediate effect to 2 Blagrave Street, Reading RG1 1AZ.
*before share based payments of £106k (2017: £44k), as set out on the face of the Consolidated Statement of Comprehensive Income
Annual report and accounts and notice of AGM
The Company's annual report and accounts for the year ended 31 March 2018 and its AGM notice will be distributed by post to shareholders on Friday 28 September 2018.
The Company's annual report and accounts and the AGM notice are available from the Company's website www.provexis.com now, and from the address below:
The Company Secretary
Provexis plc
2 Blagrave Street
Reading
RG1 1AZ
The AGM will be held at 10:30am on 25 October 2018 at the offices of Allenby Capital Limited, 5th Floor, 5 St Helen's Place, London EC3A 6AB.
This announcement contains inside information.
For further information please contact:
Provexis plc Tel: 07490 391888
Dawson Buck, Chairman enquiries@provexis.com
Ian Ford, Finance Director
Cenkos Securities plc Tel: 020 7397 8900
Mark Connelly
Stephen Keys
Chairman's statement
The Company has had a very active year, seeking to enhance further the commercial prospects of its innovative, patented Fruitflow® heart-health ingredient.
The Company's Alliance partner DSM Nutritional Products ('DSM') has continued to develop the market actively for Fruitflow® in all global markets. More than 90 regional consumer healthcare brands have now been launched by direct customers of DSM, and a number of further regional brands have been launched through DSM's distributor channels.
The Company and DSM have seen an encouraging increase in brand awareness and customer interest in Fruitflow® over the last two years, with an increasing number of further commercial projects being initiated with prospective customers, including some prospective customers which are part of global businesses.
The total projected annual sales value of the prospective sales pipeline for Fruitflow now stands at a substantial multiple of existing annual sales.
Revenues for the year were £236k (2017: £228k), an increase of 4% relative to the prior year.
The increase in revenue accruing to the Company for the year reflects:
· An increase in the net income received from the Company's Alliance Agreement with DSM, which grew by 6% year on year to £163k; this increase was aided by an improvement in underlying trading margins, reflecting continuing efforts to reduce the production costs of Fruitflow® in liquid and powder form as volumes and production efficiencies increase;
· An increase in revenue from the Company's Fruitflow® + Omega-3 product, which grew by 149% year on year to £73k in the year to 31 March 2018, compared to £29k in its initial nine month launch period from 29 June 2016 to 31 March 2017.
· Amounts in excess of £45k which were received in the year to 31 March 2017 for marketing support, compared to amounts of £Nil which were received in the year to 31 March 2018.
Underlying operating loss has reduced by 1.7% to £362k (2017: £368k), a record low for the Group, reflecting continued progress with Fruitflow® and the Group's ongoing low overhead strategy.
The Group has seen a strong start to the 2018/19 financial year, with first quarter revenues, including further marketing support received, ahead of first half revenues in 2017/18.
BY-HEALTH Co., Ltd
The Company has previously announced that it was working with DSM and BY-HEALTH Co., Ltd, a £3bn listed Chinese dietary supplement business, to support the planned launch of some Fruitflow® based products in the Chinese market.
The planned launch of a number of Fruitflow® based products in the Chinese market, with potentially substantial volumes, is progressing well, with activities driven at present by the need to obtain 'blue cap' health claim status for Fruitflow® as a dietary supplement with the China Food and Drug Administration (CFDA).
Clinical studies conducted in China are typically required to obtain blue cap health claim status, and a significant investment in six separate studies, in support of the Fruitflow® based products which BY-HEALTH plans to launch in China, is being undertaken at BY-HEALTH's expense.
Two studies have been successfully completed in China, one study is currently ongoing at a Chinese clinical site and three further planned human studies have been confirmed by BY-HEALTH.
The two completed studies (a human study and an animal study) showed excellent results in use for Fruitflow®, and BY-HEALTH intends to make the relevant blue cap submission to the CFDA by the end of 2018, to include reference to the Company's existing European Food Safety Authority ('EFSA') health claim for Fruitflow.
It was originally envisaged that a first consumer product would be launched by BY-HEALTH in the second half of 2017, but in part due to the limitations of non blue cap status it was decided to focus instead on obtaining a blue cap health claim for Fruitflow®, hence the substantial investment in the studies outlined above.
BY-HEALTH has launched a Fruitflow® sports nutrition product in China under its GymMax brand, for the exclusive use of Chinese national athletes.
In April 2017 the Company announced it had entered into a memorandum of understanding with BY-HEALTH, intended to result in a research and collaboration agreement with BY-HEALTH for Fruitflow®, focussing on BY-HEALTH's research programme into the development of new products that contribute to cardiovascular health, particularly in the field of blood pressure regulation.
The proposed research and collaboration agreement is intended to include a clinical trial which will be conducted in China, and it was originally envisaged that the Company, BY-HEALTH and a third party Chinese research organisation would sign the agreement in the first quarter of 2018, with the bulk of the research programme to be completed in 2018.
BY-HEALTH has been fully committed to the conduct of its existing Fruitflow® studies in China, and it is now intended that the Company, BY-HEALTH and a third party Chinese research organisation will sign the research and collaboration agreement in the first half of 2019, with the bulk of the research programme to be completed in 2019. This will effectively be BY-HEALTH's seventh clinical study for Fruitflow®.
It is envisaged that the Company and BY-HEALTH will jointly provide primary funding for the research and collaboration work which will include the assessment of a number of different potential product formulations. Product formulations which are covered under the Company's existing patents would continue to be owned outright by the Company, and the Company would retain proportional joint ownership of any new product formulations developed as part of the project.
It is envisaged that the Company will provide scientific and technical support for Fruitflow® to BY-HEALTH throughout the collaboration, with further potential research projects for Fruitflow® between the Company and BY-HEALTH now under discussion.
There are more than 230m people in China who are currently thought to have cardiovascular disease, and a significant increase in cardiovascular events is expected in China over the course of the next decade based on population aging and growth alone (source: World Health Organisation - Cardiovascular diseases, China). China is now the world's second-largest pharmaceuticals market, measured by how much patients and the state spend on drugs (source: health-care information company IQVIA). The Company believes that Fruitflow® has the potential to play an important role in the Chinese cardiovascular health market.
Patent application - Fruitflow® protects against adverse effects of air pollution
In December 2017 the Company announced the filing of a patent application relating to the use of Fruitflow® in protecting against the adverse effects of air pollution on the body's cardiovascular system.
Recent laboratory work has shown that Fruitflow® can reduce the platelet activation caused by airborne particulate matter, such as that from diesel emissions, by approximately one third. The beneficial effects of this reduction can be observed in laboratory models representing healthy subjects as well as in models representing subjects with an underlying cardiovascular problem.
The patent application describes 'a composition comprising a water soluble tomato extract (Fruitflow®) for use in maintaining cardiovascular health, lessening the risk of developing a cardiovascular health problem, or reducing the likelihood of worsening an existing cardiovascular health problem in a subject who is exposed, or is at risk of exposure, to particulate air pollution', and uses of Fruitflow® described in the patent application include:
· maintaining healthy platelet function in the presence of air pollution;
· maintaining a healthy blood circulation and blood flow in the presence of air pollution;
· reducing the risk of an adverse cardiovascular condition, such as atherosclerosis or thrombosis, in the presence of particulate matter air pollution;
· reducing the severity of cardiovascular diseases when exposed to particulate matter; and
· reducing the risk of cardiovascular and respiratory illness in an air polluted environment.
The World Health Organization ('WHO') estimates that in 2012 around 1 in 9 deaths were attributed to exposure to air pollution, making it the largest environmental risk factor for ill health, and with 72% of outdoor air pollution-related premature deaths being due to ischaemic heart disease and strokes.
In 2016, 91% of the world's population lived in places where air quality levels exceed WHO limits (source: World Health Organization, Ambient (outdoor) air quality and health).
The patent filing means that DSM and the Company can use this research to assist with discussions with current and potential customers. The Company expects that this patent application will have a significantly beneficial effect on the current and future commercial prospects for Fruitflow worldwide.
Fruitflow® + Omega-3 dietary supplement product - direct sales
In June 2016 the Company launched its Fruitflow® + Omega-3 dietary supplement product, which is available through the Company's e-commerce website www.fruitflowplus.com, and from June 2017 it became available through Amazon.co.uk. The product also has a Facebook page at www.facebook.com/FruitflowPlus.
Total revenues for Fruitflow® + Omega-3 grew by 149% year on year to £73k, compared to £29k in its initial nine month launch period from June 2016 to 31 March 2017 with further sales growth seen since the year end.
Further UK and international sales channel opportunities for Fruitflow® + Omega-3 are currently being progressed, and the Company is actively seeking to launch the product online into wider international markets to include North America.
Fruitflow® + Omega-3 dietary supplement product - launch in Holland & Barrett
In June 2018 the Company confirmed that it had secured a retail listing with Holland & Barrett for the Company's Fruitflow®+ Omega-3 dietary supplement product.
Holland & Barrett is Europe's largest health and wellbeing retailer (source: www.hollandandbarrett.com/info/who-we-are ), supplying its customers with a wide range of vitamins, minerals, health supplements, specialist foods and natural beauty products.
The product was launched in Holland & Barrett in August 2018, with a listing in more than 660 Holland & Barrett stores across the UK and Ireland giving Fruitflow®+ Omega-3 widespread consumer exposure.
Holland & Barrett's loyalty programme, Rewards for Life, has over 10 million members in the UK and is free for customers to join. Holland & Barrett has also recently introduced a personalised Healthbox service, providing nutritionist recommended vitamins and supplements to their customers along with health tips. Holland & Barrett's Rewards for Life programme and their new Healthbox service will facilitate more direct communications with their customers, and both are expected to provide opportunities to highlight the unique benefits of Fruitflow®+ Omega-3.
The product listing is being supported by a number of ongoing staff training, consumer marketing and promotional initiatives, to include Holland & Barrett's in house Healthy magazine and their website www.hollandandbarrett.com.
The Company's Fruitflow®+ Omega-3 dietary supplement business is complementary to its long-term Alliance Agreement with DSM and it is supported by DSM, reflecting the continued strength of the relationship between Provexis and DSM and the shared interest of both companies in seeking to maximise the commercial returns that can be achieved from Fruitflow®. The Company's Fruitflow®+ Omega-3 dietary supplement business is expected to provide the Company with an additional long term income and profit stream, and all of the revenue and costs attributable to the listing with Holland & Barrett will accrue to Provexis.
The Company had a substantial batch of Fruitflow®+ Omega-3 capsules manufactured in July 2018, and it developed some enhanced product packaging which is better suited to a retail environment.
Fruitflow® + nitrates dietary supplement product
In December 2013 British and international patent applications were filed for the use of Fruitflow® in mitigating exercise-induced inflammation and for promoting recovery from intense exercise, seeking to enhance further the potential of the technology in the sports nutrition sector. The patent was granted by the UK IPO in May 2017, and patents are being sought in Europe, the US, China and ten other territories, with potential patent protection out to December 2033.
The Company is progressing the formulation and launch of a Fruitflow® + nitrates dietary supplement product, which will be supported by the Company's strong patent position in this area, with the involvement now of third party manufacturers and with some interest already generated from brand owners. The product will have anti-inflammatory and circulation benefits for athletes seeking to recover after exercise, properties which would also be potentially beneficial to a wide range of other consumers to include people who are less active and people who suffering from the symptoms of basic ageing.
Further interest in the role of Fruitflow® in exercise was generated by Team Sunweb Pro Cycling's use of Fruitflow® in the 2018 Tour de France, with further details available on the Company's fruitflowplus.com website at www.fruitflowplus.com/sportrecovery and www.fruitflowplus.com/wp-content/uploads/2018/07/FF-athletes_summary-of-background-science-for-webpage_v2.pdf
Fruitflow® and Blood Pressure - Collaboration with University of Oslo
In November 2014 the Company signed a two stage collaboration agreement with the University of Oslo seeking to undertake further research into the relationship between Fruitflow® and blood pressure regulation.
Results from the pilot study, conducted under the collaboration in 2016, indicated that a 150mg dose of Fruitflow® in powder format significantly lowered the average 24-hour systolic blood pressure compared to placebo. When the monitoring time was split into waking and sleeping periods, both systolic and diastolic blood pressure were significantly lower after 150mg Fruitflow® treatment than after placebo treatment during the waking period; systolic pressure was also significantly lower during the sleeping period.
In September 2017 the encouraging results from the blood pressure collaboration were published in the International Journal of Food Sciences and Nutrition and the study is available to view on the Company's website at: www.provexis.org/wp-content/uploads/2017/09/IJFSN-Fruitflow-blood-pressure-study-Sep-17.pdf
Intellectual property
The Company is responsible for filing and maintaining patents and trade marks for Fruitflow® as part of the Alliance Agreement with DSM. The Company is pursuing a strategy to strengthen the breadth and duration of its patent coverage to maximise the commercial returns that can be achieved from the technology. Trade marks were originally registered in the larger global territories, and new registrations are typically now sought in additional territories in response to requests from current or prospective DSM customers for Fruitflow®.
The Company's patent application for Fruit Extracts, relating to part of the production process for Fruitflow®, was granted by the European Patent Office in January 2017, with the patent application also now having entered the national phase across larger global territories, with potential patent protection out to November 2029.
The Company's British and international patent applications for the use of Fruitflow® in mitigating exercise-induced inflammation, and for promoting recovery from intense exercise, were filed in December 2013. The patent was granted by the UK IPO in May 2017 as indicated above. Patents are being sought in Europe, the US, China and ten other territories. The patent application has now entered the national phase, with potential patent protection out to December 2033.
The patent applications for Fruitflow® as an antihypertensive (blood pressure lowering) agent are progressing well, with a patent granted by the European Patent Office in July 2018. The Company has provided primary funding for the necessary patent filings on a tightly managed budget, with the results from the blood pressure collaboration with Oslo University and the related patents being jointly owned by the Company and the University.
The Company's patent application which was announced in December 2017, relating to the use of Fruitflow® in protecting against the adverse effects of air pollution on the body's cardiovascular system, extends potential patent protection for Fruitflow® out to 2036.
Crohn's disease intellectual property
The Group continues to maintain the Crohn's disease intellectual property registered in Provexis (IBD) Limited, a company which is 75% owned by Provexis plc and 25% owned by The University of Liverpool. The Group continues to investigate further options for the Crohn's disease project, seeking to maximise its value.
People
In January 2018 the Company announced with great sadness that its then Non-executive Director Krijn Rietveld had died suddenly. Krijn was a highly valued member of the Provexis Board and we are immensely grateful for his many contributions to the business.
Krijn was a member of the Company's Audit Committee and a senior employee of the Company's Alliance Partner for Fruitflow®, DSM. Krijn was appointed to the Board in September 2008 following DSM Venturing BV's initial investment in the Company.
In July 2018 Frédéric Boned, who was then EMEA Vice President of DSM's Human Nutrition & Health business, a part of DSM Nutritional Products, was appointed as a Non-executive Director.
Frédéric brings a wealth of sales and marketing knowledge and expertise to the Company from a diverse working background. Frédéric has held a variety of senior roles in DSM's Personal Care & Aroma Ingredients business, prior to which he worked in sales and marketing positions for over ten years at Givaudan.
The Company is delighted to welcome Frédéric to the Board, and expects his proven sales and marketing knowledge and expertise to help drive Provexis and its core Fruitflow® product forward.
Frédéric has recently been appointed North American Vice President of DSM's Human Nutrition & Health business, a welcome development for Provexis in this important market for Fruitflow®.
The Board would like to thank the Company's small team of sales, marketing, e-commerce, PR and scientific consultants for their professionalism, enthusiasm and dedication in driving the business forward over the last year. The Company would also like to thank its key professional advisers for their valuable help and support.
Capital structure and funding
The Company is seeking to maximise the commercial returns that can be achieved from its Fruitflow® technology, and the Company's cost base and its resources continue to be very tightly managed. The Company remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow® revenues increase, but while the Company remains in a loss making position it will need to raise working capital on occasions.
The Company raised a further £672k through a two stage placing in May and August 2017, and on 27 September 2018 it announced it had raised a further £395k from a placing of new ordinary shares with new and existing investors at 0.40 pence per share.
The Company intends to hold its Annual General Meeting at the offices of Allenby Capital Limited, 5th Floor, 5 St Helen's Place, London EC3A 6AB at 10:30am on 25 October 2018.
Outlook
The Group has seen a strong start to the 2018/19 financial year, with first quarter revenues, including further marketing support received, ahead of first half revenues in 2017/18.
The Company is well placed to maximise the numerous commercial opportunities which the Company has been pursuing for Fruitflow®, to include its collaboration with BY-HEALTH in the vast Chinese market.
The Company would like to thank its investors for their continued support, and it remains positive about the outlook for Fruitflow® and the Provexis business for the coming year and beyond.
Dawson Buck
Chairman
Strategic report
Group strategy
The Group strategy has historically focused on the discovery, development and commercialisation of functional foods, medical foods and dietary supplements, and in particular the Group's Fruitflow® technology.
On 1 June 2010 the Company announced that it had entered into a long term Alliance Agreement with DSM Nutritional Products to commercialise Fruitflow®, through sales as an ingredient to brand owners in the food, beverage and dietary supplement categories.
The establishment of the Alliance Agreement was a significant milestone in the history of the Company. The Alliance is seeing the partners collaborate to develop Fruitflow® in all major global markets, through an effective commercialisation of current formats and pioneering new and significant applications. DSM is responsible for manufacturing, marketing and selling via its substantial sales force. Provexis is responsible for contributing scientific expertise necessary for successful commercialisation, and for maintaining and strengthening the breadth and duration of its patent and trade mark coverage for Fruitflow®, seeking to maximise the commercial returns that can be achieved from the technology. Profits from the Alliance are being shared by the parties on an agreed basis, linked to various performance milestones. In June 2015 the Company confirmed that it had agreed significantly enhanced financial terms with DSM for the Company's Alliance Agreement for Fruitflow®.
The directors believed at the time of signing the Alliance Agreement, and still retain the belief, that the commercialisation of Fruitflow® is best undertaken in conjunction with DSM as it enables Provexis to leverage the resources and relationships of DSM in the major global markets.
The Group's strategic priority is to focus on developing revenues from the Fruitflow® business together with the Group's Alliance partner DSM, whilst also managing the relationship with DSM.
The Group also seeks to ensure that it fulfils its responsibilities under the Alliance Agreement to include protecting the intellectual property of Fruitflow® and assisting DSM with scientific work required to further commercialise the technology. At the same time, the Board remains committed to keeping regular and fixed costs restricted to an appropriate level, thereby maximising the Group's profit potential and minimising cash utilised in operations.
In June 2016 Provexis launched a high quality dietary supplement product containing Fruitflow® and Omega-3 which is being sold from a separate, dedicated website www.fruitflowplus.com on a mail order basis, the product is also available to purchase from Amazon.co.uk.
The Company's Fruitflow®+ Omega-3 dietary supplement business, which is expected to provide the Company with an additional long term income and profit stream, is complementary to its Alliance Agreement with DSM and it is supported by DSM, reflecting the continued strength of the long term relationship between Provexis and DSM and the shared interest of both companies in seeking to maximise the commercial returns that can be achieved from Fruitflow®.
The Company announced in June 2018 that it had secured a retail listing with Holland & Barrett for Fruitflow®+ Omega-3, with all of the revenue and costs attributable to this listing to accrue to the Company. The Company is seeking to expand further its commercial activities with Fruitflow®+ Omega-3, and it is seeking to develop and sell further Fruitflow®+ combination products, to include a Fruitflow® + nitrates product which would be supported by the Company's strong patent position in this area.
Market opportunity
Fruitflow® is a patented natural extract from tomatoes which has been shown in human trials to reduce the propensity for aberrant blood clotting, typically associated with cardiovascular disease, which can lead to heart attack and stroke. The extract is available in two formats, a syrup and a spray-dried powder and can be included in a broad range of food, beverage and dietary supplement formats.
In May 2009, the Company's Fruitflow® technology was the first to be substantiated by the European Food Safety Authority ('EFSA') under the new Article 13(5) for proprietary and emerging science. In December 2009 the European Commission authorised the health claim 'Helps maintain normal platelet aggregation, which contributes to healthy blood flow', which was the first wording to be authorised under Article 13(5).
The global functional food market is estimated to be in excess of $170 billion per year, and the global market for cardiovascular disease, to include dietary supplements, is estimated to be in excess of $10 billion per year. Global awareness of heart health is increasing and a rising number of people are taking a proactive approach to improving heart health. The directors believe that products addressing blood flow and circulation issues continue to represent a long-term opportunity in the expanding cardiovascular sector.
Financial review
The financial review has been prepared on the basis of Group's continuing operations, as further detailed in the consolidated statement of comprehensive income.
Revenue
The Company's long-term Alliance Agreement with DSM Nutritional Products for Fruitflow® includes a financial model which is based upon the division of profits between the two partners on an agreed basis, linked to certain revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales. In June 2015 the Company confirmed that revised terms for the Alliance Agreement had been agreed with DSM, under which the fixed level of overhead deduction from sales permanently decreased with effect from 1 January 2015, backdated, thus increasing the profit share payable to the Company.
On 29 June 2016 the Company announced the launch of its Fruitflow® + Omega-3 dietary supplement product, which was sold initially from a separate, dedicated website www.fruitflowplus.com on a mail order basis. The product also has a Facebook page at www.facebook.com/FruitflowPlus
Fruitflow® + Omega-3 is a two-in-one supplement in an easy to take capsule, supporting healthy blood flow and normal heart function, and it achieved sales of £73k in the year to 31 March 2018, compared to £29k in its initial nine month launch period from 29 June 2016 to 31 March 2017.
The new dietary supplement product is expected to provide the Company with an additional long term income and profit stream, and the fruitflowplus.com website will be able to accommodate further potential Fruitflow® combination product derivatives.
In July 2017 the Company announced that it had secured a listing with Amazon.co.uk for the Company's Fruitflow® + Omega-3 dietary supplement product, and in June 2018 it was announced that the Company had secured a retail listing with Holland & Barrett for Fruitflow®+ Omega-3, with all of the revenue and costs attributable to this listing to accrue to the Company; further sales channel opportunities for the product are currently being explored.
The Group's total revenue for the year ended 31 March 2018 was £236k, an increase of 4% relative to the prior year (2017: £228k).
The increase in revenue accruing to the Company for the year reflects:
- An increase in the net income received from the Company's Alliance Agreement with DSM, which grew by 6% year on year to £163k; this increase was aided by an improvement in underlying trading margins, reflecting continuing efforts to reduce the production costs of Fruitflow® in liquid and powder form as production efficiencies increase;
- An increase in revenue from the Company's Fruitflow® + Omega-3 product, which grew by 149% year on year to £73k in the year to 31 March 2018, compared to £29k in its initial nine month launch period from 29 June 2016 to 31 March 2017.
- Amounts in excess of £45k which were received in the year to 31 March 2017 for marketing support, compared to amounts of £Nil which were received in the year to 31 March 2018.
Underlying operating loss
Underlying operating loss has reduced by 1.7% to £362k (2017: £368k), reflecting continued progress with Fruitflow® and the Group's ongoing low overhead strategy.
The Group has chosen to report underlying operating loss as the directors believe that the operating loss before share based payments provides additional useful information for shareholders on underlying trends and performance. A reconciliation of underlying operating loss to statutory operating loss is presented on the face of the consolidated statement of comprehensive income. This measure is used for internal performance analysis. The Group's cost base and its resources have been and will continue to be tightly managed within budgets approved and monitored by the Board.
Research and development costs
Research and development costs are primarily composed of patent, trade mark and other research agreement costs, with the Group seeking to maintain and strengthen the breadth and duration of its patent and trade mark coverage for Fruitflow®. Research and development costs have reduced by 2.8% to £182k (2017: £187k), reflecting reduced expenditure on the Company's two stage collaboration agreement with the University of Oslo into the relationship between Fruitflow® and blood pressure regulation.
R&D tax relief: payable tax credit
A current tax credit of £15k (2017: £14k), in respect of research and development tax relief has been recognised in the financial statements. The tax credit claim for the year ended 31 March 2016 totalling £13k was paid to the Group in April 2017, and the tax credit claim for the year ended 31 March 2017 totalling £14k was paid to the Group in April 2018.
Taxation
The current tax charge is £Nil (2017: £Nil) due to the loss made in the year. No amounts in respect of deferred tax were recognised in profit and loss from continuing operations or charged / credited to equity for the current or prior year.
Results and dividends
The loss attributable to equity holders of the parent for the year ended 31 March 2018 was £448k (2017: £380k) and the basic loss per share was 0.02p (2017: 0.02p). The directors are unable to recommend the payment of a dividend (2017: £Nil).
Consideration of section 656 of the Companies Act 2006
On 28 August 2014 it was noted in the Company's Notice of Annual General Meeting that Section 656 of the Companies Act 2006 ('section 656') had been brought to the attention of the Directors as part of the 31 March 2014 year end accounts and audit. Section 656 states that where the net assets of a public company are half or less of its called-up share capital, the directors must call a general meeting of the company to consider whether any, and if so what, steps should be taken to deal with the situation.
Further details of the issue were provided in the Company's AGM notice of 28 August 2014 which is available to download from the Company's website here www.provexis.org/wp-content/uploads/Provexis-plc-notice-of-22-Sep-14-AGM-FINAL.pdf
A resolution was not put to the 2014 Annual General Meeting in connection with section 656 and it was noted that the Directors' view in August 2014 was that the most appropriate course of action was to continue to maintain tight control over the running costs of the Company and to wait for revenues from its core Fruitflow® product to increase. Subsequent to the Company's AGM on 22 September 2014 the net assets of the Company and Group have remained less than half of the Company's called-up share capital and a further general meeting of the Company is not required under section 656.
The annual financial statements of the Company for the year ended 31 March 2018 and the report of the Directors thereon include a going concern statement which concludes that based on the level of existing cash, projected income and expenditure, and excluding the potential additional sources of funding, the directors are satisfied that the Company and the Group have adequate resources to continue in business for a period of more than twelve months from the date of approval of the financial statements. Accordingly the going concern basis has been used in preparing the financial statements.
It remains the Directors' view on 27 September 2018 that the most appropriate course of action in respect of section 656 is to continue to seek to maximise the commercial returns that can be achieved from the Company's Fruitflow® technology, and continue to maintain very tight control over the running costs of the Company.
Capital structure and funding
The Company is seeking to maximise the commercial returns that can be achieved from its Fruitflow® technology, and the Company's cost base and its resources continue to be very tightly managed. The Company remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow® revenues increase, but while the Company remains in a loss making position it will need to raise working capital on occasions.
In June 2015 the Company joined PrimaryBid.com (www.primarybid.com), an online platform dedicated to equity crowdfunding for AIM-listed companies which is further detailed in note 16; as a result of the Company joining PrimaryBid.com the Company's existing 10 September 2013 Equity Financing Facility with Darwin Strategic Limited was cancelled.
Further details of the PrimaryBid.com agreement are available to download from the announcements section of the Company's website www.provexis.com.
On 10 May 2017 the Group announced it had raised proceeds of £350,000 via the placing of 70,000,000 new ordinary shares of 0.1p each at a gross 0.50p per share with investors. The placing shares were admitted to AIM on 16 May 2017.
On 31 July 2017 the Group announced it had raised proceeds of £322,100 via the placing of 64,420,000 new ordinary shares of 0.1p each at a gross 0.50p per share with investors. The placing shares were admitted to AIM on 4 August 2017.
On 27 September 2018 the Group announced it had raised proceeds of £395,000 via the placing of 98,750,000 new ordinary shares of 0.1p each at a gross 0.40p per share with investors, with no commissions payable. It is envisaged that the placing shares will be admitted to AIM on 5 October 2018.
Key performance indicators
The principal financial KPIs monitored by the Board relate to underlying operating loss and cash and cash equivalents.
The table below shows the Group's underlying operating loss, calculated as operating profit before share based payment expense, from continuing operations for the two years ended 31 March 2018:
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Underlying operating loss | 361,618 | 367,842 |
| 31 March 2018 | 31 March 2017 | |
| £ | £ | |
| Cash and cash equivalents | 315,166 | 12,349 |
| Year | Year | ||
| ended | ended | ||
| 31 March | 31 March | ||
| 2018 | 2017 | ||
| Notes | £ | £ | |
| Revenue | 1,3 | 235,804 | 227,618 |
| Cost of goods | (23,167) | (9,533) | |
| Gross profit | 212,637 | 218,085 | |
| Selling and distribution costs | (23,878) | (11,333) | |
| Research and development costs | 4 | (181,922) | (187,163) |
| Administrative costs (including share based payment charges) | (489,777) | (446,010) | |
| R&D tax relief: payable tax credit | 8 | 15,015 | 14,445 |
| Underlying operating loss | (361,618) | (367,842) | |
| Share based payment charges | 17 | (106,307) | (44,134) |
| Loss from operations | 4 | (467,925) | (411,976) |
| Finance income | 7 | 497 | 890 |
| Loss before taxation | (467,428) | (411,086) | |
| Taxation | 8 | - | - |
| Loss and total comprehensive expense for the year | (467,428) | (411,086) | |
| Attributable to: | |||
| Owners of the parent | (448,108) | (380,087) | |
| Non-controlling interest | (19,320) | (30,999) | |
| Loss and total comprehensive expense for the year | (467,428) | (411,086) | |
| Loss per share to owners of the parent | |||
| Basic - pence | 9 | (0.02) | (0.02) |
| Diluted - pence | 9 | (0.02) | (0.02) |
| Company number 05102907 | As at | As at | |
| 31 March | 31 March | ||
| 2018 | 2017 | ||
| Notes | £ | £ | |
| Assets | |||
| Current assets | |||
| Inventories | 12 | 10,521 | 32,450 |
| Trade and other receivables | 13 | 64,621 | 86,976 |
| Corporation tax asset | 8 | 28,335 | 26,425 |
| Cash and cash equivalents | 315,166 | 12,349 | |
| Total current assets | 418,643 | 158,200 | |
| Total assets | 418,643 | 158,200 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 14 | (89,383) | (133,314) |
| Total current liabilities | (89,383) | (133,314) | |
| Net current assets | 329,260 | 24,886 | |
| Total liabilities | (89,383) | (133,314) | |
| Total net assets | 329,260 | 24,886 | |
| Capital and reserves attributable to owners of the parent company | |||
| Share capital | 16 | 1,885,238 | 1,750,818 |
| Share premium reserve | 18 | 17,179,546 | 16,648,471 |
| Warrant reserve | 18 | 26,200 | 26,200 |
| Merger reserve | 18 | 6,599,174 | 6,599,174 |
| Retained earnings | 18 | (24,903,790) | (24,561,989) |
| 786,368 | 462,674 | ||
| Non-controlling interest | 18 | (457,108) | (437,788) |
| Total equity | 329,260 | 24,886 |
| Year | Year | ||
| ended | ended | ||
| 31 March | 31 March | ||
| 2018 | 2017 | ||
| Notes | |||
| £ | £ | ||
| Cash flows from operating activities | |||
| Loss after tax | (467,428) | (411,086) | |
| Adjustments for: | |||
| Profit on sale of fixed assets | 4 | - | (3,000) |
| Finance income | (497) | (890) | |
| Tax credit receivable | 8 | (15,015) | (14,445) |
| Share-based payment charge | 106,307 | 44,134 | |
| Changes in inventories | 21,929 | (32,450) | |
| Changes in trade and other receivables | 22,478 | (37,540) | |
| Changes in trade and other payables | (43,931) | 19,567 | |
| Net cash flow from operations | (376,157) | (435,710) | |
| Tax credits received | 13,105 | 5,408 | |
| Total cash flow from operating activities | (363,052) | (430,302) | |
| Cash flow from investing activities | |||
| Proceeds from sale of fixed assets | - | 3,000 | |
| Interest received | 374 | 1,015 | |
| Total cash flow from investing activities | 374 | 4,015 | |
| Cash flow from financing activities | |||
| Proceeds from issue of share capital | 16 | 665,495 | 249,000 |
| Total cash flow from financing activities | 665,495 | 249,000 | |
| Net change in cash and cash equivalents | 302,817 | (177,287) | |
| Opening cash and cash equivalents | 12,349 | 189,636 | |
| Closing cash and cash equivalents | 315,166 | 12,349 |
| Share capital | Share premium | Warrant reserve | Merger reserve | Retained earnings | Total equity attributable to owners of the parent | Non-controlling interests | Total equity | |
| £ | £ | £ | £ | £ | £ | £ | £ | |
| At 31 March 2016 | 1,647,068 | 16,503,221 | 26,200 | 6,599,174 | (24,226,036) | 549,627 | (406,789) | 142,838 |
| Share-based charges | - | - | - | - | 44,134 | 44,134 | - | 44,134 |
| Issue of shares - placing 8 August 2016 | 93,333 | 130,667 | - | - | - | 224,000 | - | 224,000 |
| Issue of shares - placing 22 September 2016 | 10,417 | 14,583 | - | - | - | 25,000 | - | 25,000 |
| Total comprehensive expense for the year | - | - | - | - | (380,087) | (380,087) | (30,999) | (411,086) |
| At 31 March 2017 | 1,750,818 | 16,648,471 | 26,200 | 6,599,174 | (24,561,989) | 462,674 | (437,788) | 24,886 |
| Share-based charges | - | - | - | - | 106,307 | 106,307 | - | 106,307 |
| Issue of shares - placing 16 May 2017 | 70,000 | 280,000 | - | - | - | 350,000 | - | 350,000 |
| Issue of shares - placing 4 August 2017 | 64,420 | 251,075 | - | - | - | 315,495 | - | 315,495 |
| Total comprehensive expense for the year | - | - | - | - | (448,108) | (448,108) | (19,320) | (467,428) |
| At 31 March 2018 | 1,885,238 | 17,179,546 | 26,200 | 6,599,174 | (24,903,790) | 786,368 | (457,108) | 329,260 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| DSM Alliance Agreement | 162,486 | 152,957 |
| Fruitflow + Omega 3 | 73,318 | 29,391 |
| Other income | - | 45,270 |
| 235,804 | 227,618 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Loss from continuing operations is stated after charging: | ||
| Research and development costs | 181,922 | 187,163 |
| Foreign exchange gains | 1,460 | 377 |
| Profit on disposal of fixed assets - plant and equipment | - | 3,000 |
| Equity-settled share based payment expense | 106,307 | 44,134 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Audit services | ||
| Parent company | 10,500 | 10,500 |
| Subsidiaries | 8,750 | 8,750 |
| Tax services - compliance | ||
| Parent company | 2,000 | 2,000 |
| Subsidiaries | 3,000 | 3,000 |
| Other services | ||
| iXBRL services | 2,000 | 2,000 |
| Total fees | 26,250 | 26,250 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| Research and development consultants | 1 | 1 |
| Directors | 3 | 3 |
| 4 | 4 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Fees | 241,014 | 220,008 |
| Share-based payment remuneration charge: equity settled | 106,307 | 44,134 |
| Total emoluments | 347,321 | 264,142 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Directors | ||
| Aggregate emoluments | 182,010 | 172,008 |
| Company pension contributions | - | - |
| 182,010 | 172,008 | |
| Share based payment remuneration charge: equity settled | 9,646 | - |
| Total Directors' emoluments | 191,656 | 172,008 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Aggregate emoluments | 106,002 | 96,000 |
| Share based payment remuneration charge: equity settled | 4,823 | - |
| Total of the highest paid director's emoluments | 110,825 | 96,000 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Finance income | ||
| Bank interest receivable | 497 | 890 |
| 497 | 890 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| R&D tax relief: payable tax credit | ||
| Research and development credit - current year | 14,710 | 13,320 |
| Research and development credit - in respect of prior periods | 305 | 1,125 |
| Taxation credit | 15,015 | 14,445 |
| Year ended 31 March 2018 | Year ended 31 March 2017 | |
| £ | £ | |
| Loss before tax | (467,428) | (411,086) |
| Loss before tax multiplied by the standard rate of corporation tax in the UK of 19% (2017: 20%) | 88,811 | 82,217 |
| Effects of: | ||
| Expenses not deductible for tax purposes | (20,198) | (8,827) |
| Unutilised tax losses and other deductions arising in the year | (71,129) | (79,365) |
| Adjustment for R&D tax relief | 2,516 | 5,975 |
| Total taxation charge for the year | - | - |
| R&D tax relief: payable tax credit receivable within one year | 31 March 2018 | 31 March 2017 |
| £ | £ | |
| R&D tax relief: payable tax credit recoverable | 28,335 | 26,425 |
| 28,335 | 26,425 |
| Year ended | Year ended | |
| 31 March | 31 March | |
| 2018 | 2017 | |
| Loss and total comprehensive expense for the year attributable to owners of the parent - £ | 448,108 | 380,087 |
| Weighted average number of shares | 1,854,178,119 | 1,712,581,870 |
| Basic and diluted loss per share - pence | 0.02 | 0.02 |
| Goodwill | Development costs | Total | |
| £ | £ | £ | |
| Cost | |||
| At 1 April 2017 | 7,265,277 | 158,166 | 7,423,443 |
| At 31 March 2018 | 7,265,277 | 158,166 | 7,423,443 |
| Amortisation and Impairment | |||
| At 1 April 2017 | 7,265,277 | 158,166 | 7,423,443 |
| At 31 March 2018 | 7,265,277 | 158,166 | 7,423,443 |
| Net book value | |||
| At 31 March 2018 | - | - | - |
| At 31 March 2017 | - | - | - |
| Cost | |||
| At 1 April 2016 | 7,265,277 | 158,166 | 7,423,443 |
| At 31 March 2017 | 7,265,277 | 158,166 | 7,423,443 |
| Amortisation and Impairment | |||
| At 1 April 2016 | 7,265,277 | 158,166 | 7,423,443 |
| At 31 March 2017 | 7,265,277 | 158,166 | 7,423,443 |
| Net book value | |||
| At 31 March 2017 | - | - | - |
| At 31 March 2016 | - | - | - |
| Laboratory equipment | Total | ||||
| £ | £ | ||||
| Cost | |||||
| At 1 April 2017 | - | - | |||
| At 31 March 2018 | - | - | |||
| Depreciation | |||||
| At 1 April 2017 | - | - | |||
| At 31 March 2018 | - | - | |||
| Net book value | |||||
| At 31 March 2018 | - | - | |||
| At 31 March 2017 | - | - |
| Laboratory equipment | Total | ||||
| £ | £ | ||||
| Cost | |||||
| At 1 April 2016 | 68,725 | 68,725 | |||
| Disposals | (68,725) | (68,725) | |||
| At 31 March 2017 | - | - | |||
| Depreciation | |||||
| At 1 April 2016 | 68,725 | 68,725 | |||
| Disposals | (68,725) | (68,725) | |||
| At 31 March 2017 | - | - | |||
| Net book value | |||||
| At 31 March 2017 | - | - | |||
| At 31 March 2016 | - | - |
| 31 March 2018 | 31 March 2017 | |
| £ | £ | |
| Finished goods | 10,521 | 32,450 |
| 10,521 | 32,450 |
| 31 March 2018 | 31 March 2017 | |
| £ | £ | |
| Amounts receivable within one year: | ||
| Trade receivables | 1,314 | 1,251 |
| Other receivables | 11,700 | 16,287 |
| Total financial assets other than cash and cash equivalents classified as loans and receivables | 13,014 | 17,538 |
| Prepayments and accrued income | 51,607 | 69,438 |
| Total trade and other receivables | 64,621 | 86,976 |
| 31 March 2018 | 31 March 2017 | |
| £ | £ | |
| Trade payables | 29,329 | 67,932 |
| Accruals | 54,829 | 60,157 |
| Total financial liabilities measured at amortised cost | 84,158 | 128,089 |
| Other taxes and social security | 5,225 | 5,225 |
| Total trade and other payables | 89,383 | 133,314 |
| 31 March 2018 | 31 March 2017 | |
| £ | £ | |
| Depreciation in excess of capital allowances | 1,334 | 1,334 |
| Unutilised tax losses | 3,270,344 | 3,210,504 |
| 3,271,678 | 3,211,838 |
| Date of grant | Exercise price pence | Number of warrants | Share price at grant date pence | Expected volatility | Risk free rate | Expected life years | Fair value per share under warrant pence |
| 11-Sep-13 | 4.44 | 10,000,000 | 0.915 | 75% | 0.79% | 5 | 0.262 |
| Allotted, called up and fully paid | Ordinary 0.1p shares | Ordinary 0.1p shares |
| £ | number | |
| At 31 March 2017 | 1,750,818 | 1,750,818,174 |
| Issue of shares - placing 16 May 2017 | 70,000 | 70,000,000 |
| Issue of shares - placing 4 August 2017 | 64,420 | 64,420,000 |
| At 31 March 2018 | 1,885,238 | 1,885,238,174 |
| Allotted, called up and fully paid | Ordinary 0.1p shares | Ordinary 0.1p shares |
| £ | number | |
| At 31 March 2016 | 1,647,068 | 1,647,068,167 |
| Issue of shares - placing 8 August 2016 | 93,333 | 93,333,340 |
| Issue of shares - placing 22 September 2016 | 10,417 | 10,416,667 |
| At 31 March 2017 | 1,750,818 | 1,750,818,174 |
| 31 March 2018 | 31 March 2017 | |||||
| Weighted average exercise price (pence) | Weighted average share price at date of exercise (pence) | Number | Weighted average exercise price (pence) | Weighted average share price at date of exercise (pence) | Number | |
| Outstanding at the beginning of the year | 0.77 | - | 56,078,090 | 0.77 | - | 56,078,090 |
| Outstanding at the end of the year | 0.77 | - | 56,078,090 | 0.77 | - | 56,078,090 |
| 31 March 2018 | 31 March 2017 | |||
| Weighted average exercise price (pence) | Number | Weighted average exercise price (pence) | Number | |
| Outstanding at the beginning of the year | 1.12 | 82,539,530 | 1.19 | 62,539,530 |
| Granted during the year | 0.54 | 40,500,000 | 0.92 | 20,000,000 |
| Outstanding at the end of the year | 0.93 | 123,039,530 | 1.12 | 82,539,530 |
| Date of grant | Exercise price pence | Number of options | Share price at grant date pence | Expected volatility | Risk free rate | Expected life years | Fair value per share under option pence |
| 03-Sep-15 | 0.49 | 2,500,000 | 0.49 | 66% | 0.80% | 10 | 0.350 |
| 30-Dec-16 | 0.92 | 20,000,000 | 0.92 | 151% | 0.53% | 10 | 0.857 |
| 31-Jul-17 | 0.52 | 13,000,000 | 0.52 | 90% | 0.55% | 10 | 0.414 |
| 29-Dec-17 | 0.55 | 27,500,000 | 0.55 | 91% | 0.73% | 10 | 0.431 |
| Share premium | Amount subscribed for share capital in excess of nominal value, less the related costs of share issues. |
| Warrant reserve | The warrant reserve represents warrants issued as part of the Equity Financing Facility (see note 16). |
| Merger reserve | The merger reserve arose on the reverse takeover in 2005 of Provexis Natural Products Limited (formerly Provexis Limited) by Provexis plc through a share for share exchange and on the issue of shares for the acquisition of SiS (Science in Sport) Limited in 2011. SiS (Science in Sport) Limited was demerged from Provexis with effect from 9 August 2013 by way of a capital reduction demerger and transferred to a newly incorporated parent company, Science in Sport plc. |
| Retained earnings | Cumulative net gains and losses recognised in the consolidated statement of comprehensive income. |