REG - Provexis PLC - Final Results
30/09/2022 07:00
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RNS Number : 2569B Provexis PLC 30 September 2022
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.
30 September
2022
Provexis plc
("Provexis" or the "Company")
PRELIMINARY RESULTS for the YEAR ended 31 MARCH 2022
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 2022.
Key highlights
· Two new agreements secured with DSM in June 2022 for Fruitflow,
to replace the Alliance Agreement: (i) a Transfer of Business agreement and
(ii) a Premix and Market-Ready Solutions supply agreement, both to take effect
from 1 January 2023.
· DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient will transfer to become direct customers of Provexis
WEF 1 January 2023, and Provexis will take over the outsourced supply chain /
production process for Fruitflow at that time. The customer transfer process
from DSM to Provexis is currently ongoing, and thus far it has seen a number
of positive interactions with customers for direct sales of Fruitflow by
Provexis in 2023 and beyond.
· New patent application filed in June 2022 relating to the use of
Fruitflow to confer health benefits in modulating the gut microbiome of
humans, following the completion of a successful human study.
· New partnership with DSM has been agreed relating to the gut
microbiome patent, subject to certain milestones which have been agreed
between the parties. Provexis and DSM are keen to progress this encouraging
new technology towards an early commercial launch of products based on it.
· Long term strategic co-operation framework agreement for
Fruitflow secured with By-Health in November 2021, with exclusive supply and
distribution rights for By-Health to commercialise Fruitflow in China and
Australia.
· Planned launch by By-Health, a circa £4bn listed Chinese dietary
supplement business, of a number of Fruitflow based products in the Chinese
market is progressing well. Potential sales volumes remain at a significant
multiple of existing Fruitflow sales.
· By-Health continues to work on an extensive regulatory submission
to the Chinese State Administration for Market Regulation (SAMR) for
Fruitflow, seeking to establish a new permitted health function claim for
foods such as Fruitflow that can demonstrate an anti-platelet effect,
addressing the aberrant blood clots which can lead to heart attacks and
strokes.
· By-Health has made a significant investment in eight separate
studies in China, at its sole expense, in support of the Fruitflow based
products which it plans to launch in China. The five studies which have been
completed by By-Health showed excellent results in use for Fruitflow, and
provide strong evidence for By-Health in its regulatory submissions to the
SAMR for Fruitflow.
· Total revenue for the year £426k, 16% behind the prior year
(2021: £505k), primarily due to short term lockdowns and other COVID-19
disruptions in some of the growing markets for Fruitflow in the Asia Pacific
region.
· Underlying operating loss* reduced to £173k, 23% lower than the
prior year (2021: £225k) and another new record low for the Group for the
year.
· Cash £864k at 31 March 2022 (2021: £1.077m).
*Loss from operations, adjusted for (i) share-based payments of £67k (2021:
£135k), and (ii) R&D tax relief: receivable tax credit of £59k (2021:
£2k).
Annual report and accounts and notice of AGM
The Company's annual report and accounts for the year ended 31 March 2022 and
the AGM notice are available from the Shareholder information section of the
Company's website www.provexis.com (http://www.provexis.com) now, and from the
address below:
The Company Secretary
Provexis plc
2 Blagrave Street
Reading
RG1 1AZ
The Company's annual report and accounts and its AGM notice will be
distributed by post today to those shareholders who have elected to continue
to receive paper communications.
Proxy forms for use in connection with the AGM will also be distributed by
post today to all shareholders on the Company's share register.
The AGM will be held at 12:30pm on 27 October 2022 at the offices of Allenby
Capital Limited, 5th Floor, 5 St Helen's Place, London EC3A 6AB.
For further information please contact:
Provexis plc Tel: 07490 391888
Ian Ford, CEO enquiries@provexis.com
Dawson Buck, Chairman
Allenby Capital Limited Tel: 020 3328 5656
Nick Naylor / Freddie Wooding
Chairman and CEO's statement
The Company has had another very active year, and it has made some significant
progress with the commercial prospects of its innovative, patented Fruitflow®
heart-health ingredient.
The Group's total revenue for the year ended 31 March 2022 was £426k, a 16%
decrease relative to the prior year (2021: £505k).
The decrease in revenue accruing to the Company for the year reflects:
· A decrease in the net income received from the Company's Alliance
Agreement with DSM, which fell by 21% to £282k in the year (2021: £358k);
· An increase in revenue, net of sales rebates, from the Company's
Fruitflow+ Omega-3 business, including the Company's website
www.fruitflowplus.com (http://www.fruitflowplus.com) , Amazon UK, Holland
& Barrett, and the Company's distributor for Fruitflow+ Omega-3 in
China through the CBEC channel. This business grew by 4% to £144k, net of
sales rebates, in the year (2021: £138k).
· Amounts of £Nil received in the year for Fruitflow+ nitrates
development products, compared to amounts of £9k in the prior year.
The decrease in net income received from the Company's Alliance Agreement with
DSM was primarily due to short term lockdowns and other COVID-19 disruptions
in some of the growing markets for Fruitflow in the Asia Pacific region,
leading to more erratic demand in the short term.
An increasing number of further commercial projects have been initiated by DSM
with prospective customers, including some prospective customers which are
part of global businesses, and the total projected annual sales value of the
prospective sales pipeline for Fruitflow continues to stand at a substantial
multiple of existing annual sales.
Loss from operations for the year was £299k, 17% lower than the prior year
(2021: £362k).
Underlying operating loss for the year (being the loss from operations,
adjusted for (i) share-based payments of £67k (2021: £135k), and (ii)
R&D tax relief: receivable tax credit of £59k (2021: £2k)) was £173k,
23% lower than the prior year (2021: £225k) and a new record low number for
the Group.
DSM Nutritional Products
The Company's Alliance partner DSM Nutritional Products ('DSM') has continued
to develop the market for Fruitflow in all global markets. More than 100
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's alliance agreement with DSM dates back to June 2010, with a
contractual term which runs to 31 December 2022.
The Company announced in September 2021 that the Company and DSM were engaged
in constructive negotiations working towards a new agreement for Fruitflow for
the period after 31 December 2022 to replace the Alliance Agreement, and in
June 2022 the Company announced that the parties had concluded their
negotiations and had entered into (i) a Transfer of Business agreement for
Fruitflow and (ii) a Premix and Market-Ready Solutions supply agreement for
Fruitflow, both to take effect from 1 January 2023.
The Company also announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. This followed the completion of a successful human
study, the results of which strongly support the use of Fruitflow for
modulating gut microbiota to confer a number of health benefits.
Under the terms of the two new agreements with DSM, and the new patent
application:
· DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a Premix or Market-Ready solution) will transfer
to become direct customers of Provexis WEF 1 January 2023.
· DSM will help facilitate the transfer of its wholly outsourced
supply chain / production process for Fruitflow from DSM to Provexis with
effect from 1 January 2023.
· A royalty will be payable to DSM on the gross profits generated
from Fruitflow sales to customers transferred from DSM over the first four
years of the Transfer of Business agreement.
· From 1 January 2023 the net profit accruing to Provexis on sales
of Fruitflow in the calendar year - on a pro-forma basis, assuming like for
like sales and margins - would be materially ahead of the net share of the
profit that would have accrued to Provexis with like for like sales and
margins under the existing 2010 Alliance Agreement; on the same pro-forma
basis, assuming like for like sales and margins, the net profit accruing to
Provexis would further increase in each of the subsequent three calendar
years.
· A new partnership with DSM has been agreed relating to the gut
microbiome patent. This partnership will give DSM preferential access to the
use, marketing, and sale of Fruitflow based products which are based on the
patent, subject to certain milestones which have been agreed between the
parties. Provexis and DSM are keen to progress this encouraging new technology
towards an early commercial launch of products which are based on it.
· The results of the successful gut microbiome human study will be
submitted in due course for publication in a peer reviewed scientific journal.
The patent application (i) states that the results of the human study strongly
support the use of Fruitflow for modulating gut microbiota to confer a number
of health benefits, and (ii) sets out some potential new uses for Fruitflow in
treating a wide variety of human health conditions, beyond Fruitflow's
existing established use in heart-health. The global digestive health market
size was US$38 billion in 2019 and it is projected to grow to US$72 billion in
2027 at a high single-digit CAGR in the 2020-2027 period (see
www.fortunebusinessinsights.com/digestive-health-market-104750
(http://www.fortunebusinessinsights.com/digestive-health-market-104750) ).
· Provexis will sell Fruitflow as a straight ingredient to DSM
exclusively for use in DSM's Premix Solutions
(www.dsm.com/human-nutrition/en/customized-services/customized-solutions/premix-solutions.html
(http://www.dsm.com/human-nutrition/en/customized-services/customized-solutions/premix-solutions.html)
) and Market-Ready Solutions
(www.dsm.com/human-nutrition/en/customized-services/customized-solutions/market-ready-solutions.html
(http://www.dsm.com/human-nutrition/en/customized-services/customized-solutions/market-ready-solutions.html)
) businesses, with DSM then looking to sell the resulting Premix and
Market-Ready Solutions products on to its customers. DSM's Premix and
Market-Ready Solutions businesses are part of DSM's Customized Solutions
business which also offers personalised nutrition solutions to customers, a
rapidly developing growth area. The Company looks forward to supporting DSM
and its Premix and Market-Ready Solutions customers for many years to come.
· A number of DSM's customers for Fruitflow which are set to be
transferred to Provexis have been Fruitflow customers for several years,
including some distributor customers which sell Fruitflow on to third parties.
The Company looks forward to progressing these existing sales relationships,
and confirms it will be able to generate new customers for Fruitflow outside
the royalty arrangements with DSM, in addition to its existing supply and
distribution agreement for Fruitflow with By-Health. The Company is in
discussion with a number of third parties seeking to progress new sales and
distribution opportunities for Fruitflow.
From 1 January 2023 the Group's sales channels for Fruitflow will therefore
include:
1. Former DSM customers for Fruitflow;
2. DSM and its Premix and Market-Ready Solutions businesses, which will
leverage the resources and relationships of DSM in some of the major global
markets;
3. New customers for Fruitflow as a straight ingredient;
4. By-Health and its customers, through the Company's long term supply and
distribution agreement for Fruitflow with By-Health; and
5. The Group's Fruitflow+ Omega-3 dietary supplement product which is sold
direct to consumers, the Group will also look to serve its Chinese
Cross-Border e-commerce distributor for this product in China.
The year ended 31 March 2022 saw a decrease in the net income received from
the Company's Alliance Agreement with DSM, which fell by 21% to £282k in the
year (2021: £358k). The decrease was primarily due to short term lockdowns
and other COVID-19 disruptions in some of the growing markets for Fruitflow in
the Asia Pacific region, leading to more erratic demand in the short term.
This has continued into the early part of 2022/23, with a 31.5% fall in
revenues in the first quarter of the 2022/23 financial year for this business.
The Alliance Agreement business for Fruitflow is effectively now in a period
of transition and handover; the customer transfer process from DSM to
Provexis, for sales of Fruitflow from 1 January 2023 onwards, is currently
ongoing and thus far it has seen a number of very positive interactions with
customers for direct sales of Fruitflow by Provexis in 2023 and beyond.
The Company can be contacted for all Fruitflow sales enquiries by email at
fruitflow@provexis.com.
By-Health Co., Ltd.
In November 2021 the Company announced it had entered into a supply and
distribution agreement (the 'By-Health Agreement') for Fruitflow with
By-Health, a listed Chinese dietary supplement business with a market
capitalisation of approximately £4 billion.
The By-Health Agreement, which followed the Company's extensive work with
By-Health over the last five years, will take full effect from 1 January 2023
and it gives By-Health exclusive supply and distribution rights to
commercialise Fruitflow in Mainland China, Hong Kong, Macau, Taiwan and
Australia (the 'Territories').
Under the By-Health Agreement Provexis will be responsible for the
manufacture, supply and sale of Fruitflow to By-Health, and By-Health will be
responsible for the manufacture, marketing, and sale of Fruitflow based
functional food and dietary supplement finished products in the Territories,
through By-Health's extensive sales network. By-Health will also have
exclusive rights to act as the distributor of Fruitflow as an ingredient in
the Territories.
Provexis and By-Health will seek to collaborate on research and development
projects which may result in the development and approval of Fruitflow as a
drug, for potential sale and distribution in the Territories.
Regulatory progress in China - new permitted health function claim
The Company has previously announced it has been working with By-Health to
support the planned launch of a number of Fruitflow based products in the
Chinese market, with potential volumes at a significant multiple of current
Fruitflow sales.
The planned launch of Fruitflow based products in the Chinese market has been
progressing well. Clinical studies conducted in China are typically required
to obtain the necessary regulatory clearances in China, and a significant
investment in eight separate Fruitflow studies has been undertaken at
By-Health's expense.
Five studies have been successfully completed in China, and two clinical
studies and one animal study are currently ongoing.
The five completed studies showed excellent results in use for Fruitflow, and
they provide strong evidence for its efficacy on platelet function. The
Chinese regulatory system for functional health food ingredients such as
Fruitflow is governed by the State Administration for Market Regulation
(SAMR), China's top market regulator, and it is based on a defined list of 27
permitted health function claims which brand owners are permitted to use on
product labels.
Health function claims are based on test methods and criteria that have been
systematically evaluated and verified, and it is currently envisaged that the
existing list of 27 permitted health function claims might be reduced to a
revised list of 24 permitted claims. The SAMR provides the possibility of
adding new health function claims to the list, as long as the claim can be
evaluated and verified by the SAMR.
Under SAMR regulations functional health foods need to indicate a relationship
between a food or nutrient and a consequent health improvement which falls
under one of the permitted health function claims.
SAMR certified functional health foods are required to use a blue cap / blue
hat logo on their product packaging, which identifies products as approved
functional health foods.
By-Health's regulatory clearance preparations for Fruitflow were originally
focussed on obtaining blue cap health claim status for some Fruitflow based
products in China, under the existing 27 permitted health function claim
structure.
By-Health is now working on an extensive regulatory submission to the SAMR for
Fruitflow, seeking to establish a new permitted health function claim for
foods such as Fruitflow that can demonstrate an anti-platelet effect,
inhibiting platelet function and conferring beneficial effects for people who
are at risk of platelet hyperactivity-associated thrombosis.
By-Health has recently updated its website (see www.by-health.com/en/aboutus
(http://www.by-health.com/en/aboutus) ) stating that it has completed:
'Research comprehensively in the cardiovascular health area. We have developed
a new product made with Fruitflow®, popularly known as 'natural Aspirin'. It
helps to maintain normal platelet aggregation.'
By-Health currently expects to be in a position to complete the last of its
eight studies in 2022, and it will file its regulatory submission to the SAMR
for Fruitflow at the appropriate time seeking to obtain a new permitted health
function claim which would be in addition to the currently defined list of 27
(reducing to 24) permitted claims. Subject to the timing the new anti-platelet
claim, if approved, would therefore represent the 28th - or the 25th -
permitted health function claim in China.
If By-Health is successful in obtaining a new permitted health function claim
for functional health foods such as Fruitflow that can demonstrate an
anti-platelet effect, it is currently expected that this would result in some
significant orders for Fruitflow, potentially at a multiple of current total
sales values.
Market opportunity
A study backed by scientists from the National Center for Cardiovascular
Diseases in China which was updated in 2020
(www.ncbi.nlm.nih.gov/pmc/articles/PMC7008101/#
(http://www.ncbi.nlm.nih.gov/pmc/articles/PMC7008101/) ) stated that:
· the prevalence of Cardiovascular Disease ('CVD') in China has
been increasing continuously since 2006, with approximately 290 million
patients in China who now have CVD; and
· two in five deaths in China are attributed to CVD, with CVD
remaining the leading cause of death in 2016.
In December 2020 the World Health Organisation reported
(www.who.int/news/item/09-12-2020-who-reveals-leading-causes-of-death-and-disability-worldwide-2000-2019
(http://www.who.int/news/item/09-12-2020-who-reveals-leading-causes-of-death-and-disability-worldwide-2000-2019)
): 'Heart disease has remained the leading cause of death at the global level
for the last 20 years. However, it is now killing more people than ever
before. The number of deaths from heart disease increased by more than 2
million since 2000, to nearly 9 million in 2019. Heart disease now represents
16% of total deaths from all causes. More than half of the 2 million
additional deaths were in the WHO Western Pacific region.' The WHO Western
Pacific region includes China.
By-Health's long-term goal of science-based nutrition is to achieve
'comprehensive intervention for human health' (www.by-health.com/en/aboutus
(http://www.by-health.com/en/aboutus) ), and Fruitflow is well placed to
provide such intervention in the Chinese cardiovascular health market.
Fruitflow+ dietary supplement products
Fruitflow+ Omega-3 is available to purchase from the Company's subscription
focussed e-commerce website www.fruitflowplus.com
(http://www.fruitflowplus.com) , Amazon UK and Holland & Barrett.
The Fruitflow+ Omega-3 business grew by 4% in the year to £144k, net of sales
rebates (2021: £138k), reflecting further growth in subscriber numbers on the
www.fruitflowplus.com website.
In November 2020 the Company announced it had entered into a distribution
agreement for Fruitflow+ Omega-3 in China, exclusively through the Chinese
Cross-Border e-commerce ('CBEC') channel. A first CBEC test order was placed
in the year ended 31 March 2021, and a further, larger order was placed in
August 2022.
The distribution agreement in China is separate but wholly complementary to
the Company's work with By-Health, with the CBEC regulations enabling sales of
Fruitflow+ Omega-3 in China now, prior to the health function claim which
By-Health is seeking to secure.
The Company's Fruitflow+ Omega-3 direct selling business has been operating
largely as normal throughout the COVID-19 pandemic, and a further new
production run of Fruitflow+ Omega-3 capsules was completed in July 2021 thus
ensuring continued supply of the product.
Fruitflow+ Omega-3 has a social media presence on Facebook
www.facebook.com/FruitflowPlus (http://www.facebook.com/FruitflowPlus) ,
Instagram www.instagram.com/fruitflowplus
(http://www.instagram.com/fruitflowplus) and Twitter
https://twitter.com/FruitflowPlus (https://twitter.com/FruitflowPlus) .
The Company is seeking to expand further its commercial activities with
Fruitflow+ Omega-3 and other Fruitflow+ combination products, and it is
currently in dialogue with some other potential international direct selling
customers.
Intellectual property
The Company is responsible for filing and maintaining patents and trade marks
for Fruitflow, and patent coverage for Fruitflow now includes the following
patent families which are all owned outright by Provexis:
Patent family Developments in the period from Sep-21 to Sep-22
Improved Fruitflow / Fruit Extracts
Improved Fruitflow / Fruit Extracts, with patents granted by the European Patents have been granted in Japan, South Korea and the Philippines.
Patent Office in January 2017 and September 2020.
A third European patent, and a Hong Kong patent based on it, are proceeding to
Patents have been granted in eleven other major territories to include China grant (expected H1 2023).
and USA; and applications are at a late stage of progression in a further six
global territories, with potential patent protection out to November 2029.
Antihypertensive (blood pressure lowering) effects
This patent was originally developed in collaboration with the University of Patent applications are pending in China, Japan and the US.
Oslo, and it has now been granted for Fruitflow in Europe, the US and two
other major territories. Patent applications are being progressed in a further
four major territories to include the US and China, with potential patent
protection out to April 2033.
In August 2020 the Company announced it had agreed to purchase the background
and joint foreground blood pressure lowering IP owned by Inven2 AS, the
technology transfer office at the University of Oslo, and Provexis now owns
these important patents outright, with the licensing option originally held by
Inven2 having been cancelled.
Fruitflow with nitrates in mitigating exercise-induced inflammation and for
promoting recovery from intense exercise
Patents have been granted around Europe and in the US, Australia, Brazil,
China, Hong Kong, Israel, Japan, South Korea, the Philippines, New Zealand and
Mexico.
Patent applications are pending in Canada, China, Europe, Hong Kong, India and
the US.
Further patent protection is being sought in six territories, with potential
patent protection out to December 2033.
Fruitflow for air pollution
The use of Fruitflow in protecting against the adverse effects of air Australian, Indonesian, Israeli and Japanese patent protection has been
pollution on the body's cardiovascular system. secured.
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.
US, Australian, Indonesian, Israeli and Japanese patents have been secured and
there are pending applications in 12 jurisdictions (including the US where a
further application has been filed) which extends potential patent protection
for Fruitflow out to November 2037.
Fruitflow to confer health benefits in modulating the gut microbiome of humans
The Company also announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. This followed the completion of a successful human
study, the results of which strongly support the use of Fruitflow for
modulating gut microbiota to confer a number of health benefits.
Scientific journal publications
In June 2021 a review article was published in the MDPI journal Nutrients
www.mdpi.com/2072-6643/13/7/2184/htm
(http://www.mdpi.com/2072-6643/13/7/2184/htm) .
The article, titled 'Dietary Antiplatelets: A New Perspective on the Health
Benefits of the Water-Soluble Tomato Concentrate Fruitflow®' concluded that:
'Platelets have multifaceted functions which generate a complicated set of
interactions with other vascular cells, leading to many roles outside
haemostasis. As our understanding of the role of platelet activation in
response to - and in complicating - inflammatory and infectious illnesses
grow, it becomes more apparent that platelet-targeted treatments are necessary
outside the field of CVD. Dietary antiplatelets such as Fruitflow® can help
provide suitably gentle and safe yet efficacious treatments to improve public
health in response to a wide range of health challenges.'
The publication of this article is a significant opportunity for the Company
and DSM to promote Fruitflow further across scientific, trade customer and
consumer channels.
Crohn's disease intellectual property
The Group has ceased 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 Company has been conducting some research on a 'contrabiotic' in
collaboration with Prof Barry Campbell at the University of Liverpool. A new
scientific paper was completed and submitted in 2021, focussing on a type of
polysaccharide which show efficacy against pathogens such as E coli, C
difficile and S typhimurium.
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 may need to raise funds to support working capital on occasions.
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a DSM Premix or DSM Market-Ready solution) will
transfer to become direct customers of Provexis WEF 1 January 2023.
The Company will need to hold Fruitflow in stock from 1 January 2023 onwards,
to sell to new and existing customers, and the Company has therefore agreed to
purchase from DSM the remaining stocks of Fruitflow which DSM holds on 31
December 2022. It is intended that the Company will pay DSM for this inventory
over the course of a three month sale back period commencing on 1 January
2023, with payments due equally (amounting to one third of DSM's 31 December
2022 inventory) on 31 January 2023, 28 February 2023 and 31 March 2023. The
amount of inventory which DSM will hold at 31 December 2022 will depend
primarily on DSM's sales of Fruitflow over the remainder of 2022, hence it is
not currently possible to state with any certainty how much inventory will
remain at 31 December 2022, or therefore the amount which the Company would
need to pay DSM for this inventory on 31 January 2023, 28 February 2023 and 31
March 2023.
Under the terms of the DSM Transfer of Business agreement, the Company can
elect in the first quarter of 2023 to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022, being a decision which the
Company will seek to make in the first quarter of 2023 once the Company has a
clearer understanding of (i) the amount of stock remaining at 31 December
2022, (ii) the best before dates of this inventory, which are currently
estimated to be favourable / long dated in light of recent production runs of
new Fruitflow material in 2022, (iii) likely customer demand in 2023 and
beyond and (iv) the Company's financial resources at that time.
The amount of stock which will remain at 31 December 2022 clearly remains
uncertain as set out above, although it is currently expected to be in excess
of €1m (one million Euros), an amount which - if the Company elected in the
first quarter of 2023 to purchase this inventory in its entirety, which is
likely to be in the Company's best interests - would require further equity or
loan finance. Subject to the outcome of ongoing negotiations with a third
party, the Company might also be able to hold some of this stock on a
consignment basis, only paying for the stock when it was required for sale.
Based on its current level of cash it is expected that the Group will
therefore need to raise further equity finance, or potentially new loan
finance, in the coming four months, a situation which is deemed to represent a
material uncertainty related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
Annual General Meeting
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
12:30pm on 27 October 2022.
People
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.
Outlook
The Company is pleased to report on another strong year of progress.
The Company was delighted to announce the completion of two significant
agreements with DSM in June 2022, which will position the Company extremely
well for the next stage of its development.
The Company was pleased to announce the filing of a new patent application for
Fruitflow in June 2022, relating to the use of Fruitflow to confer health
benefits in modulating the gut microbiome of humans. The patent application
follows the completion of a successful human study, the results of which
strongly support the use of Fruitflow for modulating gut microbiota to confer
a number of health benefits. It is particularly encouraging to note that some
potential new uses for Fruitflow were identified in the study, and have been
highlighted in the patent application, looking to treat some major health
conditions which are beyond Fruitflow's long established and proven use in
heart-health.
The Company and DSM have had a strong long-term relationship over the past
twelve years, with the shared interest of both companies always having been to
maximise the commercial returns that can be achieved from Fruitflow. The
Company remains appreciative of DSM's past help and support, and it looks
forward to building on this relationship in the coming years through the new
gut microbiome partnership, and through ongoing sales of Fruitflow to DSM's
Premix and Market-Ready Solutions businesses.
The Company looks forward to welcoming and serving the majority of DSM's
existing customers for Fruitflow from January next year, and is pleased to be
taking over control of the supply chain / production process for Fruitflow at
the same time. There will be some clear synergies from January 2023 as the
Company will be looking to sell Fruitflow to: (i) former DSM customers for
Fruitflow; (ii) DSM and its Premix and Market-Ready Solutions businesses;
(iii) new customers for Fruitflow as a straight ingredient; and (iv) By-Health
and its customers, through the Company's long term supply and distribution
agreement for Fruitflow with By-Health. Provexis will continue to sell its
Fruitflow+ Omega-3 dietary supplement product direct to consumers, and serve
its Chinese Cross-Border e-commerce distributor for this product in China.
The Alliance Agreement business for Fruitflow is effectively now in a period
of transition and handover; the customer transfer process from DSM to
Provexis, for sales of Fruitflow from 1 January 2023 onwards, is currently
ongoing and thus far it has seen a number of very positive interactions with
customers for direct sales of Fruitflow by Provexis in 2023 and beyond.
The Company was also delighted to announce a supply and distribution agreement
for Fruitflow with By-Health in November 2021, which follows our extensive
work with By-Health over the last five years. The agreement will take full
effect from 1 January 2023.
By-Health currently expects to be in a position to complete the last of its
eight studies in 2022, and it will file its regulatory submission to the SAMR
for Fruitflow at the appropriate time, seeking to obtain a new permitted
health function claim for foods such as Fruitflow that can demonstrate an
anti-platelet effect. If By-Health is successful in obtaining a new permitted
health function claim, it is currently expected that this would result in some
significant orders for Fruitflow, potentially at a multiple of current total
sales values.
Fruitflow is well placed to play an important role in the Chinese
cardiovascular health market under the permitted health function claim
legislation, and we look forward to working closely with By-Health seeking to
maximise the commercial success of this agreement for the benefit of both
companies.
The Company has developed a strong, long lasting and wide-ranging patent
portfolio for Fruitflow, and it owns outright four existing patent families
for Fruitflow. The new microbiome patent application takes this to a potential
total of five patent families, with potential patent protection now running
out to 2042. The four existing patent families have a truly global footprint,
and the Company also holds other valuable intellectual property and trade
secrets for Fruitflow. The intellectual property for Fruitflow is of
fundamental importance to the Company and its current and future commercial
partners, to include DSM and By-Health, and it underpins the numerous
commercial opportunities which the Company and its partners are pursuing for
Fruitflow.
The Company expects that the new gut microbiome patent application, and the
other significant changes announced in June 2022 to the sales and supply chain
structure for Fruitflow, will have a strongly beneficial effect on the current
and future commercial prospects for Fruitflow and the business worldwide.
The Company would like to thank its customers and shareholders for their
continued support, and the Board remains positive about the outlook for
Fruitflow and the Provexis business for the coming year and beyond.
Dawson Buck Ian Ford
Chairman CEO
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.
In June 2010 the Company announced 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 has seen the partners collaborating to
develop Fruitflow in all major global markets, through an effective
commercialisation of current formats and through pioneering new and
significant applications. DSM has been responsible for manufacturing,
marketing and selling via its substantial sales force. Provexis has been
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 have been shared by the parties on an agreed basis,
linked to various performance milestones.
The Company announced in September 2021 that the Company and DSM were engaged
in constructive negotiations working towards a new agreement for Fruitflow for
the period after 31 December 2022 to replace the Alliance Agreement, and in
June 2022 the Company announced that the parties had concluded their
negotiations and had entered into (i) a Transfer of Business agreement for
Fruitflow and (ii) a Premix and Market-Ready Solutions supply agreement for
Fruitflow, both to take effect from 1 January 2023.
The Company also announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. This followed the completion of a successful human
study, the results of which strongly support the use of Fruitflow for
modulating gut microbiota to confer a number of health benefits.
Under the terms of the two new agreements with DSM, and the new patent
application:
· DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a Premix or Market-Ready solution) will transfer
to become direct customers of Provexis WEF 1 January 2023.
· DSM will help facilitate the transfer of its wholly outsourced
supply chain / production process for Fruitflow from DSM to Provexis with
effect from 1 January 2023.
· A royalty will be payable to DSM on the gross profits generated
from Fruitflow sales to customers transferred from DSM over the first four
years of the Transfer of Business agreement.
· From 1 January 2023 the net profit accruing to Provexis on sales
of Fruitflow in the calendar year - on a pro-forma basis, assuming like for
like sales and margins - would be materially ahead of the net share of the
profit that would have accrued to Provexis with like for like sales and
margins under the existing 2010 Alliance Agreement; on the same pro-forma
basis, assuming like for like sales and margins, the net profit accruing to
Provexis would further increase in each of the subsequent three calendar
years.
· A new partnership with DSM has been agreed relating to the gut
microbiome patent. This partnership will give DSM preferential access to the
use, marketing, and sale of Fruitflow based products which are based on the
patent, subject to certain milestones which have been agreed between the
parties. Provexis and DSM are keen to progress this encouraging new technology
towards an early commercial launch of products which are based on it.
· The results of the successful gut microbiome human study will be
submitted in due course for publication in a peer reviewed scientific journal.
The patent application (i) states that the results of the human study strongly
support the use of Fruitflow for modulating gut microbiota to confer a number
of health benefits, and (ii) sets out some potential new uses for Fruitflow in
treating a wide variety of human health conditions, beyond Fruitflow's
existing established use in heart-health. The global digestive health market
size was US$38 billion in 2019 and it is projected to grow to US$72 billion in
2027 at a high single-digit CAGR in the 2020-2027 period (see
www.fortunebusinessinsights.com/digestive-health-market-104750
(http://www.fortunebusinessinsights.com/digestive-health-market-104750) ).
· Provexis will sell Fruitflow as a straight ingredient to DSM
exclusively for use in DSM's Premix Solutions
(www.dsm.com/human-nutrition/en/customized-services/customized-solutions/premix-solutions.html
(http://www.dsm.com/human-nutrition/en/customized-services/customized-solutions/premix-solutions.html)
) and Market-Ready Solutions
(www.dsm.com/human-nutrition/en/customized-services/customized-solutions/market-ready-solutions.html
(http://www.dsm.com/human-nutrition/en/customized-services/customized-solutions/market-ready-solutions.html)
) businesses, with DSM then looking to sell the resulting Premix and
Market-Ready Solutions products on to its customers. DSM's Premix and
Market-Ready Solutions businesses are part of DSM's Customized Solutions
business which also offers personalised nutrition solutions to customers, a
rapidly developing growth area. The Company looks forward to supporting DSM
and its Premix and Market-Ready Solutions customers for many years to come.
· A number of DSM's customers for Fruitflow which are set to be
transferred to Provexis have been Fruitflow customers for several years,
including some distributor customers which sell Fruitflow on to third parties.
The Company looks forward to progressing these existing sales relationships,
and confirms it will be able to generate new customers for Fruitflow outside
the royalty arrangements with DSM, in addition to its existing supply and
distribution agreement for Fruitflow with By-Health. The Company is in
discussion with a number of third parties seeking to progress new sales and
distribution opportunities for Fruitflow.
The Directors believed at the time of signing the two new agreements with DSM
in June 2022, and still retain the belief, that it will be advantageous for
the Group to commercialise Fruitflow from 1 January 2023 by way of selling
Fruitflow to:
1. Former DSM customers for Fruitflow;
2. DSM and its Premix and Market-Ready Solutions businesses, which will
leverage the resources and relationships of DSM in some of the major global
markets;
3. New customers for Fruitflow as a straight ingredient;
4. By-Health and its customers, through the Company's long term supply and
distribution agreement for Fruitflow with By-Health.
Provexis will also continue to sell its Fruitflow+ Omega-3 dietary supplement
product direct to consumers, and serve its Chinese Cross-Border e-commerce
distributor for this product in China.
It has been a key strategic priority for the Group to develop a strong, long
lasting and wide-ranging patent portfolio for Fruitflow. The Group now owns
outright four patent families for Fruitflow which have a truly global
footprint. The company filed a new patent application in June 2022 relating to
the use of Fruitflow to confer health benefits in modulating the gut
microbiome of humans. This followed the completion of a successful human
study, the results of which strongly support the use of Fruitflow for
modulating gut microbiota to confer a number of health benefits.
The Company also holds other valuable intellectual property and trade secrets
for Fruitflow. The intellectual property for Fruitflow is of fundamental
importance to the Company and its current and future commercial partners, to
include DSM and By-Health, and it underpins the numerous commercial
opportunities which the Company and its partners are pursuing for Fruitflow.
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.
One of the Group's other key strategic priorities is its relationship with
By-Health Co., Ltd, a £4bn listed Chinese dietary supplement business.
In November 2021 the Company announced it had entered into a supply and
distribution agreement for Fruitflow with By-Health. The Agreement, which
followed the Company's extensive work with By-Health over the last five years,
will take full effect from 1 January 2023 and it gives By-Health exclusive
supply and distribution rights to commercialise Fruitflow in Mainland China,
Hong Kong, Macau, Taiwan and Australia.
Under the agreement Provexis will be responsible for the manufacture, supply
and sale of Fruitflow to By-Health, and it will contribute scientific
expertise necessary for successful commercialisation.
By-Health will be responsible for the manufacture, marketing, and sale of
Fruitflow based functional food and dietary supplement finished products in
the agreed territories (as above), through By-Health's extensive sales
network. Dietary supplement products such as Fruitflow are required to be
authorised by the relevant Government authorities in each of the agreed
territories in respect of health claims.
By-Health will also have exclusive rights to act as the distributor of
Fruitflow as an ingredient in the agreed territories, selling Fruitflow as an
ingredient to other businesses in the territories which wish to use Fruitflow
to manufacture and sell their own Fruitflow based finished products in the
territories.
Provexis and By-Health will seek to collaborate on research and development
projects which may result in the development and approval of Fruitflow as a
drug, for potential sale and distribution in the territories.
The Agreement with By-Health, which will take full effect from 1 January 2023,
commenced on 4 November 2021 and it has a term of ten years, subject to
extension and termination clauses.
By-Health regulatory progress in China - new permitted health function claim
The Company has previously announced it has been working with By-Health to
support the planned launch of a number of Fruitflow based products in the
Chinese market, with potential volumes at a significant multiple of current
Fruitflow sales.
The planned launch of Fruitflow based products in the Chinese market has been
progressing well. Clinical studies conducted in China are typically required
to obtain the necessary regulatory clearances in China, and a significant
investment in eight separate Fruitflow studies has been undertaken at
By-Health's expense.
Five studies have been successfully completed in China, and two clinical
studies and one animal study are currently ongoing.
The five completed studies showed excellent results in use for Fruitflow, and
they provide strong evidence for its efficacy on platelet function. The
Chinese regulatory system for functional health food ingredients such as
Fruitflow is governed by the State Administration for Market Regulation
(SAMR), China's top market regulator, and it is based on a defined list of 27
permitted health function claims which brand owners are permitted to use on
product labels.
Health function claims are based on test methods and criteria that have been
systematically evaluated and verified, and it is currently envisaged that the
existing list of 27 permitted health function claims might be reduced to a
revised list of 24 permitted claims. The SAMR provides the possibility of
adding new health function claims to the list, as long as the claim can be
evaluated and verified by the SAMR.
Under SAMR regulations functional health foods need to indicate a relationship
between a food or nutrient and a consequent health improvement which falls
under one of the permitted health function claims.
SAMR certified functional health foods are required to use a blue cap / blue
hat logo on their product packaging, which identifies products as approved
functional health foods.
By-Health's regulatory clearance preparations for Fruitflow were originally
focussed on obtaining blue cap health claim status for some Fruitflow based
products in China, under the existing 27 permitted health function claim
structure.
By-Health is now working on an extensive regulatory submission to the SAMR for
Fruitflow, seeking to establish a new permitted health function claim for
foods such as Fruitflow that can demonstrate an anti-platelet effect,
inhibiting platelet function and conferring beneficial effects for people who
are at risk of platelet hyperactivity-associated thrombosis.
By-Health has recently updated its website (see www.by-health.com/en/aboutus
(http://www.by-health.com/en/aboutus) ) stating that it has completed:
'Research comprehensively in the cardiovascular health area. We have developed
a new product made with Fruitflow®, popularly known as 'natural Aspirin'. It
helps to maintain normal platelet aggregation.'
By-Health currently expects to be in a position to complete the last of its
eight studies in 2022, and it will file its regulatory submission to the SAMR
for Fruitflow at the appropriate time seeking to obtain a new permitted health
function claim which would be in addition to the currently defined list of 27
(reducing to 24) permitted claims. Subject to the timing the new anti-platelet
claim, if approved, would therefore represent the 28th - or the 25th -
permitted health function claim in China.
If By-Health is successful in obtaining a new permitted health function claim
for functional health foods such as Fruitflow that can demonstrate an
anti-platelet effect, it is currently expected that this would result in some
significant orders for Fruitflow, potentially at a multiple of current total
sales values.
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 US$170
billion per year, and it is forecast to reach US$276 billion by 2025, with
products addressing cardiovascular disease forming the largest segment of the
market (source:
www.grandviewresearch.com/press-release/global-functional-foods-market
(http://www.grandviewresearch.com/press-release/global-functional-foods-market)
). 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 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 (http://www.fruitflowplus.com) on a
mail order basis, particularly focussed on subscription orders.
In August 2018 Fruitflow+ Omega-3 was launched in more than 660 Holland &
Barrett stores across the UK and Ireland, giving Fruitflow+ Omega-3 widespread
consumer exposure, with all of the revenue and costs attributable to this
listing accruing to the Company.
Fruitflow+ Omega-3 is also available to purchase from Amazon UK, and the
product has a Facebook page at www.facebook.com/FruitflowPlus
(http://www.facebook.com/FruitflowPlus) and an Instagram page at
www.instagram.com/fruitflowplus (http://www.instagram.com/fruitflowplus) .
Fruitflow+ Omega-3 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. Further sales channel opportunities for the product are currently
being explored.
The Group's total revenue for the year ended 31 March 2022 was £426k, a 16%
decrease relative to the prior year (2021: £505k).
The decrease in revenue accruing to the Company for the year reflects:
· A decrease in the net income received from the Company's Alliance
Agreement with DSM, which fell by 21% to £282k in the year (2021: £358k);
· An increase in revenue, net of sales rebates, from the Company's
Fruitflow+ Omega-3 business, including the Company's website
www.fruitflowplus.com (http://www.fruitflowplus.com) , Amazon UK, Holland
& Barrett, and the Company's distributor for Fruitflow+ Omega-3 in
China through the CBEC channel. This business grew by 4% to £144k, net of
sales rebates, in the year (2021: £138k).
· Amounts of £Nil received in the year for Fruitflow+ nitrates
development products, compared to amounts of £9k in the prior year.
Underlying operating loss
Underlying operating loss for the year was £173k (2021: £225k), a £52k year
on year improvement which reflects a year on year £76k decrease in gross
profit, a £4k decrease in selling and distribution costs, a £54k reduction
in research and development costs, a £57k increase in R&D tax relief and
a £13k reduction in administrative costs.
A reconciliation of the underlying operating loss to statutory operating loss
is provided below:
Year ended Year ended
31 March 31 March
2022 2021
£ £
Revenue 426,168 505,330
Cost of goods (46,119) (49,136)
Gross profit 380,049 456,194
Selling and distribution costs (45,268) (48,689)
Research and development costs (249,694) (303,898)
Administrative costs - share-based payment charges (67,119) (134,700)
Administrative costs - other (317,173) (330,823)
Loss from operations (299,205) (361,916)
Adjust loss from operations for:
Administrative costs - share-based payment charges 67,119 134,700
Taxation - R&D tax relief: receivable tax credit 58,905 2,460
Underlying operating loss for the year (173,181) (224,756)
The Group has chosen to report underlying operating loss as the Directors
believe that the operating loss before share-based payments, and including
R&D tax relief, provides additional useful information for shareholders on
underlying trends and performance. 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 decreased by 21% to £250k
(2021: £304k).
R&D tax relief: payable tax credit
A current tax credit of £59k (2021: £2k), in respect of research and
development tax relief has been recognised in the financial statements, £30k
of which (2021: £Nil) relates to prior years.
Taxation
The current tax charge is £Nil (2021: £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 2022 was £224k (2021: £341k) and the basic loss per share was 0.01p
(2021: 0.02p). The Directors are unable to recommend the payment of a dividend
(2021: £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
(http://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
2022 and the reports of the Directors thereon include a going concern
statement which concludes that the necessity to raise additional equity or
loan finance represents a material uncertainty that may cast significant doubt
upon the Group's and Parent Company's ability to continue as a going concern
and that should it be unable to raise further funds, the Group may be unable
to realise its assets and discharge its liabilities in the normal course of
business.
However, considering the success of previous fundraisings and the current
performance of the business, the Directors have a reasonable expectation of
raising sufficient additional equity capital or new loan finance to continue
in operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
It remains the Directors' view on 29 September 2022 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 may need to raise funds to support working capital on occasions.
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a DSM Premix or DSM Market-Ready solution) will
transfer to become direct customers of Provexis WEF 1 January 2023.
The Company will need to hold Fruitflow in stock from 1 January 2023 onwards,
to sell to new and existing customers, and the Company has therefore agreed to
purchase from DSM the remaining stocks of Fruitflow which DSM holds on 31
December 2022. It is intended that the Company will pay DSM for this inventory
over the course of a three month sale back period commencing on 1 January
2023, with payments due equally (amounting to one third of DSM's 31 December
2022 inventory) on 31 January 2023, 28 February 2023 and 31 March 2023. The
amount of inventory which DSM will hold at 31 December 2022 will depend
primarily on DSM's sales of Fruitflow over the remainder of 2022, hence it is
not currently possible to state with any certainty how much inventory will
remain at 31 December 2022, or therefore the amount which the Company would
need to pay DSM for this inventory on 31 January 2023, 28 February 2023 and 31
March 2023.
Under the terms of the DSM Transfer of Business agreement, the Company can
elect in the first quarter of 2023 to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022, being a decision which the
Company will seek to make in the first quarter of 2023 once the Company has a
clearer understanding of (i) the amount of stock remaining at 31 December
2022, (ii) the best before dates of this inventory, which are currently
estimated to be favourable / long dated in light of recent production runs of
new Fruitflow material in 2022, (iii) likely customer demand in 2023 and
beyond and (iv) the Company's financial resources at that time.
The amount of stock which will remain at 31 December 2022 clearly remains
uncertain as set out above, although it is currently expected to be in excess
of €1m (one million Euros), an amount which - if the Company elected in the
first quarter of 2023 to purchase this inventory in its entirety, which is
likely to be in the Company's best interests - would require further equity or
loan finance. Subject to the outcome of ongoing negotiations with a third
party, the Company might also be able to hold some of this stock on a
consignment basis, only paying for the stock when it was required for sale.
Based on its current level of cash it is expected that the Group will
therefore need to raise further equity finance, or potentially new loan
finance, in the coming four months, a situation which is deemed to represent a
material uncertainty related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
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
loss from operations adjusted for share-based payment charges and R&D tax
relief, for the two years ended 31 March 2022:
Year ended Year ended
31 March 31 March
2022 2021
£ £
Loss from operations 299,205 361,916
Adjust loss from operations for:
Administrative costs - share-based payment charges (67,119) (134,700)
Taxation - R&D tax relief: receivable tax credit (58,905) (2,460)
Underlying operating loss 173,181 224,756
The trading results are further detailed in this strategic report.
The table below shows the Group's cash position at 31 March 2022 and 31 March
2021:
31 March 31 March
2022 2021
£ £
Cash and cash equivalents 863,873 1,077,410
The monitoring of cash gives due consideration to anticipated future spend
required to prioritise development opportunities and to plan the resources
required to achieve the goals of the business. The £213,537 decrease in cash
and cash equivalents during the financial year is further detailed in the
consolidated statement of cash flows.
Principal risks and uncertainties
In the course of its normal business the Group is exposed to a range of risks
and uncertainties which could impact on the results of the Group.
The Board considers that risk-management is an integral part of good business
process and, it maintains a register of risks across several categories
including consultants, clients, competition, finance, technical and legal. For
each risk the Board estimates the impact, likelihood as well as identify
mitigating strategies.
This register is reviewed periodically as the Company's situation changes.
During such reviews, each risk category is considered by the Directors with a
view to understanding (i) whether the nature, impact or likelihood of any
risks has changed, (ii) whether the mitigating actions taken by the Company
should change as a result and (iii) whether any new risks or categories of
risk have arisen since the last review.
The Company announced in September 2021 that the Company and DSM were engaged
in constructive negotiations working towards a new agreement for Fruitflow for
the period after 31 December 2022 to replace the Alliance Agreement, and in
June 2022 the Company announced that the parties had concluded their
negotiations and had entered into (i) a Transfer of Business agreement for
Fruitflow and (ii) a Premix and Market-Ready Solutions supply agreement for
Fruitflow, both to take effect from 1 January 2023.
Under these new agreements the Company is seeking to expand its Fruitflow
direct selling business from 1 January 2023 and thereby reduce its commercial
reliance on the Alliance Agreement with DSM, as further outlined above. For
some time the Company has been seeking to expand its Fruitflow+ Omega-3
dietary supplement business. The Company is therefore seeking to increase its
opportunities for growth and decrease the risk inherent in its commercial
reliance on the Alliance Agreement with DSM.
The Directors have identified the following principal risks and uncertainties
that could have the most significant impact on the Group's long-term value
generation.
Funding and other risks
Provexis has experienced operating losses from continuing operations in each
year since its inception. Accordingly until Provexis has sufficient commercial
success with Fruitflow to be cash generative it will continue to rely on its
existing cash resources and further funding rounds to continue its activities.
While Provexis aims to generate licensing and sales revenues from Fruitflow,
there is no certainty that such revenues will be generated. Furthermore, the
amount and timing of revenues from Fruitflow is uncertain and will depend on
numerous factors, most of which have in the past been outside Provexis'
control due to the terms of the Alliance Agreement. It is therefore difficult
for the Directors to predict with accuracy the timing and amount of any
further capital that may be required by the Provexis Group.
Factors that could increase Provexis' funding requirements include, but are
not limited to: higher operational costs; slower progress than expected in
attracting customers to purchase Fruitflow; unexpected opportunities to
develop additional products or acquire additional technologies, products or
businesses; costs incurred in relation to the protection of Provexis'
intellectual property, and the additional working capital (in particular:
inventory) which Provexis will be required to hold as a result of the June
2022 (i) Transfer of Business agreement for Fruitflow with DSM and (ii) Premix
and Market-Ready Solutions supply agreement for Fruitflow with DSM, both to
take effect from 1 January 2023.
Any additional share issues may have a dilutive effect on Provexis
Shareholders. Further, there can be no guarantee or assurance that additional
equity funding will be forthcoming when required, nor as to the terms and
price on which such funds would be available, nor that such funds, if raised,
would be sufficient to enable Provexis to meet its working capital
requirements.
Brexit
The long term impact of the UK leaving the EU remains uncertain.
The trade deal announced in December 2020 removed key tariffs which were the
main potential impact identified for the business.
For the purposes of the Group's Fruitflow+ Omega-3 business the Group has
registered for the Import One-Stop Shop (IOSS), an electronic portal which
businesses have been able to use since 1 July 2021 to comply with their VAT
e-commerce obligations on distance sales to the EU. The Group has a number of
manufacturing options available to it for this business, and it is also
exploring some alternative sales and fulfilment options available to it
outside the UK for the delivery of finished goods in the EU.
Under the terms of the June 2022 (i) Transfer of Business agreement for
Fruitflow with DSM and (ii) Premix and Market-Ready Solutions supply agreement
for Fruitflow with DSM, both to take effect from 1 January 2023, DSM's
existing and prospective pipeline customers for Fruitflow as a straight
ingredient (not a Premix or Market-Ready solution) will transfer to become
direct customers of Provexis WEF 1 January 2023, and DSM will help facilitate
the transfer of its wholly outsourced supply chain / production process for
Fruitflow from DSM to Provexis with effect from 1 January 2023.
The outsourced supply chain / production process for Fruitflow is based solely
in the EU, and the Group expects to maintain its principal stocks of Fruitflow
in the EU, which should mitigate against any significant Brexit risks for this
business.
Covid-19
The full impact of the Covid-19 pandemic remains uncertain.
Scientific research into Covid-19 is being undertaken at considerable scale,
and it is already clear that in many patients the virus is having a
significant adverse effect on circulation, and is causing wider issues with
inflammation. Fruitflow is a natural, breakthrough ingredient that helps with
platelet aggregation, supporting normal blood flow and circulation which in
turn benefits cardiovascular health.
Some of the growing markets for Fruitflow in the Asia Pacific region have been
affected in the short term by further lockdowns and other COVID-19
disruptions, leading to more erratic demand for Fruitflow.
The Company's Fruitflow+ Omega-3 direct selling business has been operating
largely as normal throughout the pandemic.
Commercialisation
For the past twelve years, due to the terms of the Alliance Agreement,
Provexis has been largely dependent on DSM in respect of the development,
production, marketing and commercialisation of Fruitflow, and Provexis'
long-term success has been largely dependent on the ability of DSM to sell
Fruitflow.
It has been noted in prior years that Provexis' negotiating position with DSM
could have been affected by its size and limited cash resources relative to
DSM which has substantial cash resources and established levels of commercial
success. An inability to enter into any discussions with DSM on equal terms
could have led to reduced revenue from the Alliance Agreement which may have
had a significant adverse effect on Provexis' business, financial condition
and results.
The loss of, or changes affecting, Provexis' relationships with DSM could
adversely affect Provexis' results or operations as Provexis has limited input
on the sales strategies of Fruitflow adopted by DSM. Furthermore, although
Provexis has sought to include performance obligations on DSM in the Alliance
Agreement, there has been a risk that DSM may reprioritise Fruitflow within
their product portfolio resulting in Provexis achieving sales below that which
it expects. Any such situation may have a material and adverse effect on
Provexis' business, financial condition and results of operations.
In June 2022 the Company announced that the Company and DSM had concluded
their negotiations to replace the Alliance Agreement and had entered into (i)
a Transfer of Business agreement for Fruitflow and (ii) a Premix and
Market-Ready Solutions supply agreement for Fruitflow, both to take effect
from 1 January 2023.
Under these new agreements the Company is seeking to expand its Fruitflow
direct selling business from 1 January 2023 and thereby reduce its commercial
reliance on the Alliance Agreement with DSM, as further outlined above. For
some time the Company has been seeking to expand its Fruitflow+ Omega-3
dietary supplement business. The Company is therefore seeking to increase its
opportunities for growth and decrease the risk inherent in its commercial
reliance on the Alliance Agreement with DSM.
The success of Provexis will depend on the market's acceptance and valuing of
Fruitflow and there can be no guarantee that this acceptance will be
forthcoming or that Provexis' technologies will succeed. The development of a
market for Fruitflow will be affected by many factors, some of which are
beyond Provexis' control, including the emergence of newer, more successful
food IP and products and the cost of Fruitflow. Notwithstanding the health
claims made in respect of Fruitflow, there can be no guarantee that Provexis'
targeted customer base for the product will purchase or continue to purchase
the product. If a market fails to develop or develops more slowly than
anticipated, Provexis may be unable to recover the losses it may have incurred
in the development of Fruitflow and may never achieve profitability.
Limited product offering
Provexis has only one product, Fruitflow, and any problems with the commercial
success of Fruitflow will impact the financial performance of Provexis.
Intellectual property protection
Provexis is heavily dependent on its intellectual property and, in particular,
its patents. No assurance can be given that any pending patent applications or
any future patent applications will result in granted patents, that any
patents will be granted on a timely basis, that the scope of any copyright or
patent protection will exclude competitors or provide competitive advantages
to Provexis, that any of Provexis' patents will be held valid if challenged,
or that third parties will not claim rights in or ownership of the copyright,
patents and other proprietary rights held by Provexis.
Further, there can be no assurance that others have not developed or will not
develop similar products, duplicate any of Provexis' products or design around
any patents held by Provexis. Others may hold or receive patents which contain
claims having a scope that covers products developed by Provexis (whether or
not patents are issued to Provexis).
Provexis may rely on patents to protect its assets. These rights act only to
prevent a competitor copying and not to prevent a competitor from
independently developing products that perform the same functions. No
assurance can be given that others will not independently develop or otherwise
acquire substantially equivalent functional food IP or otherwise gain access
to Provexis' unpatented proprietary technology or disclose such technology or
that Provexis can ultimately protect meaningful rights to such unpatented
technology.
Once granted, a patent can be challenged both in the patent office and in the
courts by third parties. Third parties can bring material and arguments which
the patent office granting the patent may not have seen. Therefore, issued
patents may be found by a court of law or by the patent office to be invalid
or unenforceable or in need of further restriction.
A substantial cost may be incurred if Provexis is required to assert its
intellectual property rights, including any patents or trade marks against
third parties. Litigation is costly and time consuming and there can be no
assurance that Provexis will have, or will be able to devote, sufficient
resources to pursue such litigation. Potentially unfavourable outcomes in such
proceedings could limit Provexis' intellectual property rights and activities.
There is no assurance that obligations to maintain Provexis' know how would
not be breached or otherwise become known in a manner which provides Provexis
with no recourse.
Any claims made against Provexis' intellectual property rights, even without
merit, could be time consuming and expensive to defend and could have a
materially detrimental effect on Provexis' resources. A third party asserting
infringement claims against Provexis could require Provexis to cease the
infringing activity and/or require Provexis to enter into licensing and
royalty arrangements. The third party could also take legal action which could
be costly. In addition, Provexis may be required to develop alternative
non-infringing solutions that may require significant time and substantial
unanticipated resources. There can be no assurance that such claims will not
have a material adverse effect on Provexis' business, financial condition or
results.
Future development
The future development of the Company is discussed in the Chairman and CEO's
statement.
Ian Ford
Director
Consolidated statement of comprehensive income
Year Year
ended ended
31 March 31 March
2022 2021
Notes £ £
Revenue 1,3 426,168 505,330
Cost of goods sold (46,119) (49,136)
Gross profit 380,049 456,194
Selling and distribution costs (45,268) (48,689)
Research and development costs 4 (249,694) (303,898)
Administrative costs - share-based payment charges 4,16 (67,119) (134,700)
Administrative costs - other (317,173) (330,823)
Loss from operations 4 (299,205) (361,916)
Finance income 7 73 113
Loss before taxation (299,132) (361,803)
Taxation - R&D tax relief: receivable tax credit 8 58,905 2,460
Loss and total comprehensive loss for the year (240,227) (359,343)
Attributable to:
Owners of the parent (224,250) (341,007)
Non-controlling interest (15,977) (18,336)
Loss and total comprehensive loss for the year (240,227) (359,343)
Loss per share to owners of the parent
Basic - pence 9 (0.01) (0.02)
Diluted - pence 9 (0.01) (0.02)
Consolidated statement of financial position
Company number 05102907 As at As at
31 March 31 March
2022 2021
Notes £ £
Assets
Current assets
Inventories 11 85,808 60,576
Trade and other receivables 12 104,443 140,923
Corporation tax asset 8 72,865 13,960
Cash and cash equivalents 863,873 1,077,410
Total current assets 1,126,989 1,292,869
Total assets 1,126,989 1,292,869
Liabilities
Current liabilities
Trade and other payables 13 (157,909) (150,681)
Total current liabilities (157,909) (150,681)
Total liabilities (157,909) (150,681)
Total net assets 969,080 1,142,188
Capital and reserves attributable to
owners of the Parent company
Share capital 15 2,210,822 2,210,822
Share premium 17 18,675,221 18,675,221
Merger reserve 17 6,599,174 6,599,174
Retained earnings 17 (25,986,138) (25,829,007)
1,499,079 1,656,210
Non-controlling interest (529,999) (514,022)
Total equity 969,080 1,142,188
Consolidated statement of cash flows
Year Year
ended ended
31 March 31 March
2022 2021
Notes
£ £
Cash flows from operating activities
Loss after tax (240,227) (359,343)
Adjustments for:
Finance income 7 (73) (113)
Tax credit receivable 8 (58,905) (2,460)
Share-based payment charges - share options 16 67,119 55,925
Share-based payment charges - blood pressure IP 15 - 78,775
Changes in inventories (25,232) (50,492)
Changes in trade and other receivables 36,475 (1,374)
Changes in trade and other payables 7,228 604
Net cash flow from operations (213,615) (278,478)
Tax credits received - 16,202
Total cash flow from operating activities (213,615) (262,276)
Cash flow from investing activities
Purchase of blood pressure IP - cash element - (250)
Interest received 78 201
Total cash flow from investing activities 78 (49)
Cash flow from financing activities
Proceeds from issue of share capital 15 - 1,048,400
Total cash flow from financing activities - 1,048,400
Net change in cash and cash equivalents (213,537) 786,075
Opening cash and cash equivalents 1,077,410 291,335
Closing cash and cash equivalents 863,873 1,077,410
Consolidated statement of changes in equity
Share Share Merger Retained Total equity Non-controlling Total
capital premium reserve earnings attributable to owners of interests equity
the parent
£ £ £ £ £ £ £
At 31 March 2020 2,059,322 17,699,796 6,599,174 (25,543,925) 814,367 (495,686) 318,681
Share-based charges - share options - - - 55,925 55,925 - 55,925
Share-based charges - purchase of blood pressure IP - - - 78,775 78,775 - 78,775
Issue of shares 19 August 2020 - blood pressure IP 11,500 67,025 - (78,775) (250) - (250)
Issue of shares - placing 133,333 865,417 - - 998,750 - 998,750
23 December 2020
Issue of shares - placing 6,667 42,983 - - 49,650 - 49,650
25 February 2021
Total comprehensive loss for the year - - - (341,007) (341,007) (18,336) (359,343)
At 31 March 2021 2,210,822 18,675,221 6,599,174 (25,829,007) 1,656,210 (514,022) 1,142,188
Share-based charges - share options - - - 67,119 67,119 - 67,119
Total comprehensive loss for the year - - - (224,250) (224,250) (15,977) (240,227)
At 31 March 2022 2,210,822 18,675,221 6,599,174 (25,986,138) 1,499,079 (529,999) 969,080
Notes to the preliminary results for the year ended 31 March 2022
1. Accounting policies
General information
Provexis plc is a public limited company incorporated and domiciled in the
United Kingdom (registration number 05102907). The address of the registered
office is 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK. The functional
and presentational currency is pounds sterling and the financial statements
are rounded to the nearest £1.
The main activities of the Group are those of developing, licensing and
selling the proprietary, scientifically-proven Fruitflow heart-health
functional food ingredient for the global functional food sector.
Basis of preparation
The financial information set out in this release does not constitute the
Company's full statutory accounts for the year ended 31 March 2022 for the
purposes of section 434(3) of the Companies Act 2006, but it is derived from
those accounts that have been audited. Statutory accounts for 2021 have been
delivered to the Registrar of Companies and those for 2022 will be delivered
on 30 September 2022. The auditors have reported on the accounts for the year
ended 31 March 2022; and whilst their audit report was not modified their
report does contain a material uncertainty related to going concern, as set
out in the going concern paragraph of this announcement.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) as endorsed for use in the
United Kingdom, this announcement does not itself contain sufficient
information to comply with IFRS. The Company expects to publish full financial
statements for the year ended 31 March 2022 that comply with IFRS on 30
September 2022.
The accounting policies set out below have been applied to all periods
presented in these Group financial statements and are in accordance with IFRS,
as adopted by the United Kingdom, and International Financial Reporting
Interpretations Committee ('IFRIC') interpretations that were applicable for
the year ended 31 March 2022.
These accounting policies are consistent with those applied in the year ended
31 March 2021, as amended to reflect any new Standards, amendments to
Standards and interpretations which are mandatory for the year ended 31 March
2022. The adoption of these revised standards and interpretations has not had
an impact on the current and comparative figures recorded.
The IASB has issued a number of standards and interpretations with an
effective date after the date of these financial statements, none of which are
expected to have a material impact on the Group's reported financial
performance or position.
Going concern
The Group's business activities together with the factors likely to affect its
future development, and the financial position of the Group, its cash flows
and liquidity position are set out in the strategic report. In addition note 2
to the financial statements includes the Group's objectives, policies and
processes for managing its capital; its financial risk management objectives;
details of its financial instruments and its exposure to credit and liquidity
risk.
The Group made a loss for the year of £240,227 (2021: £359,343), which
includes non-cash share-based payment charges of £67,119 (2021: £134,700)
and expects to make a further loss during the year ending 31 March 2023. The
total cash outflow from operations in the year was £213,615 (2021:
£262,276). At 31 March 2022 the Group had cash balances of £863,873 (2021:
£1,077,410).
The directors have prepared projected cash flow information for a period of
more than twelve months from the date of approval of these financial
statements and have reviewed this information as at the date of these
financial statements.
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 may need to raise funds to support working capital on occasions.
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a DSM Premix or DSM Market-Ready solution) will
transfer to become direct customers of Provexis WEF 1 January 2023.
The Company will need to hold Fruitflow in stock from 1 January 2023 onwards,
to sell to new and existing customers, and the Company has therefore agreed to
purchase from DSM the remaining stocks of Fruitflow which DSM holds on 31
December 2022. It is intended that the Company will pay DSM for this inventory
over the course of a three month sale back period commencing on 1 January
2023, with payments due equally (amounting to one third of DSM's 31 December
2022 inventory) on 31 January 2023, 28 February 2023 and 31 March 2023. The
amount of inventory which DSM will hold at 31 December 2022 will depend
primarily on DSM's sales of Fruitflow over the remainder of 2022, hence it is
not currently possible to state with any certainty how much inventory will
remain at 31 December 2022, or therefore the amount which the Company would
need to pay DSM for this inventory on 31 January 2023, 28 February 2023 and 31
March 2023.
Under the terms of the DSM Transfer of Business agreement, the Company can
elect in the first quarter of 2023 to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022, being a decision which the
Company will seek to make in the first quarter of 2023 once the Company has a
clearer understanding of (i) the amount of stock remaining at 31 December
2022, (ii) the best before dates of this inventory, which are currently
estimated to be favourable / long dated in light of recent production runs of
new Fruitflow material in 2022, (iii) likely customer demand in 2023 and
beyond and (iv) the Company's financial resources at that time.
The amount of stock which will remain at 31 December 2022 clearly remains
uncertain as set out above, although it is currently expected to be in excess
of €1m (one million Euros), an amount which - if the Company elected in the
first quarter of 2023 to purchase this inventory in its entirety, which is
likely to be in the Company's best interests - would require further equity or
loan finance. Subject to the outcome of ongoing negotiations with a third
party, the Company might also be able to hold some of this stock on a
consignment basis, only paying for the stock when it was required for sale.
Based on its current level of cash it is expected that the Group will
therefore need to raise further equity finance, or potentially new loan
finance, in the coming four months, a situation which is deemed to represent a
material uncertainty related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
Basis of consolidation
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
The consolidated financial information presents the results of the Company and
its subsidiaries, Provexis Nutrition Limited, Provexis Natural Products
Limited and Provexis (IBD) Limited as if they formed a single entity ('the
Group'). All subsidiaries share the same reporting date, 31 March, as Provexis
plc. All intra group balances are eliminated in preparing the financial
statements.
Non-controlling interest
Profit or loss and each component of other comprehensive income are attributed
to the owners of the parent and to the non-controlling interests. Total
comprehensive income is attributed to the owners of the parent and the
non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
Revenue
(i) Performance obligations and timing of revenue recognition
The group's revenue is primarily derived from:
· The group's profit-sharing Alliance Agreement with DSM, with the
group's profit-sharing income from this agreement being recognised on an
accruals basis in accordance with the substance of the agreement, based on the
receipt from DSM of the relevant information to enable calculation of the
profit-sharing payment due to the group.
· Selling goods, with revenue recognised at a point in time when
control of the goods has transferred to the customer. Revenue from sales to
external customers is recognised when goods are despatched.
There is limited judgment needed in identifying the point at which these
performance obligations are satisfied.
(ii) Determining the transaction price
The amount of revenue to be earned is determined by reference to (i) the
provisions of the group's profit-sharing Alliance Agreement with DSM, which is
based on DSM's fixed price contracts with their customers, and (ii) the fixed
price contracts which the group has with its customers, in respect of the
direct sale of goods to these customers. Variable consideration relating to
volume rebates has been constrained in estimating contract revenue in order
that it is highly probable there will not be a future reversal in the amount
of revenue recognised when the amount of volume rebates has been determined.
(iii) Allocating amounts to performance obligations
For most contracts, there is a fixed unit price for each product sold, with
discounts given for bulk orders placed at a specific time. Therefore, there is
no judgement involved in allocating the contract price to each unit ordered in
such contracts (it is the total contract price divided by the number of units
ordered).
Sales rebate and discount reserves are established based on management's best
estimate of the amounts necessary to meet claims by customers in respect of
these rebates and discounts. A refund liability is made at the time of sale
and updated at the end of each reporting period for changes in circumstances.
(iv) Practical exemptions
The Group has taken advantage of the practical exemption not to account for
significant financing components where the time difference between receiving
consideration and transferring control of goods to its customer is less than
one year.
Segment reporting
The Group determines and presents operating segments based on the information
that internally is provided to the Board of Directors, which is the Group's
'chief operating decision maker' ('CODM').
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group's
other components. An operating segment's operating results are reviewed
regularly by the CODM to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial
information is available.
Segment results that are reported to the Group Board include items directly
attributable to a segment as well as those that can be allocated on a
reasonable basis.
Segment capital expenditure is the total cost incurred during the period to
acquire property, plant and equipment, and intangible assets.
Use of non-GAAP profit measure - underlying operating profit
The Directors believe that the operating loss before share-based payments
measure provides additional useful information for shareholders on underlying
trends and performance. This measure is used for internal performance
analysis. Underlying operating loss is not defined by IFRS and therefore may
not be directly comparable with other companies' adjusted profit measures. It
is not intended to be a substitute for, or superior to IFRS measurements of
profit.
A reconciliation of underlying operating profit to statutory operating profit
is set out in the Strategic Report.
Intangible assets
Research and development
Expenditure incurred on the development of internally generated products is
capitalised if it can be demonstrated that:
● It is technically feasible to develop the product for it
to be sold;
● Adequate resources are available to complete the
development;
● There is an intention to complete and sell the product;
● The Group is able to sell the product;
● Sale of the product will generate future economic
benefits; and
● Expenditure on the project can be measured reliably.
The value of the capitalised development cost is assessed for impairment
annually. The value is written down immediately if impairment has occurred.
Development costs are not being amortised as income has not yet been realised
from the underlying technology. Development expenditure, not satisfying the
above criteria, and expenditure on the research phase of internal projects is
recognised in profit and loss as incurred.
Patents and trade marks
The costs incurred in establishing patents and trade marks are either expensed
or capitalised in accordance with the corresponding treatment of the
development expenditure for the product to which they relate.
Impairment of non- financial assets
Assets that have a finite useful life but that are not yet in use and are
therefore not subject to amortisation or depreciation are tested annually for
impairment. Assets that are subject to amortisation are reviewed for
impairment annually and when events or circumstances suggest that the carrying
amount may not be recoverable, an impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its recoverable amount.
If the recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit and
loss, unless the relevant asset is carried at a revalued 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 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 in prior periods. A reversal of an impairment loss is recognised
immediately in the statement of comprehensive income, 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. Impairment losses on
goodwill are not reversed.
Inventories
Inventories, representing finished goods, are stated at the lower of cost and
net realisable value. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their
present location and condition. Cost is calculated on a first in, first out
basis.
Net realisable value is based on estimated selling price less further costs to
completion and disposal. A charge is made to the income statement for slow
moving inventories. The charge is reviewed at each reporting date.
Financial instruments
Financial assets
The Group's financial assets are comprised of 'trade and other receivables'
and 'cash and cash equivalents'. They are recognised initially at their fair
value and subsequently at amortised cost using the effective interest method,
less provision for impairment. Impairment provisions for trade and other
receivables are recognised based on the simplified approach within IFRS 9
using a provision matrix in the determination of lifetime expected credit
losses.
Financial liabilities
The Group's financial liabilities comprise 'trade and other payables' and
'borrowings'. These are recognised initially at fair value and subsequently at
amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
Government grants
Government grants are recognised when there is reasonable assurance that the
grant will be received and the Group will comply with all attached conditions.
Government grants are recognised in the statement of comprehensive income in
the same period to which the costs that they are intended to compensate are
expensed.
When research and development tax credits are claimed they are recognised on
an accruals basis and are included as other income.
Taxation
Current tax is provided at amounts expected to be recovered or to be paid
using the tax rates and tax laws that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability on the statement of financial position differs from
its tax base, except for differences arising on:
· The initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
· Investments in subsidiaries where the Group is able to control
the timing of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profits will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the reporting date and are expected
to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· The same taxable Group Company; or
· Different Group entities which intend to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, on each future period in which significant amounts
of deferred tax assets or liabilities are expected to be settled or recovered.
Foreign currency translation
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at period end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit and
loss.
Benefits for Directors and consultants
(i) Defined contribution plans
The Group provides retirement benefits to the Executive Directors, who are the
Group's only employees. The assets of these schemes are held separately from
those of the Group in independently administered funds. Contributions made by
the Group are charged to the statement of comprehensive income in the period
in which they become payable.
(ii) Accrued holiday pay
Provision has been made at the balance sheet date for holidays accrued but not
taken at the salary of the relevant employee at that date.
(iii) Share-based payment transactions for Directors and consultants
The Group operates an equity-settled, share-based compensation plan. Vesting
conditions are service conditions and performance conditions only. Where share
options are awarded to employees and others providing similar services, the
fair value of the options at the date of grant is charged to profit and loss
over the vesting period. Non-market vesting conditions are taken into account
by adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest.
If non-market related terms and conditions of options are modified before they
vest, the number of instruments expected to vest at each reporting date, and
therefore the cumulative charge, is amended accordingly. Where equity
instruments are granted to persons other than employees and others providing
similar services, profit and loss is charged with the fair value of goods and
services received.
The proceeds received when options are exercised, net of any directly
attributable transaction costs, are credited to share capital (nominal value)
and the remaining balance to share premium.
Other share-based payment transactions
The fair value of equity-settled share payments made in exchange for goods and
services received by the Group, outside of the Group's share-based
compensation plan, is determined at the date the payment is made. The nature
of the payment is assessed, and the fair value of the payment is either
capitalised or charged to the consolidated statement of comprehensive income.
National insurance on share options
All employee option holders sign statements that they will be liable for any
employers national insurance arising on the exercise of share options.
Interest income
Interest income is recognised on a time-proportion basis using the effective
interest rate method.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRSs requires the
use of certain critical accounting estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Estimates and judgements are continually made and are based on historic
experience and other factors, including expectations of future events that are
believed to be reasonable in the circumstances.
As the use of estimates is inherent in financial reporting, actual results
could differ from these estimates. The Directors believe the following to be
the key areas of estimation and judgement:
(i) Research and development
Under IAS 38 Intangible Assets, development expenditure which meets the
recognition criteria of the standard must be capitalised and amortised over
the useful economic lives of intangible assets from product launch.
(ii) Share-based payments
The Group operates an equity-settled, share-based compensation plan. The
charge for share-based payments is determined based on the fair value of
awards at the date of grant partly by use of a Binomial / Black-Scholes
convergence pricing model which require judgements to be made regarding
expected volatility, dividend yield, risk free rates of return and expected
option lives. The inputs used in these pricing models to calculate the fair
values are set out in note 16.
2. Financial risk management
2.1 Financial risk factors
The Group's activities inevitably expose it to a variety of financial risks:
market risk (including currency risk, cash flow interest rate risk and fair
value interest rate risk), credit risk and liquidity risk.
It is Group policy not to enter into speculative positions using complex
financial instruments. The Group's primary treasury objective is to minimise
exposure to potential capital losses whilst at the same time securing
favourable market rates of interest on Group cash deposits using money market
deposits with banks. Cash balances used to settle the liabilities from
operating activities are also maintained in current accounts which earn
interest at variable rates.
(a) Market risk
Foreign exchange risk
The Group's largest contract, the long-term Alliance Agreement with DSM
Nutritional Products for Fruitflow, is primarily denominated in Euros. The
Alliance Agreement is underpinned by 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.
DSM Nutritional Products seeks to sell Fruitflow in Euros, but its customers
for Fruitflow are world-wide and world-wide exchange rate fluctuations may
have an impact on the revenues accruing to DSM, and thus the profit share
accruing to the Group. The cost of goods for Fruitflow is primarily
denominated in and incurred in Euros.
Where customer or supplier transactions of more than £25,000 total value are
to be settled in foreign currencies consideration is given to settling the
sums to be received or paid through foreign exchange conversion at the outset
of the transactions to minimise the risk of adverse currency fluctuations.
Cash flow and fair value interest rate risk
The Group's interest rate risk arises from medium term and short term money
market deposits. Deposits which earn variable rates of interest expose the
Group to cash flow interest rate risk. Deposits at fixed rates expose the
Group to fair value interest rate risk.
The Group analyses its interest rate exposure on a dynamic basis throughout
the year.
(b) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and
financial institutions as well as credit exposure in relation to outstanding
receivables. Group policy is to place deposits with institutions with
investment grade A2 or better (Moody's credit rating) and deposits are made in
sterling only. The Group does not expect any losses from non-performance by
these institutions. Management believes that the carrying value of outstanding
receivables and deposits with banks represents the Group's maximum exposure to
credit risk.
(c) Liquidity risk
Liquidity risk arises from the Group's management of working capital, it is
the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due. Prudent liquidity risk management implies
maintaining sufficient cash and cash equivalents and management monitors
rolling forecasts of the Group's liquidity on the basis of expected cash flow.
The Group had trade and other payables at the statement of financial position
date of £157,909 (2021: £150,681) as disclosed in note 13.
2.2 Capital risk management
The Group considers its capital to comprise its ordinary share capital, share
premium, merger reserve and accumulated retained earnings as disclosed in the
consolidated statement of financial position.
The Group remains funded exclusively by equity capital. The Group's objectives
when managing capital are to safeguard the Group's ability to continue as a
going concern in order to provide returns for equity holders of the Company
and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
3. Segmental reporting
The Group's operating segments are determined based on the Group's internal
reporting to the Chief Operating Decision Maker (CODM). The CODM has been
determined to be the Board of Directors as it is primarily responsible for the
allocation of resources to segments and the assessment of performance of the
segments. The performance of operating segments is assessed on revenue.
The CODM uses revenue as the key measure of the segments' results as it
reflects the segments' underlying trading performance for the financial period
under evaluation. Revenue is reported separately to the CODM and all other
reports are prepared as a single business unit.
Year ended Year ended
31 March 31 March
2022 2021
£ £
DSM Alliance Agreement 281,899 357,879
Fruitflow+ Omega 3 144,269 138,251
Fruitflow+ nitrates development products - 9,200
426,168 505,330
4. Loss from continuing operations
Year ended Year ended
31 March 31 March
2022 2021
£ £
Loss from continuing operations is stated after charging:
Research and development costs 249,694 303,898
Foreign exchange losses 2,990 10,109
Equity-settled share-based payment expense:
Share-based payment charges - share options 67,119 55,925
Share-based payment charges - blood pressure IP - 78,775
Total share-based payment charges 67,119 134,700
The total fees of the Group's auditor, for services provided are analysed
below:
Year ended Year ended
31 March 31 March
2022 2021
£ £
Audit services
Parent company 9,250 9,250
Subsidiaries 8,750 6,750
Tax services - compliance
Parent company 500 500
Subsidiaries 2,500 2,350
Other services
iXBRL services 2,100 2,000
Total fees 23,100 20,850
5. Wages and salaries
The average monthly number of persons, including all Directors, employed or
engaged under contracts for services by the Group during the year was as
follows:
Year ended Year ended
31 March 31 March
2022 2021
Directors 4 4
4 4
Their aggregate emoluments were:
Year ended Year ended
31 March 31 March
2022 2021
£ £
Wages and salaries 235,746 236,380
Social security costs 20,402 23,878
Pension and other staff costs 10,502 10,202
Total cash settled emoluments 266,650 270,460
Share-based payment remuneration charge: equity settled 51,898 51,898
Total emoluments 318,548 322,358
6. Directors' remuneration
Year ended Year ended
31 March 31 March
2022 2021
£ £
Directors
Aggregate emoluments 235,746 236,380
Company pension contributions 10,502 10,202
246,248 246,582
Share-based payment remuneration charge: equity settled 51,898 51,898
Total Directors' emoluments 298,146 298,480
Emoluments disclosed above include the following amounts in respect of the
highest paid Director:
Year ended Year ended
31 March 31 March
2022 2021
£ £
Aggregate emoluments 127,008 124,008
Company pension contributions 6,350 6,200
Share-based payment remuneration charge: equity settled 22,370 22,370
Total of the highest paid Director's emoluments 155,728 152,578
During the current year and the prior year two Directors participated in
defined contribution pension schemes.
During the current year and the prior year the Directors did not receive any
benefits in kind.
7. Finance income
Year ended Year ended
31 March 31 March
2022 2021
£ £
Finance income
Bank interest receivable 73 113
73 113
8. R&D tax relief: payable tax credit and taxation
Year ended Year ended
31 March 31 March
2022 2021
£ £
R&D tax relief: payable tax credit
Research and development credit - current year 28,769 2,460
Research and development credit - in respect of prior periods 30,136 -
Taxation credit 58,905 2,460
The tax assessed for the year is different from the standard rate of
corporation tax in the UK. The differences are explained below:
Year ended Year ended
31 March 31 March
2022 2021
£ £
Loss before tax (299,132) (361,803)
Loss before tax multiplied by the
standard rate of corporation tax in the UK of 19% 56,835 68,743
Effects of:
Expenses not deductible for tax purposes (12,752) (25,593)
Unutilised tax losses and other deductions arising in the year (33,854) (44,504)
Adjustment for R&D tax relief (10,229) 1,354
Research and development credit - current year 28,769 2,460
Research and development credit - in respect of prior periods 30,136 -
Total taxation credit for the year 58,905 2,460
At 31 March 2022 the Group UK tax losses to be carried forward are estimated
to be £20,370,000 (2021: £20,200,000).
The tax losses represent deferred tax assets amounting to £3,870,655 (2021:
£3,834,700) which have not been recognised on the basis that their future
economic benefit is not probable.
R&D tax relief: payable tax credit receivable within one year 31 March 31 March
2022 2021
£ £
R&D tax relief: payable tax credit recoverable 72,865 13,960
72,865 13,960
9. Earnings per share and diluted earnings per share
Basic earnings per share amounts are calculated by dividing the profit or loss
attributable to owners of the parent by the weighted average number of
ordinary shares in issue during the financial year.
The loss attributable to equity holders of the Company for the purpose of
calculating the fully diluted loss per share is identical to that used for
calculating the basic loss per share. The exercise of share options, disclosed
in note 16, would have the effect of reducing the loss per share and is
therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.
Basic and diluted loss per share amounts are in respect of all activities.
Year ended Year ended
31 March 31 March
2022 2021
Loss and total comprehensive loss
for the year attributable to owners of the parent - £ 224,250 341,007
Weighted average number of shares 2,210,821,523 2,102,799,137
Basic and diluted loss per share - pence 0.01 0.02
10. Intangible assets
Goodwill Development costs Total
£ £ £
Cost
At 1 April 2021 7,265,277 158,166 7,423,443
At 31 March 2022 7,265,277 158,166 7,423,443
Amortisation and Impairment
At 1 April 2021 7,265,277 158,166 7,423,443
At 31 March 2022 7,265,277 158,166 7,423,443
Net book value
At 31 March 2022 - - -
At 31 March 2021 - - -
Cost
At 1 April 2020 7,265,277 158,166 7,423,443
At 31 March 2021 7,265,277 158,166 7,423,443
Amortisation and Impairment
At 1 April 2020 7,265,277 158,166 7,423,443
At 31 March 2021 7,265,277 158,166 7,423,443
Net book value
At 31 March 2021 - - -
At 31 March 2020 - - -
Development costs represent costs incurred in registering patents that meet
the capitalisation criteria set out in IAS 38, see also note 1.
11. Inventories
31 March 31 March
2022 2021
£ £
Finished goods 85,808 60,576
85,808 60,576
There are no provisions included within inventories in relation to the
impairment of inventories (2021: £Nil).
During the year inventories of £46,119 (2021: £49,136) were recognised as an
expense within cost of goods sold.
12. Trade and other receivables
31 March 31 March
2022 2021
£ £
Amounts receivable within one year:
Trade receivables 3,655 5,916
Other receivables 40,846 29,659
Total financial assets other than cash 44,501 35,575
and cash equivalents classified as loans and receivables
Prepayments and accrued income 59,942 105,348
Total trade and other receivables 104,443 140,923
Trade and other receivables do not contain any impaired assets.
Trade receivables represent debts due for the sale of goods to customers.
The Directors consider that the carrying amount of these receivables
approximates to their fair value. All amounts shown under receivables fall due
for payment within one year. The Group does not hold any collateral as
security.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables
and contract assets. To measure expected credit losses on a collective basis,
trade receivables and contract assets are grouped based on similar credit risk
and aging.
Any impairment review based on the Group's expected loss rates is currently
deemed to be immaterial to the Group.
At 31 March 2022 trade receivables of £Nil (2021: £Nil) were more than 60
days past due, and there were no lifetime expected credit losses of the full
value of trade receivables (2021: £Nil).
13. Trade and other payables
31 March 31 March
2022 2021
£ £
Trade payables 24,705 20,502
Accruals 124,666 120,449
Total financial liabilities measured at amortised cost 149,371 140,951
Other taxes and social security 8,538 9,730
Total trade and other payables 157,909 150,681
The Directors consider that the carrying amount of these liabilities
approximates to their fair value.
All amounts shown fall due within one year.
14. Deferred tax
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 19% (2021: 19%).
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.
The UK corporation tax rate for the year was 19.0% (2021: 19.0%). In March
2021, the UK Government announced an increase in the UK corporation tax rate
to 25.0% from 1 April 2023. The increase in UK corporation tax rate was
substantively enacted on 24 May 2021, but this increase is no longer expected
to come into effect following recent announcements by Government.
Deferred tax assets amounting to £3,870,655 (2021: £3,834,700) have not been
recognised on the basis that their future economic benefit is not probable.
Assuming a prevailing tax rate of 19% (2021: 19%) when the timing differences
reverse, the unrecognised deferred tax asset comprises:
31 March 31 March
2022 2021
£ £
Depreciation in excess of capital allowances - -
Unutilised tax losses 3,870,655 3,834,700
3,870,655 3,834,700
15. Share capital
Allotted, called up and fully paid Ordinary Ordinary
0.1p shares 0.1p shares
£ number
At 31 March 2021 2,210,822 2,210,821,523
At 31 March 2022 2,210,822 2,210,821,523
Allotted, called up and fully paid Ordinary Ordinary
0.1p shares 0.1p shares
£ number
At 31 March 2020 2,059,322 2,059,321,507
Issue of shares 19 August 2020 - purchase of blood pressure IP 11,500 11,500,000
Issue of shares - placing 23 December 2020 133,333 133,333,349
Issue of shares - placing 25 February 2021 6,667 6,666,667
At 31 March 2021 2,210,822 2,210,821,523
16. Share options
The Company's share option scheme for employees ('the Provexis 2005 share
option scheme') was adopted in June 2005. Under the scheme, options to
purchase ordinary shares are granted by the Board of Directors, normally
subject to the exercise price of the option being not less than the market
value at the grant date.
Share options typically vest after a period of 3 years and the vesting
schedule is subject to predetermined overall company selection criteria. In
the event that an option holder's employment is terminated, the option may not
be exercised unless the Board of Directors so permits. Share options expire 10
years from the date of grant.
Share options are exercisable between 3 and 10 years from date of grant and
are subject to performance criteria, including share price appreciation. The
Company believes the grant of options closely aligns the interests of the
option holders with those of shareholders.
The fair values of options granted are estimated at the date of grant in
accordance with IFRS 2, using a Binomial / Black-Scholes convergence model.
At 31 March 2022 the number of ordinary shares subject to options granted over
the 2005 share option scheme was:
EMI options
31 March 2022 31 March 2021
Weighted average exercise price Number Weighted average exercise price Number
(pence) (pence)
Outstanding at the beginning of the year 1.04 22,284,990 1.04 22,284,990
Lapsed during the year 1.85 (1,649,990) - -
Outstanding at the end of the year 0.97 20,635,000 1.04 22,284,990
The exercise price of EMI options outstanding at the end of the year was 0.97p
(2021: ranged between 0.97p and 1.85p) and their weighted average
contractual life was 1.2 years (2021: 2.1 years).
Of the total number of EMI options outstanding at the end of the year,
20,635,000 (2021: 22,284,990) had vested and were exercisable at the end of
the year. Their weighted average exercise price was 0.97 pence (2021: 1.04
pence).
Unapproved options
31 March 2022 31 March 2021
Weighted Number Weighted Number
average average
exercise price exercise price
(pence) (pence)
Outstanding at the beginning of the year 0.71 171,215,010 0.71 171,215,010
Granted during the year 0.80 10,000,000 - -
Lapsed during the year 1.85 (23,350,010) - -
Outstanding at the end of the year 0.55 157,865,000 0.71 171,215,010
The exercise price of unapproved options outstanding at the end of the year
ranged between 0.30p and 0.97p (2021: 0.30p and 1.85p) and their weighted
average contractual life was 5.9 years (2021: 5.8 years).
Of the total number of unapproved options outstanding at the end of the year,
85,365,000 (2021: 108,715,010) had vested and were exercisable at the end of
the year. Their weighted average exercise price was 0.71 pence (2021: 0.95
pence).
The fair values of the options have been estimated at the date of grant using
a Binomial / Black-Scholes convergence model, with an expected dividend yield
of 0% and an expected volatility for the options granted during the year of
74%.
The expected life of the options is based on historical data and is not
necessarily indicative of the exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility
is indicative of future trends, which may not necessarily be the actual
outcome.
The total share-based payment charge for the year relating to employee
share-based payment plans was £67,119 (2021: £55,925) all of which related
to equity settled share-based payment transactions.
17. Reserves
Details of movements in reserves are provided as part of the consolidated
statement of changes in equity.
The following describes the nature and purpose of each reserve within total
equity:
Share premium Amount subscribed for share capital in excess of nominal value, less the
related costs of share issues.
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.
18. Pension costs
The pension charge represents contributions payable by the Group to
independently administered funds which for continuing operations during the
year ended 31 March 2022 amounted to £10,502 (2021: £10,202). Employee and
employer pension contributions payable but not yet paid at 31 March 2022
totalled £396 (2021: £Nil).
19. Related party transactions
On 1 June 2010 the Company announced a long-term Alliance Agreement with DSM
Nutritional Products, which has seen the Company collaborate with DSM to
develop Fruitflow in all major global markets. The financial model 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. It is not possible to
determine the financial impact of the Alliance Agreement at this time.
DSM is classified as a related party of the Group in accordance with IAS 24 as
it holds shares in the Group. Further, F Boned is a Director of the Company,
and a senior employee of DSM.
Revenue recognised by the Group under agreements with DSM amounted to
£281,899 (2021: £367,079). At 31 March 2022 the Group was owed £Nil (2021:
£Nil) by DSM.
On 19 February 2021 the Group announced that Dawson Buck (Non-executive
Chairman) had subscribed for 1,666,667 new ordinary shares of 0.1p each as
part of a placing at a gross 0.75p per share. The placing shares were admitted
to trading on AIM on 25 February 2021.
Key management compensation
The Directors represent the key management personnel. Details of their
compensation and share options are given in note 6.
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