Final Results

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 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

Ian Ford, CEO

Dawson Buck, Chairman

 

 

Tel:  07490 391888

  enquiries@provexis.com

Allenby Capital Limited

Nick Naylor / Freddie Wooding

 

Tel:  020 3328 5656

 

 

 



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, 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).

 

· 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) and Market-Ready Solutions (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) 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/#) 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): '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), 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, 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, Instagram www.instagram.com/fruitflowplus and Twitter 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 Patent Office in January 2017 and September 2020.

 

Patents have been granted in eleven other major territories to include China 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.

 

 

Patents have been granted in Japan, South Korea and the Philippines.

 

A third European patent, and a Hong Kong patent based on it, are proceeding to grant (expected H1 2023).

 

 

 

Antihypertensive (blood pressure lowering) effects

This patent was originally developed in collaboration with the University of 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.

 

 

Patent applications are pending in China, Japan and the US.

 

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.

 

Further patent protection is being sought in six territories, with potential patent protection out to December 2033.

 

 

 

 

Patent applications are pending in Canada, China, Europe, Hong Kong, India and the US.

 

 

Fruitflow for air pollution

The use of Fruitflow in protecting against the adverse effects of air pollution on the body's cardiovascular system.

 

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.

 

 

Australian, Indonesian, Israeli and Japanese patent protection has been secured.

 

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.

 

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 ).

 

· 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 ) and Market-Ready Solutions ( 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) 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). 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 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 and an Instagram page at 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, 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

31 March

2022

Year ended

31 March

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

 

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

31 March

2022

Year ended

31 March

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

2022

31 March

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


(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

capital

Share

premium

Merger

reserve

Retained

earnings

Total equity

attributable to owners of

the parent

Non-controlling

interests

Total

equity

 

£

£

£

£

£

£

£

 

 

 

 

 

 

 

 

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

23 December 2020

133,333

865,417

-

-

998,750

-

998,750









Issue of shares - placing

25 February 2021

6,667

42,983

-

-

49,650

-

49,650









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

31 March

2022

Year ended

31 March

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

31 March

2022

Year ended

31 March

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

31 March

2022

Year ended

31 March

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

31 March

2022

Year ended

31 March

2021

 


 


Directors

4

4

 

4

4

 

Their aggregate emoluments were:


Year ended

31 March

2022

Year ended

31 March

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

31 March

2022

Year ended

31 March

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

31 March

2022

Year ended

31 March

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

31 March

2022

Year ended

31 March

2021

 


£

£


 


Finance income

 


Bank interest receivable

73

113


73

113

 

8. R&D tax relief: payable tax credit and taxation

 

 

 

Year ended

31 March

2022

Year ended

31 March

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

31 March

2022

Year ended

31 March

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

2022

31 March

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

2022

31 March

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

2022

31 March

2021


£

£


 


Amounts receivable within one year:

 


Trade receivables

3,655

5,916

Other receivables

40,846

29,659

Total financial assets other than cash

and cash equivalents classified as loans and receivables

44,501

35,575

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

2022

31 March

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

2022

31 March

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

0.1p shares

Ordinary

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

0.1p shares

Ordinary

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

(pence)

Number

Weighted average exercise price

(pence)

Number






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

average

exercise price

(pence)

Number

Weighted

average

exercise price

(pence)

Number


 

 



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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