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Provexis PLC (PXS)

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Tuesday 10 September, 2019

Provexis PLC

Final Results

RNS Number : 7398L
Provexis PLC
10 September 2019
 

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.

 

 

10 September 2019                                                     Provexis plc

("Provexis" or the "Company")

 

PRELIMINARY RESULTS for the YEAR ended 31 MARCH 2019

 

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 2019.

 

Key highlights

 

·      Total revenue for the year £322k, a 37% year on year increase (2018: £236k).

 

·      Planned launch by By-Health of a number of Fruitflow based products in the Chinese market, with potential volumes at a significant multiple of existing Fruitflow sales, is progressing well.

 

By-Health has made a significant investment in seven separate studies in China, at its sole expense, in support of the Fruitflow based products which it plans to launch in China. Studies conducted in China are needed to obtain 'blue cap' health claim status for dietary supplements, as required by the Chinese State Administration for Market Regulation (SAMR).

 

·      The three 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 for Fruitflow. If a successful blue cap health claim is achieved it would be expected to result in some significant orders for Fruitflow, potentially at a multiple of Fruitflow's existing annual sales.

 

·      Open-ended collaboration agreement secured with By-Health in August 2019, with project work to be managed and conducted by Provexis primarily in the UK; initial project agreed which will concentrate on the use of Fruitflow with nitrates in exercise, an area of considerable commercial interest to By-Health in China. The agreement further strengthens the close relationship between By-Health and Provexis.

 

·      The Company and its commercial partner DSM have seen an encouraging and sustained increase in brand awareness and customer interest in Fruitflow over the last three years, with the total projected annual sales value of the prospective sales pipeline for Fruitflow standing at a substantial multiple of existing annual sales.

 

·      Fruitflow+ Omega-3 launched in Holland & Barrett in August 2018, with a listing in more than 660 Holland & Barrett stores across the UK and Ireland giving Fruitflow+ Omega-3 widespread consumer exposure.

 

·      Total sales of the Company's Fruitflow+ Omega-3 dietary supplement business grew by 34% in the year to £98k, net of sales rebates, across Holland & Barrett, the Company's website www.fruitflowplus.com and Amazon UK. Strong start to the 2019/20 financial year for this business, with first quarter Fruitflow+ Omega-3 revenues substantially ahead of the comparative quarter in 2018/19.

 

·      Dr Niamh O'Kennedy appointed as an Executive Director and as Chief Scientific Officer in April 2019.

 

·      Ian Ford's role expanded to CEO and CFO in September 2019.

 

·      The Company raised £395k from a placing in October 2018 with new and existing investors at 0.40p per new ordinary share.

 

·      Underlying operating loss* £385k (2018: £362k), reflecting a £48k year on year increase in research and development costs, primarily due to Fruitflow blood pressure lowering patents entering the national phase.

 

·      Cash £326k at 31 March 2019 (2018: £315k). Based on its current level of cash the Company will be seeking to raise further funds in the coming months.

 

*before share-based payments of £149k (2018: £106k), as set out on the face of the Consolidated Statement of Comprehensive Income

 

Annual report and accounts and notice of AGM

The Company's annual report and accounts for the year ended 31 March 2019 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 on Wednesday 11 September 2019 to those shareholders who have elected to continue to receive paper communications.

 

Proxy forms for use in connection with the AGM will be distributed by post on Wednesday 11 September 2019 to all shareholders on the Company's share register.

 

The AGM will be held at 12:30pm on 4 October 2019 at the offices of Allenby Capital Limited, 5th Floor, 5 St Helen's Place, London EC3A 6AB.

 

 

For further information please contact:

 

Provexis plc

Dawson Buck, Chairman

Ian Ford, CEO and CFO

 

Tel:       07490 391888

            [email protected]

Allenby Capital Limited

Nick Naylor / Liz Kirchner

 

Tel:       020 3328 5656

 

 

 

 

 

 

Chairman's statement

The Company has had another very active year, seeking to enhance further the commercial prospects of its innovative, patented Fruitflow® heart-health ingredient.

 

The Company's Alliance partner DSM Nutritional Products ('DSM') has continued to develop the market actively for Fruitflow in all global markets. More than 90 regional consumer healthcare brands have now been launched by direct customers of DSM, and a number of further regional brands have been launched through DSM's distributor channels.

 

The Company and DSM have seen an encouraging increase in brand awareness and customer interest in Fruitflow over the last three years, with an increasing number of further commercial projects being initiated with prospective customers, including some prospective customers which are part of global businesses.

 

The Company continues to work closely with DSM, seeking to support various prospective customers globally with their commercialisation plans for Fruitflow, 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.

 

Revenues for the year were £322k, a 37% year on year increase (2018: £236k), reflecting:

 

·      An increase in the net income received from the Company's Alliance Agreement with DSM, which grew by 22% to £198k in the year (2018: £162k);

·      An increase in revenue net of sales rebates from the Company's Fruitflow+ Omega-3 business, including Holland & Barrett, the Company's website www.fruitflowplus.com and Amazon UK. This business grew by 34% to £98k, net of sales rebates, in the year (2018: £73k).

·      Amounts in excess of £26k which were received in the year for marketing support, compared to amounts of £Nil which were received in the prior year.

 

Underlying operating loss for the year was £385k (2018: £362k), reflecting a £48k year on year increase in research and development costs which was primarily due to Fruitflow blood pressure lowering patents entering the national phase of the patent application process, a one-off event in the process which represents the most significant pre-patent grant costs.

 

By-Health Co., Ltd.

The Company has previously announced it was working with DSM and BY-HEALTH Co., Ltd ('By-Health'), a listed Chinese dietary supplement business valued in excess of £3bn, to support the planned launch of a number of Fruitflow based products in the Chinese market.

 

The planned launch of a number of Fruitflow based products in the Chinese market, with potential volumes at a significant multiple of existing Fruitflow sales, is progressing well, with activities driven at present by the need to obtain 'blue cap' health claim status for Fruitflow as a dietary supplement with the State Administration for Market Regulation (SAMR), a new Chinese market regulator which has taken over the responsibilities of the former China Food and Drug Administration (CFDA).

 

Clinical studies conducted in China are typically required to obtain blue cap health claim status, and a significant investment in seven separate studies, in support of the Fruitflow based products which By-Health plans to launch in China, is being undertaken at By-Health's expense.

 

Three studies have been successfully completed in China, three studies are currently ongoing at Chinese clinical sites and a further planned human study in 2019 has been confirmed by By-Health.

 

The three completed studies (a human study and two animal studies) showed excellent results in use for Fruitflow, and they provide strong evidence for By-Health in its blue cap and other regulatory submissions to the SAMR for Fruitflow, supported by the Company's existing European Food Safety Authority ('EFSA') health claim for Fruitflow.

 

If a successful blue cap health claim is achieved for Fruitflow it would currently be expected to result in some significant orders for the product, potentially at a multiple of current total sales values. The Company will provide shareholders with as much information as it can on the timing of this highly commercially sensitive and potentially transformative process, subject to the multi-party confidentiality arrangements which inevitably surround the process.

 

In August 2019 the Company confirmed it had entered into a new collaboration agreement with By-Health to support the planned launch by By-Health of a number of Fruitflow based products in the Chinese market. The new collaboration agreement has been structured on an open-ended framework basis, enabling the parties to conduct a number of different projects over an unspecified period of time under the one overriding agreement, with all projects envisaged to be at By-Health's sole expense.

 

Projects conducted under the agreement will be focussed on specific areas of commercial focus for By-Health, and the first project which has been agreed will concentrate on the use of Fruitflow with nitrates in exercise, an area of considerable commercial interest to By-Health in China. Project work will be managed and conducted by Provexis primarily in the UK, led by Provexis' Chief Scientific Officer Dr Niamh O'Kennedy and supported by outsourced research partners which will be appointed and managed by Provexis.

 

The Fruitflow with nitrates in exercise project will provide gross income to Provexis in excess of £55k in the current financial year, to include an element of overhead recovery. The project will not affect the ownership of Provexis' existing, substantial intellectual property for the Fruitflow with nitrates formulation, which already has patents granted in the UK and Australia. Further patents for this formulation are being sought in Europe, the US, China and eleven other territories, with potential patent protection out to December 2033.

 

There are more than 230m people in China who are currently thought to have cardiovascular disease, and a significant increase in cardiovascular events is expected in China over the course of the next decade based on population aging and growth alone (source: World Health Organisation - Cardiovascular diseases, China www.wpro.who.int/china/mediacentre/factsheets/cvd/en). China is now the world's second-largest pharmaceuticals market, measured by how much patients and the state spend on drugs (source: health-care information company IQVIA www.iqvia.com/blogs/2019/04/growth-perspectives-for-the-pharma-market). The Company believes that Fruitflow has the potential to play an important role in the Chinese cardiovascular health market.

 

Fruitflow+ dietary supplement products

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.

 

The product listing has been supported by a number of ongoing staff training, consumer marketing and promotional initiatives, to include Holland & Barrett's in-house Healthy magazine and its website www.hollandandbarrett.com.

 

Fruitflow+ Omega-3 is available to purchase from Amazon UK and from the Company's e-commerce website www.fruitflowplus.com which is particularly focussed on subscription orders. The product has a Facebook page at www.facebook.com/FruitflowPlus and a newly developed Instagram page at www.instagram.com/fruitflowplus.

 

The Company believes that Fruitflow has an important role to play in women's cardiovascular health, and it has recently launched a dedicated new section of its consumer website at www.fruitflowplus.com/womens-health. The Company sponsored the annual MegsMenopause conference in May 2019, and delivered a high-profile presentation at the conference.

 

A dedicated product video for Fruitflow+ Omega-3 was launched in March 2019, and a Fruitflow App is also being developed, primarily for use on mobile device platforms.

 

Further interest in the role of Fruitflow in exercise was generated by Team Sunweb Pro Cycling's use of Fruitflow in the 2018 Tour de France, and the Company is progressing the formulation and launch of a Fruitflow+ nitrates dietary supplement product which was used by Team Sunweb in the 2019 Tour de France www.fruitflowplus.com/sportrecovery.

 

The Company's Fruitflow+ Omega-3 business has seen a strong start to the 2019/20 financial year, with first quarter Fruitflow+ Omega-3 revenues substantially ahead of the comparative quarter in 2018/19. Subscriber numbers on the www.fruitflowplus.com website have been growing steadily, rising in recent weeks to an all-time high level.

 

The Company's Fruitflow+ Omega-3 dietary supplement business is complementary to its Alliance Agreement with DSM and it is supported by DSM, reflecting the continued strength of the long-term relationship between Provexis and DSM. 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 potential direct brand owner customers.

 

Intellectual property

The Company is responsible for filing and maintaining patents and trade marks for Fruitflow as part of the Alliance Agreement with DSM, and patent coverage for Fruitflow now includes the following patent families:

 

·      Improved Fruitflow / Fruit Extracts, which was granted by the European Patent Office in January 2017. The patent has been granted in seven other major territories to include China, and patent applications are at a late stage of progression in a further seven global territories, with potential patent protection out to November 2029.

·      Antihypertensive (blood pressure lowering) effects in collaboration with the University of Oslo, which have now been granted for Fruitflow in Europe and three other major territories. Patent applications are being progressed in a further five major territories to include the US and China, with potential patent protection out to April 2033.

·      The use of Fruitflow with nitrates in mitigating exercise-induced inflammation and for promoting recovery from intense exercise. The patent was first granted by the UK IPO (Intellectual Property Office) in May 2017, and a further patent was granted in Australia in December 2018. Patents are being sought in Europe, the US, China and eleven other territories, with potential patent protection out to December 2033.

·      The use of Fruitflow in protecting against the adverse effects of air pollution on the body's cardiovascular system, which extends potential patent protection for Fruitflow out to November 2037. Recent laboratory work has shown that Fruitflow can reduce the platelet activation caused by airborne particulate matter, such as that from diesel emissions, by approximately one third.

 

Capital structure and funding

On 27 September 2018 the Company announced it had raised proceeds of £395,000 via the placing of 98,750,000 new ordinary shares of 0.1p each at a gross 0.40p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 5 October 2018.

 

The Company is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Company's cost base and its resources continue to be very tightly managed. The Company remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Company remains in a loss-making position it will need to raise funds to support working capital on occasions. Based on its current level of cash it is expected that the Group will need to raise further equity finance in the coming six 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 capital to continue in operational existence for the foreseeable future and for this reason they continue to adopt the going concern basis in preparing the Group's and Parent Company's financial statements.

 

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 4 October 2019.

 

Crohn's disease intellectual property

The Group continues to maintain the Crohn's disease intellectual property registered in Provexis (IBD) Limited, a company which is 75% owned by Provexis plc and 25% owned by The University of Liverpool. The Group continues to investigate further options for the Crohn's disease project, seeking to maximise its value.

 

People

In July 2018 Frédéric Boned, who was then EMEA Vice President of DSM's Human Nutrition & Health business, a part of DSM Nutritional Products, was appointed as a Non-executive Director.

 

Frédéric has subsequently been appointed North American Vice President of DSM's Human Nutrition & Health business, and he brings a wealth of sales and marketing knowledge and expertise to the Company from a diverse working background. Frédéric has held a variety of senior roles in DSM's Personal Care & Aroma Ingredients business, prior to which he worked in sales and marketing positions for over ten years at Givaudan.

 

The Company is delighted to welcome Frédéric to the Board, and expects his proven sales and marketing knowledge and expertise to help drive Provexis and its core Fruitflow product forward.

 

In April 2019 the Company announced the appointment of Dr Niamh O'Kennedy as an Executive Director of the Company, and as Chief Scientific Officer.

 

Niamh is a research chemist, specialising in the field of natural products chemistry, who has been working with Provexis since 2000. Niamh's experience in isolating and characterising plant-derived compounds and understanding the roles these play in complex biological systems has been pivotal in the development of Provexis' lead product, Fruitflow, and the health claim for Fruitflow which was adopted by the European Food Safety Authority ('EFSA').

 

In conjunction with Niamh's appointment, Ian Ford's role was expanded to Chief Financial Officer and Chief Operating Officer and Dawson Buck's role changed from Executive Chairman to Non-executive Chairman. In September 2019 Ian Ford's role was further expanded to CEO (now, CEO and CFO).

 

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, to include a 37% year on year increase in revenues, to £322k.

 

The Company has developed a strong, long lasting and wide-ranging patent portfolio for Fruitflow, a natural cardiovascular health product which is backed by numerous published human studies, and the Company is well placed to maximise the numerous commercial opportunities which the Company and DSM have been pursuing for Fruitflow.

 

The clinical studies which By-Health has been conducting in China, seeking to obtain blue cap health claim status for Fruitflow in China, have been progressing well and the completed studies have shown excellent results in use for Fruitflow, providing strong evidence for By-Health in its blue cap and other regulatory submissions to the Chinese SAMR.

 

If a successful blue cap health claim is achieved for Fruitflow in China it would currently be expected to result in some significant orders for Fruitflow, potentially at a multiple of current total sales values. The Company will provide shareholders with as much information as it can with regard to the timing of this commercially sensitive and potentially transformative process.

 

In August 2019 the Company was delighted to announce it had signed an open-ended collaboration agreement with By-Health, in support of By-Health's planned launch of Fruitflow based products in the Chinese market. Project work will be managed and conducted by Provexis primarily in the UK, with the first project agreed concentrating on the use of Fruitflow with nitrates in exercise, an area of considerable commercial interest to By-Health. The agreement further strengthens the close relationship between By-Health and Provexis.

 

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

Chairman

 

 

 

Strategic report

 

Group strategy

The Group strategy has historically focused on the discovery, development and commercialisation of functional foods, medical foods and dietary supplements, and in particular the Group's Fruitflow technology.

 

On 1 June 2010 the Company announced that it had entered into a long-term Alliance Agreement with DSM Nutritional Products to commercialise Fruitflow, through sales as an ingredient to brand owners in the food, beverage and dietary supplement categories.

 

The establishment of the Alliance Agreement was a significant milestone in the history of the Company. The Alliance is seeing the partners collaborate to develop Fruitflow in all major global markets, through an effective commercialisation of current formats and pioneering new and significant applications. DSM is responsible for manufacturing, marketing and selling via its substantial sales force. Provexis is responsible for contributing scientific expertise necessary for successful commercialisation, and for maintaining and strengthening the breadth and duration of its patent and trade mark coverage for Fruitflow, seeking to maximise the commercial returns that can be achieved from the technology. Profits from the Alliance are being shared by the parties on an agreed basis, linked to various performance milestones. In June 2015 the Company confirmed that it had agreed significantly enhanced financial terms with DSM for the Company's Alliance Agreement for Fruitflow.

 

The Directors believed at the time of signing the Alliance Agreement, and still retain the belief, that the commercialisation of Fruitflow is best undertaken in conjunction with DSM as it enables Provexis to leverage the resources and relationships of DSM in the major global markets.

 

The Group's strategic priority is to focus on developing revenues from the Fruitflow business together with the Group's Alliance partner DSM, whilst also managing the relationship with DSM.

 

The Group also seeks to ensure that it fulfils its responsibilities under the Alliance Agreement to include protecting the intellectual property of Fruitflow and assisting DSM with scientific work required to further commercialise the technology. At the same time, the Board remains committed to keeping regular and fixed costs restricted to an appropriate level, thereby maximising the Group's profit potential and minimising cash utilised in operations.

 

In June 2016 Provexis launched a high-quality dietary supplement product containing Fruitflow and Omega-3 which is being sold from a separate, dedicated website www.fruitflowplus.com on a mail order basis, the product is also available to purchase from Amazon.co.uk.

 

The Company's Fruitflow+ Omega-3 dietary supplement business, which is expected to provide the Company with an additional long-term income and profit stream, is complementary to its Alliance Agreement with DSM and it is supported by DSM, reflecting the continued strength of the long-term relationship between Provexis and DSM and the shared interest of both companies in seeking to maximise the commercial returns that can be achieved from Fruitflow.

 

The Company announced in June 2018 that it had secured a retail listing with Holland & Barrett for Fruitflow+ Omega-3, with all of the revenue and costs attributable to this listing to accrue to the Company. The Company is seeking to expand further its commercial activities with Fruitflow+ Omega-3, and it is seeking to develop and sell further Fruitflow+ combination products.

 

The Company is working with DSM and By-Health Co., Ltd, a £3bn listed Chinese dietary supplement business, to support the planned launch of a number of Fruitflow based products in the Chinese market. In August 2019 Provexis entered into an open-ended collaboration agreement with By-Health, which further strengthens the already close relationship between By-Health and Provexis. The Company will seek to undertake further projects for By-Health under this flexible framework agreement.

 

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.researchandmarkets.com ). Global awareness of heart health is increasing and a rising number of people are taking a proactive approach to improving heart health. The Directors believe that products addressing blood flow and circulation issues continue to represent a long-term opportunity in the expanding cardiovascular sector.

 

Financial review

The financial review has been prepared on the basis of Group's continuing operations, as further detailed in the consolidated statement of comprehensive income.

 

Revenue

The Company's long-term Alliance Agreement with DSM Nutritional Products for Fruitflow includes a financial model which is based upon the division of profits between the two partners on an agreed basis, linked to certain revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales. In June 2015 the Company confirmed that revised terms for the Alliance Agreement had been agreed with DSM, under which the fixed level of overhead deduction from sales permanently decreased with effect from 1 January 2015, backdated, thus increasing the profit share payable to the Company.

 

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 to accrue 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 a two-in-one supplement in an easy to take capsule, supporting healthy blood flow and normal heart function, and it achieved sales of £98k in the year to 31 March 2019, compared to £73k in the prior year.

 

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 2019 was £322k, a 37% increase relative to the prior year (2018: £236k).

 

The increase in revenue accruing to the Company for the year reflects:

 

·      An increase in the net income received from the Company's Alliance Agreement with DSM, which grew by 22% to £198k in the year (2018: £162k);

·      An increase in revenue net of sales rebates from the Company's Fruitflow+ Omega-3 business, including Holland & Barrett, the Company's website www.fruitflowplus.com and Amazon UK. This business grew by 34% to £98k, net of sales rebates, in the year (2018: £73k).

·      Amounts in excess of £26k which were received in the year for marketing support, compared to amounts of £Nil which were received in the prior year.

 

Underlying operating loss

Underlying operating loss for the year was £385k (2018: £362k), reflecting a £48k year on year increase in research and development costs which was primarily due to Fruitflow blood pressure lowering patents entering the national phase of the patent application process, a one-off event in the process which represents the most significant pre-patent grant costs.

 

The Group has chosen to report underlying operating loss as the Directors believe that the operating loss before share-based payments provides additional useful information for shareholders on underlying trends and performance. A reconciliation of underlying operating loss to statutory operating loss is presented on the face of the consolidated statement of comprehensive income. This measure is used for internal performance analysis. The Group's cost base and its resources have been and will continue to be tightly managed within budgets approved and monitored by the Board.

 

Research and development costs

Research and development costs are primarily composed of patent, trade mark and other research agreement costs, with the Group seeking to maintain and strengthen the breadth and duration of its patent and trade mark coverage for Fruitflow. Research and development costs have increased by 26% to £230k (2018: £182k), primarily due to Fruitflow blood pressure lowering patents entering the national phase of the patent application process, as further detailed above.

 

R&D tax relief: payable tax credit

A current tax credit of £16k (2018: £15k), in respect of research and development tax relief has been recognised in the financial statements. The tax credit claim for the year ended 31 March 2017 totalling £14k was paid to the Group in April 2018, and the tax credit claim for the year ended 31 March 2018 totalling £15k was paid to the Group in July 2019.

 

Taxation

The current tax charge is £Nil (2018: £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 2019 was £513k (2018: £448k) and the basic loss per share was 0.03p (2018: 0.02p). The Directors are unable to recommend the payment of a dividend (2018: £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 2019 and the reports of the Directors thereon include a going concern statement which concludes that the necessity to raise additional equity 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 capital to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's and Parent Company's financial statements.

 

It remains the Directors' view on 9 September 2019 that the most appropriate course of action in respect of section 656 is to continue to seek to maximise the commercial returns that can be achieved from the Company's Fruitflow technology, and continue to maintain very tight control over the running costs of the Company.

 

Capital structure and funding

The Company is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Company's cost base and its resources continue to be very tightly managed. The Company remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Company remains in a loss-making position it will need to raise working capital on occasions.

 

On 27 September 2018 the Group announced it had raised proceeds of £395,000 via the placing of 98,750,000 new ordinary shares of 0.1p each at a gross 0.40p per share with investors, with no commissions payable. The placing shares were admitted to AIM on 5 October 2018.

 

Key performance indicators

The principal financial KPIs monitored by the Board relate to underlying operating loss and cash and cash equivalents.

 

The table below shows the Group's underlying operating loss, calculated as operating profit before share-based payment expense, from continuing operations for the two years ended 31 March 2019:

 

 

 

Year ended

31 March

2019

Year ended

31 March

2018

 

 

£

£

 

 

 

Underlying operating loss

384,900

361,618

 

The trading results are further detailed in this strategic report.

 

The table below shows the Group's cash position at 31 March 2019 and 31 March 2018:

 

 

 

31 March

2019

 

31 March

2018

 

 

£

£

 

 

 

Cash and cash equivalents

325,642

315,166

 

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 £10,476 increase 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 is seeking to expand its Fruitflow+ Omega-3 dietary supplement business and thereby reduce its commercial reliance on the Alliance Agreement with DSM, as further outlined above, thus increasing opportunities for growth and decreasing risk.

 

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 are 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 DSM attracting customers to purchase Fruitflow; unexpected opportunities to develop additional products or acquire additional technologies, products or businesses; and costs incurred in relation to the protection of Provexis' intellectual property.

 

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 impact and timing of the decision for the UK to leave the EU remains uncertain.

 

The Group will continue to monitor relationships with European regulatory bodies such as the European Patent Office as new information is provided, with the current expectation being that there will not a material change to the existing European patent arrangements.

 

The importing of raw materials and finished goods for the Group's Fruitflow+Omega-3 operations, and the exporting of finished goods could be impacted following UK exit from the EU. Potential impacts could include customs and shipping delays, and delays in delivering products to the end consumer thereby impacting sales and customer service. Tariffs may also need to be absorbed, potentially impacting profitability.

 

Provexis' direct selling operations are currently focussed on a single product, Fruitflow+Omega-3 capsules, the last batch of which was manufactured outside the UK in an EU country. In mitigation of the supply chain and delivery risks for this product, the Group is in dialogue with some potential UK manufacturers, with a number of manufacturing options in hand, and it has some alternative fulfilment options available to it outside the UK for the delivery of finished goods outside the UK.

 

Commercialisation

Due to the terms of the Alliance Agreement, Provexis is largely dependent on DSM in respect of the development, production, marketing and commercialisation of Fruitflow. Fruitflow is solely reliant on DSM under the terms of the Alliance Agreement for its commercialisation.

 

Provexis' long-term success is largely dependent on the ability of DSM to sell Fruitflow. Provexis' negotiating position with DSM if they choose to vary the Alliance Agreement may be affected by its size and limited cash resources relative to DSM who have substantial cash resources and established levels of commercial success. An inability to enter into any discussions with DSM on equal terms could lead to reduced revenue from the Alliance Agreement and this may have 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 is 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.

 

Profitability depends on the success and market acceptance of Fruitflow

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.

 

 

Ian Ford

Secretary

 

 

Consolidated statement of comprehensive income

 

 

 

Year

Year

 

 

ended

ended

 

 

31 March

31 March

 

 

2019

2018

 

 

 

 

 

Notes

£

£

 

 

 

 

 

 

 

 

Revenue

1,3

322,189

235,804

Cost of goods

 

(49,433)

(23,167)

Gross profit

 

272,756

212,637

 

 

 

 

Selling and distribution costs

 

(35,033)

(23,878)

Research and development costs

4

(229,876)

(181,922)

Administrative costs (including share-based payment charges)

 

(557,960)

(489,777)

R&D tax relief: receivable tax credit

8

16,210

15,015

 

 

 

 

Underlying operating loss

 

(384,900)

(361,618)

Share-based payment charges

16

(149,003)

(106,307)

 

 

 

 

Loss from operations

4

(533,903)

(467,925)

 

 

 

 

Finance income

7

528

497

Loss before taxation

 

(533,375)

(467,428)

 

 

 

 

Taxation

8

-

-

 

 

 

 

Loss and total comprehensive expense for the year

 

(533,375)

(467,428)

 

 

 

 

Attributable to:

 

 

 

Owners of the parent

 

(513,033)

(448,108)

Non-controlling interest

 

(20,342)

(19,320)

Loss and total comprehensive expense for the year

 

(533,375)

(467,428)

 

 

 

 

Loss per share to owners of the parent

 

 

 

Basic - pence

9

(0.03)

(0.02)

Diluted - pence

9

(0.03)

(0.02)

 

 

Consolidated statement of financial position

 

Company number 05102907

 

As at

As at

 

 

31 March

31 March

 

 

2019

2018

 

Notes

£

£

 

 

 

 

Assets

 

 

 

Current assets

 

 

 

Inventories

11

45,866

10,521

Trade and other receivables

12

59,603

64,621

Corporation tax asset

8

30,920

28,335

Cash and cash equivalents

 

325,642

315,166

Total current assets

 

462,031

418,643

 

 

 

 

Total assets

 

462,031

418,643

 

 

 

 

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

13

(123,143)

(89,383)

Total current liabilities

 

(123,143)

(89,383)

Net current assets

 

338,888

329,260

 

 

 

 

Total liabilities

 

(123,143)

(89,383)

 

 

 

 

Total net assets

 

338,888

329,260

 

 

 

 

Capital and reserves attributable to

owners of the Parent company

 

 

 

Share capital

15

1,983,988

1,885,238

Share premium reserve

17

17,474,796

17,179,546

Warrant reserve

17

-

26,200

Merger reserve

17

6,599,174

6,599,174

Retained earnings

17

(25,241,620)

(24,903,790)

 

 

816,338

786,368

Non-controlling interest

 

(477,450)

(457,108)

Total equity

 

338,888

329,260

 

 

Consolidated statement of cash flows

 

 

 

Year

Year

 

 

ended

ended

 

 

31 March

31 March

 

 

2019

2018

 

Notes

 

 

 

£

 

 

 

 

Cash flows from operating activities

 

 

 

Loss after tax

 

(533,375)

(467,428)

Adjustments for:

 

 

 

Finance income

7

(528)

(497)

Tax credit receivable

8

(16,210)

(15,015)

Share-based payment charge

16

149,003

106,307

Changes in inventories

 

(35,345)

21,929

Changes in trade and other receivables

 

5,056

22,478

Changes in trade and other payables

 

33,760

Net cash flow from operations

 

(397,639)

 

 

 

 

Tax credits received

 

13,625

13,105

Total cash flow from operating activities

 

(384,014)

(363,052)

 

 

 

 

Cash flow from investing activities

 

 

 

Interest received

 

490

374

Total cash flow from investing activities

 

490

374

 

 

 

 

Cash flow from financing activities

 

 

 

Proceeds from issue of share capital

15

394,000

665,495

Total cash flow from financing activities

 

394,000

665,495

 

 

 

 

Net change in cash and cash equivalents

 

10,476

302,817

 

 

 

 

Opening cash and cash equivalents

 

315,166

Closing cash and cash equivalents

 

325,642

315,166

 

 

Consolidated statement of changes in equity

 

 

 

 

 

 

 

 

 

 

 

Share

capital

Share

premium

Warrant

reserve

Merger

reserve

Retained

earnings

Total equity

attributable to owners of

the parent

Non-controlling

interests

Total

equity

 

£

£

£

£

£

£

£

£

 

 

 

 

 

 

 

 

 

At 31 March 2017

1,750,818

16,648,471

26,200

6,599,174

(24,561,989)

462,674

(437,788)

24,886

 

 

 

 

 

 

 

 

 

Share-based charges

-

-

-

-

106,307

106,307

-

106,307

 

 

 

 

 

 

 

 

 

Issue of shares - placing

16 May 2017

70,000

280,000

-

-

-

350,000

-

350,000

 

 

 

 

 

 

 

 

 

Issue of shares - placing

4 August 2017

64,420

251,075

-

-

-

315,495

-

315,495

 

 

 

 

 

 

 

 

 

Total comprehensive

expense for the year

-

-

-

-

(448,108)

(448,108)

(19,320)

(467,428)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2018

1,885,238

17,179,546

26,200

6,599,174

(24,903,790)

786,368

(457,108)

329,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based charges

-

-

-

-

149,003

149,003

-

149,003

 

 

 

 

 

 

 

 

 

Warrants - lapsed

10 September 2018

-

-

(26,200)

-

26,200

-

-

-

 

 

 

 

 

 

 

 

 

Issue of shares - placing

5 October 2018

98,750

295,250

-

-

-

394,000

-

394,000

 

 

 

 

 

 

 

 

 

Total comprehensive

expense for the year

-

-

-

-

(513,033)

(513,033)

(20,342)

(533,375)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2019

1,983,988

17,474,796

-

6,599,174

(25,241,620)

816,338

(477,450)

338,888

 

 

 

 

 

 

 

 

 

 

 

Notes to the preliminary results for the year ended 31 March 2019

 

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 2019 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 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered after the forthcoming AGM. The auditors have reported on the accounts for the year ended 31 March 2019; 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 the use in the European Union, 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 2019 that comply with IFRS in September 2019.

 

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 European Union, and International Financial Reporting Interpretations Committee ('IFRIC') interpretations that were applicable for the year ended 31 March 2019.

 

These accounting policies are consistent with those applied in the year ended 31 March 2018, as amended to reflect any new Standards, amendments to Standards and interpretations which are mandatory for the year ended 31 March 2019.

 

The Group has adopted the appropriate new interpretations and revised Standards effective for the year ended 31 March 2019, to include IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments. The nature and effect of these changes are detailed below.

 

IFRS 15 Revenue from Contracts with Customers

(i) Sale of goods

The Group's contracts with customers for the sale of products generally include one performance obligation. The Group has concluded that revenue from the sale of products should be recognised at the point in time when control of the asset is transferred to the customer, which is on the despatch of the product. This does not represent a change to the Group's accounting policy and therefore, the adoption of IFRS 15 did not have an impact on the timing of revenue recognition.

 

(ii) Presentation and disclosure requirements

IFRS 15 requires the disaggregation of revenue recognised from contracts with customers into categories that

depict how the nature, amount and uncertainty of revenue and cash flows are affected by economic factors. The Group has disclosed this information in note 3.

 

IFRS 9 Financial Instruments

IFRS 9 replaces IAS 39 "Financial instruments: recognition and measurement" for annual periods beginning on or after 1 January 2018, which covers the accounting for financial instruments: classification and measurement, impairment and hedge accounting. The Group applied the expected credit loss model when calculating impairment losses on its financial assets measured at amortised cost (trade and other receivables). The historical loss rate has typically been very low and the impact of incorporating forward looking information when establishing has not had a material impact on impairment provisions. The impact of the application of IFRS 9 was not material to the net assets or profit for the year or prior year.

 

The adoption of these revised standards and interpretations has not had an impact on the current and comparative figures recorded but they have changed disclosure.

 

 

The following Standards, interpretations and amendments have been issued but are not yet effective and will be adopted at the point they are effective:

 

IFRS 16 'Leases' (effective 1 January 2019)

The Directors do not expect that the adoption of these Standards and interpretations in future periods will have a material impact on the consolidated financial statements of the Group. There are a number of Standards, interpretations and amendments to published accounts not listed above which the Directors consider not to be relevant to the Group.

 

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 £533,375 (2018: £467,428), which includes non-cash share-based payment charges of £149,003 (2018: £106,307) and expects to make a further loss during the year ending 31 March 2020. The total cash outflow from operations in the year was £384,014 (2018: £363,052). At 31 March 2019 the Group had cash balances of £325,642 (2018: £315,166).

 

On 27 September 2018 the Group announced it had raised proceeds of £395,000 via the placing of 98,750,000 new ordinary shares of 0.1p each at a gross 0.40p per share with investors, with no commissions payable. The placing shares were admitted to AIM on 5 October 2018.

 

The Directors have prepared projected cash flow information for a period of eighteen months from the date of approval of these financial statements and have reviewed this information as at the date of these financial statements.

 

The Group is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Group's cost base and its resources continue to be very tightly managed.

 

The Group remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Group remains in a loss-making position it will need to raise working capital on occasions.

 

The Group has access to future equity financings, either through the Group's existing PrimaryBid.com platform or through a separate equity fundraising with the Company's shareholders, as potential additional sources of funding. Based on its current level of cash it is expected that the Group will need to raise further equity finance in the coming six months.

 

The Directors have concluded that the necessity to raise additional equity 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 capital to continue in operational existence for the foreseeable future. For this reason, they 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 on the face of the Statement of Comprehensive Income.

 

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

Share-based payment transactions

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.

 

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.

 

Warrants

The Group has issued warrants to Darwin Strategic Limited, initially as part of the Equity Financing Facility and with effect from June 2015 as part of PrimaryBid.com. These warrants have been measured at fair value at the date of grant using an appropriate options pricing model.

 

The fair value of the warrants had been held on the statement of financial position within prepayments and in the warrants reserve within equity. The prepayment was released in full against share premium in the year ended 31 March 2015. The warrants lapsed in September 2018, and the warrants reserve was transferred to retained earnings in the year ended 31 March 2019.

 

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 £123,143 (2018: £89,383) as disclosed in note 13.

 

2.2 Capital risk management

The Group considers its capital to comprise its ordinary share capital, share premium, warrant reserve, 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. Based on its current level of cash it is expected that the Group will need to raise further equity finance in the coming six months.

 

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

2019

Year ended

31 March

2018

 

£

£

 

 

 

DSM Alliance Agreement

197,530

162,486

Fruitflow+ Omega 3

98,176

73,318

Other income

26,483

-

 

322,189

235,804

 

4. Loss from continuing operations

 

Year ended

31 March

2019

Year ended

31 March

2018

 

 

£

£

Loss from continuing operations is stated after charging:

 

 

 

 

 

Research and development costs

229,876

181,922

Foreign exchange losses / (gains)

1,828

(1,460)

Equity-settled share-based payment expense

149,003

106,307

 

The total fees of the Group's auditor, for services provided are analysed below:

 

 

Year ended

31 March

2019

Year ended

31 March

2018

 

£

£

Audit services

 

 

Parent company

10,500

10,500

Subsidiaries

8,750

8,750

Tax services - compliance

 

 

Parent company

2,000

2,000

Subsidiaries

3,000

3,000

Other services

 

 

iXBRL services

2,000

2,000

 

 

 

Total fees

26,250

26,250

 

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

2019

Year ended

31 March

2018

 

 

 

 

Research and development consultants

1

1

Directors

3

3

 

4

4

 

Their aggregate emoluments were:

 

Year ended

31 March

2019

Year ended

31 March

2018

 

 

£

£

 

 

 

Fees

242,680

241,014

Share-based payment remuneration charge: equity settled

149,003

106,307

Total emoluments

391,683

347,321

 

6. Directors' remuneration

 

Year ended

31 March

2019

Year ended

31 March

2018

 

£

£

Directors

 

 

Aggregate emoluments

175,342

182,010

Company pension contributions

-

-

 

175,342

182,010

Share-based payment remuneration charge: equity settled

38,269

9,646

Total Directors' emoluments

213,611

191,656

 

Emoluments disclosed above include the following amounts in respect of the highest paid Director:

 

 

Year ended

31 March

2019

Year ended

31 March

2018

 

£

£

 

 

 

Aggregate emoluments

116,004

106,002

Share-based payment remuneration charge: equity settled

19,134

4,823

Total of the highest paid Director's emoluments

135,138

110,825

 

During the current year and the prior year the Directors did not participate in defined contribution pension schemes, and did not receive any benefits in kind.

 

7. Finance income

 

Year ended

31 March

2019

Year ended

31 March

2018

 

 

£

£

 

 

 

Finance income

 

 

Bank interest receivable

528

497

 

528

497

 

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

 

 

 

Year ended

31 March

2019

Year ended

31 March

2018

 

 

£

£

R&D tax relief: payable tax credit

 

 

Research and development credit - current year

16,200

14,710

Research and development credit - in respect of prior periods

10

305

Taxation credit

16,210

15,015

 

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

2019

Year ended

31 March

2018

 

 

£

£

 

 

 

Loss before tax

(533,375)

(467,428)

 

 

 

Loss before tax multiplied by the

standard rate of corporation tax in the UK of 19%

 

101,341

 

88,811

Effects of:

 

 

Expenses not deductible for tax purposes

(28,186)

(20,198)

Unutilised tax losses and other deductions arising in the year

(76,768)

(71,129)

Adjustment for R&D tax relief

3,613

2,516

Total taxation charge for the year

-

-

 

At 31 March 2019 the Group UK tax losses to be carried forward are estimated to be £19,550,000 (2018: £19,223,000).

 

R&D tax relief: payable tax credit receivable within one year

31 March

2019

31 March

2018

 

£

£

 

 

 

R&D tax relief: payable tax credit recoverable

30,920

28,335

 

30,920

28,335

 

9. Earnings per share and diluted earnings per share

Basic earnings per share amounts are calculated by dividing the profit 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

 

2019

2018

 

 

 

Loss and total comprehensive expense

for the year attributable to owners of the parent - £

 

513,033

 

448,108

 

 

 

Weighted average number of shares

1,933,125,160

1,854,178,119

 

 

 

Basic and diluted loss per share - pence

0.03

0.02

 

10. Intangible assets

 

 

Goodwill

 

Development costs

Total

 

 

£

£

£

 

 

 

 

Cost

 

 

 

At 1 April 2018

7,265,277

158,166

7,423,443

At 31 March 2019

7,265,277

158,166

7,423,443

 

 

 

 

Amortisation and Impairment

 

 

 

At 1 April 2018

7,265,277

158,166

7,423,443

At 31 March 2019

7,265,277

158,166

7,423,443

 

 

 

 

Net book value

 

 

 

At 31 March 2019

-

-

-

At 31 March 2018

-

-

-

 

 

 

 

Cost

 

 

 

At 1 April 2017

7,265,277

158,166

7,423,443

At 31 March 2018

7,265,277

158,166

7,423,443

 

 

 

 

Amortisation and Impairment

 

 

 

At 1 April 2017

7,265,277

158,166

7,423,443

At 31 March 2018

7,265,277

158,166

7,423,443

 

 

 

 

Net book value

 

 

 

At 31 March 2018

-

-

-

At 31 March 2017

-

-

-

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

2019

31 March

2018

 

£

£

 

 

 

Finished goods

45,866

10,521

 

45,866

10,521

 

There are no provisions included within inventories in relation to the impairment of inventories (2018: £Nil).

 

During the year inventories of £49,433 (2018: £23,166) were recognised as an expense within cost of goods.

 

12. Trade and other receivables

 

31 March

2019

31 March

2018

 

£

£

 

 

 

Amounts receivable within one year:

 

 

Trade receivables

3,430

1,314

Other receivables

12,437

11,700

Total financial assets other than cash

and cash equivalents classified as loans and receivables

15,867

13,014

Prepayments and accrued income

43,736

51,607

Total trade and other receivables

59,603

64,621

 

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 2019 trade receivables of £Nil (2018: £Nil) were more than 60 days past due, and there were no lifetime expected credit losses of the full value of trade receivables (2018: £Nil).

 

13. Trade and other payables

 

31 March

2019

31 March

2018

 

£

£

 

 

 

Trade payables

36,121

29,329

Accruals

81,797

54,829

Total financial liabilities measured at amortised cost

117,918

84,158

Other taxes and social security

5,225

5,225

Total trade and other payables

123,143

89,383

 

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 17% (2018: 17%).

 

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.

 

Deferred tax assets amounting to £3,323,500 (2018: £3,271,678) have not been recognised on the basis that their future economic benefit is not probable. Assuming a prevailing tax rate of 17% (2018: 17%) when the timing differences reverse, the unrecognised deferred tax asset comprises:

 

 

31 March

2019

31 March

2018

 

£

£

 

 

 

Depreciation in excess of capital allowances

-

1,334

Unutilised tax losses

3,323,500

3,270,344

 

3,323,500

3,271,678

 

15. Share capital

 

Allotted, called up and fully paid

Ordinary

0.1p shares

Ordinary

0.1p shares

 

£

number

 

 

 

At 31 March 2018

1,885,238

1,885,238,174

Issue of shares - placing 5 October 2018

98,750

98,750,000

At 31 March 2019

1,983,988

1,983,988,174

 

On 27 September 2018 the Group announced it had raised proceeds of £395,000 via the placing of 98,750,000 new ordinary shares of 0.1p each at a gross 0.40p per share with investors, with no commissions payable. The placing shares were admitted to AIM on 5 October 2018.

 

Allotted, called up and fully paid

Ordinary

0.1p shares

Ordinary

0.1p shares

 

£

number

 

 

 

At 31 March 2017

1,750,818

1,750,818,174

Issue of shares - placing 16 May 2017

70,000

70,000,000

Issue of shares - placing 4 August 2017

64,420

64,420,000

At 31 March 2018

1,885,238

1,885,238,174

 

16. Share options

In June 2005 the Company adopted a new share option scheme for employees ('the Provexis 2005 share option scheme'). Under the scheme, options to purchase ordinary shares are granted by the Board of Directors, 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.

 

On 26 August 2018 41,117,620 options which had been issued in August 2008 lapsed. Following the lapse of the options which expired in August 2018, the total number of Ordinary Shares under option which could be issued if all of the performance criteria are met is 138,000,000 Ordinary Shares.

 

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 2019 the number of ordinary shares subject to options granted over the 2005 and prior option schemes were:

 

EMI options

 

31 March 2019

31 March 2018

 

Weighted average exercise price

(pence)

Number

Weighted average exercise price

(pence)

Number

 

 

 

 

 

Outstanding at the beginning of the year

0.77

56,078,090

0.77

56,078,090

Lapsed during the year

0.60

(33,793,100)

-

-

Outstanding at the end of the year

1.04

22,284,990

0.77

56,078,090

 

The exercise price of EMI options outstanding at the end of the year ranged between 0.97p and 1.85p (2018: 0.59p and 1.85p) and their weighted average contractual life was 4.1 years (2018: 2.3 years).

 

Of the total number of EMI options outstanding at the end of the year, 22,284,990 (2018: 56,078,090) had vested and were exercisable at the end of the year. Their weighted average exercise price was 1.04 pence (2018: 0.77 pence).

 

Unapproved options

 

31 March 2019

31 March 2018

 

Weighted

average

exercise price

(pence)

Number

Weighted

average

exercise price

(pence)

Number

 

 

 

 

 

Outstanding at the beginning of the year

0.93

123,039,530

1.12

82,539,530

Granted during the year

-

-

0.54

40,500,000

Lapsed during the year

0.59

(7,324,520)

-

-

Outstanding at the end of the year

1.14

115,715,010

0.93

123,039,530

 

The exercise price of unapproved options outstanding at the end of the year ranged between 0.49p and 1.85p (2018: 0.49p and 1.85p) and their weighted average contractual life was 6.1 years (2018: 6.7 years).

 

Of the total number of unapproved options outstanding at the end of the year, 55,215,010 (2018: 60,039,530) had vested and were exercisable at the end of the year. Their weighted average exercise price was 1.27 pence (2018: 1.22 pence).

 

Grant of options

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%.

 

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 £149,003 (2018: £106,307) 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.

Warrant reserve

In September 2013, in consideration of Darwin Strategic Limited agreeing to provide an Equity Financing Facility, the Company entered into a warrant agreement for the grant to Darwin of warrants to subscribe for up to ten million Ordinary Shares, such warrants to be exercisable at any time prior to the expiry of five years following the date of the new warrant agreement.

The total fair value of the warrants, £26,200, has previously been held within prepayments and in the warrants reserve within equity. During the year ended 31 March 2015 the prepayment was released in full against share premium. In September 2018 the warrants lapsed, and the warrants reserve was transferred to retained earnings.

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 2019 amounted to £Nil (2018: £Nil). Pension contributions payable but not yet paid at 31 March 2019 totalled £3,871, in respect of pension contribution entitlements where employees had not yet provided details of the funds to which the contributions should be made (2018: £3,871).

 

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. DSM has invested substantially in the manufacture, technology development, marketing and sale of Fruitflow since the Alliance Agreement was signed. Provexis continues to contribute scientific expertise and is collaborating in areas such as cost of goods optimisation and regulatory matters. 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.

 

The Company is working closely with DSM in various areas of the project, and in June 2015 it was announced that the Company had agreed significantly enhanced financial terms for its long-term Alliance Agreement with DSM, involving a reduction in the fixed level of overhead deduction from sales which permanently decreased with effect from 1 January 2015, backdated, thus increasing the profit share payable to the Company. 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 £224,013 (2018: £162,486). At 31 March 2019 the Group was owed £Nil (2018: £Nil) by DSM.

 

Key management compensation

The Directors represent the key management personnel. Details of their compensation and share options are given in note 6. At 31 March 2019 the Company's Chairman Dawson Buck was owed £Nil, and the Company's CEO and CFO Ian Ford was owed £1,809. The Company settled its liability to Ian Ford in June 2019.

 


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