REG - Provexis PLC - Final Results
29/09/2023 07:00
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RNS Number : 0895O Provexis PLC 29 September 2023
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.
29 September
2023
Provexis plc
("Provexis" or the "Company")
PRELIMINARY RESULTS for the YEAR ended 31 MARCH 2023
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 2023.
Key highlights
· Two new agreements secured with DSM in June 2022 for Fruitflow,
to replace the Alliance Agreement: (i) a Transfer of Business agreement and
(ii) a Premix and Market-Ready Solutions supply agreement, which both took
effect on 1 January 2023.
· DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient transferred to become direct customers of Provexis
WEF 1 January 2023, and Provexis took over the outsourced supply chain /
production process for Fruitflow at that time. Initial sales to these
customers commenced in February 2023, when the first batch of Fruitflow
inventory was transferred to the UK.
· The customer transfer process from DSM to Provexis has progressed
well, and it saw initial sales of £74k in the quarter ended 31 March 2023,
following the inventory transfer in February. Sales in excess of £280k have
been made post year end, confirmed sales orders in excess of £155k are
currently being processed and the Company is dealing with numerous sales
enquiries from existing and new customers for further direct sales of
Fruitflow in 2023 and beyond.
· New patent application filed in June 2022 relating to the use of
Fruitflow to confer health benefits in modulating the gut microbiome of
humans, following the completion of a successful human study.
· New long term partnership with DSM has been agreed relating to
the gut microbiome patent, subject to certain milestones which have been
agreed between the parties. Strong launch of this new technology by DSM in
January 2023, with widespread trade press coverage and encouraging early
interest from some significant global customers.
· Planned launch by BYHEALTH, a circa £4bn listed Chinese dietary
supplement business, of a number of Fruitflow based products in the Chinese
market has been progressing well, with potential sales volumes remaining at a
significant multiple of existing Fruitflow sales.
· BYHEALTH has been working since 2015 on an extensive regulatory
submission to the Chinese State Administration for Market Regulation (SAMR)
for Fruitflow, seeking to establish a new permitted health function claim for
foods such as Fruitflow that can demonstrate an anti-platelet effect.
· In August 2023 BYHEALTH submitted: i) the first application under
the new SAMR Implementation Rules, seeking to obtain a new permitted health
function claim for foods such as Fruitflow which help to 'maintain normal
platelet aggregation function and benefit blood flow health'; and ii) some
related product registration applications. BYHEALTH stated publicly that it
has been working on the project since 2015, with 'tens of millions of funds'
(RMB) invested by BYHEALTH in the research and development work.
· The exclusive Fruitflow supply and distribution agreement which
was agreed with BYHEALTH in 2021 took full effect from 1 January 2023, with
exclusive supply and distribution rights for BYHEALTH to commercialise
Fruitflow in China and Australia.
· Total revenue for the year £390k, (2022: £426k), reflecting the
transitional nature of the year with nine months of the DSM Alliance Agreement
to 31 December 2022, and an initial three months of the new direct sales
arrangements for Fruitflow to 31 March 2023.
· Underlying operating loss* £348k (2022: £173k), in a
transitional year for the business.
· Cash £379k at 31 March 2023 (2022: £864k), following inventory
purchases in the year of more than £315k.
*Loss from operations, adjusted for (i) share-based payments of £40k (2022:
£67k), and (ii) R&D tax relief: receivable tax credit of £33k (2022:
£59k).
Annual report and accounts and notice of AGM
The Company's annual report and accounts for the year ended 31 March 2023 and
the AGM notice will be available from the Shareholder information section of
the Company's website www.provexis.com (http://www.provexis.com) on 29
September 2023, and from the address below:
The Company Secretary
Provexis plc
2 Blagrave Street
Reading
RG1 1AZ
The Company's annual report and accounts and its AGM notice will be
distributed by post today to those shareholders who have elected to continue
to receive paper communications.
Proxy forms for use in connection with the AGM will also be distributed by
post today to all shareholders on the Company's share register.
The AGM will be held at 12:30pm on 26 October 2023 at the offices of Allenby
Capital Limited, 5th Floor, 5 St Helen's Place, London EC3A 6AB.
For further information please contact:
Provexis plc Tel: 07490 391888
Ian Ford, CEO enquiries@provexis.com
Dawson Buck, Chairman
Allenby Capital Limited Tel: 020 3328 5656
Nick Naylor
Chairman and CEO's statement
The Company has had another very active year, and it has made some significant
progress with the commercial prospects of its innovative, patented Fruitflow®
heart-health ingredient.
DSM Nutritional Products - new agreements for Fruitflow®
Provexis entered into a long-term Alliance Agreement with DSM Nutritional
Products in 2010 to commercialise Fruitflow through sales as an ingredient to
brand owners in the food, beverage and dietary supplement categories, with a
contractual term for the Agreement which ran to 31 December 2022.
More than 100 regional consumer healthcare brands have now been launched by
direct customers of DSM, and a number of further regional brands have been
launched through DSM's distributor channels. An increasing number of
commercial projects have been initiated by DSM with prospective customers in
recent years, including some prospective customers which are part of global
businesses, and the total projected annual sales value of the prospective
sales pipeline for Fruitflow, which is now shared across Provexis and DSM,
continues to stand at a substantial multiple of existing annual sales.
In June 2022 Provexis announced it had secured two new agreements with DSM for
Fruitflow, to replace the Alliance Agreement: (i) a Transfer of Business
agreement and (ii) a Premix and Market-Ready Solutions supply agreement, which
both took effect on 1 January 2023.
The Company also announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. This followed the completion of a successful human
study, the results of which strongly support the use of Fruitflow for
modulating gut microbiota to confer a number of health benefits, to include a
reduction in TMAO (trimethylamine-n-oxide).
Under the terms of the two new agreements with DSM, and the new patent
application:
· DSM's existing and prospective pipeline customers for Fruitflow
as a straight ingredient (not a Premix or Market-Ready solution) transferred
to become direct customers of Provexis WEF 1 January 2023, and the Company
took over the wholly outsourced supply chain / production process for
Fruitflow from DSM at that time.
· A royalty will be payable to DSM on the gross profits generated
from Fruitflow sales to customers transferred from DSM over the first four
years of the Transfer of Business agreement.
· From 1 January 2023 the net profit accruing to Provexis on sales
of Fruitflow in the calendar year - on a pro-forma basis, assuming like for
like sales and margins - would be materially ahead of the net share of the
profit that would have accrued to Provexis with like for like sales and
margins under the 2010 Alliance Agreement. On the same pro-forma basis,
assuming like for like sales and margins, the net profit accruing to Provexis
would further increase in each of the subsequent three calendar years.
· A new partnership was agreed with DSM in 2022 relating to the gut
microbiome patent, giving DSM preferential access to the use, marketing, and
sale of Fruitflow based products which are based on the patent, subject to
certain milestones which have been agreed between the parties.
· In addition to the patent's core claim for Fruitflow, for
modulating gut microbiota to confer a number of health benefits, the patent
also sets out some potential new uses for Fruitflow in treating a wide variety
of human health conditions, beyond Fruitflow's existing established use in
heart-health. The global digestive health market size was US$38 billion in
2019 and it is projected to grow to US$72 billion in 2027 at a high
single-digit CAGR in the 2020-2027 period (see
www.fortunebusinessinsights.com/digestive-health-market-104750
(http://www.fortunebusinessinsights.com/digestive-health-market-104750) ).
· The results of the successful gut microbiome human study have
been submitted for publication in a peer reviewed scientific journal
www.sciencedirect.com/science/article/pii/S0022316622131275
(http://www.sciencedirect.com/science/article/pii/S0022316622131275) .
· DSM conducted a strong launch of the new microbiome technology in
January 2023
(www.dsm.com/human-nutrition/en/talking-nutrition/press-releases/2023-01-20-new-study-reveals-dsms-fruitflow-activates-gut-heart.html
(http://www.dsm.com/human-nutrition/en/talking-nutrition/press-releases/2023-01-20-new-study-reveals-dsms-fruitflow-activates-gut-heart.html)
), with widespread trade press coverage and encouraging early interest shown
from some significant global customers.
· Provexis will sell Fruitflow as a straight ingredient to DSM
exclusively for use in DSM's Premix Solutions and Market-Ready Solutions
businesses, with DSM then looking to sell the resulting Premix and
Market-Ready Solutions products on to its customers. DSM's Premix and
Market-Ready Solutions businesses are part of DSM's Customized Solutions
business which also offers personalised nutrition solutions to customers, a
rapidly developing growth area. The Company looks forward to supporting DSM
and its Premix and Market-Ready Solutions customers for many years to come.
· A number of DSM's customers for Fruitflow which have been
transferred to Provexis have been Fruitflow customers for several years,
including some distributor customers which sell Fruitflow on to third parties.
The Company has been progressing these sales relationships since the Transfer
of Business agreement was announced in June 2022, and confirms it will be able
to generate new customers for Fruitflow outside the royalty arrangements with
DSM, in addition to its existing supply and distribution agreement for
Fruitflow with BYHEALTH.
From 1 January 2023 the Group's sales channels for Fruitflow therefore
included:
1. Former DSM customers for Fruitflow;
2. DSM and its Premix and Market-Ready Solutions businesses, which will
leverage the resources and relationships of DSM in some of the major global
markets;
3. New customers for Fruitflow as a straight ingredient;
4. BYHEALTH and its customers, through the Company's long term supply and
distribution agreement for Fruitflow with BYHEALTH; and
5. The Group's Fruitflow+ Omega-3 dietary supplement product which is sold
direct to consumers, the Group will also look to serve its Chinese
Cross-Border e-commerce distributor for this product in China.
The Company is in discussions with a number of third parties seeking to
progress new sales and distribution opportunities for Fruitflow, and it can be
contacted for all Fruitflow sales enquiries by email at
fruitflow@provexis.com.
Fruitflow® transfer arrangements from 1 January 2023, and trading for the
year
The customer transfer process from DSM to Provexis has progressed well, with
sales commencing to customers for Fruitflow II SD (Fruitflow II SD is
Fruitflow as an ingredient, in Spray Dried powder form) in February 2023, when
the first batch of Fruitflow inventory was transferred from DSM's fulfilment
centre in The Netherlands to the Company's outsourced fulfilment centre in the
UK.
The Alliance Agreement for Fruitflow ended on 31 December 2022, in a
transitional year for the business which saw total revenue as follows:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Revenue
Fruitflow II SD ingredient - from 1 January 2023 74,239 -
DSM Alliance Agreement - up to 31 December 2022 170,269 281,899
Fruitflow+ Omega 3 145,408 144,269
389,916 426,168
Loss from operations for the year was £421k, (2022: £299k) in a transitional
year for the business.
Underlying operating loss for the year (being the loss from operations,
adjusted for (i) share-based payments of £40k (2022: £67k), and (ii) R&D
tax relief: receivable tax credit of £33k (2022: £59k)) was £348k (2022:
£173k).
Sales of the Fruitflow II SD ingredient in excess of £280k have been made in
the six months after the Company's 31 March 2023 year end, confirmed sales
orders in excess of £155k are currently being processed and the Company is
dealing with numerous sales enquiries from existing and new customers for
further direct sales of Fruitflow II SD in 2023 and beyond.
Fruitflow II SD is currently manufactured in the EU. Rules of origin under the
BREXIT trade deal announced in December 2020 have meant that shipments of
Fruitflow II SD from a UK fulfilment centre for re-export and sale to EU
customers are at potential risk of additional tariffs on re-entry into the EU
(see www.bbc.co.uk/news/55648201 (http://www.bbc.co.uk/news/55648201) ).
Consequently, the Company is in the process of setting up a new Irish
subsidiary company, which will use an outsourced fulfilment centre in Ireland
to serve EU customers for Fruitflow. This is expected to be an attractive new
sales channel for EU customers, facilitating greater sales of Fruitflow II SD
into the EU.
BYHEALTH Co., Ltd.
In November 2021 the Company announced it had entered into a supply and
distribution agreement (the 'BYHEALTH Agreement') for Fruitflow with BYHEALTH,
a listed Chinese dietary supplement business with a market capitalisation of
approximately £4 billion.
The BYHEALTH Agreement, which followed the Company's extensive work with
BYHEALTH over the last six years, took full effect from 1 January 2023 and it
gives BYHEALTH exclusive supply and distribution rights to commercialise
Fruitflow in Mainland China, Hong Kong, Macau, Taiwan and Australia (the
'Territories').
Under the BYHEALTH Agreement Provexis will be responsible for the manufacture,
supply and sale of Fruitflow to BYHEALTH, and BYHEALTH will be responsible for
the manufacture, marketing, and sale of Fruitflow based functional food and
dietary supplement finished products in the Territories, through BYHEALTH's
extensive sales network. BYHEALTH will also have exclusive rights to act as
the distributor of Fruitflow as an ingredient in the Territories.
Provexis and BYHEALTH will seek to collaborate on research and development
projects which may result in the development and approval of Fruitflow as a
drug, for potential sale and distribution in the Territories.
Regulatory progress in China - new permitted health function claim
Provexis has been working with BYHEALTH for more than six years to support the
planned launch of a number of Fruitflow based products in the Chinese market.
Clinical studies conducted in China are typically required to obtain the
necessary regulatory clearances in China, and a significant investment in
eight separate Fruitflow studies has been undertaken at BYHEALTH's expense.
Completed studies have shown excellent results in use for Fruitflow, and they
provide strong evidence for the efficacy of Fruitflow on platelet function.
The Chinese regulatory system for functional health food ingredients, such as
Fruitflow, is governed by the State Administration for Market Regulation (the
'SAMR') and it is based on a defined list of permitted health function claims
which brand owners are permitted to use on product labels.
The SAMR provides the possibility of adding new health function claims to the
list, with claims needing to demonstrate a relationship between a food or
nutrient and a consequent health improvement, subject to evaluation and
verification by the SAMR.
SAMR certified functional health foods are required to use a blue cap / blue
hat logo on their product packaging, which identifies products as approved
functional health foods in China.
BYHEALTH has been working on an extensive regulatory submission to the SAMR
seeking to establish a new permitted health function claim for foods such as
Fruitflow that can demonstrate an anti-platelet effect, inhibiting platelet
function and conferring beneficial health effects.
On 28 August 2023 the SAMR announced in China that the 'Implementation Rules
for Health Food New Functions and Product Technology Evaluation' (the
'Implementation Rules') had been agreed by the SAMR in June 2023, with these
new rules to take effect from 28 August 2023.
On 29 August 2023 it was announced in China that BYHEALTH had submitted: i)
the first application under the Implementation Rules, seeking to obtain a new
permitted health function claim for foods such as Fruitflow which help to
'maintain normal platelet aggregation function and benefit blood flow health';
and ii) some related product registration applications.
The significance of these major developments for Fruitflow in China is further
outlined here
www.nutraingredients-asia.com/Article/2023/09/05/china-set-to-approve-new-function-claims-for-health-foods#
(http://www.nutraingredients-asia.com/Article/2023/09/05/china-set-to-approve-new-function-claims-for-health-foods)
. BYHEALTH has noted that it has been working on the project since 2015, with
'tens of millions of funds' (RMB) invested by BYHEALTH in the research and
development work.
The Company has previously stated that if BYHEALTH is successful in obtaining
a new permitted health function claim in China for functional health foods,
such as Fruitflow, that can demonstrate an anti-platelet effect, it is
expected that this would result in some significant orders for Fruitflow,
potentially at a multiple of current total sales values.
Market opportunity
A study backed by scientists from the National Center for Cardiovascular
Diseases in China which was updated in 2020
(www.ncbi.nlm.nih.gov/pmc/articles/PMC7008101/#
(http://www.ncbi.nlm.nih.gov/pmc/articles/PMC7008101/) ) stated that:
· the prevalence of Cardiovascular Disease ('CVD') in China has
been increasing continuously since 2006, with approximately 290 million
patients in China who now have CVD; and
· two in five deaths in China are attributed to CVD, with CVD
remaining the leading cause of death in 2016.
The World Health Organisation
(www.who.int/news-room/fact-sheets/detail/cardiovascular-diseases-(cvds)
(http://www.who.int/news-room/fact-sheets/detail/cardiovascular-diseases-(cvds))
) states that:
· Cardiovascular diseases (CVDs) are the leading cause of death
globally.
· An estimated 17.9 million people died from CVDs in 2019,
representing 32% of all global deaths. Of these deaths, 85% were due to heart
attack and stroke.
· Over three quarters of CVD deaths take place in low- and
middle-income countries.
BYHEALTH's long-term goal of science-based nutrition is to achieve
'comprehensive intervention for human health', and Fruitflow is well placed to
provide such intervention in the Chinese cardiovascular health market.
Fruitflow+ dietary supplement products
Fruitflow+ Omega-3 is available to purchase from the Company's subscription
focussed e-commerce website www.fruitflowplus.com
(http://www.fruitflowplus.com) , Amazon UK and Holland & Barrett.
The Fruitflow+ Omega-3 business reported sales in the year of £145k, net of
sales rebates (2022: £144k), reflecting largely unchanged subscriber numbers
on the www.fruitflowplus.com website, and a further order from the Company's
Chinese Cross-Border e-commerce ('CBEC') channel.
The CBEC distribution agreement in China is separate but wholly complementary
to the Company's work with BYHEALTH, with the CBEC regulations enabling sales
of Fruitflow+ Omega-3 in China now, prior to the health function claim which
BYHEALTH is seeking to secure.
Fruitflow+ Omega-3 has a social media presence on Facebook
www.facebook.com/FruitflowPlus (http://www.facebook.com/FruitflowPlus) ,
Instagram www.instagram.com/fruitflowplus
(http://www.instagram.com/fruitflowplus) and Twitter / X
https://twitter.com/FruitflowPlus (https://twitter.com/FruitflowPlus) .
The Company is seeking to expand further its commercial activities with
Fruitflow+ Omega-3 and other Fruitflow+ combination products, and it is
currently in dialogue with some other potential international direct selling
customers.
Intellectual property
The Company is responsible for filing and maintaining patents and trade marks
for Fruitflow, and patent coverage for Fruitflow now includes the following
patent families which are all owned outright by Provexis:
Patent family Developments in the period from Sep-22 to Sep-23
Improved Fruitflow / Fruit Extracts
Improved Fruitflow / Fruit Extracts, with patents granted by the European A third European patent, and a Hong Kong patent based on it, proceeded to
Patent Office in January 2017, September 2020 and April 2023. grant in April 2023; further divisional European and corresponding Hong Kong
applications have been filed.
Patents have been granted in eleven other major territories to include China
and USA; and applications are at a late stage of progression in a further five
global territories, with potential patent protection out to November 2029.
Antihypertensive (blood pressure lowering) effects
This patent was originally developed in collaboration with the University of Patent applications are pending in China and Japan.
Oslo, and it has now been granted for Fruitflow in Europe, the US and four
other territories. Patent applications are being progressed in China and
Japan, with potential patent protection out to April 2033.
In August 2020 the Company announced it had agreed to purchase the background
and joint foreground blood pressure lowering IP owned by Inven2 AS, the
technology transfer office at the University of Oslo, and Provexis now owns
these important patents outright.
Fruitflow with nitrates in mitigating exercise-induced inflammation and for
promoting recovery from intense exercise
Patents have been granted around Europe and in the US, Australia, Brazil,
Canada, China, Hong Kong, India, Israel, Japan, South Korea, the Philippines,
New Zealand and Mexico.
Patents were granted in Canada, Brazil and a second patent was secured in
China.
Further patent protection is being sought in six territories, with potential
patent protection out to December 2033.
Fruitflow for air pollution
The use of Fruitflow in protecting against the adverse effects of air Brazilian and Malaysian patent protection has been secured.
pollution on the body's cardiovascular system.
Laboratory work has shown that Fruitflow can reduce the platelet activation
caused by airborne particulate matter, such as that from diesel emissions, by
approximately one third.
US, Australian, Brazilian, Indonesian, Israeli, Japanese and Malaysian patents
have been secured and there are pending applications in 10 jurisdictions
(including the US where a further application has been filed) which extends
potential patent protection for Fruitflow out to November 2037.
Fruitflow to confer health benefits in modulating the gut microbiome of humans
The Company also announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. This followed the completion of a successful human An international Patent Application was filed in June 2023 (covering all major
study, the results of which strongly support the use of Fruitflow for jurisdictions).
modulating gut microbiota to confer a number of health benefits.
Capital structure and funding
The Company is seeking to maximise the commercial returns that can be achieved
from its Fruitflow technology, and the Company's cost base and its resources
continue to be very tightly managed. The Company remains keen to minimise
dilution to shareholders and it is focussed on moving into profitability as
Fruitflow revenues increase, but while the Company remains in a loss-making
position it may need to raise funds in the future to meets its working capital
requirements.
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
II SD as a straight ingredient (not a DSM Premix or DSM Market-Ready solution)
transferred to become direct customers of Provexis WEF 1 January 2023.
The Company has needed to hold Fruitflow II SD in stock from 1 January 2023
onwards, to sell to new and existing customers, and the Company therefore
agreed to purchase from DSM the remaining stocks of Fruitflow which DSM held
on 31 December 2022.
It was originally intended that the Company would pay DSM for this inventory
over the course of a three month sale back period, commencing on 1 January
2023, with the Company having the option to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022.
The Company and DSM have been in further negotiations around the inventory
transfer throughout the course of 2023, and the parties expect to be able to
conclude these further negotiations in the coming months. The amount of stock
which the Company will finally elect to purchase from DSM remains uncertain,
and it will ultimately depend on (i) the best before dates of this inventory,
which remain favourable / long dated in light of recent production runs of new
Fruitflow material, (ii) recent stability data which suggests that the best
before dates could be further extended, (iii) estimated customer demand in
2023/24 and beyond, (iv) the comparative costs and timing of a potential
production run for a new batch of material and (v) the Company's financial
resources at that time.
Based on its current level of cash it is expected that the Group may therefore
need to raise further equity finance, or potentially new loan finance, in the
coming months, a situation which is deemed to represent a material uncertainty
related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
Annual General Meeting
The Company intends to hold its Annual General Meeting at the offices of
Allenby Capital Limited, 5th Floor, 5 St Helen's Place, London EC3A 6AB at
12:30pm on 26 October 2023.
People
The Board would like to thank the Company's small team of sales, marketing,
e-commerce, PR and scientific consultants for their professionalism,
enthusiasm and dedication in driving the business forward over the last year.
The Company would also like to thank its key professional advisers for their
valuable help and support.
Outlook
The Company is pleased to report on another strong year of progress.
The Company was delighted to announce the completion of two significant
agreements with DSM in June 2022, which have positioned the Company extremely
well for the next stage of its development.
The Company was also pleased to announce the filing of a new patent
application for Fruitflow in June 2022, relating to the use of Fruitflow to
confer health benefits in modulating the gut microbiome of humans. The patent
application follows the completion of a successful human study, the results of
which strongly support the use of Fruitflow for modulating gut microbiota to
confer a number of health benefits, to include a reduction in TMAO. It is
particularly encouraging to note that some potential new uses for Fruitflow
were identified in the study, and have been highlighted in the patent
application, looking to treat some major health conditions which are beyond
Fruitflow's long established and proven use in heart-health.
DSM conducted a strong launch of the new microbiome technology in January
2023, with widespread trade press coverage and encouraging early interest
shown from some significant global customers.
The Company has been delighted to welcome and serve the majority of DSM's
existing customers for Fruitflow from January this year, and was pleased to
take over control of the supply chain / production process for Fruitflow at
the same time.
There have been some clear synergies from January 2023 as the Company has been
looking to sell Fruitflow to: (i) former DSM customers for Fruitflow; (ii) DSM
and its Premix and Market-Ready Solutions businesses; (iii) new customers for
Fruitflow as a straight ingredient; and (iv) BYHEALTH and its customers,
through the Company's long term supply and distribution agreement for
Fruitflow with BYHEALTH. Provexis will continue to sell its Fruitflow+ Omega-3
dietary supplement product direct to consumers, and serve its Chinese
Cross-Border e-commerce distributor for this product in China.
Sales of the Fruitflow II SD ingredient in excess of £280k have been made in
the six months after the Company's 31 March 2023 year end, confirmed sales
orders in excess of £155k are currently being processed and the Company is
dealing with numerous sales enquiries from existing and new customers for
further direct sales of Fruitflow II SD in 2023 and beyond.
Provexis has been working with BYHEALTH for more than six years to support the
planned launch of a number of Fruitflow based products in the Chinese market.
Clinical studies conducted in China are typically required to obtain the
necessary regulatory clearances in China, and a significant investment in
eight separate Fruitflow studies has been undertaken at BYHEALTH's expense.
Completed studies have shown excellent results in use for Fruitflow, and they
provide strong evidence for the efficacy of Fruitflow on platelet function.
The Chinese regulatory system for functional health food ingredients, such as
Fruitflow, is governed by the State Administration for Market Regulation (the
'SAMR') and it is based on a defined list of permitted health function claims
which brand owners are permitted to use on product labels.
In August 2023 the Company was delighted to report that BYHEALTH had
submitted: i) the first application for a new permitted health function claim
and ii) some related product registration applications.
The significance of these major developments for Fruitflow in China is further
outlined here
www.nutraingredients-asia.com/Article/2023/09/05/china-set-to-approve-new-function-claims-for-health-foods#
(http://www.nutraingredients-asia.com/Article/2023/09/05/china-set-to-approve-new-function-claims-for-health-foods)
. BYHEALTH has noted that it has been working on the project since 2015, with
'tens of millions of funds' (RMB) invested by BYHEALTH in the research and
development work.
Fruitflow is well placed to play an important role in the Chinese
cardiovascular health market under the permitted health function claim
legislation, and we look forward to working closely with BYHEALTH seeking to
maximise the commercial success of this agreement for the benefit of both
companies.
The Company has developed a strong, long lasting and wide-ranging patent
portfolio for Fruitflow, and it owns outright four existing patent families
for Fruitflow. The new microbiome patent application takes this to a potential
total of five patent families, with potential patent protection now running
out to 2042. The four existing patent families have a truly global footprint,
and the Company also holds other valuable intellectual property and trade
secrets for Fruitflow. The intellectual property for Fruitflow is of
fundamental importance to the Company and its current and future commercial
partners, to include DSM and BYHEALTH, and it underpins the numerous
commercial opportunities which the Company and its partners are pursuing for
Fruitflow.
The Company expects that the new gut microbiome patent application, the
significant changes to the sales and supply chain structure for Fruitflow from
January 2023, and the recent BYHEALTH regulatory developments in China, will
have a strongly beneficial effect on the current and future commercial
prospects for Fruitflow and the business worldwide.
The Company would like to thank its customers and shareholders for their
continued support, and the Board remains strongly positive about the outlook
for Fruitflow and the Provexis business for the coming year and beyond.
Dawson Buck Ian Ford
Chairman CEO
Strategic report
Group strategy
The Group strategy has historically focused on the discovery, development and
commercialisation of functional foods, medical foods and dietary supplements,
and in particular the Group's Fruitflow technology.
Provexis entered into a long-term Alliance Agreement with DSM Nutritional
Products in 2010 to commercialise Fruitflow through sales as an ingredient to
brand owners in the food, beverage and dietary supplement categories. More
than 100 regional consumer healthcare brands have now been launched by direct
customers of DSM, and a number of further regional brands have been launched
through DSM's distributor channels.
In June 2022 Provexis announced it had secured two new agreements with DSM for
Fruitflow, to replace the Alliance Agreement: (i) a Transfer of Business
agreement and (ii) a Premix and Market-Ready Solutions supply agreement, which
both took effect on 1 January 2023. DSM's existing and prospective pipeline
customers for Fruitflow as a straight ingredient transferred to become direct
customers of Provexis WEF 1 January 2023, and Provexis took over the
outsourced supply chain / production process for Fruitflow at that time.
Fruitflow has a number of specific health benefits which have been reflected
in separate patent filings for the use of Fruitflow in:
· mitigating exercise-induced inflammation;
· managing blood pressure;
· protecting against the adverse effects of air pollution on the
body's cardiovascular system. Laboratory work has shown that Fruitflow can
reduce the platelet activation caused by airborne particulate matter, such as
that from diesel emissions, by approximately one third; and
· conferring health benefits in modulating the gut microbiome of
humans, to include a reduction in TMAO, following the completion of a
successful human study which is further detailed here
www.dsm.com/human-nutrition/en/talking-nutrition/press-releases/2023-01-20-new-study-reveals-dsms-fruitflow-activates-gut-heart.html
(http://www.dsm.com/human-nutrition/en/talking-nutrition/press-releases/2023-01-20-new-study-reveals-dsms-fruitflow-activates-gut-heart.html)
.
A new partnership was agreed with DSM in June 2022 relating to the
commercialisation of the gut microbiome patent, subject to certain milestones
which have been agreed between the parties.
In November 2021 Provexis entered into a long term supply and distribution
agreement for Fruitflow with BYHEALTH Co., Ltd. ('BYHEALTH'), a £4bn listed
Chinese dietary supplement business, to support the planned launch of some
Fruitflow based products in the Chinese market. The planned launch is
progressing well with potential sales volumes remaining at a significant
multiple of existing Fruitflow sales.
BYHEALTH has been working on an extensive regulatory submission to the Chinese
State Administration for Market Regulation (the SAMR) seeking to establish a
new permitted health function claim for foods such as Fruitflow that can
demonstrate an anti-platelet effect.
In August 2023 the SAMR announced in China that the 'Implementation Rules for
Health Food New Functions and Product Technology Evaluation' had been agreed
by the SAMR in June 2023, and on 29 August 2023 BYHEALTH submitted: i) the
first application under the Implementation Rules, seeking to obtain a new
permitted health function claim for foods such as Fruitflow which help to
'maintain normal platelet aggregation function and benefit blood flow health';
and ii) some related product registration applications.
BYHEALTH has noted that it has been working on the project since 2015, with
'tens of millions of funds' (RMB) invested by BYHEALTH in the research and
development work.
It has been a key strategic priority for the Group to develop a strong, long
lasting and wide-ranging patent portfolio for Fruitflow, and it owns outright
four existing patent families for Fruitflow. The new microbiome patent
application takes this to a potential total of five patent families, with
potential patent protection now running out to 2042. The four existing patent
families have a truly global footprint, and the Company also holds other
valuable intellectual property and trade secrets for Fruitflow. The
intellectual property for Fruitflow is of fundamental importance to the
Company and its current and future commercial partners, to include DSM and
BYHEALTH, and it underpins the numerous commercial opportunities which the
Company and its partners are pursuing for Fruitflow.
Market opportunity
Fruitflow is a patented natural extract from tomatoes which has been shown in
human trials to reduce the propensity for aberrant blood clotting, typically
associated with cardiovascular disease, which can lead to heart attack and
stroke. The extract is available in two formats, a syrup and a spray-dried
powder and can be included in a broad range of food, beverage and dietary
supplement formats.
In May 2009, the Company's Fruitflow technology was the first to be
substantiated by the European Food Safety Authority ('EFSA') under the new
Article 13(5) for proprietary and emerging science. In December 2009 the
European Commission authorised the health claim 'Helps maintain normal
platelet aggregation, which contributes to healthy blood flow', which was the
first wording to be authorised under Article 13(5).
The global functional food market is estimated to be in excess of US$170
billion per year, and it is forecast to reach US$276 billion by 2025, with
products addressing cardiovascular disease forming the largest segment of the
market (source:
www.grandviewresearch.com/press-release/global-functional-foods-market
(http://www.grandviewresearch.com/press-release/global-functional-foods-market)
). Global awareness of heart health is increasing and a rising number of
people are taking a proactive approach to improving heart health. The
Directors believe that products addressing blood flow and circulation issues
continue to represent a long-term opportunity in the expanding cardiovascular
sector.
Financial review
The financial review has been prepared on the basis of Group's continuing
operations, as further detailed in the consolidated statement of comprehensive
income.
Revenue
The Company's alliance agreement with DSM dates back to June 2010, with a
contractual term which ran to 31 December 2022.
In June 2022 the Company announced that it had entered into two new agreements
with DSM for Fruitflow, to replace the Alliance Agreement for the period after
31 December 2022, being: (i) a Transfer of Business agreement for Fruitflow
and (ii) a Premix and Market-Ready Solutions supply agreement for Fruitflow,
both to take effect from 1 January 2023.
In the year ended 31 March 2023, a transitional year which included nine
months of the DSM Alliance Agreement to 31 December 2022, and an initial three
months of the new direct sales arrangements for Fruitflow to 31 March 2023,
the Group's sales comprised:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Fruitflow II SD ingredient - from 1 January 2023 74,239 -
DSM Alliance Agreement - up to 31 December 2022 170,269 281,899
Fruitflow+ Omega 3 145,408 144,269
389,916 426,168
From 1 January 2023, the principal sales channels for the Group's Fruitflow II
SD ingredient are:
1. Former DSM customers for Fruitflow;
2. DSM and its Premix and Market-Ready Solutions businesses, which will
leverage the resources and relationships of DSM in some of the major global
markets;
3. New customers for Fruitflow as a straight ingredient; and
4. BYHEALTH and its customers, through the Company's long term supply and
distribution agreement for Fruitflow with BYHEALTH.
The Group's Fruitflow+ Omega-3 dietary supplement product is sold to:
1. Direct consumers, via the Company's website www.fruitflowplus.com
(http://www.fruitflowplus.com) which is particularly focussed on subscription
orders;
2. The Group's Chinese Cross-Border e-commerce distributor for Fruitflow+
Omega-3 in China;
3. Consumers via Amazon UK, and Holland & Barrett.
Fruitflow+ Omega-3 has a Facebook page at www.facebook.com/FruitflowPlus
(http://www.facebook.com/FruitflowPlus) and an Instagram page at
www.instagram.com/fruitflowplus (http://www.instagram.com/fruitflowplus) .
Further sales channel opportunities for the product are currently being
explored.
Underlying operating loss
Underlying operating loss for the year was £348k (2022: £173k), an increase
of £175k year on year which reflects an £86k year on year decrease in gross
profit, in a transitional year which included nine months of the DSM Alliance
Agreement to 31 December 2022, and an initial three months of the new direct
sales arrangements for Fruitflow to 31 March 2023.
The £175k increase in underlying operating loss also included a £6k increase
in selling and distribution costs, a £12k reduction in research and
development costs, a £26k decrease in R&D tax relief (the prior year
R&D tax credit included £30k which was in respect of prior periods) and a
£69k increase in administrative costs.
A reconciliation of the underlying operating loss to statutory operating loss
is provided below:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Revenue 389,916 426,168
Cost of goods (95,497) (46,119)
Gross profit 294,419 380,049
Selling and distribution costs (51,609) (45,268)
Research and development costs (237,221) (249,694)
Administrative costs - share-based payment charges (40,591) (67,119)
Administrative costs - other (385,925) (317,173)
Loss from operations (420,927) (299,205)
Adjust loss from operations for:
Administrative costs - share-based payment charges 40,591 67,119
Taxation - R&D tax relief: receivable tax credit 32,800 58,905
Underlying operating loss for the year (347,536) (173,181)
The Group has chosen to report underlying operating loss as the Directors
believe that the operating loss before share-based payments, and including
R&D tax relief, provides additional useful information for shareholders on
underlying trends and performance. This measure is used for internal
performance analysis. The Group's cost base and its resources have been and
will continue to be tightly managed within budgets approved and monitored by
the Board.
Research and development costs
Research and development costs are primarily composed of patent, trade mark
and other research agreement costs, with the Group seeking to maintain and
strengthen the breadth and duration of its patent and trade mark coverage for
Fruitflow. Research and development costs have decreased by 5% to £237k
(2022: £250k).
R&D tax relief: payable tax credit
A current tax credit of £33k (2022: £59k), in respect of research and
development tax relief has been recognised in the financial statements, £Nil
of which (2022: £30k) relates to prior years.
Taxation
The current tax charge is £Nil (2022: £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 2023 was £385k (2022: £224k) and the basic loss per share was 0.02p
(2022: 0.01p). The Directors are unable to recommend the payment of a dividend
(2022: £Nil).
Consideration of section 656 of the Companies Act 2006
On 28 August 2014 it was noted in the Company's Notice of Annual General
Meeting that Section 656 of the Companies Act 2006 ('section 656') had been
brought to the attention of the Directors as part of the 31 March 2014 year
end accounts and audit. Section 656 states that where the net assets of a
public company are half or less of its called-up share capital, the Directors
must call a general meeting of the company to consider whether any, and if so
what, steps should be taken to deal with the situation.
Further details of the issue were provided in the Company's AGM notice of 28
August 2014 which is available to download from the Company's website here
www.provexis.org/wp-content/uploads/Provexis-plc-notice-of-22-Sep-14-AGM-FINAL.pdf
(http://www.provexis.org/wp-content/uploads/Provexis-plc-notice-of-22-Sep-14-AGM-FINAL.pdf)
A resolution was not put to the 2014 Annual General Meeting in connection with
section 656 and it was noted that the Directors' view in August 2014 was that
the most appropriate course of action was to continue to maintain tight
control over the running costs of the Company and to wait for revenues from
its core Fruitflow product to increase. Subsequent to the Company's AGM on 22
September 2014 the net assets of the Company and Group have remained less than
half of the Company's called-up share capital and a further general meeting of
the Company is not required under section 656.
The annual financial statements of the Company for the year ended 31 March
2023 and the reports of the Directors thereon include a going concern
statement which concludes that the necessity to raise additional equity or
loan finance represents a material uncertainty that may cast significant doubt
upon the Group's and Parent Company's ability to continue as a going concern
and that should it be unable to raise further funds, the Group may be unable
to realise its assets and discharge its liabilities in the normal course of
business.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
It remains the Directors' view on 29 September 2023 that the most appropriate
course of action in respect of section 656 is to continue to seek to maximise
the commercial returns that can be achieved from the Company's Fruitflow
technology, and continue to maintain very tight control over the running costs
of the Company.
Capital structure and funding
The Company is seeking to maximise the commercial returns that can be achieved
from its Fruitflow technology, and the Company's cost base and its resources
continue to be very tightly managed. The Company remains keen to minimise
dilution to shareholders and it is focussed on moving into profitability as
Fruitflow revenues increase, but while the Company remains in a loss-making
position it may need to raise funds in the future to meets its working capital
requirements.
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
II SD as a straight ingredient (not a DSM Premix or DSM Market-Ready solution)
transferred to become direct customers of Provexis WEF 1 January 2023.
The Company has needed to hold Fruitflow II SD in stock from 1 January 2023
onwards, to sell to new and existing customers, and the Company therefore
agreed to purchase from DSM the remaining stocks of Fruitflow which DSM held
on 31 December 2022.
It was originally intended that the Company would pay DSM for this inventory
over the course of a three month sale back period, commencing on 1 January
2023, with the Company having the option to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022.
The Company and DSM have been in further negotiations around the inventory
transfer throughout the course of 2023, and the parties expect to be able to
conclude these further negotiations in the coming months. The amount of stock
which the Company will finally elect to purchase from DSM remains uncertain,
and it will ultimately depend on (i) the best before dates of this inventory,
which remain favourable / long dated in light of recent production runs of new
Fruitflow material, (ii) recent stability data which suggests that the best
before dates could be further extended, (iii) estimated customer demand in
2023/24 and beyond, (iv) the comparative costs and timing of a potential
production run for a new batch of material and (v) the Company's financial
resources at that time.
Based on its current level of cash it is expected that the Group may therefore
need to raise further equity finance, or potentially new loan finance, in the
coming months, a situation which is deemed to represent a material uncertainty
related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
Key performance indicators
The principal financial KPIs monitored by the Board relate to underlying
operating loss and cash and cash equivalents.
The table below shows the Group's underlying operating loss, calculated as
loss from operations adjusted for share-based payment charges and R&D tax
relief, for the two years ended 31 March 2023:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Loss from operations 420,927 299,205
Adjust loss from operations for:
Administrative costs - share-based payment charges (40,591) (67,119)
Taxation - R&D tax relief: receivable tax credit (32,800) (58,905)
Underlying operating loss 347,536 173,181
The trading results are further detailed in this strategic report.
The table below shows the Group's cash position at 31 March 2023 and 31 March
2022:
31 March 31 March
2023 2022
£ £
Cash and cash equivalents 379,121 863,873
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 £484,752 decrease in cash
and cash equivalents during the financial year is further detailed in the
consolidated statement of cash flows.
Principal risks and uncertainties
In the course of its normal business the Group is exposed to a range of risks
and uncertainties which could impact on the results of the Group.
The Board considers that risk-management is an integral part of good business
process and, it maintains a register of risks across several categories
including consultants, clients, competition, finance, technical and legal. For
each risk the Board estimates the impact, likelihood as well as identify
mitigating strategies.
This register is reviewed periodically as the Company's situation changes.
During such reviews, each risk category is considered by the Directors with a
view to understanding (i) whether the nature, impact or likelihood of any
risks has changed, (ii) whether the mitigating actions taken by the Company
should change as a result and (iii) whether any new risks or categories of
risk have arisen since the last review.
The Company announced in September 2021 that the Company and DSM were engaged
in constructive negotiations working towards a new agreement for Fruitflow for
the period after 31 December 2022 to replace the Alliance Agreement, and in
June 2022 the Company announced that the parties had concluded their
negotiations and had entered into (i) a Transfer of Business agreement for
Fruitflow and (ii) a Premix and Market-Ready Solutions supply agreement for
Fruitflow, which both took effect from 1 January 2023.
Under these new agreements the Company is seeking to expand its Fruitflow
direct selling business and thereby reduce its past commercial reliance on the
Alliance Agreement with DSM, as further outlined above. For some time the
Company has been seeking to expand its Fruitflow+ Omega-3 dietary supplement
business. The Company is therefore seeking to increase its opportunities for
growth and decrease the risk inherent in its past commercial reliance on the
Alliance Agreement with DSM.
The Directors have identified the following principal risks and uncertainties
that could have the most significant impact on the Group's long-term value
generation.
Funding and other risks
Provexis has experienced operating losses from continuing operations in each
year since its inception. Accordingly until Provexis has sufficient commercial
success with Fruitflow to be cash generative it will continue to rely on its
existing cash resources and further funding rounds to continue its activities.
While Provexis aims to generate licensing and sales revenues from Fruitflow,
there is no certainty that such revenues will be generated. Furthermore, the
amount and timing of revenues from Fruitflow is uncertain and will depend on
numerous factors, most of which have in the past been outside Provexis'
control due to the terms of the Alliance Agreement. It is therefore difficult
for the Directors to predict with accuracy the timing and amount of any
further capital that may be required by the Provexis Group.
Factors that could increase Provexis' funding requirements include, but are
not limited to: higher operational costs; slower progress than expected in
attracting customers to purchase Fruitflow; unexpected opportunities to
develop additional products or acquire additional technologies, products or
businesses; costs incurred in relation to the protection of Provexis'
intellectual property, and the additional working capital (in particular:
inventory) which Provexis is now required to hold as a result of the June 2022
(i) Transfer of Business agreement for Fruitflow with DSM and (ii) Premix and
Market-Ready Solutions supply agreement for Fruitflow with DSM, which both
took effect from 1 January 2023.
Any additional share issues may have a dilutive effect on Provexis
Shareholders. Further, there can be no guarantee or assurance that additional
equity funding will be forthcoming when required, nor as to the terms and
price on which such funds would be available, nor that such funds, if raised,
would be sufficient to enable Provexis to meet its working capital
requirements.
Brexit
The long term impact of the UK leaving the EU remains uncertain.
The trade deal announced in December 2020 removed key tariffs which were the
main potential impact identified for the business.
For the purposes of the Group's Fruitflow+ Omega-3 business the Group has
registered for the Import One-Stop Shop (IOSS), an electronic portal which
businesses have been able to use since 1 July 2021 to comply with their VAT
e-commerce obligations on distance sales to the EU.
Under the terms of the June 2022 (i) Transfer of Business agreement for
Fruitflow with DSM and (ii) Premix and Market-Ready Solutions supply agreement
for Fruitflow with DSM, which both took effect from 1 January 2023, DSM's
existing and prospective pipeline customers for Fruitflow as a straight
ingredient (not a Premix or Market-Ready solution) transferred to become
direct customers of Provexis WEF 1 January 2023, and DSM has helped to
facilitate the transfer of its wholly outsourced supply chain / production
process for Fruitflow from DSM to Provexis with effect from 1 January 2023.
The outsourced supply chain / production process for Fruitflow is based solely
in the EU, and the Group expects to maintain stocks of Fruitflow in the EU,
which should mitigate against any significant Brexit risks for this business.
The Company is in the process of setting up a new Irish subsidiary company,
which will use an outsourced fulfilment centre in Ireland to hold these
stocks, and serve EU customers for Fruitflow. This is expected to be an
attractive new sales channel for EU customers, and it will further mitigate
the risks of Brexit.
Covid-19
The full impact of the Covid-19 pandemic remains uncertain.
Scientific research into Covid-19 is being undertaken at considerable scale,
and it is already clear that in many patients the virus is having a
significant adverse effect on circulation, and is causing wider issues with
inflammation. Fruitflow is a natural, breakthrough ingredient that helps with
platelet aggregation, supporting normal blood flow and circulation which in
turn benefits cardiovascular health.
Some of the growing markets for Fruitflow in the Asia Pacific region have been
affected in the short term by further lockdowns and other COVID-19
disruptions, leading to more erratic demand for Fruitflow.
Commercialisation
For the past twelve years, due to the terms of the Alliance Agreement,
Provexis has been largely dependent on DSM in respect of the development,
production, marketing and commercialisation of Fruitflow, and Provexis'
long-term success has been largely dependent on the ability of DSM to sell
Fruitflow.
It has been noted in prior years that Provexis' negotiating position with DSM
could have been affected by its size and limited cash resources relative to
DSM which has substantial cash resources and established levels of commercial
success. An inability to enter into any discussions with DSM on equal terms
could have led to reduced revenue from the Alliance Agreement which may have
had a significant adverse effect on Provexis' business, financial condition
and results.
The loss of, or changes affecting, Provexis' relationships with DSM could
adversely affect Provexis' results or operations as Provexis has limited input
on the sales strategies of Fruitflow adopted by DSM. Furthermore, although
Provexis has sought to include performance obligations on DSM in the Alliance
Agreement, there has been a risk that DSM may reprioritise Fruitflow within
their product portfolio resulting in Provexis achieving sales below that which
it expects. Any such situation may have a material and adverse effect on
Provexis' business, financial condition and results of operations.
In June 2022 the Company announced that the Company and DSM had concluded
their negotiations to replace the Alliance Agreement and had entered into (i)
a Transfer of Business agreement for Fruitflow and (ii) a Premix and
Market-Ready Solutions supply agreement for Fruitflow, which both took effect
from 1 January 2023.
Under these new agreements the Company is seeking to expand its Fruitflow
direct selling business and thereby reduce its past commercial reliance on the
Alliance Agreement with DSM, as further outlined above. For some time the
Company has been seeking to expand its Fruitflow+ Omega-3 dietary supplement
business. The Company is therefore seeking to increase its opportunities for
growth and decrease the risk inherent in its past commercial reliance on the
Alliance Agreement with DSM.
The success of Provexis will depend on the market's acceptance and valuing of
Fruitflow and there can be no guarantee that this acceptance will be
forthcoming or that Provexis' technologies will succeed. The development of a
market for Fruitflow will be affected by many factors, some of which are
beyond Provexis' control, including the emergence of newer, more successful
food IP and products and the cost of Fruitflow. Notwithstanding the health
claims made in respect of Fruitflow, there can be no guarantee that Provexis'
targeted customer base for the product will purchase or continue to purchase
the product. If a market fails to develop or develops more slowly than
anticipated, Provexis may be unable to recover the losses it may have incurred
in the development of Fruitflow and may never achieve profitability.
Limited product offering
Provexis has only one product, Fruitflow, and any problems with the commercial
success of Fruitflow will impact the financial performance of Provexis.
Intellectual property protection
Provexis is heavily dependent on its intellectual property and, in particular,
its patents. No assurance can be given that any pending patent applications or
any future patent applications will result in granted patents, that any
patents will be granted on a timely basis, that the scope of any copyright or
patent protection will exclude competitors or provide competitive advantages
to Provexis, that any of Provexis' patents will be held valid if challenged,
or that third parties will not claim rights in or ownership of the copyright,
patents and other proprietary rights held by Provexis.
Further, there can be no assurance that others have not developed or will not
develop similar products, duplicate any of Provexis' products or design around
any patents held by Provexis. Others may hold or receive patents which contain
claims having a scope that covers products developed by Provexis (whether or
not patents are issued to Provexis).
Provexis may rely on patents to protect its assets. These rights act only to
prevent a competitor copying and not to prevent a competitor from
independently developing products that perform the same functions. No
assurance can be given that others will not independently develop or otherwise
acquire substantially equivalent functional food IP or otherwise gain access
to Provexis' unpatented proprietary technology or disclose such technology or
that Provexis can ultimately protect meaningful rights to such unpatented
technology.
Once granted, a patent can be challenged both in the patent office and in the
courts by third parties. Third parties can bring material and arguments which
the patent office granting the patent may not have seen. Therefore, issued
patents may be found by a court of law or by the patent office to be invalid
or unenforceable or in need of further restriction.
A substantial cost may be incurred if Provexis is required to assert its
intellectual property rights, including any patents or trade marks against
third parties. Litigation is costly and time consuming and there can be no
assurance that Provexis will have, or will be able to devote, sufficient
resources to pursue such litigation. Potentially unfavourable outcomes in such
proceedings could limit Provexis' intellectual property rights and activities.
There is no assurance that obligations to maintain Provexis' know how would
not be breached or otherwise become known in a manner which provides Provexis
with no recourse.
Any claims made against Provexis' intellectual property rights, even without
merit, could be time consuming and expensive to defend and could have a
materially detrimental effect on Provexis' resources. A third party asserting
infringement claims against Provexis could require Provexis to cease the
infringing activity and/or require Provexis to enter into licensing and
royalty arrangements. The third party could also take legal action which could
be costly. In addition, Provexis may be required to develop alternative
non-infringing solutions that may require significant time and substantial
unanticipated resources. There can be no assurance that such claims will not
have a material adverse effect on Provexis' business, financial condition or
results.
Future development
The future development of the Company is discussed in the Chairman and CEO's
statement.
Ian Ford
Director
Consolidated statement of comprehensive income
Year Year
ended ended
31 March 31 March
2023 2022
Notes £ £
Revenue 1,3 389,916 426,168
Cost of goods sold (95,497) (46,119)
Gross profit 294,419 380,049
Selling and distribution costs (51,609) (45,268)
Research and development costs 4 (237,221) (249,694)
Administrative costs - share-based payment charges 4,16 (40,591) (67,119)
Administrative costs - other (385,925) (317,173)
Loss from operations 4 (420,927) (299,205)
Finance income 7 1,011 73
Loss before taxation (419,916) (299,132)
Taxation - R&D tax relief: receivable tax credit 8 32,800 58,905
Loss and total comprehensive loss for the year (387,116) (240,227)
Attributable to:
Owners of the parent (385,241) (224,250)
Non-controlling interest (1,875) (15,977)
Loss and total comprehensive loss for the year (387,116) (240,227)
Loss per share to owners of the parent
Basic - pence 9 (0.02) (0.01)
Diluted - pence 9 (0.02) (0.01)
Consolidated statement of financial position
Company number 05102907 As at As at
31 March 31 March
2023 2022
Notes £ £
Assets
Current assets
Inventories 11 327,797 85,808
Trade and other receivables 12 61,114 104,443
Corporation tax asset 8 77,960 72,865
Cash and cash equivalents 379,121 863,873
Total current assets 845,992 1,126,989
Total assets 845,992 1,126,989
Liabilities
Current liabilities
Trade and other payables 13 (188,337) (157,909)
Total current liabilities (188,337) (157,909)
Total liabilities (188,337) (157,909)
Total net assets 657,655 969,080
Capital and reserves attributable to
owners of the Parent company
Share capital 15 2,217,822 2,210,822
Share premium 17 18,703,321 18,675,221
Merger reserve 17 6,599,174 6,599,174
Retained earnings 17 (26,330,788) (25,986,138)
1,189,529 1,499,079
Non-controlling interest (531,874) (529,999)
Total equity 657,655 969,080
Consolidated statement of cash flows
Year Year
ended ended
31 March 31 March
2023 2022
Notes
£ £
Cash flows from operating activities
Loss after tax (387,116) (240,227)
Adjustments for:
Finance income 7 (1,011) (73)
Tax credit receivable 8 (32,800) (58,905)
Share-based payment charges - share options 16 40,591 67,119
Changes in inventories (241,989) (25,232)
Changes in trade and other receivables 43,453 36,475
Changes in trade and other payables 30,428 7,228
Net cash flow from operations (548,444) (213,615)
Tax credits received 27,705 -
Total cash flow from operating activities (520,739) (213,615)
Cash flow from investing activities
Interest received 887 78
Total cash flow from investing activities 887 78
Cash flow from financing activities
Proceeds from issue of share capital 15 35,100 -
Total cash flow from financing activities 35,100 -
Net change in cash and cash equivalents (484,752) (213,537)
Opening cash and cash equivalents 863,873 1,077,410
Closing cash and cash equivalents 379,121 863,873
Consolidated statement of changes in equity
Share Share Merger Retained Total equity Non-controlling Total
capital premium reserve earnings attributable to owners of interests equity
the parent
£ £ £ £ £ £ £
At 31 March 2021 2,210,822 18,675,221 6,599,174 (25,829,007) 1,656,210 (514,022) 1,142,188
Share-based charges - share options - - - 67,119 67,119 - 67,119
Total comprehensive loss for the year - - - (224,250) (224,250) (15,977) (240,227)
At 31 March 2022 2,210,822 18,675,221 6,599,174 (25,986,138) 1,499,079 (529,999) 969,080
Share-based charges - share options - - - 40,591 40,591 - 40,591
Issue of shares - share options 7,000 28,100 - - 35,100 - 35,100
exercised 23 May 2022
Total comprehensive loss for the year - - - (385,241) (385,241) (1,875) (387,116)
At 31 March 2023 2,217,822 18,703,321 6,599,174 (26,330,788) 1,189,529 (531,874) 657,655
Notes to the preliminary results for the year ended 31 March 2023
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 2023 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 2022 have been
delivered to the Registrar of Companies and those for 2023 will be delivered
on 29 September 2023. The auditors have reported on the accounts for the year
ended 31 March 2023; and whilst their audit report was not modified their
report does contain a material uncertainty related to going concern, as set
out in the going concern paragraph of this announcement.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) as endorsed for use in the
United Kingdom, this announcement does not itself contain sufficient
information to comply with IFRS. The Company expects to publish full financial
statements for the year ended 31 March 2023 that comply with IFRS on 29
September 2023.
The accounting policies set out below have been applied to all periods
presented in these Group financial statements and are in accordance with IFRS,
as adopted by the United Kingdom, and International Financial Reporting
Interpretations Committee ('IFRIC') interpretations that were applicable for
the year ended 31 March 2023.
These accounting policies are consistent with those applied in the year ended
31 March 2022, as amended to reflect any new Standards, amendments to
Standards and interpretations which are mandatory for the year ended 31 March
2023. The adoption of these revised standards and interpretations has not had
an impact on the current and comparative figures recorded.
The IASB has issued a number of standards and interpretations with an
effective date after the date of these financial statements, none of which are
expected to have a material impact on the Group's reported financial
performance or position.
Going concern
The Group's business activities together with the factors likely to affect its
future development, and the financial position of the Group, its cash flows
and liquidity position are set out in the strategic report. In addition note 2
to the financial statements includes the Group's objectives, policies and
processes for managing its capital; its financial risk management objectives;
details of its financial instruments and its exposure to credit and liquidity
risk.
The Group made a loss for the year of £387,116 (2022: £240,227), which
includes non-cash share-based payment charges of £40,591 (2022: £67,119) and
expects to make a further loss during the year ending 31 March 2024. The total
cash outflow from operations in the year was £520,739 (2022: £213,615). At
31 March 2023 the Group had cash balances of £379,121 (2022: £863,873).
The directors have prepared projected cash flow information for a period of
more than twelve months from the date of approval of these financial
statements and have reviewed this information as at the date of these
financial statements.
The Company is seeking to maximise the commercial returns that can be achieved
from its Fruitflow technology, and the Company's cost base and its resources
continue to be very tightly managed. The Company remains keen to minimise
dilution to shareholders and it is focussed on moving into profitability as
Fruitflow revenues increase, but while the Company remains in a loss-making
position it may need to raise funds in the future to meets its working capital
requirements.
Under the terms of the DSM Transfer of Business agreement which was announced
in June 2022, DSM's existing and prospective pipeline customers for Fruitflow
II SD as a straight ingredient (not a DSM Premix or DSM Market-Ready solution)
transferred to become direct customers of Provexis WEF 1 January 2023.
The Company has needed to hold Fruitflow II SD in stock from 1 January 2023
onwards, to sell to new and existing customers, and the Company therefore
agreed to purchase from DSM the remaining stocks of Fruitflow which DSM held
on 31 December 2022.
It was originally intended that the Company would pay DSM for this inventory
over the course of a three month sale back period, commencing on 1 January
2023, with the Company having the option to purchase some but not all of DSM's
remaining stocks of Fruitflow at 31 December 2022.
The Company and DSM have been in further negotiations around the inventory
transfer throughout the course of 2023, and the parties expect to be able to
conclude these further negotiations in the coming months. The amount of stock
which the Company will finally elect to purchase from DSM remains uncertain,
and it will ultimately depend on (i) the best before dates of this inventory,
which remain favourable / long dated in light of recent production runs of new
Fruitflow material, (ii) recent stability data which suggests that the best
before dates could be further extended, (iii) estimated customer demand in
2023/24 and beyond, (iv) the comparative costs and timing of a potential
production run for a new batch of material and (v) the Company's financial
resources at that time.
Based on its current level of cash it is expected that the Group may therefore
need to raise further equity finance, or potentially new loan finance, in the
coming months, a situation which is deemed to represent a material uncertainty
related to going concern.
Considering the success of previous fundraisings and the current performance
of the business, the Directors have a reasonable expectation of raising
sufficient additional equity capital or new loan finance to continue in
operational existence for the foreseeable future. Subject to the outcome of
ongoing negotiations with a third party, the Company might also be able to
hold some of its future stock requirements on a consignment basis, only paying
for the stock when it was required for sale. For these reasons the Directors
continue to adopt the going concern basis in preparing the Group's and Parent
Company's financial statements.
Basis of consolidation
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
The consolidated financial information presents the results of the Company and
its subsidiaries, Provexis Nutrition Limited, Provexis Natural Products
Limited and Provexis (IBD) Limited as if they formed a single entity ('the
Group'). All subsidiaries share the same reporting date, 31 March, as Provexis
plc. All intra group balances are eliminated in preparing the financial
statements.
Non-controlling interest
Profit or loss and each component of other comprehensive income are attributed
to the owners of the parent and to the non-controlling interests. Total
comprehensive income is attributed to the owners of the parent and the
non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
Revenue
(i) Performance obligations and timing of revenue recognition
The group's revenue is primarily derived from:
· 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.
· The group's profit-sharing Alliance Agreement with DSM which was
in place up to 31 December 2022, 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.
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 fixed
price contracts which the group has with its customers, in respect of the
direct sale of goods to these customers and (ii) the provisions of the group's
profit-sharing Alliance Agreement with DSM, which is based on DSM's fixed
price contracts with their customers. Variable consideration relating to
volume rebates has been constrained in estimating contract revenue in order
that it is highly probable there will not be a future reversal in the amount
of revenue recognised when the amount of volume rebates has been determined.
(iii) Allocating amounts to performance obligations
For most contracts, there is a fixed unit price for each product sold, with
discounts given for bulk orders placed at a specific time. Therefore, there is
no judgement involved in allocating the contract price to each unit ordered in
such contracts (it is the total contract price divided by the number of units
ordered).
Sales rebate and discount reserves are established based on management's best
estimate of the amounts necessary to meet claims by customers in respect of
these rebates and discounts. A refund liability is made at the time of sale
and updated at the end of each reporting period for changes in circumstances.
(iv) Practical exemptions
The Group has taken advantage of the practical exemption not to account for
significant financing components where the time difference between receiving
consideration and transferring control of goods to its customer is less than
one year.
Segment reporting
The Group determines and presents operating segments based on the information
that internally is provided to the Board of Directors, which is the Group's
'chief operating decision maker' ('CODM').
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group's
other components. An operating segment's operating results are reviewed
regularly by the CODM to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial
information is available.
Segment results that are reported to the Group Board include items directly
attributable to a segment as well as those that can be allocated on a
reasonable basis.
Segment capital expenditure is the total cost incurred during the period to
acquire property, plant and equipment, and intangible assets.
Use of non-GAAP profit measure - underlying operating profit
The Directors believe that the operating loss before share-based payments
measure provides additional useful information for shareholders on underlying
trends and performance. This measure is used for internal performance
analysis. Underlying operating loss is not defined by IFRS and therefore may
not be directly comparable with other companies' adjusted profit measures. It
is not intended to be a substitute for, or superior to IFRS measurements of
profit.
A reconciliation of underlying operating profit to statutory operating profit
is set out in the Strategic Report.
Intangible assets
Research and development
Expenditure incurred on the development of internally generated products is
capitalised if it can be demonstrated that:
● It is technically feasible to develop the product for it
to be sold;
● Adequate resources are available to complete the
development;
● There is an intention to complete and sell the product;
● The Group is able to sell the product;
● Sale of the product will generate future economic
benefits; and
● Expenditure on the project can be measured reliably.
The value of the capitalised development cost is assessed for impairment
annually. The value is written down immediately if impairment has occurred.
Development costs are not being amortised as income has not yet been realised
from the underlying technology. Development expenditure, not satisfying the
above criteria, and expenditure on the research phase of internal projects is
recognised in profit and loss as incurred.
Patents and trade marks
The costs incurred in establishing patents and trade marks are either expensed
or capitalised in accordance with the corresponding treatment of the
development expenditure for the product to which they relate.
Impairment of non- financial assets
Assets that have a finite useful life but that are not yet in use and are
therefore not subject to amortisation or depreciation are tested annually for
impairment. Assets that are subject to amortisation are reviewed for
impairment annually and when events or circumstances suggest that the carrying
amount may not be recoverable, an impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its recoverable amount.
If the recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit and
loss, unless the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the
asset in prior periods. A reversal of an impairment loss is recognised
immediately in the statement of comprehensive income, unless the relevant
asset is carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase. Impairment losses on
goodwill are not reversed.
Inventories
Inventories, representing finished goods, are stated at the lower of cost and
net realisable value. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their
present location and condition. Cost is calculated on a first in, first out
basis.
Net realisable value is based on estimated selling price less further costs to
completion and disposal. A charge is made to the income statement for slow
moving inventories. The charge is reviewed at each reporting date.
Financial instruments
Financial assets
The Group's financial assets are comprised of 'trade and other receivables'
and 'cash and cash equivalents'. They are recognised initially at their fair
value and subsequently at amortised cost using the effective interest method,
less provision for impairment. Impairment provisions for trade and other
receivables are recognised based on the simplified approach within IFRS 9
using a provision matrix in the determination of lifetime expected credit
losses.
Financial liabilities
The Group's financial liabilities comprise 'trade and other payables' and
'borrowings'. These are recognised initially at fair value and subsequently at
amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
Government grants
Government grants are recognised when there is reasonable assurance that the
grant will be received and the Group will comply with all attached conditions.
Government grants are recognised in the statement of comprehensive income in
the same period to which the costs that they are intended to compensate are
expensed.
When research and development tax credits are claimed they are recognised on
an accruals basis and are included as other income.
Taxation
Current tax is provided at amounts expected to be recovered or to be paid
using the tax rates and tax laws that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability on the statement of financial position differs from
its tax base, except for differences arising on:
· The initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
· Investments in subsidiaries where the Group is able to control
the timing of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profits will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the reporting date and are expected
to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· The same taxable Group Company; or
· Different Group entities which intend to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, on each future period in which significant amounts
of deferred tax assets or liabilities are expected to be settled or recovered.
Foreign currency translation
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at period end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit and
loss.
Benefits for Directors and consultants
(i) Defined contribution plans
The Group provides retirement benefits to the Executive Directors, who are the
Group's only employees. The assets of these schemes are held separately from
those of the Group in independently administered funds. Contributions made by
the Group are charged to the statement of comprehensive income in the period
in which they become payable.
(ii) Accrued holiday pay
Provision has been made at the balance sheet date for holidays accrued but not
taken at the salary of the relevant employee at that date.
(iii) Share-based payment transactions for Directors and consultants
The Group operates an equity-settled, share-based compensation plan. Vesting
conditions are service conditions and performance conditions only. Where share
options are awarded to employees and others providing similar services, the
fair value of the options at the date of grant is charged to profit and loss
over the vesting period. Non-market vesting conditions are taken into account
by adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest.
If non-market related terms and conditions of options are modified before they
vest, the number of instruments expected to vest at each reporting date, and
therefore the cumulative charge, is amended accordingly. Where equity
instruments are granted to persons other than employees and others providing
similar services, profit and loss is charged with the fair value of goods and
services received.
The proceeds received when options are exercised, net of any directly
attributable transaction costs, are credited to share capital (nominal value)
and the remaining balance to share premium.
Other share-based payment transactions
The fair value of equity-settled share payments made in exchange for goods and
services received by the Group, outside of the Group's share-based
compensation plan, is determined at the date the payment is made. The nature
of the payment is assessed, and the fair value of the payment is either
capitalised or charged to the consolidated statement of comprehensive income.
National insurance on share options
All employee option holders sign statements that they will be liable for any
employers national insurance arising on the exercise of share options.
Interest income
Interest income is recognised on a time-proportion basis using the effective
interest rate method.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRSs requires the
use of certain critical accounting estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Estimates and judgements are continually made and are based on historic
experience and other factors, including expectations of future events that are
believed to be reasonable in the circumstances.
As the use of estimates is inherent in financial reporting, actual results
could differ from these estimates. The Directors believe the following to be
the key areas of estimation and judgement:
(i) Research and development
Under IAS 38 Intangible Assets, development expenditure which meets the
recognition criteria of the standard must be capitalised and amortised over
the useful economic lives of intangible assets from product launch.
(ii) Share-based payments
The Group operates an equity-settled, share-based compensation plan. The
charge for share-based payments is determined based on the fair value of
awards at the date of grant partly by use of a Binomial / Black-Scholes
convergence pricing model which require judgements to be made regarding
expected volatility, dividend yield, risk free rates of return and expected
option lives. The inputs used in these pricing models to calculate the fair
values are set out in note 16.
2. Financial risk management
2.1 Financial risk factors
The Group's activities inevitably expose it to a variety of financial risks:
market risk (including currency risk, cash flow interest rate risk and fair
value interest rate risk), credit risk and liquidity risk.
It is Group policy not to enter into speculative positions using complex
financial instruments. The Group's primary treasury objective is to minimise
exposure to potential capital losses whilst at the same time securing
favourable market rates of interest on Group cash deposits using money market
deposits with banks. Cash balances used to settle the liabilities from
operating activities are also maintained in current accounts which earn
interest at variable rates.
(a) Market risk
Foreign exchange risk
The Group's sales of Fruitflow are primarily denominated in Euros, and 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.
The Group analyses its foreign exchange exposure on a dynamic basis throughout
the year.
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 £188,337 (2022: £157,909) as disclosed in note 13.
2.2 Capital risk management
The Group considers its capital to comprise its ordinary share capital, share
premium, merger reserve and accumulated retained earnings as disclosed in the
consolidated statement of financial position.
The Group remains funded exclusively by equity capital. The Group's objectives
when managing capital are to safeguard the Group's ability to continue as a
going concern in order to provide returns for equity holders of the Company
and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
3. Segmental reporting
The Group's operating segments are determined based on the Group's internal
reporting to the Chief Operating Decision Maker (CODM). The CODM has been
determined to be the Board of Directors as it is primarily responsible for the
allocation of resources to segments and the assessment of performance of the
segments. The performance of operating segments is assessed on revenue.
The CODM uses revenue as the key measure of the segments' results as it
reflects the segments' underlying trading performance for the financial period
under evaluation. Revenue is reported separately to the CODM and all other
reports are prepared as a single business unit.
Year ended Year ended
31 March 31 March
2023 2022
£ £
Fruitflow II SD ingredient - from 1 January 2023 74,239 -
DSM Alliance Agreement - up to 31 December 2022 170,269 281,899
Fruitflow+ Omega 3 145,408 144,269
389,916 426,168
4. Loss from continuing operations
Year ended Year ended
31 March 31 March
2023 2022
£ £
Loss from continuing operations is stated after charging:
Research and development costs 237,221 249,694
Foreign exchange (gains) / losses (16,633) 2,990
Equity-settled share-based payment expense:
Share-based payment charges - share options 40,591 67,119
Total share-based payment charges 40,591 67,119
The total fees of the Group's auditors, and the Group's former auditors for
services provided are analysed below:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Audit services
Parent company 12,000 9,250
Subsidiaries 20,000 8,750
Tax services - compliance
Parent company 1,000 500
Subsidiaries 6,500 2,500
Other services
iXBRL services 2,300 2,100
Total fees 41,800 23,100
5. Wages and salaries
The average monthly number of persons, including all Directors, employed or
engaged under contracts for services by the Group during the year was as
follows:
Year ended Year ended
31 March 31 March
2023 2022
Directors 4 4
4 4
Their aggregate emoluments were:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Wages and salaries 278,456 235,746
Social security costs 28,805 20,402
Pension and other staff costs 23,086 10,502
Total cash settled emoluments 330,347 266,650
Share-based payment remuneration charge: equity settled 12,251 51,898
Total emoluments 342,598 318,548
6. Directors' remuneration
Year ended Year ended
31 March 31 March
2023 2022
£ £
Directors
Aggregate emoluments 278,456 235,746
Company pension contributions 23,086 10,502
301,542 246,248
Share-based payment remuneration charge: equity settled 12,251 51,898
Total Directors' emoluments 313,793 298,146
Emoluments disclosed above include the following amounts in respect of the
highest paid Director:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Aggregate emoluments 160,808 127,008
Company pension contributions 14,081 6,350
Share-based payment remuneration charge: equity settled 6,125 22,370
Total of the highest paid Director's emoluments 181,014 155,728
During the current year and the prior year two Directors participated in
defined contribution pension schemes.
During the current year and the prior year the Directors did not receive any
benefits in kind.
7. Finance income
Year ended Year ended
31 March 31 March
2023 2022
£ £
Finance income
Bank interest receivable 1,011 73
1,011 73
8. R&D tax relief: payable tax credit and taxation
Year ended Year ended
31 March 31 March
2023 2022
£ £
R&D tax relief: payable tax credit
Research and development credit - current year 32,800 28,769
Research and development credit - in respect of prior periods - 30,136
Taxation credit 32,800 58,905
The tax assessed for the year is different from the standard rate of
corporation tax in the UK. The differences are explained below:
Year ended Year ended
31 March 31 March
2023 2022
£ £
Loss before tax (419,916) (299,132)
Loss before tax multiplied by the
standard rate of corporation tax in the UK of 19% 79,784 56,835
Effects of:
Expenses not deductible for tax purposes (7,712) (12,752)
Unutilised tax losses and other deductions arising in the year (53,384) (33,854)
Adjustment for R&D tax relief (18,688) (10,229)
Research and development credit - current year 32,800 28,769
Research and development credit - in respect of prior periods - 30,136
Total taxation credit for the year 32,800 58,905
At 31 March 2023 the Group UK tax losses to be carried forward are estimated
to be £20,491,448 (2022: £20,197,422).
The UK corporation tax rate for the year was 19.0% (2022: 19.0%). In March
2021, the UK Government announced an increase in the UK corporation tax rate
to 25.0% from 1 April 2023. The tax losses represent deferred tax assets
amounting to £5,122,862, calculated at 25% (2022: £3,837,510, calculated at
19%), which have not been recognised on the basis that their future economic
benefit is not probable.
R&D tax relief: payable tax credit receivable within one year 31 March 31 March
2023 2022
£ £
R&D tax relief: payable tax credit recoverable 77,960 72,865
77,960 72,865
9. Earnings per share and diluted earnings per share
Basic earnings per share amounts are calculated by dividing the profit or loss
attributable to owners of the parent by the weighted average number of
ordinary shares in issue during the financial year.
The loss attributable to equity holders of the Company for the purpose of
calculating the fully diluted loss per share is identical to that used for
calculating the basic loss per share. The exercise of share options, disclosed
in note 16, would have the effect of reducing the loss per share and is
therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.
Basic and diluted loss per share amounts are in respect of all activities.
Year ended Year ended
31 March 31 March
2023 2022
Loss and total comprehensive loss
for the year attributable to owners of the parent - £ 385,241 224,250
Weighted average number of shares 2,216,805,085 2,210,821,523
Basic and diluted loss per share - pence 0.02 0.01
10. Intangible assets
Goodwill Development costs Total
£ £ £
Cost
At 1 April 2022 7,265,277 158,166 7,423,443
At 31 March 2023 7,265,277 158,166 7,423,443
Amortisation and Impairment
At 1 April 2022 7,265,277 158,166 7,423,443
At 31 March 2023 7,265,277 158,166 7,423,443
Net book value
At 31 March 2023 - - -
At 31 March 2022 - - -
Cost
At 1 April 2021 7,265,277 158,166 7,423,443
At 31 March 2022 7,265,277 158,166 7,423,443
Amortisation and Impairment
At 1 April 2021 7,265,277 158,166 7,423,443
At 31 March 2022 7,265,277 158,166 7,423,443
Net book value
At 31 March 2022 - - -
At 31 March 2021 - - -
Development costs represent costs incurred in registering patents that meet
the capitalisation criteria set out in IAS 38, see also note 1.
11. Inventories
31 March 31 March
2023 2022
£ £
Finished goods 327,797 85,808
327,797 85,808
There are no provisions included within inventories in relation to the
impairment of inventories (2022: £Nil).
During the year inventories of £78,403 (2022: £46,119) were recognised as an
expense within cost of goods sold.
12. Trade and other receivables
31 March 31 March
2023 2022
£ £
Amounts receivable within one year:
Trade receivables 3,968 3,655
Other receivables 40,385 40,846
Total financial assets other than cash 44,353 44,501
and cash equivalents classified as loans and receivables
Prepayments and accrued income 16,761 59,942
Total trade and other receivables 61,114 104,443
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 2023 trade receivables of £Nil (2022: £Nil) were more than 60
days past due, and there were no lifetime expected credit losses of the full
value of trade receivables (2022: £Nil).
13. Trade and other payables
31 March 31 March
2023 2022
£ £
Trade payables 19,514 24,705
Accruals 157,887 124,666
Total financial liabilities measured at amortised cost 177,401 149,371
Other taxes and social security 10,936 8,538
Total trade and other payables 188,337 157,909
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 25% (2022: 19%).
No amounts in respect of deferred tax were recognised in profit and loss from
continuing operations or charged / credited to equity for the current or prior
year.
The UK corporation tax rate for the year was 19.0% (2022: 19.0%). In March
2021, the UK Government announced an increase in the UK corporation tax rate
to 25.0% from 1 April 2023.
Deferred tax assets amounting to £5,122,862 (2022: £3,837,510) have not been
recognised on the basis that their future economic benefit is not probable.
Assuming a prevailing tax rate of 25% (2022: 19%) when the timing differences
reverse, the unrecognised deferred tax asset comprises:
31 March 31 March
2023 2022
£ £
Depreciation in excess of capital allowances - -
Unutilised tax losses 5,122,862 3,837,510
5,122,862 3,837,510
15. Share capital
Allotted, called up and fully paid Ordinary Ordinary
0.1p shares 0.1p shares
£ number
At 31 March 2022 2,210,822 2,210,821,523
Issue of shares - share options exercised 23 May 2022 7,000 7,000,000
At 31 March 2023 2,217,822 2,217,821,523
Allotted, called up and fully paid Ordinary Ordinary
0.1p shares 0.1p shares
£ Number
At 31 March 2021 2,210,822 2,210,821,523
At 31 March 2022 2,210,822 2,210,821,523
16. Share options
The Company's share option scheme for employees ('the Provexis 2005 share
option scheme') was adopted in June 2005. Under the scheme, options to
purchase ordinary shares are granted by the Board of Directors, normally
subject to the exercise price of the option being not less than the market
value at the grant date.
Share options typically vest after a period of 3 years and the vesting
schedule is subject to predetermined overall company selection criteria. In
the event that an option holder's employment is terminated, the option may not
be exercised unless the Board of Directors so permits. Share options expire 10
years from the date of grant.
Share options are exercisable between 3 and 10 years from date of grant and
are subject to performance criteria, including share price appreciation. The
Company believes the grant of options closely aligns the interests of the
option holders with those of shareholders.
The fair values of options granted are estimated at the date of grant in
accordance with IFRS 2, using a Binomial / Black-Scholes convergence model.
At 31 March 2023 the number of ordinary shares subject to options granted over
the 2005 share option scheme was:
EMI options
31 March 2023 31 March 2022
Weighted average exercise price Number Weighted average exercise price Number
(pence) (pence)
Outstanding at the beginning of the year 0.97 20,635,000 1.04 22,284,990
Granted during the year 0.83 34,000,000 - -
Lapsed during the year - - 1.85 (1,649,990)
Outstanding at the end of the year 0.88 54,635,000 0.97 20,635,000
The exercise price of EMI options outstanding at the end of the year ranged
between 0.83p and 0.97p (2022: was 0.97p) and their weighted average
contractual life was 6.2 years (2022: 1.2 years).
Of the total number of EMI options outstanding at the end of the year,
20,635,000 (2022: 20,635,000) had vested and were exercisable at the end of
the year. Their weighted average exercise price was 0.97 pence (2022: 0.97
pence).
Unapproved options
31 March 2023 31 March 2022
Weighted Number Weighted Number
average average
exercise price exercise price
(pence) (pence)
Outstanding at the beginning of the year 0.55 157,865,000 0.71 171,215,010
Granted during the year 0.83 16,000,000 0.80 10,000,000
Exercised during the year 0.50 (7,000,000) - -
Lapsed during the year - - 1.85 (23,350,010)
Outstanding at the end of the year 0.58 166,865,000 0.55 157,865,000
The exercise price of unapproved options outstanding at the end of the year
ranged between 0.30p and 0.97p (2022: 0.30p and 0.97p) and their weighted
average contractual life was 5.3 years (2022: 5.9 years).
Of the total number of unapproved options outstanding at the end of the year,
140,865,000 (2022: 85,365,000) had vested and were exercisable at the end of
the year. Their weighted average exercise price was 0.54 pence (2022: 0.71
pence).
The fair values of the options have been estimated at the date of grant using
a Binomial / Black-Scholes convergence model, with an expected dividend yield
of 0% and an expected volatility for the options granted during the year of
74%.
The expected life of the options is based on historical data and is not
necessarily indicative of the exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility
is indicative of future trends, which may not necessarily be the actual
outcome.
The total share-based payment charge for the year relating to employee
share-based payment plans was £40,591 (2022: £67,119) all of which related
to equity settled share-based payment transactions.
17. Reserves
Details of movements in reserves are provided as part of the consolidated
statement of changes in equity.
The following describes the nature and purpose of each reserve within total
equity:
Share premium Amount subscribed for share capital in excess of nominal value, less the
related costs of share issues.
Merger reserve The merger reserve arose on the reverse takeover in 2005 of Provexis Natural
Products Limited (formerly Provexis Limited) by Provexis plc through a share
for share exchange and on the issue of shares for the acquisition of SiS
(Science in Sport) Limited in 2011. SiS (Science in Sport) Limited was
demerged from Provexis with effect from 9 August 2013 by way of a capital
reduction demerger and transferred to a newly incorporated parent company,
Science in Sport plc.
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income.
18. Pension costs
The pension charge represents contributions payable by the Group to
independently administered funds which for continuing operations during the
year ended 31 March 2023 amounted to £23,086 (2022: £10,502). Employee and
employer pension contributions payable but not yet paid at 31 March 2023
totalled £Nil (2022: £396).
19. Related party transactions
On 1 June 2010 the Company announced a long-term Alliance Agreement with DSM
Nutritional Products, with a contractual term which ran to 31 December 2022.
The financial model was based upon the division of profits between the two
partners on an agreed basis, linked to certain revenue targets, following the
deduction of the cost of goods and a fixed level of overhead from sales. It is
not possible to determine the financial impact of the Alliance Agreement at
this time.
In June 2022 the Company announced that it had entered into two new agreements
for Fruitflow with DSM: (i) a Transfer of Business agreement and (ii) a Premix
and Market-Ready Solutions supply agreement, both to take effect from 1
January 2023. Under the terms of the two new agreements with DSM, DSM's
existing and prospective pipeline customers for Fruitflow as a straight
ingredient (not a Premix or Market-Ready solution) transferred to become
direct customers of Provexis WEF 1 January 2023. A royalty will be payable to
DSM on the gross profits generated from Fruitflow sales to customers
transferred from DSM over the first four years of the Transfer of Business
agreement.
The Company also announced the filing of a new patent application in June 2022
relating to the use of Fruitflow to confer health benefits in modulating the
gut microbiome of humans. A new partnership has been agreed with DSM relating
to the gut microbiome patent, giving DSM preferential access to the use,
marketing, and sale of Fruitflow based products which are based on the patent,
subject to certain milestones which have been agreed between the parties.
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, a senior employee of DSM, was
a Director of the Company for part of the year, until his resignation on 14
October 2022. F Boned announced his resignation from DSM with effect from 15
October 2022.
Revenue recognised by the Group under agreements with DSM amounted to
£170,269 (2022: £281,899). At 31 March 2023 the Group was owed £2,716
(2022: £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.
20. Events after the reporting date
No material post balance sheet events occurred after the end of the period.
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