TIDMPXS
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(R) 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 GBP74k in the quarter
ended 31 March 2023, following the inventory transfer in February.
Sales in excess of GBP280k have been made post year end, confirmed
sales orders in excess of GBP155k 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 GBP4bn 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 GBP390k, (2022: GBP426k),
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* GBP348k (2022: GBP173k), in a
transitional year for the business.
-- Cash GBP379k at 31 March 2023 (2022: GBP864k) , following
inventory purchases in the year of more than GBP315k.
*Loss from operations, adjusted for (i) share-based payments of
GBP40k (2022: GBP67k), and (ii) R&D tax relief: receivable tax
credit of GBP33k (2022: GBP59k).
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 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(R) heart-health ingredient.
DSM Nutritional Products - new agreements for Fruitflow(R)
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
).
-- 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
.
-- 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 ), 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(R) 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
GBP GBP
--------------------------------------------- ----------- -----------
Revenue
Fruitflow II SD ingredient - from 1 January 74,239 -
2023
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 GBP421k, (2022: GBP299k)
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 GBP40k (2022:
GBP67k), and (ii) R&D tax relief: receivable tax credit of
GBP33k (2022: GBP59k)) was GBP348k (2022: GBP173k).
Sales of the Fruitflow II SD ingredient in excess of GBP280k
have been made in the six months after the Company's 31 March 2023
year end, confirmed sales orders in excess of GBP155k 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 ). 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 GBP4
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#
. 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/# ) 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)
) 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 ,
Amazon UK and Holland & Barrett.
The Fruitflow+ Omega-3 business reported sales in the year of
GBP145k, net of sales rebates (2022: GBP144k), 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 , Instagram
www.instagram.com/fruitflowplus and Twitter / X
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, A third European patent, and a
with patents granted by the European Hong Kong patent based on it, proceeded
Patent Office in January 2017, September to grant in April 2023; further
2020 and April 2023. divisional European and corresponding
Hong Kong applications have been
Patents have been granted in eleven filed.
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 Patent applications are pending
This patent was originally developed in China and Japan.
in collaboration with the University
of 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 were granted in Canada,
Patents have been granted around Brazil and a second patent was
Europe and in the US, Australia, secured in China.
Brazil, Canada, China, Hong Kong,
India, Israel, Japan, South Korea,
the Philippines, New Zealand and
Mexico.
Further patent protection is being
sought in six territories, with
potential patent protection out
to December 2033.
------------------------------------------
Fruitflow for air pollution
The use of Fruitflow in protecting Brazilian and Malaysian patent
against the adverse effects of air 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 An international Patent Application
The Company also announced the filing was filed in June 2023 (covering
of a new patent application in June all major jurisdictions).
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.
------------------------------------------
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 GBP280k
have been made in the six months after the Company's 31 March 2023
year end, confirmed sales orders in excess of GBP155k 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#
. 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
.
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 GBP4bn 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
). 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
GBP GBP
--------------------------------------------- ----------- -----------
Fruitflow II SD ingredient - from 1 January 74,239 -
2023
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 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 and an Instagram page at
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 GBP348k (2022:
GBP173k), an increase of GBP175k year on year which reflects an
GBP86k 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 GBP175k increase in underlying operating loss also included
a GBP6k increase in selling and distribution costs, a GBP12k
reduction in research and development costs, a GBP26k decrease in
R&D tax relief (the prior year R&D tax credit included
GBP30k which was in respect of prior periods) and a GBP69k 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
GBP GBP
-------------------------------------------- ----------- -----------
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 GBP237k (2022:
GBP250k).
R&D tax relief: payable tax credit
A current tax credit of GBP33k (2022: GBP59k), in respect of
research and development tax relief has been recognised in the
financial statements, GBPNil of which (2022: GBP30k) relates to
prior years.
Taxation
The current tax charge is GBPNil (2022: GBPNil) 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 GBP385k (2022: GBP224k) and the basic
loss per share was 0.02p (2022: 0.01p). The Directors are unable to
recommend the payment of a dividend (2022: GBPNil).
Consideration of section 656 of the Companies Act 2006
On 28 August 2014 it was noted in the Company's Notice of Annual
General Meeting that Section 656 of the Companies Act 2006
('section 656') had been brought to the attention of the Directors
as part of the 31 March 2014 year end accounts and audit. Section
656 states that where the net assets of a public company are half
or less of its called-up share capital, the Directors must call a
general meeting of the company to consider whether any, and if so
what, steps should be taken to deal with the situation.
Further details of the issue were provided in the Company's AGM
notice of 28 August 2014 which is available to download from the
Company's website here
www.provexis.org/wp-content/uploads/Provexis-plc-notice-of-22-Sep-14-AGM-FINAL.pdf
A resolution was not put to the 2014 Annual General Meeting in
connection with section 656 and it was noted that the Directors'
view in August 2014 was that the most appropriate course of action
was to continue to maintain tight control over the running costs of
the Company and to wait for revenues from its core Fruitflow
product to increase. Subsequent to the Company's AGM on 22
September 2014 the net assets of the Company and Group have
remained less than half of the Company's called-up share capital
and a further general meeting of the Company is not required under
section 656.
The annual financial statements of the Company for the year
ended 31 March 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
GBP GBP
-------------------------------------------- ----------- -----------
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
GBP GBP
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 GBP484,752 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 GBP GBP
---------------------------------------- ------ ---------- ----------
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 GBP GBP
----------------------------------- ------ ------------- -------------
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
--------------------------------------------- ------ ---------- ----------
GBP GBP
--------------------------------------------- ------ ---------- ----------
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 Non-controlling Total
capital premium reserve earnings equity interests equity
attributable
to owners
of
the
parent
GBP GBP GBP GBP GBP GBP GBP
-------------------- ---------- ----------- ---------- ------------- -------------- ---------------- ----------
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
exercised 23 May
2022 7,000 28,100 - - 35,100 - 35,100
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 GBP1.
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 GBP387,116 (2022:
GBP240,227), which includes non-cash share-based payment charges of
GBP40,591 (2022: GBP67,119) and expects to make a further loss
during the year ending 31 March 2024. The total cash outflow from
operations in the year was GBP520,739 (2022: GBP213,615). At 31
March 2023 the Group had cash balances of GBP379,121 (2022:
GBP863,873).
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 GBP25,000
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 GBP188,337 (2022: GBP157,909) 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
GBP GBP
--------------------------------------------- ----------- -----------
Fruitflow II SD ingredient - from 1 January 74,239 -
2023
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
GBP GBP
--------------------------------------------- ----------- -----------
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
GBP GBP
--------------------------- ----------- -----------
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
GBP GBP
------------------------------------------ ----------- -----------
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
GBP GBP
------------------------------------------ ----------- -----------
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
GBP GBP
------------------------------------------------- ----------- -----------
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
GBP GBP
-------------------------- ----------- -----------
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
GBP GBP
---------------------------------------------- ----------- -----------
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
GBP GBP
---------------------------------------------- ----------- -----------
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 GBP20,491,448 (2022: GBP20,197,422).
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 GBP5,122,862,
calculated at 25% (2022: GBP3,837,510, 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 31 March 31 March
within one year 2023 2022
GBP GBP
------------------------------------------------ --------- ---------
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 - GBP 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 Total
costs
GBP GBP GBP
----------------------------- ---------- ------------ ----------
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
GBP GBP
---------------- --------- ---------
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: GBPNil).
During the year inventories of GBP78,403 (2022: GBP46,119) were
recognised as an expense within cost of goods sold.
12. Trade and other receivables
31 March 31 March
2023 2022
GBP GBP
------------------------------------------- --------- ---------
Amounts receivable within one year:
Trade receivables 3,968 3,655
Other receivables 40,385 40,846
------------------------------------------- --------- ---------
Total financial assets other than cash
and cash equivalents classified as loans
and receivables 44,353 44,501
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 GBPNil (2022: GBPNil) were
more than 60 days past due, and there were no lifetime expected
credit losses of the full value of trade receivables (2022:
GBPNil).
13. Trade and other payables
31 March 31 March
2023 2022
GBP GBP
-------------------------------------------------- -------- --------
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 GBP5,122,862 (2022:
GBP3,837,510) 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
GBP GBP
---------------------------------------------- ------------- ----------
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
GBP 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
GBP 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 Number Weighted Number
average average
exercise exercise
price price
(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 exercise
price 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 GBP40,591 (2022: GBP67,119)
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 GBP23,086 (2022:
GBP10,502). Employee and employer pension contributions payable but
not yet paid at 31 March 2023 totalled GBPNil (2022: GBP396).
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 GBP170,269 (2022: GBP281,899). At 31 March 2023 the
Group was owed GBP2,716 (2022: GBPNil) 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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END
FR BKLBLXKLXBBF
(END) Dow Jones Newswires
September 29, 2023 02:00 ET (06:00 GMT)
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