Provexis plc
Annual report and accounts 2011
Company number 05102907
Contents
1
2
3
4
6
8
14
19
21
22
23
24
25
47
48
52
Corporate statement
Key highlights
Chairman‟s statement
Chief Executive‟s statement
Directors‟ report – financial review
Directors‟ report – business overview
Directors‟ report – remuneration report
Independent auditor‟s report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Parent company balance sheet
Notes to the parent company financial statements
Company information
Corporate statement
The Provexis strategy is the discovery, development and licensing of scientifically-proven functional food,
medical food and dietary supplement technologies, with five areas of focus:
Collaborating with leading research institutes to identify and develop proprietary technologies
Developing credible scientific proof to demonstrate efficacy and support product claims
Gaining regulatory and safety clearances in relevant global markets
Implementing global IP strategies, underpinned by strong patent portfolios
Commercialising technologies through collaboration and licensing with global brand owners and
ingredients corporations.
Provexis plc Annual report and accounts 2011
1
Key highlights
Key highlights
The Company has entered into a conditional agreement to acquire SiS (Science in Sport) Limited for a
consideration of £8m, partially funded by a £2.5m conditional placing at 1.5p per share, which is
expected to complete on 24 June 2011.
Good progress to commercialise Fruitflow® heart-health technology in all major global markets under the
Alliance Agreement with DSM Nutritional Products.
Clinical trial for NSP#3G for Crohn‟s disease patients progressed through interim review with focus now
on opening new trial centres to complete patient recruitment.
Collaboration with Institute of Food Research for the reduction of cardiovascular inflammation and the
reduction of risk of certain cancers making good progress with the first human trials underway.
Agreement entered into with DSM Nutritional Products to develop technology for management of blood
glucose.
£2.5m total funding raised through Equity Financing Facility in June 2010 and October 2010.
Loss attributable to owners of the parent for the year ended 31 March 2011 £2.0m (2010: £1.6m).
Key financial results
Cash balance as at 31 March 2011 £7.6m (2010: £7.0m).
Loss per share for the year ended 31 March 2011 0.17p (2010: 0.18p).
Provexis plc Annual report and accounts 2011
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Chairman’s statement
The business has made substantial progress this year through the development of its long-term, global
commercial agreement with DSM for our lead Fruitflow® technology, in addition to the broader pipeline being
extended and developed.
I can announce that we are about to meet our objective of making an acquisition, as we today announce that
the Company has entered into a conditional agreement to purchase SiS (Science in Sport) Limited, which is
expected to complete on 24 June 2011. The business develops, manufactures and sells nutrition products
for sports people and its heritage is in providing nutrition products for professional and elite athletes. In
addition to bringing revenues and cash flow to the Group, there is a great synergy between the two
businesses and we believe our existing scientific and regulatory skills will help the acquired business to
cement further its reputation in its target sectors.
Following the signing of our Alliance Agreement with DSM on 1 June 2010, good progress has been made in
the commercialisation of our lead heart-health Fruitflow® technology. DSM launched Fruitflow® to the
industry in Europe in November 2010 and in the US in March 2011. DSM has made significant progress in
marketing the technology in a broad range of global markets, attracting positive interest from a wide range of
global, multinational and national brand owners in the functional food and dietary supplement sectors. We
are pleased with the progress made by DSM.
Having a broader pipeline remains central to our strategy and progress has been made on a number of
fronts. While we have been frustrated with the slow progress in patient recruitment for our NSP#3G Crohn‟s
disease trial, an independent interim review of trial data has given us confidence to open further patient
centres. Our collaboration with the Institute of Food Research, with an initial objective of developing a
product for cardiovascular inflammation, is proceeding well and a first human trial is underway. We recently
entered into a development agreement with DSM where the Group will bring its scientific and regulatory
expertise to bear to commercialise DSM owned intellectual property.
With our first commercial deal for Fruitflow®, a major acquisition and the expansion of our pipeline, it has
been a busy year and I would like to thank the executive team, all of our staff and our advisors for their
efforts and professionalism.
Dawson Buck
Chairman
Provexis plc Annual report and accounts 2011
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Chief Executive’s statement
Strategy
We have continued to execute our strategy of discovery, development and licensing functional food, medical
food and dietary supplements. Our intention to make acquisitions in order to develop shareholder value has
been realised through our entering into a conditional agreement to acquire SiS (Science in Sport) Limited
(“SiS”), which is expected to complete on 24 June 2011. We believe that there is good synergy between the
two businesses and that our existing scientific and regulatory expertise can assist in making the SiS
business a leader in claims-supported sports nutrition.
The Provexis business model now extends from discovery, through development and now to market by a
combination of licensing and direct sales revenues. The Directors believe that this gives the business the
correct balance of short-term revenues and long-term pipeline potential.
The executive team will continue to seek further acquisitions as part of the long-term aim to strengthen the
pipeline. We have continued to invest in top quality management expertise in order to assist the Group in
meeting its strategic goals and this policy will continue.
To support our strategy, we raised £2.5m via our Equity Financing Facility in June and October 2010, with a
further £2.5m from the conditional placing announced on 17 June 2011. Together, these fundraising events
will enable us to undertake the acquisition of SiS, which is expected to complete on 24 June 2011, and
deliver on our strategic plan.
Fruitflow®
The Company announced on 1 June 2010 that it had entered into a long-term alliance with DSM Nutritional
Products (“DSM”) to develop Fruitflow® in all major global markets, through an effective commercialisation of
current formats and pioneering new and significant applications (the “Alliance”).
DSM launched Fruitflow® to the industry in Europe in November 2010 and in the US in March 2011.
Manufacturing and supply chain for a cost effective syrup version of Fruitflow® has been secured. Also good
progress has been made on optimising the powder version of Fruitflow®, suitable for formats such as tablets
and capsules, and this format will be commercially available late in the summer.
Fruitflow® has been recognised in the industry for its strong science and innovation, being awarded the
„Most Innovative Health Ingredient‟ and winning the best innovation in the „Heart Health‟ category at the
major Health Ingredients Europe Conference in November 2010. In March 2011 the technology was awarded
„Best New Ingredient‟ at the 2011 NutrAwards held at the Nutracon 2011 exhibition in Anaheim, California.
The Alliance partners continue to collaborate on regulatory matters related to certain markets. In addition, the
Provexis scientific team continues to support its counterparts in areas such as analytical methods and
analysis, together with deepening the understanding of the core science.
DSM has made significant progress in marketing the technology in a broad range of global markets,
attracting positive interest from a wide range of global, multinational and national brand owners in the
functional food and dietary supplement sectors. The Directors are pleased with the progress being made in
the marketplace by the Company's Alliance partner.
NSP#3G plantain extract
A fully independent Data Monitoring Committee (“DMC”) has reviewed the data gathered from the first
patients to complete the full 12 months of treatment in the Crohn‟s disease trial. Following their review, the
DMC has confirmed that there are no negative findings associated with this initial dataset and no safety
concerns related to the administration of the test product. The DMC recommended a further interim review of
the study be conducted in Q4 2011. The interim review findings are in line with the Company‟s expectations.
Following this advice, Provexis intends to identify up to four additional trial centres to facilitate full recruitment
of the remaining patients required, to enable it to complete the trial in the shortest feasible timeline. The
Directors have previously noted that the recruitment of patients for clinical trials in the area of inflammatory
bowel disease is recognised as being challenging across the industry. The Company remains committed to
Provexis plc Annual report and accounts 2011
4
Chief Executive’s statement
this key technology and believes that opening extra trial centres will expedite the trial and support initial
commercial discussions with corporate partners.
The Group‟s Liverpool-based R&D team will also continue to research and characterise NSP#3G extracts for
addressing C.difficile, the so-called hospital „super bug‟, and antibiotic-associated diarrhoea.
Isothiocyanates
The isothiocyanate-based cardiovascular inflammation work in collaboration with Institute of Food Research
(“IFR”) is proceeding well. A novel extract has been developed and the first human trial has now
commenced. A second trial will commence later this year, with a third and final trial to provide regulatory
support for product launches being scheduled for 2012.
Blood glucose
We recently announced an agreement for development of DSM-owned intellectual property for the promotion
of healthy blood glucose levels, following a period of assessment by Provexis. Under the agreement, it is the
intention that Provexis will develop a cost effective product, carry out clinical trials and gain the necessary
regulatory clearances. DSM will contribute intellectual property and know-how to the development
programme. The partners will together identify the most appropriate commercialisation arrangements before
the product is launched.
Outlook
The commercial progress of Fruitflow® is an important objective for the Group in the coming financial period
and we expect to see progress as our Alliance partner DSM continues its marketing and selling efforts, in
addition to launching the powder version for dietary supplements.
Integrating the SiS business is the second major objective and we look to complete this as quickly as
possible in order to focus existing and new management members on growing revenues in this business.
It is important that we reach full recruitment in the Crohn‟s disease trial during this year, in order that
commercial partnering discussions can commence. The isothiocyanate technology platform and the new
blood glucose technology will both be accelerated in order we can bring these to market in the earliest
possible time.
The management team will be focused on progress in the revenue generating areas of Fruitflow® and SiS,
while not losing sight of the medium and long term importance of the broader pipeline. Cash management
will continue to be an area of high importance. We will maintain our strategy of developing the capability of
the overall Provexis team in line with our goals.
Stephen Moon
Chief Executive
Provexis plc Annual report and accounts 2011
5
Directors’ report – financial review
Revenue and grant income
Revenue for the year ended 31 March 2011 was £50,086 (2010: £14,767).
Grant income for the year ended 31 March 2011 was £ Nil (2010: £80,000), the amount in 2010 being the
final part of a £100,000 grant which was awarded to the Group in January 2009 by The Northwest Regional
Development Agency (NWDA).
Research and development costs
Research and development (“R&D”) costs for the year ended 31 March 2011 were £1,268,874 (2010:
£718,468), including £17,959 capitalised under IAS 38 (2010: £20,646), reflecting the recruitment of
additional R&D staff, continuation of the clinical trial for the Group's NSP#3G technology for Crohn‟s disease
and the commencement of isothiocyanate-based cardiovascular inflammation work in collaboration with the
Institute of Food Research (“IFR”).
R&D expenditure comprises in-house costs (staff, R&D consumables, intellectual property, facilities and
depreciation of R&D assets) and external costs (preclinical studies, manufacturing, regulatory affairs and
clinical trials).
The Group‟s R&D team continues to research further claim areas for the Group‟s technologies.
The Group aims to achieve cost effective research and development and to bring products to market through
licensing partners as soon as is practicable.
Administrative costs
Administrative costs for the year relating to continuing operations were £1,274,493 (2010: £1,184,859).
The Group‟s cost base and its resources have been and will continue to be tightly managed.
Taxation
A research and development tax credit of £221,218 (2010: £54,408) of which £71,228 related to the prior
year in respect of research and development expenditure incurred has been recognised in the financial
statements and is shown as a debtor at 31 March 2011.
Losses and dividends
The loss attributable to owners of the parent for the year ended 31 March 2011 was £1,986,206 (2010:
£1,648,180) and the loss per share was 0.17p (2010: 0.18p).
The directors do not recommend the payment of a dividend (2010: £ Nil).
Effect of change in accounting standard
The application of the following standard has resulted in the losses attributable to the non-controlling interest
being accounted for in the financial statements even where this resulted in the non-controlling interest having
a deficit balance:
•
IAS 27 (Amendment) „Consolidated and Separate Financial Statements‟ effective for periods
beginning on or after 1 July 2009.
For further Information about this change in accounting standard see the Principal risks and uncertainties
section of the business overview on page 10.
Financial instruments
Information about the use of financial instruments by the Group is disclosed in notes 1 and 2.
Provexis plc Annual report and accounts 2011
6
Directors’ report – financial review continued
Capital structure and funding
The group is funded entirely by equity funding.
On 31 March 2010 the Company announced that it had secured a 3 year Equity Financing Facility of up to
£25m (the “EFF”) with Evolution Securities Limited (“Evolution”). The EFF has been arranged by Darwin
Strategic Limited (“Darwin”), an appointed representative of Evolution.
On 22 June 2010 the Company announced that it had raised a net £88,426 by drawing down on the EFF,
allotting 2,135,000 new ordinary shares of 0.1p each to Darwin.
On 4 October 2010 the Company announced that it had raised a further net £2.4m by drawing down on the
EFF, allotting 86,300,000 new ordinary shares of 0.1p each to Darwin.
The Directors are of the opinion that at 17 June 2011, the Group's liquidity and capital resources are
adequate to deliver the current strategic objectives and 2011/12 business plan and that the Group meets
going concern criteria. See also note 1 to the consolidated financial statements on page 26.
Cash at bank at 31 March 2011 was £7,551,505 (31 March 2010: £7,049,134).
Provexis plc Annual report and accounts 2011
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Directors’ report – business overview
Principal activities
Provexis plc is a life sciences-driven enterprise that discovers, develops and licenses scientifically-proven
technologies for the global functional food, medical food and dietary supplement sectors.
Provexis plc has two wholly owned subsidiaries, Provexis Nutrition Limited (“PNL”) and Provexis Natural
Products Limited (“PNP”) which are registered in England and Wales. Provexis plc also owns 75% of
Provexis (IBD) Limited (“IBD”) which is also registered in England and Wales.
Group strategy
The Provexis strategy is the discovery, development and licensing of functional food, medical food and
dietary supplement technologies, with five areas of focus:
Collaborating with leading research institutes to identify and develop proprietary technologies
Developing credible scientific proof to demonstrate efficacy and support product claims
Gaining regulatory and safety clearances in relevant global markets
Implementing global IP strategies, underpinned by strong patent portfolios
Commercialising technologies through collaboration and licensing with global brand owners and
ingredients corporations.
Review of the performance of the business and future developments
The Chairman‟s Statement on page 3, the Chief Executive‟s Statement on pages 4 and 5 and the Financial
Review on pages 6 and 7 report on the Group‟s performance during the year ended 31 March 2011,
its position at that date and its likely future development.
Key performance indicators
The executive management and Directors utilise a balanced scorecard of key activities including R&D project
progress, commercial milestones and regulatory activities to monitor and measure the performance of the
business. These are measures of the progress of the business towards its strategic target of revenue
generation and profitability, and are considered by the Board to be the key non-financial performance
indicators used to determine achievement of Group strategy and are discussed in the Chief Executive‟s
statement. The balanced scorecard is reviewed regularly by the executive team and the Directors.
The Directors consider Group cash and the absolute values of, and the ratio between, research and
development costs and other administrative overhead costs as being the Group‟s key financial performance
indicators. The cost related indicators assist in monitoring financial control to reduce the hurdle to achieving
the key future financial milestone of monthly break-even. 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 table below shows the Group‟s cash position at 31 March 2011 and 31 March 2010:
Cash at bank and in hand
31 March
2011
£
7,551,505
7,551,505
31 March
2010
£
7,049,134
7,049,134
Provexis plc Annual report and accounts 2011
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Directors’ report – business overview continued
Key performance indicators (continued)
The table below shows the Group‟s R&D ratio for the two years ended 31 March 2011. The R&D ratio is the
percentage of research and development costs relative to total operating expenses. The Directors strive to
maximise the ratio of research and development costs to administrative costs.
Research and development costs
Administrative costs
Total operating costs
R&D ratio
31 March
2011
£
1,250,915
1,274,493
2,525,408
50%
31 March
2010
£
697,822
1,184,859
1,882,681
37%
The increase in the R&D ratio for the year is primarily due to increased R&D expenditure including the
continuation of the clinical trial for Crohn‟s Disease and two new projects: the development of a new product
for the promotion of healthy blood glucose levels and a project targeting cardiovascular inflammation being
carried out in conjunction with the Institute of Food Research.
Post balance sheet events
As disclosed in note 23 to the financial statements, on 1 June 2011 the Group announced an agreement to
commercialise DSM owned intellectual property, through the development of a new product for the promotion
of healthy blood glucose levels.
On 17 June 2011 the Group entered into a conditional agreement to acquire 100% of the issued share
capital of SiS (Science in Sport) Limited, a company which manufactures and sells sports nutrition products
for a maximum consideration of £8m, subject to completion. £7m is payable in cash of which £250,000 is to
be held in escrow against claims for one year or longer if claims have been notified but not settled. The
balance of the consideration is £1m in Provexis shares, with a lock-in of two years.
The £7m cash consideration will be met by £4.5m from current cash reserves and £2.5m from a placing for
new shares. The Company intends to undertake an Open Offer to shareholders of the Company as soon as
is reasonably practicable after the completion of the Acquisition.
Principal risks and uncertainties
The Directors consider that the key risks of the Group are as set out below:
The Group‟s success will depend in part on its ability to obtain and maintain rigorous patent protection for its
technologies both in the UK and internationally. The Group cannot give definitive assurance that pending or
future patent applications will be granted or that patents granted will not be challenged, invalidated or
held unenforceable.
The Group cannot assure that its intellectual property rights are sufficiently broad to prevent third parties
from producing competing functional food, medical food and dietary supplement technologies similar in
nature to its own. The Group also relies on protection of trade secrets, know-how and confidential and
proprietary information. To mitigate this, the Group enters into non-disclosure agreements with employees,
consultants and prospective commercial partners but cannot assure that such agreements will provide
complete safeguards against unauthorised disclosure of confidential information.
The Group‟s commercial success will also depend in part on avoiding infringement of other third parties‟
patents or proprietary rights and the breach of any licences in connection with the pursuit of its technologies.
Management is of the opinion that it does not infringe third parties‟ patents or other rights and is not aware of
any such infringements but cannot assure that it will not be found in the future to infringe such rights.
The Group has a limited pipeline of new technologies and new indications for technologies already in
development. As a result of regulatory and competitive uncertainties and the unpredictability of successful
outcomes to new research and development, the Group cannot provide assurance that it will be able to
develop and license these new technologies.
The Group continues to pursue acquisitions as part of its growth strategy. Such acquisitions may not realise
expected benefits.
Provexis plc Annual report and accounts 2011
9
Directors’ report – business overview continued
Principal risks and uncertainties (continued)
The Group may require additional funding. To the extent that the current cash resources of the Group and
the funds received from the Open Offer are insufficient to cover the Group's liabilities in the longer term it
may be necessary to seek additional funds through future equity or debt financings and there is no certainty
that such funds would be available. Any such further financings, if available at all, may be on terms that are
not favourable to the Group. Further, if adequate capital cannot be obtained, the Group's operating results
and financial condition could be adversely affected.
The Group currently employs fourteen people, excluding Non-executive Directors, and has a very small
management team. Should it lose any key management resources and be unable to attract replacements of
equivalent calibre to continue implementation of its business plan, future development and commercial
activities could be materially adversely affected.
The Group relies on potential license partners to meet certain commercial and development milestones and
their failure to achieve this, or other delays or cancellation of projects due to internal or market factors
affecting potential license partners could affect the execution of the Group‟s business plan, with a material
adverse effect on the business. In these circumstances the Group would look to raise additional funding
through the issue of additional equity through rights issues, share placing and the exercise of share options
but no assurance can be given regarding the successful outcome of such financing initiatives.
As noted previously the Group is not able to predict successful outcomes to research and development. The
non-controlling interest share of Provexis (IBD) Limited‟s loss would need to be reversed if the project didn‟t
come to fruition. At 31 March 2011 this would increase the loss attributable to the equity holders of the
parent by £136,459 to £2,120,665.
Policy on the payment of creditors
It is the policy of the Group to pay creditors and suppliers in accordance with their normal terms of business.
Creditor days outstanding for the Group at 31 March 2011 amounted to 22 days compared to 33 days at
31 March 2010.
Board of Directors
The Board of Directors has overall responsibility for the Group.
The Board comprises a Non-executive Chairman, two additional Non-executive Directors, all of whom are
independent, and three further Executive Directors. The Board continues to be satisfied that it has an
appropriate mix of independence and experience in its Non-executive Directors.
The Directors of the Company during the year are shown below.
Executive Directors
S N Moon
S N Morrison
I Ford
Non-executive Directors
C D Buck
N C Bain
K Rietveld
A qualifying third-party indemnity provision as defined in Section 234 of the Companies Act 2006 is in force
for the benefit of each of the Directors in respect of liabilities incurred as a result of their office, to the extent
permitted by law. In respect of those liabilities for which Directors may not be indemnified, the Company
maintained a Directors‟ and officers‟ liability insurance policy throughout the financial year.
Provexis plc Annual report and accounts 2011
10
Directors’ report – business overview continued
Audit Committee
The Audit Committee comprises two Non-executive Directors, and is chaired by Neville Bain as Senior
Independent Non-executive Director. It meets as required and specifically to review the Interim Report and
Annual Report and to consider the suitability and monitor the effectiveness of the internal control processes.
There were three Audit Committee meetings during the year. The Audit Committee reviews the findings of
the external auditors and reviews accounting policies and material accounting judgements.
The independence of the auditors is considered by the Audit Committee. The Audit Committee (with no
Executive Director present) meets at least once per calendar year with the auditors to discuss their
objectivity and independence, the Annual Report, any audit issues arising, internal control processes and
any other appropriate matters. As well as providing audit related services, the auditors provide taxation
advice, corporate finance services and share scheme advice and undertake work in relation to the interim
report. The fees in respect of the non-audit services provided are £22,300 for the year ended 31 March 2011
(2010: £25,000). Further, the overall fees paid to the auditors are not deemed to be of such significance to
them as to impair their independence. The Audit Committee considers that the objectivity and independence
of the auditors is safeguarded.
The current terms of reference of the Audit Committee are set out in the governance pages on the Group‟s
website www.provexis.com.
Internal control
The Directors are responsible for establishing and maintaining the Group‟s system of internal control and for
reviewing its effectiveness. The system of internal control is designed to manage, rather than eliminate, the
risk of failure to the achievement of business objectives and can only provide reasonable but not absolute
assurance against material misstatement or loss.
The Audit Committee continues to monitor and review the effectiveness of the system of internal control and
report to the Board when appropriate with recommendations. There have been no significant changes to the
system of internal control throughout the year.
The annual review of internal control and financial reporting procedures did not highlight any issues
warranting the introduction of an internal audit function. It was again concluded, given the current size and
transparency of the operations of the Group, that an internal audit function was still not required.
The main features of the internal control system are outlined below:
● A control environment exists through the close management of the business by the Executive
Directors. The Group has a defined organisational structure with delineated approval limits.
Controls are implemented and monitored by the Executive Directors.
● The Board has a schedule of matters expressly reserved for its consideration and this schedule
includes acquisitions and disposals, major capital projects, treasury and risk management policies
and approval of budgets.
● The Group utilises a detailed budgeting and forecasting system. Detailed budgets are prepared
annually by the Executive Directors before submission to the Board for approval. Forecasts are
regularly updated at least quarterly to reflect changes in the business and are monitored by the
Board including future cash flow projections. Actual results are monitored against annual budgets
regularly and at least quarterly, with variances highlighted for the Board.
● Financial risks are identified and evaluated for each major transaction for consideration by
the Board.
● Standard financial control procedures operate throughout the Group to ensure that the assets
of the Group are safeguarded and that proper accounting records are maintained.
● A risk review process is in operation whereby the Chief Executive and Finance Director present
a report to the Board each year on the key business risks.
Provexis plc Annual report and accounts 2011
11
Directors’ report – business overview continued
Going concern
The Directors have a reasonable expectation that the Group and the Company will continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in
preparing the Group‟s financial statements.
See also note 1 to the consolidated financial statements on page 26.
Employees
The Executive Directors keep staff informed of the progress and development of the Group regularly through
formal and informal meetings and employee feedback is encouraged. The Company has a policy of offering
share options to all eligible employees, subject to availability under the option plan rules and with due
consideration to the level of dilution to shareholders.
The Group does not discriminate between employees and prospective employees on grounds of age, race,
religion or gender. Every effort is made to provide the same opportunities to disabled persons as to others.
The Board recognises its obligation towards its employees to provide a safe and healthy working
environment. The Group complies with health and safety legislation including conducting regular inspections
and risk assessments.
Environmental, social and community matters
As a result of the size and nature of the Group‟s operations, the impact of the Group‟s operations on the local
community and the environment is not considered to be significant. Recycling of office supplies is undertaken
where possible.
Charitable and political contributions
No political or charitable donations were made during the year (2010: £Nil).
Relationship with shareholders
The Directors seek to build a mutual understanding of objectives between the Company and its
shareholders. The Group reports formally to shareholders in its interim and annual reports setting out details
of its activities. In addition, the Group keeps shareholders informed of events and progress through the issue
of regulatory news in accordance with the AIM rules of the London Stock Exchange. The Chief Executive
and Finance Director seek to meet with significant shareholders following interim and final results. The Group
also maintains investor relations pages and other information regarding the business, its products and
activities on its website www.provexis.com.
Where possible the Annual Report is sent to shareholders at least 20 working days before the Annual
General Meeting. Directors are required to attend Annual General Meetings of the Company unless unable
to do so for personal reasons or due to pressing commercial commitments. Shareholders are given the
opportunity to vote on each separate issue. The Company counts all proxy votes and will indicate the level of
proxies lodged on each resolution, after it has been dealt with by a show of hands.
Adequacy of information supplied to auditors
Each Director has taken all reasonable steps to make himself aware of any information needed by the
Company‟s auditors for the purpose of their audit and to establish that the auditors are aware of that
information. The Directors are not aware of any relevant audit information of which the auditors are unaware.
BDO LLP have expressed their willingness to continue in office. Under the Companies Act 2006 section
487(2) they will be automatically re-appointed as auditors 28 days after these accounts are sent to the
members, unless the members exercise their rights under the Companies Act 2006 to prevent their re-
appointment.
Provexis plc Annual report and accounts 2011
12
Directors’ report – business overview continued
Directors’ responsibilities
The directors are responsible for preparing the directors‟ report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law
the directors have elected to prepare the group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union and the company financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and
company and of the profit or loss of the group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London Stock Exchange for companies trading
securities on the Alternative Investment Market.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether the group financial statements have been prepared in accordance with IFRSs as adopted
by the European Union, subject to any material departures disclosed and explained in the financial
statements;
state whether the company financial statements have been prepared in accordance with applicable UK
Accounting Standards, subject to any material departures disclosed and explained in the financial
statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the company‟s transactions and disclose with reasonable accuracy at any time the financial position
of the company and enable them to ensure that the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and the financial statements are made available
on a website. Financial statements are published on the company's website in accordance with legislation in
the United Kingdom governing the preparation and dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance and integrity of the company's website is the
responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein.
By order of the Board
Ian Ford
Secretary
17 June 2011
Provexis plc Annual report and accounts 2011
13
Directors’ report – remuneration report
Remuneration Committee: composition and terms of reference
The Group‟s Remuneration Committee during the year ended 31 March 2011 comprised two independent
Non-executive Directors and was chaired by Dawson Buck.
The purpose of the Remuneration Committee is to ensure that the Executive Directors are fairly rewarded for
their individual contribution to the overall performance of the Company. The Committee considers and
recommends to the Board the remuneration of the Executive Directors and is kept informed of the
remuneration packages of senior staff and invited to comment on these.
Policy on Executive Directors’ remuneration
Executive remuneration packages are designed to attract and retain executives of the necessary skill and
calibre to run the Company successfully but avoiding paying more than is necessary. Direct benchmarking of
remuneration is not possible given the specialised nature and size of the Company. The Remuneration
Committee recommends to the Board remuneration packages by reference to individual performance and
uses the knowledge and experience of the Non-executive Directors and published surveys relating to AIM
Directors, and market changes generally. The Remuneration Committee has responsibility for recommending
any long term incentive schemes.
The full Board determines whether or not Executive Directors are permitted to serve in roles with other
companies. Such permission is only granted where a role is on a strictly limited basis, where there are no
conflicts of interest or competing activities and providing there is not an adverse impact on the commitments
required to the Group. Earnings from such roles are not disclosed nor paid to the Group.
There are four main elements of the remuneration package for Executive Directors and senior staff:
(i) Basic salaries and benefits in kind
Basic salaries are recommended to the Board by the Remuneration Committee, taking into account the
performance of the individual and the rates for similar positions in comparable companies. Benefits in kind
comprising private medical insurance are available to all senior staff and Executive Directors.
(ii) Share option scheme
The Company operates a share option scheme which was established in June 2005 (”the Provexis 2005
share option scheme”) to motivate the Executive Directors and employees through equity participation in the
Company. Options granted pursuant to the Provexis 2005 share option scheme may take the form of either
unapproved share options or tax favoured EMI options. Exercise of options under the scheme is subject to
specified exercise periods and compliance with the AIM rules of the London Stock Exchange.
The scheme is overseen by the Remuneration Committee which recommends to the Board all grants of
share options based on the Committee‟s assessment of personal performance and specifying the terms
under which eligible individuals may be invited to participate.
In June 2005 the Company undertook a reverse takeover of Provexis Natural Products Limited (“PNP”,
formerly Provexis Limited) through a share for share exchange. Prior to the takeover the Company and PNP
had granted EMI options and unapproved options. Options granted by the Company prior to the takeover
remain subject to the same terms as contained in the individual share option contracts under which they
were originally granted. The PNP EMI options and unapproved options were rolled over into options over the
Company‟s ordinary shares, and these replacement options remain subject to the same terms as contained
in the individual PNP share option contracts under which they were originally granted.
The Combined Code refers to the requirement for the performance-related elements of remuneration to form
a significant proportion of the total remuneration package of Executive Directors and should be designed to
align their interests with those of shareholders. In the development phase of the Group and during the early
stages of revenue generation, the Remuneration Committee currently considers that the best alignment of
these interests is through continued use of incentives for performance through the award of share options or
other share-based arrangements.
Provexis plc Annual report and accounts 2011
14
Directors’ report – remuneration report continued
Policy on Executive Directors’ remuneration (continued)
(iii) Bonus scheme
The Company has an established discretionary non-pensionable bonus scheme for Executive Directors,
which is subject to the achievement of agreed goals and targets that are designed to incentivise Directors to
perform at the highest levels, and align Directors‟ interests with those of the shareholders.
For the Executive Directors the performance-related annual bonus potential is up to 40% of basic salary. The
Remuneration Committee approved bonuses of between 20% and 40% of salary for 2011 based on the
achievements in 2011. In 2010 annual bonuses of 15% were paid.
(iv) Pension contributions
The Group pays a defined contribution to the pension scheme of Executive Directors and employees. The
individual pension schemes are private and their assets are held separately from those of the Group.
Salaries and benefits were reviewed in April 2010 to cover the year from 1 April 2010 to 31 March 2011.
Future reviews will continue to be undertaken on an annual basis each April to enable the Group‟s
performance over the preceding financial year and the strategy for the forthcoming year to be considered.
Service contracts
The Chief Executive is employed under a service contract requiring twelve months‟ notice by either party,
and the Chief Operating Officer and Finance Director are employed under service contracts requiring three
months‟ notice. All Non-executive Directors receive payments under appointment letters which are
terminable by three months‟ notice from either party.
Policy on Non-executive Directors’ remuneration
Dawson Buck and Neville Bain each receive a fee for their services as a director, which is approved by the
Board, mindful of the time commitment and responsibilities of their roles and of current market rates for
comparable organisations and appointments. Non-executive Directors are reimbursed for travelling and other
minor expenses incurred.
Neville Bain, Non-executive Director, received 330,300 share options prior to the Group joining AIM, and he
exercised these options on 12 February 2010. However, to maintain independence, the Non-executive
Directors do not participate in any incentive or share option arrangements.
Gains made on exercise of directors’ share options
N C Bain - exercise on 12 February 2010
of 330,300 share options granted on 17 June 2004
Gain
Year ended
31 March 2011
£
Year ended
31 March 2010
£
-
-
20,082
20,082
Provexis plc Annual report and accounts 2011
15
Directors’ report – remuneration report continued
Details of directors’ remuneration
The emoluments of the individual Directors for the year were as follows:
Executive Directors
S N Moon
S N Morrison
I Ford
Non-executive Directors
C D Buck
N C Bain
J B Diggines (resigned 17 September 2009)
K Rietveld
Year ended 31 March 2011
Benefits
in kind
Bonus
payments
Pension
Total
Year ended 31
March 2010
Total
£
£
£
£
£
Salary and
directors’
fees
£
175,443
124,881
110,139
886
1,792
1,618
70,656
25,126
31,258
8,832 255,817
6,281 158,080
5,582 148,597
191,149
143,451
118,866
35,000
17,500
-
-
462,963
-
-
-
-
4,296
-
-
-
-
127,040
-
-
-
-
35,000
17,500
-
-
20,695 614,994
42,500
17,500
7,500
-
520,966
The above fees and emoluments exclude reimbursed expenditure incurred in the conduct of Group business.
Share-based payment expense
The share-based payment expenses of the individual Directors recognised for the year were as follows:
Executive Directors
S N Moon
S N Morrison
I Ford
Non-executive Directors
C D Buck
N C Bain
J B Diggines (resigned 17 September 2009)
K Rietveld
Directors’ interests in shares
S N Moon
S N Morrison
I Ford
C D Buck
N C Bain
Year ended
31 March
2011
£
Year ended
31 March
2010
£
15,857
11,666
12,324
-
-
-
-
39,847
107,303
36,870
41,651
-
-
-
-
185,824
Ordinary shares of
0.1 pence each
Ordinary shares of
0.1 pence each
Beneficial interests
31 March 2011
1 April 2010
1,540,000
1,668,333
1,668,333
11,271,359
5,608,416
21,756,441
1,540,000
1,668,333
1,668,333
11,271,359
5,608,416
21,756,441
Other than as shown in the table and as further disclosed above in respect of Deferred Shares, no Director
had any interest in the shares of the Company or its subsidiary companies at 31 March 2011.
Provexis plc Annual report and accounts 2011
16
Directors’ report – remuneration report continued
Directors’ interests in share options
The Board uses share options to align Directors and employees interests with those of shareholders in order
to provide incentives and reward them based on improvements in Company performance.
On 1 September 2008 the Company announced that further to an announcement on 1 August 2008 the
Company's Remuneration Committee had approved the grant of options over 62,471,648 ordinary shares of
0.1p each to certain Directors and employees of the Company. As a condition of the grant of options, certain
Directors surrendered 19,089,110 existing options and an additional 3,709,384 existing options were
surrendered by other existing employees.
On 15 October 2009 the Company‟s Remuneration Committee modified the Performance Period and
Performance Target of share options over 62,471,648 ordinary shares of 0.1p each held by the Executive
Directors and employees of the Company.
Following the changes agreed to the Performance Period and Performance Target, share options over
27,305,073 ordinary shares of 0.1p each held by the Executive Directors and employees of the Company
vested on 15 October 2009. Share options over 35,166,575 ordinary shares of 0.1p each held by certain
Directors and employees of the Company will vest on 1 April 2011.
The share options held by the Directors and not exercised at 31 March 2011 are summarised below.
S N Moon
S N Morrison
I Ford
Number of options over shares
At 1 April 2010 Options exercised
in year
At 31 March 2011
21,117,620
12,000,000
10,000,000
43,117,620
-
-
-
-
21,117,620
12,000,000
10,000,000
43,117,620
The unapproved share options at 31 March 2011 of the Directors who served during the year are set
out below:
Grant date
Number
awarded
Exercise
price/share
Earliest
exercise date
Expiry date
S N Moon
August 2008
7,324,520
7,324,520
0.900p
April 2011
August 2018
The EMI share options at 31 March 2011 of the Directors who served during the year are set out below:
Grant date
Number
awarded
Exercise
price/share
Earliest
exercise date
Expiry date
S N Moon
S N Moon
S N Moon
S N Morrison
S N Morrison
I Ford
I Ford
August 2008
August 2008
August 2008
October 2008
October 2008
August 2008
August 2008
1,117,620
2,675,480
10,000,000
6,000,000
6,000,000
5,000,000
5,000,000
35,793,100
1.000p
0.900p
0.900p
0.900p
0.900p
0.900p
0.900p
August 2008
April 2011
October 2009
April 2011
October 2009
April 2011
October 2009
August 2018
August 2018
August 2018
October 2018
October 2018
August 2018
August 2018
All options were granted with an exercise price at or above market value on the date of grant.
The Company carried out a share re-organisation on 28 August 2008, which is further detailed in note 17 to
the consolidated financial statements on page 41.
Provexis plc Annual report and accounts 2011
17
Directors’ report – remuneration report continued
Directors’ interests in share options (continued)
Share options which had been granted prior to 28 August 2008 over existing ordinary shares with a nominal
value of 1p each in the capital of the Company became options over new ordinary shares with a nominal
value of 0.1p each in the capital of the Company. The options remain subject to the same terms as contained
in the individual option contracts under which they were originally granted.
Share options issued after 28 August 2008 are options over new ordinary shares with a nominal value of
0.1p each in the capital of the Company.
Dawson Buck
Chairman of the Remuneration Committee
Provexis plc Annual report and accounts 2011
18
Independent auditor’s report to the members of Provexis
plc continued
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PROVEXIS PLC
We have audited the financial statements of Provexis plc for the year ended 31 March 2011 which comprise
the group statement of financial position and company balance sheet, the group statement of comprehensive
income, the group statement of cash flows, the group statement of changes in equity and the related notes.
The financial reporting framework that has been applied in the preparation of the group financial statements
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been applied in preparation of the parent company
financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the company‟s members, as a body, in accordance with sections Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
company‟s members those matters we are required to state to them in an auditor‟s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company‟s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors‟ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board‟s (APB‟s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB‟s website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group‟s and the parent company‟s
affairs as at 31 March 2011 and of the group‟s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent company‟s financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the directors‟ report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Provexis plc Annual report and accounts 2011
19
Independent auditor’s report to the members of Provexis
plc continued
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns;
or
certain disclosures of directors‟ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Christopher Pooles (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Reading
United Kingdom
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
Provexis plc Annual report and accounts 2011
20
Consolidated statement of comprehensive income
Revenue
Grant income
Research and development costs
Administrative costs
Loss from operations
Finance income
Loss before tax
Taxation
Loss and total comprehensive expense
for the year
Attributable to:
Owners of the parent
Non-controlling interest
Loss per share to owners of the parent
Basic and diluted – pence
Notes
1,3
4
5
8
9
19
10
Year
ended
31 March
2011
£
50,086
-
(1,250,915)
(1,274,493)
(2,475,322)
133,439
(2,341,883)
221,218
(2,120,665)
Year
ended
31 March
2010
£
14,767
80,000
(697,822)
(1,184,859)
(1,787,914)
85,326
(1,702,588)
54,408
(1,648,180)
(1,984,206)
(136,459)
(2,120,665)
(1,648,180)
-
(1,648,180)
0.17
0.18
Provexis plc Annual report and accounts 2011
21
Consolidated statement of financial position
Company number 05102907
Non-current assets
Goodwill
Other intangible assets
Plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Corporation tax asset
Cash and cash equivalents
Total current assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total net assets
Capital and reserves attributable
to owners of the parent company
Share capital
Share premium reserve
Warrant reserve
Merger reserve
Retained earnings
Non-controlling interest
Total equity
Notes
11,12
11
13
14
9
15
16
17
19
19
19
19
As at
31 March
2011
£
3,802,685
75,892
89,769
3,968,346
As at
31 March
2010
£
3,802,685
57,933
61,182
3,921,800
253,249
271,220
7,551,505
8,075,974
274,638
111,844
7,049,134
7,435,616
(563,190)
(563,190)
(295,498)
(295,498)
11,481,130
11,061,918
4,812,036
16,909,650
115,980
6,273,909
(16,493,986)
11,617,589
(136,459)
4,723,601
14,527,277
115,980
6,273,909
(14,578,849)
11,061,918
-
11,481,130
11,061,918
These consolidated financial statements were approved and authorised for issue by the Board on 17 June
2011. The notes on pages 25 to 46 form part of these consolidated financial statements.
Stephen Moon
Director
Ian Ford
Director
On behalf of the Board of Provexis plc
Provexis plc Annual report and accounts 2011
22
Consolidated statement of cash flows
Cash flows from operating activities
Loss after tax
Adjustments for:
Depreciation
Finance income
Taxation
Share-based payment charge
Operating cash outflow before changes in working capital
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Cash used in operations
Tax credits received
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of plant and equipment
Purchase of intangible assets
Interest received
Cash generated by investing activities
Cash flows from financing activities
Proceeds from issue of
share capital – share placings and open offer
Expenses paid on share issues
Proceeds from exercise of share options
Cash generated by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
15
15
Year ended
31 March
2011
£
Notes
Year ended
31 March
2010
£
(2,120,665)
(1,648,180)
28,697
(133,439)
(221,218)
69,069
(2,377,556)
(5,898)
267,692
(2,115,762)
61,844
(2,053,918)
(57,285)
(17,959)
148,339
73,095
2,684,534
(201,340)
-
2,483,194
502,371
7,049,134
7,551,505
20,908
(85,326)
(54,408)
225,909
(1,541,097)
(66,737)
61,525
(1,546,309)
46,215
(1,500,094)
(15,149)
(20,646)
70,347
34,552
7,130,293
(401,779)
107,899
6,836,413
5,370,871
1,678,263
7,049,134
Provexis plc Annual report and accounts 2011
23
Consolidated statement of changes in equity
Share
Share Warrant
Merger
Retained
to owners of
controlling
capital
premium
reserve
reserve
earnings
the parent
interests
£
£
£
£
£
£
£
Total equity
attributable
Non-
At 31 March 2009
4,434,907
7,979,558
Share-based charges
-
-
Issue of shares - exercise of
share options
3,482
104,417
Issue of shares - subscription
30 September 2010
40,969
915,185
Issue of shares - subscription
16 October 2010
159,031
3,633,544
Issue of shares - open offer 22
December 2010
85,212
1,894,573
-
-
-
-
-
-
Issue of warrants - equity
financing facility 30 March 2011
Total comprehensive expense
for the year
-
-
-
-
115,980
-
6,273,909
(13,156,578)
5,531,796
-
-
-
-
-
-
-
225,909
225,909
-
-
-
-
-
107,899
956,154
3,792,575
1,979,785
115,980
(1,648,180)
(1,648,180)
At 31 March 2010
4,723,601
14,527,277
115,980
6,273,909
(14,578,849)
11,061,918
Share-based charges
-
-
Issue of shares - EFF
drawdown – 28-Jun-10
Issue of shares - EFF
drawdown – 08-Oct-10
2,135
86,291
86,300
2,296,082
Total comprehensive expense
for the year
-
-
-
-
-
-
-
-
-
-
69,069
69,069
-
-
88,426
2,382,382
Total
equity
£
5,531,796
225,909
107,899
956,154
3,792,575
1,979,785
115,980
(1,648,180)
11,061,918
69,069
88,426
2,382,382
-
-
-
-
-
-
-
-
-
-
-
-
(1,984,206)
(1,984,206)
(136,459)
(2,120,665)
At 31 March 2011
4,812,036
16,909,650
115,980
6,273,909
(16,493,986)
11,617,589
(136,459)
11,481,130
The total comprehensive expense for the year represents the total recognised income and expense for the
year.
Provexis plc Annual report and accounts 2011
24
Notes to the consolidated financial statements
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 Thames Court, 1 Victoria Street, Windsor,
Berkshire SL4 1YB, UK.
As described in the Directors‟ Report, the main activities of the Group are those of discovering, developing
and licensing scientifically-proven technologies for the global functional food, medical food and dietary
supplement sectors.
Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the
International Accounting Standards Board (IASB) as adopted by the European Union (“adopted IFRS”).
The Company has elected to prepare its parent company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (“UK GAAP”), and these are set out on pages 47 to 51.
The accounting policies set out below have been applied to all periods presented in these Group financial
statements and are in accordance with IFRS, as adopted by the European Union, and International Financial
Reporting Interpretations Committee (“IFRIC”) interpretations that were applicable for the year ended
31 March 2011.
The following new standards, amendments to standards and interpretations, applied for the first time from 1
April 2010:
•
•
•
IFRS 3 (Revised) „Business Combinations‟ effective for periods beginning on or after 1 July 2009;
Improvements to IFRSs (2009) effective for periods beginning on or after 1 January 2010; and
IFRS 2 (Amendment)
Transactions‟ effective for periods beginning on or after 1 January 2010.
„Share-based Payment: Group Cash-settled Share-based Payment
The adoption of these standards and interpretations has not had any significant impact on the amounts
reported in these financial statements but may impact the accounting for future transactions and
arrangements.
The application of the following standard has resulted in the losses attributable to the non-controlling interest
being accounted for in the financial statements even where this resulted in the non-controlling interest having
a deficit balance:
•
IAS 27 (Amendment) „Consolidated and Separate Financial Statements‟ effective for periods
beginning on or after 1 July 2009.
The Directors have determined that only one operating segment exists under the terms of International
Financial Reporting Standard 8 „Operating Segments‟, as the Group is organised and operates as a single
business unit and all activities are based in the UK..
The following new standards, amendments to standards and interpretations have been issued but are not
effective for the year ended 31 March 2011. The new standards, amendments to standards and
interpretations will be relevant to the Group but have not been adopted early as the Directors do not expect
these standards and interpretations to have a material effect on the consolidated financial statements:
IFRS 9 „Financial Instruments‟ is effective from periods commencing on or after 1 January 2013.
IAS 24 (Amended) „Related party disclosures‟ is effective from periods commencing on or after 1
January 2011.
There are a number of standards, interpretations and amendments to published accounts not listed above
which the Directors consider not to be relevant to the Group.
Provexis plc Annual report and accounts 2011
25
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Going concern
The Group‟s business activities together with the factors likely to affect its future development are set out in
the Business Overview on pages 8 to 13. The financial position of the Group, its cash flows and liquidity
position are set out in the Financial Review on pages 6 and 7. 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 attributable to owners of the parent of £1,984,206 (2010: £1,648,180)
and expects to make a further loss during the year ending 31 March 2012. At 31 March 2011 the Group had
cash balances of £7,551,505 (2010: £7,049,134).
The directors have prepared projected cash flow information for a period including twelve months from the
date of approval of these financial statements and have reviewed this information as at the date of these
financial statements. Based on the level of existing cash, projected income and expenditure and other
sources of funding, the Directors are satisfied that the Company and the Group have adequate resources to
continue in business for the foreseeable future. Accordingly the going concern basis has been used in
preparing the financial statements.
Basis of consolidation
Subsidiaries are all entities (including special purpose 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.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The
cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of
acquisition over the fair value of the Group‟s share of the identifiable net assets acquired is recorded as
goodwill.
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
Revenue comprises the fair value received or receivable for exclusivity arrangements, collaboration
agreements, royalties and sales of the Group‟s Fruitflow® product net of value added tax.
The accounting policies for the principal revenue streams of the Group are as follows:
(i) Exclusivity arrangements and similar agreements are recognised as revenue in the accounting period in
which the related services, or required activities, are performed or specified conditions are fulfilled in
accordance with the terms of completion of the specific transaction.
(ii) Royalty income relating to the sale by a licensee of licensed product is recognised on an accruals basis in
accordance with the substance of the relevant agreement and based on the receipt from the licensee of the
relevant information to enable calculation of the royalty due.
(iii) Sales of the Group‟s Fruitflow® product are recorded net of value added tax when the significant risks
and rewards of ownership have been transferred to the buyer.
Provexis plc Annual report and accounts 2011
26
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Leased assets
Leases, which contain terms whereby the Group does not assume substantially all the risks and rewards
incidental to ownership of the leased item are classified as operating leases. Operating lease rentals are
charged to the statement of comprehensive income on a straight line basis over the lease term. The Group
does not hold any assets under finance leases.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group‟s share of the
identifiable net assets acquired. Goodwill on acquisition of subsidiaries is included in „intangible assets‟.
Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses.
An impairment loss is recognised within administrative expenses in the consolidated statement of
comprehensive income for the amount by which the asset‟s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset‟s fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows.
Impairment losses on goodwill are not reversed.
Research and development
Certain Group products are in the research phase and others are in the development phase. 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 the statement of comprehensive income as incurred.
Patents and trademarks
The costs incurred in establishing patents and trademarks are either expensed or capitalised in accordance
with the corresponding treatment of the development expenditure for the product to which they relate.
Plant and equipment
Plant and machinery, fixtures, fittings and computer equipment and laboratory equipment are stated at
historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost
includes expenditure that is directly attributable to the acquisition of the items. Depreciation is charged to the
statement of comprehensive income on all plant and equipment at rates calculated to write off the cost or
valuation, less estimated residual value, of each asset on a straight line basis over their estimated useful
lives, which is 3 years for plant and machinery, fixtures, fittings and computer equipment and 5 years for
laboratory equipment.
The assets‟ residual values and useful lives are determined by the Directors and reviewed and adjusted if
appropriate at each balance sheet date in accordance with the Group policy for impairment of assets.
Provexis plc Annual report and accounts 2011
27
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Impairment of 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.
Goodwill is allocated to cash-generating units („CGU‟) for the purpose of impairment testing to the extent that
it is possible to allocate goodwill to a CGU on a non-arbitrary basis. A CGU is identified at the lowest
aggregation of assets that generate largely independent cash inflows, and that which is looked at by
management for monitoring and managing the business.
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 the
statement of comprehensive income, 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.
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. The Group will assess at
each balance sheet date whether there is objective evidence that the financial asset is impaired. If an asset
is judged to be impaired the carrying amount of the asset will be adjusted to its impaired valuation.
Financial liabilities
The Group‟s financial liabilities comprise „trade and other payables‟. 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.
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 balance sheet date. When research and
development tax credits are claimed they are recognised on an accruals basis and are included as a
taxation credit.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on the
balance sheet differs from its tax base, except for differences arising on:
The initial recognition of goodwill
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.
Provexis plc Annual report and accounts 2011
28
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Taxation (continued)
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 balance sheet 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 the statement of comprehensive income.
Employee benefits
(i) Defined contribution plans
The Group provides retirement benefits to all employees and Executive Directors. 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
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 the statement of
comprehensive income over the vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately,
the cumulative amount recognised over the vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of the options when granted. As long as all
other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions
are satisfied. The cumulative charge is not adjusted for failure to achieve a market vesting condition. If
market related terms and conditions of options are modified before they vest, the change in the fair value of
the options, measured immediately before and after the modification, is also charged to the statement of
comprehensive income over the remaining vesting period. If non-market related terms and conditions of
options are modified before they vest, the number of instruments expected to vest at each balance sheet
date, and therefore the cumulative charge, is therefore amended accordingly. Where equity instruments are
granted to persons other than employees and others providing similar services, the statement of
comprehensive income is charged with the fair value of goods and services received.
The proceeds received when options are exercised, net of any directly attributable transaction costs, are
credited to share capital (nominal value) and the remaining balance to share premium.
National insurance on share options
All employee option holders sign statements that they will be liable for any employers national insurance
arising on the exercise of share options.
Provexis plc Annual report and accounts 2011
29
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Interest income
Interest income is recognised on a time-proportion basis using the effective interest rate method.
Warrants
The Group has issued warrants to Evolution Securities Limited as part of the Equity Financing Facility. These
are considered to be outside the scope of share-based employee remuneration, and hence out of the scope
of IFRS 2. These warrants have been measured at fair value at the date of grant using an appropriate
options pricing model. This fair value has been held on the balance sheet within prepayments and in the
warrants reserve within equity. The prepayment will be released against share premium as the equity
financing facility is utilised. The warrants reserve will be released to share premium when the warrants are
exercised. If the warrants lapse then the reserve is transferred to retained earnings.
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. The Directors consider that the criteria to capitalise development expenditure were met in 2007 for
one of the Group‟s products and have continued to be met since.
(ii) Share-based payments
The Group operates an equity-settled, share-based compensation plan. Employee and similar services
received, and the corresponding increase in equity, are measured by reference to the fair value of the equity
instruments at the date of grant, which is based upon certain assumptions over the future performance of the
share price.
(iii) Goodwill and impairment
The recoverable amount of goodwill is determined based on value in use calculations of the cash-generating
units to which it relates. The value in use calculations use pre-tax cash flow projections for nine years using
data from the Group‟s latest internal forecasts. The revenue forecasts are extrapolated beyond nine years
and costs are extrapolated beyond two years at growth rates of 2% (2010: between 2% and 7%). The results
of the value in use calculations are reviewed by the Board.
The key assumptions for the value in use calculations are those regarding discount rates, revenue
commencement dates, growth rates, absolute values of expected sales and expected margins and costs.
Management estimate discount rates using pre-tax rates that reflect the current market assessment of the
time value of money and the risks specific to the cash-generating unit. Revenue commencement dates are
based on current planned launch dates. Growth rates, absolute values of expected sales and expected
margins and costs are based on information received from commercial partners and market intelligence
reports on expectations of future changes in the market.
Pre-tax cash flow projections are discounted to calculate value in use using a pre-tax discount rate. The pre-
tax discount rate is based on a number of factors including the risk-free rate in the UK, the Group's estimated
market risk premium, and a premium to reflect the inherent risk of the forecast income streams included in
the Group‟s cash flow projections, which remain subject to contracts being agreed with prospective
customers.
Further information is given in note 12 to these consolidated financial statements.
Provexis plc Annual report and accounts 2011
30
Notes to the consolidated financial statements continued
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 primarily enters into contracts which are to be settled in UK pounds. However, some contracts
involve other major world currencies including the US Dollar and the Euro. Where large contracts of more
than £50,000 total value are to be settled in foreign currencies consideration is given to converting the
appropriate amounts to or from UK pounds at the outset of the contract to minimise the risk of adverse
currency fluctuations.
The Group incurred minimal expenditure in foreign currencies during the year, and the prior year, and
consequently there is no material exposure to foreign currency rate risk.
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 £563,190 (2010:
£295,498) as disclosed in note 16 on page 39.
2.2 Capital risk management
The Group considers its capital to comprise its ordinary share capital, share premium, warrant reserve,
merger reserve and accumulated retained earnings as disclosed in the consolidated statement of financial
position on page 22.
The Group remains funded primarily by equity capital which reflects the development status of its products.
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.
2.3 Fair value estimation
The Group uses amortised cost, using the effective interest rate method, to determine subsequent fair value
after initial recognition, for its financial instruments.
Provexis plc Annual report and accounts 2011
31
Notes to the consolidated financial statements continued
3. Segmental reporting
The Directors have determined that only one operating segment exists under the terms of International
Financial Reporting Standard 8 „Operating Segments‟, as the Group is organised and operates as a single
business unit and all activities are based in the UK..
4. Grant income
NWDA R&D grant income recognised in consolidated statement of
comprehensive income
5. Loss from operations
Loss from operations is stated after charging:
Depreciation of plant and equipment
Operating lease costs – land and buildings
Equity-settled share based payment expense
Defined contribution pension expense
Year ended
31 March
2011
£
Year ended
31 March
2010
£
-
-
80,000
80,000
Year ended
31 March
2011
£
Year ended
31 March
2010
£
28,697
120,543
69,069
37,370
20,908
102,875
225,909
31,581
The total fees of the Group‟s auditor, BDO LLP, for services provided are analysed below:
Audit services
Parent company
Subsidiaries
Tax services – compliance
Parent company
Subsidiaries
Other services
Tax advisory services
Parent company – share option scheme advice
Subsidiary – NWDA grant
Review of interim statement
Corporate finance
Year ended
31 March
2011
£
Year ended
31 March
2010
£
14,000
27,500
4,000
10,600
700
-
-
5,000
7,000
12,600
26,900
3,600
8,400
2,000
8,000
3,000
5,000
-
Total fees
68,800
69,500
Provexis plc Annual report and accounts 2011
32
Notes to the consolidated financial statements continued
6. Wages and salaries
The average monthly number of persons (including all Directors) employed by the Group during the year was
as follows:
Administrative staff
Research and development staff
Directors
Their aggregate emoluments were:
Wages and salaries
Social security costs
Other pension and insurance benefits costs
Total cash settled emoluments
Accrued holiday pay
Share-based payment remuneration charge: equity settled
Total emoluments
7. Directors’ emoluments
Directors
Aggregate emoluments
Company pension contributions
Share based payment remuneration charge: equity settled
Gains made on exercise of directors‟ share options
Total Directors’ emoluments
Year ended
31 March
2011
Year ended
31 March
2010
1
8
6
15
-
7
6
13
Year ended
31 March
2011
£
Year ended
31 March
2010
£
953,287
102,944
48,089
1,104,320
13,429
69,069
1,186,818
733,879
71,980
38,266
844,125
1,600
225,909
1,071,634
Year ended
31 March
2011
£
Year ended
31 March
2010
£
594,299
20,695
39,847
-
654,841
502,144
18,822
185,824
20,082
726,872
Emoluments disclosed above include the following amounts in respect of the highest paid Director:
Aggregate emoluments
Company pension contributions
Share based payment remuneration charge: equity settled
Total of the highest paid Director’s emoluments
Year ended
31 March
2011
£
Year ended
31 March
2010
£
246,985
8,832
15,857
271,674
183,169
7,980
107,303
298,452
During the year, three Directors (2010: three Directors) participated in defined contribution pension schemes.
Directors‟ emoluments include amounts attributable to benefits in kind comprising private medical insurance
on which the directors are assessed for tax purposes. The amounts attributable to benefits in kind are stated
at cost to the Group, which is also the tax value of the attributable benefits.
Further details of Directors‟ emoluments are included in the Remuneration report on pages 14 to 18.
Provexis plc Annual report and accounts 2011
33
Notes to the consolidated financial statements continued
8. Finance income
Bank interest receivable
9. Taxation
Current tax income
United Kingdom corporation tax research and development credit
Adjustment in respect of prior period
United Kingdom corporation tax research and development credit
Taxation credit
Year ended
31 March
2011
£
Year ended
31 March
2010
£
133,439
133,439
85,326
85,326
Year ended
31 March
2011
£
Year ended
31 March
2010
£
150,000
71,218
221,218
50,000
4,408
54,408
The tax assessed for the year is different from the standard rate of corporation tax in the UK. The differences
are explained below:
Loss before tax
Loss before tax multiplied by the
standard rate of corporation tax in the UK of 28% (2010: 28%)
Effects of:
Expenses not deductible for tax purposes
Difference between depreciation and capital allowances
Other short-term timing differences
Unutilised tax losses and other deductions arising in the year
Tax deduction for share options exercised
Additional deduction for R&D expenditure
Surrender of tax losses for R&D tax credit refund
Adjustments in respect of prior years
Total tax credit for the year
Year ended
31 March
2011
£
Year ended
31 March
2010
£
2,341,883
1,702,588
655,727
476,725
(12,435)
8,005
(21,718)
(508,496)
-
178,917
(150,000)
71,218
221,218
3,540
(5,854)
(63,255)
(442,056)
80,900
50,000
(50,000)
4,408
54,408
At 31 March 2011 the Group UK tax losses to be carried forward are estimated to be £14,488,679
(2010: £13,398,578).
Provexis plc Annual report and accounts 2011
34
Notes to the consolidated financial statements continued
9. Taxation (continued)
Deferred tax
Deferred tax assets amounting to £4,093,379 (2010: £4,391,974) have not been recognised on the basis that
their future economic benefit is not certain. Assuming a prevailing tax rate of 26% (2010: 28%) when the
timing differences reverse, the unrecognised deferred tax asset comprises:
Depreciation in excess of capital allowances
Other short term timing differences
Unutilised tax losses
Share-based payments
Income tax asset receivable within one year
Corporation tax recoverable
Year ended
31 March
2011
£
Year ended
31 March
2010
£
4,324
6,773
3,767,057
315,225
4,093,379
16,903
-
3,639,702
735,369
4,391,974
31 March
2011
£
271,220
271,220
31 March
2010
£
111,844
111,844
10. Loss per share
Basic and diluted loss per share amounts are calculated by dividing the loss attributable to owners of the
parent by the weighted average number of ordinary shares in issue during the period.
There are 62,471,648 share options in issue (2010: 62,471,648) that are all currently anti-dilutive and have
therefore been excluded from the calculations of the diluted loss per share.
Basic and diluted loss per share amounts are in respect of all activities.
Loss for the year attributable
to owners of the parent - £
Year ended
31 March
2011
Year ended
31 March
2010
1,984,206
1,648,180
Weighted average number of shares
1,150,836,614
937,060,783
Basic and diluted loss per share – pence
0.17
0.18
Provexis plc Annual report and accounts 2011
35
Notes to the consolidated financial statements continued
11. Intangible assets
Cost
At 1 April 2010
Additions
At 31 March 2011
Amortisation and impairment
At 1 April 2010
At 31 March 2011
Net book value
At 31 March 2011
At 31 March 2010
Cost
At 1 April 2009
Additions
At 31 March 2010
Amortisation and impairment
At 1 April 2009
At 31 March 2010
Net book value
At 31 March 2010
At 31 March 2009
Goodwill
£
Development
costs
£
57,933
17,959
75,892
7,265,277
-
7,265,277
3,462,592
3,462,592
Total
£
7,323,210
17,959
7,341,169
-
-
3,462,592
3,462,592
3,802,685
3,802,685
75,892
57,933
3,878,577
3,860,618
7,265,277
-
7,265,277
3,462,592
3,462,592
37,287
20,646
57,933
7,302,564
20,646
7,323,210
-
-
3,462,592
3,462,592
3,802,685
3,802,685
57,933
37,287
3,860,618
3,839,972
Development costs represent costs incurred in registering patents that meet the capitalisation criteria set out
in IAS 38, see also note 1.
Provexis plc Annual report and accounts 2011
36
Notes to the consolidated financial statements continued
12. Goodwill and impairment
Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value of the
Group‟s share of the net assets of the acquired subsidiary at the date of acquisition.
Goodwill arose on 23 June 2005 when the Company acquired the entire issued share capital of
Provexis Natural Products Limited (formerly Provexis Limited), a private company engaged in research and
development. Provexis Natural Products Limited has been consolidated using the purchase method and its
results have been incorporated in the Group results from the date of acquisition.
Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual
basis or more frequently if there are indications that goodwill may be impaired.
The recoverable amount of goodwill is determined based on value in use calculations of the cash-generating
units to which it has been allocated.
The key assumptions for the value in use calculations are those regarding discount rates, revenue
commencement dates, growth rates, absolute values of expected sales and expected margins and costs.
Management estimate discount rates using pre-tax rates that reflect the current market assessment of the
time value of money and the risks specific to the cash-generating unit. Revenue commencement dates are
based on current planned launch dates. Growth rates, absolute values of expected sales and expected
margins and costs are based on information received from commercial partners and market intelligence
reports on expectations of future changes in the market. The growth rates used are below the long-term
growth rates for the Nutraceuticals industry.
The value in use calculations use pre-tax cash inflow projections for nine years using data from the Group‟s
approved internal forecasts. The cash inflow forecasts are extrapolated beyond nine years at growth rates of
2% (2010: between 2% and 7%) for a further 6 years and thereafter at a nil growth rate in perpetuity. The
results of the value in use calculations are reviewed by the Board.
The Directors believe that it is appropriate to use internally approved forecasts for a period of 9 years as this
will give a more accurate estimate of the likely growth patterns in the early stages of the product‟s life than
the application of a single growth rate.
The value in use calculations use pre-tax cash outflows for two to four years based on approved budgets.
The cash outflow forecasts are extrapolated beyond two to four years at growth rates of 2% for a further 13
or 11 years (2010: 2%) and thereafter at a nil growth rate in perpetuity. The results of value in use
calculations are reviewed by the Board.
The values used in the Group‟s internal forecasts reflect anticipated market developments, following
discussions with prospective customers and suppliers. An element of the risk inherent in the forecast income
streams, which remain subject to contracts being agreed with prospective customers, has been incorporated
in the Group‟s pre-tax cash flow projections and discount rates.
Pre-tax cash flow projections have been discounted to calculate value in use using pre-tax discount rates of
15.8% and 29.8% (2010: 23%) reflecting the stage of development of their respective cash generating units.
No impairment charge was required in the current or previous year.
The pre-tax discount rate is based on a number of factors including the risk-free rate in the UK, the Group's
estimated market risk premium, and a premium to reflect the inherent risk of the forecast income streams
included in the Group‟s cash flow projections, which remain subject to contracts being agreed with
prospective customers.
Provexis plc Annual report and accounts 2011
37
Notes to the consolidated financial statements continued
13. Plant and equipment
Cost
At 1 April 2010
Additions
Disposals
At 31 March 2011
Depreciation
At 1 April 2010
Charge for the year
Disposals
At 31 March 2011
Net book value
At 31 March 2011
At 31 March 2010
Cost
At 1 April 2009
Additions
At 31 March 2010
Depreciation
At 1 April 2009
Charge for the year
At 31 March 2010
Net book value
At 31 March 2010
At 31 March 2009
Fixtures, fittings
and computer
equipment
£
Laboratory
equipment
Total
£
£
49,784
15,010
(196)
64,598
39,251
8,014
(196)
47,069
17,529
10,533
Fixtures, fittings
and computer
equipment
£
41,433
8,351
49,784
34,549
4,702
39,251
10,533
6,884
85,967
42,275
-
128,242
35,318
20,684
-
56,002
72,240
50,649
Laboratory
equipment
135,751
57,285
(196)
192,840
74,569
28,698
(196)
103,071
89,769
61,182
Total
£
£
79,169
6,798
85,967
19,112
16,206
35,318
50,649
60,057
120,602
15,149
135,751
53,661
20,908
74,569
61,182
66,941
Provexis plc Annual report and accounts 2011
38
Notes to the consolidated financial statements continued
14. Trade and other receivables
Amounts receivable within one year:
Trade receivables
Other receivables
Total loans and receivables
Prepayments and accrued income
31 March
2011
£
31 March
2010
£
48,708
39,862
88,570
164,679
253,249
-
48,529
48,529
226,109
274,638
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.
15. Cash and cash equivalents
Cash at bank and in hand
16. Trade and other payables
Trade payables
Other taxes and social security
Accruals
Total financial liabilities measured at amortised cost
31 March
2011
£
31 March
2010
£
7,551,505
7,551,505
7,049,134
7,049,134
31 March
2011
£
91,529
62,376
409,285
563,190
31 March
2010
£
87,409
72,972
135,117
295,498
The Directors consider that the carrying amount of these liabilities approximates to their fair value.
All amounts shown fall due within one year.
Provexis plc Annual report and accounts 2011
39
Notes to the consolidated financial statements continued
17. Share capital
On 31 March 2010 the Company announced that it had secured a 3 year Equity Financing Facility of up to
£25m (the “EFF”) with Evolution Securities Limited (“Evolution”). The EFF was arranged by Darwin Strategic
Limited (“Darwin”), an appointed representative of Evolution.
On 22 June 2010 the Company announced that it had raised a net £88,426 by drawing down on the EFF,
allotting 2,135,000 new ordinary shares of 0.1p each to Darwin.
On 4 October 2010 the Company announced that it had raised a further net £2.4m by drawing down on the
EFF, allotting 86,300,000 new ordinary shares of 0.1p each to Darwin.
The EFF agreement, provides the Company with a facility which (subject to certain limited restrictions) can
be drawn down at any time over the 3 years ending on 29 March 2013. The timing and amount of any draw
down is at the discretion of Provexis. Provexis is under no obligation to make a draw down and may make as
many draw downs as its wishes, up to the total value of the EFF, by way of issuing subscription notices to
Evolution. Following delivery of a subscription notice, Evolution will subscribe and Provexis will allot to
Evolution new ordinary shares of 0.1p each (“Ordinary Shares”).
The subscription price for any Ordinary Shares to be subscribed by Evolution under a subscription notice will
be at a 7.5% discount to an agreed reference price determined during 5, 10 or 15 trading days following
delivery of a subscription notice (the “Pricing Period”). The length of the Pricing Period is at the discretion of
Provexis and is set at each relevant subscription notice. Provexis is also obliged to specify in each
subscription notice a minimum price below which Ordinary Shares will not be issued.
Warrant reserve
In consideration of Evolution agreeing to provide the EFF the Company entered into a warrant agreement
dated 30 March 2010 for the grant to Evolution of warrants to subscribe for up to ten million Ordinary Shares,
such warrants to be exercisable at a price of 20 pence per share and to be exercisable at any time prior to
the expiry of 36 months following the date of the warrant agreement.
The warrants were measured at fair value at the date of grant using a Black-Scholes model, with the
following assumptions:
Date of
grant
Exercise
price
Number of
warrants
pence
Share
price at
grant date
pence
Expected
volatility
Risk free
rate
Expected
life
years
Fair value
per share
under
warrant
pence
30-Mar-10
20.0 10,000,000
6.3
70%
1.77%
3
1.1598
Warrant reserve (continued)
An expected dividend yield of 0% was used in the above valuation.
The assumption made for the expected life of the warrants 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 fair value of the warrants, £115,980, has been held on the balance sheet within prepayments and in
the warrants reserve within equity. The prepayment will be released against share premium as the equity
financing facility is utilised. The warrants reserve will be released to share premium when the warrants are
exercised. If the warrants lapse then the reserve is transferred to retained earnings.
Evolution or the Company may terminate the EFF in specified circumstances. The issue of subscription
notices is subject to specified pre-conditions. The Company has provided warranties and indemnities to
Evolution and affiliated persons. If the aggregate price paid for the Ordinary Shares allotted under the EFF
by the second anniversary of the EFF is not equal to or more than five million pounds (subject to certain
exceptions), or if the EFF is terminated by Evolution in certain circumstances, then the Company will be
required to pay a fee to Evolution amounting to 1% of the value of the facility in cash or by an issue of fully
paid ordinary shares at the Company‟s discretion.
Provexis plc Annual report and accounts 2011
40
Notes to the consolidated financial statements continued
17. Share capital (continued)
Share re-organisation
In August 2008, to facilitate a share placing, the company undertook a share re-organisation when It was
agreed to sub-divide:
each of the 401,724,366 then issued existing ordinary shares of 1p each in the capital of the Company
into one new ordinary share of 0.1p and one Deferred Share of 0.9p; and
each of the 148,275,634 unissued ordinary shares of 1p each into 10 new ordinary shares of 0.1p each,
The share re-organisation was approved at an EGM on 26 August 2008.
The rights attached to the new ordinary shares are substantially the same as the rights attached to the
original, pre placing ordinary shares. The Deferred Shares have very limited rights which are deferred to the
new ordinary shares and effectively carry no value as a result. Accordingly, the holders of the Deferred
Shares are not entitled to receive notice of, attend or vote at general meetings of the Company; nor be
entitled to receive any dividends or any payment on a return of capital until at least £10,000,000 has been
paid on each new ordinary share. No application will be made for the Deferred Shares to be admitted to
trading on AIM. No certificates for the Deferred Shares will be issued.
Full details of the share re-organisation were provided in a circular to shareholders on 1 August 2008. The
circular is available to download from the Company‟s website www.provexis.com.
Allotted, called up and fully paid
At 31 March 2010
Issued on subscription
At 31 March 2011
At 31 March 2010
Issued on subscription
At 31 March 2011
Allotted, called up and fully paid
At 31 March 2009
Issued on exercise of share options
Issued on subscription
Issued on open offer
At 31 March 2010
At 31 March 2009
Issued on exercise of share options
Issued on subscription
Issued on open offer
At 31 March 2010
Ordinary
0.1p shares
number
Deferred
0.9p shares
number
Total
number
1,108,081,929
88,435,000
1,196,516,929
401,724,366
-
401,724,366
1,509,806,295
88,435,000
1,598,241,295
Ordinary
0.1p shares
£
Deferred
0.9p shares
£
1,108,082
88,435
1,196,517
3,615,519
-
3,615,529
Ordinary
0.1p shares
number
Deferred
0.9p shares
number
Total
£
4,723,601
88,435
4,812,036
Total
number
819,387,796
3,482,469
200,000,000
85,211,664
1,108,081,929
401,724,366
-
-
-
401,724,366
1,221,112,162
3,482,469
200,000,000
85,211,664
1,509,806,295
Ordinary
0.1p shares
£
Deferred
0.9p shares
£
819,388
3,482
200,000
85,212
1,108,082
3,615,519
-
-
-
3,615,519
Total
£
4,434,907
3,482
200,000
85,212
4,723,601
Provexis plc Annual report and accounts 2011
41
Notes to the consolidated financial statements continued
17. Share capital (continued)
During the year ended 31 March 2011 the Company issued ordinary shares of 0.1p each as follows:
Date
Reason for issue
22.06.10
04.10.10
Share subscription
Share subscription
Shares issued
£
2,135
86,300
88,435
Number
2,135,000
86,300,000
88,435,000
During the year ended 31 March 2010 the Company issued ordinary shares of 0.1p as follows:
Date
Reason for issue
Shares issued
04.09.09
11.09.09
30.09.09
16.10.09
22.12.09
19.02.10
Exercise of share options
Exercise of share options
Share subscription
Share subscription
Open offer
Exercise of share options
£
1,768
1,384
40,969
159,031
85,212
330
288,694
Number
1,768,180
1,383,989
40,969,390
159,030,610
85,211,664
330,300
288,694,133
18. Share options
In June 2005 the Company adopted a new share option scheme for employees (”the Provexis 2005 share
option scheme”). Under the scheme, options to purchase ordinary shares are granted by the Board of
Directors, subject to the exercise price of the option being not less than the market value at the grant date.
The 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 the option holder‟s employment is terminated, the option
may not be exercised unless the Board of Directors so permits. The options expire 10 years from the date
of grant.
The Company undertook a reverse takeover of Provexis Natural Products Limited (“PNP”, formerly Provexis
Limited) in June 2005 through a share for share exchange. Prior to the takeover the Company and PNP had
granted EMI options and unapproved options. Options granted by the Company prior to the takeover remain
subject to the same terms as contained in the individual share option contracts under which they were
originally granted. The PNP EMI options and unapproved options were rolled over into options over the
Company‟s ordinary shares, and these replacement options remain subject to the same terms as contained
in the individual PNP share option contracts under which they were originally granted.
On 1 September 2008 the Company announced that further to an announcement on 1 August 2008 the
Company's Remuneration Committee had approved the grant of options over 62,471,648 ordinary shares of
0.1p each to certain Directors and employees of the Company. As a condition of the grant of options, certain
Directors surrendered 19,089,110 existing options and an additional 3,709,384 existing options were
surrendered by other existing employees.
On 15 October 2009 the Company‟s Remuneration Committee modified the Performance Period and
Performance Target of share options over 62,471,648 ordinary shares of 0.1p each held by the Executive
Directors and employees of the Company.
Following the changes agreed to the Performance Period and Performance Target, share options over
27,305,073 ordinary shares of 0.1p each held by certain Directors and employees of the Company vested on
15 October 2009. Share options over 35,166,575 ordinary shares of 0.1p each held by certain Directors and
employees of the Company will vest on 1 April 2011.
Provexis plc Annual report and accounts 2011
42
Notes to the consolidated financial statements continued
18. Share options (continued)
At 31 March 2011 the number of ordinary shares subject to options granted over the 2005 and prior option
schemes were:
EMI options
31 March 2011
31 March 2010
Weighted
average
exercise price
(pence)
Number
Weighted
average
exercise price
(pence)
Number
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Cancelled during the year
Outstanding at the end of the year
1.07
-
-
-
1.07
51,552,031
-
-
-
51,552,031
-
2.75
-
1.15 54,198,000
-
(2,645,969)
-
1.07 51,552,031
The exercise price of EMI options outstanding at the end of the year ranged between 0.9p and 6.28p
(2010: 0.9p and 6.28p) and their weighted average contractual life was 7.3 years (2010: 8.3 years).
Of the total number of EMI options outstanding at the end of the year, 23,709,976 (2010: 23,709,976) had
vested and were exercisable at the end of the year. Their weighted average exercise price was 1.3 pence
(2010: 1.8 pence).
Unapproved options
31 March 2011
Weighted
average
exercise price
(pence)
Number
31 March 2010
Number
Weighted
average
exercise
price
(pence)
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Cancelled during the year
Outstanding at the end of the year
1.18 10,919,617
-
-
-
1.18 10,919,617
-
-
-
1.39
-
4.20
-
1.18
11,756,117
-
(836,500)
-
10,919,617
The exercise price of unapproved options outstanding at the end of the year ranged between 0.9p and 6.28p
(2010: 0.9p and 6.28p) and their weighted average contractual life was 6.3 years (2010: 7.3 years).
Of the total number of unapproved options outstanding at the end of the year, 3,595,097 (2010: 3,595,097)
had vested and were exercisable at the end of the year. Their weighted average exercise price was 1.7
pence (2010: 1.7 pence).
Provexis plc Annual report and accounts 2011
43
Notes to the consolidated financial statements continued
18. Share options (continued)
Grant of options
The fair values of the options have been estimated at the date of grant using a Black-Scholes model, using
the following assumptions:
Tranche
Date of
grant
Exercise
price
Number of
options
pence
1
2
3
4
06-Jun-07
29-Nov-07
26-Aug-08
01-Oct-08
3.38
2.875 17,304,347
2,751,479
0.9 44,166,575
0.9 12,000,000
Share
price at
grant
date
pence
2.75
3.00
0.87
0.725
Expected
volatility
Risk free
rate
Expected
life
Fair value
per share
under
option
78%
65%
65%
65%
4.44%
3.77%
4.45%
4.39%
years
pence
10
10
10
10
1.42
1.06
0.585
0.485
An expected dividend yield of 0% has been used in all of the above valuations.
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.
total charge
The
(2010: £225,909) all of which related to equity settled share-based payment transactions.
to employee share-based payment plans was £69,069
the year relating
for
The Company carried out a share re-organisation on 28 August 2008, which is further detailed in note 17 to
the consolidated financial statements on page 41.
Share options which had been granted prior to 28 August 2008 over existing ordinary shares with a nominal
value of 1p each in the capital of the Company became options over new ordinary shares with a nominal
value of 0.1p each in the capital of the Company. The options remain subject to the same terms as contained
in the individual option contracts under which they were originally granted.
Share options issued after 28 August 2008 are options over new ordinary shares with a nominal value of
0.1p each in the capital of the Company.
Provexis plc Annual report and accounts 2011
44
Notes to the consolidated financial statements continued
19. Reserves
At 1 April 2009
Loss for the year
Share-based
charges
Issue of shares -
exercise of share
options
Issue of shares -
subscription
Issue of shares -
open offer
Warrants
issued
during the year -
equity
financing
facility
At 31 March 2010
Loss for the year
Share-based
charges
Issue of shares -
subscription
At 31 March 2011
Share
premium
reserve
Warrant
reserve
Merger
reserve
Retained
earnings
£
£
£
£
Total
attributable
to equity
holders of the
parent
£
7,979,558
-
-
104,417
4,548,729
1,894,573
-
-
-
-
-
-
6,273,909
-
-
(13,156,578)
(1,648,180)
225,909
1,096,889
(1,648,180)
225,909
-
-
-
-
104,417
4,548,729
1,894,573
-
-
-
-
Non-
controlling
interest
Total
equity
£
£
-
-
-
1,096,889
(1,648,180)
225,909
104,417
4,548,729
1,894,573
-
-
-
-
-
115,980
115,980
115,980
14,527,277
-
-
115,980
-
-
6,273,909
-
-
(14,578,849)
(1,984,206)
69,069
6,338,317
(1,984,206)
69,069
-
(136,459)
-
6,338,317
(2,120,665)
69,069
2,382,373
-
-
-
2,382,373
-
2,382,373
16,909,650
115,980
6,273,909
(16,493,986)
6,805,553
(136,459)
6,669,094
The following describes the nature and purpose of each reserve within total equity:
Share capital
Share premium
Warrant reserve
Merger reserve
Retained earnings
Amount subscribed for share capital at nominal value.
Amount subscribed for share capital in excess of nominal value.
The warrant reserve arose in March 2010 when the Group issued warrants to
Evolution Securities Limited as part of the Equity Financing Facility (see Note 17).
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.
Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income.
20. Pension costs
The pension charge represents contributions payable by the Group to independently administered funds
which during the year ended 31 March 2011 amounted to £37,370 (2010: £31,581). Pension contributions
payable but not yet paid at 31 March 2011 totalled £26,051, in respect of pension contribution entitlements
where employees had not yet provided details of the funds to which the contributions should be made
(2010: £16,368). In addition, pension contributions payable in arrears at 31 March 2011 totalled £ Nil
(2010: £1,189). All unpaid contributions are included in accrued social security costs at the balance
sheet date.
21. Operating lease commitments
Future minimum rentals payable under non-cancellable operating leases are as follows:
Due within 1 year
31 March
2011
£
90,500
90,500
31 March
2010
£
86,500
86,500
Operating lease payments represent rentals payable by the Group for various offices. The leases have
various terms, escalation clauses and renewal rights typical of lease agreements for the class of asset.
Provexis plc Annual report and accounts 2011
45
Notes to the consolidated financial statements continued
22. Related party transactions
On 12 February 2010 the Company announced that it had entered into a Letter of Intent (“LOI”) for its
Fruitflow® technology with DSM Nutritional Products (“DSM”).
The LOI provided a framework for the parties to develop a long-term Alliance Agreement (the “Agreement”),
giving DSM exclusive global rights to Fruitflow®.
On 1 June 2010 the Company announced a long-term Alliance Agreement with DSM Nutritional Products,
which will see the Company collaborate with DSM to develop Fruitflow® in all major global markets. DSM will
invest substantially in the manufacture, technology development, marketing and sale of Fruitflow® in the
coming years. Provexis will continue to contribute scientific expertise and will collaborate in areas such as
cost of goods optimisation and regulatory matters. The financial model is based upon the division of profits
between the two partners on an agreed basis, linked to certain revenue targets, following the deduction of
the cost of goods and a fixed level of overhead from sales. The Company is working closely with DSM in
various areas related to launch planning. It is not possible to determine the financial impact of the Alliance
Agreement at this time.
DSM is classified as a related party of the Group in accordance with IAS 24 as it holds shares in the Group.
Further, K Rietveld is a director of the Company, and a senior employee of DSM. The directors of Provexis
(the "Directors"), having consulted with Evolution Securities Limited ("Evolution Securities"), the Company's
nominated adviser, consider that the terms of the letter of intent and the Alliance Agreement are fair and
reasonable insofar as Provexis's shareholders are concerned. In providing advice to the Directors, Evolution
Securities has taken into account the Directors' commercial assessments.
On 1 June 2011 the Group announced an agreement to commercialise DSM owned intellectual property,
through the development of a new product for the promotion of healthy blood glucose levels.
Key management compensation
The Directors represent the key management personnel. Details of their compensation and share options are
given in note 7 and within the Remuneration report on pages 14 to 18.
23. Post balance sheet events
On 1 June 2011 the Group announced an agreement to commercialise DSM owned intellectual property,
through the development of a new product for the promotion of healthy blood glucose levels.
On 17 June 2011 the Group entered into an agreement to acquire 100% of the issued share capital of SiS
(Science in Sport) Limited, a company which manufactures and sells sports nutrition products for a maximum
consideration of £8m, subject to completion. £7m is payable in cash of which £250,000 is to held in escrow
against claims under the Share Purchase Agreement and related contracts for one year or longer if claims
have been notified but not settled. The balance of the consideration is £1m in Provexis shares, with a lock-in
of two years. The £7m cash consideration will be met by £4.5m from current cash reserves and £2.5m from
a subscription for new shares. The Company intends to undertake an Open Offer to shareholders of the
Company as soon as is reasonably practicable after the completion of the Acquisition.
Completion of the acquisition is dependent on the fulfilment of certain conditions, which had not been met at
the date of approval:
the admission by the London Stock Exchange of the consideration shares to AIM becoming effective
in accordance with the AIM Rules; and
a placing agreement between the Company and Evolution Securities Limited concerning the placing
becoming unconditional in all respects (save for the condition in the placing agreement that the
agreement concerning the Acquisition becomes unconditional).
Since the acquisition agreement entered into on 17 June 2011 is conditional, and completion has therefore
not yet occurred, control is not deemed to have passed to the Company as at the date of approval of the
financial statements and there is therefore no requirement to provide IFRS 3 disclosures in respect of a post
balance sheet acquisition. However, in the interests of full disclosure, we have included those disclosures
for which information is available at the date of approval.
For the financial year ended 31 December 2010, SiS had unaudited turnover of £4.6 million (2009: £4.3
million (unaudited)) and unaudited profit before tax of £0.2 million (2009: £0.4 million (unaudited)). As at 31
December 2010, SiS had unaudited net assets of £0.96 million (2009: £0.8 million (unaudited)).
Provexis plc Annual report and accounts 2011
46
Parent company balance sheet
Company number 05102907
Fixed assets
Investments
Current assets
Debtors - due within one year
Debtors - due after one year
Cash and cash equivalents
Total current assets
Net assets
Notes
3
4
4
5
As at
31 March
2011
£
As at
31 March
2010
£
1,117,336
1,117,336
103,593
10,143,754
7,508,925
17,756,272
115,980
5,285,050
6,979,011
12,380,041
18,873,608
13,497,377
Creditors: amounts falling due after more than one year
6
(2,900,418)
-
Total net assets
15,973,190
13,497,377
Capital and reserves
Share capital
Share premium reserve
Warrant reserve
Retained earnings
Equity shareholders’ funds
8
9
9
9
10
4,812,036
16,909,650
115,980
(5,864,476)
15,973,190
4,723,601
14,527,277
115,980
(5,869,481)
13,497,377
These financial statements were approved and authorised for issue by the Board on 17 June 2011.
The notes on pages 48 to 51 form part of these parent company financial statements.
Stephen Moon
Director
Ian Ford
Director
On behalf of the Board of Provexis plc
Provexis plc Annual report and accounts 2011
47
Notes to the parent company financial statements
1. Accounting policies
The parent company financial statements have been prepared under the historical cost convention and in
accordance with UK GAAP.
Share-based employee remuneration
The Company has no employees however the Company will issue shares to satisfy share awards made by
its subsidiary companies. The Company records a management charge equivalent to the fair value of the
share-based payment incurred by its subsidiaries as disclosed in note 9 on page 51.
Taxation
Current tax, including UK corporation tax is provided at amounts expected to be paid (or recovered) using
the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax balances are recognised in respect of all timing differences that have originated but not
reversed by the balance sheet date, except that the recognition of deferred tax assets is limited to the extent
that the Company anticipates making sufficient taxable profits in the future to absorb the reversal of the
underlying timing differences. Deferred tax balances are not discounted.
Valuation of investments
Investments are stated at cost less any provision for impairment. Profits or losses arising from disposals of
fixed asset investments are treated as part of the result from ordinary activities.
Warrants
The Group has issued warrants to Evolution Securities Limited as part of the Equity Financing Facility. These
are considered to be outside the scope of share-based employee remuneration, and hence out of the scope
of FRS20. These warrants have been measured at fair value at the date of grant using an appropriate
options pricing model. This fair value has been held on the balance sheet within prepayments and in the
warrants reserve within equity. The prepayment will be released against share premium as the equity
financing facility is utilised. The warrants reserve will be released to share premium when the warrants are
exercised. If the warrants lapse then the reserve is transferred to retained earnings.
2. Profit attributable to shareholders
As permitted by Section 408 of the Companies Act 2006 no separate Company profit and loss account has
been included in these financial statements. The Group loss for the year includes a loss after tax of £64,065
(2010: £ Nil) which is dealt with in the financial statements of the Company. The total fees of the Group‟s
auditor, BDO LLP, for services provided are analysed in note 5 to the consolidated financial statements on
page 32. Total fees for the year were £68,896 (2010: £69,500).
The parent company did not have any employees in the year and therefore there were no payroll costs or
pension costs (2010: Nil).
Provexis plc Annual report and accounts 2011
48
Notes to the parent company financial statements continued
3. Investments
Cost
Provision for impairment
Net book value
31 March
2011
£
1,382,919
(265,583)
1,117,336
31 March
2010
£
1,382,919
(265,583)
1,117,336
At 31 March 2011 the Company owned the following material subsidiary undertakings:
Share of issued
ordinary share
capital, and voting
rights
Country of
incorporation and
operation
Business activity
Provexis Nutrition Limited
100%
England and Wales
Provexis Natural Products Limited
100%
England and Wales
Provexis (IBD) Limited
75%
England and Wales
Functional food,
medical food and
dietary supplement
technologies
Functional food,
medical food and
dietary supplement
technologies
Functional food,
medical food and
dietary supplement
technologies
There are no significant restrictions on the ability of subsidiary undertakings to transfer funds to the parent,
other than those imposed by the Companies Act 2006.
4. Debtors
Debtors falling due within one year
Prepayments
Total debtors falling due within one year
Debtors falling due after one year
Amounts owed by subsidiaries
Total debtors falling due after one year
31 March
2011
£
103,593
103,593
10,143,754
10,143,754
31 March
2010
£
115,980
115,980
5,285,050
5,285,050
Total debtors
10,247,347
5,401,030
5. Cash and cash equivalents
Cash at bank and in hand
31 March
2011
£
7,508,925
7,508,925
31 March
2010
£
6,979,011
6,979,011
Provexis plc Annual report and accounts 2011
49
Notes to the parent company financial statements continued
6. Creditors: amounts falling due after one year
Creditors falling due after one year
Amounts owed to subsidiaries
Total creditors falling due after one year
7. Deferred tax
31 March
2011
£
2,900,418
2,900,418
31 March
2010
£
-
-
Deferred tax assets amounting to £227,205 (2010: £153,128) have not been recognised on the basis that
their future economic benefit is not certain.
8. Share capital
Allotted, called up and fully paid
At 31 March 2010
Issued on subscription
At 31 March 2011
At 31 March 2010
Issued on subscription
At 31 March 2011
Allotted, called up and fully paid
At 31 March 2009
Issued on exercise of share options
Issued on subscription
Issued on open offer
At 31 March 2010
At 31 March 2009
Issued on exercise of share options
Issued on subscription
Issued on open offer
At 31 March 2010
Ordinary
0.1p shares
number
Deferred
0.9p shares
number
Total
number
1,108,081,929
88,435,000
1,196,516,929
401,724,366
-
401,724,366
1,509,806,295
88,435,000
1,598,241,295
Ordinary
0.1p shares
£
Deferred
0.9p shares
£
1,108,082
88,435
1,196,517
3,615,519
-
3,615,529
Ordinary
0.1p shares
number
Deferred
0.9p shares
Number
Total
£
4,723,601
88,435
4,812,036
Total
number
819,387,796
3,482,469
200,000,000
85,211,664
1,108,081,929
401,724,366
-
-
-
401,724,366
1,221,112,162
3,482,469
200,000,000
85,211,664
1,509,806,295
Ordinary
0.1p shares
£
Deferred
0.9p shares
£
819,388
3,482
200,000
85,212
1,108,082
3,615,519
-
-
-
3,615,519
Total
£
4,434,907
3,482
200,000
85,212
4,723,601
Details of the share subscriptions, share placings, and the shares issued by the Company during the two
years ended 31 March 2011 are given in note 17 to the consolidated financial statements on pages 40 to 42.
Details on the share option scheme and share based payment charge for the year are given in note 18 to the
consolidated financial statements on page 44.
Provexis plc Annual report and accounts 2011
50
Notes to the parent company financial statements continued
9. Reserves
Share
premium
reserve
£
Warrant
reserve
Retained
earnings
£
£
At 1 April 2010
Retained loss for the year
Share-based charges
Reduction of premium – subscription under EFF
Shares issued during the year - subscription under EFF
At 31 March 2011
14,527,277
-
-
(12,386)
2,394,759
16,909,650
115,980
-
-
-
-
115,980
(5,869,481)
(64,065)
69,070
-
-
(5,864,476)
10. Shareholders’ funds
Reconciliation of movement in shareholders‟ funds.
Loss for year
Share-based payment charge (note 18 – page 44)
Shares issued during the year
Premium on shares issued
Reduction of premium on share issue
Warrants issued during the year - equity financing facility
Net additions to shareholders‟ funds
Opening shareholders‟ funds
Closing shareholders‟ funds
31 March
2011
£
31 March
2010
£
(64,065)
69,070
88,435
2,394,759
(12,386)
-
2,475,813
13,497,377
15,973,190
-
225,909
288,694
6,547,719
-
115,980
7,178,302
6,319,075
13,497,377
11. Related party transactions
The Company has taken advantage of the exemption conferred by Financial Reporting Standard 8 “Related
party disclosures” not to disclose transactions with 100% owned members of the Group headed Provexis plc
on the grounds that 100% of the voting rights of the Company are controlled within that Group and the
Company is included in the consolidated financial statements.
Provexis (IBD) Limited is 75% owned by Provexis plc and 25% owned by Ulive Enterprises Limited. Ulive
Enterprises Limited is 75% owned by The University of Liverpool.
Provexis plc wholly owns Provexis Nutrition Limited and Provexis Natural Products Limited. Provexis
Nutrition Limited, Provexis Natural Products Limited and Provexis (IBD) Limited are under the common
control of Provexis plc.
The Company did not trade with Provexis (IBD) Limited during the year ended 31 March 2011 (2010: Nil). At
31 March 2011 the Company was owed £5,509 by Provexis (IBD) Limited (31 March 2010: owed £5,509).
Provexis (IBD) Limited does not have a bank account, and all its cash accounting transactions during the
year were processed by Provexis plc, and Provexis Natural Products Limited (“Provexis group companies”).
Amounts transacted by Provexis (IBD) Limited with Provexis group companies are charged through inter
company accounts and the net amount transacted during the year was £545,838 (2010: £380,094). Provexis
(IBD) Limited owed Provexis group companies a total of £1,426,593 at 31 March 2011 (31 March 2010:
owed £880,755).
Details of a related party transaction with DSM are given in note 22 to the consolidated financial statements
on page 46.
12. Post balance sheet events
Details of post balance sheet events are given in note 23 to the consolidated financial statements on
page 46.
Provexis plc Annual report and accounts 2011
51
Company information
Company number
05102907
Directors
Audit committee
Remuneration committee
Registrars
Secretary and registered office
C D Buck
N C Bain
K Rietveld
S N Moon
S N Morrison
I Ford
N C Bain
C D Buck
C D Buck
N C Bain
K Rietveld
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
I Ford
Thames Court
1 Victoria Street
Windsor
Berkshire SL4 1YB
Nominated adviser and broker
Evolution Securities Limited
100 Wood Street
London EC2V 7AN
Principal solicitors
Auditors
Shoosmiths
Apex Plaza
Forbury Road
Reading
Berkshire RG1 1SH
BDO LLP
Kings Wharf
20–30 Kings Road
Reading
Berkshire RG1 3EX
Provexis plc Annual report and accounts 2011
52