Provexis plc
Annual report and accounts 2014
Company number 05102907
Contents
1
2
3
5
12
16
19
21
22
23
24
25
55
56
60
About Provexis
Key highlights
Chairman’s statement
Strategic report
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
About Provexis
Provexis Limited was founded in 1999 to commercialise the Fruitflow® anti-thrombotic technology discovered
at the Rowett Research Institute by Professor Asim Dutta Roy.
Provexis plc was listed on the Alternative Investment Market (AIM) in 2005.
Fruitflow® is a patented natural extract from tomatoes which has been shown in human trials to reduce the
propensity for aberrant blood clotting, typically associated with cardiovascular disease, which can lead to heart
attack and stroke. The extract is available in two formats, a syrup and a spray-dried powder and can be
included in a broad range of food, beverage and dietary supplement formats.
In May 2009, the company’s Fruitflow® technology was the first to be substantiated by the European Food
Safety Authority (“EFSA”) under the new Article 13(5) for proprietary and emerging science. In December 2009
the European Commission authorised the health claim “Helps maintain normal platelet aggregation, which
contributes to healthy blood flow”, which was the first wording to be authorised under Article 13(5).
In June 2010 it was announced that the company had entered into a long-term Alliance Agreement with DSM
Nutritional Products to commercialise Fruitflow®, through sales as an ingredient to brand owners in the food,
beverage and dietary supplement categories. The Alliance is seeing the partners collaborate to develop
Fruitflow® in all major global markets, through an effective commercialisation of current formats and pioneering
new and significant applications. DSM is responsible for: manufacturing; marketing; and selling via its
substantial sales force. Provexis is responsible for contributing scientific expertise necessary for successful
commercialisation, and for maintaining and strengthening the breadth and duration of its patent and trade mark
coverage for Fruitflow®, seeking to maximise the commercial returns that can be achieved from the
technology. Profits from the Alliance are being shared by the parties on an agreed basis, linked to various
performance milestones.
Fruitflow® was launched in Europe in November 2010 at the Health Ingredients Europe Conference in Madrid,
where it was awarded the overall award for ‘Most Innovative Health Ingredient’ and won the best innovation in
the ‘Heart Health’ category. The US trade launch was at the Natural Products Expo West in Anaheim in March
2011. In 2012 Fruitflow® was named one of the most innovative products of the year at the Food Ingredients
South America trade show.
Fruitflow® in powder format was officially launched by DSM at the Vitafoods exhibition in Geneva in May 2013.
The powder version is suitable for use in a wide range of products including soft gels, capsules, tablets and
stick packs, enabling manufacturers to target a broader consumer base.
Specialising in functional food and dietary supplements, Provexis has a clear commercial focus to deliver viable
products and scientific intellectual property from the laboratory through to revenue stream.
Provexis plc Annual report and accounts 2014
1
Key highlights
Key highlights
Demerger of Science in Sport, delivering an initial 25% return on Provexis’ original investment, with
shareholders receiving underlying one SiS share for each Provexis share
Restructuring of Company resulting in a low overhead licensing business model
Over 27 regional consumer healthcare brands containing Fruitflow® have now been launched by DSM
customers
An increasing number of further commercial projects have been initiated by the Company’s Alliance partner
DSM with prospective customers, with good prospects for these projects to be launched as consumer
products; interest in the technology exists in all major global markets
Fruitflow® powder for tablets, gel capsules and dietary supplements commercially launched by DSM and
manufacturing plant in place
Revenues from profit sharing Alliance for the period £4k (2013: £37k) largely due to high scale-up costs in
the initial powder manufacturing setup phase, which are now at an end
Cash £515k (2013: £617k) following fundraising of £287k using Equity Financing Facility in September
2013
Further fundraising of £45k using Equity Financing Facility in April 2014
Revenues from continuing operations £4k (2013: £37k).
Key financial results
Underlying operating loss from continuing operations* reduced to £0.58m (2013: £1.17m);
Statutory operating loss from continuing operations £1.02m (2013: £4.27m); statutory profit attributable to
owners of the parent £0.49m (2013: loss of £4.34m). These results are after charging £Nil (2013: £2.78m)
of non-cash amortisation and impairment charges, £Nil (2013: £0.14m) of restructuring costs and a £0.39m
(2013: £0.18m) non-cash share based payment charge.
Cash balance at 31 March 2014 £0.51m (2013: £0.62m).
Basic loss per share from continuing operations 0.06p (2013: 0.27p).
*before impairment and amortisation of intangible assets, share based payments and exceptional costs of £0.44m (2013: £3.10m),
as set out on the face of the Consolidated Statement of Comprehensive Income
Provexis plc Annual report and accounts 2014
2
Chairman’s statement
The past year has seen substantial change and progress across the Group. During the year the Science in
Sport business was demerged from Provexis, delivering an initial 25% return on the original acquisition price,
and the cost base of the legacy Provexis business was significantly reduced. The Company’s Alliance partner
DSM Nutritional Products has continued to develop the market actively for the Company’s novel, patented
Fruitflow® heart-health ingredient in all global markets.
During the first half of the year the Company substantially reduced the running costs of the business. The
Aberdeen R&D facility was closed in April 2013 with a resulting reduction in full time staff costs; the Company
has retained the services of its key R&D officer in a consultancy role.
In August 2013 the demerger of the Company’s Science in Sport business became effective, which lead to
further considerable cost savings for the Group, particularly in respect of staff and other central administrative
expenditure.
The actions taken in 2013 were as envisaged reflected in a 51% reduction in underlying operating loss from
continuing operations for the year, which fell to £0.58m.
We used our equity financing facility to drawdown £287k in September 2013 to bolster the Company’s cash
reserves, with a further £45k drawdown in April 2014 to strengthen the balance sheet further, and help fund
the Company’s patent and trade mark costs for Fruitflow®.
Fruitflow®
The Company’s Alliance partner DSM Nutritional Products has continued to make good progress marketing
Fruitflow®, with 10 new consumer brands having been launched in the year. Over 27 regional consumer
brands worldwide containing our novel, patented technology have been launched since the Alliance Agreement
was signed in 2010.
An increasing number of further commercial projects have been initiated by DSM with prospective customers,
with good prospects for these projects to be launched as consumer products. Interest in the technology exists
in all major global markets.
The powder format of Fruitflow® was officially launched by DSM at Vitafoods in May 2013. The format has
broad potential applications in tablet, gel capsule and dietary supplement products, and interest from potential
customers for this format remains strong.
The Company’s long-term Alliance Agreement with DSM Nutritional Products for Fruitflow® includes a financial
model which is based upon the division of profits between the two partners on an agreed basis, linked to certain
revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales.
DSM has invested substantial resource into establishing a commercial scale supply chain for powder
manufacturing and cost of goods has been high in this start-up phase, on a low volume base, which is typical
for a new ingredient launch. DSM’s manufacturing and technical teams have been highly focused on reducing
Fruitflow® production costs and as manufacturing volume increases unit costs will decrease, enabling more
positive margins and thus profit distributions to Provexis.
The initial powder manufacturing setup phase for Fruitflow® has now been concluded, and a reduction in
Fruitflow® powder production costs was realised towards the close of the quarter ended 30 June 2014.
We collaborated with DSM at the start of the financial year to complete a substantial piece of consumer
research to understand more fully consumer attitudes to Fruitflow® and blood flow, in order to support potential
customers in understanding the key success factors for any new brand launches. The DSM marketing and
sales teams are using the findings from this research to assist their customers with potential brand positioning.
DSM has also been able to assist the Company in the development of its web site.
Provexis plc Annual report and accounts 2014
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Chairman’s statement
Intellectual property
The Company is responsible for filing and maintaining patents and trade marks for Fruitflow® as part of the
Alliance Agreement with DSM. We are pursuing a strategy to strengthen the breadth and duration of our patent
coverage to maximise the commercial returns that can be achieved from the technology. Trade marks were
originally registered in the larger global territories, and new registrations are typically now sought in additional
territories in response to requests from current or prospective DSM customers for Fruitflow®.
In December 2013 British and international patent applications were filed for the use of Fruitflow® in mitigating
exercise-induced inflammation and for promoting recovery from intense exercise, seeking to enhance further
the potential of the technology in the sports nutrition sector.
Trade marks for Fruitflow® have been registered in the EU, US, China, Japan and a further six international
territories, and trade marks have been applied for in a further thirteen territories to support existing and
forthcoming consumer brands across all major global markets.
People
I would like to thank the executive team and our staff and advisors for their high levels of commitment and
professionalism throughout the year.
Outlook
While DSM’s high scale-up related costs of powder manufacturing reduced our share of profits in the year, it
is pleasing to note that a reduction in production costs for Fruitflow® powder was realised after the close of
the financial year. Having capacity in place for the powder format is a strategically important milestone, and
we continue to work closely with DSM to explore all avenues for growing revenues for our novel technology.
The number of international brands containing Fruitflow® continues to steadily increase, with a further 10
consumer brands launched in the year. Over 27 regional consumer brands worldwide have now been
launched, and an increasing number of further commercial projects have been initiated with prospective
customers.
With DSM making good progress in the marketplace it remains our belief that products addressing blood flow
and circulation issues represent a long-term opportunity in the functional food sector. With the Company’s very
low operational costs we are well positioned to drive value for shareholders, and we remain positive about the
outlook for the Fruitflow® business.
Dawson Buck
Chairman
20 August 2014
Provexis plc Annual report and accounts 2014
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Strategic report
The strategic report should be read in conjunction with the Chairman’s statement on pages 3 to 4, the Group’s
financial statements and the Notes to the Group’s financial statements set out on pages 21 to 54.
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”) and
those parts of the Companies Act 2006 that are applicable to financial statements prepared in accordance with
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 55 to 59.
Group strategy
The Group strategy has historically focused on the discovery, development and commercialisation of functional
foods, medical foods and dietary supplements, and in particular the Group’s Fruitflow® technology.
On 1 June 2010 the Company announced that it had entered into a long term Alliance Agreement with DSM
Nutritional Products to commercialise Fruitflow®, through sales as an ingredient to brand owners in the food,
beverage and dietary supplement categories.
The establishment of the Alliance Agreement was a significant milestone in the history of the Company. The
Alliance is seeing the partners collaborate to develop Fruitflow® in all major global markets, through an
effective commercialisation of current formats and pioneering new and significant applications. DSM is
responsible for: manufacturing; marketing; and selling via its substantial sales force. Provexis is responsible
for contributing scientific expertise necessary for successful commercialisation, and for maintaining and
strengthening the breadth and duration of its patent and trade mark coverage for Fruitflow®, seeking to
maximise the commercial returns that can be achieved from the technology. Profits from the Alliance are being
shared by the parties on an agreed basis, linked to various performance milestones.
The directors believed at the time of signing the Alliance Agreement, and still retain the belief, that the
commercialisation of Fruitflow® is best undertaken in conjunction with DSM as it enables Provexis to leverage
the resources and relationships of DSM in the major global markets.
In June 2011 the Group acquired SiS (Science in Sport) Limited, a sports nutrition business focused on the
SiS brand of endurance sports nutrition products., which gave the Group two operating segments, the existing
Fruitflow® business and SiS (Science in Sport) Limited.
Following a strategic review the Board concluded in June 2013 that a demerger of SiS (Science in Sport)
Limited to a new AIM listed company called Science in Sport plc would be in the best interests of shareholders,
as more fully detailed in a circular to shareholders and admission to trading on AIM document for Science in
Sport plc which were issued on 28 June 2013. Copies of the circular and the admission to trading on AIM
document can be downloaded from Provexis plc’s website www.provexis.com.
Pursuant to the terms of the demerger agreement Science in Sport plc allotted and issued to the holders of
ordinary shares in the capital of Provexis plc 15,188,000 ordinary shares of 10 pence each in consideration of
the transfer to Science in Sport plc by Provexis plc of the whole of the issued share capital of SiS (Science in
Sport) Limited. Science in Sport plc was admitted to the AIM segment of the London Stock Exchangeʼs market
for listed securities as from 9 August 2013.
At the date of the demerger, Science in Sport plc acquired the entire issued share capital of SiS (Science in
Sport) Limited in return for issuing shares to the shareholders of Provexis plc.
These transactions resulted in the demerger of SiS (Science in Sport) Limited from the Group.
Following the demerger the Group’s strategic priority is to focus on developing revenues from the Fruitflow®
business together with the Group’s Alliance partner DSM, whilst also managing the relationship with DSM.
Provexis plc Annual report and accounts 2014
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Strategic report
Group strategy (continued)
The Group also seeks to ensure that it fulfils its responsibilities under the Alliance Agreement to include
protecting the intellectual property of Fruitflow® and assisting DSM with scientific work required to further
commercialise the technology. At the same time, the Board remains committed to keeping regular and fixed
costs restricted to an appropriate level, thereby maximising the Group’s profit potential.
The Group continues to maintain the Crohn’s disease intellectual property registered in Provexis (IBD) Limited,
and continues to seek a purchaser for the intellectual property as part of the completion of the R&D
rationalisation phase.
Market opportunity
Fruitflow® is a patented natural extract from tomatoes which has been shown in human trials to reduce the
propensity for aberrant blood clotting, typically associated with cardiovascular disease, which can lead to heart
attack and stroke. The extract is available in two formats, a syrup and a spray-dried powder and can be
included in a broad range of food, beverage and dietary supplement formats.
In May 2009, the company’s Fruitflow® technology was the first to be substantiated by the European Food
Safety Authority (“EFSA”) under the new Article 13(5) for proprietary and emerging science. In December 2009
the European Commission authorised the health claim “Helps maintain normal platelet aggregation, which
contributes to healthy blood flow”, which was the first wording to be authorised under Article 13(5).
The global functional food market is estimated to be in excess of $170 billion per year, and the global market
for cardiovascular disease, to include dietary supplements, is estimated to be in excess of $10 billion per year.
Global awareness of heart health is increasing and a rising number of people are taking a proactive approach
to improving heart health. The directors believe that products addressing blood flow and circulation issues
continue to represent a long-term opportunity in the expanding cardiovascular sector.
Financial review
SiS (Science in Sport) Limited represented a separate major line of business for the Group under the definitions
within IFRS 5, hence the results of SiS (Science in Sport) Limited up to the date of the demerger are shown
as discontinued in these financial statements. Prior year comparatives have been restated as necessary.
The financial review has been prepared on the basis of Group’s continuing operations, as further detailed in
the consolidated statement of comprehensive income on page 21.
Revenue
Revenue from the profit sharing Alliance for Fruitflow® for the year ended 31 March 2014 was £3,967 (2013:
£37,351).
The Company’s long-term Alliance Agreement with DSM Nutritional Products for Fruitflow® includes a financial
model which is based upon the division of profits between the two partners on an agreed basis, linked to certain
revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales.
The reduction in revenue accruing to the Company for the year is primarily due to the high scale-up costs of
the initial powder manufacturing setup phase for Fruitflow®, which increased the cost of goods and reduced
the gross margin, despite an increase in the overall sales of Fruitflow®. DSM’s manufacturing and technical
teams remain highly focused on reducing Fruitflow® production costs, and as manufacturing volume increases
unit costs will decrease, enabling more positive margins and thus profit distributions. The initial powder
manufacturing setup phase for Fruitflow® has now been completed, and a resulting reduction in the cost of
goods was achieved during the quarter ended 30 June 2014.
Underlying operating loss
Underlying operating loss has reduced by 51% to £577,961 (2013: £1,169,267), reflecting the significant
restructuring conducted between 2012 and 2013, and continued progress with Fruitflow®.
The Group has chosen to report underlying operating loss as the directors believe that the operating loss
before amortisation and impairment of acquired goodwill and other intangible assets, share based payments
and exceptional items measure provides additional useful information for shareholders on underlying trends
and performance. A reconciliation of underlying operating loss to statutory operating loss is presented on the
face of the consolidated statement of comprehensive income. This measure is used for internal performance
analysis.
Provexis plc Annual report and accounts 2014
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Strategic report
Underlying operating loss (continued)
The Group’s cost base and its resources have been and will continue to be tightly managed within budgets
approved and monitored by the Board.
Research and development costs
Research and development costs have reduced by 56% to £142,985 (2013: £324,468), also reflecting the
significant restructuring conducted between 2012 and 2013.
Restructuring costs
Restructuring costs of £Nil (2013: £135,787) were incurred during the year. The prior year’s costs primarily
related to staff reductions and all the costs of closing the Group’s facility at the University of Aberdeen, as the
Group sought to reduce its cost base.
Taxation
A current tax credit of £15,823 (2013: £83,087), primarily in respect of research and development tax credits
has been recognised in the financial statements. Tax credit claims totalling £220,717 were paid to the Group
during the year in respect of research and development expenditure for the two years ended 31 March 2013.
Results and dividends
The profit attributable to equity holders of the parent for the year ended 31 March 2014, including discontinued
operations, was £488,353 (2013: loss of £4,338,600) and the basic profit per share was 0.03p (2013: loss of
0.29p). The profit attributable to equity holders of the parent for the year ended 31 March 2014 included a profit
from discontinued operations of £1,434,983 (2013: loss of £221,364) in respect of SiS (Science in Sport)
Limited, which was demerged from the Group in August 2013. The profit from discontinued operations in the
year ended 31 March 2014 includes the profit arising from the demerger itself, as further detailed in note 10.
The directors are unable to recommend the payment of a dividend (2013: £Nil).
Capital structure and funding
Prior to the demerger of SiS (Science in Sport) Limited in August 2013, Provexis plc converted £448,163 of an
intercompany debt from SiS (Science in Sport) Limited into equity by way of a capital contribution.
In August 2013, following the completion of the demerger, SiS (Science in Sport) Limited made payments
amounting to £290,000 to Provexis to settle the remaining outstanding intercompany debt.
On 11 September 2013 the Company announced that it had raised a net £286,750 by drawing down on the
Company’s equity financing facility (the “EFF”) which was arranged by Darwin Strategic Limited (“Darwin”),
allotting 31,000,000 new ordinary shares of 0.1p each to Darwin.
On 19 November 2013 the Company announced that application had been made for the admission to AIM of
1,750,000 ordinary shares of 0.1p each in the Company, pursuant to the exercise of options by former
employees. The Company received net proceeds of £15,750 in respect of this transaction.
On 23 April 2014 the Company announced that it had raised a net £45,403 by drawing down on the Company’s
EFF, allotting 7,000,000 new ordinary shares of 0.1p each to Darwin.
Further details of the EFF agreement and the drawdowns made using the EFF are available to download from
the announcements section of the Company’s website www.provexis.com.
Going concern
The Group’s business activities together with the factors likely to affect its future development, and the financial
position of the Group, its cash flows and liquidity position are set out in the strategic report on pages 5 to 11.
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.
Provexis plc Annual report and accounts 2014
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Strategic report
Going concern (continued)
The Group made a loss for the year from continuing operations of £998,264 (2013: £4,170,342) and expects
to make a further loss during the year ending 31 March 2015. The total cash outflow from continuing operations
in the year was £252,948 (2013: £287,931). At 31 March 2014 the Group had cash balances of £514,827
(2013: £616,612).
The directors have prepared projected cash flow information for a period of more than twelve months from the
date of approval of these financial statements and have reviewed this information as at the date of these
financial statements. The directors have also considered this issue in light of the significant reduction in net
assets following the demerger of the SiS (Science in Sport) Limited business.
The Group has access to future equity financings, either through the Group’s existing equity drawdown facility
with Darwin or through an equity fundraising with the Company’s shareholders, as potential additional sources
of funding.
Based on the level of existing cash, projected income and expenditure, and excluding the potential additional
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.
Key performance indicators
The principal financial KPIs monitored by the Board relate to underlying operating profit/(loss) and cash and
cash equivalents.
The table below shows the Group’s underlying operating loss from continuing operations for the two years
ended 31 March 2014:
Underlying operating loss
Year ended
31 March
2014
£
Year ended
31 March
2013
restated
£
577,961
1,169,267
The £591,306 reduction in underlying operating loss in 2014 was primarily attributable to a reduction in central
administrative costs of £443,207, along with a further £181,483 reduction in R&D costs. The trading results
are further detailed in the strategic report on pages 5 to 11.
The table below shows the Group’s cash position at 31 March 2014 and 31 March 2013:
Cash and cash equivalents
31 March
2014
£
31 March
2013
£
514,827
616,612
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 £101,785 reduction
in cash and cash equivalents during the financial year is primarily the result of the operating cash outflows
arising during the year, as further detailed in the consolidated statement of cash flows on page 23.
At this stage in the Group’s development, the Board does not consider it appropriate to establish an internal
audit function.
Provexis plc Annual report and accounts 2014
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Strategic report
Principal risks and uncertainties
In the course of its normal business the Group is exposed to a range of risks and uncertainties which could
impact on the results of the Group. The Board considers that risk-management is an integral part of good
business process and, on a bi-annual basis, reviews the industry, operational and financial risks facing the
Group and considers the adequacy of the controls and mitigants to manage the risks.
The directors have identified the following principal risks and uncertainties that could have the most significant
impact on the Group’s long-term value generation.
Funding and other risks
Provexis has experienced operating losses from continuing operations in each year since its inception.
Accordingly until Provexis has sufficient commercial success with Fruitflow® to be cash generative it will
continue to rely on its existing cash resources and further funding rounds to continue its activities. While
Provexis aims to generate licensing revenues from Fruitflow®, there is no certainty that such revenues will be
generated. Furthermore, the amount and timing of revenues from Fruitflow® is uncertain and will depend on
numerous factors, most of which are outside Provexis’ control due to the terms of the Alliance Agreement. It
is therefore difficult for the directors to predict with accuracy the timing and amount of any further capital that
may be required by the Provexis Group.
Factors that could increase Provexis’ funding requirements include, but are not limited to: higher operational
costs; slower progress than expected in DSM attracting customers to purchase Fruitflow®; unexpected
opportunities to develop additional products or acquire additional technologies, products or businesses; and
costs incurred in relation to the protection of Provexis’ intellectual property.
Any additional share issues may have a dilutive effect on Provexis Shareholders. Further, there can be no
guarantee or assurance that additional equity funding will be forthcoming when required, nor as to the terms
and price on which such funds would be available, nor that such funds, if raised, would be sufficient to enable
Provexis to meet its working capital requirements.
Early stage of operations
Whilst the Provexis Group has generated small levels of profit share revenue from Fruitflow®, Fruitflow® is
still at an early stage of its commercial development. There are a number of operational, strategic and financial
risks associated with early stage companies and products. The Provexis Group faces risks frequently
encountered by early stage and pre-revenue companies looking to commercialise new (food) technology. In
particular, the future growth and prospects of Provexis will be heavily dependent on its alliance partner, DSM,
in securing product sales on appropriate terms and to attract customers who can produce products that will
maximise the revenue potential of Fruitflow®.
Provexis is heavily dependent on DSM in marketing and selling Fruitflow® to achieve market acceptance,
market penetration and, ultimately, sales of products that contain Fruitflow® in sufficient commercial volumes.
The development of Provexis’ revenues is difficult to predict and there is no guarantee that Provexis will
generate increasing revenues in the foreseeable future. Further there can be no assurance that Provexis’
proposed operations will be profitable or produce a reasonable return on investment.
Commercialisation
Due to the terms of the Alliance Agreement, Provexis is solely dependent on DSM in respect of the
development, production, marketing and commercialisation of Fruitflow®. Fruitflow® is solely reliant on DSM
under the terms of the Alliance Agreement for its commercialisation.
Provexis’ long-term success is fully dependent on the ability of DSM to sell Fruitflow®. Provexis’ negotiating
position with DSM if they choose to vary the Alliance Agreement may be affected by its size and limited cash
resources relative to DSM who have substantial cash resources and established levels of commercial success.
An inability to enter into any discussions with DSM on equal terms could lead to reduced revenue from the
Alliance Agreement and this may have a significant adverse effect on Provexis’ business, financial condition
and results.
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Strategic report
Principal risks and uncertainties (continued)
Commercialisation (continued)
The loss of, or changes affecting, Provexis’ relationships with DSM could adversely affect Provexis’ results or
operations as Provexis has limited input on the sales strategies of Fruitflow® adopted by DSM. Furthermore,
although Provexis has sought to include performance obligations on DSM in the Alliance Agreement, there is
a risk that DSM may reprioritise Fruitflow® within their product portfolio resulting in Provexis achieving sales
below that which it expects. Any such situation may have a material and adverse effect on Provexis’ business,
financial condition and results of operations.
Profitability depends on the success and market acceptance of Fruitflow®
The success of Provexis will depend on the market’s acceptance and valuing of Fruitflow® and there can be
no guarantee that this acceptance will be forthcoming or that Provexis’ technologies will succeed. The
development of a market for Fruitflow® will be affected by many factors, some of which are beyond Provexis’
control, including the emergence of newer, more successful food IP and products and the cost of Fruitflow®.
Notwithstanding the health claims made in respect of Fruitflow®, there can be no guarantee that Provexis’
targeted customer base for the product will purchase or continue to purchase the product. If a market fails to
develop or develops more slowly than anticipated, Provexis may be unable to recover the losses it may have
incurred in the development of Fruitflow® and may never achieve profitability.
Limited product offering
Provexis has only have one product, Fruitflow®, and any problems with the commercial success of Fruitflow®
will impact the financial performance of Provexis. Provexis does not have sufficient funds to develop new
functional food technology or alternative product versions of Fruitflow®.
Intellectual property protection
Provexis is heavily dependent on its intellectual property and, in particular, its patents. No assurance can be
given that any pending patent applications or any future patent applications will result in granted patents, that
any patents will be granted on a timely basis, that the scope of any copyright or patent protection will exclude
competitors or provide competitive advantages to Provexis, that any of Provexis’ patents will be held valid if
challenged, or that third parties will not claim rights in or ownership of the copyright, patents and other
proprietary rights held by Provexis.
Further, there can be no assurance that others have not developed or will not develop similar products,
duplicate any of Provexis’ products or design around any patents held by Provexis. Others may hold or receive
patents which contain claims having a scope that covers products developed by Provexis (whether or not
patents are issued to Provexis).
Provexis may rely on patents to protect its assets. These rights act only to prevent a competitor copying and
not to prevent a competitor from independently developing products that perform the same functions. No
assurance can be given that others will not independently develop or otherwise acquire substantially equivalent
functional food IP or otherwise gain access to Provexis’ unpatented proprietary technology or disclose such
technology or that Provexis can ultimately protect meaningful rights to such unpatented technology.
Once granted, a patent can be challenged both in the patent office and in the courts by third parties. Third
parties can bring material and arguments which the patent office granting the patent may not have seen.
Therefore, issued patents may be found by a court of law or by the patent office to be invalid or unenforceable
or in need of further restriction.
A substantial cost may be incurred if Provexis is required to assert its intellectual property rights, including any
patents or trade marks against third parties. Litigation is costly and time consuming and there can be no
assurance that Provexis will have, or will be able to devote, sufficient resources to pursue such litigation.
Potentially unfavourable outcomes in such proceedings could limit Provexis’ intellectual property rights and
activities. There is no assurance that obligations to maintain Provexis’ know how would not be breached or
otherwise become known in a manner which provides Provexis with no recourse.
Provexis plc Annual report and accounts 2014
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Strategic report
Principal risks and uncertainties (continued)
Intellectual property protection (continued)
Any claims made against Provexis’ intellectual property rights, even without merit, could be time consuming
and expensive to defend and could have a materially detrimental effect on Provexis’ resources. A third party
asserting infringement claims against Provexis could require Provexis to cease the infringing activity and/or
require Provexis to enter into licensing and royalty arrangements. The third party could also take legal action
which could be costly. In addition, Provexis may be required to develop alternative non-infringing solutions that
may require significant time and substantial unanticipated resources. There can be no assurance that such
claims will not have a material adverse effect on Provexis’ business, financial condition or results.
Future development
The future development of the Company is discussed in the Chairmanʼs statement on pages 3 to 4.
Other statutory disclosures
Directors
At the end of the financial year Provexis plc had three directors all of whom were male.
Employees
At the end of the financial year Provexis plc did not have any senior managers, or employees; the directors
are engaged under service contracts with the Company. The Company does not discriminate between
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 to provide a safe and healthy working environment. The Company
complies with relevant health and safety legislation.
Information this report does not contain
As a result of the size and nature of the Companyʼs operations it has not been deemed necessary to provide
information about:
Environmental matters and the impact of the Companyʼs business on the environment.
Social, community and human rights issues.
This strategic report, which has been prepared in accordance with the requirements of the Companies Act
2006, has been approved and signed on behalf of the Board
Ian Ford
Secretary
20 August 2014
Provexis plc Annual report and accounts 2014
11
Directors’ report
The Company has chosen, in accordance with Section 414 C(ii) of the Companies Act 2006, and as noted in
this Directorsʼ report, to include certain matters in its strategic report that would otherwise be required to be
disclosed in this Directorsʼ report. The strategic report can be found on pages 5 to 11.
Provexis plc is a public limited company incorporated and domiciled in the United Kingdom (registration number
05102907). The address of the registered office is Prospect House, Queens Road, Reading, Berkshire RG1
4RP, UK. 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.
Review of the performance of the business and future developments
The Chairman’s statement on pages 3 to 4 and the strategic report on pages 5 to 11 report on the Companyʼs
performance during the year ended 31 March 2014, its position at that date and its likely future development.
Board of Directors
The Board of Directors has overall responsibility for the Group.
The Board comprises an Executive Chairman, an Executive Finance Director and an additional Non-executive
Director K Rietveld, a senior employee of DSM. DSM is classified as a related party of the Group in accordance
with IAS 24 as it holds shares in the Group.
The Directors of Provexis (the "Directors"), having consulted with Cenkos Securities Limited ("Cenkos
Securities"), the Company's nominated adviser, consider that the terms of the Fruitflow® Alliance Agreement
are fair and reasonable insofar as Provexis's shareholders are concerned. In providing advice to the Directors,
Cenkos Securities has taken into account the Directors' commercial assessments.
The directors of the Company during the year and up to the date that the financial statements were approved
are shown below.
Executive Directors
C D Buck
I Ford
S N Moon (resigned 17 December 2013)
Non-executive Directors
K Rietveld
J M Clarke (resigned 9 August 2013)
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.
Going concern
The directors have a reasonable expectation that 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
Companyʼs financial statements. Further detail with regards to the consideration of going concern can be
found in the strategic report on pages 5 to 11.
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.
The auditors, Chantrey Vellacott DFK LLP, have expressed their willingness to continue in office and a
resolution to re-appoint them will be proposed at the next annual general meeting.
Provexis plc Annual report and accounts 2014
12
Directors’ report
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 www.provexis.com 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.
Corporate governance
The Board of directors of Provexis plc is collectively accountable to the Company’s shareholders for the good
corporate governance of the Group. Under the AIM Rules for Companies, the Group is not required to comply
with the UK Corporate Governance Code. However, the Board is aware of best practice as defined by the UK
Corporate Governance Code and will seek to adopt procedures to institute good governance insofar as is
practical and appropriate for a public company of its size and nature.
The Company is subject to the UK City Code on Takeovers and Mergers.
Provexis plc Annual report and accounts 2014
13
Directors’ report
Internal control and risk management
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’
investment and the Group’s assets, as well as reviewing its effectiveness. The system of internal control is
designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material loss and misstatement.
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 key control procedures operating within the Group include, but are not limited to:
1. a comprehensive system of financial budgeting, forecasting and then reporting and reviewing actual
monthly results for the current year against these expectations;
2. a system of operational and financial Key Performance Indicators (“KPIs”), which are reviewed on a
monthly basis;
3. procedures for appraisal, review and authorisation of capital expenditure;
4. properly authorised treasury procedures and banking arrangements;
regular review of materials and services supply agreements; and
5.
regular review of tax, insurance and health and safety matters.
6.
Audit Committee
The Audit Committee comprises the Executive Chairman Dawson Buck and Krijn Rietveld, the Company’s
Non-executive Director. The Committee is chaired by Dawson Buck, and it meets as required and specifically
to consider the suitability and monitor the effectiveness of the internal control processes. 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 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 compliance, corporate finance services and iXBRL compliance
services and undertake work in relation to the interim report. The fees in respect of the non-audit services
provided are £22,000 for the year ended 31 March 2014 (2013: £10,500). The Audit Committee have
considered the non-audit fees agreed with Chantrey Vellacott DFK in respect of the demerger and are satisfied
that that the objectivity and independence of the auditors is safeguarded.
Environmental, social and community matters
As noted in the strategic report on pages 5 to 11 given the size and nature of the Companyʼs operations, the
impact of the Companyʼs operations on the local community and the environment is not considered to be
significant. Recycling of office supplies is undertaken where possible.
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 Chairman and Finance Director
seek to consult 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.
Provexis plc Annual report and accounts 2014
14
Directors’ report
Post balance sheet events
On 23 April 2014 the Group announced that it had raised net proceeds of £45,403 by drawing down on its
Equity Financing Facility with Darwin Strategic Limited.
Under the terms of the Equity Financing Facility agreement the Company allotted 7,000,000 new ordinary
shares of 0.1p each to Darwin Strategic Limited which were admitted to AIM on 29 April 2014.
By order of the Board
Ian Ford
Secretary
20 August 2014
Provexis plc Annual report and accounts 2014
15
Remuneration report
Remuneration Committee: composition and terms of reference
On 17 December 2013 the Company announced that its former CEO Stephen Moon had stepped down from
the Board to focus on the demerged SiS business, leaving Provexis plc with three directors: the former Non-
executive Chairman Dawson Buck, who took up the role of Executive Chairman on Stephen Moon’s departure;
Ian Ford; Finance Director, and Krijn Rietveld, a Non-executive Director and senior employee of DSM.
It was noted in the Company’s demerger circular to shareholders on 28 June 2013 that the Board believed it
was appropriate to reduce further the operating costs of the Provexis Group associated with the Fruitflow®
Business, given that the investment phase of Fruitflow® is complete, in order to minimise the cost of services
supplied under the Alliance Agreement by Provexis, and maximise operating profit as Fruitflow® revenues
develop. The Board believed then, and continues to believe, that this action will maximise Provexis shareholder
value over the short, medium and long term.
The Board resolved in June 2013 to reduce the operating costs of the Fruitflow® business, whilst fully
maintaining its contribution to the Alliance Agreement, and it believes that its obligations towards the Fruitflow®
business can be met with a small team comprising two part-time executives, together with a Non-executive
Director to oversee strategy and governance matters.
Following completion of the demerger Stephen Moon and Ian Ford entered into new agreements with Provexis
that reflect the services required to manage the Fruitflow® business only. In December 2013 when Stephen
Moon stepped down from the Board, Dawson Buck entered into a new agreement with Provexis, reflecting the
change in his role from Non-executive Chairman to Executive Chairman with effect from 17 December 2013.
The Board changes in December 2013 were agreed with some of the Company’s larger shareholders before
they were put into effect, and it was agreed that given the small size of the Board the Group’s Remuneration
Committee would be disbanded, with future remuneration issues to include share options to be primarily
determined in dialogue between the Company and its larger shareholders.
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 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.
Service contracts
The Chairman Dawson Buck is engaged under a contract for services requiring six months’ notice by either
party, and the Finance Director Ian Ford is engaged under a contract for services requiring three months’
notice by either party.
Krijn Rietveld, a Non-executive Director and senior employee of DSM, joined the Board in September 2008
following DSM Venturing B.V.’s investment in the Company as announced on 1 August 2008. Krijn Rietveld is
not paid by Provexis.
Gains made on exercise of directors’ share options
No directors’ share options were exercised during the year (2013: Nil).
Provexis plc Annual report and accounts 2014
16
Remuneration report
Details of directors’ remuneration
The emoluments of the individual directors for the year were as follows:
Year ended
31 March
2014
Executive Directors
C D Buck
I Ford
S N Moon (resigned 17 December 2013)
Non-executive Directors
J M Clarke (resigned 9 August 2013)
K Rietveld
Year ended
31 March
2013
Total
Salary and
directors’
fees
£
45,771
98,912
89,430
Benefits
in kind
Pension
Total
£
-
676
385
£
£
£
-
2,368
3,678
45,771
101,956
93,493
35,000
137,468
211,491
10,428
-
244,541
-
-
1,061
-
-
6,046
10,428
-
251,648
29,000
-
412,959
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
C D Buck
I Ford
S N Moon (resigned 17 December 2013)
Non-executive Directors
J M Clarke (resigned 9 August 2013)
K Rietveld
Directors’ interests in shares
C D Buck
I Ford
S N Moon (resigned 17 December 2013)
Year
ended
31
March
2014
£
16,050
79,522
259,707
62,510
-
417,789
Year
ended
31
March
2013
£
-
41,453
88,087
-
-
129,540
Ordinary shares of
0.1 pence each
Ordinary shares of
0.1 pence each
Beneficial interests
31 March 2014
1 April 2013
12,906,433
2,201,832
-
15,108,265
12,906,433
2,201,832
2,060,666
17,168,931
Other than as shown in the table and as further disclosed in respect of share options in note 21, no director
had any interest in the shares of the Company or its subsidiary companies at 31 March 2014.
Provexis plc Annual report and accounts 2014
17
Remuneration report
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.
The share options held by the directors and not exercised at 31 March 2014 are summarised below.
C D Buck
I Ford
S N Moon (resigned 17 December 2013)
31 March
2014
7,000,000
25,000,000
-
32,000,000
31 March
2013
-
18,000,000
38,117,620
56,117,620
The unapproved share options at 31 March 2014 of the directors who served during the year are set out below:
Grant date
Number
awarded
Exercise
price/share
Earliest
exercise date
C D Buck
I Ford
S N Moon
S N Moon
S N Moon
J M Clarke
June 2013
June 2011
June 2013
June 2011
August 2008
June 2013
7,000,000
6,350,010
5,365,000
17,000,000
7,324,520
7,000,000
50,039,530
0.972p
1.846p
0.972p
1.846p
0.593p
0.972p
April 2016
April 2014
April 2014
April 2014
April 2011
April 2014
Expiry date
June 2023
June 2021
June 2023
June 2021
August 2018
June 2023
The EMI share options at 31 March 2014 of the directors who served during the year are set out below:
Grant date
Number
awarded
Exercise
price/share
Earliest
exercise date
I Ford
I Ford
I Ford
I Ford
S N Moon
S N Moon
S N Moon
S N Moon
June 2013
June 2011
August 2008
August 2008
June 2013
August 2008
August 2008
August 2008
7,000,000
1,649,990
5,000,000
5,000,000
8,635,000
1,117,620
2,675,480
10,000,000
41,078,090
0.972p
1.846p
0.593p
0.593p
0.972p
0.659p
0.593p
0.593p
April 2016
April 2014
April 2011
October 2009
April 2014
August 2008
April 2011
October 2009
Expiry date
June 2023
June 2021
August 2018
August 2018
June 2023
August 2018
August 2018
August 2018
All options were granted with an exercise price at or above market value on the date of grant.
Provexis plc Annual report and accounts 2014
18
Independent auditor’s report to the members of Provexis plc
TO THE MEMBERS OF PROVEXIS PLC
We have audited the financial statements of Provexis plc for the year ended 31 March 2014 which comprise
the consolidated statement of comprehensive income, the consolidated statement of financial position, the
consolidated statement of cash flows, the consolidated statement of changes in equity, the parent company
balance sheet and 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 the 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 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 auditors’ 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 directors' responsibilities statement, 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 Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient
to give reasonable assurance that the financial statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to
the group’s and the parent company's circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial information in
the annual report to identify material inconsistencies with the audited financial statements and to identify any
information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
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 2014 and of the group’s profit 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.
Provexis plc Annual report and accounts 2014
19
Independent auditor’s report to the members of Provexis plc
continued
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the directors’ report and strategic report for the financial year for which
the financial statements are prepared is consistent with the financial statements.
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.
Neil Tustian (Senior Statutory Auditor)
For and on behalf of Chantrey Vellacott DFK LLP,
Chartered accountant and statutory auditor
Reading
20 August 2014
Provexis plc Annual report and accounts 2014
20
Consolidated statement of comprehensive income
Year
ended
31 March
2014
Notes
£
Revenue
Research and development costs
Administrative costs
Underlying operating loss
Amortisation and impairment charges
Costs of demerger of SiS (Science in Sport) Limited
Restructuring costs
Share based payment charges
Loss from continuing operations
Finance income
Loss before taxation
Taxation
1,3
4
11
10
4
21
4
7
8
Year
ended
31 March
2013
restated1
£
37,351
(324,468)
(3,978,719)
(1,169,267)
(2,781,499)
-
(135,787)
(179,283)
3,967
(142,985)
(879,958)
(577,961)
-
(49,824)
-
(391,191)
(1,018,976)
(4,265,836)
4,889
(1,014,087)
12,407
(4,253,429)
15,823
83,087
Loss for the year from continuing operations
(998,264)
(4,170,342)
Discontinued operation
Profit / (loss) for the year from discontinued operation
10
1,434,983
(221,364)
Profit / (loss) and total comprehensive
income / (expense) for the year
Attributable to:
Owners of the parent
Non-controlling interest
Profit / (loss) and total comprehensive
income / (expense) for the year
Earnings / (loss) per share to owners of the parent
From continuing and discontinued operations
Basic - pence
Diluted - pence
From continuing operations
Basic - pence
Diluted - pence
22
22
22
9
9
9
9
436,719
(4,391,706)
488,353
(51,634)
(4,338,600)
(53,106)
436,719
(4,391,706)
0.03
0.03
(0.06)
(0.06)
(0.29)
(0.29)
(0.27)
(0.27)
1 The results for the year ended 31 March 2013 have been restated to reflect the presentation of the SiS (Science in Sport) business as
discontinued in the year.
Provexis plc Annual report and accounts 2014
21
Consolidated statement of financial position
Company number 05102907
Assets
Non-current assets
Intangible assets
Plant and equipment
Deferred tax
Total non-current assets
Current assets
Inventories
Trade and other receivables
Corporation tax asset
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Net current assets
Non-current liabilities
Borrowings
Deferred tax
Total non-current liabilities
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
As at
31 March
2014
£
As at
31 March
2013
£
Notes
11
13
19
14
15
8
16
17
18
18
19
20
22
22
22
22
22
-
-
-
-
-
112,637
15,823
514,827
643,287
6,553,502
634,920
110,348
7,298,770
913,387
1,253,305
288,801
616,612
3,072,105
643,287
10,370,875
(108,212)
-
(108,212)
535,075
-
-
-
(1,787,569)
(64,774)
(1,852,343)
1,219,762
(161,871)
(450,789)
(612,660)
(108,212)
(2,465,003)
535,075
7,905,872
1,554,816
16,183,870
26,200
6,599,174
(23,505,513)
858,547
(323,472)
535,075
5,134,170
20,769,423
60,000
6,599,174
(24,385,057)
8,177,710
(271,838)
7,905,872
These consolidated financial statements were approved and authorised for issue by the Board on 20 August
2014. The notes on pages 25 to 54 form part of these consolidated financial statements.
Ian Ford
Director
On behalf of the Board of Provexis plc
Provexis plc Annual report and accounts 2014
22
Consolidated statement of cash flows
Year
ended
31 March
2014
Notes
£
Year
ended
31 March
2013
restated
£
11
13
(998,264)
(4,170,342)
-
-
9,140
-
(4,889)
(15,823)
391,191
63,177
(225,460)
(780,928)
2,781,499
37,876
35,027
1,556
(12,407)
(83,087)
179,283
(2,914)
(22,083)
(1,255,592)
220,717
(13,133)
162,369
(340,125)
(573,344)
(1,433,348)
-
-
4,763
4,763
(3,037)
(25,545)
12,427
(16,155)
(113,599)
(108,836)
(426,082)
(442,237)
286,750
15,750
302,500
(23,797)
278,703
(252,948)
(150,529)
290,000
11,692
(101,785)
785,447
36,000
821,447
223,345
1,044,792
(287,931)
(542,862)
-
-
(830,793)
Cash flows from operating activities
Loss after tax
Adjustments for:
Amortisation and impairment
Impairment of fixed assets
Depreciation
Loss on sale of fixed assets
Net finance income
Taxation
Share-based payment charge
Changes in trade and other receivables
Changes in trade and other payables
Net cash flow from continuing operations
Tax credits received
Cash flow from discontinued operations
Total cash flow from operations
Cash flow from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Net cash flow from continuing operations
Cash flow from discontinued operations
Total cash flow from investing activities
Cash flow from financing activities
Proceeds from issue of share capital
Proceeds from exercise of share options
Net cash flow from continuing operations
Cash flow from discontinued operations
Total cash flow from financing activities
Net decrease in cash and cash equivalents
- from continuing operations
- from discontinued operations
- add: inter company debt repaid by SiS business at demerger
- add: bank overdraft held by SiS business at demerger
Net decrease in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
16
16
616,612
514,827
1,447,405
616,612
Provexis plc Annual report and accounts 2014
23
Consolidated statement of changes in equity
Share
capital
Share
premium
Warrant
reserve
Merger
reserve
Retained
earnings
£
£
£
£
£
Total equity
attributable
to owners of
the parent
£
Non-
controlling
interests
Total
equity
£
£
At 31 March 2012
5,085,352
19,998,832
60,000
6,599,174
(20,225,740)
11,517,618
(218,732)
11,298,886
Share-based charges
-
-
Issue of shares - share options
exercised 27 April 2012
Issue of shares - equity financing
facility 23 May 2012
Issue of shares - equity financing
facility 3 September 2012
Total comprehensive expense for
the year
4,000
32,000
13,198
230,504
31,620
508,087
-
-
-
-
-
-
-
-
-
-
-
-
179,283
179,283
-
-
-
36,000
243,702
539,707
-
-
-
-
179,283
36,000
243,702
539,707
(4,338,600)
(4,338,600)
(53,106)
(4,391,706)
At 31 March 2013
5,134,170
20,769,423
60,000
6,599,174
(24,385,057)
8,177,710
(271,838)
7,905,872
Share-based charges
Demerger of SiS (Science in Sport)
- issue redeemable shares
-
50,000
-
-
Demerger of SiS (Science in Sport)
- issue SiS cancellation shares
1,518,651
(1,518,651)
Demerger of SiS (Science in Sport)
- redeem redeemable shares
(50,000)
-
Demerger of SiS (Science in Sport)
- transfer to Science in Sport plc
(5,134,170)
(3,370,275)
-
-
-
-
-
Warrants cancelled during the
period - equity financing facility
Warrants issued during the period -
equity financing facility
Issue of shares - equity financing
facility 11 September 2013
Issue of shares - equity financing
facility fee 11 September 2013
Issue of shares - share options
exercised 22 November 2013
Total comprehensive income for
the period
-
-
2,038
(60,000)
-
26,200
31,000
255,750
3,415
31,585
1,750
14,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391,191
391,191
-
-
-
-
-
-
-
-
-
50,000
-
(50,000)
(8,504,445)
(57,962)
26,200
286,750
35,000
15,750
-
-
-
-
-
-
-
-
-
-
391,191
50,000
-
(50,000)
(8,504,445)
(57,962)
26,200
286,750
35,000
15,750
488,353
488,353
(51,634)
436,719
At 31 March 2014
1,554,816
16,183,870
26,200
6,599,174
(23,505,513)
858,547
(323,472)
535,075
Provexis plc Annual report and accounts 2014
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 Prospect House, Queens Road, Reading, Berkshire RG1
4RP, UK.
The main activities of the Group are those of developing and licensing the proprietary, scientifically-proven
Fruitflow® heart-health functional food ingredient for the global functional food sector.
Company reorganisation and demerger
SiS (Science in Sport) Limited was demerged from Provexis plc with effect from 9 August 2013 by way of a
capital reduction demerger and transferred to a newly incorporated parent company, Science in Sport plc.
Pursuant to the terms of the demerger agreement Science in Sport plc allotted and issued to the holders of
ordinary shares in the capital of Provexis plc 15,188,000 ordinary shares of 10 pence each in consideration of
the transfer to Science in Sport plc by Provexis plc of the whole of the issued share capital of SiS (Science in
Sport) Limited. Science in Sport plc was admitted to the AIM segment of the London Stock Exchangeʼs market
for listed securities as from 9 August 2013.
At the date of the demerger, Science in Sport plc acquired the entire issued share capital of SiS (Science in
Sport) Limited in return for issuing shares to the shareholders of Provexis plc.
These transactions resulted in the demerger of SiS (Science in Sport) Limited from the Group.
SiS (Science in Sport) Limited represented a separate major line of business for the Group under the definitions
within IFRS 5, hence the results of SiS (Science in Sport) Limited up to the date of the demerger are shown
as discontinued in these financial statements. Prior year comparatives have been restated as necessary.
Prior to the demerger, Provexis plc converted £448,163 of an intercompany debt from SiS (Science in Sport)
Limited into equity by way of a capital contribution. At the time of the demerger, a payment of £290,000 was
made to Provexis plc to settle the remaining outstanding intercompany debt.
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”) and
those parts of the Companies Act 2006 that are applicable to financial statements prepared in accordance with
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 55 to 59.
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
2014.
There have been no new or amended standards adopted by the Group since the prior financial year.
Provexis plc Annual report and accounts 2014
25
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Basis of preparation (continued)
The following new standards, amendments to standards or interpretations have been issued and are effective
for the year ended 31 March 2014, however, the directors do not expect them to have a material effect on the
Group’s financial statements:
Amendments to IAS 1 – Presentation of Items of Other Comprehensive Income
Amendments to IAS 19 – Employee Benefits
IAS 27 – Separate Financial Statements
IAS 28 – Investments in Associates and Joint Ventures
Amendments to IFRS 7 – Financial Instruments: Disclosures – Offsetting Financial Assets and
Financial Liabilities and IAS 32 (Amended) Financial instruments: Presentation
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 – Fair Value Measurements
Annual Improvements 2009-2011 cycle
Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities:
Transition Guidance
The following new standards, amendments to standards and interpretations have been issued but are not
effective for the year ended 31 March 2014. The new standards, amendments to standards and interpretations
(effective for periods beginning on or after 1 January 2014 unless otherwise stated) 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:
Investment Entities – Amendments to IFRS 10, IFRS 12 and IAS 27
Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)
Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)
IFRS 9 Financial Instruments (effective periods commencing on or after 1 January 2015)
There are a number of standards, interpretations and amendments to published accounts not listed above
which the directors consider not to be relevant to the Group.
Going concern
The Group’s business activities together with the factors likely to affect its future development are set out in
the strategic report on pages 5 to 11. The financial position of the Group, its cash flows and liquidity position
are also set out in the strategic report on pages 5 to 11. 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 from continuing operations of £998,264 (2013: £4,170,342) and expects
to make a further loss during the year ending 31 March 2015. The total cash outflow from continuing operations
in the year was £252,948 (2013: £287,931). At 31 March 2014 the Group had cash balances of £514,827
(2013: £616,612).
The directors have prepared projected cash flow information for a period of more than twelve months from the
date of approval of these financial statements and have reviewed this information as at the date of these
financial statements. The directors have also considered this issue in light of the significant reduction in net
assets following the demerger of the SiS (Science in Sport) Limited business.
The Group has access to future equity financings, either through the Group’s existing equity drawdown facility
with Darwin or through an equity fundraising with the Company’s shareholders, as potential additional sources
of funding.
Based on the level of existing cash, projected income and expenditure, and excluding the potential additional
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.
Provexis plc Annual report and accounts 2014
26
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
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. The direct costs of
acquisition are recognised immediately as an expense.
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 net of sales rebates and excluding VAT and trade discounts.
The accounting policies for the principal revenue streams of the Group are as follows:
(i) Exclusivity arrangements and collaboration 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.
Segment reporting
The Group determines and presents operating segments based on the information that internally is provided
to the Chairman, who is the Group’s ‘chief operating decision maker’ (“CODM”).
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Group’s other components. An operating segment’s operating results are reviewed regularly by the CODM to
make decisions about resources to be allocated to the segment and assess its performance, and for which
discrete financial information is available.
Segment results that are reported to the Group Board include items directly attributable to a segment as well
as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment, and intangible assets.
Provexis plc Annual report and accounts 2014
27
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Use of non-GAAP profit measure – underlying operating profit
The directors believe that the operating loss before amortisation and impairment of acquired intangibles, share
based payments and exceptional items measure provides additional useful information for shareholders on
underlying trends and performance. This measure is used for internal performance analysis. Underlying
operating loss is not defined by IFRS and therefore may not be directly comparable with other companies’
adjusted profit measures. It is not intended to be a substitute for, or superior to IFRS measurements of profit.
Exceptional items are those material items which, by virtue of their size or incidence, are presented separately
in the Statement of Comprehensive Income to give a full understanding of the Group’s underlying financial
performance. Transactions which may give rise to exceptional items include the restructuring of business
activities and acquisitions. A reconciliation of underlying operating profit to statutory operating profit is set out
on the face of the Statement of Comprehensive Income.
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.
For the purposes of assessing impairment, assets are grouped into cash generating units (‘CGU’) being the
lowest levels for which there are separately identifiable cash flows. The recoverable amount of a CGU is the
higher of a CGU’s fair value less costs to sell and value in use.
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.
Website development costs
Website development costs are capitalised to the extent that it is capable of generating direct revenues from
enabling orders to be placed. Costs associated with the planning stage are recognised in the Income
Statement.
Provexis plc Annual report and accounts 2014
28
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-
line basis over their useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or
give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using
appropriate valuation techniques.
In-process research and development programmes acquired in such combinations are recognised as an asset
even if subsequent expenditure is written off because the criteria specified in the policy for research and
development costs above are not met.
The significant intangibles recognised by the Group, their useful economic lives and the methods used to
determine the cost of intangibles acquired in a business combination are as follows:
Intangible asset
Useful economic life
Valuation method
Trademarks
Patents / recipes / formulations
Covenants not to compete
Customer relationships
Website development costs
9.5
4.5 to 9.5
3.0
9.5
5.0
Relief From Royalty Rate Method
Relief From Royalty Rate Method
Comparative Business Valuation
Multi-Period Excess Earnings Method
Historic Cost
Non-current assets held for sale or distribution and disposal groups
Non-current assets and disposal groups are classified as held for sale when, at the year end:
they are available for immediate sale;
-
- management is committed to a plan to sell;
-
-
-
-
it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;
an active programme to locate a buyer has been initiated;
the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and
a sale is expected to complete within 12 months from the date of classification.
Non-current assets and disposal groups classified as held for sale are measured at the lower of:
-
their carrying amount immediately prior to being classified as held for sale in accordance with the Group's
accounting policy; and
fair value less costs to sell.
-
Following their classification as held for sale, non-current assets (including those in a disposal group) are not
depreciated.
The results of operations disposed during the year are included in the consolidated statement of
comprehensive income up to the date of disposal.
A discontinued operation is a component of the Group's business that represents a separate major line of
business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that
has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale.
Discontinued operations are presented in the consolidated statement of comprehensive income as a single
line which comprises the post-tax profit or loss of the discontinued operation along with the post-tax gain or
loss recognised on the re-measurement to fair value less costs to sell or on disposal of the assets or disposal
groups constituting discontinued operations. The cash flows from discontinued operations are also disclosed
as a single-line item in each category of the cash flow statement.
Provexis plc Annual report and accounts 2014
29
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Plant and equipment
Plant and machinery, fixtures, fittings and computer equipment and laboratory equipment are stated at cost
less accumulated depreciation and any accumulated impairment losses. 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:
between 3 and 8 years for motor vehicles, plant and machinery, fixtures, fittings and computer equipment;
and
5 years for laboratory equipment.
Leasehold improvements are depreciated on a straight line basis over the unexpired portion of the lease.
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.
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal
proceeds and the carrying amount of the asset and is recognised in the income statement.
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. Impairment losses on goodwill are not reversed.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated as follows:
Raw materials - cost of purchase on first in, first out basis.
Work in progress and finished goods - cost of raw materials and labour, together with attributable overheads
based on the normal level of activity.
Net realisable value is based on estimated selling price less further costs to completion and disposal. A charge
is made to the income statement for slow moving inventories. The charge is reviewed at each balance sheet
date.
Provexis plc Annual report and accounts 2014
30
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
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’ and ‘borrowings’. These are recognised
initially at fair value and subsequently at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received and the
Group will comply with all attached conditions. Government grants are recognised in the statement of
comprehensive income in the same period to which the costs that they are intended to compensate are
expensed.
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.
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.
Provexis plc Annual report and accounts 2014
31
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
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.
Interest income
Interest income is recognised on a time-proportion basis using the effective interest rate method.
Warrants
The Group has issued warrants to Darwin Strategic Limited as part of the Equity Financing Facility. 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 or
are cancelled 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.
Provexis plc Annual report and accounts 2014
32
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Critical accounting estimates and judgements (continued)
As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. The
directors believe the following to be the key areas of estimation and judgement:
(i) Research and development
Under IAS 38 Intangible Assets, development expenditure which meets the recognition criteria of the standard
must be capitalised and amortised over the useful economic lives of intangible assets from product launch.
(ii) Share-based payments
The Group operates an equity-settled, share-based compensation plan. The charge for share-based payments
is determined based on the fair value of awards at the date of grant partly by use of the Black-Scholes pricing
model which require judgements to be made regarding expected volatility, dividend yield, risk free rates of
return and expected option lives. The inputs used in these pricing models to calculate the fair values are set
out in note 21. An element of the share-based payment charge also relies on certain assumptions over the
future performance of the share price which may not be met or may be exceeded by the time the relevant
awards vest.
(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. Further detail on key assumptions, including growth rates, discount rates and the time
period of these value in use calculations is given in note 12.
The Group prepares and approves formal five year management plans for its operations, which are used in
the value in use calculations. In certain cases the fifth year of the management plan is not indicative of the
long- term future performance as operations may not have reached maturity. In this case management extends
the plan data for a longer period.
(iv) Fair value of identifiable net assets acquired
Upon acquisition of a business, its identifiable assets and liabilities are assessed to determine their fair value.
The values attributed to assets and liabilities as part of this process are, where appropriate, based on market
values identified for equivalent assets, together with management’s experience and assessments including
comparison to the carrying value of assets of a similar condition and age in the existing business.
(v) Valuation of inventories
Inventories are valued at the lower of cost and net realisable value. Cost comprises direct materials, labour
and, where appropriate, overheads that have been incurred in bringing the inventory to its present location and
condition. Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
(vi) Useful economic lives of intangible and tangible assets
In relation to the Group’s finite life intangible assets and property, plant and equipment, useful economic lives
and residual values of assets have been established using historical experience and an assessment of the
nature of the assets involved. Assets are assessed on an ongoing basis to determine whether circumstances
exist that could lead to potential impairment of the carrying value of such assets.
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.
Provexis plc Annual report and accounts 2014
33
Notes to the consolidated financial statements continued
2.1 Financial risk factors (continued)
(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 £108,212 (2013:
£1,787,569) as disclosed in note 17.
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. 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.
Provexis plc Annual report and accounts 2014
34
Notes to the consolidated financial statements continued
3. Segmental reporting
Following the demerger of SiS (Science in Sport) Limited in August 2013 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 Group’s reporting segment is determined based on the Group’s internal reporting to the Chief
Operating Decision Maker (CODM). The CODM has been determined to be the Chairman of the Board of
Directors as he is primarily responsible for the allocation of resources to segments and the assessment of
performance of the segments.
The CODM uses underlying operating profit/(loss) as the key measure of the segments’ results as it reflects
the segments’ underlying trading performance for the financial period under evaluation.
Underlying operating profit/(loss) is a consistent measure within the Group which measures the performance
of the segment before goodwill and acquired intangible asset amortisation and impairment, share based
payment charges, restructuring charges and acquisition costs arising from acquisitions.
The results of the former SiS segment for the period up to the demerger can be seen in note 10.
4. Loss from continuing operations
Loss from continuing operations is stated after charging:
Depreciation of plant and equipment
Amortisation and impairment of intangible assets
Research and development costs
Foreign exchange gains
Costs of demerger of SiS (Science in Sport) Limited
Restructuring costs
Loss on disposal of property, plant and equipment
Grant income
Operating lease costs - land and buildings
Equity-settled share based payment expense
Defined contribution pension expense
Year ended
31 March
2014
£
Year ended
31 March
2013
restated
£
9,140
-
142,985
(603)
49,824
-
-
-
12,266
391,191
7,624
35,027
2,781,499
324,468
(1,191)
-
135,787
1,556
(3,000)
57,568
179,283
1,552
Restructuring costs of £135,787 were incurred in 2013 as part of the closure of the group’s R&D facility at the
University of Aberdeen, along with other reductions in group administrative headcount.
Provexis plc Annual report and accounts 2014
35
Notes to the consolidated financial statements continued
4. Loss from continuing operations (continued)
The total fees of the Group’s auditor, for services provided are analysed below:
Chantrey Vellacott DFK
Year ended
Year ended
31 March
31 March
2014
2013
£
£
BDO LLP
Year ended
31 March
2014
£
Year ended
31 March
2013
£
Audit services
Parent company
Subsidiaries
Tax services - compliance
Parent company
Subsidiaries
Other services
iXBRL services
Review of interim statement
Corporate finance
- demerger of SiS (Science in Sport)
13,000
12,000
15,000
24,500
2,000
3,000
2,000
-
15,000
2,500
6,000
2,000
-
-
Total fees
47,000
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
5,000
-
5,000
The Group engaged Chantrey Vellacott DFK LLP to assist the Group with the demerger of SiS (Science in
Sport) Limited from the Provexis Group to a new company called Science in Sport plc. Science in Sport plc
engaged Chantrey Vellacott DFK to assist it with the admission of its entire issued and to be issued ordinary
share capital to trading on AIM on 9 August 2013.
Further information on the demerger and admission of Science in Sport plc to AIM can be found in the circular,
and admission to trading on AIM document, which were issued on 28 June 2013. Copies of the circular and
the admission to trading on AIM document can be downloaded from Provexis plc’s website www.provexis.com.
5. Wages and salaries
The average monthly number of persons (including all directors) employed by the Group during the year for
continuing operations was as follows:
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
Year ended
31 March
2014
Year ended
31 March
2013
restated
-
4
4
3
4
7
Year ended
31 March
2014
£
289,307
23,960
11,476
324,743
(28,343)
391,191
687,591
Year ended
31 March
2013
restated
£
673,253
75,486
7,181
755,920
(5,066)
179,283
930,137
Provexis plc Annual report and accounts 2014
36
Notes to the consolidated financial statements continued
6. Directors’ remuneration
Directors
Aggregate emoluments
Company pension contributions
Share based payment remuneration charge: equity settled
Total Directors’ emoluments
Year ended
31 March
2014
£
Year ended
31 March
2013
£
245,600
6,046
251,646
417,789
669,435
396,490
16,469
412,959
129,540
542,499
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
2014
£
Year ended
31 March
2013
£
89,814
3,678
259,707
353,199
201,473
10,018
88,087
299,578
During the year, two directors (2013: two 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 16 to 18.
7. Finance income
Finance income
Bank interest receivable
Year ended
31 March
2014
£
Year ended
31 March
2013
restated
£
4,889
4,889
12,407
12,407
Provexis plc Annual report and accounts 2014
37
Notes to the consolidated financial statements continued
8. 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
2014
£
15,823
-
15,823
Year ended
31 March
2013
restated
£
65,740
17,347
83,087
The tax assessed for the year is different from the standard rate of corporation tax in the UK. The differences
are explained below:
Year ended
31 March
2014
£
Year ended
31 March
2013
restated
£
Loss before tax
1,014,087
4,253,429
Loss before tax multiplied by the
standard rate of corporation tax in the UK of 23% (2013: 24%)
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
Additional deduction for R&D expenditure
Surrender of tax losses for R&D tax credit refund
Share scheme deduction
Adjustments in respect of prior years
Total tax credit for the year
233,240
1,020,823
(535)
(2,102)
(89,974)
(130,271)
18,380
(17,262)
4,347
-
15,823
(43,491)
(17,564)
(661,853)
(255,246)
79,752
(77,692)
21,011
17,347
83,087
At 31 March 2014 the Group UK tax losses to be carried forward are estimated to be £17,833,920 (2013:
£17,622,991).
The rate change from 23% to 21% had been substantively enacted by the balance sheet date, so deferred tax
is provided for at a rate of 21%.
Income tax asset receivable within one year
Corporation tax recoverable
31 March
2014
£
15,823
15,823
31 March
2013
£
288,801
288,801
Provexis plc Annual report and accounts 2014
38
Notes to the consolidated financial statements continued
9. Earnings per share and diluted earnings per share
Basic earnings per share amounts are calculated by dividing the profit attributable to owners of the parent by
the weighted average number of ordinary shares in issue during the financial year.
Diluted earnings per share amounts are calculated by dividing the profit attributable to owners of the parent by
the weighted average number of ordinary shares in issue during the financial year adjusted for the effects of
potentially dilutive options. The dilutive effect is calculated on the full exercise of all potentially dilutive ordinary
share options granted by the Group.
Year ended 31 March 2014
Basic
Potentially
dilutive
share options
and warrants
Diluted
Basic
Year ended 31 March 2013
Potentially
dilutive
share options
and warrants
Diluted
Profit / (loss) - £
Continuing operations
Discontinued operations
Total operations
attributable to owners
(946,630)
1,434,983
488,353
-
-
-
(946,630)
(4,117,236)
1,434,983
(221,364)
488,353
(4,338,600)
-
-
-
(4,117,236)
(221,364)
(4,338,600)
Share options
Warrants
Weighted average
number of shares
-
-
110,640,510
10,000,000
-
-
-
-
90,071,648
10,000,000
-
-
1,537,655,373
120,640,510
1,658,295,883
1,502,924,005
100,071,648
1,602,995,653
Earnings / (loss) per share (pence)
Continuing operations
Discontinued operations
Total
(0.06)
0.09
0.03
0.00
0.00
0.00
(0.06)
0.09
0.03
(0.27)
(0.02)
(0.29)
0.00
0.00
0.00
(0.27)
(0.02)
(0.29)
There have been no transactions involving ordinary shares between the reporting date and the date of approval
of these financial statements which would significantly change the earnings per share calculations shown
above.
The earnings per share for continuing operations do not include potentially dilutive share options and warrants
on the basis that the continuing operations made a loss.
Provexis plc Annual report and accounts 2014
39
Notes to the consolidated financial statements continued
10. Discontinued operations
SiS (Science in Sport) Limited , which was acquired by Provexis plc in June 2011, was demerged from Provexis
with effect from 9 August 2013 by way of a capital reduction demerger and transferred to a newly incorporated
parent company, Science in Sport plc.
The Company incurred certain demerger costs as part of this process:
Costs of demerger of SiS (Science in Sport) Limited
Year ended
31 March
2014
£
49,824
Year ended
31 March
2013
restated
£
-
Pursuant to the terms of the demerger agreement Science in Sport plc allotted and issued to the holders of
ordinary shares in the capital of Provexis plc 15,188,000 ordinary shares of 10 pence each in consideration of
the transfer to Science in Sport plc by Provexis plc of the whole of the issued share capital of SiS (Science in
Sport) Limited. Science in Sport plc was admitted to the AIM segment of the London Stock Exchangeʼs market
for listed securities as from 9 August 2013.
At the date of the demerger, Science in Sport plc acquired the entire issued share capital of SiS (Science in
Sport) Limited in return for issuing shares to the shareholders of Provexis plc.
These transactions resulted in the demerger of SiS (Science in Sport) Limited from the Group.
SiS (Science in Sport) Limited represented a separate major line of business for the Group under the definitions
within IFRS 5, hence the results of SiS (Science in Sport) Limited up to the date of the demerger are shown
as discontinued in these financial statements. Prior year comparatives have been restated as necessary. There
is no impact on the prior year balance sheet.
Prior to the demerger, Provexis plc converted £448,163 of an intercompany debt from SiS (Science in Sport)
Limited into equity by way of a capital contribution. At the time of the demerger, a payment of £290,000 was
made to Provexis plc to settle the remaining outstanding intercompany debt.
The disclosures below relate to the SiS (Science in Sport) Limited demerged business segment.
a) The results of SiS (Science in Sport) Limited before demerger were as follows:
Revenue
Cost of goods
Gross profit
Research and development costs
Administrative costs
Underlying operating profit
Amortisation and impairment charges
Restructuring costs
Profit / (loss) from operations
Finance income
Finance costs
Profit / (loss) before taxation
Taxation
Loss and total comprehensive expense for the period
Period
ended
8 August
2014
£
2,617,857
(1,096,643)
1,521,214
(57,571)
(1,449,638)
147,962
(101,576)
(32,381)
14,005
26
(2,214)
11,817
20,663
32,480
Year
ended
31 March
2013
£
5,522,240
(2,418,177)
3,104,063
(151,085)
(3,343,966)
74,330
(286,735)
(178,583)
(390,988)
-
(3,275)
(394,263)
172,899
(221,364)
The results of discontinued operations were previously recorded in the SiS segment, see also note 3.
Provexis plc Annual report and accounts 2014
40
Notes to the consolidated financial statements continued
10. Discontinued operations (continued)
b) Income tax relating to the SiS (Science in Sport) Limited business is as follows:
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
United Kingdom corporation tax - other adjustments
Total current tax income
Deferred tax
Origination and reversal of temporary differences
Tax on loss for the year
4 months
ended
8 August
2014
£
Year
ended
31 March
2013
£
-
-
-
-
20,663
20,663
-
39,950
67,267
107,217
65,682
172,899
c) The profit from discontinued operations shown in the income statement is made up as follows:
Profit in the financial period up to demerger of the discontinued business
Dividend in specie, at fair value - 1,518,650,979 shares at 0.56 pence
Net assets of SiS (Science in Sport) Limited business demerged
SiS intercompany debt converted into equity by way of a capital contribution
Intangible assets - goodwill at net book value
Intangible assets - other fair value adjustments on acquisition
Deferred tax
Profit for the year from discontinued operation
Year
ended
31 March
2014
£
32,480
8,504,445
(775,799)
(448,163)
(4,437,991)
(1,870,115)
430,126
1,434,983
The value of the dividend in specie represents the fair value of SiS (Science in Sport) Limited, which has been
derived from the placing price of Science in Sport plc at the time of the demerger, on admission.
Provexis plc Annual report and accounts 2014
41
Notes to the consolidated financial statements continued
11. Intangible assets
Goodwill
Development
costs
Trademarks
£
£
£
Patents /
recipes /
formulations
£
Covenants
not to
compete
£
Customer
relationships
£
Website
development
costs
£
Total
£
11,703,268
-
(4,437,991)
158,166
-
1,004,029
-
180,886
-
22,480
-
1,228,696
-
174,999
7,172
14,472,524
7,172
-
(1,004,029)
(180,886)
(22,480)
(1,228,696)
(182,171)
(7,056,253)
7,265,277
158,166
-
-
-
-
-
7,423,443
7,265,277
-
158,166
-
186,714
35,229
47,691
8,999
13,238
2,498
228,495
43,112
19,441
11,738
7,919,022
101,576
-
-
(221,943)
(56,690)
(15,736)
(271,607)
(31,179)
(597,155)
7,265,277
158,166
At 31 March 2013
4,437,991
-
-
-
-
-
-
-
-
-
-
-
-
-
7,423,443
-
817,315
133,195
9,242
1,000,201
155,558
6,553,502
11,642,165
61,103
11,703,268
132,621
25,545
158,166
1,004,029
-
1,004,029
180,886
-
180,886
22,480
-
22,480
1,228,696
-
1,228,696
9,514
165,485
174,999
14,220,391
252,133
14,472,524
4,603,398
-
2,661,879
7,265,277
38,546
-
119,620
158,166
81,027
105,687
-
186,714
20,696
26,995
-
47,691
5,745
7,493
-
13,238
99,158
129,337
-
228,495
2,218
17,223
-
19,441
4,850,788
286,735
2,781,499
7,919,022
At 31 March 2012
7,038,767
94,075
4,437,991
-
817,315
923,002
133,195
160,190
9,242
1,000,201
155,558
6,553,502
16,735
1,129,538
7,296
9,369,603
Cost
At 1 April 2013
Additions
Demerger of SiS
(Science in Sport)
At 31 March 2014
Amortisation and
impairment
At 1 April 2013
Charge for year
Demerger of SiS
(Science in Sport)
At 31 March 2014
Net book value
At 31 March 2014
Cost
At 1 April 2012
Additions
At 31 March 2013
Amortisation and
impairment
At 1 April 2012
Charge for year
Impairment
At 31 March 2013
Net book value
At 31 March 2013
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 2014
42
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. The consolidated balance
sheet of the Group at the start of the prior year included goodwill relating to two cash generating units (CGUs),
Provexis, in respect of Fruitflow®, and SiS.
SiS (Science in Sport) Limited, which was acquired by Provexis plc in June 2011, was demerged from Provexis
by way of a capital reduction demerger with effect from 9 August 2013 and the goodwill arising on the cost of
its acquisition in 2011 was reversed as part of the demerger.
For the Provexis CGU, a total non cash impairment loss of £2,781,499 was recognised in the year ended 31
March 2013, made up of the existing £2,661,879 carrying value of the Provexis CGU, and the related £119,620
of intangible assets, in respect of previously capitalised intangible development costs. At the time the
impairment loss was recognised the proposed demerger of SiS (Science in Sport) Limited remained conditional
inter alia upon the approval of the Company’s shareholders at a General Meeting, and the confirmation of the
Company’s reduction of capital by the Court, hence for the purposes of IAS 36 it amounted to a future
restructuring to which an entity was not yet committed.
The carrying amount of goodwill is allocated to the CGUs as follows:
Goodwill carrying amount
Year ended 31 March 2014
£
Year ended 31 March 2013
£
Provexis
SiS
Total
Provexis
SiS
Total
At start of year
Additions
Impairment charge for year
Demerger of SiS
(Science in Sport)
At end of year
-
-
-
-
-
4,437,991
-
-
4,437,991
-
-
2,661,879
-
(2,661,879)
4,376,888
61,103
-
7,038,767
61,103
(2,661,879)
(4,437,991)
(4,437,991)
-
-
-
-
-
-
4,437,991
4,437,991
Under IAS 36 the reversal of an impairment loss for goodwill is prohibited.
Provexis plc Annual report and accounts 2014
43
Notes to the consolidated financial statements continued
13. Plant and equipment
Leasehold
improvements
£
Fixtures,
fittings,
plant and
equipment
£
Laboratory
equipment
Motor
vehicles
Total
£
£
£
230,956
-
659,045
106,453
147,145
-
11,527
-
1,048,673
106,453
(230,956)
(691,402)
-
(11,527)
(933,885)
-
74,096
147,145
-
221,241
58,706
16,409
198,528
54,702
147,145
-
9,374
1,722
413,753
72,833
(75,115)
(179,134)
-
(11,096)
(265,345)
-
-
74,096
147,145
-
-
-
-
-
221,241
-
2,153
634,920
172,250
460,517
Leasehold
improvements
£
219,247
11,709
-
230,956
10,706
48,000
-
-
58,706
Fixtures,
fittings,
plant and
equipment
£
410,395
251,925
(3,275)
659,045
90,699
109,548
-
(1,719)
198,528
Laboratory
equipment
Motor
vehicles
Total
£
£
£
147,145
-
-
147,145
84,270
24,999
37,876
-
147,145
11,527
-
-
11,527
788,314
263,634
(3,275)
1,048,673
4,209
5,165
-
-
9,374
2,153
7,318
189,884
187,712
37,876
(1,719)
413,753
634,920
598,430
Cost
At 1 April 2013
Additions
Demerger of SiS
(Science in Sport)
At 31 March 2014
Depreciation
At 1 April 2013
Charge for the year
Demerger of SiS
(Science in Sport)
At 31 March 2014
Net book value
At 31 March 2014
At 31 March 2013
Cost
At 1 April 2012
Additions
Disposals
At 31 March 2013
Depreciation
At 1 April 2012
Charge for the year
Impairment - site closure
Disposals
At 31 March 2013
Net book value
At 31 March 2013
At 31 March 2012
172,250
208,541
460,517
319,696
-
62,875
The carrying amount of fixtures, fittings, plant and equipment includes an amount of £Nil (2013: £245,266) in
respect of assets held under an asset loan agreement.
Provexis plc Annual report and accounts 2014
44
Notes to the consolidated financial statements continued
14. Inventories
Raw materials
Finished goods
31 March
2014
£
-
-
-
31 March
2013
£
503,093
410,294
913,387
During the year inventories of £816,438 (2013: £1,746,504) were recognised as an expense within cost of
sales in discontinued operations.
15. Trade and other receivables
Amounts receivable within one year:
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables - net
Other receivables
Total financial assets other than cash
and cash equivalents classified as loans and receivables
Prepayments and accrued income
Total trade and other receivables
31 March
2014
£
31 March
2013
£
-
-
-
33,207
33,207
79,430
112,637
755,106
(32,233)
722,873
124,615
847,488
405,817
1,253,305
Trade receivables represent debts due for the sale of goods to customers. The provision for impairment of
receivables is estimated by the Group’s management based on prior experience.
The balance at 31 March 2014 of £112,637 is £1,140,668 less than the prior year due predominantly to the
demerger of SiS (Science in Sport) Limited in August 2013.
Trade receivables are denominated in Sterling. The directors consider that the carrying amount of these
receivables approximates to their fair value. Trade and other receivables are categorised as loans and
receivables under IAS 39.
All amounts shown under receivables fall due for payment within one year.
The Group does not hold any collateral as security.
As at 31 March 2014 trade receivables of £Nil (2013: £125,319) were past due but not impaired. They relate
to customers with no default history. The ageing analysis of these receivables is as follows:
Up to 3 months
31 March
2014
£
-
-
31 March
2013
£
125,319
125,319
As at 31 March 2014 trade receivables of £Nil (2013: £32,233) were past due and impaired. The amount of
the provision as at 31 March was £Nil (2013: £32,233).
Provexis plc Annual report and accounts 2014
45
Notes to the consolidated financial statements continued
15. Trade and other receivables (continued)
Movements on the group provision for impairment of trade receivables are as follows
At beginning of the year
Provided during the year
Unused amounts reversed
Demerger of SiS (Science in Sport) Limited
31 March
2014
£
31 March
2013
£
32,233
2,000
-
(34,233)
-
32,101
5,750
(5,618)
-
32,233
The movement on the provision for impaired receivables has been included in administrative expenses within
discontinued operations in the consolidated statement of comprehensive income.
Other classes of financial assets included within trade and other receivables do not contain impaired assets.
16. Cash and cash equivalents
Cash at bank and in hand
17. Trade and other payables
Trade payables
Other payables
Accruals
Total financial liabilities measured at amortised cost
Other taxes and social security
Total trade and other payables
31 March
2014
£
514,827
514,827
31 March
2013
£
616,612
616,612
31 March
2014
£
31 March
2013
£
19,028
-
85,313
104,341
3,871
108,212
929,939
109,171
680,805
1,719,915
67,654
1,787,569
The directors consider that the carrying amount of these liabilities approximates to their fair value.
All amounts shown fall due within one year.
18. Borrowings
Secured borrowings at amortised cost
Asset loan agreement at fixed rate
Amounts due for settlement within 12 months
Amounts due for settlement after 12 months
31 March
2014
£
31 March
2013
£
-
-
-
-
-
226,645
226,645
64,774
161,871
226,645
The asset loan agreement at 31 March 2013 was provided in September 2012 by HSBC Asset Finance (UK)
Limited for SiS (Science in Sport) Limited, and it ceased to be a liability of the Provexis Group when SiS
(Science in Sport) Limited was demerged from Provexis in August 2013.
Provexis plc Annual report and accounts 2014
46
Notes to the consolidated financial statements continued
19. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 21%
(2013: 23%).
Details of the deferred tax asset and liability are as follows:
Asset
2014
£
Liability
2014
£
Net
2014
£
Asset
2013
£
Liability
2013
£
Net
2013
£
Business combinations
Available losses
Net tax assets / (liabilities)
-
-
-
-
-
-
-
-
-
-
110,348
110,348
(450,789)
-
(450,789)
(450,789)
110,348
(340,441)
No amounts in respect of deferred tax were recognised in the income statement from continuing operations
or charged / credited to equity for the current or prior year.
At 31 March 2014 a deferred tax asset of £Nil (2013: £110,348) was recognised in respect of tax losses in SiS
and other temporary differences giving rise to deferred tax assets where the directors believed it was probable
that these assets would be recovered. The directors made this assessment based on the evidence available
from projected budgets, forecasts of profitability and post year end profitability of the entity.
Deferred tax assets amounting to £3,789,701 (2013: £4,030,256) have not been recognised on the basis that
their future economic benefit is not certain. Assuming a prevailing tax rate of 21% (2013: 23%) 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
Year ended
31 March
2014
£
Year ended
31 March
2013
£
22,981
1,540
3,745,123
20,057
3,789,701
23,068
1,540
3,922,672
82,976
4,030,256
Provexis plc Annual report and accounts 2014
47
Notes to the consolidated financial statements continued
20. Share capital
On 11 September 2013 the Company announced that it had signed a new 5 year Equity Financing Facility
(“EFF”) with Darwin Strategic Limited (“Darwin”). The new facility, which is up to £10m, replaced the Company's
existing EFF and warrant agreements with Darwin, dated 7 November 2011, which have accordingly been
cancelled.
The new EFF agreement, dated 10 September 2013, provides the Company with a facility which (subject to
certain limited restrictions) can be drawn down at any time over the 5 years ending on 9 September 2018. 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 Darwin. Following delivery of a subscription notice, Darwin will subscribe and
Provexis will allot to Darwin new ordinary shares of 0.1p each (“Ordinary Shares”).
The subscription price for any Ordinary Shares to be subscribed by Darwin 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.
EFF fee and warrant reserve
In consideration of Darwin agreeing to provide the EFF the Company agreed to:
(i)
(ii)
Pay a fee to Darwin amounting to approximately £35,000 by way of an issue of 3,414,635 fully paid
Ordinary Shares, at a gross 1.025p per share. The contingent fee amounting to a maximum of
£125,000 payable under the 7 November 2011 Equity Financing Facility was cancelled.
Enter into a new warrant agreement dated 10 September 2013 for the grant to Darwin of warrants to
subscribe for up to ten million Ordinary Shares, such warrants to be exercisable at a price of 4.44
pence per share and to be exercisable at any time prior to the expiry of five years following the date
of the new warrant agreement. The ten million warrants issued to Darwin in conjunction with the
September 2011 EFF were cancelled.
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
11-Sep-13
4.44 10,000,000
0.915
75%
0.79%
5
0.262
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, £26,200, 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.
Darwin 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 Darwin and
affiliated persons.
Provexis plc Annual report and accounts 2014
48
Notes to the consolidated financial statements continued
20. Share capital (continued)
Share re-organisation and reduction of capital
In August 2013, following a general meeting held on 15 July 2013, the Company undertook a share re-
organisation and reduction of capital to facilitate the demerger of SiS (Science in Sport) Limited.
The demerger was effected by Provexis returning to Provexis shareholders capital in an amount equal to the
market value of the ordinary shares of £1 each in the capital of SiS (Science in Sport) Limited as at 9 August
2013, the demerger effective date. The return of capital to Provexis shareholders was satisfied by the transfer
by Provexis to Science in Sport plc of SiS (Science in Sport) Limited’s ordinary shares of £1 each, and the
allotment and issue of Science in Sport plc ordinary shares credited as fully paid to the holders of Provexis
ordinary shares who were registered on the Provexis share register at 5.00 p.m. on 6 August 2013, the
demerger record time, in accordance with the terms of the demerger agreement.
This involved:
(i)
(ii)
(iii)
the allotment and issue of Science in Sport Cancellation Shares credited as fully paid;
the cancellation of the Company’s existing 0.9p deferred shares of £3.6 million, followed by the
cancellation of the Science in Sport Cancellation Shares and the reduction of Provexis’ share premium
account, which amounted to £8.5 million in aggregate;
the return of capital by Provexis to Provexis shareholders of an amount equal to the market value of
the SiS (Science in Sport) Limited ordinary shares of £1 each. The return of capital to Provexis
shareholders was satisfied by the transfer by Provexis to Science in Sport plc of the SiS (Science in
Sport) Limited ordinary shares of £1 each held by Provexis, and the allotment and issue of Science in
Sport plc ordinary shares credited as fully paid by Science in Sport plc to Provexis shareholders who
were registered on the Provexis share register at 5.00 p.m. on 6 August 2013, the demerger record
time, on the basis of one Science in Sport plc ordinary share for every one hundred Provexis ordinary
shares then held.
Science in Sport plc’s share capital then comprised one ordinary share and 50,000 redeemable shares and,
therefore, Provexis allotted and issued 50,000 redeemable shares in Provexis plc prior to the demerger
becoming effective in order to ensure that the share capital of Science in Sport plc mirrored as nearly as may
be the share capital of Provexis at the demerger record time. Provexis shareholders continued to hold their
existing shares in Provexis and, immediately following the demerger, each Provexis shareholder held as nearly
as may be the same percentage of Provexis plc ordinary shares and Science in Sport plc ordinary shares in
each of Provexis and Science in Sport respectively. Science in Sport plc was admitted to trading on AIM on 9
August 2013.
Full details of the demerger, share re-organisation and reduction of capital were provided on 28 June 2013 in
a circular to shareholders and in an AIM admission document for Science in Sport plc. The circular and AIM
admission document are available to download from the Company’s website www.provexis.com.
Allotted, called up and fully paid
Ordinary
0.1p shares
Deferred
0.9p shares
At 31 March 2013
Demerger of SiS (Science in Sport)
- issue redeemable shares
Demerger of SiS (Science in Sport)
- issue Science in Sport Cancellation Shares
Demerger of SiS (Science in Sport)
- redeem redeemable shares
Demerger of SiS (Science in Sport)
- cancel deferred shares
Demerger of SiS (Science in Sport)
- cancel Science in Sport Cancellation Shares
Issued on subscription - equity financing facility
Issued for equity financing facility fee
Issued on exercise of share options
At 31 March 2014
number
number
1,518,650,979
401,724,366
-
-
-
-
-
31,000,000
3,414,635
1,750,000
1,554,815,614
-
-
-
(401,724,366)
-
-
-
-
-
Science in
Sport 0.1p
Cancellation
Shares
number
Redeemable
£1 shares
Total
number
number
-
-
-
1,920,375,345
50,000
50,000
1,518,650,979
-
1,518,650,979
-
-
(1,518,650,979)
-
-
-
-
(50,000)
(50,000)
-
-
-
-
-
-
(401,724,366)
(1,518,650,979)
31,000,000
3,414,635
1,750,000
1,554,815,614
Provexis plc Annual report and accounts 2014
49
Notes to the consolidated financial statements continued
20. Share capital (continued)
At 31 March 2013
Demerger of SiS (Science in Sport)
- issue redeemable shares
Demerger of SiS (Science in Sport)
- issue Science in Sport Cancellation Shares
Demerger of SiS (Science in Sport)
- redeem redeemable shares
Demerger of SiS (Science in Sport)
- cancel deferred shares
Demerger of SiS (Science in Sport)
- cancel Science in Sport Cancellation Shares
Issued on subscription - equity financing facility
Issued for equity financing facility fee
Issued on exercise of share options
At 31 March 2014
Allotted, called up and fully paid
Ordinary
0.1p shares
Deferred
0.9p shares
£
£
1,518,651
3,615,519
-
-
-
-
-
31,000
3,415
1,750
1,554,816
-
-
-
(3,615,519)
-
-
-
-
-
Science in
Sport 0.1p
Cancellation
Shares
£
-
-
Redeemable
£1 shares
Total
£
-
50,000
£
5,134,170
50,000
1,518,651
-
1,518,651
-
-
(1,518,651)
-
-
-
-
(50,000)
(50,000)
-
-
-
-
-
-
(3,615,519)
(1,518,651)
31,000
3,415
1,750
1,554,816
Ordinary
0.1p shares
number
Deferred
0.9p shares
number
Total
number
At 31 March 2012
Issued on exercise of share options
Issued on subscription - equity financing facility
At 31 March 2013
1,469,832,215
4,000,000
44,818,764
1,518,650,979
401,724,366
-
-
401,724,366
1,871,556,581
4,000,000
44,818,764
1,920,375,345
Ordinary
0.1p shares
£
Deferred
0.9p shares
£
Total
£
At 31 March 2012
Issued on exercise of share options
Issued on subscription - equity financing facility
At 31 March 2013
1,469,833
4,000
44,818
1,518,651
3,615,519
-
-
3,615,519
5,085,352
4,000
44,818
5,134,170
During the year ended 31 March 2014 the Company issued ordinary shares of 0.1p each as follows:
Date
Reason for issue
17.09.13
17.09.13
22.11.13
Share subscription - equity financing facility
Share subscription - equity financing facility fee
Exercise of share options
Shares issued
£
31,000
3,415
1,750
36,165
Number
31,000,000
3,414,635
1,750,000
36,164,635
During the year ended 31 March 2013 the Company issued ordinary shares of 0.1p each as follows:
Date
Reason for issue
27.04.12
23.05.12
03.09.12
Exercise of share options
Share subscription - equity financing facility
Share subscription - equity financing facility
Shares issued
£
4,000
13,198
31,620
48,818
Number
4,000,000
13,197,880
31,620,884
48,818,764
Provexis plc Annual report and accounts 2014
50
Notes to the consolidated financial statements continued
21. 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.
Following the demerger of SiS (Science in Sport) Limited in August 2013 appropriate modifications were
proposed to the exercise price of certain outstanding EMI and unapproved share option awards under
Provexis’ share option schemes. The proposed modifications were to reflect the reduction in value of Provexis
which arose from the share re-organisation, reduction of capital and demerger of SiS (Science in Sport)
Limited, calculated on a pro rata basis immediately after the demerger using the respective market values of
Provexis plc and Science in Sport plc, net of Science in Sport plc’s August 2013 placing (“the Demerger
Modifications”).
Details of the share re-organisation, reduction of capital, demerger of SiS (Science in Sport) Limited and
proposed option Demerger Modifications were provided on 28 June 2013 in a circular to shareholders and in
an AIM admission document for Science in Sport plc, which are available to download from the Company’s
website www.provexis.com.
As envisaged in the June 2013 circular to shareholders an advance assurance was sought from HMRC to
approve the variation in the exercise price arising out of the reduction of capital and demerger for unexercised
EMI options as at 9 August 2013, the demerger effective date. The advance assurance was not successful,
and the Company remains in dialogue with HMRC on this issue. On 20 August 2014 it was agreed that the
modifications proposed to the exercise price of certain outstanding awards under Provexis’ share option
schemes would take immediate effect.
The fair values of the options granted during the year were estimated at the date of grant in accordance with
IFRS 2, using a Black-Scholes model.
At 31 March 2014 the number of ordinary shares subject to options granted over the 2005 and prior option
schemes were:
EMI options
Weighted
average
exercise
price
(pence)
31 March 2014
Weighted
average
share price
at date of
exercise
(pence)
31 March 2013
Number
Weighted
average
exercise
price
(pence)
Weighted
average
share price
at date of
exercise
(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
1.44
0.97
0.90
2.56
0.78
-
-
1.98
-
-
55,802,021
20,635,000
(1,750,000)
(16,192,356)
58,494,665
1.42
-
0.90
-
1.44
-
-
2.00
-
-
59,802,021
-
(4,000,000)
-
55,802,021
The exercise price of EMI options outstanding at the end of the year ranged between 0.59p and 1.85p
(2013: 0.9p and 6.28p) and their weighted average contractual life was 6.0 years (2013: 3.9 years).
Of the total number of EMI options outstanding at the end of the year, 49,844,675 (2013: 44,552,031) had
vested and were exercisable at the end of the year. Their weighted average exercise price was 0.71 pence
(2013: 1.09 pence).
Provexis plc Annual report and accounts 2014
51
Notes to the consolidated financial statements continued
21. Share options (continued)
Unapproved options
31 March 2014
Weighted
average
exercise price
(pence)
Number
31 March 2013
Number
Weighted
average
exercise
price
(pence)
Outstanding at the beginning of the year
Granted during the year
Cancelled during the year
Outstanding at the end of the year
2.30 34,269,627
0.97 19,365,000
3.20
(1,488,782)
7.33 52,145,845
2.28 34,269,627
-
-
2.30 34,269,627
The exercise price of unapproved options outstanding at the end of the year ranged between 0.59p and 1.85p
(2013: 0.9p and 6.28p) and their weighted average contractual life was 7.3 years (2013: 6.9 years).
Of the total number of unapproved options outstanding at the end of the year, 38,795,835 (2013: 10,919,617)
had vested and were exercisable at the end of the year. Their weighted average exercise price was 1.27 pence
(2013: 1.23 pence).
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
5
6
06-Jun-07
29-Nov-07
26-Aug-08
01-Oct-08
17-Jun-11
27-Jun-13
3.38
2.875 17,304,347
2,751,479
0.9 44,166,575
0.9 12,000,000
2.8 51,300,000
1.475 40,000,000
Share
price at
grant
date
pence
2.75
3.00
0.87
0.725
2.00
1.475
Expected
volatility
Risk free
rate
Expected
life
Fair value
per share
under
option
78%
65%
65%
65%
88%
88%
4.44%
3.77%
4.45%
4.39%
4.48%
0.79%
years
pence
10
10
10
10
10
10
1.42
1.06
0.585
0.485
1.17
0.785
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.
The total charge for the year relating to employee share-based payment plans was £391,191 (2013: £179,283)
all of which related to equity settled share-based payment transactions.
Provexis plc Annual report and accounts 2014
52
Notes to the consolidated financial statements continued
22. Reserves
At 31 March 2012
Loss for the year
Share-based charges
Issue of shares - exercise of
share options
Issue of shares - equity
financing facility 23 May
2012
Issue of shares - equity
financing facility 3
September 2012
At 31 March 2013
Loss for the year
Share-based charges
Demerger of SiS (Science in
Sport) - issue SiS
cancellation shares
Demerger of SiS (Science in
Sport) - transfer to Science
in Sport plc
Warrants cancelled during
the period - equity financing
facility
Warrants issued during the
period - equity financing
facility
Issue of shares - equity
financing facility 11
September 2013
Issue of shares - equity
financing facility fee 11
September 2013
Issue of shares - share
options exercised 22
November 2013
At 31 March 2014
Share
premium
reserve
Warrant
reserve
Merger
reserve
Retained
earnings
£
£
£
£
Total
attributable
to equity
holders of
the parent
£
Total reserves
Non-
controlling
interest
£
£
19,998,832
-
-
32,000
230,504
508,087
60,000
-
-
6,599,174
-
-
(20,225,740)
(4,338,600)
179,283
6,432,266
(4,338,600)
179,283
(218,732)
(53,106)
-
-
-
-
-
-
-
-
-
-
32,000
230,504
508,087
-
-
-
6,213,534
(4,391,706)
179,283
32,000
230,504
508,087
20,769,423
60,000
6,599,174
(24,385,057)
3,043,540
(271,838)
2,771,702
-
-
(1,518,651)
(3,370,275)
-
-
-
-
2,038
(60,000)
-
26,200
255,750
31,585
14,000
-
-
-
-
-
-
-
-
-
-
-
-
488,353
391,191
488,353
391,191
(51,634)
-
436,719
391,191
-
-
-
-
-
-
-
(1,518,651)
(3,370,275)
(57,962)
26,200
255,750
31,585
14,000
-
-
-
-
-
-
-
(1,518,651)
(3,370,275)
(57,962)
26,200
255,750
31,585
14,000
16,183,870
26,200
6,599,174
(23,505,513)
(696,269)
(323,472)
(1,019,741)
The following describes the nature and purpose of each reserve within total equity:
Share capital
Share premium
Warrant reserve
Merger reserve
Amount subscribed for share capital at nominal value.
Amount subscribed for share capital in excess of nominal value.
The warrant reserve represents warrants issued as part of the Equity Financing
Facility (see note 20).
The merger reserve arose on the reverse takeover in 2005 of Provexis Natural
Products Limited (formerly Provexis Limited) by Provexis plc through a share for
share exchange and on the issue of shares for the acquisition of SiS (Science in
Sport) Limited in 2011.
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income.
23. Pension costs
The pension charge represents contributions payable by the Group to independently administered funds which
for continuing operations during the year ended 31 March 2014 amounted to £7,624 (2013, restated: £1,552).
Pension contributions payable but not yet paid at 31 March 2014 totalled £3,871, in respect of pension
contribution entitlements where employees had not yet provided details of the funds to which the contributions
should be made (2013: £9,057).
Provexis plc Annual report and accounts 2014
53
Notes to the consolidated financial statements continued
24. Operating lease commitments
Future minimum rentals payable under non-cancellable operating leases are as follows:
Due within 1 year
Due between 1 year and 2 years
Due between 2 years and 5 years
31 March
2014
£
8,151
-
-
8,151
31 March
2013
£
189,403
151,342
186,762
527,507
Operating lease payments primarily 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.
25. Related party transactions
On 1 June 2010 the Company announced a long-term Alliance Agreement with DSM Nutritional Products,
which has seen the Company collaborate with DSM to develop Fruitflow® in all major global markets. DSM
has invested substantially in the manufacture, technology development, marketing and sale of Fruitflow® since
the Alliance Agreement was signed. Provexis continues to contribute scientific expertise and is collaborating
in areas such as cost of goods optimisation and regulatory matters. The financial model is based upon the
division of profits between the two partners on an agreed basis, linked to certain revenue targets, following the
deduction of the cost of goods and a fixed level of overhead from sales. The Company is working closely with
DSM in various areas of the project. 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 Cenkos Securities Limited ("Cenkos Securities"), the Company's
nominated adviser, consider that the terms of the Alliance Agreement are fair and reasonable insofar as
Provexis's shareholders are concerned. In providing advice to the Directors, Cenkos Securities has taken into
account the Directors' commercial assessments.
Revenue recognised by the Group under agreements with DSM amounted to £3,967 (2013: £34,351). At 31
March 2014 the Group was owed £Nil (2013: £23,009) by DSM.
Key management compensation
The directors represent the key management personnel. Details of their compensation and share options are
given in note 6 and within the Remuneration report on pages 16 to 18.
26. Post balance sheet events
On 23 April 2014 the Group announced that it had raised net proceeds of £45,403 by drawing down on its
Equity Financing Facility with Darwin Strategic Limited.
Under the terms of the Equity Financing Facility agreement the Company allotted 7,000,000 new ordinary
shares of 0.1p each to Darwin Strategic Limited which were admitted to AIM on 29 April 2014.
Provexis plc Annual report and accounts 2014
54
Parent company balance sheet
Company number 05102907
Fixed assets
Investments
Current assets
Debtors - due within one year
Debtors - due after one year
Total debtors
Cash and cash equivalents
Total current assets and net current assets
Total assets
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Share capital
Share premium reserve
Warrant reserve
Retained earnings
Equity shareholders’ funds
As at
31 March
2014
£
As at
31 March
2013
£
Notes
3
4
4
5
7
8
8
9
9
-
7,035,336
61,200
-
61,200
350,102
411,302
57,962
1,337,898
1,395,860
450,591
1,846,451
411,302
8,881,787
-
-
411,302
8,881,787
1,554,816
16,183,870
26,200
(17,353,584)
411,302
5,134,170
20,769,423
60,000
(17,081,806)
8,881,787
These financial statements were approved and authorised for issue by the Board on 20 August 2014.
The notes on pages 56 to 59 form part of these parent company financial statements.
Ian Ford
Director
On behalf of the Board of Provexis plc
Provexis plc Annual report and accounts 2014
55
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 applicable United Kingdom Accounting Standards.
Going concern
The going concern basis has been applied in preparing the parent company financial statements for the
reasons identified and disclosed in note 1 to the consolidated financial statements.
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 8.
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 Darwin Strategic Limited as part of the Equity Financing Facility. 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.
Post balance sheet events
Details of post balance sheet events relevant to the parent company are included in note 26 to the consolidated
financial statements.
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 £662,969
(2013: £6,446,663) which is dealt with in the financial statements of the Company. The total fees of the Group’s
auditor, Chantrey Vellacott DFK LLP, for services provided are analysed in note 4 to the consolidated financial
statements. Total fees for the year were £13,000 (2013: £15,000).
The parent company did not have any employees in the year and therefore there were no payroll costs or
pension costs (2013: Nil).
Provexis plc Annual report and accounts 2014
56
Notes to the parent company financial statements continued
3. Investments
Cost at start of year
Demerger of SiS (Science in Sport) Limited
Provision for impairment
Net book value
31 March
2014
£
7,035,336
(7,035,336)
-
-
31 March
2013
£
8,418,255
-
(1,382,919)
7,035,336
At 31 March 2013 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
2014
£
61,200
61,200
31 March
2013
£
57,962
57,962
-
-
1,337,898
1,337,898
Total debtors
61,200
1,395,860
5. Cash and cash equivalents
Cash at bank and in hand
31 March
2014
£
350,102
350,102
31 March
2013
£
450,591
450,591
Provexis plc Annual report and accounts 2014
57
Notes to the parent company financial statements continued
6. Deferred tax
Deferred tax assets amounting to £54,171 (2013: £59,331) have not been recognised on the basis that their
future economic benefit is not certain.
7. Share capital
Allotted, called up and fully paid
At 31 March 2013
Demerger of SiS (Science in Sport)
- issue redeemable shares
Demerger of SiS (Science in Sport)
- issue Science in Sport Cancellation Shares
Demerger of SiS (Science in Sport)
- redeem redeemable shares
Demerger of SiS (Science in Sport)
- cancel deferred shares
Demerger of SiS (Science in Sport)
- cancel Science in Sport Cancellation Shares
Issued on subscription - equity financing facility
Issued for equity financing facility fee
Issued on exercise of share options
At 31 March 2014
At 31 March 2013
Demerger of SiS (Science in Sport)
- issue redeemable shares
Demerger of SiS (Science in Sport)
- issue Science in Sport Cancellation Shares
Demerger of SiS (Science in Sport)
- redeem redeemable shares
Demerger of SiS (Science in Sport)
- cancel deferred shares
Demerger of SiS (Science in Sport)
- cancel Science in Sport Cancellation Shares
Issued on subscription - equity financing facility
Issued for equity financing facility fee
Issued on exercise of share options
At 31 March 2014
Allotted, called up and fully paid
Ordinary
0.1p shares
Deferred
0.9p shares
number
number
1,518,650,979
401,724,366
-
-
-
-
-
31,000,000
3,414,635
1,750,000
1,554,815,614
-
-
-
(401,724,366)
-
-
-
-
-
Ordinary
0.1p shares
Deferred
0.9p shares
£
£
1,518,651
3,615,519
-
-
-
-
-
31,000
3,415
1,750
1,554,816
-
-
-
(3,615,519)
-
-
-
-
-
Science in
Sport 0.1p
Cancellation
Shares
number
Redeemable
£1 shares
Total
number
number
-
-
-
1,920,375,345
50,000
50,000
1,518,650,979
-
1,518,650,979
-
-
(1,518,650,979)
-
-
-
-
Science in
Sport 0.1p
Cancellation
Shares
£
-
-
(50,000)
(50,000)
-
-
-
-
-
-
(401,724,366)
(1,518,650,979)
31,000,000
3,414,635
1,750,000
1,554,815,614
Redeemable
£1 shares
Total
£
-
50,000
£
5,134,170
50,000
1,518,651
-
1,518,651
-
-
(1,518,651)
-
-
-
-
(50,000)
(50,000)
-
-
-
-
-
-
(3,615,519)
(1,518,651)
31,000
3,415
1,750
1,554,816
Ordinary
0.1p shares
Number
Deferred
0.9p shares
number
Total
number
At 31 March 2012
Issued on exercise of share options
Issued on subscription - equity financing facility
At 31 March 2013
1,469,832,215
4,000,000
44,818,764
1,518,650,979
401,724,366
-
-
401,724,366
1,871,556,581
4,000,000
44,818,764
1,920,375,345
At 31 March 2012
Issued on exercise of share options
Issued on subscription - equity financing facility
At 31 March 2013
Ordinary
0.1p shares
£
Deferred
0.9p shares
£
1,469,833
4,000
44,818
1,518,651
3,615,519
-
-
3,615,519
Total
£
5,085,352
4,000
44,818
5,134,170
Details of the share subscriptions, share placings, and the shares issued by the Company during the two years
ended 31 March 2014 are given in note 20 to the consolidated financial statements.
Details on the share option scheme and share based payment charge for the year are given in note 21 to the
consolidated financial statements.
Provexis plc Annual report and accounts 2014
58
Notes to the parent company financial statements continued
8. Reserves
At 1 April 2013
Retained loss for the year
Share-based charges
Demerger of SiS (Science in Sport)
- issue SiS cancellation shares
Demerger of SiS (Science in Sport)
- transfer to Science in Sport plc
Warrants cancelled during the period - equity financing facility
Warrants issued during the period - equity financing facility
Issue of shares - equity financing facility 11 September 2013
Issue of shares - equity financing facility fee 11 September 2013
Issue of shares - share options exercised 22 November 2013
At 31 March 2014
9. Shareholders’ funds
Reconciliation of movement in shareholders’ funds
Share
premium
reserve
£
20,769,423
-
-
(1,518,651)
(3,370,275)
2,038
-
255,750
31,585
14,000
16,183,870
Warrant
reserve
Retained
earnings
£
£
60,000
-
-
(17,081,806)
(662,969)
391,191
-
-
-
-
(60,000)
26,200
-
-
-
26,200
-
-
-
-
-
(17,353,584)
Loss for year
Share-based payment charge (note 21)
Shares issued during the year
Demerger of SiS (Science in Sport) - issue SiS cancellation shares
Demerger of SiS (Science in Sport) - cancel deferred shares
Demerger of SiS (Science in Sport) - transfer to Science in Sport plc
Premium on shares issued
Warrants cancelled during the period - equity financing facility
Warrants issued during the period - equity financing facility
Net decrease in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
31 March
2014
£
31 March
2013
£
(662,969)
391,191
36,165
(1,518,651)
(3,615,519)
(3,370,275)
301,335
(57,962)
26,200
(8,470,485)
8,881,787
411,302
(6,446,663)
179,283
48,818
-
-
-
770,591
-
-
(5,447,971)
14,329,758
8,881,787
10. 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.
Provexis (IBD) Limited is 75% owned by Provexis plc and 25% 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 2014 (2013: Nil). At
31 March 2014 the Company was owed £5,509 by Provexis (IBD) Limited (31 March 2013: 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 £206,533 (2013: £212,426). Provexis
(IBD) Limited owed Provexis group companies and Provexis Nutrition limited a total of £2,174,643 at 31 March
2014 (31 March 2013: owed £1,968,110). Provisions of £2,174,643 (2013: £1,968,110) have been recognised
in the accounts of Provexis group companies and Provexis Nutrition Limited.
Details of a related party transaction with DSM are given in note 25 to the consolidated financial statements.
Provexis plc Annual report and accounts 2014
59
Company information
Company number
05102907
Directors
Audit committee
Registrars
Secretary and registered office
Nominated adviser and broker
Principal solicitors
Auditors
C D Buck
K Rietveld
I Ford
C D Buck
K Rietveld
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
I Ford
Prospect House
58 Queens Road
Reading
Berkshire RG1 4RP
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS
Shoosmiths
Apex Plaza
Forbury Road
Reading
Berkshire RG1 1SH
Chantrey Vellacott DFK LLP
Prospect House
Queens Road
Reading
Berkshire RG1 4RP
Provexis plc Annual report and accounts 2014
60