Pyxis Tankers
Annual Report 2021

Plain-text annual report

Provexis plc Annual report and accounts 2021 Company number 05102907 Contents 1 2 3 9 17 19 23 26 30 31 32 33 34 49 50 51 54 About Provexis Key highlights Chairman and CEO’s statement Strategic report Directors’ report Corporate governance 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 statement of financial position Parent company statement of changes in equity 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 Duttaroy. In 2005 Provexis plc was listed on AIM, the London Stock Exchange’s international market for smaller growing companies, with the stock symbol PXS. Fruitflow is a patented, natural, breakthrough ingredient which helps with platelet aggregation. Fruitflow 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 powder, and it can be included in a broad range of food, beverage and dietary supplement formats. Fruitflow is a highly concentrated form of bioactives which is lycopene-free and contains over 30 known anti- platelet compounds. Published clinical studies have shown that Fruitflow works to maintain healthy blood flow in a similar way to 75mg aspirin but with a milder and reversible action; Fruitflow has a similar antiplatelet effect to a single dose of aspirin - but when taken daily, it has none of aspirin’s side effects. The science behind Fruitflow has been validated by leading peer review publications and regulatory authorities. Fruitflow is the only natural antiplatelet to have a health claim approved by the European Food Safety Authority, stating that 150mg of Fruitflow ‘helps maintain normal platelet aggregation, which contributes to healthy blood flow’. Fruitflow has a number of other specific health benefits which have been reflected in separate patent filings for the use of Fruitflow in: • mitigating exercise-induced inflammation; • managing blood pressure; and • protecting against the adverse effects of air pollution on the body’s cardiovascular system. Laboratory work has shown that Fruitflow can reduce the platelet activation caused by airborne particulate matter, such as that from diesel emissions, by approximately one third. Provexis plc entered into a long-term Alliance Agreement with DSM Nutritional Products in 2010 to commercialise Fruitflow through sales as an ingredient to brand owners in the food, beverage and dietary supplement categories. More than 90 regional consumer healthcare brands have now been launched by direct customers of DSM, and a number of further regional brands have been launched through DSM’s distributor channels. The Alliance involves the partners collaborating 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 shared by the parties on an agreed basis, linked to various performance milestones. Provexis sells a high quality dietary supplement product containing Fruitflow and Omega-3 from its separate website www.fruitflowplus.com on a mail order basis. The product is also available to purchase from Amazon.co.uk and from Holland & Barrett. The Company is working closely with By-Health Co., Ltd, a £5bn listed Chinese dietary supplement business, to support the planned launch of some Fruitflow based products in the Chinese market. The planned launch is progressing well with potential sales volumes remaining at a significant multiple of existing Fruitflow sales. By-Health has made a significant investment in eight separate clinical studies in China, at its sole expense, in support of the Fruitflow based products which it plans to launch in China. The five studies which have been completed by By-Health showed excellent results in use for Fruitflow, and provide strong evidence for By- Health in its regulatory submissions to the Chinese State Administration for Market Regulation (SAMR). By-Health has been working on an extensive regulatory submission to the SAMR for Fruitflow, seeking to establish a new permitted health function claim for food ingredients such as Fruitflow that can demonstrate an anti-platelet effect, addressing the aberrant blood clots which can lead to heart attacks and strokes. By-Health currently expects to be in a position to complete the last of its eight studies and file its regulatory submission to the SAMR for Fruitflow in the first half of 2022. If By-Health is successful in obtaining a new permitted health function claim it is currently expected that this would result in some significant orders for Fruitflow, potentially at a multiple of current total sales values. Provexis plc Annual report and accounts 31 March 2021 1 Key highlights Key highlights • Total revenue for the year £505k, a 45% year on year increase (2020: £348k). • Planned launch by By-Health, a circa £5bn listed Chinese dietary supplement business, of a number of Fruitflow based products in the Chinese market is progressing well. Potential sales volumes remain at a significant multiple of existing Fruitflow sales. • By-Health has made a significant investment in eight separate studies in China, at its sole expense, in support of the Fruitflow based products which it plans to launch in China. • The five studies which have been completed by By-Health showed excellent results in use for Fruitflow, and provide strong evidence for By-Health in its regulatory submissions to the Chinese State Administration for Market Regulation (SAMR) for Fruitflow. • By-Health is now working on an extensive regulatory submission to the SAMR for Fruitflow, seeking to establish a new permitted health function claim for food ingredients such as Fruitflow that can demonstrate an anti-platelet effect, addressing the aberrant blood clots which can lead to heart attacks and strokes. • By-Health currently expects to be in a position to complete the last of its eight studies and file its regulatory submission to the SAMR for Fruitflow in the first half of 2022. If By-Health is successful in obtaining a new permitted health function claim it is currently expected that this would result in some significant orders for Fruitflow, potentially at a multiple of current total sales values. • The Company and its commercial partner DSM have been engaged in constructive negotiations, working towards a new agreement for Fruitflow for the period after 31 December 2022. • By default from 1 January 2023 the existing Alliance Agreement (i) permits DSM to continue to sell Fruitflow to its existing customers, on the basis that a royalty on Fruitflow sales, fixed at favourable market conditions, will remain payable to the Company; and (ii) permits the Company to sell Fruitflow as an ingredient directly to third parties, outside the existing profit sharing arrangements. The Company will provide shareholders with a further update in due course. • Fruitflow has been recognised in a further four published scientific journals, two of them in the context of COVID-19; the Frontiers in Nutrition journal stated that nutraceuticals such as Fruitflow may serve as a ‘safe antiplatelet prophylactic treatment for those at high risk of COVID-19.’ • £1.0 million placing completed in December 2020, significantly strengthening the Company’s capital base and de-risking the business. • Purchase of background and joint foreground Oslo blood pressure lowering IP in August 2020, for a total consideration of 11.5m new ordinary shares in Provexis, giving the Company full ownership of its four key patent families for Fruitflow. • Underlying operating loss* reduced to £225k, 30% lower than the prior year (2020: £321k) and another new record low for the Group for the year. • Cash £1.077m at 31 March 2021 (2020: £291k). *before share-based payments of £135k (2020: £104k), as set out on the face of the Consolidated Statement of Comprehensive Income Provexis plc Annual report and accounts 31 March 2021 2 Chairman and CEO’s statement The Company has had a very active year, and it has made some significant progress with the commercial prospects of its innovative, patented Fruitflow® heart-health ingredient. The Company is pleased to report a 45% year on year increase in revenues to £505k (2020: £348k), reflecting: • An increase in the net income received from the Company’s Alliance Agreement with DSM, which grew by 54% to £358k in the year (2020: £233k); • An increase in revenue, net of sales rebates, from the Company’s Fruitflow+ Omega-3 business, including the Company’s website www.fruitflowplus.com, Amazon UK, Holland & Barrett, and the Company’s distributor for Fruitflow+ Omega-3 in China through the CBEC channel. This business grew by 20% to £138k, net of sales rebates, in the year (2020: £115k). • Amounts of £9k received in the year for Fruitflow+ nitrates development products, compared to amounts of £Nil in the prior year. Underlying operating loss for the year was £225k, 30% lower than the prior year (2020: £321k) and a new record low number for the Group. By-Health Co., Ltd. The Company has previously announced it was working with By-Health Co., Ltd. (‘By-Health’), a listed Chinese dietary supplement business valued at approximately £5bn, to support the planned launch of a number of Fruitflow based products in the Chinese market, with potential volumes at a significant multiple of existing Fruitflow sales. The planned launch of Fruitflow based products in the Chinese market has been progressing well. Clinical studies conducted in China are typically required to obtain the necessary regulatory clearances in China, and a significant investment in eight separate Fruitflow studies has been undertaken at By-Health’s expense. Five studies have been successfully completed in China, and two clinical studies and one animal study are currently ongoing. The five completed studies showed excellent results in use for Fruitflow, and they provide strong evidence for By-Health in its regulatory submissions to the State Administration for Market Regulation (SAMR), China's top market regulator. Regulatory submissions to the SAMR are also supported by the Company’s existing European Food Safety Authority (‘EFSA’) health claim for Fruitflow. The existing Chinese SAMR regulatory system for functional health food ingredients such as Fruitflow is based on a defined list of 27 permitted health function claims, which brand owners are permitted to use on product labels. Health function claims are based on test methods and criteria that have been systematically evaluated and verified, and it is currently envisaged that the existing list of 27 permitted health function claims will be reduced to a revised list of 24 permitted claims. The SAMR provides the possibility of adding new health function claims to the list, as long as the claim can be evaluated and verified by the SAMR. Under SAMR regulations functional health foods need to indicate a relationship between a food or nutrient and a consequent health improvement which falls under one of the permitted health function claims. This relationship must be supported by scientific tests which are performed by the SAMR. SAMR certified functional health foods are required to use a blue cap / blue hat logo on their product packaging, which identifies products as approved functional health foods. By-Health’s regulatory clearance preparations for Fruitflow were originally focussed on obtaining blue cap health claim status for some Fruitflow based products in China, under the existing 27 permitted health function claim structure. By-Health is now working on an extensive regulatory submission to the SAMR for Fruitflow, seeking to establish a new permitted health function claim for foods such as Fruitflow that can demonstrate an anti-platelet effect, inhibiting platelet function and conferring beneficial effects for people who are at risk of platelet hyperactivity- associated thrombosis - the aberrant blood clots which lead to heart attacks and strokes. By-Health has recently updated its website www.by-health.com/en/aboutus stating that it has completed: Provexis plc Annual report and accounts 31 March 2021 3 Chairman and CEO’s statement ‘Research comprehensively in the cardiovascular health area. We have developed a new product made with Fruitflow®, popularly known as ‘natural Aspirin’. It helps to maintain normal platelet aggregation.’ By-Health currently expects to be in a position to complete the last of its eight studies and file its regulatory submission to the SAMR for Fruitflow in the first half of 2022, seeking to obtain a new permitted health function claim which would be in addition to the currently defined list of 27 (reducing to 24) permitted claims. Subject to the timing the new anti-platelet claim, if approved, would therefore represent the 28th - or the 25th - permitted health function claim in China. If By-Health is successful in obtaining a new permitted health function claim for functional health foods such as Fruitflow that can demonstrate an anti-platelet effect, it is currently expected that this would result in some significant orders for Fruitflow, potentially at a multiple of current total sales values. The Company will provide shareholders with as much information as it can on the timing of this commercially sensitive and potentially transformative process, subject to the multi-party confidentiality arrangements which surround the process. A study backed by scientists from the National Center for Cardiovascular Diseases in China which was updated in 2020 (www.ncbi.nlm.nih.gov/pmc/articles/PMC7008101/#) stated that: • The prevalence of Cardiovascular Disease (‘CVD’) in China has been increasing continuously since 2006, with approximately 290 million patients in China who now have CVD; • Two in five deaths in China are attributed to CVD, with CVD remaining the leading cause of death in 2016. In December 2020 the WHO reported (www.who.int/news/item/09-12-2020-who-reveals-leading-causes-of- death-and-disability-worldwide-2000-2019): ‘Heart disease has remained the leading cause of death at the global level for the last 20 years. However, it is now killing more people than ever before. The number of deaths from heart disease increased by more than 2 million since 2000, to nearly 9 million in 2019. Heart disease now represents 16% of total deaths from all causes. More than half of the 2 million additional deaths were in the WHO Western Pacific region.’ The WHO Western Pacific region includes China. By-Health’s long-term goal of science-based nutrition is to achieve ‘comprehensive intervention for human health’ (www.by-health.com/en/aboutus), and the Company continues to believe that Fruitflow has the potential to play an important role in the Chinese cardiovascular health market. DSM Nutritional Products The Company’s Alliance partner DSM Nutritional Products (‘DSM’) has continued to develop the market for Fruitflow in all global markets. More than 90 regional consumer healthcare brands have now been launched by direct customers of DSM, and a number of further regional brands have been launched through DSM’s distributor channels. An increasing number of further commercial projects have been initiated with prospective customers, including some prospective customers which are part of global businesses, and the total projected annual sales value of the prospective sales pipeline for Fruitflow continues to stand at a substantial multiple of existing annual sales. The Company and DSM have experienced increased consumer interest for Fruitflow over the past eighteen months in light of the COVID-19 pandemic, as consumers have looked to nutritional interventions to help them fortify the circulatory system against the effects of COVID-19. This helped to generate an increase in the net income received by the Company from the Alliance Agreement with DSM for the financial year, which grew by 54% to £358k (2020: £233k). More recently some of the growing markets for Fruitflow in the Asia Pacific region have been affected in the short term by lockdowns and other COVID-19 disruptions, leading to more erratic demand which has seen a 9.5% fall in revenues in the first quarter of the 2021/22 financial year for this business, relative to a very strong first quarter in 2020/21. The Alliance Agreement with DSM dates back to June 2010, with a contractual term which runs to 31 December 2022. By default from 1 January 2023 the agreement (i) permits DSM to continue to sell Fruitflow to its existing customers, on the basis that a royalty on Fruitflow sales, fixed at favourable market conditions, will remain payable to the Company; and (ii) permits the Company to sell Fruitflow as an ingredient directly to third parties, outside the existing profit sharing arrangements. Provexis plc Annual report and accounts 31 March 2021 4 Chairman and CEO’s statement The Company and DSM have started and are currently engaged in constructive negotiations working towards a new agreement. The commercial terms of the negotiations remain confidential between the two parties, and the Company will provide shareholders with a further update in due course. Fruitflow+ dietary supplement products Fruitflow+ Omega-3 is available to purchase from the Company’s subscription focussed e-commerce website www.fruitflowplus.com, Amazon UK and Holland & Barrett. In November 2020 the Company announced it had entered into a distribution agreement with a company which is now acting as the distributor for Fruitflow+ Omega-3 in China, exclusively through the Chinese Cross-Border e-commerce (‘CBEC’) channel. A first test order has been placed by the distributor and shipped to China. The distribution agreement in China is separate but wholly complementary to the Company’s work with By- Health, with the CBEC regulations enabling the distributor to sell Fruitflow+ Omega-3 in China now, prior to the health function claim which By-Health is seeking to secure. Fruitflow+ Omega-3 has a social media presence on Facebook www.facebook.com/FruitflowPlus, Instagram www.instagram.com/fruitflowplus and Twitter https://twitter.com/FruitflowPlus, and the Company was pleased to support Brentford FC in January 2021 as their Emirates FA Cup Fourth Round tie sleeve sponsor. The Company believes that Fruitflow has an important role to play in women’s cardiovascular health, and there is a dedicated section of its consumer website addressing this topic at www.fruitflowplus.com/womens-health. Further interest in the role of Fruitflow in exercise has been generated by pro cycling Team DSM (formerly Team Sunweb)’s use of Fruitflow in the Tour de France. The benefits that Fruitflow can provide for athletes in terms of improved recovery are set out in more detail on the website at www.fruitflowplus.com/sportrecovery. The Company continues to work on a potential Fruitflow+ nitrates product which would be supported by the Company’s strong patent position in this area. The product would have anti-inflammatory and circulation benefits for athletes seeking to recover after exercise, properties which would also be potentially beneficial to a wide range of other consumers to include people who are less active and people who suffering from the symptoms of basic ageing. In collaboration with DSM a trial batch of Fruitflow+ nitrates development products was manufactured during the year and sold to DSM. The Company’s Fruitflow+ Omega-3 direct selling business has been operating largely as normal throughout the COVID-19 pandemic, and despite some initial delays in the supply chain a production run of Fruitflow+ Omega-3 capsules was completed in July 2020 thus ensuring continued supply of the product. A further new production run of Fruitflow+ Omega-3 capsules was completed in July 2021. Subscriber numbers on the www.fruitflowplus.com website have been growing steadily, and currently stand at a further new all-time high level. The Company is seeking to expand further its commercial activities with Fruitflow+ Omega-3 and other Fruitflow+ combination products, and it is currently in dialogue with some other potential international direct selling customers. Scientific journal publications 1. In September 2020 Fruitflow was recognised in a review article by the Frontiers in Nutrition journal www.frontiersin.org/articles/10.3389/fnut.2020.583080/full which stated that nutraceuticals such as Fruitflow may serve as: ‘A safe antiplatelet prophylactic treatment for those at high risk of COVID-19 who may also be at increased risk of thrombotic complications and an alternative to pharmacological compounds that may cause greater risk of bleeding.’ 2. In January 2021 a review article was published by the influential journal Medical Hypotheses, a leading peer-reviewed journal which advances new discussion and innovation in medical treatments. The article www.sciencedirect.com/science/article/pii/S0306987720333715, titled ‘Platelet hyperactivity in COVID-19: Can the tomato extract Fruitflow® be used as an antiplatelet regime?’ was written by Professor Provexis plc Annual report and accounts 31 March 2021 5 Chairman and CEO’s statement Asim K Duttaroy, who was the original inventor of Fruitflow, and Dr Niamh O’Kennedy, Provexis plc’s Chief Scientific Officer. 3. In January 2021 a review article was published in the MDPI journal Nutrients www.mdpi.com/2072- 6643/13/1/144/htm. The article, titled the ‘Role of Gut Microbiota and Their Metabolites on Atherosclerosis, Hypertension and Human Blood Platelet Function’ was written by Professor Asim K Duttaroy and it noted that emerging data suggest a strong relationship between microbiota-derived compounds and an increased risk of CVD, with widely accumulated data also indicating that Fruitflow may be useful in the primary prevention of CVD. The article concluded that there is a ‘strong possibility of finding new approaches to treat or prevent CVD’ with further scientific work required seeking to develop novel preventative or therapeutic regimes. 4. In June 2021 a further review article was published in the MDPI journal Nutrients www.mdpi.com/2072- 6643/13/7/2184/htm. The article, titled ‘Dietary Antiplatelets: A New Perspective on the Health Benefits of the Water-Soluble Tomato Concentrate Fruitflow®’ concluded that: ‘Platelets have multifaceted functions which generate a complicated set of interactions with other vascular cells, leading to many roles outside haemostasis. As our understanding of the role of platelet activation in response to - and in complicating - inflammatory and infectious illnesses grow, it becomes more apparent that platelet-targeted treatments are necessary outside the field of CVD. Dietary antiplatelets such as Fruitflow® can help provide suitably gentle and safe yet efficacious treatments to improve public health in response to a wide range of health challenges.’ The publication of these four articles is a significant opportunity for the Company and DSM to promote Fruitflow further across scientific, trade customer and consumer channels. Intellectual property The Company is responsible for filing and maintaining patents and trade marks for Fruitflow as part of the Alliance Agreement with DSM, and patent coverage for Fruitflow now includes the following patent families which are all owned outright by Provexis: Patent family Developments in the period from Sep-20 to Sep-21 A second European patent has been secured (previously referred to as proceeding to grant) and national protection has been secured in major European states. Patents have been granted in Hong Kong, Israel, South Korea and the USA, with a further application in the Philippines now proceeding to grant. US patent protection has been secured for Fruitflow as an antihypertensive (blood pressure lowering) agent. A Canadian patent application is proceeding to grant. Improved Fruitflow / Fruit Extracts Improved Fruitflow / Fruit Extracts, with patents granted by the European Patent Office in January 2017 and September 2020. The patent has been granted in ten other major territories to include China and USA; a patent application is proceeding to grant in the Philippines; and applications are at a late stage of progression in a further six global territories, with potential patent protection out to November 2029. Antihypertensive (blood pressure lowering) effects This patent was originally developed in collaboration with the University of Oslo, and it has now been granted for Fruitflow in Europe, the US and two other major territories. Patent applications are being progressed in a further four major territories to include the US and China, with potential patent protection out to April 2033. In August 2020 the Company announced it had agreed to purchase the background and joint foreground blood pressure lowering IP owned by Inven2 AS, the technology transfer office at the University of Oslo, and Provexis now owns these important patents outright, with the licensing option originally held by Inven2 having been cancelled. Fruitflow with nitrates in mitigating exercise-induced inflammation and for promoting recovery from intense exercise Provexis plc Annual report and accounts 31 March 2021 6 Chairman and CEO’s statement Patent family Developments in the period from Sep-20 to Sep-21 Patents have been granted around Europe and in the US, Australia, Brazil, China, Hong Kong, Israel, Japan, South Korea, the Philippines, New Zealand and Mexico. Further patent protection is being sought in six territories, with potential patent protection out to December 2033. Fruitflow for air pollution The use of Fruitflow in protecting against the adverse effects of air pollution on the body’s cardiovascular system. Laboratory work has shown that Fruitflow can reduce the platelet activation caused by airborne particulate matter, such as that from diesel emissions, by approximately one third. A US application has proceeded to grant and there are pending applications in 16 jurisdictions (including the US where a further application has been filed) which extends potential patent protection for Fruitflow out to November 2037. Patents have been secured (previously referred to as proceeding to grant) in the US and also Europe, with national protection also secured in major European states. Patent protection has also been secured in Brazil, China, Japan, Mexico, South Korea, Israel, the Philippines and Hong Kong. US patent protection has been secured covering the use of Fruitflow in protecting subjects who have certain medical conditions and who have been exposed to air pollution. Crohn’s disease intellectual property The Group continues to maintain the Crohn’s disease intellectual property registered in Provexis (IBD) Limited, a company which is 75% owned by Provexis plc and 25% owned by The University of Liverpool. The Group continues to investigate further options for the Crohn’s disease project, seeking to maximise its value. The Company has been conducting some research on a ‘contrabiotic’ in collaboration with Prof Barry Campbell at the University of Liverpool. A new scientific paper was recently completed and submitted, focussing on a type of polysaccharide which show efficacy against pathogens such as E coli, C difficile and S typhimurium. Capital structure and funding The Company is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Company’s cost base and its resources continue to be very tightly managed. The Company remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Company remains in a loss-making position it may need to raise funds to support working capital on occasions. On 17 December 2020 the Group announced it had raised proceeds of a gross £1.0 million via the placing of 133,333,349 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 23 December 2020. On 19 February 2021 the Group announced it had raised proceeds of a gross £50,000 via the placing of 6,666,667 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 25 February 2021. The Company intends to hold its Annual General Meeting at the offices of Allenby Capital Limited, 5th Floor, 5 St Helen’s Place, London EC3A 6AB at 12:30pm on 4 November 2021. People The Board would like to thank the Company’s small team of sales, marketing, e-commerce, PR and scientific consultants for their professionalism, enthusiasm and dedication in driving the business forward over the last year. The Company would also like to thank its key professional advisers for their valuable help and support. Outlook The Company is pleased to report on another strong year of progress. Revenues grew by 45% year on year to £505k, reflecting strong growth from the Company’s Alliance Agreement with DSM, and an increase in revenue from the Company’s Fruitflow+ Omega-3 business which has seen subscriber numbers increase to a further new all-time high level. Provexis plc Annual report and accounts 31 March 2021 7 Chairman and CEO’s statement The Company and DSM have had a strong long-term relationship, with the shared interest of both companies being to maximise the commercial returns that can be achieved from Fruitflow. The total projected annual sales value of the prospective sales pipeline for Fruitflow continues to stand at a substantial multiple of existing annual sales. The Alliance Agreement with DSM dates back to June 2010, with a contractual term which runs to 31 December 2022. By default from 1 January 2023 the agreement (i) permits DSM to continue to sell Fruitflow to its existing customers, on the basis that a royalty on Fruitflow sales, fixed at favourable market conditions, will remain payable to the Company; and (ii) permits the Company to sell Fruitflow as an ingredient directly to third parties, outside the existing profit sharing arrangements. The Company and DSM have started and are currently engaged in constructive negotiations working towards a new agreement. The commercial terms of the negotiations remain confidential between the two parties, and the Company will provide shareholders with a further update in due course. The Company has developed a strong, long lasting and wide-ranging patent portfolio for Fruitflow, and it now owns outright four patent families for Fruitflow which have a truly global footprint. The Company also holds other valuable intellectual property and trade secrets for the technology. The intellectual property for Fruitflow is of fundamental importance to the Company and its current and future commercial partners, to include DSM and By-Health, and it underpins the numerous commercial opportunities which the Company and its partners are pursuing for Fruitflow. By-Health’s planned launch of Fruitflow based products in the Chinese market has been progressing well. Clinical studies conducted in China are typically required to obtain the necessary regulatory clearances in China, and a significant investment in eight separate Fruitflow studies has been undertaken at By-Health’s expense. Five studies have been successfully completed in China, and two clinical studies and one animal study are currently ongoing. The five completed studies showed excellent results in use for Fruitflow, and they provide strong evidence for By-Health in its regulatory submissions to the State Administration for Market Regulation (SAMR), China's top market regulator. By-Health has been working on an extensive regulatory submission to the SAMR for Fruitflow, seeking to establish a new permitted health function claim for foods such as Fruitflow that can demonstrate an anti-platelet effect, conferring beneficial effects for people who are at risk of platelet hyperactivity-associated thrombosis - the aberrant blood clots which lead to heart attacks and strokes. By-Health currently expects to be in a position to complete the last of its eight studies and file its regulatory submission to the SAMR for Fruitflow in the first half of 2022, seeking to obtain a new permitted health function claim which would be in addition to the currently defined list of permitted health claims in China. If By-Health is successful in obtaining a new permitted health function claim, it is currently expected that this would result in some significant orders for Fruitflow, potentially at a multiple of current total sales values. The Company continues to believe that Fruitflow has the potential to play an important role in the Chinese cardiovascular health market. The Board was delighted to announce a £1.0 million placing in December 2020, and a smaller £50k placing in February 2021, with the funds raised helping to provide the Company with additional working capital to support its international growth plans. The placing has significantly strengthened the Company’s capital base and de- risked the business, to the benefit of all shareholders. The Company would like to thank its customers and shareholders for their continued support, and the Board remains positive about the outlook for Fruitflow and the Provexis business for the coming year and beyond. Dawson Buck Chairman 29 September 2021 Ian Ford CEO Provexis plc Annual report and accounts 31 March 2021 8 Strategic report The strategic report should be read in conjunction with the Chairman and CEO’s statement on pages 3 to 8, the Group’s financial statements and the Notes to the Group’s financial statements set out on pages 30 to 48. Group strategy The Group strategy has historically focused on the discovery, development and commercialisation of functional foods, medical foods and dietary supplements, and in particular the Group’s Fruitflow technology. On 1 June 2010 the Company announced that it had entered into a long-term Alliance Agreement with DSM Nutritional Products to commercialise Fruitflow, through sales as an ingredient to brand owners in the food, beverage and dietary supplement categories. The establishment of the Alliance Agreement was a significant milestone in the history of the Company. The Alliance is seeing the partners collaborate to develop Fruitflow in all major global markets, through an effective commercialisation of current formats and pioneering new and significant applications. DSM is responsible for manufacturing, marketing and selling via its substantial sales force. Provexis is responsible for contributing scientific expertise necessary for successful commercialisation, and for maintaining and strengthening the breadth and duration of its patent and trade mark coverage for Fruitflow, seeking to maximise the commercial returns that can be achieved from the technology. Profits from the Alliance are being shared by the parties on an agreed basis, linked to various performance milestones. In June 2015 the Company confirmed that it had agreed significantly enhanced financial terms with DSM for the Company’s Alliance Agreement for Fruitflow. The Directors believed at the time of signing the Alliance Agreement, and still retain the belief, that it is advantageous for the Group to commercialise Fruitflow in conjunction with DSM as it enables Provexis to leverage the resources and relationships of DSM in some of the major global markets. One of the Group’s key strategic priorities is to focus on developing revenues from the Fruitflow business together with the Group’s Alliance partner DSM, whilst also managing the relationship with DSM. The Group also seeks to ensure that it fulfils its responsibilities under the Alliance Agreement to include protecting the intellectual property of Fruitflow and assisting DSM with scientific work required to further commercialise the technology. At the same time, the Board remains committed to keeping regular and fixed costs restricted to an appropriate level, thereby maximising the Group’s profit potential and minimising cash utilised in operations. In June 2016 Provexis launched a high-quality dietary supplement product containing Fruitflow and Omega-3 which is being sold from a separate, dedicated website www.fruitflowplus.com on a mail order basis. The product is also available to purchase from Amazon.co.uk and from Holland & Barrett. The Company’s Fruitflow+ Omega-3 dietary supplement business is expected to provide the Company with an additional long-term income and profit stream. The dietary supplement business is complementary to the Company’s Alliance Agreement with DSM and it is supported by DSM, reflecting the continued strength of the long-term relationship between Provexis and DSM and the shared interest of both companies in seeking to maximise the commercial returns that can be achieved from Fruitflow. The Alliance Agreement with DSM has a contractual term which runs from June 2010 to 31 December 2022. By default from 1 January 2023 the agreement (i) permits DSM to continue to sell Fruitflow to its existing customers, on the basis that a royalty on Fruitflow sales, fixed at favourable market conditions, will remain payable to the Company; and (ii) permits the Company to sell Fruitflow as an ingredient directly to third parties, outside the existing profit sharing arrangements. The Company and DSM have started and are currently engaged in constructive negotiations working towards a new agreement. The commercial terms of the negotiations remain confidential between the two parties, and the Company will provide shareholders with a further update in due course. One of the Group’s other key strategic priorities is its relationship with By-Health Co., Ltd, a £5bn listed Chinese dietary supplement business. The Group has been working with By-Health to support the planned launch of some Fruitflow based products in the Chinese market. The planned launch is progressing well with potential sales volumes remaining at a significant multiple of existing Fruitflow sales. Provexis plc Annual report and accounts 31 March 2021 9 Strategic report Group strategy (continued) By-Health has made a significant investment in eight separate clinical studies in China, at its sole expense, in support of the Fruitflow based products which it plans to launch in China. The five studies which have been completed by By-Health showed excellent results in use for Fruitflow, and provide strong evidence for By- Health in its regulatory submissions to the Chinese State Administration for Market Regulation (SAMR). By-Health has been working on an extensive regulatory submission to the SAMR for Fruitflow, seeking to establish a new permitted health function claim for food ingredients such as Fruitflow that can demonstrate an anti-platelet effect, addressing the aberrant blood clots which can lead to heart attacks and strokes. By-Health currently expects to be in a position to complete the last of its eight studies and file its regulatory submission to the SAMR for Fruitflow in the first half of 2022. If By-Health is successful in obtaining a new permitted health function claim it is currently expected that this would result in some significant orders for Fruitflow, potentially at a multiple of current total sales values. Market opportunity Fruitflow is a patented natural extract from tomatoes which has been shown in human trials to reduce the propensity for aberrant blood clotting, typically associated with cardiovascular disease, which can lead to heart attack and stroke. The extract is available in two formats, a syrup and a spray-dried powder and can be included in a broad range of food, beverage and dietary supplement formats. In May 2009, the Company’s Fruitflow technology was the first to be substantiated by the European Food Safety Authority (‘EFSA’) under the new Article 13(5) for proprietary and emerging science. In December 2009 the European Commission authorised the health claim ‘Helps maintain normal platelet aggregation, which contributes to healthy blood flow’, which was the first wording to be authorised under Article 13(5). The global functional food market is estimated to be in excess of US$170 billion per year, and it is forecast to reach US$276 billion by 2025, with products addressing cardiovascular disease forming the largest segment of the market (source: www.grandviewresearch.com/press-release/global-functional-foods-market). Global awareness of heart health is increasing and a rising number of people are taking a proactive approach to improving heart health. The Directors believe that products addressing blood flow and circulation issues continue to represent a long-term opportunity in the expanding cardiovascular sector. Financial review The financial review has been prepared on the basis of Group’s continuing operations, as further detailed in the consolidated statement of comprehensive income on page 30. Revenue The Company’s long-term Alliance Agreement with DSM Nutritional Products for Fruitflow includes a financial model which is based upon the division of profits between the two partners on an agreed basis, linked to certain revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales. In June 2015 the Company confirmed that revised terms for the Alliance Agreement had been agreed with DSM, under which the fixed level of overhead deduction from sales permanently decreased with effect from 1 January 2015, backdated, thus increasing the profit share payable to the Company. In June 2016 the Company announced the launch of its Fruitflow+ Omega-3 dietary supplement product, which was sold initially from a separate, dedicated website www.fruitflowplus.com on a mail order basis, particularly focussed on subscription orders. In August 2018 Fruitflow+ Omega-3 was launched in more than 660 Holland & Barrett stores across the UK and Ireland, giving Fruitflow+ Omega-3 widespread consumer exposure, with all of the revenue and costs attributable to this listing to accrue to the Company. Fruitflow+ Omega-3 is also available to purchase from Amazon UK, and the product has a Facebook page at www.facebook.com/FruitflowPlus and an Instagram page at www.instagram.com/fruitflowplus. Fruitflow+ Omega-3 is a two-in-one supplement in an easy to take capsule, supporting healthy blood flow and normal heart function, and it achieved sales of £138k in the year to 31 March 2021, compared to £115k in the prior year. Provexis plc Annual report and accounts 31 March 2021 10 Strategic report Revenue (continued) Fruitflow+ Omega-3 is expected to provide the Company with an additional long-term income and profit stream, and the fruitflowplus.com website will be able to accommodate further potential Fruitflow combination product derivatives. Further sales channel opportunities for the product are currently being explored. The Group’s total revenue for the year ended 31 March 2021 was £505k, a 45% increase relative to the prior year (2020: £348k). The increase in revenue accruing to the Company for the year reflects: • An increase in the net income received from the Company’s Alliance Agreement with DSM, which grew by 54% to £358k in the year (2020: £233k); • An increase in revenue, net of sales rebates, from the Company’s Fruitflow+ Omega-3 business, including the Company’s website www.fruitflowplus.com, Amazon UK, Holland & Barrett, and the Company’s distributor for Fruitflow+ Omega-3 in China through the CBEC channel. This business grew by 20% to £138k, net of sales rebates, in the year (2020: £115k). • Amounts of £9k received in the year for Fruitflow+ nitrates development products, compared to amounts of £Nil in the prior year. Underlying operating loss Underlying operating loss for the year was £225k (2020: £321k), a £96k year on year improvement which reflects a year on year £144k increase in gross profit, an £8k increase in selling and distribution costs, a £52k increase in research and development costs, a £9k reduction in R&D tax relief and a £21k reduction in administrative costs. The Group has chosen to report underlying operating loss as the Directors believe that the operating loss before share-based payments provides additional useful information for shareholders on underlying trends and performance. A reconciliation of underlying operating loss to statutory operating loss is presented on the face of the consolidated statement of comprehensive income. This measure is used for internal performance analysis. The Group’s cost base and its resources have been and will continue to be tightly managed within budgets approved and monitored by the Board. Research and development costs Research and development costs are primarily composed of patent, trade mark and other research agreement costs, with the Group seeking to maintain and strengthen the breadth and duration of its patent and trade mark coverage for Fruitflow. Research and development costs have increased by 21% to £304k (2020: £252k). R&D tax relief: payable tax credit A current tax credit of £2k (2020: £11k), in respect of research and development tax relief has been recognised in the financial statements. The tax credit claim for the year ended 31 March 2019 totalling £16k was paid to the Group in May 2020. Taxation The current tax charge is £Nil (2020: £Nil) due to the loss made in the year. No amounts in respect of deferred tax were recognised in profit and loss from continuing operations or charged / credited to equity for the current or prior year. Results and dividends The loss attributable to equity holders of the parent for the year ended 31 March 2021 was £341k (2020: £406k) and the basic loss per share was 0.02p (2020: 0.02p). The Directors are unable to recommend the payment of a dividend (2020: £Nil). Consideration of section 656 of the Companies Act 2006 On 28 August 2014 it was noted in the Company’s Notice of Annual General Meeting that Section 656 of the Companies Act 2006 (‘section 656’) had been brought to the attention of the Directors as part of the 31 March 2014 year end accounts and audit. Section 656 states that where the net assets of a public company are half or less of its called-up share capital, the Directors must call a general meeting of the company to consider whether any, and if so what, steps should be taken to deal with the situation. Provexis plc Annual report and accounts 31 March 2021 11 Strategic report Consideration of section 656 of the Companies Act 2006 (continued) Further details of the issue were provided in the Company’s AGM notice of 28 August 2014 which is available to download from the Company’s website here www.provexis.org/wp-content/uploads/Provexis-plc-notice-of- 22-Sep-14-AGM-FINAL.pdf A resolution was not put to the 2014 Annual General Meeting in connection with section 656 and it was noted that the Directors’ view in August 2014 was that the most appropriate course of action was to continue to maintain tight control over the running costs of the Company and to wait for revenues from its core Fruitflow product to increase. Subsequent to the Company’s AGM on 22 September 2014 the net assets of the Company and Group have remained less than half of the Company’s called-up share capital and a further general meeting of the Company is not required under section 656. The annual financial statements of the Company for the year ended 31 March 2021 and the report of the Directors thereon include a going concern statement which concludes that 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 a period of more than twelve months from the date of approval of the financial statements. Accordingly, the going concern basis has been used in preparing the financial statements. It remains the Directors’ view on 29 September 2021 that the most appropriate course of action in respect of section 656 is to continue to seek to maximise the commercial returns that can be achieved from the Company’s Fruitflow technology, and continue to maintain very tight control over the running costs of the Company. Capital structure and funding The Company is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Company’s cost base and its resources continue to be very tightly managed. The Company remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Company remains in a loss-making position it may need to raise funds to support working capital on occasions. On 17 December 2020 the Group announced it had raised proceeds of a gross £1.0 million via the placing of 133,333,349 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 23 December 2020. On 19 February 2021 the Group announced it had raised proceeds of a gross £50,000 via the placing of 6,666,667 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 25 February 2021. Key performance indicators The principal financial KPIs monitored by the Board relate to underlying operating loss and cash and cash equivalents. The table below shows the Group’s underlying operating loss, calculated as operating profit before share- based payment expense, from continuing operations for the two years ended 31 March 2021: Underlying operating loss Year ended 31 March 2021 Year ended 31 March 2020 £ £ 224,756 320,888 The trading results are further detailed in this strategic report on pages 9 to 16. Provexis plc Annual report and accounts 31 March 2021 12 Strategic report Key performance indicators (continued) The table below shows the Group’s cash position at 31 March 2021 and 31 March 2020: Cash and cash equivalents 31 March 2021 31 March 2020 £ £ 1,077,410 291,335 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 £786,075 increase in cash and cash equivalents during the financial year is further detailed in the consolidated statement of cash flows on page 32. Principal risks and uncertainties In the course of its normal business the Group is exposed to a range of risks and uncertainties which could impact on the results of the Group. The Board considers that risk-management is an integral part of good business process and, it maintains a register of risks across several categories including consultants, clients, competition, finance, technical and legal. For each risk the Board estimates the impact, likelihood as well as identify mitigating strategies. This register is reviewed periodically as the Company’s situation changes. During such reviews, each risk category is considered by the Directors with a view to understanding (i) whether the nature, impact or likelihood of any risks has changed, (ii) whether the mitigating actions taken by the Company should change as a result and (iii) whether any new risks or categories of risk have arisen since the last review. The Company is seeking to expand its Fruitflow+ Omega-3 dietary supplement business and thereby reduce its commercial reliance on the Alliance Agreement with DSM, as further outlined above, thus increasing opportunities for growth and decreasing risk. The Directors have identified the following principal risks and uncertainties that could have the most significant impact on the Group’s long-term value generation. Funding and other risks Provexis has experienced operating losses from continuing operations in each year since its inception. Accordingly until Provexis has sufficient commercial success with Fruitflow to be cash generative it will continue to rely on its existing cash resources and further funding rounds to continue its activities. While Provexis aims to generate licensing and sales revenues from Fruitflow, there is no certainty that such revenues will be generated. Furthermore, the amount and timing of revenues from Fruitflow is uncertain and will depend on numerous factors, most of which are outside Provexis’ control due to the terms of the Alliance Agreement. It is therefore difficult for the Directors to predict with accuracy the timing and amount of any further capital that may be required by the Provexis Group. Factors that could increase Provexis’ funding requirements include, but are not limited to: higher operational costs; slower progress than expected in DSM attracting customers to purchase Fruitflow; unexpected opportunities to develop additional products or acquire additional technologies, products or businesses; and costs incurred in relation to the protection of Provexis’ intellectual property. Any additional share issues may have a dilutive effect on Provexis Shareholders. Further, there can be no guarantee or assurance that additional equity funding will be forthcoming when required, nor as to the terms and price on which such funds would be available, nor that such funds, if raised, would be sufficient to enable Provexis to meet its working capital requirements. Provexis plc Annual report and accounts 31 March 2021 13 Strategic report Principal risks and uncertainties (continued) Brexit The long term impact of the UK leaving the EU remains uncertain. The trade deal announced in December 2020 removed key tariffs which were the main potential impact identified for the business, and the Group remains in dialogue with some potential UK manufacturers for its Fruitflow+ Omega-3 product, with a number of manufacturing options in hand. The Group is also exploring some alternative sales and fulfilment options available to it outside the UK for the delivery of finished goods in the EU. The Group has registered for the Import One-Stop Shop (IOSS), an electronic portal which businesses have been able to use since 1 July 2021 to comply with their VAT e-commerce obligations on distance sales to the EU. Covid-19 The impact of the Covid-19 pandemic remains uncertain. Scientific research into Covid-19 is being undertaken at considerable scale, with more than two thousand studies in progress worldwide. It is already clear that in many patients the virus is having a significant adverse effect on circulation, and it is causing wider issues with inflammation. Fruitflow is a natural, breakthrough ingredient that helps with platelet aggregation, supporting normal blood flow and circulation which in turn benefits cardiovascular health. The Company and its Alliance partner DSM Nutritional Products have experienced increased consumer interest for Fruitflow in light of the Covid-19 pandemic, as consumers look to nutritional interventions to help them fortify the circulatory system against the effects of Covid-19. The Company and DSM will look to maximise the commercial opportunities arising from this increased consumer interest in Fruitflow, and will further promote the core blood circulatory and anti-inflammatory benefits of the product. Some of the growing markets for Fruitflow in the Asia Pacific region have recently been affected in the short term by lockdowns and other COVID-19 disruptions, leading to more erratic demand for Fruitflow which has seen a 9.5% fall in revenues in the first quarter of the 2021/22 financial year for this business, relative to a very strong first quarter in 2020/21. The Company’s Fruitflow+ Omega-3 direct selling business has been operating largely as normal throughout the pandemic, and despite some initial delays in the supply chain a new production run of Fruitflow+ Omega- 3 capsules was completed in July 2020, and a further production run was completed in July 2021, thus ensuring continued supply of the product. Commercialisation Due to the terms of the Alliance Agreement, Provexis is largely dependent on DSM in respect of the development, production, marketing and commercialisation of Fruitflow. Fruitflow is solely reliant on DSM under the terms of the Alliance Agreement for its commercialisation. Provexis’ long-term success is largely dependent on the ability of DSM to sell Fruitflow. Provexis’ negotiating position with DSM if they choose to vary the Alliance Agreement may be affected by its size and limited cash resources relative to DSM who have substantial cash resources and established levels of commercial success. An inability to enter into any discussions with DSM on equal terms could lead to reduced revenue from the Alliance Agreement and this may have a significant adverse effect on Provexis’ business, financial condition and results. The loss of, or changes affecting, Provexis’ relationships with DSM could adversely affect Provexis’ results or operations as Provexis has limited input on the sales strategies of Fruitflow adopted by DSM. Furthermore, although Provexis has sought to include performance obligations on DSM in the Alliance Agreement, there is a risk that DSM may reprioritise Fruitflow within their product portfolio resulting in Provexis achieving sales below that which it expects. Any such situation may have a material and adverse effect on Provexis’ business, financial condition and results of operations. Provexis plc Annual report and accounts 31 March 2021 14 Strategic report Principal risks and uncertainties (continued) Profitability depends on the success and market acceptance of Fruitflow The success of Provexis will depend on the market’s acceptance and valuing of Fruitflow and there can be no guarantee that this acceptance will be forthcoming or that Provexis’ technologies will succeed. The development of a market for Fruitflow will be affected by many factors, some of which are beyond Provexis’ control, including the emergence of newer, more successful food IP and products and the cost of Fruitflow. Notwithstanding the health claims made in respect of Fruitflow, there can be no guarantee that Provexis’ targeted customer base for the product will purchase or continue to purchase the product. If a market fails to develop or develops more slowly than anticipated, Provexis may be unable to recover the losses it may have incurred in the development of Fruitflow and may never achieve profitability. Limited product offering Provexis has only one product, Fruitflow, and any problems with the commercial success of Fruitflow will impact the financial performance of Provexis. Intellectual property protection Provexis is heavily dependent on its intellectual property and, in particular, its patents. No assurance can be given that any pending patent applications or any future patent applications will result in granted patents, that any patents will be granted on a timely basis, that the scope of any copyright or patent protection will exclude competitors or provide competitive advantages to Provexis, that any of Provexis’ patents will be held valid if challenged, or that third parties will not claim rights in or ownership of the copyright, patents and other proprietary rights held by Provexis. Further, there can be no assurance that others have not developed or will not develop similar products, duplicate any of Provexis’ products or design around any patents held by Provexis. Others may hold or receive patents which contain claims having a scope that covers products developed by Provexis (whether or not patents are issued to Provexis). Provexis may rely on patents to protect its assets. These rights act only to prevent a competitor copying and not to prevent a competitor from independently developing products that perform the same functions. No assurance can be given that others will not independently develop or otherwise acquire substantially equivalent functional food IP or otherwise gain access to Provexis’ unpatented proprietary technology or disclose such technology or that Provexis can ultimately protect meaningful rights to such unpatented technology. Once granted, a patent can be challenged both in the patent office and in the courts by third parties. Third parties can bring material and arguments which the patent office granting the patent may not have seen. Therefore, issued patents may be found by a court of law or by the patent office to be invalid or unenforceable or in need of further restriction. A substantial cost may be incurred if Provexis is required to assert its intellectual property rights, including any patents or trade marks against third parties. Litigation is costly and time consuming and there can be no assurance that Provexis will have, or will be able to devote, sufficient resources to pursue such litigation. Potentially unfavourable outcomes in such proceedings could limit Provexis’ intellectual property rights and activities. There is no assurance that obligations to maintain Provexis’ know how would not be breached or otherwise become known in a manner which provides Provexis with no recourse. Any claims made against Provexis’ intellectual property rights, even without merit, could be time consuming and expensive to defend and could have a materially detrimental effect on Provexis’ resources. A third party asserting infringement claims against Provexis could require Provexis to cease the infringing activity and/or require Provexis to enter into licensing and royalty arrangements. The third party could also take legal action which could be costly. In addition, Provexis may be required to develop alternative non-infringing solutions that may require significant time and substantial unanticipated resources. There can be no assurance that such claims will not have a material adverse effect on Provexis’ business, financial condition or results. Future development The future development of the Company is discussed in the Chairman and CEO’s statement on pages 3 to 8. Provexis plc Annual report and accounts 31 March 2021 15 Strategic report Other statutory disclosures Directors At the end of the financial year Provexis plc had four Directors, three male and one female. Employees At the end of the financial year Provexis plc had two employees, who are both Directors of 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. Directors duties in relation to s172 Companies Act 2006 The Directors of the Company have a duty to promote the success of the Company. A Director of the Company must act in a way they consider, in good faith, to promote the success of the Company for the benefit of its members, and in doing so have regard (amongst other matters) to: • • • • • • the likely consequences of any decisions in the long-term, the interests of the Group’s employees, the need to foster the Group’s business relationships with suppliers, customers and others, the impact of the Group’s operations on the community and environment, the desirability of the Group maintaining a reputation for high standards of business conduct, and the need to act fairly between the shareholders of the Group. The Directors give careful consideration to these factors in discharging their duties under section 172 of the Companies Act 2006, and consider that these requirements are further addressed in this Strategic Report (pages 9 to 16) and in the Group’s Corporate governance report on pages 19 to 22. Information this report does not contain As a result of the size and nature of the Company’s operations it has not been deemed necessary to provide information about: • Environmental matters and the impact of the Company’s 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 Director 29 September 2021 Provexis plc Annual report and accounts 31 March 2021 16 Directors’ report The Company has chosen, in accordance with Section 414 C(11) 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 9 to 16. Provexis plc is a public limited company incorporated and domiciled in the United Kingdom (registration number 05102907). The address of the registered office is 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK. 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. Board of Directors The Board of Directors has overall responsibility for the Group. The Directors of the Company during the year and up to the date that the financial statements were approved are shown below. Executive Directors I Ford N A O’Kennedy Non-executive Directors F Boned C D Buck DSM is classified as a related party of the Group because F Boned, a Non-executive Director, is also a senior employee of DSM. 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 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. On 17 December 2020 the Group announced it had raised proceeds of a gross £1.0 million via the placing of 133,333,349 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 23 December 2020. On 19 February 2021 the Group announced it had raised proceeds of a gross £50,000 via the placing of 6,666,667 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 25 February 2021. The Group is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Group’s cost base and its resources continue to be very tightly managed. The Group remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Group remains in a loss-making position it may need to raise working capital on occasions, and the Directors believe that the Group has access to future equity financings 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 a period of more than twelve months from the date of approval of the financial statements. Accordingly, the going concern basis has been used in preparing the financial statements. Provexis plc Annual report and accounts 31 March 2021 17 Directors’ report Auditors The Group’s External Auditor, James Cowper Kreston, is engaged to provide its independent opinion on the Group’s financial statements. A scope of their work for the year ended 31 March 2021 is included within the Independent auditor's report on pages 26 to 29. James Cowper Kreston have expressed their willingness to continue in office and a resolution to re-appoint them as the Company's auditor will be proposed at the next annual general meeting. Each Director has taken all reasonable steps to make themselves 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. Directors’ responsibilities The Directors are responsible for preparing the strategic report, 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 and Company 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 AIM. 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 Group and 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. By order of the Board Ian Ford Secretary 29 September 2021 Provexis plc Annual report and accounts 31 March 2021 18 Corporate governance report Corporate governance The Board is led by the Non-executive Chairman, Dawson Buck, who is responsible for the Group’s corporate governance arrangements and who ensures that all members of the Board are able to contribute to Board discussions and decision-making. The Board of Directors of Provexis plc is collectively accountable to the Company’s shareholders for the good corporate governance of the Group. The Board recognises the importance of sound corporate governance and it has adopted the Quoted Companies Alliance (‘QCA’) Corporate Governance Code (to the extent practical given the Group’s size and stage of development), in line with the London Stock Exchange’s changes to the AIM Rules requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code. A copy of the Group’s report setting out in broad terms how the Group currently complies with the QCA code can be found on the Company’s website investor pages www.provexis.org/aim26. The Company is subject to the UK City Code on Takeovers and Mergers. The Company’s business model and strategy, including key challenges in their execution, are set out in the strategic report. The Board’s approach to embedding effective risk management, in order to execute and deliver strategy, is also set out in the strategic report. Corporate culture The Board believes that the promotion of a corporate culture based on sound ethical values and behaviours is important to maximise shareholder value. The culture of the Group is to be entrepreneurial and innovative, developing viable technologies and functional food and dietary supplement products which are underpinned by high quality scientific intellectual property. The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Group’s operations. These values are enshrined in the working practices adopted by all of the Group’s consultants and they are consistent with the Group’s strategy, reflecting the high ethical and regulatory compliance required of a functional foods and dietary supplements business. The Directors believe that the Company culture encourages collaborative, ethical behaviour which benefits consultants, clients and shareholders. The Directors further believe that the Company’s small team of sales, marketing, e-commerce, PR and scientific consultants have worked and continue to work in line with the Company’s values. Board of Directors The Board is responsible to shareholders for the proper management of the Group. A statement of Directors’ responsibilities is set out on page 18. Provexis plc Annual report and accounts 31 March 2021 19 Dawson Buck Ian Ford Dr Niamh O’Kennedy Frederic Boned Chief Executive Officer Chief Scientific Officer Non-executive director Corporate governance report The Board of Provexis plc currently comprises: Director Role Appointed Time commitment Experience, skills, personal qualities and capabilities Non-executive Chairman June 2005 Sufficient time as required to fulfil his duties. Dawson has over twenty years’ senior international experience within the electronic security, property, retail and IT industries. Dawson was a founder and the CEO of Automated Loss Prevention Ltd, which he led from its inception to its sale to the Sensormatic Electronic Corporation Inc in 1992. Until 2005 Dawson was Deputy Chief Executive of ANGLE plc. July 2007 Full time Ian is a Chartered Accountant who trained with PwC and its predecessor firms in London, qualifying in 1991. Ian has over 25 years’ post qualification experience, with more than 20 years in senior financial roles with UK and US listed growth companies, to include Rubicon Group plc and SITEL Europe plc, the latter as Group Finance Director. Ian played key roles in the rapid growth of these businesses, including extensive merger and acquisition activity. Ian joined the Company as Finance Director in 2007 and he has been very closely involved with the Company’s relationships and contracts with DSM, By- Health and the Company’s investors over that time. Brings to the Board Extensive commercial operations experience in growth businesses and listed companies. Extensive commercial and financial experience in growth businesses and listed companies. April 2019 July 2018 Full time Niamh is a research chemist, specialising in the field of natural products chemistry, who has been working with Provexis since 2000. Niamh’s experience in isolating and characterising plant-derived compounds and understanding the roles these play in complex biological systems has been pivotal in the development of Provexis’ lead product, Fruitflow®, and the health claim for Fruitflow® which was adopted by the European Food Safety Authority (‘EFSA’). Niamh holds an honorary position at The University of Aberdeen. Extensive scientific experience and expertise, particularly in the field of isolating and characterising plant-derived compounds and understanding the roles these play in complex biological systems. Member of the Company’s Scientific Advisory Board. 3 3 to time as fulfil his Sufficient required duties. Frederic is North American Vice President of DSM’s Human Nutrition & Health business, a part of the Company’s Alliance Agreement partner DSM Nutritional Products. Frédéric has previously held a variety of senior roles in DSM’s Personal Care & Aroma Ingredients business including Director of Personal Care EMEA and Senior Director of Global Marketing and Innovation. Prior to DSM, Frédéric held several sales and marketing positions for over ten years at Givaudan. Frédéric has a chemical engineering degree from the Engineering School in Geneva, and an EMBA from the Business School of Lausanne. Extensive sales and marketing knowledge and expertise. Audit Committee. 3 1 Committee Audit Committee. 3 3 Board meetings held during the year Board meetings attended during the year Considered to be independent - 3 3 No - more than ten years’ service No - Executive Director No - Executive Director No - connected to DSM Provexis plc Annual report and accounts 31 March 2021 20 Corporate governance report The Company notes that under the QCA Code best practice is to have half of its board be independent, and specifically a minimum of two independent non-executive directors. The Board is aware that Provexis does not currently comply with the QCA code in this respect, but due to the Company’s small size and currently limited resources the Board is comfortable that the current Board composition does enable it to fulfil its obligations. The Directors regularly review the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group. The Company’s Non-executive Chairman Dawson Buck, although not considered independent under the QCA code, does bring independent judgement to the Board due to him now having a Non-executive role. The experience, personal qualities and skills of the Directors are as set out in the table above. The Chairman and Non-Executive director maintain their skillsets through a combination of other executive, non-executive and advisory roles. In addition, knowledge is kept up to date on key issues and developments pertaining to the Group, and corporate governance matters, through updates from the Executive Directors and various external advisers. Executive Directors maintain their skillsets through practice in day-to-day roles, enhanced by updates from external advisers and by attending specific training and external courses where required. Board effectiveness and evaluation The Company supports the concept of an effective Board leading and controlling the Company. The effectiveness of the Board is kept under review by the Directors, who assess the individual contributions of each of the members of the team to ensure that their contribution is relevant and effective and that they are suitably committed to the business. Where necessary, specific actions are identified to improve certain areas. The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience in the scientific, operational and financial development of functional food and dietary supplement companies, as further detailed in the table above. Board training and advice There is an induction process for new Directors. The Company has periodically held briefings for the Directors covering regulations that are relevant to their role as directors of an AIM-quoted company, typically to coincide with significant changes in regulations. The Company Secretary, supported by the Company’s Nominated adviser and broker, informs the Board in the first instance of any material changes to the AIM Rules and other relevant laws and regulations. All Directors are able to take training and/or independent professional advice in the furtherance of their duties if necessary. All Directors also have access, at the Company’s expense, to experienced legal advice through the Company’s legal advisors and other independent professional advisors as required. The Company maintains appropriate insurance in the event of legal action being taken against a Director. No individual Director or Committee of the Board received external advice in relation to their Board duties in the year. The Board is in very regular dialogue, and it meets physically on an ad-hoc basis when necessary. All of the Directors are subject to election by shareholders at the first AGM after their appointment to the Board and will continue to seek re-election at least once every three years. Audit Committee The Audit Committee comprises the Non-executive Chairman Dawson Buck and Frederic Boned, a 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. As well as providing audit related services, the auditors provide taxation compliance and advisory 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 £4,850 for the year ended 31 March 2021 (2020: £4,700). Provexis plc Annual report and accounts 31 March 2021 21 Corporate governance 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. At this stage in the Group’s development, the Board does not consider it appropriate to establish an internal audit function. Environmental, social and community matters As noted in the strategic report 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 Directors 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 21 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. Dawson Buck Chairman 29 September 2021 Provexis plc Annual report and accounts 31 March 2021 22 Remuneration report Remuneration Committee: composition and terms of reference In 2013 it was agreed with some of the Company’s larger shareholders 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, CEO Ian Ford and CSO Dr Niamh O’Kennedy are engaged under contracts for services requiring six months’ notice by either party. Frederic Boned, a Non-executive Director and senior employee of DSM, joined the Board in July 2018. Frederic Boned is not paid by Provexis, and is not specifically remunerated by DSM for his services to Provexis. Gains made on exercise of Directors’ share options No Directors’ share options were exercised during the year (2020: Nil). Details of Directors’ remuneration The emoluments of the individual Directors for the year were as follows: Year ended 31 March 2021 Year ended 31 March 2020 Salary and Directors’ fees Benefits in kind Pension Total Total £ 124,008 80,040 - 32,332 236,380 £ - - - - - £ 6,200 4,002 - - 10,202 £ £ 130,208 84,042 122,589 75,518 - 32,332 246,582 - 36,000 234,107 Executive Directors I Ford Dr N A O’Kennedy * Non-executive Directors F Boned C D Buck ** * ** Dr Niamh O’Kennedy joined the Board on 12 April 2019. Dawson Buck changed from Executive Chairman to Non-executive Chairman on 12 April 2019. The above fees and emoluments exclude reimbursed expenditure incurred in the conduct of Group business. Provexis plc Annual report and accounts 31 March 2021 23 Remuneration report Share-based payment expense The share-based payment expenses of the individual Directors recognised for the year were as follows: Executive Directors I Ford Dr N A O’Kennedy Non-executive Directors F Boned C D Buck Directors’ interests in shares I Ford and family Dr N A O’Kennedy C D Buck and family Year ended 31 March 2021 £ Year ended 31 March 2020 £ 22,370 22,370 - 7,158 51,898 31,567 18,941 - 23,148 73,656 Ordinary shares of 0.1 pence each Ordinary shares of 0.1 pence each Beneficial interests 31 March 2021 1 April 2020 10,000,000 - 27,083,334 37,083,334 10,000,000 - 25,416,667 35,416,667 Other than as shown in the table and as further disclosed in respect of share options in note 16, no Director had any interest in the shares of the Company or its subsidiary companies at 31 March 2021. Provexis plc Annual report and accounts 31 March 2021 24 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 2021 are summarised below. I Ford Dr N A O’Kennedy (appointed 12 April 2019) C D Buck 31 March 2021 31 March 2020 50,000,000 38,000,000 25,000,000 113,000,000 50,000,000 38,000,000 25,000,000 113,000,000 The unapproved share options at 31 March 2021 of the Directors who served during the year are set out below: Grant date Number awarded Exercise price/share Earliest exercise date Expiry date I Ford N A O’Kennedy C D Buck I Ford N A O’Kennedy C D Buck N A O’Kennedy N A O’Kennedy N A O’Kennedy C D Buck I Ford September 2019 September 2019 September 2019 December 2017 December 2017 December 2017 July 2017 December 2016 November 2014 June 2013 June 2011 25,000,000 25,000,000 8,000,000 10,000,000 1,500,000 10,000,000 2,500,000 4,000,000 5,000,000 7,000,000 6,350,010 104,350,010 0.30p 0.30p 0.30p 0.55p 0.55p 0.55p 0.52p 0.92p 0.67p 0.972p 1.846p April 2022 April 2022 April 2022 April 2020 April 2020 April 2020 April 2020 April 2019 April 2017 April 2016 April 2014 September 2029 September 2029 September 2029 December 2027 December 2027 December 2027 July 2027 December 2026 November 2024 June 2023 June 2021 The EMI share options at 31 March 2021 of the Directors who served during the year are set out below: Grant date Number awarded Exercise price/share Earliest exercise date Expiry date I Ford I Ford June 2013 June 2011 7,000,000 1,649,990 8,649,990 0.972p 1.846p April 2016 April 2014 June 2023 June 2021 All options were granted with an exercise price at or above market value on the date of grant. Provexis plc Annual report and accounts 31 March 2021 25 Independent auditor’s report to the members of Provexis plc Opinion We have audited the financial statements of Provexis plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the ye ar ended 31 March 2021 which comprise the Consolidated statement of comprehensive income, Consolidated statement of financial position, Consolidated statement of cash flows, Consolidated statement of changes in equity, Parent company statement of financial position, Parent company statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. 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, including Financial Reporting Standard 102 The Financial Reporting Standard in the United Kingdom and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). In our opinion: • • • • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2021 and of the Group’s loss for the year then ended; the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the Parent Company 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. Basis for opinion We conducted our audit in accordance with International Standards of Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further discussed in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standards as applied to listed entities, and we have fulfilled our ethical responsibilities with these requirements. We believe that the audit evidence we have obtained is s ufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Overview of the scope of our audit We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK and Ireland)’). We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all our audits we also addressed the risk of management override of internal controls, including evaluating whether there is evidence of bias by the directors that represented a risk of material misstatement due to fraud. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account our understanding of the group and its environment, the accounting processes and controls, and the industry in which the group operates. The group operates within the parent company and a number of operating subsidiaries. We performed full scope statutory audits in respect of the parent company and the subsidiaries to enable us to provide an opinion on the consolidated financial statements. The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and e ffort, are identified in the Key audit matters section below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financ ial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Provexis plc Annual report and accounts 31 March 2021 26 Independent auditor’s report to the members of Provexis plc continued Key audit matter Revenue Revenue is a significant driver of the business and there is a risk that management might overstate revenue to meet targets or market expectations as well minimising losses. We therefore identified revenue recognition as a significant risk. How we addressed the Key audit matter in the audit Our procedures included: • Agreement of revenue recognised under the DSM Alliance Agreement to appropriate evidence; Testing a sample of sales of physical product to supporting evidence • • Considering the appropriateness and application of the group’s revenue recognition policies. Key observations Based on the procedures we performed, we noted no material issues in respect of revenue. Key audit matter Share-based payments The group has recognised significant amounts in respect of share-based payments during the period. Accounting for share based payments is complex and requires the exercise of judgement. How we addressed the Key audit matter in the audit Our procedures included: • Reviewing the methodology and assumptions used in calculating the share-based payment charge • Checking the arithmetic accuracy of the calculations • Considering the appropriateness and application of the We therefore identified revenue recognition as a significant risk. group’s accounting policy • Reviewing the relevant disclosures Key observations Based on the procedures we performed, we noted no material issues in respect of share-based payments. Our application of materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decision of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgements we determined materiality for the consolidated financial statements as a whole, and the parent company financial statements, to be £20,000, based upon 6% of the reported loss for the year. We agreed with the directors that we would report all audit difference in excess of £2,000 as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report on disclosure matters that we identified when assessing the overall presentation of the financial statements. Other information included in the annual report The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially misstated. If we identify such material inconsistencies or apparent material misstatement, we are required to determine whether there is a material misstatement in the financial statement or a material misstatement in the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • • The information given in the Group strategic report and the directors’ report for the financial year for which the financial statements are prepared are consistent with the financial statements; and The Group strategic report and the directors’ report have been prepared in accordance with the applicable legal requirements. Provexis plc Annual report and accounts 31 March 2021 27 Independent auditor’s report to the members of Provexis plc continued Matters on which we are required to report by exception In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to the financial statements which the Companies Act 2006 require to report to you if, in our opinion: • Adequate accounting records have not been kept, or returns adequate for the audit have not been received from branches not visited by us; or • The 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. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 18 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group's and the parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in t he aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. The specific procedures for this engagement that we designed and performed to detect material misstatements in respect of irregularities, including fraud, included: • • Enquiry of management and those charged with governance around actual and potential litigation and claims; Enquiry of management and those charged with governance to identify any material instances of non-compliance with laws and regulations; • Reviewing financial statement disclosures and agreeing to supporting documentation to assess compliance with applicable • laws and regulations; Performing audit work to address the risk of irregularities due to management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for evidence of bias. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report. Provexis plc Annual report and accounts 31 March 2021 28 Independent auditor’s report to the members of Provexis plc continued Use of our report 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. Alan Poole BA (Hons) FCA (Senior Statutory Auditor) For and on behalf of James Cowper Kreston Chartered Accountants and Statutory Auditors Reading 29 September 2021 Provexis plc Annual report and accounts 31 March 2021 29 Consolidated statement of comprehensive income Year ended 31 March 2021 Year ended 31 March 2020 Notes £ £ 1,3 4 8 16 15 4 7 8 505,330 (49,136) 456,194 (48,689) (303,898) (465,523) 2,460 (224,756) (55,925) (78,775) 347,937 (35,782) 312,155 (40,656) (251,865) (455,948) 11,502 (320,888) (103,924) - (359,456) (424,812) 113 347 (359,343) (424,465) - - Revenue Cost of goods Gross profit Selling and distribution costs Research and development costs Administrative costs (including share-based payment charges) R&D tax relief: receivable tax credit Underlying operating loss Share-based payment charges - share options Share-based payment charges - blood pressure IP Loss from operations Finance income Loss before taxation Taxation Loss and total comprehensive loss for the year (359,343) (424,465) Attributable to: Owners of the parent Non-controlling interest Loss and total comprehensive loss for the year Loss per share to owners of the parent Basic - pence Diluted - pence (341,007) (18,336) (359,343) (406,229) (18,236) (424,465) 9 9 (0.02) (0.02) (0.02) (0.02) Provexis plc Annual report and accounts 31 March 2021 30 Consolidated statement of financial position Company number 05102907 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 Total current liabilities Net current assets Total liabilities Total net assets Capital and reserves attributable to owners of the Parent company Share capital Share premium Merger reserve Retained earnings Non-controlling interest Total equity Notes 11 12 8 13 15 17 17 17 As at 31 March 2021 £ 60,576 140,923 13,960 1,077,410 1,292,869 1,292,869 (150,681) (150,681) As at 31 March 2020 £ 10,084 139,637 27,702 291,335 468,758 468,758 (150,077) (150,077) 318,681 (150,681) (150,077) 1,142,188 318,681 2,210,822 18,675,221 6,599,174 (25,829,007) 1,656,210 (514,022) 1,142,188 2,059,322 17,699,796 6,599,174 (25,543,925) 814,367 (495,686) 318,681 These consolidated financial statements were approved and authorised for issue by the Board on 29 September 2021. The notes on pages 34 to 48 form part of these consolidated financial statements. Ian Ford Director - On behalf of the Board of Provexis plc Provexis plc Annual report and accounts 31 March 2021 31 Consolidated statement of cash flows Notes 7 8 16 15 Year ended 31 March 2021 Year ended 31 March 2020 £ £ (359,343) (424,465) (113) (2,460) 55,925 78,775 (50,492) (1,374) 604 (347) (11,502) 103,924 - 35,782 (80,086) 26,934 (278,478) (349,760) 16,202 14,720 (262,276) (335,040) (250) 201 (49) - 399 399 15 1,048,400 1,048,400 300,334 300,334 Cash flows from operating activities Loss after tax Adjustments for: Finance income Tax credit receivable Share-based payment charges - share options Share-based payment charges - blood pressure IP Changes in inventories Changes in trade and other receivables Changes in trade and other payables Net cash flow from operations Tax credits received Total cash flow from operating activities Cash flow from investing activities Purchase of blood pressure IP - cash element Interest received Total cash flow from investing activities Cash flow from financing activities Proceeds from issue of share capital Total cash flow from financing activities Net change in cash and cash equivalents 786,075 (34,307) Opening cash and cash equivalents Closing cash and cash equivalents 291,335 1,077,410 325,642 291,335 Provexis plc Annual report and accounts 31 March 2021 32 Consolidated statement of changes in equity Share capital Share premium Merger reserve Retained earnings £ £ £ £ Total equity attributable to owners of the parent £ Non- controlling interests Total equity £ £ At 31 March 2019 1,983,988 17,474,796 6,599,174 (25,241,620) 816,338 (477,450) 338,888 Share-based charges - share options - - Issue of shares - placing 17 December 2019 75,334 225,000 Total comprehensive loss for the year - - - - - 103,924 103,924 - 300,334 - - 103,924 300,334 (406,229) (406,229) (18,236) (424,465) At 31 March 2020 2,059,322 17,699,796 6,599,174 (25,543,925) 814,367 (495,686) 318,681 Share-based charges - share options Share-based charges - purchase of blood pressure IP - - - - Issue of shares 19 August 2020 - blood pressure IP 11,500 67,025 Issue of shares - placing 23 December 2020 Issue of shares - placing 25 February 2021 133,333 865,417 6,667 42,983 Total comprehensive loss for the year - - - - - - - - 55,925 55,925 78,775 78,775 (78,775) (250) - - 998,750 49,650 - - - - - 55,925 78,775 (250) 998,750 49,650 (341,007) (341,007) (18,336) (359,343) At 31 March 2021 2,210,822 18,675,221 6,599,174 (25,829,007) 1,656,210 (514,022) 1,142,188 Provexis plc Annual report and accounts 31 March 2021 33 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 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK. The functional and presentational currency is pounds sterling and the financial statements are rounded to the nearest £1. The main activities of the Group are those of developing, licensing and selling the proprietary, scientifically- proven Fruitflow heart-health functional food ingredient for the global functional food sector. Basis of preparation The 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 - Financial Reporting Standard 102 (‘UK GAAP’), and these are set out on pages 49 to 53. 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 2021. These accounting policies are consistent with those applied in the year ended 31 March 2020, as amended to reflect any new Standards, amendments to Standards and interpretations which are mandatory for the year ended 31 March 2021. The adoption of these revised standards and interpretations has not had an impact on the current and comparative figures recorded. The IASB has issued a number of standards and interpretations with an effective date after the date of these financial statements, none of which are expected to have a material impact on the Group’s reported financial performance or position. Going concern The Group’s business activities together with the factors likely to affect its future development, and the financial position of the Group, its cash flows and liquidity position are set out in the strategic report on pages 9 to 16. In addition note 2 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit and liquidity risk. The Group made a loss for the year of £359,343 (2020: £424,465), which includes non-cash share-based payment charges of £134,700 (2020: £103,924) and expects to make a further loss during the year ending 31 March 2022. The total cash outflow from operations in the year was £262,276 (2020: £335,040). At 31 March 2021 the Group had cash balances of £1,077,410 (2020: £291,335). On 17 December 2020 the Group announced it had raised proceeds of a gross £1.0 million via the placing of 133,333,349 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 23 December 2020. On 19 February 2021 the Group announced it had raised proceeds of a gross £50,000 via the placing of 6,666,667 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 25 February 2021. 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 Group is seeking to maximise the commercial returns that can be achieved from its Fruitflow technology, and the Group’s cost base and its resources continue to be very tightly managed. Provexis plc Annual report and accounts 31 March 2021 34 Notes to the consolidated financial statements continued 1. Accounting policies (continued) Going concern (continued) The Group remains keen to minimise dilution to shareholders and it is focussed on moving into profitability as Fruitflow revenues increase, but while the Group remains in a loss-making position it may need to raise working capital on occasions, and the Group has access to future equity financings 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 a period of more than twelve months from the date of approval of the financial statements. Accordingly, the going concern basis has been used in preparing the financial statements. Basis of consolidation Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The consolidated financial information presents the results of the Company and its subsidiaries, Provexis Nutrition Limited, Provexis Natural Products Limited and Provexis (IBD) Limited as if they formed a single entity (‘the Group’). All subsidiaries share the same reporting date, 31 March, as Provexis plc. All intra group balances are eliminated in preparing the financial statements. Non-controlling interest Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Revenue (i) Performance obligations and timing of revenue recognition The group’s revenue is primarily derived from: • The group’s profit-sharing Alliance Agreement with DSM, with the group’s profit-sharing income from this agreement being recognised on an accruals basis in accordance with the substance of the agreement, based on the receipt from DSM of the relevant information to enable calculation of the profit-sharing payment due to the group. • Selling goods, with revenue recognised at a point in time when control of the goods has transferred to the customer. Revenue from sales to external customers is recognised when goods are despatched. There is limited judgment needed in identifying the point at which these performance obligations are satisfied. (ii) Determining the transaction price The amount of revenue to be earned is determined by reference to (i) the provisions of the group’s profit- sharing Alliance Agreement with DSM, which is based on DSM’s fixed price contracts with their customers, and (ii) the fixed price contracts which the group has with its customers, in respect of the direct sale of goods to these customers. Variable consideration relating to volume rebates has been constrained in estimating contract revenue in order that it is highly probable there will not be a future reversal in the amount of revenue recognised when the amount of volume rebates has been determined. (iii) Allocating amounts to performance obligations For most contracts, there is a fixed unit price for each product sold, with discounts given for bulk orders placed at a specific time. Therefore, there is no judgement involved in allocating the contract price to each unit ordered in such contracts (it is the total contract price divided by the number of units ordered). Sales rebate and discount reserves are established based on management’s best estimate of the amounts necessary to meet claims by customers in respect of these rebates and discounts. A refund liability is made at the time of sale and updated at the end of each reporting period for changes in circumstances. Provexis plc Annual report and accounts 31 March 2021 35 Notes to the consolidated financial statements continued 1. Accounting policies (continued) Revenue (continued) (iv) Practical exemptions The Group has taken advantage of the practical exemption not to account for significant financing components where the time difference between receiving consideration and transferring control of goods to its customer is less than one year. Segment reporting The Group determines and presents operating segments based on the information that internally is provided to the Board of Directors, which is the Group’s ‘chief operating decision maker’ (‘CODM’). An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the CODM to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Group Board include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets. Use of non-GAAP profit measure - underlying operating profit The Directors believe that the operating loss before share-based payments measure provides additional useful information for shareholders on underlying trends and performance. This measure is used for internal performance analysis. Underlying operating loss is not defined by IFRS and therefore may not be directly comparable with other companies’ adjusted profit measures. It is not intended to be a substitute for, or superior to IFRS measurements of profit. A reconciliation of underlying operating profit to statutory operating profit is set out on the face of the Statement of Comprehensive Income. Intangible assets Research and development Expenditure incurred on the development of internally generated products is capitalised if it can be demonstrated that: ● ● ● ● ● ● It is technically feasible to develop the product for it to be sold; Adequate resources are available to complete the development; There is an intention to complete and sell the product; The Group is able to sell the product; Sale of the product will generate future economic benefits; and Expenditure on the project can be measured reliably. The value of the capitalised development cost is assessed for impairment annually. The value is written down immediately if impairment has occurred. Development costs are not being amortised as income has not yet been realised from the underlying technology. Development expenditure, not satisfying the above criteria, and expenditure on the research phase of internal projects is recognised in profit and loss as incurred. Patents and trade marks The costs incurred in establishing patents and trade marks are either expensed or capitalised in accordance with the corresponding treatment of the development expenditure for the product to which they relate. Provexis plc Annual report and accounts 31 March 2021 36 Notes to the consolidated financial statements continued 1. Accounting policies (continued) Impairment of non- financial assets Assets that have a finite useful life but that are not yet in use and are therefore not subject to amortisation or depreciation are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment annually and when events or circumstances suggest that the carrying amount may not be recoverable, an impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairment losses on goodwill are not reversed. Inventories Inventories, representing finished goods, are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is calculated on a first in, first out basis. Net realisable value is based on estimated selling price less further costs to completion and disposal. A charge is made to the income statement for slow moving inventories. The charge is reviewed at each reporting date. Financial instruments Financial assets The Group’s financial assets are comprised of ‘trade and other receivables’ and ‘cash and cash equivalents’. They are recognised initially at their fair value and subsequently at amortised cost using the effective interest method, less provision for impairment. Impairment provisions for trade and other receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of lifetime expected credit losses. Financial liabilities The Group’s financial liabilities comprise ‘trade and other payables’ and ‘borrowings’. These are recognised initially at fair value and subsequently at amortised cost. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand. Government grants Government grants are recognised when there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants are recognised in the statement of comprehensive income in the same period to which the costs that they are intended to compensate are expensed. When research and development tax credits are claimed they are recognised on an accruals basis and are included as other income. Provexis plc Annual report and accounts 31 March 2021 37 Notes to the consolidated financial statements continued 1. Accounting policies (continued) Taxation Current tax is provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on the statement of financial position differs from its tax base, except for differences arising on: • The initial recognition of an asset or liability in a transaction which is not a business combination and at • the time of the transaction affects neither accounting or taxable profit; and Investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profits will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted. Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: • The same taxable Group Company; or • Different Group entities which intend to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, on each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. Foreign currency translation Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss. Benefits for Directors and consultants (i) Defined contribution plans The Group provides retirement benefits to the Executive Directors, who are the Group’s only employees. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the statement of comprehensive income in the period in which they become payable. (ii) Accrued holiday pay Provision has been made at the balance sheet date for holidays accrued but not taken at the salary of the relevant employee at that date. (iii) Share-based payment transactions for Directors and consultants The Group operates an equity-settled, share-based compensation plan. Vesting conditions are service conditions and performance conditions only. Where share options are awarded to employees and others providing similar services, the fair value of the options at the date of grant is charged to profit and loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. If non-market related terms and conditions of options are modified before they vest, the number of instruments expected to vest at each reporting date, and therefore the cumulative charge, is amended accordingly. Where equity instruments are granted to persons other than employees and others providing similar services, profit and loss is charged with the fair value of goods and services received. The proceeds received when options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and the remaining balance to share premium. Provexis plc Annual report and accounts 31 March 2021 38 Notes to the consolidated financial statements continued 1. Accounting policies (continued) Other share-based payment transactions The fair value of equity-settled share payments made in exchange for goods and services received by the Group, outside of the Group’s share-based compensation plan, is determined at the date the payment is made. The nature of the payment is assessed, and the fair value of the payment is either capitalised or charged to the consolidated statement of comprehensive income. National insurance on share options All employee option holders sign statements that they will be liable for any employers national insurance arising on the exercise of share options. Interest income Interest income is recognised on a time-proportion basis using the effective interest rate method. Critical accounting estimates and judgements The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are continually made and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable in the circumstances. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. The Directors believe the following to be the key areas of estimation and judgement: (i) Research and development Under IAS 38 Intangible Assets, development expenditure which meets the recognition criteria of the standard must be capitalised and amortised over the useful economic lives of intangible assets from product launch. (ii) Share-based payments The Group operates an equity-settled, share-based compensation plan. The charge for share-based payments is determined based on the fair value of awards at the date of grant partly by use of a Binomial / Black-Scholes convergence pricing model which require judgements to be made regarding expected volatility, dividend yield, risk free rates of return and expected option lives. The inputs used in these pricing models to calculate the fair values are set out in note 16. Provexis plc Annual report and accounts 31 March 2021 39 Notes to the consolidated financial statements continued 2. Financial risk management 2.1 Financial risk factors The Group’s activities inevitably expose it to a variety of financial risks: market risk (including currency risk, cash flow interest rate risk and fair value interest rate risk), credit risk and liquidity risk. It is Group policy not to enter into speculative positions using complex financial instruments. The Group’s primary treasury objective is to minimise exposure to potential capital losses whilst at the same time securing favourable market rates of interest on Group cash deposits using money market deposits with banks. Cash balances used to settle the liabilities from operating activities are also maintained in current accounts which earn interest at variable rates. (a) Market risk Foreign exchange risk The Group’s largest contract, the long-term Alliance Agreement with DSM Nutritional Products for Fruitflow, is primarily denominated in Euros. The Alliance Agreement is underpinned by a financial model which is based upon the division of profits between the two partners on an agreed basis, linked to certain revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales. DSM Nutritional Products seeks to sell Fruitflow in Euros, but its customers for Fruitflow are world-wide and world-wide exchange rate fluctuations may have an impact on the revenues accruing to DSM, and thus the profit share accruing to the Group. The cost of goods for Fruitflow is primarily denominated in and incurred in Euros. Where customer or supplier transactions of more than £25,000 total value are to be settled in foreign currencies consideration is given to settling the sums to be received or paid through foreign exchange conversion at the outset of the transactions to minimise the risk of adverse currency fluctuations. Cash flow and fair value interest rate risk The Group’s interest rate risk arises from medium term and short term money market deposits. Deposits which earn variable rates of interest expose the Group to cash flow interest rate risk. Deposits at fixed rates expose the Group to fair value interest rate risk. The Group analyses its interest rate exposure on a dynamic basis throughout the year. (b) Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as credit exposure in relation to outstanding receivables. Group policy is to place deposits with institutions with investment grade A2 or better (Moody’s credit rating) and deposits are made in sterling only. The Group does not expect any losses from non-performance by these institutions. Management believes that the carrying value of outstanding receivables and deposits with banks represents the Group’s maximum exposure to credit risk. (c) Liquidity risk Liquidity risk arises from the Group’s management of working capital, it is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and management monitors rolling forecasts of the Group’s liquidity on the basis of expected cash flow. The Group had trade and other payables at the statement of financial position date of £150,681 (2020: £150,077) as disclosed in note 13. 2.2 Capital risk management The Group considers its capital to comprise its ordinary share capital, share premium, merger reserve and accumulated retained earnings as disclosed in the consolidated statement of financial position. The Group remains funded exclusively by equity capital. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for equity holders of the Company and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Provexis plc Annual report and accounts 31 March 2021 40 Notes to the consolidated financial statements continued 3. Segmental reporting The Group’s operating segments are determined based on the Group’s internal reporting to the Chief Operating Decision Maker (CODM). The CODM has been determined to be the Board of Directors as it is primarily responsible for the allocation of resources to segments and the assessment of performance of the segments. The performance of operating segments is assessed on revenue. The CODM uses revenue as the key measure of the segments’ results as it reflects the segments’ underlying trading performance for the financial period under evaluation. Revenue is reported separately to the CODM and all other reports are prepared as a single business unit. DSM Alliance Agreement Fruitflow+ Omega 3 Fruitflow+ nitrates development products 4. Loss from continuing operations Loss from continuing operations is stated after charging: Research and development costs Foreign exchange losses / (gains) Equity-settled share-based payment expense Year ended 31 March 2021 £ Year ended 31 March 2020 £ 357,879 138,251 9,200 505,330 232,667 115,270 - 347,937 Year ended 31 March 2021 Year ended 31 March 2020 £ £ 303,898 10,109 134,700 251,865 (4,048) 103,924 The total fees of the Group’s auditor, for services provided are analysed below: Audit services Parent company Subsidiaries Tax services - compliance Parent company Subsidiaries Other services iXBRL services Total fees Year ended 31 March 2021 £ Year ended 31 March 2020 £ 9,250 6,750 500 2,350 2,000 9,000 6,500 500 2,250 1,950 20,850 20,200 Provexis plc Annual report and accounts 31 March 2021 41 Notes to the consolidated financial statements continued 5. Wages and salaries The average monthly number of persons, including all Directors, employed or engaged under contracts for services by the Group during the year was as follows: Directors Their aggregate emoluments were: Wages and salaries Social security costs Pension and other staff costs Total cash settled emoluments Share-based payment remuneration charge: equity settled Total emoluments 6. Directors’ remuneration Directors Aggregate emoluments Company pension contributions Share-based payment remuneration charge: equity settled Total Directors’ emoluments Year ended 31 March 2021 Year ended 31 March 2020 4 4 4 4 Year ended 31 March 2021 Year ended 31 March 2020 £ £ 236,380 25,733 10,202 272,315 51,898 324,213 232,026 10,038 380 242,444 73,860 316,304 Year ended 31 March 2021 £ Year ended 31 March 2020 £ 236,380 10,202 246,582 51,898 298,480 229,856 4,251 234,107 73,656 307,763 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 2021 £ Year ended 31 March 2020 £ 124,008 6,200 22,370 152,578 120,006 2,583 31,567 154,156 During the year, two Directors participated in defined contribution pension schemes (2020: Nil). During the current year and the prior year the Directors did not receive any benefits in kind. Further details of Directors’ emoluments are included in the Remuneration report on pages 23 to 25. Provexis plc Annual report and accounts 31 March 2021 42 Notes to the consolidated financial statements continued 7. Finance income Finance income Bank interest receivable 8. R&D tax relief: payable tax credit and taxation R&D tax relief: payable tax credit Research and development credit - current year Research and development credit - in respect of prior periods Taxation credit Year ended 31 March 2021 Year ended 31 March 2020 £ £ 113 113 347 347 Year ended 31 March 2021 Year ended 31 March 2020 £ £ 2,460 - 2,460 11,500 2 11,502 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 2021 Year ended 31 March 2020 £ £ Loss before tax (359,343) (424,465) Loss before tax multiplied by the standard rate of corporation tax in the UK of 19% Effects of: Expenses not deductible for tax purposes Unutilised tax losses and other deductions arising in the year Adjustment for R&D tax relief Total taxation charge for the year 68,275 80,648 (25,593) (44,504) 1,822 - (19,746) (62,874) 1,972 - At 31 March 2021 the Group UK tax losses to be carried forward are estimated to be £20,200,000 (2020: £19,900,000). The tax losses represent deferred tax assets amounting to £3,834,700 (2020: £3,781,200) which have not been recognised on the basis that their future economic benefit is not probable. R&D tax relief: payable tax credit receivable within one year R&D tax relief: payable tax credit recoverable 31 March 2021 £ 13,960 13,960 31 March 2020 £ 27,702 27,702 Provexis plc Annual report and accounts 31 March 2021 43 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 or loss attributable to owners of the parent by the weighted average number of ordinary shares in issue during the financial year. The loss attributable to equity holders of the Company for the purpose of calculating the fully diluted loss per share is identical to that used for calculating the basic loss per share. The exercise of share options, disclosed in note 16, would have the effect of reducing the loss per share and is therefore anti-dilutive under the terms of IAS 33 ‘Earnings per Share’. Basic and diluted loss per share amounts are in respect of all activities. Year ended 31 March 2021 Year ended 31 March 2020 Loss and total comprehensive loss for the year attributable to owners of the parent - £ 341,007 406,229 Weighted average number of shares 2,102,799,137 2,005,600,196 Basic and diluted loss per share - pence 0.02 0.02 10. Intangible assets Cost At 1 April 2020 At 31 March 2021 Amortisation and Impairment At 1 April 2020 At 31 March 2021 Net book value At 31 March 2021 At 31 March 2020 Cost At 1 April 2019 At 31 March 2020 Amortisation and Impairment At 1 April 2019 At 31 March 2020 Net book value At 31 March 2020 At 31 March 2019 Goodwill £ Development costs £ Total £ 7,265,277 7,265,277 158,166 158,166 7,423,443 7,423,443 7,265,277 7,265,277 158,166 158,166 7,423,443 7,423,443 - - - - - - 7,265,277 7,265,277 158,166 158,166 7,423,443 7,423,443 7,265,277 7,265,277 158,166 158,166 7,423,443 7,423,443 - - - - - - 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 31 March 2021 44 Notes to the consolidated financial statements continued 11. Inventories Finished goods 31 March 2021 £ 60,576 60,576 31 March 2020 £ 10,084 10,084 There are no provisions included within inventories in relation to the impairment of inventories (2020: £Nil). During the year inventories of £49,136 (2020: £35,782) were recognised as an expense within cost of goods. 12. Trade and other receivables Amounts receivable within one year: Trade receivables 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 Trade and other receivables do not contain any impaired assets. 31 March 2021 £ 31 March 2020 £ 5,916 29,659 35,575 105,348 140,923 4,709 51,533 56,242 83,395 139,637 Trade receivables represent debts due for the sale of goods to customers. The Directors consider that the carrying amount of these receivables approximates to their fair value. All amounts shown under receivables fall due for payment within one year. The Group does not hold any collateral as security. The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging. Any impairment review based on the Group’s expected loss rates is currently deemed to be immaterial to the Group. At 31 March 2021 trade receivables of £Nil (2020: £Nil) were more than 60 days past due, and there were no lifetime expected credit losses of the full value of trade receivables (2020: £Nil). 13. Trade and other payables Trade payables Accruals Total financial liabilities measured at amortised cost Other taxes and social security Total trade and other payables 31 March 2021 £ 20,502 120,449 140,951 9,730 150,681 31 March 2020 £ 22,297 112,749 135,046 15,031 150,077 The Directors consider that the carrying amount of these liabilities approximates to their fair value. All amounts shown fall due within one year. Provexis plc Annual report and accounts 31 March 2021 45 Notes to the consolidated financial statements continued 14. Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2020: 19%). No amounts in respect of deferred tax were recognised in profit and loss from continuing operations or charged / credited to equity for the current or prior year. The UK corporation tax rate for the year was 19.0% (2020: 19.0%). In March 2021, the UK Government announced an increase in the UK corporation tax rate to 25.0% from 1 April 2023. The increase in UK corporation tax rate was substantively enacted on 24 May 2021. Deferred tax assets amounting to £3,834,700 (2020: £3,781,200) have not been recognised on the basis that their future economic benefit is not probable. Assuming a prevailing tax rate of 19% (2020: 19%) when the timing differences reverse, the unrecognised deferred tax asset comprises: Depreciation in excess of capital allowances Unutilised tax losses 15. Share capital Allotted, called up and fully paid At 31 March 2020 Issue of shares 19 August 2020 - purchase of blood pressure IP Issue of shares - placing 23 December 2020 Issue of shares - placing 25 February 2021 At 31 March 2021 31 March 2021 £ - 3,834,700 3,834,700 31 March 2020 £ - 3,781,200 3,781,200 Ordinary 0.1p shares £ Ordinary 0.1p shares number 2,059,322 11,500 133,333 6,667 2,210,822 2,059,321,507 11,500,000 133,333,349 6,666,667 2,210,821,523 On 13 August 2020 the Group announced the purchase of the background and joint foreground antihypertensive (blood pressure lowering) intellectual property and patents from Inven2 AS, the technology transfer office at the University of Oslo. The total consideration was 11,500,000 new ordinary shares of 0.1p, valued at £78,775 on the date the shares were issued, and this amount was fully expensed during the year in accordance with the Group’s accounting policy. On 17 December 2020 the Group announced it had raised proceeds of a gross £1.0 million via the placing of 133,333,349 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 23 December 2020. On 19 February 2021 the Group announced it had raised proceeds of a gross £50,000 via the placing of 6,666,667 new ordinary shares of 0.1p each at a gross 0.75p per share with investors, with no commissions payable. The placing shares were admitted to trading on AIM on 25 February 2021. Allotted, called up and fully paid At 31 March 2019 Issue of shares - placing 17 December 2019 At 31 March 2020 Ordinary 0.1p shares £ Ordinary 0.1p shares number 1,983,988 75,334 2,059,322 1,983,988,174 75,333,333 2,059,321,507 Provexis plc Annual report and accounts 31 March 2021 46 Notes to the consolidated financial statements continued 16. Share options In June 2005 the Company adopted a new share option scheme for employees (‘the Provexis 2005 share option scheme’). Under the scheme, options to purchase ordinary shares are granted by the Board of Directors, subject to the exercise price of the option being not less than the market value at the grant date. Share options typically vest after a period of 3 years and the vesting schedule is subject to predetermined overall company selection criteria. In the event that an option holder’s employment is terminated, the option may not be exercised unless the Board of Directors so permits. Share options expire 10 years from the date of grant. Share options are exercisable between 3 and 10 years from date of grant and are subject to performance criteria, including share price appreciation. The Company believes the grant of options closely aligns the interests of the option holders with those of shareholders. The fair values of options granted are estimated at the date of grant in accordance with IFRS 2, using a Binomial / Black-Scholes convergence model. At 31 March 2021 the number of ordinary shares subject to options granted over the 2005 and prior option schemes were: EMI options 31 March 2021 31 March 2020 Weighted average exercise price (pence) Number Weighted average exercise price (pence) Number Outstanding at the beginning of the year Outstanding at the end of the year 1.04 1.04 22,284,990 22,284,990 1.04 1.04 22,284,990 22,284,990 The exercise price of EMI options outstanding at the end of the year ranged between 0.97p and 1.85p (2020: 0.97p and 1.85p) and their weighted average contractual life was 2.1 years (2020: 3.1 years). Of the total number of EMI options outstanding at the end of the year, 22,284,990 (2020: 22,284,990) had vested and were exercisable at the end of the year. Their weighted average exercise price was 1.04 pence (2020: 1.04 pence). Unapproved options 31 March 2021 31 March 2020 Number Weighted average exercise price (pence) Weighted average exercise price (pence) Number Outstanding at the beginning of the year Granted during the year Lapsed during the year Outstanding at the end of the year 0.71 - - 0.71 171,215,010 - - 171,215,010 1.14 0.30 0.97 0.71 115,715,010 62,500,000 (7,000,000) 171,215,010 The exercise price of unapproved options outstanding at the end of the year ranged between 0.30p and 1.85p (2020: 0.30p and 1.85p) and their weighted average contractual life was 5.8 years (2020: 6.8 years). Of the total number of unapproved options outstanding at the end of the year, 108,715,010 (2020: 68,215,010) had vested and were exercisable at the end of the year. Their weighted average exercise price was 0.95 pence (2020: 1.19 pence). Provexis plc Annual report and accounts 31 March 2021 47 Notes to the consolidated financial statements continued 16. Share options (continued) The fair values of the options have been estimated at the date of grant using a Binomial / Black-Scholes convergence model, with an expected dividend yield of 0% and an expected volatility of 81%. The expected life of the options is based on historical data and is not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The total share-based payment charge for the year relating to employee share-based payment plans was £55,925 (2020: £103,924) all of which related to equity settled share-based payment transactions. 17. Reserves Details of movements in reserves are provided as part of the consolidated statement of changes in equity. The following describes the nature and purpose of each reserve within total equity: Share premium Merger reserve Amount subscribed for share capital in excess of nominal value, less the related costs of share issues. The merger reserve arose on the reverse takeover in 2005 of Provexis Natural Products Limited (formerly Provexis Limited) by Provexis plc through a share for share exchange and on the issue of shares for the acquisition of SiS (Science in Sport) Limited in 2011. SiS (Science in Sport) Limited was demerged from Provexis with effect from 9 August 2013 by way of a capital reduction demerger and transferred to a newly incorporated parent company, Science in Sport plc. Retained earnings Cumulative net gains and losses recognised in the consolidated statement of comprehensive income. 18. Pension costs The pension charge represents contributions payable by the Group to independently administered funds which for continuing operations during the year ended 31 March 2021 amounted to £10,202 (2020: £4,251). Employee and employer pension contributions payable but not yet paid at 31 March 2021 totalled £Nil (2020: £5,611). 19. Related party transactions On 1 June 2010 the Company announced a long-term Alliance Agreement with DSM Nutritional Products, which has seen the Company collaborate with DSM to develop Fruitflow in all major global markets. DSM has invested substantially in the manufacture, technology development, marketing and sale of Fruitflow since the Alliance Agreement was signed. Provexis continues to contribute scientific expertise and is collaborating in areas such as cost of goods optimisation and regulatory matters. The financial model is based upon the division of profits between the two partners on an agreed basis, linked to certain revenue targets, following the deduction of the cost of goods and a fixed level of overhead from sales. The Company is working closely with DSM in various areas of the project, and in June 2015 it was announced that the Company had agreed significantly enhanced financial terms for its long-term Alliance Agreement with DSM, involving a reduction in the fixed level of overhead deduction from sales which permanently decreased with effect from 1 January 2015, backdated, thus increasing the profit share payable to the Company. It is not possible to determine the financial impact of the Alliance Agreement at this time. DSM is classified as a related party of the Group in accordance with IAS 24 as it holds shares in the Group. Further, F Boned is a Director of the Company, and a senior employee of DSM. Revenue recognised by the Group under agreements with DSM amounted to £367,079 (2020: £232,667). At 31 March 2021 the Group was owed £Nil (2020: £Nil) by DSM. On 19 February 2021 the Group announced that Dawson Buck (Non-executive Chairman) had subscribed for 1,666,667 new ordinary shares of 0.1p each as part of a placing at a gross 0.75p per share. The placing shares were admitted to trading on AIM on 25 February 2021. 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 23 to 25. At 31 March 2021 the Directors were owed £Nil (2020: £Nil). Provexis plc Annual report and accounts 31 March 2021 48 Parent company statement of financial position Company number 05102907 Assets Non-current assets Investments Total non-current assets Current assets Cash and cash equivalents Total current assets Total assets Liabilities Total liabilities Net current assets Total net assets Capital and reserves attributable to owners of the Parent company Share capital Share premium Retained earnings Total equity Notes 3 As at 31 March 2021 £ As at 31 March 2020 £ - - 4,146 4,146 4,146 - 4,146 4,146 - - 110 110 110 - 110 110 5 2,210,822 18,675,221 (20,881,897) 4,146 2,059,322 17,699,796 (19,759,008) 110 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 £1,178,814 (2020: £404,247) which is dealt with in the financial statements of the Company. These financial statements were approved and authorised for issue by the Board on 29 September 2021. The notes on pages 51 to 53 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 31 March 2021 49 Parent company statement of changes in equity At 31 March 2019 Share-based charges Share capital £ Share premium £ Retained earnings £ 1,983,988 17,474,796 (19,458,685) Total equity £ 99 - - 103,924 103,924 Issue of shares - placing 17 December 2019 75,334 225,000 - 300,334 Total comprehensive loss for the year - - (404,247) (404,247) At 31 March 2020 2,059,322 17,699,796 (19,759,008) 110 Share-based charges - share options Share-based charges - purchase of blood pressure IP - - - - 55,925 78,775 55,925 78,775 Issue of shares 19 August 2020 - blood pressure IP 11,500 67,025 (78,775) (250) Issue of shares - placing 23 December 2020 133,333 865,417 Issue of shares - placing 25 February 2021 6,667 42,983 - - 998,750 49,650 Total comprehensive loss for the year - - (1,178,814) (1,178,814) At 31 March 2021 2,210,822 18,675,221 (20,881,897) 4,146 Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share issues. Retained earnings represents cumulative net gains and losses recognised in the consolidated statement of comprehensive income. Provexis plc Annual report and accounts 31 March 2021 50 Notes to the parent company 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 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK. Basis of preparation The Parent company financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards, including FRS 102. The Company has taken advantage of disclosure exemptions and does not prepare a statement of cash flows. 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 4 to the consolidated financial statements. 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 reporting date. Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the reporting 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. 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 total fees of the Group’s auditor, James Cowper Kreston, for services provided are analysed in note 4 to the consolidated financial statements. Total audit fees for the year were £9,250 (2020: £9,000). The Parent company did not have any employees in the year and therefore there were no payroll costs or pension costs (2020: Nil). Provexis plc Annual report and accounts 31 March 2021 51 Notes to the parent company financial statements continued 3. Investments At 31 March 2021 the Company owned the following 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 The registered office of each of the three subsidiary undertakings above is 2 Blagrave Street, Reading, Berkshire RG1 1AZ, UK. 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. Deferred tax Deferred tax assets amounting to £49,012 (2020: £49,012) have not been recognised on the basis that their future economic benefit is not probable. 5. Share capital Allotted, called up and fully paid At 31 March 2020 Issue of shares 19 August 2020 - purchase of blood pressure IP Issue of shares - placing 23 December 2020 Issue of shares - placing 25 February 2021 At 31 March 2021 Allotted, called up and fully paid At 31 March 2019 Issue of shares - placing 17 December 2019 At 31 March 2020 Ordinary 0.1p shares £ Ordinary 0.1p shares number 2,059,322 11,500 133,333 6,667 2,210,822 2,059,321,507 11,500,000 133,333,349 6,666,667 2,210,821,523 Ordinary 0.1p shares £ Ordinary 0.1p shares number 1,983,988 75,334 2,059,322 1,983,988,174 75,333,333 2,059,321,507 Details of the share subscriptions, share placings, and the shares issued by the Company during the two years ended 31 March 2021 are given in note 15 to the consolidated financial statements. Details on the share option scheme and share-based payment charge for the year are given in note 16 to the consolidated financial statements. Provexis plc Annual report and accounts 31 March 2021 52 Notes to the parent company financial statements continued 6. Related party transactions The Company has taken advantage of the exemption conferred by FRS 102 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 2021 (2020: Nil). At 31 March 2021 the Company was owed £5,509 by Provexis (IBD) Limited (31 March 2020: 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 £73,346 (2020: £72,944). Provexis (IBD) Limited owed Provexis group companies and Provexis Nutrition Limited a total of £2,936,846 at 31 March 2021 (31 March 2020: owed £2,863,500). Provisions of £2,936,846 (2020: £2,863,500) 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 19 to the consolidated financial statements. On 19 February 2021 the Group announced that Dawson Buck (Non-executive Chairman) had subscribed for 1,666,667 new ordinary shares of 0.1p each as part of a placing at a gross 0.75p per share. The placing shares were admitted to trading on AIM on 25 February 2021. Provexis plc Annual report and accounts 31 March 2021 53 Company information Company number 05102907 Directors Audit committee Registrars Secretary and registered office Nominated adviser and broker Principal solicitors Auditors C D Buck F Boned I Ford N A O’Kennedy C D Buck F Boned Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA I Ford 2 Blagrave Street Reading Berkshire RG1 1AZ Allenby Capital Limited 5 St Helen's Place London EC3A 6AB TLT LLP 20 Gresham Street London EC2V 7JE James Cowper Kreston Reading Bridge House George Street Reading Berkshire RG1 8LS Provexis plc Annual report and accounts 31 March 2021 54 

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