Provexis Regulatory News (PXS)

17 June 2011

Provexis plc

("Provexis" or the "Company")

Acquisition of SiS (Science in Sport) Limited andconditional placing to raise £2.5 million

Provexis plc (PXS.L), the life-science business that discovers, develops and licenses scientifically-proven functional food, medical food and dietary supplement technologies, is pleased to announce that is has entered into a conditional agreement to purchase the entire issued share capital of SiS (Science in Sport) Limited (the "Acquisition") a revenue generating, profitable company which manufactures and sells sports nutrition products ("SiS").

The Company has also raised £2.5 million via a placing of 166,666,662 new ordinary shares of 0.1 pence each in the Company ("Ordinary Shares") (the "Placing"), conditional, inter alia, on completion of the Acquisition and receipt of the all of the Placing proceeds from placees by Evolution Securities Limited ("Evolution"). Additionally, the Company intends to undertake an Open Offer to shareholders of the Company ("Shareholders") as soon as is reasonably practicable after the completion of the Acquisition (the "Open Offer").

Summary

·; The Acquisition of SiS is for total consideration of £8.0 million, of which £7.0 million will be satisfied in cash and a further £1.0 million will be satisfied in new Ordinary Shares (fully paid).

·; SiS produces sports nutrition products for consumers and professional and elite athletes, including Olympic athletes, professional cyclists and triathletes.

·; For the financial year ended 31 December 2010, SiS had unaudited turnover of £4.6 million (2009: £4.3 million (unaudited)) and unaudited profit before tax of £0.2 million (2009: £0.4 million (unaudited)). As at 31 December 2010, SiS had unaudited net assets of £0.96 million (2009: £0.8 million (unaudited)). The Directors believe the Acquisition price is attractive in the context of recent deals in the sports nutrition market.

·; The global sports drink market had an estimated $24.5 billion of sales in 2010. In the same period in the UK, sales of sports drinks were estimated to be £220 million, sports foods £30 million and sports supplements £70 million. All three sectors in the UK have shown growth since 2006.

·; The Acquisition provides immediate revenue and cash flow to the Company and its subsidiaries (the "Group") and diversifies the Group's business model from its existing longer-term technology development and licensing model. The spectrum of the Company's operations post-Acquisition will extend from the existing discovery, development and licensing of intellectual property to include the marketing and direct sales of functional foods.

·; The directors of the Company (the "Directors") believe that Provexis can use its management and technical capabilities to support growth in the SiS business in the areas of product development, scientific and regulatory expertise and expertise in the sports nutrition sector.

·; The Placing will raise £2.5 million (before expenses) which the Company will use to partially fund the cash consideration for the Acquisition.

·; Open Offer to all shareholders to raise up to approximately £2.2 million, to be undertaken as soon as reasonably practicable after the completion of the Acquisition.

The Company will be hosting a meeting for shareholders to discuss the Acquisition with Stephen Moon, Chief Executive, on 24 June 2011 at 10.00 a.m. at Haggie Financial, 4 Sun Court, 66-67 Cornhill, London, EC3V 3NB. A presentation to be given at the meeting by Stephen Moon will be exhibited on the Company website www.provexis.com following the meeting.

Stephen Moon, Chief Executive Officer of Provexis plc, commented:

"We are delighted to announce that the Company has entered into a conditional agreement to acquire SiS (Science in Sport) Limited which is expected to complete on 24 June 2011. Science in Sport is a highly regarded and growing company in the substantial sector of sports nutrition. I believe there are strong synergies between the two businesses, with the existing scientific, regulatory and product development capability of Provexis available to further enhance the reputation of Science in Sport with elite and professional athletes. The revenue generating, profitable nature of the new business will help us to achieve our strategic goals, by adding a near term revenue stream to our longer-term pipeline development bias. Management of the enlarged business will be highly focused on growing revenues from our Fruitflow heart-health Alliance with DSM Nutritional Products, the new Science in Sport business and continuing to build longer-term shareholder value from our pipeline."

Phil Walker, Managing Director of SiS commented:

 "This represents a great opportunity for the growth of the business. Provexis offers a solid platform for SiS to continue its development, in terms of products and share of the market. I firmly believe that Provexis' scientific, product development and management experience will add further value to the SiS business. This is an exciting time for the sports nutrition market, particularly in the approach to the Olympics, with an increasing number of athletes and consumers demanding high quality products."

Enquiries:

Forward Looking Statements

This announcement contains statements about the Company that are or may be "forward looking statements". All statements, other than statements of historical facts, included in the announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "projects", "would", "could", "continue" or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include statements relating to the following: management strategic vision; aims and objectives; the conduct of clinical trials; the Company's ability to find partners for the development and commercialisation of its products; the effect of competition; trends in results of operations; margin; and exchange rates. These forward-looking statements are not guarantees of future performance and have not been reviewed by the auditors of the Company. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation, the Company does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based). All subsequent oral or written forward-looking statements attributed to the Company or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this document are based on information available to the Directors at the date of this document, unless some other time is specified in relation to them.

Further Information on the Acquisition and Placing

1. Introduction

The Board is pleased to announce that on 17 June 2011 the Company entered into a conditional sale and purchase agreement (the "Agreement") to acquire the entire issued share capital of SiS.

The consideration payable under the Agreement is £6.75 million payable in cash on completion of the Acquisition ("Completion"), £0.25 million payable in cash on Completion to be held in escrow for a year pending any warranty or tax covenant claims under the Agreement and £1.0 million in fully paid Ordinary Shares at a price of 2.83 pence per Ordinary Share, being the average of the closing middle market price of Ordinary Shares for the five business days prior to the date of this announcement ("Consideration Shares"). The Consideration Shares (subject to certain exceptions) are subject to a lock-in period of two years from completion of the Acquisition.

The cash consideration payable under the Agreement will be financed by the Placing of 166,666,662 new Ordinary Shares to raise gross proceeds of £2.5 million and £4.5 million from the Company's existing cash resources. The Acquisition is still conditional on a placing agreement between the Company and Evolution Securities Limited concerning the Placing becoming unconditional in all respects (save for the condition in the placing agreement that the agreement concerning the Acquisition becomes unconditional) and the admission by the London Stock Exchange of the Consideration Shares to AIM becoming effective in accordance with the AIM Rules for Companies ("AIM Rules"). The Acquisition is currently expected to complete on 24 June 2011.

Shareholders should note that neither the Acquisition nor Placing are conditional on shareholder approval.

2. Description of the Acquisition

SiS is a manufacturer of sports nutrition products for use by consumers and professional and elite athletes. The business was founded in 1992 by the Lawson family. SiS's products are used by elite and professional athletes including, amongst others, Olympic athletes, professional football teams, rugby teams, athletes in a range of sports and is particularly strong in cycling. Distribution of SiS's products is largely in the UK although there are distributors in some major global markets. SiS manufactures its products in leased facilities in the North West of England.

For the financial year ended 31 December 2010, SiS had unaudited turnover of £4.6 million (2009: £4.3 million (unaudited)) and unaudited profit before tax of £0.2 million (2009: £0.4 million (unaudited)). As at 31 December 2010, SiS had unaudited net assets of £0.96 million (2009: £0.8 million (unaudited)).

3. Background to and reasons for the Acquisition

The Company has a current strategy of developing and licensing functional foods, medical foods and dietary supplements. Over the past 18 months the Directors have undertaken a review of various acquisition opportunities to supplement this strategy. The Directors believe the Acquisition will enhance the value of the Company by extending its business strategy from purely discovery, development and licensing to a combination of discovery, development, licensing and direct sales.

The key attractions of the Acquisition for the Company are as follows:

·; SiS has demonstrated revenue growth and is a profitable company. The Board expects the infrastructure and resources of the Company to provide opportunities for sales growth of certain SiS products and to support future product launches;

·; the Directors believe that the scientific and regulatory expertise of the Company may be used to benefit the SiS products;

·; SiS operates within the sports nutrition market. The global sports drink market had an estimated $24.5 billion of sales in 2010 and this market is estimated to have grown by a third since 2006. Global sports foods were estimated to be worth $1.7 billion in 2010 and sports supplements at between $4 billion and $4.5 billion. In the UK sports drinks sales were estimated to be £220 million in 2010, an increase of 7.6% in value terms on the previous year, with growth since 2006 being 44%. In the same year sports foods sales were estimated to be £30 million, a three-fold sales increase since 2006. Sales of sports supplements were estimated to be £70 million, with this sector growing by approximately 5% for each of the last five years.

·; SiS provides revenue generating products. Following the Acquisition, the Company will have a range of functional and medical food technologies from early stage development through to revenue generation. The Directors believe a broad portfolio of technologies at various stages of development increases the value creation opportunities available to the Company and prevents the Company from being dependent on any single product; and

·; the Directors believe the Consideration for the Acquisition is attractive based on recent take out valuations within the functional food sector.

The Board views the Acquisition of SiS as an excellent opportunity to combine SiS's sports products with the Company's product and development pipeline, commercial infrastructure and expertise. In the opinion of the Board the Company will benefit from a broader portfolio of products (both directly marketed and licensed) whilst maintaining the upside potential in the development pipeline.

4. Summary of the sale and purchase Agreement

On 17 June 2011 the Company entered into a conditional sale and purchase agreement ("Agreement") with John Lawson and others ("Sellers") to acquire the entire issued share capital of SiS. The total consideration payable under the Agreement is £8.0 million of which £7.0 million is payable in cash on completion of the Acquisition and £1.0 million is payable in fully paid up Ordinary Shares at a price of 2.83 per Ordinary Share, being the average of the closing middle market price of Ordinary Shares for the five business days prior to the date of the Agreement. The Consideration Shares (subject to certain exceptions) are subject to a lock-in period of two years from completion of the Acquisition. The Agreement contains certain warranties and a tax covenant given by certain of the Sellers to the Company. Of the £7.0 million payable in cash on completion, £0.25 million is to be paid into an escrow account for a year pending any warranty or tax covenant claims under the Agreement.

Completion of the Agreement is conditional (the "Conditions") on:

·; the admission of the Consideration Shares to trading on AIM; and

·; a placing agreement between the Company and Evolution concerning the Placing becoming unconditional in all respects (save for the condition in the placing agreement that the agreement concerning the Acquisition becomes unconditional). The placing agreement is conditional, inter alia, on none of the warranties in the placing agreement becoming untrue, inaccurate or misleading in any material respects prior to Admission (defined below in paragraph 5) and receipt of all of the Placing proceeds by Evolution from placees.

If the Conditions have not been fulfilled by 5 p.m. on 30 June 2011 (or such later date as Provexis and John Lawson representing the holders of the shares in SiS may agree in writing) the Agreement shall terminate with effect from that time and date.

5. The Placing

The Company has today raised £2.5 million (before expenses) by way of a conditional Placing by Evolution of 166,666,662 new Ordinary Shares (the "Placing Shares") with existing and new investors at a price of 1.5 pence per share (the "Placing Price"). The Placing is non-underwritten. The Placing Price is at a discount of approximately 46 per cent. to the closing middle market price of an Ordinary Share on 16 June 2011, being the last dealing day prior to the date of this announcement.

The Placing, which is being structured as a cashbox placing, is conditional, inter alia, on admission of the Placing Shares to trading on AIM ("Admission"), none of the warranties in the placing agreement becoming untrue, inaccurate or misleading in any material respects prior to Admission and receipt of all of the Placing proceeds by Evolution from placees. It is expected that Admission will occur, and dealings in the Placing Shares will begin, at 8.00 a.m. on 24 June 2011. The Placing Shares are being issued under the authorities granted to the Company at its annual general meeting held on 9 September 2010.

The Placing Shares represent approximately 12.2 per cent. of the enlarged ordinary share capital of the Company following completion of the Acquisition. The Placing Shares will, when issued, rank pari passu in all respects with the existing issued Ordinary Shares, including the right to receive any dividends and other distributions declared following completion of the Acquisition.

6. Director's participation in Placing

Certain of the Directors have agreed to participate in the Placing as follows:

7. Open Offer

While the Directors believe that the Placing is in the best interests of the Company and Shareholders as a whole, they consider that all Shareholders should be offered the opportunity to participate at the same price per Ordinary Share as those subscribing under the Placing. However, the Directors consider that an offer to existing Shareholders by way of a rights or other pre-emptive issue is not currently practicable or feasible due to the delays that would be incurred through the production and approval of a prospectus which would have to comply with the UK Listing Authority's Prospectus Rules and be pre-vetted and approved by the FSA. Therefore, the Board intends, as soon as reasonably practicable after the completion of the Acquisition, to undertake an Open Offer to be made available to all Shareholders to subscribe for new Ordinary Shares at 1.5 pence per share, being the same price as the Placing Price, to raise up to approximately £2.2 million.

The Directors expect to post a circular detailing the Open Offer as soon as reasonably practicable after completion of the Acquisition.

8. Strategy following completion of the Acquisition

The Company, following the completion of the Acquisition (the "Enlarged Group"), has a strategy of building a balanced portfolio of functional food and medical food technologies. The Board's key corporate goals in implementing this strategy are to:

·; grow revenue in the Enlarged Group's commercialised products. This goal will include investment in the SiS products and the marketing and selling of SiS products, together with working with the Company's alliance partner DSM Nutritional Products ("DSM") to achieve the joint aim of launching Fruitflow® with brand owners;

·; develop pipeline technology attractive to global brand owners for licensing or direct sales by the Enlarged Group. This goal will include the continued development of the Company's NSP#3G plantain technology targeted at Crohn's disease and other areas related to inflammatory bowel disease, development of a cardiovascular inflammation technology in conjunction with the Institute of Food Research, development of DSM-owned technology for the management of blood glucose and the launch of new products within SiS; and

·; acquire new functional and medical food technology that complements the Enlarged Group's existing commercialised product range or development pipeline.

The Acquisition enables Provexis to broaden its business strategy from purely early discovery, development and licensing to a combination of discovery, development, licensing and direct sales.

9. Current trading

The Company has today also released its preliminary results for the year ended 31 March 2011.

Following the Acquisition and the Placing, the Company expects to have net cash of £2.1 million (not including any funds from the Open Offer).

10. Board changes

On completion of the Acquisition, the Company intends to appoint Philip Walker, a key consultant to SiS, as a Director of the Company. Philip Walker, aged 52, was most recently the CEO of Abbeycrest plc (2002-2008), and prior to that held senior finance positions with Yates Group plc, latterly as acting Group Finance Director. Philip qualified as a Chartered Accountant in 1984 and spent his early career with PricewaterhouseCoopers.

Further information on Philip Walker, including the relevant disclosures required for a new Director under the AIM Rules, is available at the end of this announcement.

11. Options

The Company also today announces, following a recommendation from the Company's Remuneration Committee, that it intends to grant new options over Ordinary Shares ("Options") under the Provexis 2005 share option scheme to certain Directors as follows:

The Company also intends to grant a further 18,300,000 Options to existing employees.

The above Options will be granted to the Directors and employees within 42 days from the date of this announcement.

Additionally, on completion of the Acquisition 10,000,000 new Options will be granted to Philip Walker within 42 days from the date of completion of the Acquisition. As set out above, the Company intends to appoint Mr Walker on completion of the Acquisition.

The new Options will have an exercise price of 2.8 pence, being the closing mid-market price on the day before the date of this announcement.

The Company's Remuneration Committee believes the above grant of new Options will align the Directors' interests with those of Shareholders. The Options will be subject to performance criteria, including Ordinary Share price appreciation, and will be exercisable between 3 and 10 years from date of grant.

Following the issue of the new Options, as set out above, the total number of Ordinary Shares under option which could be issued if all of the performance criteria are met are 123,771,648 Ordinary Shares, representing approximately 8.9 per cent of the issued share capital of the Company following completion of the Acquisition and Placing.

12. AIM disclosures for the appointment of Philip Walker

Save as set out below there are no other matters which are required to be disclosed pursuant to paragraph (g) of Schedule 2 of the AIM Rules for Companies.

Philip Walker Service Contract

On completion of the Acquisition, Philip Walker will enter into a service contract with SiS whereby he will act as the managing director of SiS. The contract will be terminable on three months' written notice by either party. Under the service agreement Mr Walker will be entitled to a base salary of £125,000 per annum and will be entitled to participate in the SiS discretionary bonus scheme. Mr Walker will be entitled under the service agreement to 25 days' holiday (plus statutory holidays), a contribution annually to a pension scheme of an amount equal to 5% of salary, sick pay, private medical insurance (to include his spouse and dependent children under 18 years of age) and a grant of 10,000,000 Options.