TIDMNSCI
RNS Number : 9099N
NetScientific PLC
28 September 2023
Strictly embargoed until 07.00, 28 September 2023
NetScientific plc
("NetScientific" or "NSCI" or the "Company" or the "Group")
Interim Results for the six months ended 30 June 2023
NetScientific plc (AIM: NSCI), the deeptech and life sciences VC
investment group, is pleased to announce its interim results for
the six months ended 30 June 2023.
Commenting on the results Dr. Ilian Iliev, CEO of NetScientific,
said:
"During the first half of 2023 w e have made significant
progress and achieved important milestones as we continue to
successfully execute on our 'evergreen' strategy, covering core
operating costs through a combination of corporate finance fees and
value creation services fees via our wholly owned subsidiary, EMV
Capital. We have also demonstrated our ability to generate
profitable partial exits from our portfolio, even in the absence of
a strong M&A or IPO market. Despite challenging capital
markets, third-party syndicated investments have played a pivotal
role, with EMV Capital syndicating funding of GBP5.6 million to
support ten of our portfolio companies.
"This essential funding for our portfolio companies has helped
to facilitate the execution of their growth strategies and
preparations for forthcoming scale-up investment rounds as well as
supporting the appreciating fair value of NetScientific's direct
holdings. In such a challenging venture capital landscape,
characterised by macroeconomic volatility and industry
fluctuations, our in-house fundraising capacity distinguishes us
from many of our peers."
Operational and Financial Highlights
-- Total Income : GBP1.15m, an increase of c .64% (H1 2022:
GBP0.7m), of which the majority is from the ' core' services
provided by NetScientific and EMV Capital .
-- Group losses: from operations decreased slightly to GBP1.6m (H1 2022: GBP1.7m ).
o Core Company and EMV Capital losses GBP0.4m (H1 2022:
GBP0.7m).
o Losses at both subsidiary portfolio companies, Glycotest and
ProAxsis, have increased, reflecting further investments made by
them in their growth strategies.
-- Fair Value and Net Assets : Portfolio valuation of GBP35.5m
(2022: GBP41.8m) and net assets of GBP18.1m (2022: GBP25.2m), with
the decreases mainly due to the decline of the PDS Biotechnology
share price to $5.03 (at 30 June 2023) from $13.20 (at 31 December
2022). These declines were offset by a GBP3.1m (11%) improvement in
fair value in the non-listed portfolio, including the following
significant changes:
o Vortex Biotech Holdings up from GBP0.7m to GBP2.8m (a 300%
increase of GBP2.1m).
o DName-iT up from GBP0.1m to GBP1m (a 900% increase of
GBP0.9m).
o Q-Bot up from GBP3.8 to GBP4.1m (an 8% increase of
GBP0.3m).
-- Capital Under Advisory (CUA): Increased c.11% to GBP26.1m
(2022: GBP23.5m), providing significant and growing potential
future profit for the Group from future realisations through
performance fee arrangements.
-- Profitable Partial Exits: A total of GBP117,000 profitable
partial exits of the Group's position in certain portfolio
holdings, with further profitable sales post-balance sheet leading
to total proceeds of GBP895,000 in the year to date. As well as
providing non-dilutive funding to the Group, this demonstrates our
strategy and underpins valuations.
-- Value Creation Services: Ongoing programs to accelerate
several of our portfolio companies through to value inflection
points that offer strong prospects for further fair value increases
in the next 12-18 months, and the potential for exits .
Summary and Outlook
Our strategic focus includes the advancement of our sustainable
business model and boosting the Net Asset Value and fair value of
our portfolio companies. This creates the potential for substantial
investment returns from our maturing portfolio through targeted
growth and profitable exits. In particular, our objectives
include:
-- Value Creation : We are actively progressing a few of our
portfolio companies through value creation stages, ensuring they
achieve their full potential.
-- External Funding of Portfolio : We are facilitating and
syndicating external funding for our portfolio companies, to
accelerate growth and development. This also generates advisory,
commission and performance fee opportunities.
-- Proactive Portfolio Management : We maintain a proactive
approach to portfolio management, protecting our positions while
supporting management in their business plan execution.
-- Increased Fee Generation : We are actively working to enhance
our fee generation capabilities, ensuring a sustainable revenue
stream to support our growth objectives.
-- Selective Group Divestments : We are strategically evaluating
our portfolio to identify opportunities for selective divestments,
allowing us to optimise our holdings and obtain investment
returns.
-- Funds Practice : We are exploring new fund opportunities in line with our growth strategy.
In the first half of this year, we have made significant strides
toward our strategic objectives, positioning ourselves for further
revenue and balance sheet growth in 2024. We remain confident about
the prospects of our Group, driven by a robust investment model,
and a strategic vision that positions us at the forefront of the
deeptech and life sciences VC industry.
Investor Meet Company Presentation
The Company will provide a live presentation relating to the
Interim Results via Investor Meet Company on 3 October 2023 at
11:00 a.m.
The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via your
Investor Meet Company dashboard up until 9:00 a.m. on the day
before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet NETSCIENTIFIC PLC via:
https://www.investormeetcompany.com/netscientific-plc/register-investor
Investors who already follow NETSCIENTIFIC PLC on the Investor
Meet Company platform will automatically be invited.
The person responsible for arranging the release of this
announcement on behalf of the Company is Ilian Iliev, Chief
Executive Officer of the Company.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE UK VERSION OF REGULATION (EU) NO 596/2014 WHICH
IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT
2018, AS AMED. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN.
-ends-
For more information, please contact:
NetScientific
Dr. Ilian Iliev, CEO Via Belvedere Communications
WH Ireland (NOMAD, Financial Adviser and Broker)
Chris Fielding / Darshan Patel +44 (0)20 7220 1666
Belvedere Communications
John West / Llew Angus +44 (0) 203 008 6867
Email: nsci@belvederepr.com
About NetScientific
NetScientific plc (AIM: NSCI) is a deeptech and life sciences VC
investment group with an international portfolio of innovative
companies.
NetScientific identifies, invests in, and builds high growth
companies in the UK and internationally. The Company adds value
through the proactive management of its portfolio, progressing to
key value inflection points, and delivering investment returns
through partial or full liquidity events.
NetScientific differentiates itself by employing a
capital-efficient investment approach, making judicial use of its
balance sheet and syndicating investments through its wholly owned
VC subsidiary, EMV Capital. The group secures a mixture of direct
equity stakes and carried interest stakes in its portfolio of
companies, creating a lean structure that can support a large
portfolio.
NetScientific is headquartered in London, United Kingdom, and is
admitted to trading on AIM, a market operated by the London Stock
Exchange.
www.netscientific.net
CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
I am delighted to present an update on NetScientific's progress
during the first half of 2023. Our commitment to becoming a
prominent deeptech venture capital investor in the life sciences,
sustainability, and industrials sectors, both in the UK and
internationally, continues to drive strong results across our
business and portfolio companies.
Operational Highlights
Within our own business we have made significant progress and
achieved a number of key milestones, including:
-- Successfully executing our 'evergreen' sustainable strategy,
covering core operating costs through a combination of corporate
finance fees, value creation fees, and profits from partial exits
of portfolio holdings.
-- NetScientific has shown a reduction in losses during this
period, attributed to our capital-efficient model, while EMV
Capital has remained profitable. As a result, we have no immediate
need to raise capital through Company share placements.
-- Substantial operational progress including expanding our
team, improving our 'playbooks', and continuing to enhance our fund
management practice.
In our portfolio companies:
-- Syndicated investments have played a pivotal role, with EMV
Capital syndicated investors contributing GBP 5.6 m in third-party
syndicated investments to support ten portfolio companies, of which
GBP 2. 6m was added to CUA.
-- EMV Capital's fundraising support has secured essential
funding for our portfolio companies and facilitated the execution
of their growth strategies and preparations for forthcoming
scale-up investment rounds. It has also substantially contributed
to the appreciating fair value of NetScientific's direct
holdings.
-- Despite a 15% decrease in fair value, primarily attributed to
the decline in the share price of NASDAQ-listed PDS Biotechnology,
we have seen strong gains in the valuations of several other
portfolio companies where we have been proactively engaged. This
validates our investment strategy of portfolio diversification and
active management.
-- Value creation programs are ongoing to support and accelerate
a cohort of our portfolio companies as they progress towards key
value inflection points. This provides strong prospects for further
fair value increases in the next 12-18 months and increases the
prospects for profitable exits.
Financial Highlights
Reflecting our venture capital model, we report on both the
'core' operations of our Group (composed of NetScientific and EMV
Capital), and our 'portfolio subsidiaries' (Glycotest and
ProAxsis). We treat the latter as separately managed portfolio
companies, each now supported by external investors.
-- Total income was GBP1.15m, an increase of c.64% (H1 2022: GBP0.7m)
o Income from the 'core' of NetScientific and EMV Capital
increased by c.100% to GBP1.0m (H1 2022: GBP0.5m), primarily from
the near doubling of EMV Capital revenues.
o A total of GBP117,000 profitable partial exits of the Group's
position in certain portfolio holdings, and further such exits
post-balance sheet period leading to total proceeds of GBP895,000
in the year to date. As well as providing non-dilutive funding to
the Group, this demonstrates our strategy and underpins
valuations.
-- Group losses from operations decreased slightly to GBP1.6m (H1 2022: GBP1.7m).
o Losses from operations at the 'core' decreased by c.43% to
GBP394,000 (H1 2022: GBP695,000), with EMV Capital achieving a
modest profit.
o Losses at both subsidiary portfolio companies, Glycotest and
ProAxsis, have increased, reflecting further investments made by
them in their growth strategies. While these losses are
consolidated at Group level, the companies are funded by third
party sources and therefore do not require further funding from the
'core'.
-- The Directors' valuation of the Company's portfolio (fair
value) has decreased by 15% to GBP35.5m (2022: GBP41.8m) and net
assets reduced to GBP18.1m (2022: GBP25.2m).
o These decreases are mainly due to the decline of the PDS
Biotechnology share price to $5.03 (at 30 June 2023) from $13.20
(at 31 December 2022).
o These declines were offset by a GBP3.1m (11%) improvement in
fair value in the non-listed portfolio, including the following
significant changes:
-- Vortex Biotech Holdings up from GBP0.7m to GBP2.8m (a 300%
increase of GBP2.1m)
-- DName-iT up from GBP0.1m to GBP1m (a 900% increase of
GBP0.9m)
-- Q-Bot up from GBP3.8 to GBP4.1m (an 8% increase of
GBP0.3m)
-- CUA increased c.11% to GBP26.1m (2022: GBP23.5m), providing
growing potential future profit for the Group from future
realisations.
-- Working capital management remains prudent. The Group ended
the period within an existing GBP200,000 bank overdraft facility,
with a negative net cash balance of GBP93,000. The net cash
position is GBP296,000 as of 26 September 2023. The Group has a
further c.GBP5.2m held as readily realisable quoted securities as
at 26 September 2023.
Portfolio Review
Summary
Despite continued headwinds in the venture and capital markets,
our portfolio has seen some strong fundraising results, continued
progress through value inflection points, and fundraising support
by EMV Capital. Following our capital-efficient investment model,
the portfolio consists of a combination of direct investments and
CUA, as summarised in the table below.
Portfolio Country Sector Stage Group CUA Fair Value CUA (m)
Company Stake (%) (m)
(%)
Jun Dec Jun Dec
2023 2022 2023 2022
-------- -------- -------- --------
EMV Capital UK Venture Sales 100% - GBP3.5 GBP3.5 - -
capital
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Liver cancer
Glycotest US diagnostics Late clinical 62.5% 3.0% GBP11.0 GBP11.0 GBP0.3 -
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
PDS US Immuno-oncology Late clinical 4.3% - GBP5.3 GBP14.7 - -
Biotechnology
-Nasdaq Listed
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Q-Bot UK Robotics Sales 18.6% 33.9% GBP4.1 GBP3.8 GBP4.5 GBP4.4
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
ProAxsis UK Respiratory Sales 100% - GBP3.5 GBP3.5 - -
diagnostics
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Vortex Biotech Liquid biopsy
Holdings Ltd UK/US oncology Sales 25.0% 13.9% GBP2.8 GBP0.7 GBP1.6 GBP0.7
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Regenerative Early
EpiBone US medicine clinical 1.5% 0.4% GBP1.1 GBP1.2 GBP0.2 GBP0.2
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
DName-iT BEL Lab technology Pre sales 36.9% 14.8% GBP1.0 GBP0.1 GBP0.4 GBP0.1
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
SageTech
Medical Waste
Equipment UK anaesthetic Sales 5.4% 25.9% GBP0.9 GBP0.9 GBP3.9 GBP3.8
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Semiconductors
Sofant satellite Early
Technologies UK coms sales 1.7% 30.5% GBP0.5 GBP0.4 GBP5.3 GBP4.3
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
FOx Biosystems BEL Research Sales 3.2% - GBP0.4 GBP0.6 - -
equipment
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
CytoVale US Medical Late clinical 1.0% - GBP0.4 GBP0.4 - -
biomarker
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
G - Tech US Wearable Early 3.8% - GBP0.4 GBP0.4 - -
Medical gut monitor clinical
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Martlet Venture
Capital UK capital Investing 1.3% 7.7% GBP0.3 GBP0.3 GBP1.3 GBP1.3
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Smart building
PointGrab IL automation Sales 0.5% 21.0% GBP0.1 GBP0.1 GBP4.1 GBP4.1
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
QuantalX IL Medical Late clinical 0.4% - GBP0.1 GBP0.1 - -
Neuroscience diagnostics
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Heat pumps
and passive
Ventive UK ventilation Sales 18.4% 35.3% GBP0.1 GBP0.1 GBP0.1 GBP0.1
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
DeepTech UK Recycling Pre sales 30.0% - - - - GBP0.5
Recycling
Limited
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Oncocidia BEL Cancer Early 31.3% - - - - -
therapeutics clinical
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Wanda Health UK/US Digital Sales - 90.4% - - GBP3.6 GBP3.2
health
monitoring
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Nanotech US Material Sales - - - - GBP0.8 GBP0.8
Industrial science
Solutions
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
TOTAL - - - - - GBP35.5 GBP41.8 GBP26.1 GBP23.5
--------- ----------------- -------------- ------- ------ -------- -------- -------- --------
Note : The 'Group stake %' amounts show direct holdings of the
Group in the issued share capital of each relevant company at 30
June 2023. These percentages are likely to be diluted by future
events, such as future dilutive investment rounds, exercise of
management options, and the conversion of convertible
securities.
The combination of direct and capital under advisory investments
gives the Group a greater influence in the portfolio companies,
access to follow-on funding through other investors, and enables
greater financial and value-added support for the portfolio
companies.
The amounts under capital under advisory are associated with
carried interest or profit share agreements, typically between 10%
and 20%. While it is difficult to value or estimate the current
value of these stakes, for demonstration purposes an average 2x
portfolio return on the capital under advisory of GBP26.1m would
result in carry returns to EMV Capital of over GBP4.5m.
Selected portfolio company highlights
Glycotest, Inc. ("Glycotest") ( https://www.glycotest.com/ ) -
62.5% direct stake / 3% CUA
-- Glycotest is a liver disease diagnostics company
commercialising new and unique blood tests for life threatening
liver cancers and fibrosis-cirrhosis. The Philadelphia-based
company has exclusive, world-wide rights to over 50
patent-protected serum protein biomarkers, assay technology, and
biomarker panels and algorithms that exploit novel sugar-based
disease signals. Fosun Pharma, a leading global pharmaceutical
company, is a co-investor in the business, and has a licence for
the distribution of the product in China.
-- In August 2023 Glycotest completed subject enrolment and
sample collection in its HCC Panel clinical validation study.
-- With one of the world's largest databanks in the liver cancer
study space, Glycotest is now positioned to complete sample assays
and data analysis when validated assays are available with the
objective of establishing the effectiveness of the HCC Panel test
for the identification of patients with curable early-stage liver
cancer.
-- Troubleshooting of the HCC Panel assays by an expert contract
lab was completed earlier in 2023 and a way forward to revised
assays has been identified. Delivery of effective assays for the
HCC Panel is a priority for 2024.
-- The Company continues to explore avenues for commercialisation, having established important relationships with multiple key clinical opinion leader sites through the HCC Panel clinical validation study.
-- Glycotest continues to work closely with Fosun Pharma for the
successful development and realisation of returns from the
business, including through commercialisation of licensed products
in China.
-- In line with NetScientific's capital-efficient approach, in
May 2023 EMV Capital launched a third party fundraising program to
raise up to $1m to complement funding provided by Fosun Pharma . To
date $ 495,000 has been raised for such fundraising program, though
a secured convertible loan agreement .
PDS Biotechnology Corporation ("PDS") (
https://www.pdsbiotech.com/ ) (PDSB: NASDAQ) - 4.3% direct
stake
-- PDS Biotech is a clinical-stage immunotherapy company
focusing on cancer and infectious diseases. Using its Versamune(R)
technology, it develops therapies and vaccines that activate
T-cells and enhance immune responses. Its primary focus is on
HPV-related head and neck cancers. PDS Biotech has four Phase 2
trials with partners such as Merck, the National Cancer Institute,
MD Anderson, and Mayo Clinic, and an infectious disease vaccine
program. The company also plans to launch a Phase 3 clinical trial
for one of its programs.
-- NetScientific backed PDS Biotechnology in 2014 prior to its NASDAQ listing.
-- PDS has continued to make progress in 2023 in its ambitious
clinical development program , including :
o Conclusion of an exclusive global license agreement for
Investigational IL-12 Tumor-Targeted Cytokine from Merck KGaA,
Darmstadt, Germany (January 2023).
o Successful meeting with FDA for triple combination of PDS0101,
PDS0301 and a commercial immune checkpoint inhibitor (February
2023) and announcement of plan to initiate a Phase 3 study
evaluating PDS0101 in combination with KEYTRUDA(R) in head and neck
cancer (March 2023).
o Presentation of interim data at the leading 2023 American
Society of Clinical Oncology (ASCO) annual meeting, demonstrating a
12-month overall survival rate of 87% (June 2023).
o Addition of PDS Biotech to Russell 2000(R) and Russell 3000(R)
Indexes (June 2023).
-- The period has been characterised by continued weakness in
the US biotech public markets, and respectively PDS' share price
has remained at relatively low levels.
ProAxsis Ltd ("ProAxsis") ( https://proaxsis.com/ ) - 100%
direct stake
-- ProAxsis is a commercial medtech company, with a focus on
respiratory diagnostics, a growing global health burden. ProAxsis
uses its proprietary ProteaseTag(R) technology to develop
laboratory-based assays and rapid point-of-care tests for the
measurement of inflammatory biomarkers associated with chronic
respiratory diseases such as Chronic Obstructive Pulmonary Disease
(COPD), cystic fibrosis and bronchiectasis. The company is a
spin-out of Queens University Belfast.
-- ProAxsis continues to benefit from ongoing sales of its
Neatstik product, and several potential contracts for lab services
with global pharma in the pipeline .
-- Following a strategic review at the start of the year, the
ProAxsis board determined to refocus the company on its core
respiratory capabilities , cutting out non-core activities, pausing
its US laboratory initiative, and implementing various related team
and cost reduction measures resulting in c.50% decreased cost
base.
-- The company has recently appointed Alan Markey as its new
Chair. Alan brings 25 years' executive experience in the
international pharmaceutical and medical devices sectors , and
specific experience in taking diagnostic products to market.
-- ProAxsis is now developing a highly novel, digitally-enabled
version of the company's point-of-care test (NEATstik(R)) for
ongoing monitoring of patients with chronic respiratory disease. To
accelerate this, it is exploring a partnership with telehealth
specialist Wanda Health, another portfolio company.
-- To support this development program, the company is
partnering with clinical experts at Imperial College, London, one
of the largest COPD expert centres in the world.
-- The GBP500,000 loan facility provided by AB Group in February 2023 remains in place .
-- In line with NetScientific's capital-efficient approach, in
July 2023 EMV Capital launched a third party fundraising program to
raise up to GBP500,000. To date c.GBP200,000 has been raised under
such fundraising program, though a convertible loan agreement,
including GBP35,000 from ProAxsis directors.
-- The company also won grants of GBP100,000 and GBP30,000 from
the Regional Economic Development Agency for NI and Association of
British HealthTech Industries to develop advanced respiratory
products and to develop regulatory strategies.
-- The company is now focused on implementing its commercial
strategy, through a combination of sales of existing products, and
progressing a route to launch the digitally-enabled Neatstik.
Q -Bot Ltd ("Q-Bot) ( https://q-bot.co ) - direct stake 18.6% /
CUA 33.9%
-- Q-Bot is an award-winning robotics developer for construction
retrofit. Its AI-powered robotic tools are used to inspect,
monitor, and retrofit insulation for residential buildings.
Specifically, Q-Bot is focused on the unmet market need for
underfloor insulation, helping to reduce fuel poverty in social
housing, improve energy efficiency, and align with new regulations
around decarbonisation. As a market leader, Q-Bot is now scaling
and seeking to capture a significant share of this market in the UK
and internationally.
-- In July 2023 , EMV Capital led a successful closing of a
GBP3.5m investment round to fund the next stage of growth, from a
mixture of existing and new investors.
-- The company continues to make progress in its international
expansion strategy, with specific initiatives for growth into the
EU and US .
-- The company's revenues increased 56% in its most recent
financial year to March 2023, and are expected to continue growing
.
Vortex Biotech Holdings Ltd ("Vortex") (
https://vortexbiosciences.com/ ) - direct stake 25.0% / CUA
13.9%
-- Vortex's core technology allows for the capture and isolation
of high-quality Circulating Tumour Cells ("CTCs") from blood
samples. Its mission is to be the innovation leader in liquid
biopsy CTC capture technology that improves therapeutic decisions
and saves lives. This is expected to contribute to a shift in how
cancer can be treated and monitored in the growing liquid biopsy
market. Vortex was founded upon research at UCLA, and is now dually
based in London and San Francisco.
-- In June 2023 EMV Capital led a GBP3.2m EIS investment round
into Vortex, which has allowed further acceleration of the roadmap
.
-- The company is progressing its service offering for biopharma to support the development of biomarker-driven personalised medicines .
-- It has launched a CTC Centre of Excellence at The London
Cancer Hub's Innovation Gateway, on the same site as the Institute
of Cancer Research and the Royal Marsden NHS Foundation Trust.
-- Vortex also announced in September 2023 the launch of a
Technical Feasibility Study to characterise a fully integrated
"sample-to-result" workflow combining Vortex's VTX-1 platform, and
that of their partner AxonDx to isolate, count, and characterise
CTCs in cancer patient samples.
-- A recent study by the Nice University Hospital compared
several CTC liquid biopsy platforms. This peer-reviewed evaluation
concluded that Vortex' VTX-1 platform is superior across a range of
parameters critical for future commercial adoption.[1]
[1] Martel et al (2023) Assessment of Different Circulating
Tumor Cell Platforms for Uveal Melanoma: Potential Impact for
Future Routine Clinical Practice - PubMed (nih.gov)
DName-iT ( https://dnameit.com ) - 36.9% direct stake / 14.8%
CUA
-- A University of Leuven spin-out, DName-iT has developed a
platform to avoid sample authentication errors and to correct for
sample contamination in genetic sequencing laboratory tests.
DName-iT operates at the cross-roads of major, growing markets of
liquid biopsy, laboratory services, clinical trials, and NGS.
DName-iT estimates that up to 2% of specimens are mis-identified
through laboratories' workflows, leading to potentially fatal
consequences for patients.
-- Following the CetroMed acquisition by NetScientific, EMV
Capital's value creation team took over the development of the
business, refreshed its business plan, and has worked alongside the
founder and other experts.
-- EMV Capital advised on the reorganisation of the company ,
and on its recent GBP500,000 EIS investment round, with the
participation of EMV Capital investors and Belgium's Gamma Frisius
Fund. NSCI has an effective ownership of 46.1% through CetroMed's
ownership of 61.5% in DName-iT. University of Leuven is a
co-investor in the project.
-- Kevin Dean, an EMV Capital Venture Partner, joined the
company as Interim CEO, driving the company through its pilots
program and towards the next investment round.
-- DName-iT also setup a collaboration partnership with ProAxsis
as manufacturing partner, helping to scale the company in a
capital-efficient way .
-- There is an EU Laboratory pilot underway to validate the
technology, with regulatory planning, and a go - to - market
strategy for 2024.
Sofant Technologies ( https://sofant.com ) - 1.7% direct stake /
30.5 % CUA
-- An Edinburgh University spin-out, the company is developing
phased array antennas for satellite for the rapidly growing
low-orbit satellite telecommunications market. Leveraging its
innovative technology, Sofant asserts a substantial up to 70%
energy efficiency advantage and significant cost savings compared
to its competitors, due to its modular design. The company is
executing a EUR7.3m contract with the UK Space Agency and the
European Space Agency.
-- In May 2023, Sofant unveiled a substantial partnership with
Inmarsat, a global leader in satellite communications, which
involves non-dilutive funds in Non-Recurring Engineering and a
substantial pre-purchase commitment by Inmarsat (recently acquired
by Viasat).
-- EMV Capital provided further support by leading a follow-on
EIS investment of GBP2.3m, including GBP 1. 3m from EMVC
investors.
Ventive ( https://ventive.co.uk ) - 18.4% direct stake / 35.3%
CUA
-- Ventive specialises in passive and energy-efficient
ventilation systems for schools and a unique modular heat pump for
newbuild residential applications. Once in production, its
innovative design for heat pumps, which utilise phase change
material for heat transfer, is expected to position it well in the
growing market for heat pumps. The company is focused on growth in
two markets segments of high-priority for the sustainability
agenda: air quality and sustainable heating.
-- Notable developments post-investment include an accelerated
development program with Clear Blue Energy and QM Systems, a
pre-purchase agreement with a leading non-UK heat pump distributor,
and increased sales in the Natural Ventilation range.
-- Following the September 2022 restructure and investment round
led by EMV Capital, the company has focused on execution of the
heatpump project and revenue growth from its passive air
ventilation project.
-- Ventive's passive air ventilation system has now been
delivered to over 30 schools and five leisure centres, achieving
excellent air quality results. Market demand has continued to
increase with minimal marketing spend by the company .
-- The heatpump project has progressed well, with prototypes now
being tested and the company building a book for potential
buyers.
-- Ian Cooke, a Venture Partner at EMV Capital, joined as Chair
in August 2023, as part of the company's preparation for further
investment and growth.
DeepTech Recycling Technologies - 30% direct stake
-- In December 2022, Deeptech Recycling Technologies acquired
the majority of assets from the administrator of Recycling
Technologies Limited, which company had aborted an AIM IPO that had
been targeted for admission in early 2022. Recycling Technologies
had developed advanced and environmentally sound technologies for
recycling mixed plastic waste, generating valuable naptha,
lubricants, and feedstock for the plastics industry. During 2023 ,
Deeptech Recycling Technologies, with support from EMV Capital's
value creation team, has focused on consolidating assets and
intellectual property, further R&D, assessing market
opportunities, and starting the company's commercial roadmap.
-- Commercial progress includes:
o Successful commercial discussions with a company in the
plastic waste space, with approval to start a proof-of-concept
project to demonstrate the technology.
o Discussions with various private and public funding sources
for funding support for future plants in the UK.
o Discussions with UK and EU parties for potential
proof-of-concept and technical feasibility projects to demonstrate
management and recycling of different waste streams.
Board and management
As we embark on the next phase of our development, significant
changes have been made to our Board and management team. These
changes demonstrate our commitment to strengthening our leadership
and enhancing our capabilities and corporate governance.
-- Dr. Charles Spicer has joined our Board as the Non-Executive
Chair, bringing a wealth of experience from the City, complementing
the Board's skillset.
-- Dr. Jonathan Robinson , who previously served as Interim
Non-Executive Chair, has transitioned into the role of Senior
Independent Director.
-- Prof. Stephen Smith , after a seven-year tenure with
NetScientific, stepped down on 30 June 2023 from his position as a
Non-Executive Director. We thank him for his service and
contributions to the Company.
In line with our commitment to growth and excellence, we are
actively refreshing our panel of advisers and venture partners.
This initiative is geared towards bolstering the Group's capacity
to provide comprehensive support to our portfolio companies.
We have also made planned additions to our management team.
These new members bring valuable expertise in project management,
human capital management, and other crucial infrastructure skills.
Their contributions will be instrumental in driving our
organisation forward as we continue to pursue our goals.
Summary and Outlook
Our strategic focus includes the advancement of our sustainable
business model and boosting the Net Asset Value and Fair Value of
our portfolio companies. This creates the potential for substantial
investment returns from our maturing portfolio through targeted
growth and profitable exits. In particular, our objectives
include:
-- Value Creation : We are actively progressing a cohort of our
portfolio companies through value creation stages, ensuring they
achieve their full potential.
-- External Funding of Portfolio : We are facilitating and
syndicating external funding for our portfolio companies, to
accelerate growth and development. This also generates advisory,
commission and performance fee opportunities.
-- Proactive Portfolio Management : We maintain a proactive
approach to portfolio management, protecting our positions while
supporting management in their business plan execution.
-- Increased Fee Generation : We are actively working to enhance
our fee generation capabilities, ensuring a sustainable revenue
stream to support our growth objectives.
-- Selective Group Divestments : We are strategically evaluating
our portfolio to identify opportunities for selective divestments,
allowing us to optimise our holdings and obtain investment
returns.
-- Funds Practice : We are exploring new fund opportunities in line with our growth strategy.
In the first half of this year, we have made significant strides
towards our strategic objectives, positioning ourselves for further
revenue and balance sheet growth in 2024. We remain confident about
the prospects of our Group, driven by a robust investment model,
and a strategic vision that positions us at the forefront of the
deeptech and life sciences VC industry.
Dr. Ilian Iliev
Chief Executive Officer
28 September 2023
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2023
NetScientific plc
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
Continuing Operations Notes 2023 2022
GBP000s GBP000s
------------------------------------------- -------- ------------ ------------
Total Income 1,154 656
Revenue 4 770 391
Cost of sales (53) (30)
------------------------------------------- -------- ------------ ------------
Gross profit 717 361
Other operating income 5 384 265
Research and development costs (808) (814)
Selling, general and administrative
costs (1,840) (1,427)
Other costs (67) (103)
Loss from operations (1,614) (1,718)
Finance income 22 51
Finance expense (45) (20)
Loss before taxation (1,637) (1,687)
Income Tax 17 29
------------------------------------------- -------- ------------ ------------
Total loss for the period from
continuing operations (1,620) (1,658)
------------------------------------------- -------- ------------ ------------
Loss attributable to:
Owners of the parent 6 (1,364) (1,394)
Non-controlling interests (256) (264)
------------------------------------------- -------- ------------ ------------
(1,620) (1,658)
------------------------------------------- -------- ------------ ------------
Basic and diluted loss per share
attributable to owners of the parent
during the period: 6
Total loss for the period from continuing
operations (5.8p) (6.6p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2023
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
Notes 2023 2022
GBP000s GBP000s
Loss for the period (1,620) (1,658)
Items that may be subsequently
reclassified to profit or loss in
subsequent periods:
Exchange differences on translation
of foreign operations (272) 352
Change in fair value of investments
classified as fair value through
other comprehensive income (5,698) (2,873)
Total comprehensive profit/(loss)
for the period (7,590) (4,179)
Attributable to:
Owners of the parent (7,376) (3,887)
Non-controlling interests (214) (292)
---------------------------- ---------- ----------
(7,590) (4,179)
--------------------------- ---------- ----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Unaudited Audited
30 June 31 December
2023 2022
Notes GBP000s GBP000s
Assets
Non-current assets
Property, plant and equipment 160 144
Right-of-use assets 338 420
Intangible assets 7 3,423 3,367
Equity investments classified as
FVTOCI* 8 17,622 22,743
Derivative financial assets classified
as FVTPL** 9 355 693
---------------------------------------- -------- ---------- -------------
Total non-current assets 21,898 27,367
Current assets
Inventories 82 76
Trade and other receivables 10 1,002 658
Cash and cash equivalents 11 61 852
---------------------------------------- -------- ---------- -------------
Total current assets 1,145 1,586
---------------------------------------- -------- ---------- -------------
Total assets 23,043 28,953
---------------------------------------- -------- ---------- -------------
Liabilities
Current liabilities
Bank overdraft 11 (154) -
Trade and other payables 12 (2,980) (2,457)
Lease liabilities (150) (168)
Loans and borrowings 13 (464) (99)
---------------------------------------- -------- ---------- -------------
Total current liabilities (3,748) (2,724)
Non-current liabilities
Lease liabilities (207) (268)
Loans and borrowings 13 (993) (719)
---------------------------------------- -------- ---------- -------------
Total non-current liabilities (1,200) (987)
---------------------------------------- -------- ---------- -------------
Total liabilities (4,948) (3,711)
---------------------------------------- -------- ---------- -------------
Net assets 18,095 25,242
---------------------------------------- -------- ---------- -------------
Issued capital and reserves
Attributable to the parent
Called up share capital 14 1,174 1,174
Warrants 42 42
Share premium account 74,175 74,175
Capital reserve account 237 237
Equity investment reserve 7,579 13,277
Foreign exchange and capital reserve 1,107 1,421
Retained earnings (65,787) (64,486)
---------------------------------------- -------- ---------- -------------
Equity attributable to the owners
of the parent 18,527 25,840
---------------------------------------- -------- ---------- -------------
Non-controlling interests (432) (598)
---------------------------------------- -------- ---------- -------------
Total equity 18,095 25,242
---------------------------------------- -------- ---------- -------------
* Fair value through other comprehensive income
** Fair value through profit and loss
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2023
Shareholders' equity
Foreign
exchange
Equity and
Share Share Capital investment Retained capital Non-controlling Total
capital Warrants premium reserve reserve earnings reserve Total interests equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
1 January 2022 1,056 42 72,792 237 4,504 (61,499 1,368 18,500 9 18,509
Loss for the
period - - - - - (1,394) - (1,394) (264) (1,658)
Other
comprehensive
income -
Foreign
exchange
differences - - - - - - 380 380 (28) 352
Change in fair
value during
the period - - - - (2,873) - - (2,873) - (2,873)
Total
comprehensive
income - - - - (2,873) (1,394) 380 (3,887) (292) (4,179)
Issue of share
capital 112 - 1,388 - - - - 1,500 - 1,500
Cost of share
issue - - (56) - - - - (56) - (56)
Share-based
payments - - - - - 62 - 62 - 62
--------------- -------- --------- -------- -------- ----------- --------- --------- ---------- ---------------- -------------------
30 June 2022 1,168 - 74,124 237 1,631 (62,831) 1,748 16,119 (283) 15,836
--------------- -------- --------- -------- -------- ----------- --------- --------- ---------- ---------------- -------------------
Loss for the
period - - - - - (1,700) - (1,700) (316) (2,016)
Other
comprehensive
income -
Foreign
exchange
differences - - - - - - (327) (327) 1 (326)
Change in fair
value during
the period - - - - 11,646 - - 11,646 - 11,646
Total
comprehensive
income - - - - 11,646 (1,700) (327) 9,619 (315) 9,304
Issue of share
capital 6 - 51 - - - - 57 - 57
Share-based
payments - - - - - 45 - 45 - 45
--------------- -------- --------- -------- -------- ----------- --------- --------- ---------- ---------------- -------------------
31 December
2022 1,174 42 74,175 237 13,277 (64,486) 1,421 25,840 (598) 25,242
--------------- -------- --------- -------- -------- ----------- --------- --------- ---------- ---------------- -------------------
Loss for the
period - - - - - (1,364) - (1,364) (256) (1,620)
Other
comprehensive
income -
Foreign
exchange
differences - - - - - - (314) (314) 42 (272)
Change in fair
value during
the period - - - - (5,698) - - (5,698) - (5,698)
Total
comprehensive
income - - - - (5,698) (1,364) (314) (7,376) (214) (7,590)
Decrease in
subsidiary
shareholding - - - - - 26 - 26 380 406
Share-based
payments - - - - - 37 - 37 - 37
--------------- -------- --------- -------- -------- ----------- --------- --------- ---------- ---------------- -------------------
30 June 2023 1,174 42 74,175 237 7,579 (65,787) 1,107 18,527 (432) 18,095
--------------- -------- --------- -------- -------- ----------- --------- --------- ---------- ---------------- -------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2023
Notes Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
2023 2022
GBP000s GBP000s
Cash flows from operating activities
Loss after income tax (1,620) (1,658)
Adjustments for:
Depreciation of property, plant and
equipment 25 20
Depreciation of right to use assets 82 16
Amortisation of intangibles 124 105
Estimated credit losses on trade receivables 18 18
Change in fair value of financial assets
classified as FVTPL (342) (179)
Capitalisation of development costs (180) (280)
Share-based payments 37 62
R&D tax credit - (21)
Foreign exchange gain/(loss) (205) 233
Share of associate loss 8 -
Finance income (22) (61)
Finance costs 38 4
Income Tax (17) (29)
---------------------------------------------- ------ ------------ ------------
(2,054) (1,770)
Changes in working capital
(Increase) in inventories (6) (4)
Decrease/(Increase) in trade and other
receivables (177) 473
Increase in trade and other payables 629 169
---------------------------------------------- ------ ------------ ------------
Cash used in operations (1,608) (1,132)
---------------------------------------------- ------ ------------ ------------
Income tax received - -
---------------------------------------------- ------ ------------ ------------
Net cash used in operating activities (1,608) (1,132)
---------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (41) (24)
Purchase of equity investments classified (4) -
as FVTOCI
Purchase of derivative financial assets
classified as FVTPL (43) (593)
Disposal of subsidiary stake, net of 123 -
cash disposed of
Disposal of equity investments classified 117 -
as FVTOCI
---------------------------------------------- ------ ------------ ------------
Net cash from/(used in) investing
activities 152 (617)
---------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
Lease payments (94) (19)
Repayment of borrowings (44) (35)
Proceeds of loan 659 -
Proceeds from share issue - 1,500
Share issue cost - (56)
---------------------------------------------- ------ ------------ ------------
Net cash from financing activities 521 1,390
---------------------------------------------- ------ ------------ ------------
(Decrease)/Increase in cash and cash
equivalents (935) (359)
Cash and cash equivalents at beginning
of the period 852 2,710
Exchange differences on cash and cash
equivalents (10) 12
---------------------------------------------- ------ ------------ ------------
Bank overdraft and cash equivalents
at end of the period 11 (93) 2,363
---------------------------------------------- ------ ------------ ------------
NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2023
1. ACCOUNTING POLICIES
Basis of preparation
The interim financial information, which is unaudited, have been
prepared on the basis of the accounting policies expected to apply
for the financial year to 31 December 2023 and in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006. Policies have been
consistently applied to all periods presented apart from where new
standards have been adopted during the period, see below for
changes in accounting policies.
The financial information for the period ended 30 June 2023 does
not constitute the full statutory accounts for that period. The
Annual Report and Financial Statements for the year ended 31
December 2022 have been filed with the Registrar of Companies.
The Independent Auditor's Report on the Report and Financial
Statements for the year ended 31 December 2022 was qualified as
Directors did not perform year end valuations for some of the hard
to value investments worth c.GBP1 million for the year ended 31
December 2022.
Going Concern
The 2022 Annual Report audit report drew attention to the
material uncertainty relating to going concern as follows:
"We draw attention to note 2 to the financial statements, which
indicates the Directors' considerations over going concern. The
going concern of the Group and Parent Company is dependent on
additional funding being raised which has not yet been executed. As
stated in note 2, these events or conditions, along with other
matters as set forth in note 2, indicate that a material
uncertainty exists that may cast significant doubt on the Group and
the Parent Company's ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
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."
In the 2022 Annual Report we set out the various options
underpinning the going concern assumptions.
The Directors are confident that NetScientific remains a going
concern, and it is appropriate to prepare the financial statements
on this basis. Accordingly, the financial statements do not include
any adjustments that would be necessary if the Group and Company
were unable to continue as a going concern.
Business Combinations
The Group recognises identifiable assets acquired and
liabilities assumed in a business combination, regardless of
whether they have been previously recognised in the acquiree's
financial statements prior to the acquisition. Assets acquired and
liabilities assumed are generally measured at their
acquisition-date fair values. Goodwill is stated after separate
recognition of identifiable intangible assets. It is calculated as
the excess of the sum of: a) fair value of consideration
transferred; b) the recognised amount of any non-controlling
interest in the acquiree; and c) acquisition-date fair value of any
existing equity interest in the acquiree, over the acquisition-date
fair values of identifiable net assets. If the fair values of
identifiable net assets exceed the sum calculated above, the excess
amount (i.e. gain on a bargain purchase) is recognised in profit or
loss immediately.
Change in accounting policies
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2022 annual financial statements, except for the following
amendments which apply for the first time in 2023. However, not all
are expected to impact the Group as they are either not relevant to
the Group's activities or require accounting which is consistent
with the Group's current accounting policies.
The following new standards and amendments are effective for the
period beginning 1 January 2023:
-- IFRS 17 Insurance Contracts;
-- Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement
2);
-- Definition of Accounting Estimates (Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and
Errors);
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes); and
-- International Tax Reform - Pillar Two Model Rules (Amendment to IAS 12 Income Taxes)
IFRS 17 Insurance Contracts
IFRS 17 was issued by the IASB in 2017 and replaces IFRS 4 for
annual reporting periods beginning on or after 1 January 2023.
IFRS 17 introduces an internationally consistent approach to the
accounting for insurance contracts. Prior to IFRS 17, significant
diversity has existed worldwide relating to the accounting for and
disclosure of insurance contracts, with IFRS 4 permitting many
previous accounting approaches to be followed.
The Group carried out an assessment of its contracts and
operations and concluded that the adoption of IFRS 17 has had no
effect on the interim condensed consolidated financial
statements.
Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement
2)
In February 2021, the IASB issued amendments to IAS 1 and IFRS
Practice Statement 2 Making Materiality Judgements, providing
guidance to help entities meet the accounting policy disclosure
requirements. The amendments aim to make accounting policy
disclosures more informative by replacing the requirement to
disclose 'significant accounting policies' with 'material
accounting policy information'. The amendments also provide
guidance under what circumstance, the accounting policy information
is likely to be considered material and therefore requiring
disclosure.
These amendments had no effect on the interim condensed
consolidated financial statements of the Group as they relate to
disclosures of accounting policies in complete financial statements
rather than interim financial statements. The amendments are
expected to be applicable for the accounting policy disclosures in
the annual consolidated financial statements of the Group.
Definition of Accounting Estimates (Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and
Errors)
The amendment to IAS 8, which added the definition of accounting
estimates, clarifies that the effects of a change in an input or
measurement technique are changes in accounting estimates, unless
resulting from the correction of prior period errors. These
amendments clarify how entities make the distinction between
changes in accounting estimate, changes in accounting policy and
prior period errors.
These amendments had no effect on the interim condensed
consolidated financial statements of the Group.
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes)
In May 2021, the IASB issued amendments to IAS 12, which clarify
whether the initial recognition exemption applies to certain
transactions that result in both an asset and a liability being
recognised simultaneously (e.g. a lease in the scope of IFRS 16).
The amendments introduce an additional criterion for the initial
recognition exemption, whereby the exemption does not apply to the
initial recognition of an asset or liability which at the time of
the transaction, gives rise to equal taxable and deductible
temporary differences.
These amendments had no effect on the interim condensed
consolidated financial statements of the Group.
International Tax Reform - Pillar Two Model Rules (Amendment to
IAS 12 Income Taxes)
In December 2021, the Organisation for Economic Co-operation and
Development (OECD) released a draft legislative framework for a
global minimum tax that is expected to be used by individual
jurisdictions. The goal of the framework is to reduce the shifting
of profit from one jurisdiction to another in order to reduce
global tax obligations in corporate structures. In March 2022, the
OECD released detailed technical guidance on Pillar Two of the
rules.
The IASB issued the final Amendments (the Amendments)
International Tax Reform - Pillar Two Model Rules, in response to
stakeholder concerns, on 23 May 2023.
The Amendments introduce a temporary exception to entities from
the recognition and disclosure of information about deferred tax
assets and liabilities related to Pillar Two model rules. The
Amendments also provide for additional disclosure requirements with
respect to an entity's exposure to Pillar Two income taxes.
The amendments to IAS 12 were effective immediately, however,
the amendments have not yet been endorsed for adoption in the
Group's jurisdiction, and therefore, the Group is unable to apply
them as at 30 June 2023.
Therefore, for the half year ended 30 June 2023, the Group has
developed an accounting policy, in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors to not account
for deferred taxes related to Pillar Two income taxes. The Group
believes this policy results in the most relevant and reliable
information. The effect of the application of this accounting
policy is expected to be consistent with the effect of the
amendments to IAS 12 when they are adopted by the Group.
The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
group.
Use of estimates and judgements
There have been no material revisions to the nature and estimate
assumptions as reported in prior periods, including:
(a) Impairment of goodwill;
(b) The valuation of intangibles;
(c) The valuation of equity investments; and
(d) The capitalisation of development costs
2. SIGNIFICANT EVENTS AND TRANSACTIONS
Global Environment
The Group is operating in an increasingly uncertain
macroeconomic environment. The after-effects of the pandemic,
significant turmoil in the tech and capital sectors, the
geopolitical concerns, most notably the conflict in Ukraine, and
the more recent economic pressures are causing additional market
volatility and uncertainty.
The carrying value of the Group's assets have been assessed in
light of current events and the long-term impacts that these may
have on the investments of the Group. Overall, we believe that the
sectors the Group is active in are in a strong position and it was
not seen as necessary to impair the carrying value of any assets
further. The recoverable amount was determined based on values in
use, which utilises current budgets/reforecasts and cash flow
projections. We are closely monitoring and managing the events, and
will take further actions if required, as the situation continues
to evolve. Cash planning and management is in place for all
businesses, which have been stress tested based on a number of
scenarios. Importantly as a result of the various factors,
NetScientific and several of its portfolio companies are seeing new
sustainable opportunities, offering potential for future
growth.
3. SEGMENTAL REPORTING
An operating segment is a component of the group that engages in
business activities from which it may earn revenues and incur
expenses, for which separate financial information is available and
whose operating results are evaluated and as identified by Board of
Directors.
The Board of Directors assess the performance of the operating
segment using financial information which is measured and presented
in a manner consistent with that in the financial statements.
Revenue from contracts with customers by segment
30 June 2023 Delivered Service Fees Total
Goods GBP000s GBP000s
GBP000s
-------------- ---------- ------------- --------------------
EMV Capital - 699 699
ProAxsis 30 41 71
30 740 770
-------------- ---------- ------------- --------------------
30 June 2022 Delivered Goods Service Fees Total
GBP000s GBP000s GBP000s
-------------- ---------------- ------------- ---------
EMV Capital - 276 276
ProAxsis 67 48 115
67 324 391
-------------- ---------------- ------------- ---------
Total Loss for the period by segment
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
2023 2022
GBP000s GBP000s
--------------- ------------ ------------
NetScientific (403) (541)
EMV Capital 9 (154)
ProAxsis (559) (236)
Glycotest (712) (654)
Cetromed 45 (73)
(1,620) (1,658)
--------------- ------------ ------------
The above losses reflect investment in R&D by Glycotest and
ProAxsis, which add value for the future through new product and
clinical trials. ProAxsis has seen further investment through
proportional Grant funding. The investment by the Group has been
done through shareholder loans, which are expected to be repaid in
due course.
4. REVENUE
Geographic breakdown of revenue from contracts with
customers:
30 June 2023 Delivered Service Fees Total
Goods GBP000s GBP000s
GBP000s
------------------- ---------- ------------- --------------------
United Kingdom 2 740 742
Europe 3 - 3
Rest of the World 25 - 25
30 740 770
------------------- ---------- ------------- --------------------
30 June 2022 Delivered Goods Service Fees Total
GBP000s GBP000s GBP000s
------------------- ---------------- ------------- ---------
United Kingdom - 324 324
Europe 4 - 4
Rest of the World 63 - 63
67 324 391
------------------- ---------------- ------------- ---------
Total Income is the sum of revenue and other operating
income.
5. OTHER OPERATING INCOME
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
2023 2022
GBP000s GBP000s
---------------------------------------- ------------ ------------
Fair value movement during the period
on convertible debt - 179
Gain on available for sale investments 64 -
Gain on sale of subsidiary stake 276 -
R&D tax credit above the line - 21
Miscellaneous income 44 65
384 265
6. LOSS PER SHARE
The basic and diluted loss per share is calculated by dividing
the loss for the financial period by the weighted average number of
ordinary shares in issue during the period. Potential ordinary
shares from outstanding options at 30 June 2023 of 1,669,540 (30
June 2022: 1,120,010; 31 December 2022: 1,431,050) are not treated
as dilutive as the group is loss making.
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
2023 2022
GBP000s GBP000s
------------------------------------------- ------------ ------------
Loss attributable to equity holders
of the Company
Continuing operations (1,364) (1,394)
Total Loss attributable to equity holders
of the Company (1,364) (1,394)
------------ ------------
Number of shares
------------ ------------
Weighted average number of ordinary
shares in issue 23,488,148 21,146,591
------------ ------------
In the prior year on 29 June 2022 the Company issued 2,238,807
of 5p ordinary shares at 67p per share, raising gross funds of
GBP1,500k and net funds of GBP1,444k.
The total number of voting rights in the Company at 30 June 2023
is 23,488,148 5p ordinary shares (30 June 2022: 23,360,660, 31
December 2022: 23,488,148.
7. INTANGIBLE ASSETS
Development Investment
Carry Interest costs Acquisition
Goodwill Arrangements Costs Patents Total
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
Cost
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 1 January 2022 669 1,627 922 17 50 3,285
Additions - - 280 - - 280
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 30 June 2022 669 1,627 1,202 17 50 3,565
Additions - - 268 - - 268
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 31 December
2022 669 1,627 1,470 17 50 3,833
Additions - - 180 - - 180
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 30 June 2023 669 1,627 1,650 17 50 4,013
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
Accumulated amortisation
and impairment
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 1 January 2022 - 216 18 - 6 240
Amortisation charge - 81 19 - 4 105
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 30 June 2022 - 297 37 - 10 344
Amortisation charge - 82 37 - 3 122
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 31 December
2022 - 379 74 - 13 466
Amortisation charge - 81 40 - 3 124
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 30 June 2023 - 460 114 - 16 590
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
Net book value
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 30 June 2023 669 1,167 1,536 17 34 3,423
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 31 December
2022 669 1,248 1,396 17 37 3,367
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
At 30 June 2022 669 1,330 1,165 17 40 3,221
-------------------------- --------- --------------- -------------- --------------- ---------- ----------
The main factors leading to the recognition of these intangibles
are resulting from the acquisition by NetScientific of EMV Capital,
ProAxsis and Cetromed.
ProAxsis acquired a key patent as part of the buyout of the
founders and Queens University for GBP50k which will be amortised
over the economic life of the patent. A further GBP180k of ProAxsis
development costs have been capitalised during the period taking
the total capitalised to GBP1,650k in line with the accounting
policy as certain projects now meet all the criteria for
development costs to be recognised as an asset as it is probable
that future economic value will flow to the Group.
8. EQUITY INVESTMENTS CLASSIFIED AS FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVTOCI)
NetScientific makes direct investments into portfolio companies
through a mixture of equity and loans. The tables below outline the
Group's positions.
Represents equity securities
Unaudited Audited
Six months Year ended
ended 30 31 December
June 2022
2023 GBP000s
GBP000s
--------------------------------------------------------------------------- ------------------ ----------------
Opening balance at start of period 22,743 11,516
Additions 4 555
Disposals (117) (451)
Conversion of financial assets classified
as FVTPL 400 2,004
Change in fair value during the period (5,408) 9,119
Closing balance at end of period 17,622 22,743
Unaudited
Six months Audited
% of ended 30 Year ended
issued June 2023 31 December
Country share Currency GBP000s 2022
Name of incorporation capital denomination GBP000s
-------------------- --------------------- -------- --------------- ------------------- --------------------
PDS Biotechnology
Corp USA 4.4% US$ 5,297 14,680
Q-Bot UK 18.6% UKGBP 4,112 3,728
Vortex Biotech
Holdings UK 30.0% UK 2,800 300
Epibone, Inc. USA 1.5% US$ 1,116 1,179
DName-iT Holdings UK 49.2% UK 1,372 -
SageTech Medical
Equipment UK 5.5% UKGBP 887 887
Sofant Technologies UK 1.5% UK 453 402
Fox Biosystems
NV BEL 4.3% EUREUR 479 495
CytoVale, Inc. USA 1.0% US$ 393 415
G-Tech Medical,
Inc. USA 3.8% US$ 335 354
Martlet Capital UK 1.3% UK 192 175
PointGrab Israel 0.5% US$ 72 76
QuantalX Israel US$ 58 -
Ventive UK 18.4% UK 56 52
DeepTech Recycling UK 30.0% UK - -
17,622 22,743
------------------------------------ --------------- --------------- ------------------- --------------------
Equity investments classified as fair value through other
comprehensive income are held for sale, fair valued and stand at
GBP17,622k (2022: GBP22,743k). A decrease in value of GBP5,121k,
which relates predominately to the decrease in fair value of PDS
Biotechnology Corporation offset by increases in fair value on
Vortex Biotech Holdings, DName-iT Holdings, Q-Bot Ltd and Sofant
Technologies.
9. DERIVATIVE FINANCIAL ASSETS CLASSIFIED AS FAIR VALUE THROUGH PROFIT AND LOSS (FVTPL)
Warrants, convertible loans and loans Unaudited
classified as FVTPL Six months Audited
ended 30 Year ended
June 31 December
2023 2022
GBP000s GBP000s
--------------------------------------------------------- ------------ --------------
Opening balance at start of period 693 1,462
Additions 43 710
Repayment - (48)
Additional accrued interest 22 93
Conversion to Equity Investments classified
as FVTOCI (400) (2,004)
Change in fair value during the period (3) 480
Closing balance at end of period 355 693
--------------------------------------------------------- ------------ --------------
30 June
Currency 2023 2022
Name Country of incorporation denomination GBP000s GBP000s
------------------------ ------------------------- ----------------- --------------- ----------
Q-Bot Ltd UK UKGBP 190 140
Vortex Biotech Holdings
Ltd UK UKGBP - 385
G-Tech Medical, Inc. USA US$ 83 88
Martlet Capital Ltd UK UKGBP 82 80
355 693
-------------------------------------------------------------------- --------------- ----------
Derivative financial assets classified as fair value through
profit and loss are GBP355k (2022: GBP693k). An decrease in fair
value of GBP338k, which mainly relates to the conversion of Vortex
Biotech Holdings to equity investments classified as FVTOCI for
GBP400k.
10. TRADE AND OTHER RECEIVABLES
Current Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2023 2022
GBP000s GBP000s
---------------------------------- ------------ --------------
Trade receivables 359 218
Taxation 92 75
Other receivables 268 52
Prepayments 136 108
Accrued income 147 205
Closing balance at end of period 1,002 658
The carrying value of trade and other receivables classified at
amortised cost approximates fair value. The Group does not hold any
collateral as security against any trade and other receivables.
Estimated credit losses have been calculated as follows:
Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2023 2022
GBP000s GBP000s
-------------------------------------------- ------------ --------------
Gross carrying amount of trade receivables 451 276
Impairment provision (estimated credit
losses) (92) (58)
Trade receivables 359 218
11. CASH AND CASH EQUIVALENTS
Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2023 2022
GBP000s GBP000s
---------------------------------- ------------ --------------
Short term deposits 1 12
Cash and cash equivalents 60 840
Bank overdraft (154) -
Closing balance at end of period (93) 852
A subsidiary has a GBP200k overdraft facility with HSBC UK Bank
Plc that is guaranteed by NetScientific Plc.
12. TRADE AND OTHER PAYABLES
Current Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2023 2022
GBP000s GBP000s
---------------------------------- ------------ --------------
Trade payables 938 497
Other payables 361 421
Deferred income 553 478
Accruals 1,128 1,061
Closing balance at end of period 2,980 2,457
The carrying value of trade and other payables classified as
financial liabilities are measured at amortised cost which
approximates fair value.
13. LOANS AND BORROWINGS
Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2023 2022
GBP000s GBP000s
------------------------------------------- ------------ --------------
Total falling due within one year (464) (99)
Total falling due more than one year (993) (719)
Closing balance at end of period (1,457) (818)
The maturity of the loans are as follows:
Amounts falling due within one year
on demand (464) (99)
Amounts falling due between one and
two years (99) (99)
Amounts falling due between two and
five years (894) (620)
Amounts falling due over five years - -
------------------------------------------- ------------ --------------
(1,457) (818)
------------------------------------------- ------------ --------------
Loans and borrowings represent:
An original unsecured loan note by a third party to ProAxsis of
GBP100k. GBP20k is outstanding at 30 June 2023 (H1 2022: GBP50k).
There is no interest charged and is payable in equal instalments of
GBP10k p.a. First instalment upon signing of document and then
equally over nine years.
ProAxsis has entered into two secured HSBC coronavirus business
interruption loan agreements "CBIL's" for GBP245k and then GBP200k.
The CBIL's facility incurs interest of 3.99% p.a. above the Bank of
England base rate. The first twelve months was interest free and
the loan is repayable within six years with principal repayments
starting after thirteen months. The total outstanding at 30 June
2023 was GBP327k (H1 2022: GBP406k).
AB Group Limited an entity associated with Melvin Lawson has
advanced GBP365k to ProAxsis Limited during the period of a GBP500k
facility. The rate of interest applicable to the loan is 10 per
cent. per annum, payable on repayment of the loan. In addition,
ProAxsis has granted to AB Group warrants over shares in ProAxsis
equal to the value of GBP150,000 at an exercise price determined by
reference to a future third-party fundraising of at least
GBP500,000, such price to be discounted by 30 per cent. The
warrants have an exercise period commencing on the date of any such
third-party fundraising and ending on the five year anniversary of
the date of the Loan Agreement. The balance outstanding on the loan
at 30 June 2023 is GBP374k (H1 2022: GBPNil). The terms of the loan
are currently being renegotiated.
Glycotest Inc., has raised a further GBP316k/$402k under the
terms of a secured convertible loan agreement, with third party
investors, syndicated by EMV Capital Limited ( EMV Capital, the
Company's wholly owned VC firm). Interest is charged at 12 per
cent. per annum. Conversion will be at a 40% discount at the
discretion of the lender. The 2022 CLA shall be subordinated to the
2023 CLA for the purposes of repayment and security. The balance
outstanding on convertible loan agreements at 30 June 2023 is
GBP735k (H1 2022: GBPNil).
14. CALLED UP SHARE CAPITAL
The total number of voting rights in the Company and issued
capital at 30 June 2023 is 23,488,148 5p ordinary shares (30 June
2022: 23,360,660, 31 December 2022: 23,488,148).
In the prior year on 29 June 2022 the Company issued 2,238,807
of 5p ordinary shares at 67p per share, raising gross funds of
GBP1,500k and net funds of GBP1,444k after deducting costs of
GBP56k.
15. RELATED PARTY DISCLOSURES
Beckman Group and Melvin Lawson, who is interested in 16.68%
(2022: 16.77%) of the issued share capital of NetScientific, is
also considered and presumed to be acting in concert with Dr Ilian
Iliev, as defined by The City Code on Takeovers and Mergers.
AB Group Limited an entity associated with Melvin Lawson has
advanced GBP365k to ProAxsis limited during the period of a GBP500k
facility. The rate of interest applicable to the loan is 10 per
cent. per annum, payable on repayment of the loan. In addition,
ProAxsis has granted to AB Group warrants over shares in ProAxsis
equal to the value of GBP150,000 at an exercise price determined by
reference to a future third party fundraising of at least
GBP500,000, such price to be discounted by 30 per cent. The
warrants have an exercise period commencing on the date of any such
third party fundraising and ending on the five year anniversary of
the date of the Loan Agreement. The balance outstanding on the loan
at 30 June 2023 is GBP374k.
EMV Capital provides corporate finance, consulting and
management services to Vortex Biotech Holdings Limited, Vortex
Liquid Biopsy Solutions Limited and Vortex Biosciences Inc. related
parties by common substantial shareholders. During the period
revenue was booked totalling GBP50k (H1 2022: GBP52k). The balance
outstanding at 30 June 2023 is GBP8k (31 December 2022: GBP9k).
EMV Capital also provided corporate finance, consulting and
management services to Wanda Health Holdings Limited, Wanda
Connected Health Systems Limited and Wanda Inc. related parties by
common substantial shareholders. During the period revenue was
booked totalling GBP55k (H1 2022: GBP44k), with a value of further
work in progress to be agreed. The balance outstanding at 30 June
2023 is GBP77k (31 December 2022: GBP60k).
Except as noted above, there are no additional related party
transactions that could have a material effect on the financial
position or performance of the Group and of the Company during this
financial period under review.
16. EVENTS AFTER THE REPORTING PERIOD
Options: NetScientific announced that it had granted a total of
579,703 new options to subscribe for ordinary shares in the capital
of the Company to certain of its Directors. Ed Hooper chose to
receive payment in the form of 40,000 new Ordinary Shares, rather
than cash, in respect of c.77.5 per cent. of the annual bonus
awarded to him (on a projected net of tax basis) for the year ended
31 December 2022. The new Ordinary Shares were issued at a price of
GBP0.63 per share. It also reported that Dr. Charles Spicer
(Chair), purchased 16,286 ordinary shares and Ed Hooper purchased
20,000 ordinary shares in the Company through their self-invested
personal pensions.
Portfolio partial exits: Further profitable partial exits
post-balance sheet have been made of GBP778,000 taking the total
proceeds year to date amount to GBP895,000.
PDS commercial developments: PDS announced the submission to the
U.S. Food and Drug Administration (FDA) of an updated Chemistry,
Manufacturing and Controls (CMC) package and a Phase 3 multicenter
registrational protocol to the company's Investigational New Drug
(IND) submission to evaluate the combination of PDS0101 and
KEYTRUDA(R) (pembrolizumab), Merck's anti-PD-1 therapy, for the
treatment of recurrent or metastatic human papillomavirus (HPV)
16-positive head and neck squamous cell carcinoma (HNSCC).
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END
IR NKOBDCBKDOCB
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
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