TIDMNSCI
RNS Number : 3104B
NetScientific PLC
30 September 2022
NetScientific plc
("NetScientific" or "NSCI" or the "Company" or the "Group")
Interim Results for the six months ended 30 June 2022
London, UK - 30 September 2022: NetScientific Plc (AIM: NSCI),
the active international holding company, which invests in,
develops and commercialises life sciences/healthcare,
sustainability and technology companies, today announces its
interim results for the six months ended 30 June 2022.
The first half of the year has been a challenging period,
against a backdrop of declining markets across life sciences and
technology sectors, and a worsening macro-economic environment.
While there has been some inevitable slow-down on a few of the
portfolio companies, others are likely to benefit from an
environment of high-energy prices and weak Sterling. Overall,
although delayed in certain areas, the portfolio remains robust,
with plans in place for further growth, adapting to the changing
environment, through value inflection points and routes to
exit.
Highlights
Key operational and financial highlights include:
-- Fair Value of GBP29.2 million (2021: 31.0 million), slight
decrease as a result of recent market turmoil and the PDS
Biotechnology share price fall, mitigated by an increase in Fair
Value in other portfolio companies [1]
-- Capital light investment model has delivered over GBP2.5
million of syndicated new investment with Capital under advisory up
11% at GBP24.6 million (2021: 22.1 million)
-- Proactive management of well-balanced portfolio of 22
companies, with further development and additional direct balance
sheet investment of GBP1.3 million
-- Deeper involvement in selected companies
o Focused on delivering significant returns
o Modest balance sheet investments in portfolio companies
alongside EMV Capital syndicated third party investments to secure
portfolio company funding needs
o Key value inflection points identified for many companies for
profitable liquidity events and exits
o Acquisition of 30% in Vortex Biotech Holdings for a non-cash
consideration
o Progressed turnaround of Q-Bot
-- Raised GBP1.5 million in June 2022 PLC placing
o Strengthening the Company's balance sheet
o Limited dilution for existing shareholders
o Strong participation from the investor network of subsidiary,
EMV Capital
o Facilitating the continuation of the Company's capital light
investment strategy
-- Progress in "Trans-Atlantic bridges" phased programme, and international expansion
-- Loss for the period of GBP1.7 million (H1 2021: loss GBP1.4
million) reflecting further R&D investment in ProAxsis and
Glycotest (in the form of shareholder loans), a small increase in
headcount and considered building of the NetScientific platform
(including systems and people) to drive growth and deliver added
shareholder value
-- Secondary sale: Post-balance sheet, executed a secondary sale
of 5.8% of the Group's Q-Bot stake, realising a GBP110k profit
Commenting on Outlook and Future Prospects, Ilian Iliev, CEO of
NetScientific, said:
"We are pleased with progress in the first six months of the
year, following on from a successful 2021. Our portfolio of
high-growth companies is well funded, with our capital light model
and network of investors securing their finance needs without the
requirement to deploy significant amounts of NetScientific cash.
Our portfolio fundraising transactions generate returns through
increased value of direct company holdings and a carry fee on
"capital under advisory". We will build on this established
business model and operating template, to drive continued growth,
and realise shareholder value.
" We have a well-balanced portfolio across sectors and
geographies, with businesses at different stages of their
development, and adaptable for a changing sectoral and
macro-economic dynamics. Within several of our companies, we are
working on substantial liquidity events or routes to exit. ."
John Clarkson, Executive Chairman of NetScientific PLC added
:
"It is reassuring that NSCI's strategy and actions have proven
resilient and appropriate, even in difficult market conditions and
a challenging economic climate. Indeed, despite these factors and
some consequential delays, the fundamentals remain strong and the
company is well placed to take advantage of the opportunities, in
the current operating environment.
"With the benefits of a well-balanced portfolio, strong
proactive management and the capital light business model, we look
forward positively to continued progress, generating revenue,
adding value, then realising returns for shareholders"
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
For more information, please contact:
NetScientific
Ilian Iliev, CEO Via Walbrook PR
WH Ireland (NOMAD, Financial Adviser and Broker)
Chris Fielding / Darshan Patel +44 (0)20 7220 1666
Walbrook PR +44 (0)20 7933 8780 or netscientific@walbrookpr.com
Nick Rome / Joe Walker / Paul
McManus 07748 325 236
About NetScientific
NetScientific Plc ("NSCI") is an active holding Company that
proactively invests in a global portfolio of companies across the
healthcare, life science, ESG, and deep technology sectors.
NetScientific delivers shareholder returns through a proactive
and hands-on management approach to its portfolio companies;
identifying, investing in, and helping to build game-changing
companies. The Group targets value inflection points and the
release of value through partial or full exits from trade sales,
public listings, or equity sales. The Company has a strong
Trans-Atlantic and growing international presence, providing
attractive expansion prospects.
The Company differentiates itself by employing a capital-light
investment approach, making use of its wholly owned subsidiary, EMV
Capital's network of private, corporate, and institutional
investors. By syndicating investment and making minimal use of its
balance sheet, the Company is able to secure direct stakes, as well
as carried interest stakes, in its portfolio. This ultimately
creates a structure that can support a large portfolio with a
limited balance sheet.
NetScientific is headquartered in London, United Kingdom, and
was admitted to trading on AIM, a market operated by the London
Stock Exchange, in 2013.
www.netscientific.net
BUSINESS AND OPERATING OVERVIEW
Introduction
We are pleased to report our financial results and summary of
operations for the six months ended 30 June 2022. The first half of
2022 continued the progress made since the start of the Company's
turnaround in the past couple of years, in what have been extremely
tough market conditions.
We are focused on our next stage of growth, adding value and
delivering results for shareholders. Using our now established
business model, and with the benefit of additional funds, we are
exploiting the potential of existing and new opportunities. Based
on our detailed knowledge of the portfolio and individual
businesses, we have been selectively identifying portfolio
companies to build deeper ownership, influence and involvement, and
drive investment returns and realisations.
Our team has been busy providing operational as well as
financial support to help portfolio companies grow, offering
venture capital and corporate finance advice, strategic guidance,
and access to an established network of corporate and industry
partners in the UK and internationally.
A Differentiated Business Model
We can now be characterised as a truly active holding company
with a balanced, enhanced and expanded portfolio of companies
across several sectors. As well as being a pro-active manager,
generating returns through growth in the value of our direct
balance sheet holdings, we differentiate ourselves by employing a
capital-light investment approach, making use of our wholly owned
subsidiary, EMV Capital's network of private, corporate and
institutional investors, to provide venture capital investments,
corporate finance services, and management services to our
portfolio. By syndicating investment and making minimal use of our
balance sheet, we can secure direct stakes, and/or carried
interests in our portfolio. This not only earns revenues, but also
can deliver profit share and carry fees as a result of capital
under advisory. This ultimately creates a structure that can
support a larger portfolio with a limited balance sheet, offset by
ongoing fees.
Advantages of our model
Flexibility: As an active investment Company, the permanent
capital funding model means that NSCI is not driven by the usual
fund lifecycles on deployment and exit and can support investee
companies through their growth journey. We are therefore able to
take a longer and more strategic investment view, whilst still
remaining live to shorter-term opportunities including in the
secondary markets.
Capital efficient investment strategies for portfolio companies:
Through our proactive approach, we help portfolio companies
identify capital efficient investment strategies, using different
corporate finance tools and making particular use of non-dilutive
financing such as grants and corporate joint development
agreements.
Pro-active investment approach: Our team can open up value
opportunities which are not available in typical passive investment
approaches, such as identifying secondaries to participate in and
having early visibility on investment rounds.
Working with strategic investors and multinational corporations
: Using our established network, we can broker and monetise
introductions between portfolio companies and appropriate
investors/multinational corporations, with a focus on both
corporate VC investment and collaboration opportunities.
Access to capital: As demonstrated in its own two previous
fundraisings, NSCI is able to introduce funding from its investor
network, supplementing its broker's activities.
Fee-generating activities: Our tailored approach provides a
range of fee sources, including corporate finance, consultancy,
board monitoring, and reimbursement fees help to offset the costs
of infrastructure.
Early liquidity/secondaries: We are able to broker and
participate in partial liquidity events, such as through the
secondary market sale of portfolio company stock to new investors
into portfolio companies. This can generate additional cash returns
well ahead of a full exit, with several secondary transactions
being actively pursued.
Early liquidity/secondaries: We are able to arrange and lead in
partial liquidity events, such as through the secondary market sale
of portfolio company stock to new investors into portfolio
companies. As well as providing liquidity to outgoing shareholders
and incoming new investors, this can generate additional cash
returns to the Group well ahead of a full exit. We have
successfully executed two significant profitable secondary
transactions, with several others being actively pursued.
Trans-Atlantic bridges: Our on the ground presence in the US
supports the business needs of core companies, helps expend market
access, and assists portfolio companies to 'land' and grow in the
US. This provides a differentiator for the Group and is attractive
to new companies looking to join the EMV Capital/NSCI
portfolio.
Infrastructure/team: Our small, focused, and effective core
team, and trusted network of venture partners and advisors, means
that NSCI/EMVC has an outsize impact against a relatively modest
cost base.
Routes to Exit: For a core six investee companies, we are
currently actively working on routes to exit, with the potential
for outsized returns.
Operational Review
Over the first half of 2022 the Company has continued its active
programme to deliver on its strategy and drive shareholder value.
The Company invested GBP1.26 million and raised over GBP2.5 million
in total for portfolio companies.
In accordance with the strategic plan, operational actions
include:
-- continued pro-active, commercial management of portfolio and individual companies;
-- judicious investments to protect and enhance NetScientific's
position in several of its existing portfolio companies;
-- clear and detailed evaluation of the Group's portfolio,
including business plans, timelines, milestones, associated funding
needs, value inflection points, the balance of risk and reward, and
the priorities and potential for each portfolio company;
-- an alignment of EMV Capital's operations to act in synergy
with NetScientific's investment and portfolio objectives;
-- a wider application of the company's "capital light"
approach, utilising the draw of the PLC brand, and the
NetScientific balance sheet, to anchor future investments or
secondaries, and achieve a multiplier effect with third party
investment adding to Capital Under Advisory;
-- selective investments, deeper stakes, greater involvement,
and focusing on realising enhanced returns in certain portfolio
companies and target areas;
-- extending our network, platform, and access to deal flow; and
-- building a pipeline of fund-raising engagements and
consultancy agreements for execution in the second half of 2022,
and into 2023.
Trans-Atlantic Bridges and internationalisation
Our combined US and UK portfolio has led to the identification
of a number of synergies and opportunities for operational
cross-over on both sides of the Atlantic, and further international
potential. We plan to consolidate our progress with specific 'on
the ground' initiatives, including facilitating for select
portfolio companies access to a proposed facility on the East Coast
of the USA, to help our existing portfolio companies and future
additions accelerate internationalisation and growth.
Both Glycotest and ProAxsis have an immediate need for a US lab,
with associated commercialisation and sales/marketing facilities.
Temporary space has already been secured, close to Washington DC
and plans are well advanced for suitable leased premises.
Several portfolio companies have accessed investments and
capital, product markets, and corporate and research relationships
on either side of the Atlantic, and beyond. For instance, we have
assisted Q-Bot, Sofant and Wanda in establishing corporate links in
the US construction industry, telecoms and healthcare markets
respectively, and have supported Vortex' continued operation of a
US-UK presence.
ESG/Impact Investment
The Group continues to be well positioned in the Environment,
Social and Corporate Governance ("ESG") and impact investment
space, as an investor in therapeutics and diagnostics for major
chronic diseases (such as PDS Biotechnology and Vortex in oncology,
ProAxsis in respiratory diseases), as well as investments in
sustainability companies (such as Q-Bot's carbon-mitigating
retrofit insulation, or Sofant's low-energy satellite
communications infrastructure).
We are focused on sustainable value creation from a strong base
and continue to build out key processes that enable increased
transactional, portfolio management, and investment realisation
capacity. Having completed a turnround in the past couple of years,
and having transformed the business, the Group is now in a strong
position, with the fundamentals in place for continued
progress.
Awards
We were delighted that EMV Capital has been nominated as a
Finalist in the 2022 Health Investor Awards for the Private Equity
Investor of the Year awards, and is a Finalist in the ESG Champion
of the Year category at the Growth Investor Awards 2022. ProAxsis
won the Best Established Small Business award at the Belfast
Telegraph Enterprise Awards 2022.
COVID-19
Although there was a general initial negative impact on the
Group, the consequences have varied across the portfolio, and the
sources of revenue and individual companies have been managed
accordingly. In the aftermath of the pandemic, new opportunities
have been opened for both the healthcare and broader technology
sectors. It was not seen as necessary to impair the carrying value
of any assets.
Global Economic Environment
The macro-economic environment remains exceedingly
unpredictable. The aftermath of the pandemic, capital markets
volatility, geopolitical issues and concerns, most notably Russia's
invasion of Ukraine, and the more recent macro-economic pressures,
continue to contribute to business uncertainty.
In this climate, the first half year has at times been a
challenging period, with some inevitable slow-down in a few of the
portfolio companies. At the same time, some of our portfolio
companies are likely to benefit from an environment of high-energy
prices and weak Sterling. Overall, although delayed in certain
areas, the portfolio remains robust, with plans in place for
further growth adapting to the changing environment, through value
inflection points and routes to exit.
Portfolio Summary
Following our capital-light investment model, the portfolio
consists of a combination of direct investments and capital under
advisory. This enhanced portfolio is well balanced, facilitates
risk management, and provides synergistic benefits, through
consolidated proactive management across the Group, as summarised
below.
Portfolio Country Sector Sub-Sector Stage Group Unaudited Capital Under
companies of Interest Directors' Advisory (At
Development % Estimated Value Cost to Third
Party)
--------------- -------- ---------------- ----------- ------------
31 Dec 30 Jun 31 Dec 30 Jun
21 22 21 22
--------------- -------- ---------------- ----------- ------------ --------- ----------- --------- ---------
Subsidiaries
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
EMV Capital Venture Financial
Ltd UK Capital Services Sales 100% Equity GBP3.5m GBP3.5m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
ProAxsis Respiratory Life
Ltd UK diagnostics Sciences Sales 100% Equity GBP3.5m GBP3.5m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Glycotest, Liver cancer Life Late stage
Inc. US diagnostics Sciences clinical 64% Equity GBP11.0m GBP11.0m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Cetromed Holding
Ltd UK Life Sciences Investment Company 75% Equity - - - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Sub Total GBP18.0m GBP18.0m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Direct/Advised
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
PDS
Biotechnology Life Phase II
Corporation US Immuno-oncology Sciences clinical 4.7% Equity GBP8.0m GBP4.0m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
23.7% GBP1.0m
Equity + GBP3.2m
+ 15.6% GBP0.3m + GBP0.1m
Q-Bot Ltd UK Robotics Technology Sales Advised CLA OD GBP2.3m GBP2.8m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
SageTech
Medical Waste 5.9% Equity
Equipment anaesthetic Commercial + 25.14%
Ltd UK capture/recycle Healthcare stage Advised GBP0.9m GBP0.9m GBP3.5m GBP3.8m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
GBP0.3m
+ GBP0.3m
Epibone, Regenerative Life Early stage GBP0.5m + GBP0.6m GBP0.2m GBP0.2m
Inc. US medicine Sciences clinical 0.8% Equity CLA CLA CLA CLA
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
CytoVale, Medical Life Late stage
Inc. US biomarker Sciences clinical 1.0% Equity GBP0.4m GBP0.4m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
G - Tech
Medical, Waerable Life Early stage
Inc. US gut monitor Sciences clinical 3.8% Equity GBP0.4m GBP0.4m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
1.5% Equity
+ GBP75k
Convertible
Martlet Venture loan note
Capital Capital Holding + 10.3%
Ltd UK - Deeptech Investment Company Indirect GBP0.3m GBP0.3m GBP1.3m GBP1.3m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Fox Biosystems Research Life
* BEL Equipment Sciences Sales 5.1% Equity GBP0.3m GBP0.3m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Sofant Semiconductors
Technologies Satellite 25.1% GBP0.3m GBP0.4m
Ltd UK Coms Technology Pre sales Advised CLA CLA GBP3.0m GBP3.0m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
0.5% Equity
PointGrab, Smart building + 20.8%
Inc. IL automation Technology Sales Advised GBP0.1m GBP0.1m GBP4.1m GBP4.1m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Dname-iT Life 61.5%
* BEL Lab technology Sciences Pre sales Equity GBP0.1m GBP0.1m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
QuantalX Medical Life Late stage
Neuroscience IL diagnostics Sciences clinical 0.4% Equity GBP0.1m GBP0.1m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Oncocidia Cancer Life Early stage 41.3%
* BEL therapeutics Sciences clinical Equity - - - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Longevity $250k
Biotech, Neurology Life Early stage Convertible
Inc. US therapeutics Sciences clinical loan note - - - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Sub Total GBP13.0m GBP11.2m GBP14.4m GBP15.2m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Advised
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Vortex Liquid
Biosciences, biopsy Life 96.0%
Inc. UK/US oncology Sciences Sales Indirect - - GBP3.9m GBP4.9m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Digital
Wanda Health, health 74.7%
Inc. UK/US monitoring Healthcare Sales Indirect - - GBP2.2m GBP2.9m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Insight
Photonic Semiconductors
Solutions, Akinetic $1.25m
Inc. US laser Technology Sales Warrants - - GBP0.9m GBP0.9m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Nanotech
Industrial $1.0m
Solutions, Material Convertible
Inc. US science Technology Sales loan note - - GBP0.7m GBP0.7m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
Sub Total - - GBP7.7m GBP9.4m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
TOTAL GBP31.0m GBP29.2m GBP22.1m GBP24.6m
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
On the Consolidated Statement of Financial Position, the owned
portfolio is shown as Equity investments classified as FVTOCI and
Financial assets classified as FVTPL.
The combination of direct and capital under advisory investments
gives the Group a greater influence in the portfolio companies,
access to follow-on funding, 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 GBP24.6 million could
result in carry returns to EMV Capital of over GBP4 million.
Subsidiaries and listed investment highlights
EMV Capital (100% owned subsidiary)
-- EMV Capital is the Venture Capital and Corporate Finance arm
of NetScientific, enabling the execution of the capital light
investment model of the Group (acquired in 2020).
-- Investment syndication occurs through its growing EIS
investment practice, a family office network, wealth managers,
institutional VCs and corporate venture capital - with the backing
of a PLC balance sheet and brand.
-- EMV Capital has in place a carried interest arrangement with
investors, providing additional potential investment returns and
fees to the Group.
-- During the period, EMVC executed several syndicated
transactions, increasing Capital Under Advisory by 11% to GBP24.6
million (2021: GBP22.1 million) following the successful completion
of several fundraising transactions (SageTech, Q-Bot and Sofant),
and continued funding of portfolio companies under existing
investor arrangements (Vortex, Wanda).
-- The company also provides paid-for management support
services to several of the portfolio companies, to support growth
and fund-raising initiatives, and planning routes to exit.
-- The company also signed several additional fundraising
mandates, and further incubation support and consultancy
engagements - building a pipeline for the rest of 2022 and
beyond.
-- EMV Capital was delighted to appoint Ed Hooper as an
Executive Director (in addition to his role as General Counsel for
NSCI), Ed brings a wealth of high-calibre transactional expertise,
providing further critical mass as we continue our structured
growth and realisation plans.
ProAxsis Ltd (100% owned subsidiary)
-- Belfast-based subsidiary, which specialises in respiratory,
other diagnostics, and building a significant expertise in the
measurement of inflammatory biomarkers, with a growing global
client list of pharmaceutical companies, and leading academic
laboratories.
-- Advances include further services to clinical trials and the
commercialisation of five novel or improved products, following
their successful CE marking in the first half of 2022.
-- The global licence agreement with AstraZeneca, in May 2022
was a "blue chip" validation of ProAxsis. This was further enhanced
by the successfully completed Performance Evaluation study of the
COVID-19 antibody test, with exceptional levels of sensitivity and
specificity of 100% and 99.3% respectively.
-- This COVID-19 antibody test gives ProAxsis a competitive
position in the COVID and the wider research and clinical trials
markets.
-- The company established the necessary infrastructure and
human resources and will continue its investment programme to
exploit its full business potential.
-- ProAxsis has already taken temporary lab space close to
Washington DC. Plans are well advanced for leasing a long-term
suitable full US lab, with associated commercialisation and
sales/marketing facilities.
-- This will enable the company to deliver consistent
high-quality service for clinical trials, either side of the
Atlantic and to access higher value US clinical trials. The
ProAxsis team has created a strong sales pipeline on either side of
the Atlantic.
-- In addition to grant finance, these developments are expected
to enhance the ability of the company to access third party
funding.
Glycotest (62% holding)
-- Focused on the development of early-stage liver cancer diagnostics.
-- Co-investment with Fosun Pharma as minority partner, with a
licensing agreement for the Chinese market.
-- Enrolment and progress in clinical trials has progressed well
even with COVID-19 delays, building up valuable samples, data, and
productive sites, and is now entering the final stage. The bulk of
the significant spend has already been deployed and becomes due for
reimbursement by Fosun, under the existing agreement. In 2021,
Fosun made a further payment on account of $1 million leaving a
balance of $3 million of milestone-based funding to Glycotest.
-- Glycotest management believes the clinical trials have
resulted in one of the world's largest databanks in the liver
cancer study space, providing a good basis for further
development.
-- The HCC Panel clinical validation study and algorithm
training set have continued to be delayed by technical issues,
problems with the outsourced lab, and operating arrangements. These
are being progressively tackled.
-- An expert contract lab has been commissioned to carry out
troubleshooting and assay optimisation to complete the training
set, which will be a significant value inflection point for the
company, now expected in the first half of 2023.
-- The company is exploring avenues for commercialisation and
opportunities, recognising the significant value inflection points
and continues to work closely with Fosun Pharma for the successful
development and realisation of returns from the business.
PDS Biotechnology (NASDAQ Listed, 4.7% holding)
-- NetScientific backed PDS Biotechnology in 2014 prior to its
NASDAQ listing and retains a shareholding of 4.7%.
-- The Immunotherapy biopharma company is developing novel
T-cell activating cancer treatment, and infectious disease vaccine
candidates.
-- After a successful fund-raise of $52m in 2021, PDS recently
raised $35m non-dilutive funding from Horizon Technology Finance
which extends its runway well into 2024.
-- The company has four phase 2 oncology clinical trials in
progress. Clinical partnerships are with Merck, MD Anderson Cancer
Center and National Cancer Institute.
-- Interim data presented in June 2022 at ASCO from the NCI-led
PDS0101 Phase 2 trial showed tumor reduction in c.67% of patients
(four of six subjects) who had failed prior treatment.
-- FDA fast-track status has been secured for phase 3, with
multiple near-term readouts expected in the second half of 2022 and
2023.
-- The fair value of the NetScientific stake was GBP4.0 million
at the end of period (2021: GBP8.0 million), broadly in line with
the biotech sector.
Portfolio Strategy and other company updates
-- In line with our stated strategy, a prioritised framework is
applied to the portfolio and the proactive management of the
companies.
-- Following a detailed review of the portfolio of 22 companies,
we have focused on several portfolio companies where we have made
greater direct and syndicated investments, increasing influence,
and value-added management support.
-- We are considered by many of our portfolio companies as the
'go to' investment partner, which provides us early access to
investment opportunities (including secondaries).
-- Consequently, the Group has invested GBP593,000 in
non-subsidiary companies and syndicated over GBP2.5 million in
total for portfolio companies over the past six months, as we
continue to grow and add value across the enhanced portfolio.
Several direct investments were made by NetScientific in the
portfolio companies as part of the capital light investment model,
and to enable the syndication of further funds by EMVC. These
included:
Q-Bot (24% direct stake, 16% indirect stake)
-- London-based Q-Bot, which is a leading UK developer of robots
for use in the retrofit construction industry, has successfully
closed a GBP1.62m investment round to fund the next stage of its
growth, primarily from existing investors.
-- The fair value of NSCI's c.24% stake (acquired for c.GBP1m in
Q3 2021) has increased by 108% to GBP2.1m.
-- The additional funds allowed Q-Bot to accelerate the rollout
of its unique solution of remotely applying underfloor insulation
across the UK and engage with growing overseas demand.
-- Q-Bot's growth is through an expansion of its network of
Accredited Installation Partners, industrialising robot
manufacturing at scale, and internationalisation to the EU and
US.
-- EMV Capital also supported a Board-led turnaround initiated
in Q3 2021 under a consultancy project with Q-Bot.
-- Revenues doubled in its most recent financial year to March
2022, and is expected to continue growing in the UK, with
international sales due to start later in 2022
-- As the UK's de facto leader in construction and retrofit
robotics, Q-Bot works with both social and private landlords, as
well as homeowners, having now insulated more than 3,000
properties.
-- Our VC arm EMV Capital led the investment round, with further syndicated investment planned.
-- The Group converted GBP500k of Q-Bot convertible loan notes
plus interest in the round at a 25% discount.
Vortex (30% direct stake)
-- Co-located in the UK and the US Bay Area, US, Vortex's
mission is to build a platform around its high-quality Circulating
Tumour Cell ("CTC") capture technology - providing researchers and
clinicians access to critical insights from whole cancer cells that
underpin one of the main causes of metastasis, treatment
resistance, and disease recurrence.
-- In May 2022 NetScientific announced the conditional
acquisition of its 30% stake, which has been now completed
-- Appointment of Paul Jones as CEO, an experienced senior
industry professional to lead the company's growth.
-- It has a growing international customer base for its
automated VTX-1 instrument and associated cartridges, an innovative
"no touch" microfluidic chip technology which captures high
quality, viable CTCs from blood with very high yields.
-- These can then provide input to further downstream molecular
analysis, ultimately informing patient access to therapy and
monitoring.
-- The company's development is taking place in a growing
market. The liquid biopsy market size was valued at $8.1 billion in
2021 and is projected to surpass $26.2 billion by 2030, growing at
14 percent over the period (Precedent Research).
We are working actively with several other promising companies,
exploring how best to progress their ambitious growth paths and
deliver results. At the time of writing, there are several
fundraisings underway, as well as a promising pipeline of further
consultancy engagements which will be announced in due course.
FINANCIAL OVERVIEW
In line with expectations, the Group made a loss of GBP1.7
million (H1 2021: GBP1.5 million) for the period, all from
continuing operations, including continued substantial expensed
investment in research and development at ProAxsis and Glycotest,
active management and considered additional headcount and building
of the NetScientific platform .
Income Statement
Revenue for the first half of 2022 was down a modest 4% to
GBP391,000 (H1 2021: GBP407,000), with a promising pipeline for the
second half of 2022. ProAxsis revenue at GBP115k (2021: GBP82k) is
up 40% on the prior year, with kit sales and new products up 49%,
and clinical research services up 30%.
Other operating income increased to GBP265,000 (H1 2021:
GBP53,000), as a result of fair value movement and adjustments on
derivative financial assets classified as "fair value through
profit and loss" (FVTPL) of GBP179,000 (H1 2021: GBPNil), grant and
other income of GBP65,000 (H1 2021: GBP7,000), and ProAxsis R&D
tax above the line of GBP21,000 (H1 2021: GBP46,000).
Research and development costs of GBP814,000 (H1 2021:
GBP651,000) were higher in the first half as Cetromed, Glycotest,
and ProAxsis continue development and clinical trials. Further
development costs on five projects of GBP280,000 (H1 2021:
GBP290,000) was capitalised at ProAxsis during the period.
Selling and administrative costs of GBP1.4 million (H1 2021:
GBP1.2 million) were higher, mainly due to increased headcount in
the subsidiaries and at head office, and increased spending in
drives towards commercialisation and eventual liquidity events.
Balance Sheet
Cash at the period end amounted to GBP2.4 million (2021: GBP2.7
million), following a fundraise of GBP1.44 million net of costs in
June 2022.
Cash used in operations during the period was GBP1.132 million
(H1 2021: GBP1.134 million). Cash held within the subsidiary
Glycotest is not freely available for use within the wider group as
it would need the consent of a minority shareholder. Intangible
assets stood at GBP3.221 million (2021: GBP3.045 million). ProAxsis
capitalised a further GBP280,000 of development costs during the
period (2021: GBP585,000) and amortisation during the period was
GBP105,000 (2021: GBP163,000). Refer to note 8 below for more
information.
Equity investments held for sale and classified as fair value
through other comprehensive income ("FVTOCI") stood at GBP9.435
million on 30 June 2022 (2021: GBP11.516 million). A decrease in
value of GBP2.081 million, relates predominately to the PDS
Biotechnology (NASDAQ: PDSB) price decline, and a trade investment
measured at fair value, was down GBP4.0 million during the period.
This is offset by an increase in fair value on Q-Bot of GBP1.1
million to GBP2.1 million during the period, reflecting the
increased share price in the fundraise of Q2 2022.
All equity investments not quoted on an active market have had
their fair values established using inputs other than quoted prices
that are observable, i.e., the price from the latest third party
round as publicly disclosed. Refer to note 9 below for further
information.
Derivative financial instruments classified as fair value
through profit and loss ("FVTPL"), were fair valued and stood at
GBP1.651 million on 30 June 2022 (2021: GBP1.462 million). An
increase in value of GBP189,000 was obtained, which relates
predominately to a Vortex loan of GBP250,000. Refer to note 10
below for further information.
The Group ended the period with net assets of GBP15.836 million
(2021: GBP18.509 million), amounting to a decrease of GBP2.673
million. The movement is shown in the consolidated statement of
changes in equity and is mainly constituted by the loss in the
period of GBP1.448 million and the negative movement in equity
investments held for sale and derivative financial instruments of
GBP2.873 million, offset by the successful fundraise during June
2022 of GBP1.444 million net of costs.
Board and Senior Management
There were no Board changes during the period, and the Board
continues to work effectively providing the requisite corporate
governance, positive challenge, and strategic drive. Ed Hooper, a
senior City lawyer, was appointed as General Counsel and joined the
Board of EMV Capital as executive director.
Summary and Outlook
The Board will closely monitor the markets and relevant industry
developments. It maintains a flexible approach to new
opportunities, both for investment and generating returns from
investments.
NetScientific's portfolio is focused on businesses with high
growth prospects. These are expected to generate shareholder
returns through the increased value of direct company holdings and
a carry fee on "capital under advisory". We will build on this
established business model and operating template, to drive
continued growth, and realise shareholder value.
The Group also continues to be well positioned in both the ESG
and impact investment arenas, with long-standing investments in
sustainability and healthcare.
We will continue to benefit from our capital-light investment
approach, utilising EMV Capital's network of private, corporate,
and institutional investors and the judicious use of NSCI's balance
sheet. All the while, we are able to assist with the fund-raising
needs of our portfolio companies, with a significant percentage
added as Capital Under Advisory with carried interest. The Board
believes that the balanced investment approach, with advised and
carried interest stakes, leads to diversified investment returns
with a structure that can support a large portfolio and limited
balance sheet.
We are focused on progressing the various projects, including
fee-generating transactions, in the second half of 2022, and
beyond, building opportunities for growth and realising returns for
shareholders.
John Clarkson Ilian Iliev
Executive Chairman Chief Executive Officer
30 September 2022 30 September 2022
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2022
NetScientific plc
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
Continuing Operations Notes 2022 2021
GBP000s GBP000s
------------------------------------------- -------- ------------ ------------
Total Income 656 460
Revenue 4 391 407
Cost of sales (30) (35)
------------------------------------------- -------- ------------ ------------
Gross profit 361 372
Other operating income 265 53
Research and development costs (814) (651)
Selling, general and administrative
costs (1,427) (1,205)
Other costs (103) (51)
Loss from operations (1,718) (1,482)
Finance income 51 2
Finance expense (20) (8)
Loss before taxation (1,687) (1,488)
Income Tax 29 40
------------------------------------------- -------- ------------ ------------
Total loss for the period from
continuing operations (1,658) (1,448)
------------------------------------------- -------- ------------ ------------
Loss attributable to:
Owners of the parent 5 (1,394) (1,195)
Non-controlling interests (264) (253)
------------------------------------------- -------- ------------ ------------
(1,658) (1,448)
------------------------------------------- -------- ------------ ------------
Basic and diluted loss per share
attributable to owners of the parent
during the period: 5
Total loss for the period from continuing
operations (6.6p) (7.9p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2022
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
Notes 2022 2021
GBP000s GBP000s
Loss for the period (1,658) (1,448)
Items that may be subsequently
reclassified to profit or loss in
subsequent periods:
Exchange differences on translation
of foreign operations 352 (10)
Change in fair value of investments
classified as fair value through
other comprehensive income (2,873) 9,892
Total comprehensive profit/(loss)
for the period (4,179) 8,434
Attributable to:
Owners of the parent (3,887) 8,689
Non-controlling interests (292) (255)
---------------------------- ---------- --------
(4,179) 8,434
--------------------------- ---------- --------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Unaudited Audited
30 June 31 December
2022 2021
Notes GBP000s GBP000s
Assets
Non-current assets
Property, plant and equipment 6 140 136
Right-of-use assets 7 142 158
Intangible assets 8 3,221 3,045
Equity investments classified as
FVTOCI* 9 9,435 11,516
Derivative financial assets classified
as FVTPL** 10 1,651 1,462
Total non-current assets 14,589 16,317
Current assets
Inventories 11 71 67
Trade and other receivables 12 1,159 1,598
Cash and cash equivalents 13 2,363 2,710
Total current assets 3,593 4,375
Total assets 18,182 20,692
Liabilities
Current liabilities
Trade and other payables 14 (1,742) (1,529)
Lease liabilities 15 (33) (32)
Loans and borrowings 16 (89) (59)
Total current liabilities (1,864) (1,620)
Non-current liabilities
Lease liabilities 15 (115) (131)
Loans and borrowings 16 (367) (432)
Total non-current liabilities (482) (563)
Total liabilities (2,346) (2,183)
Net assets 15,836 18,509
Issued capital and reserves
Attributable to the parent
Called up share capital 17 1,168 1,056
Warrants 42 42
Share premium account 74,124 72,792
Capital reserve account 237 237
Equity investment reserve 1,631 4,504
Foreign exchange and capital reserve 1,748 1,368
Retained earnings (62,831) (64,499)
Equity attributable to the owners
of the parent 16,119 18,500
Non-controlling interests (283) 9
Total equity 15,836 18,509
* Fair value through other comprehensive income
** Fair value through profit and loss
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2022
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 2021 746 65,594 65,594 237 (1,505) (59,702) 1,368 6,738 158 6,896
Loss for the
period - - - - - (1,195) - (1,195) (253) (1,448)
Other
comprehensive
income -
Foreign
exchange
differences - - - - - - (8) (8) (2) (10)
Change in fair
value during
the period - - - - 9,892 - - 9,892 - 9,892
Total
comprehensive
income - - - - 9,892 (1,195) (8) 8,689 (255) 8,434
Issue of share
capital 303 - 7,492 - - - - 7,795 - 7,795
Cost of share
issue - - (436) - - - - (436) - (436)
Decrease in
subsidiary
shareholding - - - - - 215 2 217 128 345
Share-based
payments - - - - - 42 - 42 - 42
30 June 2021 1,049 - 72,650 237 8,387 (60,640) 1,362 23,045 31 23,076
Loss for the
period - - - - - (1,190) - (1,190) (224) (1,414)
Other
comprehensive
income -
Foreign
exchange
differences - - - - - - 8 8 (7) 1
Change in fair
value during
the period - - - - (3,883) - - (3,883) - (3,883)
Total
comprehensive
income - - - - (3,883) (1,190) 8 (5,065) (231) (5,296)
Issue of share
capital 7 - 143 - - - - 150 - 150
Cost of share
issue - - (1) - - - - (1) - (1)
Issue of
warrants - 42 - - - - - 42 - 42
Decrease in
subsidiary
shareholding - - - - - 232 (2) 230 209 439
Share-based
payments - - - - - 99 - 99 - 99
31 December
2021 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 42 74,124 237 1,631 (62,831) 1,748 16,119 (283) 15,836
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2022
Notes Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
2022 2021
GBP000s GBP000s
Cash flows from operating activities
Loss after income tax (1,658) (1,448)
Adjustments for:
Depreciation of property, plant
and equipment 20 25
Depreciation of right to use assets 16 16
Amortisation of intangibles 105 61
Estimated credit losses on trade
receivables 18 (9)
Change in fair value of financial (179) -
assets classified as FVTPL
Capitalisation of development costs (280) (255)
Share-based payments 62 42
R&D tax credit (21) -
Foreign exchange gain/(loss) 233 5
Finance income (61) (2)
Finance costs 4 8
Income Tax (29) (86)
(1,770) (1,643)
Changes in working capital
(Increase) in inventories (4) (15)
Decrease/(Increase) in trade and
other receivables 473 (117)
Increase in trade and other payables 169 563
Cash used in operations (1,132) (1,212)
Income tax received - 78
Net cash used in operating activities (1,132) (1,134)
Cash flows from investing activities
Purchase of property, plant and
equipment (24) (41)
Purchase of equity investments classified
as FVTOCI - (622)
Purchase of derivative financial
assets classified as FVTPL (593) (100)
Net cash (used in) investing activities (617) (763)
Cash flows from financing activities
Proceeds received on change in stake
in subsidiary - 345
Lease payments (19) (19)
Repayment of borrowings (35) (360)
Interest paid - (3)
Proceeds of loan - 550
Proceeds from share issue 1,500 7,641
Share issue cost (56) (436)
Net cash from financing activities 1,390 7,718
(Decrease)/Increase in cash and
cash equivalents (359) 5,821
Cash and cash equivalents at beginning
of the period 2,710 1,628
Exchange differences on cash and
cash equivalents 12 (9)
Cash and cash equivalents at end
of the period 13 2,363 7,440
NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2022
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 2022 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 2022 does
not constitute the full statutory accounts for that period. The
Annual Report and Financial Statements for the year ended 31
December 2021 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 2021 was unqualified and did not
contain a statement under sections 498(2) or 498(3) of the
Companies Act 2006.
Going Concern
The 2021 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 is not yet secured. 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."
The Directors have prepared and reviewed budget cashflows which
were approved by the Board of Directors in the Board meeting of 1
February 2022. The review included the key budget assumptions,
sensitivities, and contingency plans to cover eventualities,
including the associated cash flow projections. The review has been
updated and also taken into consideration the potential impact of
changing market conditions and other risks. Having made substantial
progress, including a GBP1.5m fund-raise in June, and as shown on
the balance sheet, the Group remains in a strong position. As a
result, The Directors do not believe going concern is an issue for
the next 12 months from the date of this report.
The financial statements do not include any adjustments that
would be necessary if the group or company was unable to continue
as a going concern.
1 ACCOUNTING POLICIES (continued)
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 2021 annual financial statements.
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS
3).
The following amendments are effective for the period beginning
1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8);
and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
In January 2020, the IASB issued amendments to IAS 1, which
clarify the criteria used to determine whether liabilities are
classified as current or non-current. These amendments clarify that
current or non-current classification is based on whether an entity
has a right at the end of the reporting period to defer settlement
of the liability for at least twelve months after the reporting
period. The amendments also clarify that 'settlement' includes the
transfer of cash, goods, services, or equity instruments unless the
obligation to transfer equity instruments arises from a conversion
feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The
amendments were originally effective for annual reporting periods
beginning on or after 1 January 2022. However, in May 2020, the
effective date was deferred to annual reporting periods beginning
on or after 1 January 2023.
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 amount
of estimates of amounts 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
Impact of accounting standards to be applied in future
periods
There are a number of standards and interpretations which have
been issued by the International Accounting Standards Board that
are effective for periods beginning subsequent to 31 December 2021,
that the Group has decided not to adopt early. The Group does not
believe these standards and interpretations will have a material
impact on the financial statements once adopted.
2. SIGNIFICANT EVENTS AND TRANSACTIONS
COVID
The consequences of the COVID pandemic have varied across the
portfolio, the negative impact has been managed, with new
opportunities opening up and the individual companies have adjusted
accordingly. Group companies have received minimal amounts of
Government Covid-19 business support. The approach has been to
respond proactively to the operating environment, particularly to
minimise downside risks and concentrate on upside opportunities.
Given the core focus of the Group, the Board believes that in the
aftermath of the COVID pandemic there is increased potential across
several of its portfolio companies.
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 impact to these and downturn in global environment on the
Group's interim consolidated financial statements for the six
months ended 30 June 2022 are summarised as follows.
(a) No impairment of group assets.
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 by the Chief Operating
Decision Maker to assess performance and determine the allocation
of resources. The Chief Operating Decision Maker has been
identified as the 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 2022 Delivered Service Fees Total
Goods GBP000s GBP000s
GBP000s
-------------- ---------- ------------- ---------
EMV Capital - 276 276
ProAxsis 67 48 115
67 324 391
-------------- ---------- ------------- ---------
30 June 2021 Delivered Goods Service Fees Total
GBP000s GBP000s GBP000s
-------------- ---------------- ------------- ---------
EMV Capital - 325 325
ProAxsis 45 37 82
45 362 407
-------------- ---------------- ------------- ---------
Total Loss for the period by segment
Unaudited Unaudited
Six months Six months
ended 30 June ended 30 June
2022 2021
GBP000s GBP000s
--------------- --------------- ---------------
NetScientific (541) (772)
EMV Capital (154) 18
ProAxsis (236) (88)
Glycotest (654) (606)
Cetromed (73) -
(1,658) (1,448)
--------------- --------------- ---------------
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
Revenue from contracts with customers: United Kingdom
Delivered Service Fee's Total
Goods GBP000s GBP000s
GBP000s
-------------- ---------- -------------- ---------
30 June 2022 67 324 391
30 June 2021 45 362 407
5. 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 2022 of 1,120,010 (30
June 2021: 620,729; 31 December 2021: 1,064,498) are not treated as
dilutive as the group is loss making.
Unaudited Unaudited
Six months Six months
ended 30 ended 30
June June
2022 2021
GBP000s GBP000s
------------------------------------------- ------------ ------------
Loss attributable to equity holders
of the Company
Continuing operations (1,475) (1,195)
Total Loss attributable to equity holders
of the Company (1,475) (1,195)
------------ ------------
Number of shares
Weighted average number of ordinary
shares in issue 21,146,591 15,067,947
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. On 29 June 2021 the Company issued 5,958,123 of
5p ordinary shares at 130p per share, raising gross funds of
GBP7,746k and net funds of GBP7,309k. The total number of voting
rights in the Company at 30 June 2022 is 23,360,660 5p ordinary
shares (30 June 2021: 20,975,311, 31 December 2021: 21,121,853.
6. PROPERTY, PLANT AND EQUIPMENT
Furniture,
Leasehold fittings Plant
Improvement and equipment and machinery Totals
GBP000s GBP000s GBP000s GBP000s
----------------------- ------------- --------------- --------------- ---------
Cost
----------------------- ------------- --------------- --------------- ---------
At 1 January 2021 100 35 170 305
----------------------- ------------- --------------- --------------- ---------
Additions - 5 36 41
----------------------- ------------- --------------- --------------- ---------
At 30 June 2021 100 40 206 346
----------------------- ------------- --------------- --------------- ---------
Additions - 15 6 20
----------------------- ------------- --------------- --------------- ---------
At 31 December 2021 100 55 212 367
----------------------- ------------- --------------- --------------- ---------
Exchange adjustments - 1 - 1
----------------------- ------------- --------------- --------------- ---------
Additions - 3 21 24
----------------------- ------------- --------------- --------------- ---------
At 30 June 2022 100 59 233 392
----------------------- ------------- --------------- --------------- ---------
Depreciation
----------------------- ------------- --------------- --------------- ---------
At 1 January 2021 42 18 117 177
----------------------- ------------- --------------- --------------- ---------
Charge for the period 6 2 17 25
----------------------- ------------- --------------- --------------- ---------
At 30 June 2021 48 20 134 202
----------------------- ------------- --------------- --------------- ---------
Charge for the period 4 9 16 29
----------------------- ------------- --------------- --------------- ---------
At 31 December 2021 52 29 150 231
----------------------- ------------- --------------- --------------- ---------
Charge for the period 6 4 11 20
----------------------- ------------- --------------- --------------- ---------
At 30 June 2022 58 33 161 252
----------------------- ------------- --------------- --------------- ---------
Net book value
----------------------- ------------- --------------- --------------- ---------
At 30 June 2022 42 26 72 140
----------------------- ------------- --------------- --------------- ---------
At 31 December 2021 48 26 62 136
----------------------- ------------- --------------- --------------- ---------
At 30 June 2021 52 20 72 144
----------------------- ------------- --------------- --------------- ---------
ProAxsis leasehold improvements of GBP100k are funded by a
third-party loan.
7. RIGHT-OF-USE-ASSETS
Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2022 2021
GBP000s GBP000s
------------------------------------ ------------ --------------
Cost
Opening balance at start of period 253 253
Closing balance at end of period 253 253
Amortisation
Opening balance at start of period (95) (64)
Add:
Charge for the period (16) (31)
Closing balance at end of period (111) (95)
------------------------------------ ------------ --------------
Net Book Value
As at end of period 142 158
------------------------------------ ------------ --------------
There is one long term lease, the Group has decided it will
apply the modified retrospective approach to IFRS 16. In addition,
it has decided to measure right-of-use assets by reference to the
measurement of the lease liability on that date.
The lease liabilities were measured at the present value of the
remaining lease payments, discounted using the Group's incremental
borrowing rate as at 1 January 2019. The Group's incremental
borrowing rate is the rate at which a similar borrowing could be
obtained from an independent creditor under comparable terms and
conditions. The rate applied was 3.5%.
Right-of-use assets are amortised on a straight-line basis over
the remaining term of the lease or over the remaining economic life
of the asset.
Short term leases still expensed as operating amount to GBP9k
(H1 2021: GBP20k) with a maturity of two months.
8 . INTANGIBLE ASSETS
Development Investment
Carry Interest costs Acquisition
Goodwill Arrangements Costs Patents Total
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
-------------------------- --------- --------------- ------------ ------------- -------- --------
Cost
-------------------------- --------- --------------- ------------ ------------- -------- --------
At 1 January 2021 669 1,627 337 17 50 2,700
Additions - - 585 - - 585
At 31 December
2021 669 1,627 922 17 50 2,700
-------------------------- --------- --------------- ------------ ------------- -------- --------
Additions - - 280 - - 280
At 30 June 2021 669 1,627 1,202 17 50 2,955
-------------------------- --------- --------------- ------------ ------------- -------- --------
Accumulated amortisation
and impairment
-------------------------- --------- --------------- ------------ ------------- -------- --------
At 1 January 2021 - 76 - - 1 77
Amortisation charge - 140 18 - 5 163
-------------------------- --------- --------------- ------------ ------------- -------- --------
At 31 December
2021 - 216 18 - 6 240
-------------------------- --------- --------------- ------------ ------------- -------- --------
Amortisation charge - 81 19 - 4 105
-------------------------- --------- --------------- ------------ ------------- -------- --------
At 30 June 2021 - 297 37 - 10 345
-------------------------- --------- --------------- ------------ ------------- -------- --------
Net book value
-------------------------- --------- --------------- ------------ ------------- -------- --------
At 30 June 2022 669 1,330 1,165 17 40 3,221
-------------------------- --------- --------------- ------------ ------------- -------- --------
At 31 December
2021 669 1,411 904 17 44 3,045
-------------------------- --------- --------------- ------------ ------------- -------- --------
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 GBP280k of ProAxsis
development costs have been capitalised during the period taking
the total capitalised to GBP1,202k 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.
9. 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 2021
2022 GBP000s
GBP000s
------------------------------------------------------------------------- ------------- --------------
Opening balance at start of period 11,516 2,970
Additions - 2,192
Acquired through business combinations - 342
Conversion of derivative financial assets 652 -
Change in fair value during the period (2,733) 6,012
Closing balance at end of period 9,435 11,516
Unaudited
Six months Audited
% of ended 30 Year ended
issued June 2022 31 December
Country share Currency GBP000s 2021
Name of incorporation capital denomination GBP000s
---------------------- ------------------- ------------- ------------- ------------- --------------
PDS Biotechnology
Corp USA 4.72% US$ 4,024 8,047
Q-Bot Ltd UK 23.70% UKGBP 2,778 1,025
SageTech Medical
Equipment Ltd UK 2.25% UKGBP 887 887
CytoVale, Inc. USA 1.00% US$ 412 371
Fox Biosystems
NV BEL 5.06% EUREUR 400 335
G-Tech Medical,
Inc. USA 3.04% US$ 351 317
Epibone, Inc. USA 0.84% US$ 322 290
Martlet Capital
Ltd UK 1.51% UK 175 175
PointGrab Israel 0.49% US$ 76 68
Oncocidia BEL 41.27% EUREUR 10 1
9,435 11,516
----------------------- --------------------------------- ------------- ------------- --------------
Equity investments classified as fair value through other
comprehensive income are held for sale, fair valued and stand at
GBP9,435k (2021: GBP11,516k). A decrease in value of GBP2,081k,
which relates predominately to the decrease in fair value of PDS
Biotechnology Corporation offset by a GBP1.1m increase in fair
value on Q-Bot Ltd.
10. 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
2022 2021
GBP000s GBP000s
---------------------------------------------------- ------------- --------------
Opening balance at start of period 1,462 78
Additions 593 1,332
Additional accrued interest 51 24
Conversion to Equity Investments classified (652) -
as FVTOCI
Change in fair value during the period 197 28
Closing balance at end of period 1,651 1,462
----------
30 June
Currency 2022 2021
Name Country of incorporation denomination GBP000s GBP000s
------------------------ ------------------------- -------------- -------------- --------
EpiBone, Inc. USA US$ 604 543
Sofant Technologies
Ltd UK UKGBP 351 324
Vortex Biotech Holdings
Ltd UK UKGBP 253 -
Fox Biosystems NV BEL EUREUR 135 128
Q-Bot Ltd UK UKGBP 143 312
G-Tech Medical, Inc. USA US$ 87 79
Martlet Capital Ltd UK UKGBP 78 76
1,651 1,462
----------------------------------------------------------------- -------------- --------
Derivative financial assets classified as fair value through
profit and loss are GBP1,651k (2021: GBP1,462k). An increase in
fair value of GBP189k, which mainly relates to the increase in fair
value of Vortex Biotech Holdings.
11. INVENTORY
Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2022 2021
GBP000s GBP000s
---------------------------------- ------------ --------------
Finished products 71 67
Closing balance at end of period 71 67
Inventories are held at net realisable value. ProAxsis finished
products constitute ProteaseTag active neutrophil elastase
immunoassay kits.
During the period the impairment charges totalled GBPNil (H1
2021: GBPNil).
12. TRADE AND OTHER RECEIVABLES
Current Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2022 2021
GBP000s GBP000s
---------------------------------- ------------ --------------
Trade receivables 159 140
Taxation 138 88
Other receivables 66 815
Prepayments 97 77
Accrued income 699 478
Closing balance at end of period 1,159 1,598
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
2022 2021
GBP000s GBP000s
-------------------------------------------- ------------ --------------
Gross carrying amount of trade receivables 198 161
Impairment provision (estimated credit
losses) (39) (21)
Trade receivables 159 140
13. CASH AND CASH EQUIVALENTS
Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2022 2021
GBP000s GBP000s
---------------------------------- ------------ --------------
Short term deposits 526 1,990
Cash and cash equivalents 1,837 720
Closing balance at end of period 2,363 2,710
14. TRADE AND OTHER PAYABLES
Current Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2022 2021
GBP000s GBP000s
---------------------------------- ------------ --------------
Trade payables 133 219
Other payables 525 56
Corporation tax - -
Deferred income 322 323
Accruals 762 931
Closing balance at end of period 1,742 1,529
The carrying value of trade and other payables classified as
financial liabilities are measured at amortised cost which
approximates fair value.
15. LEASE LIABILITIES
Transition Method and Practical Expedients Utilised
On adoption of IFRS 16, on 1 January 2019, the Group recognised
right-of-use assets and lease liabilities in relation to leases of
office space, which had previously been classified as operating
leases.
The lease liabilities were measured at the present value of the
remaining lease payments, discounted using the incremental
borrowing rate as at 1 January 2019. The incremental borrowing rate
is the rate at which a similar borrowing could be obtained from an
independent creditor under comparable terms and conditions. The
rate applied was 3.5%.
Lease liability Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2022 2021
GBP000s GBP000s
------------------------------------ ------------ --------------
Opening balance at start of period (163) (194)
Add:
Payments 19 38
Less:
Interest charge during the period (4) (7)
Closing balance at end of period (148) (163)
Split as follows:
Current Liability (33) (32)
Long Term Liability (115) (131)
------------------------------------ ------------ --------------
(148) (163)
------------------------------------ ------------ --------------
The judgement that the Group was reasonably certain to extend
for the full term of the lease beyond the contractual breaks in the
third, fifth and seventh years of the lease have made a material
difference to the carrying value of the asset/liability. The impact
of this judgement is to increase the initial asset/liability
amounts by GBP216k, GBP181k and GBP114k respectively.
The Group has elected to utilise the practical expedient for all
rent concessions that meet the criteria. The practical expedient
has been applied retrospectively, meaning it has been applied to
all rent concessions that satisfy the criteria, which in the case
of the Group, occurred from March 2020 to June 2020.
Accounting for the rent concessions as lease modifications would
have resulted in the Group remeasuring the lease liability to
reflect the revised consideration using a revised discount rate,
with the effect of the change in the lease liability recorded
against the right-of-use asset. By applying the practical
expedient, the Group is not required to determine a revised
discount rate and the effect of the change in the lease liability
is reflected in profit or loss in the period in which the event or
condition that triggers the rent concession occurs.
16. LOANS AND BORROWINGS
Unaudited
Six months Audited
ended 30 Year ended
June 31 December
2022 2021
GBP000s GBP000s
------------------------------------------- ------------ --------------
Total falling due within one year (89) (59)
Total falling due more than one year (367) (432)
Closing balance at end of period (456) (491)
The maturity of the loans are as follows:
Amounts falling due within one year
on demand (89) (59)
Amounts falling due between one and
two years (67) (67)
Amounts falling due between two and
five years (282) (282)
Amounts falling due over five years (18) (83)
------------------------------------------- ------------ --------------
(456) (491)
------------------------------------------- ------------ --------------
Loans and borrowings represent:
An original unsecured loan note by a third party to ProAxsis of
GBP100k. GBP50k is outstanding at 30 June 2022 (H1 2021: GBP60k).
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 is interest free and the
loan is repayable within six years with principal repayments
starting after thirteen months. The total outstanding at 30 June
2022 was GBP406k (H1 2021: GBP445k).
17. CALLED UP SHARE CAPITAL
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.
In the prior year:
On 29 June 2021 the Company issued 5,958,123 of 5p ordinary
shares at 130p per share, raising gross funds of GBP7,746k and net
funds of GBP7,309k after deducting costs of GBP437k.
On 25 January 2021 the Company issued 101,066 of 5p ordinary
shares at 49.47p per share to Chairman John Clarkson, who has taken
the payment in shares, rather than cash for fees owed to
Development Financial and Management Services Ltd.
On 20 December 2021 the Company issued 146,542 of 5p ordinary
shares at 102.36p, based upon the average of the middle market
quotation between 1 November 2021 and 5 November 2021 (inclusive)
for the purchase of 75% of Cetromed Limited, a life sciences
holding company with several portfolio companies spun out of the
University of Leuven, Belgium.
The total number of voting rights in the Company and issued
capital at 30 June 2022 is 23,360,660 5p ordinary shares (30 June
2021: 20,975,311, 31 December 2021: 21,121,853.
18. RELATED PARTY DISCLOSURES
Beckman Group and Melvin Lawson, who is interested in 16.77%
(2021: 16.25%) 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 The City Code on Takeovers and
Mergers.
EMV Capital provides corporate finance, consulting and
management services to Vortex Biosciences Inc. a related party by
common substantial shareholders. During the period revenue was
booked totalling GBP52k (H1 2021: GBP18k). The balance outstanding
at 30 June 2022 is GBP321k (31 December 2021: GBP330k) has been
resolved post-balance sheet, as part of the Vortex
restructuring.
EMV Capital also provided corporate finance, consulting and
management services to Wanda Inc. a related party by common
substantial shareholders. During the period revenue was booked
totalling GBP44k (2020: GBP17k), with a value of further work in
progress to be agreed. The balance outstanding at 30 June 2022 is
GBP50k (31 December 2021: GBP68k).
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.
19. EVENTS AFTER THE REPORTING PERIOD
On 16 August 2022 NetScientific announced the completion of the
acquisition of a 30% stake in Vortex Biotech Holdings Limited
"Vortex" and the appointment of Paul Jones as the new Vortex Chief
Executive Officer. The consideration for the Acquisition is
GBP300,000, satisfied by the transfer by the Group to Vortex of
GBP300,000 of invoices ( "Services Invoices") to be raised to: (i)
extinguish obligations of Vortex US to EMV Capital Limited for
services provided under the Services Agreement; and (ii) cover fees
payable by Vortex US to EMV Capital Limited in accordance with
terms of certain loans made to Vortex US by associates of Deeptech
Disruptive Growth Investments Limited.
On 29 September 2022, EMV Capital sold down 5.8% of the Group's
direct stake in Q-Bot, realising a gross profit of GBP110,215.
[1] 'Fair Value' is unaudited Directors' estimated value of the
directly owned stakes, based on the BVCA valuation method. Decrease
is predominately in PDS Biotechnology (Nasdaq listed) where
underlying clinical trials outlook remains positive.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR SDLSISEESEFU
(END) Dow Jones Newswires
September 30, 2022 02:00 ET (06:00 GMT)
Netscientific (LSE:NSCI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Netscientific (LSE:NSCI)
Historical Stock Chart
From Apr 2023 to Apr 2024
