Investment in Wanda, related party transactions
28/05/2024 07:00
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RNS Number : 9448P NetScientific PLC 28 May 2024
NetScientific plc
("NetScientific", the "Group" or the "Company")
Investment in 30% of Wanda and Related Party Transactions
NetScientific plc (AIM: NSCI), the deep tech and life sciences VC investment
group, announces its investment in 30 per cent. of the issued share capital of
Wanda Connected Health Systems Limited (Wanda Health), an intelligent platform
for remote patient monitoring and virtual care in the UK and the US
(Investment). Connected with the Investment, the Group has restructured some
of its engagements relating to Wanda Health.
Background to and rationale for the Investment
On 22 March 2019, the Group sold its c.90 per cent. interest in Wanda, Inc.
(Wanda US) to Deeptech Disruptive Growth Investments Limited (Deeptech) as the
Company's previous management had concluded that the Group was no longer in a
position to provide financial support to Wanda US.
The sale to Deeptech was managed by EMV Capital Limited (EMV Capital) (which
at that time was not owned by NetScientific). Thereafter, EMV Capital entered
into a management agreement with Deeptech on 5 August 2020 whereby, EMV
Capital agreed to provide certain investment advisory services to Deeptech in
respect of, inter alia, Wanda US (Management Agreement). EMV Capital was
subsequently acquired by NetScientific on 24 August 2020 and is now a wholly
owned subsidiary.
Following various fundraisings and strategic changes to the Wanda business as
detailed below, the NetScientific Directors believe that the Wanda business
has now been materially de-risked, having made significant commercial and
operational progress, underpinning significant growth prospects, placing it in
a stronger position than in 2019. The Board is accordingly delighted for the
Group to be in a position to re-acquire a strategic stake in Wanda, providing
it with exposure to the fast-growing remote patient monitoring market. The
Investment is in line with the Company's strategy of deepening stakes in
selected portfolio companies with high return potential.
About Wanda
Wanda Health is an intelligent platform for remote patient monitoring and
virtual care. Wanda Health is empowering healthcare providers and payers with
early detection of exacerbations in patients with acute, chronic, and
specialty diseases, helping them speed interventions, prevent adverse events,
and improve patient adherence. Wanda is a UCLA spin-out focused on intelligent
remote monitoring of physiological data, patient engagement and healthcare
analytics for post-acute care, chronic disease patients and population health.
Wanda's platform enables the control and reduction of hospitalisation and
readmission rates through a remote patient monitoring system that collects
data from patients' homes or community settings and provides it to clinicians,
highlighting high risks cohorts. Wanda also uses its comprehensive
multi-modality patient engagement tools to ensure that adherence to treatment
protocols increases, improving patient outcomes. This patient centric approach
to care model delivery, combined with secure computing and revolutionary data
mining and analytics provides actionable insights to the care provider to
improve patient outcomes, whilst reducing cost of care of chronic conditions.
Strategic and operational changes in Wanda
Upon the acquisition of Wanda US by Deeptech in March 2019, Dr Ilian Iliev
(now the NetScientific's Chief Executive Officer) was appointed as Chairman of
Wanda. The aim of Deeptech (and Dr Iliev as Chairman and EMV Capital as a
fundraising adviser and investment adviser) was to progress the Wanda business
from an R&D business into a commercially and growth focused business, and
to prepare it for scale-up and further external fundraising. Activities over
the previous five year period have included: further product development,
business development (including strategic partnerships and increasing sales),
filing for FDA clearance for software as a medical device status, re-launch of
US sales, the implementation of a quality management system, and reducing
operational costs.
To commercialise the technology in the UK and Europe, Wanda Health was
incorporated by Deeptech on 20 June 2020 as a sister company to Wanda US, and
a UK-based CEO was hired to lead Wanda.
Immediately prior to the Investment, Wanda Health acquired the issued share
capital of Wanda US owned by Deeptech (Restructuring). The rationale behind
the Restructuring was to bring Wanda Health and Wanda US together within the
same corporate group, enabling it to seek third party fundraising and benefit
from EIS investment.
Principal details of the Investment
In recognition of the services provided by EMV Capital to Wanda Health in
relation to monitoring loans made to it and to Wanda US, Wanda Health agreed
to pay EMV Capital a fee of approximately £62,658 (Wanda Invoice). EMV
Capital assigned the Wanda Invoice to NetScientific UK Limited (NSUK), another
subsidiary of the Company.
In lieu of a cash payment to settle the Wanda Invoice, NSUK has subscribed for
6,125 ordinary shares in the capital of Wanda Health, equivalent to the value
of the Wanda Invoice and amounting to 30 per cent. of the enlarged issued
share capital of Wanda Health (Share Subscription).
In the 12 month period ended 31 December 2023, Wanda Health and Wanda US
incurred a loss before taxation of £1.5 million.
Connected with its services in structuring, and preparing the documentation
relating to, the Restructuring, the Investment and matters ancillary thereto,
EMV Capital has charged a corporate finance transaction fee of £20,000 to
Wanda Health (Transaction Fee).
Management Agreement and New Engagement Letters
As the current value of Wanda is perceived by EMV Capital to be significantly
lower than the performance fee hurdle rate of £9.5 million in the Management
Agreement, EMV Capital and Deeptech have agreed to terminate the Management
Agreement. Accordingly, on completion of the Investment, the Management
Agreement shall terminate (as it only relates to Wanda and another company
that Deeptech has since realised). The Group remains interested in the
increase in value of Wanda Health due to its (now) direct interest in 30 per
cent. of the issued shares of Wanda Health.
The Group has entered into two services agreements with Wanda Health (New
Engagement Letters), the principal terms of which include:
· advising on a proposed third party fundraising by Wanda
Health (Fundraising), pursuant to which EMV Capital will charge customary fees
to Wanda Health, including a commission of 6 per cent. of investment monies
introduced by EMV Capital to Wanda Health; and
· providing value creation services, pursuant to which EMV
Support Services Limited (a wholly owned subsidiary of the Company) will
charge an initial fee of c.£138,500, corporate finance fees of c.£32,000
(conditional upon completion of the Fundraising), an ongoing monthly retainer
of £8,000 (which may increase by an agreed daily rate and where third party
suppliers are provided), and sales commissions relating to the introduction of
purchasers and licensing, joint development or joint development
counterparties.
Related Party Transactions
Each of (i) the Share Subscription, (ii) the Transaction Fee; (iii) the
termination of the Management Agreement; and (iv) the New Engagement Letters,
being entered into by a company controlled by a substantial shareholder of
NetScientific, represents a related party transaction in accordance with the
AIM Rules for Companies.
At the time of entering into the related party transactions, Wanda Health is a
company wholly owned by Deeptech, which in turn is an investment vehicle
currently owned as to 97.5 per cent. by Melvin Lawson (who is currently
interested in c.16.65 per cent. of the issued share capital of NetScientific),
and as to 2.5 per cent. by Dr Ilian Iliev, the Chief Executive Officer of
NetScientific (who is currently interested in c.15.21 per cent. of the issued
share capital of NetScientific).
The Directors, excluding Dr Ilian Iliev (by reason of his interest in
Deeptech), consider, having consulted with the Company's nominated adviser,
Panmure Gordon (UK) Limited, that the terms of each of these transactions are
fair and reasonable in so far as shareholders of NetScientific are concerned.
Dr Ilian Iliev, CEO of NetScientific, and Chair of Wanda Health, said:
"NetScientific is pleased to secure a 30 per cent. direct stake in Wanda,
which meets our criteria for deeper involvement in selected portfolio
companies, focused on delivering enhanced shareholder returns. We re-gain an
interest in a significantly strengthened and de-risked version of Wanda, at a
time where we see significant upside potential for the business in a
transformed digital healthcare market.
"We look forward to working closely with Wanda's management team on the
proposed fundraising and to deploying our value creation services team to
drive growth in the fast-growing remote patient monitoring market."
The person responsible for arranging the release of this announcement on
behalf of the Company is Edward Hooper, General Counsel and Executive Director
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 AMENDED. 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
Ilian Iliev, CEO Via Belvedere Communications
Panmure Gordon (UK) Limited (NOMAD and Broker)
Emma Earl / Will Goode / Freddy Crossley / Mark Rogers (Corporate Finance) +44 (0)20 7886 2500
Rupert Dearden (Corporate Broking)
Belvedere Communications
John West / Llewellyn Angus / Lily Pearce +44 (0)20 7653 8702
About NetScientific
NetScientific plc (AIM: NSCI) is a deep tech 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 (http://www.netscientific.net)
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