Preliminary Results for the year ended 31 Dec 2022
31/05/2023 07:01
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RNS Number : 1039B NetScientific PLC 31 May 2023
For release: 07.01, 31 May 2023
NetScientific plc
("NetScientific" or the "Company")
Preliminary Results for the year ended 31 December 2022
2022 delivered strong results and uplifts in the portfolio value
NetScientific Plc (AIM: NSCI), investment and commercialisation group with an
international portfolio of innovative life science, sustainability and
technology companies, announces its preliminary results for the year ended 31
December 2022.
Investor Presentation
The Company will hold a live online presentation for investors at 11:00 BST on
Monday, 5 June on the Investor Meet Company platform. Investors can join the
live presentation via:
https://www.investormeetcompany.com/netscientific-plc/register-investor
(https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fwww.investormeetcompany.com%2fnetscientific-plc%2fregister-investor&c=E,1,psV1pJJLnqjngp09fWj2O3NEJc21AZ7zQoaaHP58XwHit4uv3RaLhSyE5PaVz_bTeI7MBiHdvT8RI5Y6iHCoA41s_MnvBD_PRHa9fvEdKakip4odEJHzttA,&typo=1)
.
Investors who already follow NetScientific on the Investor Meet Company
platform will automatically be invited. Questions can be submitted pre-event
via the Investor Meet Company dashboard up until 09:00 BST on the day before
the meeting, or at any time during the live presentation.
Financial and Operational Highlights:
This was a year of good progress for the Company as shown in the results. The
implementation of its planned growth strategy has delivered both strategically
and tactically:
· Directors' valuation of the Company's portfolio increased by
c.35% to £41.8 million (2021: 31.0 million).
· Portfolio increased to 24 companies, 2 additions.
· EMV Capital was profitable on increased revenues of £1.2
million.
· Group loss for the year increased to £3.7 million (2021: £2.9
million).
· ProAxsis drive towards external fund-raise to fund next stage of
growth, including planned launch of Point of Care diagnostic for COPD, and
driving sales to pharma clients.
· Glycotest progress towards completing clinical sample collection,
raised $500k from Fosun (in addition to NetScientific support).
· Stronger balance sheet, with total assets of £29.0 million
(2021: £20.7 million, a c. 40% increase).
· Net assets of £25.2 million (2021: £18.5 million, a c.36%
increase).
· Cash on the balance sheet was £0.9 million (2021: £2.7 million),
with a further c.£8 million held as readily realisable quoted securities.
· Direct balance sheet investments of c.£3.2 million, together
with £5.3 million of third party syndicated investments - while the
portfolio overall raised c.£70m in equity and venture debt.
· Capital under advisory now stands at £23.5 million.
· Realisations of £0.5 million from a growing portfolio company,
locking in a £0.3 million profit.
· Raised £1.5 million in June 2022 placing, strengthening the
Company's balance sheet.
Post balance sheet events
· PDS Biotech: On 3 January 2023, PDS Biotechnology Corporation
(Nasdaq: PDSB), announced an exclusive global licence agreement with Merck
KGaA, Darmstadt, Germany for the tumour-targeting IL-12 fusion protein M9241
(formerly known as NHS-IL12), which will join the pipeline as PDS0301. On 27
February 2023, PDS announced the successful completion of a Type B meeting
with the U.S. Food and Drug Administration (FDA) for a combination therapy
of PDS0101, PDS0301 and an FDA-approved immune checkpoint inhibitor (ICI) for
the treatment of recurrent/metastatic human papilloma virus (HPV)-positive,
ICI refractory head and neck cancer. On 30 March 2023, announced plan to
Initiate Phase 3 study evaluating PDS0101 in Combination with KEYTRUDA® in
head and neck cancer in 2023. On 26 May 2023, the company announced interim
data indicating 12-month survival rate of 87% with PDS0101 in combination with
KEYTRUDA® (pembrolizumab) for head and neck cancer patients.
· ProAxsis: On 27 February 2023, wholly owned portfolio company,
respiratory diagnostics specialist, ProAxsis, entered into an
unsecured £500,000 six-month loan agreement (the "Loan Agreement") with AB
Group Limited ("AB Group"), a related party transaction under Rule 13 of the
AIM Rules for Companies. See announcement date 28 February 2023 for more
details. The loan is intended to provide ProAxsis with additional time to
prepare for an external fundraising.
· Glycotest: On 2 May 2023, NetScientific's portfolio company
Glycotest (specialist in liver disease diagnostics), announced the launch of a
third-party fundraising programme to raise up to $1 million, of which $0.25
million has already been received, with further commitments. In line with the
Group's 'capital light' investment strategy, the Company and Fosun agreed to
introduce third party investors into Glycotest through the fundraising,
without reliance on NetScientific balance sheet. This is intended to provide
Glycotest with further capital to progress development, reduce reliance on the
traditionally slow-moving corporate co-investments, prepare for market launch
in the US, and explore wider market opportunities.
· Sofant Technologies: On 24 May 2023, NetScientific's portfolio
company Sofant Technologies announced a joint development agreement with
Inmarsat Government, the leading provider of secure, global, mission-critical
telecommunications to the US Government, with a focus on aerial use of
Sofant's phased array antenna for aircraft telecoms. In addition, a further c.
£1 million was syndicated by EMV Capital and invested in Sofant post-balance
sheet.
· Board Changes: On 31 January 2023, John Clarkson stepped down as
Non-Executive Director of the Company, and resigned from the Board with
immediate effect. Jonathan Robinson, Non-Executive Director of the Company
became Interim Non-Executive Chair while the Company completed its recruitment
process to appoint a new Chair.
On 3 April 2023, as part of its business update, the company announced Prof.
Stephen Smith intends not to stand for re-election at the forthcoming Annual
General Meeting. On 31May 2023, the Group announced that Charles Spicer will
be taking the post of non-Executive Director from 1 June, and non-Executive
Chairman from 29 June. Jonathan Robinson will remain with the company as a
Non-Executive Director.
Summary and Outlook
· The Company now has a robust investment model with ample room for
growth and development, offering the potential for substantial investment
returns from a maturing portfolio. Its early advantage in the deeptech
sector positions it to become a key player in the next phase of the VC
industry.
· The focus for 2023 will be to progress its sustainable business
model through the generation of more fees from EMV Capital, selective
divestments, external funding for subsidiaries and by expanding its funds
practice. The Company's aim to increase the net asset value and fair value
of the business by progressing cohort companies through value creation stages,
obtaining third party investment rounds, and proactive portfolio management.
· Management plans to generate investment returns through profitable
exits of select portfolio companies and targeted growth of a curated
portfolio. By focusing on value creation services and accelerate routes to
exit and by scaling up the 'capital light' investment model we can move
towards a more evergreen investment model.
Dr. Ilian Iliev, CEO of NetScientific commented: "We are delighted with the
Company's strong performance during 2022, showing early validation of our
model - despite significant market volatility. Our team is committed to
delivering the agreed growth strategy, developing the portfolio companies and
exploiting opportunities to unlock and realise the requisite shareholder
returns. We have a powerful investment model with the potential for
significant investment returns in the deeptech space, and in line with an
evolving VC industry. We are excited about the future prospects of the
company."
Jonathan Robinson, Interim Non-Executive Chair of NetScientific commented: "I
am very pleased to report that the 2020 turnaround plan is now bearing fruit.
Reflecting progress, we have evolved our board to align with the company's
strategy and growth ambitions, emphasising transactional and industry
experience. We look forward to the continued execution of our
ambitious plans. "
For more information, please contact:
NetScientific
Dr, Ilian Iliev, CEO
Via Belvedere Communications
WH Ireland (NOMAD, Financial Adviser and Broker)
Chris Fielding / Darshan Patel / Enzo
Aliaj +44
(0)20 7220 1666
Belvedere Communications
John West / Llew
Angus
+44 (0) 203 008 6867
Email: nsci@belvederepr.com (mailto:nsci@belvederepr.com)
About NetScientific
NetScientific plc (AIM: NSCI) is an investment and commercialisation group
with an international portfolio of innovative life science, sustainability and
technology 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-light 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)
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 AMENDED. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.#-
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT
1 CHAIR'S STATEMENT
I joined the business in December 2022, as Non-Executive Director and Chair of
the Audit & Risk Committee. I then became interim Non-Executive Chair in
early 2023, during a transitional phase and in order to lead the Board during
our search for a new Chair.
At the time of my joining, the company had completed significant parts of its
2020 turnaround plan and was ready to execute its growth strategy. I am
delighted to report that this is well underway, with NetScientific and EMV
Capital now operating together to provide 'capital light' funding and value
creation services to the portfolio. NetScientific and EMV Capital also engage
closely together in transactions with potential new portfolio companies,
utilising minimal balance sheet commitment. Since late 2022, the Group has
also assisted our subsidiaries ProAxsis and Glycotest to become financially
independent portfolio companies by accessing external finance, thus reducing
overall demand on the Group's finances.
In 2022, we witnessed high market volatility due to geopolitical events and
decreased liquidity, marking the end of a number of years of relatively easily
available capital. The venture capital industry experienced noteworthy
changes, with declining valuations and failed companies becoming more common.
Despite this challenging environment, NetScientific and its portfolio
performed well, improving its performance in key areas. The company's
turnaround strategy, which in 2022 included syndicated investments in core
portfolio companies, and the ability to seize good opportunities, contributed
to its resilience. Our diversified portfolio meant that some companies were
positioned to overcome challenges while others benefited from increased market
focus on sustainability and energy security.
We evolved our Board to align with the company's strategy and growth
ambitions, emphasising transaction and industry experience. As well as my own
appointment, Ed Hooper joined our board as an Executive Director and has been
a significant addition to the team. In January 2023, I assumed the role of
Interim Non-Executive Chair until we recruited a new Chair. We are therefore
very pleased to announce Charles Spicer as our new Non-Executive Chair. We
eagerly anticipate working with Charles for many reasons, including his
substantial board and specialist experience in the life sciences and deeptech
sectors. As planned, I will soon transition from Interim Chair to
Non-Executive Director, maintaining my close involvement with the company.
On behalf of the Board, I extend gratitude to the hard-working employees of
NetScientific and EMV Capital, as well as our portfolio companies and
shareholders, for their valued support.
Dr. Jonathan Robinson,
Interim Non-Executive Chair, NetScientific PLC
31 May 2023
2 CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
Our goal is to become a leading deeptech venture capital (VC) investor in the
life sciences, sustainability, and industrials sectors in the UK and
internationally. We believe the global VC industry is at the end of a cycle
and is now shifting away from traditional investment models focused on
software, internet, and digital-only ventures 1 . We anticipate that the next
stage of the VC industry's focus will revolve around deeptech opportunities in
our target sectors, driven by advancements in artificial intelligence,
robotics, semiconductors, materials science, 'in silico' design and
breakthroughs in life sciences.
These developments present a compelling investment theme that requires a
different VC approach, encompassing skillsets, engagement models, expertise,
and capital deployment strategies tailored to deeptech investments. After 10
years of operational VC experience in this field, we continue to refine our
investment and portfolio development strategy, which has been designed around
the challenges of investing in deeptech - often involving hardware or
hardware/software models. Our core multi-disciplinary team possesses an
appropriate skillset mix, and has built the right processes, 'playbooks' and
portfolio support structures apt for the unique challenges of investing and
scaling businesses in deeptech.
Early success and validation of our strategy are evident in our 2022
performance. Despite market volatility, we achieved a remarkable 35% increase
in Fair Value to £41.8m, representing a 4x growth since implementing the new
strategy nearly three years ago. This increase in valuations is not a passive
or accidental outcome. It was in large measure driven by our team's hard work,
and implementation of our model including: hands-on management; value creation
efforts with select portfolio companies; capturing synergies between
companies; and taking new or deeper stakes on advantageous terms, avoiding
overvaluation. While exits through Initial Public Offerings or trade sales to
corporations may remain challenging and at lower valuations, we have
demonstrated modest profitable divestments through secondaries.
It is worth noting, as other market commentators have also done, that our
current market cap is at a substantial discount to our Fair Value. Though
operational challenges persist, we are confident in our position for the next
phase of developments as we build our business.
Financial and Operational Highlights:
· Directors' valuation of the Company's portfolio has increased by
c.35% to £41.8 million (2021: 31.0 million), driven by valuation increases
across several companies. 2
· Portfolio increased to 24 companies, through 2 additions during
the year.
· EMV Capital was profitable on increased revenues of £1.2
million, providing valuable infrastructure and services to the Group and its
portfolio companies.
· Group Loss for the year increased to £3.7 million (2021: £2.9
million), of which £1.5m was attributable to the 'core' of NetScientific PLC
and EMV Capital, with the balance of £2.2 million consolidated from the
subsidiary portfolio companies ProAxsis and Glycotest due to further
commercialisation and development expenditure.
· ProAxsis drive towards external fund-raise to fund next stage of
growth, including planned launch of Point of Care diagnostic for COPD, and
driving sales to pharma clients. Post-balance sheet £500k funding package
from family office.
· Glycotest progress towards completing clinical sample collection,
raised $500k from Fosun (in addition to NetScientific support). Post-balance
sheet announcement of a $2m investment package, combining private investment
of $1m and funding of $1m by Fosun.
· The company ends the year with a stronger balance sheet, with
total assets of £28.9 million (2021: £20.7 million, a c. 40% increase), and
net assets of £25.2 million (2021: £18.5 million, a c.36% increase).
· Cash on the balance sheet was £0.9 million (2021: £2.7
million), with a further c.£9.3 million held as readily realisable quoted
securities as at 26 May 2023.
· The Group's 'capital light' investment model enabled
NetScientific to continue to support its portfolio companies with a very
selective use of its balance sheet: direct balance sheet investments of
c.£3.2 million, together with £5.3 million of third party syndicated
investments led by EMV Capital - while the portfolio overall raised c.£70m in
equity and venture debt
· Capital under advisory now stands at £23.5 million (2021: 22.1
million) 3 .
· Realisations of £0.5 million from a growing portfolio company,
locking in a £0.3 million profit on that stake.
· Raised £1.5 million in June 2022 PLC placing, strengthening the
Company's balance sheet and with strong participation from the investor
network of EMV Capital.
Portfolio highlights
In 2022, our portfolio experienced a successful year of value growth and
fundraisings despite challenging markets. A total of £70 million was raised
through equity and venture debt by 18 companies at various stages of
investment. We selectively participated in 10 of these investments through
both direct and syndicated means, aligning with our 'capital light' model.
With two new additions, our portfolio now consists of 24 companies, including
EMV Capital. More details on the individual companies' developments are
given in the Portfolio Update section later in the statement.
In terms of new investments, we introduced two companies to our portfolio:
· Ventive Limited, in which we hold a 16% direct stake, received a
£2.5 million financing package that included equity and debt matched funding.
This unlocked a c.£1.5m BEIS grant, and the company's business lines include
passive air ventilation systems and modular heat pumps.
· Deeptech Recycling Technologies Limited, in which we hold a 30%
direct stake, acquired the majority of assets from Recycling Technologies, a
well known developer of plastic waste recycling technologies. Our Value
Creation team is working on relaunching this business in the rapidly growing
plastics waste management sector.
In addition, we restructured our participation in Vortex from capital under
advisory into a direct 30% stake.
EMV Capital Ltd ("EMVC")
EMVC is a wholly-owned subsidiary and the corporate finance and venture
capital arm of NetScientific. It was acquired in August 2020, and was founded
and owned by our CEO Dr. Ilian Iliev. It follows an investment model where
it syndicates investments from its extensive network of private, institutional
VC, and corporate investors in pre-Series A and Series A stages. It actively
engages with portfolio companies to focus on venture capital returns.
EMVC plays a vital role in the Group's strategy by generating revenues,
enabling a 'capital light' investment model, and providing specialised support
and value creation services to portfolio companies. Additionally, it offers
potential additional investment returns to the Group through its the Capital
Under Advisory.
Key developments in 2022 for EMVC included syndicating £5.3 million, reaching
now a total advisory capital of £23.5m (only slightly higher than 2021 due to
the subtraction of £3.9m Vortex Biosciences restructuring). Revenues
increased by 15% to £1.2m from corporate finance and value creation
activities, resulting in a net profit of £85 thousand. EMVC successfully
integrated its portfolio into NetScientific's Group strategy, facilitating
advantageous acquisitions of stakes in Vortex, Ventive, and Deeptech
Recycling. Furthermore, EMVC raised significant capital for portfolio
companies including Q-Bot, SageTech, Sofant, DName-iT, Vortex, Wanda, Deeptech
Recycling, Ventive, and FOx Biosystems.
To support growth at its portfolio companies, EMVC offers value creation
services through its in-house operational team, venture partners, and
suppliers, encompassing investment readiness, IP strategy, corporate
collaborations, financial functions, and senior executive placements. It has
retained contracts with several of its portfolio companies, helping them
accelerate development, and execute strategy pivots.
The fair value of NetScientific's stake in EMVC remains unchanged at £3.5m
since its acquisition in 2020. While its value is believed to be higher, as it
is not seeking external finance, revaluation is not possible due to BVCA
rules. However, growth projections indicate significant potential for upside,
driven by expanding capital under advisory, proprietary deal flow, and
recurring income from management and board fees.
Strategy update
As highlighted above, NetScientific's acquisition of EMV Capital in August
2020 has transformed our company from a standstill into a scalable VC
business. In just over two years, many of the objectives of this turnaround
have been successfully achieved:
· Directors' Valuation of the Company's portfolio has increased
almost fourfold, from £11.8 million at the end of 2019 to over £41.8 million
by the end of 2022.
· Capital under advisory more than doubled, from £9.6 million in
early 2020 to £23.5 million in 2022.
· Integrated portfolios of EMV Capital and NetScientific, growing
from eight companies in early 2020 to 24 in 2022, with increased direct stakes
and influence.
· Shifted from solely relying on the balance sheet for funding
portfolio companies to incorporating third-party funding through the 'capital
light' investment approach.
· Proactive investment approach with investor director
representation in 13 companies and value creation or fundraising programs with
10 companies.
· Expanded team and infrastructure offering corporate finance and
value creation services, primarily covered through fees charged to portfolio
companies.
· Notable success stories include NASDAQ-listed PDS Biotech,
rapidly growing companies Q-Bot (robotics) and Sofant (semi-conductors), and
regenerative medicine company EpiBone.
· Several additional companies in the portfolio show potential for
value appreciation and growth as they are currently held at relatively low (or
nil) valuations, and their valuation is expected to crystallise as they access
external finance (e.g. Vortex, ProAxsis, Deeptech Recycling, Ventive,
DName-iT).
· Co-led the restructuring and acquired a valuable position in
Cambridge-based early-stage VC Martlet Capital (itself with positions in 49
deeptech companies), now providing high-quality deal flow access from the
Cambridge high-tech cluster.
· Diversified portfolio across deeptech sectors to mitigate risk
and increase return opportunities.
· Assisting portfolio companies in collaborating with leading
corporations globally for joint development agreements, corporate VC
investments, licensing opportunities, and pre-purchase commitments.
· Leveraging portfolio synergies and internationalisation efforts
through collaborations and partnerships.
· Identifying key value inflection points for profitable liquidity
events and exits for many companies.
To continue to drive shareholder value and investment returns, we will employ
and scale our differentiated investment and portfolio growth model, focusing
on:
· 'Capital light' investment strategy.
· Proactive investment approach.
· Value creation services.
Our portfolio strategy entails:
· Concentrating on a cohort of eight to ten companies at a time for
growth and investment realisations through fundraising support and value
creation services.
· Making selective new investments that align with our model, offer
good value, and can benefit from value creation services to drive growth.
· Growing a funds practice to expand capital deployment
capabilities and portfolio coverage.
Summary and Outlook
We now possess a robust investment model with ample room for growth and
development, offering the potential for substantial investment returns from a
maturing portfolio. Our early advantage in the deeptech sector positions us
to become a key player in the next phase of the VC industry.
Our focus for 2023 will be to progress our sustainable business model through
the generation of more fees from EMV Capital, selective divestments, external
funding for subsidiaries and by expanding our funds practice. We aim to
increase the net asset value and fair value of your business by progressing
cohort companies through value creation stages, obtaining third party
investment rounds, and proactive portfolio management.
We plan to generate investment returns through profitable exits of select
portfolio companies and targeted growth of a curated portfolio, by focusing on
value creation services and accelerate routes to exit and by scaling up our
'capital light' investment model we can move towards a more evergreen
investment model. We have a powerful investment model with potential for
significant investment returns in the deeptech space and we are excited about
the future prospects of our company.
Finally, I would like to express my gratitude to Jonathan Robinson for his
interim leadership as Chair, supporting the final stages of our turnaround
project. His measured and practical approach has greatly contributed to the
execution of our strategy, and we eagerly anticipate his ongoing support. We
are also excited to welcome Charles Spicer as our new Non-Executive Chair and
look forward to working with him.
Dr. Ilian Iliev
CEO, NetScientific PLC
31 May 2023
Portfolio Performance
NetScientific's Directors' valuation of its direct owned portfolio is £41.8m
(£31.0m in 2021). An additional £23.5m of capital under advisory (£22.1m in
2021) offers potential future returns through carried interest.
NetScientific's portfolio consists of 24 companies in the Healthcare,
Sustainability, and Technology sectors across the UK, US, EU, and Israel.
These companies vary in their development stages, with a significant portion
generating commercial revenues or engaging in joint development agreements and
corporate collaborations. Some are in earlier stages (pre-Series A) or
turnaround projects, balancing higher risks with potential investment
returns. Note in the table below that EMV Capital is a core operational unit
of the Group, rather than a portfolio company held for sale or further
investment.
NetScientific invests directly from its balance sheet, while its subsidiary
EMV Capital syndicates investments as capital under advisory with a carried
interest arrangement with investors. The Group's interest can combine both
direct and carried interest holdings, providing increased returns and
influence in the companies. The Group holds board seats and advisory roles in
many portfolio companies, particularly those where its direct or advised
holdings are larger. Its fee-based advisory roles encompass value creation
services and corporate finance arrangements, generating fees for the Group and
aiding businesses in reaching value inflection points.
Carried interest or profit share agreements are associated with the model,
typically entailing 15% to 20% of profits earned for investors above a minimum
return hurdle rate of 10%. Capital under advisory is expected to grow through
further syndicated investments in existing and new portfolio companies. There
is ongoing work for the potential launch of a new VC fund practice under EMV
Capital, which (if successful) would further scale the capital under advisory.
The Consolidated Statement of Financial Position reflects the owned portfolio
as equity investments classified as fair value through other comprehensive
income (FVTOCI) and financial assets classified as fair value through profit
and loss (FVTPL), adhering to the British Venture Capital Association
guidelines widely accepted in the VC community.
Portfolio Company Country Sector Stage Group Stake (%) CAU (%) Fair Value (m) CAU (m)
2022 2021 2022 2021
EMV Capital UK Venture capital Sales 100% - £3.5 £3.5 - -
PDS Biotechnology -Nasdaq Listed US Immuno-oncology Phase II clinical 4.4% - £14.7 £8.0 - -
Glycotest US Liver cancer diagnostics Late clinical 62.5% - £11.0 £11.0 - -
Q-Bot UK Robotics Sales 17.6% 30.9% £3.8 £1.3 £4.4 £2.3
ProAxsis UK Respiratory diagnostics Sales 100% - £3.5 £3.5 - -
EpiBone US Regenerative medicine Early clinical 1.3% 0.3% £1.2 £0.8 £0.2 £0.2
SageTech Medical Equipment UK Waste anaesthetic Commercial 5.5% 25.5% £0.9 £0.9 £3.8 £3.5
Vortex Biotech Holdings Ltd UK/US Liquid biopsy oncology Sales 30% - £0.7 - £0.7 £3.9
FOx Biosystems BEL Research equipment Sales 3.9% - £0.6 £0.3 - -
Sofant Technologies UK Semiconductors satellite coms Early sales 1.5% 22.9% £0.4 £0.3 £4.3 £3.0
CytoVale US Medical biomarker Late clinical 1.0% - £0.4 £0.4 - -
G - Tech Medical US Wearable gut monitor Early clinical 3.8% - £0.4 £0.4 - -
Martlet Capital UK Venture capital Sales 1% 5.9% £0.3 £0.3 £1.3 £1.3
DName-iT BEL Lab technology Pre sales 61.5% 0% £0.1 £0.1 £0.1 -
PointGrab IL Smart building automation Sales 0.5% 20.8% £0.1 £0.1 £4.1 £4.1
QuantalX Neuroscience IL Medical diagnostics Late clinical 0.4% - £0.1 £0.1 - -
Ventive UK Heat pumps and passive ventilation Sales 15.9% 35.3% £0.1 - £0.1 -
Deeptech Recycling Limited UK Recycling Industrial 30% - - - £0.5 -
CetroMed UK Holding company Holding company 75% - - - - -
Oncocidia BEL Cancer therapeutics Early clinical 41.3% - - - - -
Longevity Biotech US Neurology therapeutics Early clinical - - - - - -
Wanda Health UK/US Digital health monitoring Sales - 74.7% - - £3.2 £2.2
Nanotech Industrial Solutions US Material science Sales - - - - £0.8 £0.7
Insight Photonic Solutions US Semiconductors akinetic laser Sales - - - - - £0.9
TOTAL - - - - - £41.8 £31.0 £23.5 £22.1
CORE PORTFOLIO COMPANIES 4
PDS Biotechnology Corporation ("PDS") (https://www.pdsbiotech.com/
(https://www.pdsbiotech.com/) ) (Stock symbol PDSB: NASDAQ) - 4.4% stake
PDS Biotech is a clinical-stage immunotherapy company focusing on cancer and
infectious diseases. Using their Versamune® technology, they develop
therapies and vaccines that activate T-cells and enhance immune responses.
Their 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 programmes.
Key developments 2022: The company made significant clinical progress in its
Phase 2 trials and secured a $35 million venture debt facility from Horizon
amidst market turbulence. Its IP portfolio was strengthened through a
licensing agreement with the NCI and a US patent for its Novel HPV 16
immunotherapy. Recent achievements include a licensing deal with Merck KgaA,
plans for a Phase 3 trial, and promising data presented at the 2022 ASCO
Annual Meeting. The combination of PDS0101 and KEYTRUDA® showed a 41%
response rate and an 87% survival rate at nine months for HPV16-positive HNSCC
patients. The combination was well-tolerated with no severe adverse events
reported. The FDA granted Fast Track designation for this combination, on the
back of which the company is preparing for a Phase 3 clinical trial.
NSCI Interest: NetScientific backed PDS as the first institutional investor in
2014, and has continued its support over the years, including by anchoring a
NASDAQ placement in 2020, and supporting a subsequent placement in 2021.
NetScientific currently owns 4.44% of the undiluted share capital (2021:
4.72%). The current value of NetScientific's stake as of 26 May 2023 at a
share price of $8.56 per share is worth £9.3m, with a company market
capitalization of $264m.
Dr. Ilian Iliev is on the Board of PDS Biotech Inc.
Glycotest, Inc. ("Glycotest") (https://www.glycotest.com/
(https://www.glycotest.com/) ) - 62.5% Subsidiary
Glycotest is a liver disease diagnostics company commercialising new and
unique blood tests for life threatening liver cancers and
fibrosis-cirrhosis. The 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 license for the distribution of the product in China.
Glycotest's lead product is its HCC Panel-a biomarker panel, driven by a
proprietary algorithm, for curable early-stage hepatocellular carcinoma (HCC),
the most common form of primary liver cancer. Glycotest is close to completing
its HCC Panel clinical trial with 20 leading medical sites (hospitals and
liver treatment centres) across the US and Israel. The clinical trial blood
sample collection is now determined to be substantively complete, enabling
progress toward HCC Panel test validation. The early Glycotest clinical
studies gave encouraging results, despite a particular problem identified in
the assays' calibration at a subcontractor laboratory, requiring some remedial
fine-tuning action and consideration of alternative approaches. A leading
contract research organisation was engaged to provide an independent
perspective of the problem encountered. Potential solutions were identified,
and further work will now be conducted to revise assays, carry out the test
validation, and evaluate next development options.
There is a large and growing global need for liver disease diagnostics. Liver
cancer is a growing global problem, with estimates of over 90million US
patients and over 2 billion patients worldwide who could benefit from regular
testing for liver cancers and fibrosis-cirrhosis. Future potential market
growth will come from the fatty liver disease and NASH pandemic. The US and
China represent major initial market entry points with existing go-to-market
channels for Glycotest. The initial target markets are the USA (market
estimated to be over $800 million) and China (through a licensing arrangement
with Fosun Pharma).
NetScientific setup Glycotest in 2012, based on technology that originated at
the Blumberg Institute and Drexel University College of Medicine in
Philadelphia. In 2019, NetScientific negotiated a $10m milestone-based
investment and licensing deal with Shanghai Fosun Pharmaceutical Co., Ltd.
("Fosun Pharma"), whereby Fosun Pharma received a minority stake in Glycotest
and the rights to develop and commercialise the HCC Panel and pipeline liver
disease tests in China, for which Glycotest Inc. will receive a royalty, with
Glycotest Inc. retaining rights to ex-China markets. Fosun has already
invested $7m, with a further $3m remaining against milestones. Supporting its
investment, Glycotest also closed a $1.46m convertible loan funding round with
$500k from Fosun alongside NetScientific investment in December 2022.
Post-balance sheet, on 2(nd) May 2023 EMV Capital setup a $1m Convertible Loan
syndicated from private investors to provide additional working capital to the
company, as it prepares for a larger external round later in 2023 to support
commercialisation.
NSCI Interest: Company shareholding in Glycotest is 62.5% (2021: 62.5%). As of
31 December 2022, the Group has invested £3.9 million (2021: £3.9
million). Based on the equity investment price by Fosun 's milestone-based
investments, fair value of NetScientific's stake is £11.0m.
Dr Ilian Iliev is Chair, John Clarkson and Ed Hooper are Board members.
Charles Swindell is COO.
Q-Bot Ltd ("Q-Bot) (https://q-bot.co/ (https://q-bot.co/) ) - Direct Equity
Holding 17.6%, Capital Under Advisory 30.9%
Q-Bot is an award-winning robotics developer for construction retrofit. Their
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.
Key developments 2022: After a successful strategy review in 2021, Q-Bot has
seen impressive growth. The energy market's volatility has fuelled demand for
their retrofit offering, resulting in record-breaking monthly installations by
major partners. Commercial sales nearly doubled to over £2m in FY2022, with
an expected 80% revenue increase in FY2023. So far, over 3,500 homes have been
insulated, with continued growth in the installation rate through partners and
direct installs. The company is actively working on expanding internationally
in the EU and US through partnerships, including operations now in France and
the Netherlands. EMV Capital's value creation services team has supported the
Board of Q-Bot since late 2021 in various growth acceleration and fund-raising
projects. It has also led a £2.5m in EIS equity investment and debt facility
raised in the company throughout 2022.
NSCI Interest: Direct equity holding of 17.6% (2021: 18.3%), and capital under
advisory from syndicated investors representing 30.9% (2021: 12.3%). After a
May 2022 conversion of loan note of c.£500k into equity, NetScientific total
cost is £1.5m. Following a Q4 22 investment round, our stake has a fair value
of £3,728k (2021: £1,025k), indicating a c.2.5x valuation uplift within an
18-month period. During 2022, a £140k working capital loan was extended to
Q-Bot, carrying interest at 10% p.a.
On 30 December 2022, £48k was repaid, including interest and an arrangement
fee.
Dr. Ilian Iliev is on the Board of Q-Bot Ltd.
ProAxsis Ltd ("ProAxsis") (https://proaxsis.com/ (https://proaxsis.com/) ) -
100% Subsidiary
ProAxsis is a commercial medtech company, with a focus on respiratory
diagnostics, a growing global burden exacerbated in the aftermath of Covid.
ProAxsis uses its proprietary ProteaseTag® technology to develop
laboratory-based assays and rapid point-of-care tests for the measurement of
active protease 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.
The company has refined its product portfolio alongside a quality laboratory,
enabling commercialisation of its technology through clinical services to
pharma industry clients, and via direct kit sales to both Pharma and
University researchers. Development projects include a unique combination of
its CE Marked Lateral Flow Test (NEATstik) in respiratory disease patients
with a robust market-ready Virtual Care Platform, as well as enhancing its
offering for ongoing patient monitoring at point-of-care.
Key developments 2022: The company won further pharma services contracts and
entered into key R&D collaborations. A number of companies have published
data detailing their utility of the ProAxsis technology, including Insmed
(US), Chiesi (EU) and Mereo (UK). ProAxsis was announced as the NI Small
Business of the Year at the Belfast Telegraph Awards. The company has secured
further grant awards of some £420K, to support the ongoing development
programme.
In February 2023, the company secured a £500,000 funding facility from AB
Group, to facilitate growth and prepare the company for a fund-raise in 2023.
ProAxsis has also started a collaboration with Wanda Health (another
NetScientific portfolio company) to deliver a digitally enabled COPD
diagnostic platform.
NSCI Interest: 100% owned subsidiary (95% fully diluted). The fair value of
NetScientific's stake in ProAxsis is £3.5m on basis of last investment round.
As of 31 December 2022, the Group has invested £3.7 million (2021: £2.8
million).
John Clarkson is Chair and Dr. Ilian Iliev is a Board member of ProAxsis.
EpiBone, Inc. ("EpiBone") (https://www.epibone.com/ (https://www.epibone.com/)
) - Direct Equity Holding 1.3%, Capital Under Advisory 0.3%
EpiBone's bone reconstruction technology allows patients to "grow their own
bone" by utilizing a scan of the patient's bone defect and their own stem
cells to construct a defect-specific autologous-like bone graft. The company
focuses on the $32bn bone and joint reconstruction market and offers bone
reconstruction, cartilage replacement, and liquid cartilage joint treatment.
EpiBone's proprietary bioreactor technology is a result of 20 years of
research and experience with orthopaedic tissue engineering. It follows a
three-step process to regenerate human bone.
Key developments 2022: All six Phase I/Iia patients successfully implanted in
the clinical trial. Significant progress in biphasic bone and cartilage graft
development. Positive feedback on the injectable cartilage product from
preclinical work. First close on $22m Series A fundraise.
NSCI Interest: NetScientific's direct investment in EpiBone is valued at £1.2
million based on the Series A round closed in December 2022.
SageTech Medical Equipment Ltd ("SageTech") (http://www.sagetechmedical.com/
(http://www.sagetechmedical.com/) ) - Direct Equity Holding 5.5%, Capital
Under Advisory 25.5%
SageTech developed a flexible, affordable modular system to capture waste
anaesthetic gas in hospital operating theatres. It uses reusable canisters to
collect and recycle the gas, addressing the significant problem of unaddressed
air pollution caused by these gases. The solution reduces the carbon footprint
of a midsized hospital, equivalent to 1,200 cars per year. This innovative
technology contributes to a circular economy and offers substantial
environmental benefits.
The system enables hospitals without fixed Anaesthetic Gas Scavenging Systems
to utilize anaesthetic gas in various areas. SageTech recently launched the
SID-Dock waste volatile anaesthetic gas capture machine, which seamlessly
integrates into hospital operating theatres without requiring modifications to
existing equipment. It has obtained the UK Conformity Assessed (UKCA) marking
and ISO 13485:2016 certification, ensuring compliance with UK medical sector
requirements.
The solution is currently being evaluated at renowned UK NHS hospitals,
including Guy & St. Thomas' and Cromwell Hospital, with initial sales
anticipated. SageTech aims to commercialize the technology, starting with the
NHS and expanding to private hospitals in the UK, international markets, and
the veterinary industry.
NSCI Interest: NetScientific has a direct equity investment of 5.5% (2021:
5.1%) with a fair value of £887k (2021: £887k), and an advised stake of
25.5% (2021: 21.0%).
John Clarkson serves as a Non-Executive Board member of SageTech.
Vortex Biotech Holdings Ltd ("Vortex") San Francisco/London
(https://vortexbiosciences.com/ (https://vortexbiosciences.com/) ) - Direct
Equity Holding 30.0%
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 Circulating Tumour Cell (CTC) capture technology that
improves therapeutic decisions and saves lives. This exciting area is
providing critical information from research to the clinic, contributing to a
major shift in how cancer can be treated and monitored. Vortex was formed on
the back of research at UCLA.
Vortex is focused on developing its position in the multi-billion dollar
oncology liquid biopsy market. The combination of targeted therapies and
precise diagnostics is allowing for the era of personalized medicine to
emerge. The capture and enrichment of circulating tumour cells is expected to
be a critical element of targeted companion diagnostics. Vortex' growth
strategy aims to develop it into an industry leading platform that will help
accelerate the translation of research insights into the clinic and help
deliver to an affordable population health agenda. This will be done through
the development of laboratories that will act as centres of excellences for
the use of CTCs, combining its proprietary "no touch" microfluidic chip
technology, with various assays and workflow integrations.
Vortex' VTX-1 platform has been placed and used for KOL published research in
leading University and Research centres in the US, UK and EU, including UCLA,
UC Berkeley, Stanford University, Ghent University (Belgium), University of
Maryland, and Ecole Polytechnique Federale de Lausanne. In addition, Vortex is
now seeing growing interest from pharma and biotech clients in the service
model it is launching. The company has developed several workflow integrations
of the VTX-1 instrument with third party instruments, opening further
commercialisation opportunities.
Key Developments 2022: In August 2022, NetScientific announced the completion
of the acquisition of a 30% equity stake in Vortex Biotech Holdings Limited
("Vortex") for a non-cash consideration, in line with NetScientific's 'capital
light' investment model. In support of its next phase of growth as a service
provider, Vortex has recently opened a lab at The London Cancer Hub's
Innovation Gateway, which is already home to The Institute of Cancer Research,
London, and The Royal Marsden NHS Foundation Trust. This is in addition to
their lab in San Francisco, providing the company with a trans-Atlantic
coverage for its target Pharma customer base.
NSCI Interest: 30.0% Direct; £0.7m advance assurance agreement, indirect
(advised)
Dr Ilian Iliev is Executive Chair, and Paul Jones is CEO.
FOx Biosystems (3.9% stake, NSCI effective stake 2.9%)
(https://foxbiosystems.com/)
Provides real-time, label-free analysis technology based on an innovative
fibre-optic-based surface plasmon resonance biosensor, enabling users to
generate high quality biomolecular data such as affinity data, kinetic data
and concentration measurements. The company was formed as a spin-out following
a sponsored research agreement with K.U. Leuven that saw CetroMed invest
€537k. Subsequently it saw investments by Belgian high-tech investors LRM,
Heran Partners, K.U. Leuven's Gemma Frisius Fund.
Key developments 2022: FOx Biosystems received a €2.5m European Innovation
Council (EIC) grant to accelerate the market introduction of unique EV
analysis and isolation application, as well as closing a €2.5m investment
round, providing the company with the funds to accelerate development.
NSCI Interest: December 2020 £150k convertible loan agreement (part of a
£2.5m convertible loan agreement led by the current investors) converted in
November 2022. The NetScientific stake is valued at £495k.
Sofant Technologies Ltd ("Sofant") Edinburgh (http://www.sofant.com/
(http://www.sofant.com/) ) - Direct Equity Holding 1.5%, Capital Under
Advisory 22.9%
An Edinburgh University spin-out, the company is developing phased array
antennas for satellite and terrestrial communications that has high energy
efficiency and a modular scalable design. The antenna enables access to
low-latency, super-fast low Earth orbit (LEO) satellite broadband networks.
The company is executing a €7.3m contract with the UK Space Agency and the
European Space Agency.
Key Developments 2022: Signed with several corporations in the telecoms
industry, including a Fortune Global 500 aerospace company. Post-balance sheet
announcement of Joint Development Agreement with Inmarsat Government, focused
on aircraft applications. EMV Capital led a £4.2m investment round, in which
NetScientific participated led by EMV Capital in 2022. EMV Capital closed a
further £1m of EIS funding into the company post-balance sheet.
NSCI Interest: Direct equity holding of 1.5% and "capital under advisory" of
c.£4.3m at cost representing 22.9% of the cap table. The NSCI Group through
its direct and indirect holdings is the largest shareholder of Sofant.
Dr. Ilian Iliev is on the Board of Sofant Technologies Ltd.
Martlet Capital Ltd ("Martlet") Cambridge (http://martletcap.com
(https://martletcap.com/) /) - Direct Equity Holding 1.0%, Capital Under
Advisory 5.9%
Cambridge-based early-stage VC specializing in deep tech and life sciences,
with a focus on the Cambridge high-tech cluster. Formed in September 2021 as a
spin-out from Marshall Group. Advised by EMV Capital and co-led initial
funding round of £12m. The company has a portfolio of 49 investments
companies in the life sciences, sustainability, and industrials sectors,
primarily in the Cambridge region, and often with IP and links to Cambridge
University. Key Investments include Paragraf, a producer of novel
graphene-based semiconductors; Echion Technologies, Li-ion battery
technology supplier using proprietary anode materials; and Dogtooth, a
developer of robotic solutions for the agricultural sector.
Key Developments 2022: Completed second close of additional £9.6m in 2022.
The company saw early exit from the portfolio, including acquisitions and
IPOs. The EMV Capital, Martlet Capital and SARANAC teams are working toward
the establishment of a follow-on investment vehicle, which would be owned 40%
by the Group. Focus on follow-on growth investment opportunities from Martlet
Capital and the Cambridge innovation ecosystem.
NSCI Interest: Fair value of direct investment: £250k (2021: £250k). Total
syndicated amount as capital under advisory by EMV Capital: £1.48m. Total
direct and syndicated amount represents 1.0% (2021: 11.2%) of issued share
capital. Convertible Loan Notes: £0.52m (£0.075m direct holding and £0.445m
advised).
Dr. Ilian Iliev is on the Board of Martlet Capital Ltd.
PointGrab (https://www.pointgrab.com/ (https://www.pointgrab.com/) ) Israel -
Direct Equity Holding 0.5%, Capital Under Advisory 20.8%
PointGrab provides IoT-based office workspace optimization solutions. Its
AI-powered edge analytics sensing solution is used by Fortune 500 companies
globally, helping them save up to 40% on real estate and facility management
expenses. The solution offers features like occupancy data, energy saving, air
quality monitoring, and smart facilities management. PointGrab's AI system
prioritizes privacy and data security. The company has deployed 10,000+
sensors in 40 countries, serving 45 Fortune 500 companies. PointGrab's
offering helps transform workplaces for COVID-19 adaptations, including
workplace density monitoring and social distancing.
Key Developments 2022: Increased demand for real estate restructuring in major
markets. Growing adoption of smart space solutions for flexible working.
PointGrab expanded sales and introduced new digital features for international
growth.
NSCI Interest: Direct equity holding: 0.5% (2021: 0.5%), Indirect capital
under advisory: 20.8% (2021: 27.2%). Fair valued at the most recent investment
round: £76k (2021: £68k).
Dr. Ilian Iliev is on the Board of PointGrab.
CetroMed Group
On 20 December 2021, NetScientific acquired 75% of the issued share capital of
CetroMed Limited ("CetroMed") for a non-cash consideration. CetroMed is a life
sciences holding company with several portfolio companies spun out of the
University of Leuven, Belgium, a leading European research institution.
CetroMed was previously owned by the Azima Trust (through Zahra Holdings Ltd),
the family trust of Farad Azima, the founder and ex-CEO of NetScientific. The
acquisition of the majority stake in CetroMed resulted in significant stakes
in three new portfolio companies (FOx Biosystems, DName-iT and Oncocidia) and
the establishment of commercial relationships with K.U. Leuven and other
players in this key European high-tech cluster. Consistent with the Group's
'capital light' strategy, the transaction of £192k was funded through £150k
of NetScientific PLC new ordinary shares at £1.02, and the issue of £42k
worth of warrants at a strike price of £1.30 per share. Following the
acquisition, EMV Capital undertook detailed development plans for the various
CetroMed portfolio companies, with early results outlined in the section on
FOx and DName-iT. It was decided to focus investments on the CetroMed
portfolio companies directly, and therefore no further investment will be made
into CetroMed itself.
NSCI Interest: The fair value of the investment in CetroMed is £228k (2021:
£228k), with significant growth potential.
Wanda Health, US and UK (https://www.wandahealth.com/
(https://www.wandahealth.com/) ) - no direct holdings, capital under
advisory 75% stake
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. The company 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.
Key Developments 2022: Wanda partnered with Smart Meter Corporation to ensure
reliable patient data capture regardless of access to smart devices and
internet connectivity and is in a position to sign two strategic partnerships
with blue chip companies to deliver RPM in both domestic and international
markets. The company has filed for FDA clearance for software as a Medical
Device status and the implementation of a Quality Management System, which
will form the foundation for UKCA an CE marking submissions in the first half
of 2023. Wanda has also signed further US-based reimbursement customers, with
a growing international pipeline and platform training delivered to medical
staff. Wanda is exploring pilot projects for the delivery of Virtual Wards and
Population Health Management for Integrated Care Systems in the NHS and
continued to build on its US client base throughout 2022 with delivery of
Remote Patient Monitoring services against enhanced reimbursement models for
Medicare. Wanda also has a collaboration with ProAxsis (another
NetScientific company) around integrating a digital platform with ProAxsis'
COPD test.
NSCI Interest: capital under advisory of a 75% investors' stake, which is a
related party due to common substantial shareholders.
Dr Ilian Iliev is Executive Chair, with ex-IBM sales executive Tom Smith as
CEO.
NEW INVESTMENTS
During the period, the Group made new investments in two companies (Ventive
and Deeptech Recycling) and restructured two existing portfolio companies
(DName-iT and Vortex). The Group utilized a 'capital light' investment model,
acquiring and safeguarding stakes without using cash, thereby preserving NS
balance sheet.
Ventive Limited
Ventive (http://ventive.co.uk/) specializes in passive and energy-efficient
ventilation systems for schools and a unique modular heat pump for newbuild
residential applications. Their innovative heat pumps, which utilize Phase
Change Material for heat transfer, are well-positioned in the growing market
for heat pumps. In September 2022, EMV Capital collaborated with the Ventive
team to facilitate a £2.5m financing round, including debt and equity,
enabling the company to secure a £1.5m matching funding grant from the
Department for Business, Energy & Industrial Strategy (BEIS). This funding
has propelled Ventive's modular heat pump production project in partnership
with QM Systems (part of Pipehawk PLC), resulting in cost and carbon dioxide
emissions reductions.
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. NSCI's interest in Ventive includes a 15.9% direct holding
and a 35.3% indirect holding as "capital under advisory."
Deeptech Recycling Technologies Limited (https://recyclingtechnologies.co.uk/
(https://recyclingtechnologies.co.uk/) ) - Direct stake of 30%
In December 2022, Deeptech Recycling Technologies acquired the majority of
assets from Recycling Technologies Limited, which aimed to have an AIM IPO 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. Deeptech
Recycling Technologies, with support from NSCI's Value Creation team, has
focused on consolidating assets and intellectual property, assessing market
opportunities, and adopting a customer-centric and cost-effective approach.
The company aims to establish a profitable presence in the plastics waste
management industry, capitalizing on the increasing demand for recycling
solutions driven by environmental regulations and fiscal pressures. Noteworthy
areas of exploration include TetraPak recycling, as well as recycling of
polystyrene, medical waste, and film extensively used in food packaging. NSCI
holds a 30% direct holding in Deeptech Recycling Technologies.
DName-iT Ltd (https://www.dnameit.com/ (https://www.dnameit.com/) ) - Direct
stake of 61.5%, NSCI effective stake 46.1%
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 has created a proprietary
molecular barcoding system, called DName® barcodes that allows the detection
of sample swaps and contamination. Prior to EMV Capital's involvement the
company was mothballed. In 2022 EMV Capital's value creation team restarted
development of the business, refreshed business plan, working alongside the
founder and other experts.
EMV Capital advised on the creation of a new UK holding company that oversees
the Belgian subsidiary and facilitated the launch of a £500k EIS investment
round. NSCI has an effective ownership of 46.1% through CetroMed's ownership
of 61.5% in DName-iT Ltd. University of Leuven is a co-investor in the
project.
MONITORING PORTFOLIO
We have minority investments in several companies that we monitor, but have no
active involvement or board representation. Some of these may well result in
significant returns to NetScientific upon exit.
1. CytoVale, Inc., USA applies machine learning and high-speed imaging
to detect diseases in real time. Key developments include published data
demonstrating the potential of their IntelliSep test. https://cytovale.com/
(https://cytovale.com/)
NSCI Interest: Direct investment valued at £415,000.
2. G-Tech Medical, Inc., USA is developing a wearable technology to
measure gastrointestinal motility. Key developments include FDA 510k clearance
submission and improved second-generation patches.
http://www.gtechmedical.com/ (http://www.gtechmedical.com/)
NSCI Interest: Direct investment valued at £442,000.
3. QuantalX Neuroscience, Israel is developing DELPHI MD, a precise
and objective brain evaluation tool for early prevention of brain
degeneration. Key developments include FDA breakthrough designation and
upcoming commercialization in 2023. https://quantalx.com/
(https://quantalx.com/)
NSCI Interest: Direct investment valued at approximately £100,000, no board
representation.
4. Longevity Biotech, Inc., USA: focuses on developing
Hybridtides®, therapeutic candidates for neurological disorders. Key
developments involve DOD grant and Michael J Fox Foundation support.
https://www.longevitybiotech.com/ (https://www.longevitybiotech.com/)
NSCI Interest: Convertible loan fully impaired
5. Oncocidia Ltd., UK: is developing a targeted radiopharmaceutical
cancer treatment using Iodine-131. http://www.oncocidia.com/
(http://www.oncocidia.com/)
NSCI Interest: Effective stake of 31%
6. Nanotech Industrial Solutions Inc., USA: develops inorganic
nanomaterials for industrial applications. Key developments include an ongoing
management-led restructuring. https://nisusacorp.com/
(https://nisusacorp.com/)
NSCI Interest: "Capital under advisory" of $1 million convertible loan
agreement
7. Insight Photonics, USA: has developed an Akinetic, all
semiconductor laser with improved performance for various applications.
https://www.sweptlaser.com/ (https://www.sweptlaser.com/)
NSCI Interest: "Capital under advisory" of $1.25m warrants.
Consolidated INCOME Statement
For the year ended 31 December 2022
Continuing Operations Notes 2022 2021
£000's £000's
Total Income 1,820 1,260
Revenue 1,004 1,107
Cost of sales (222) (118)
Gross profit 782 989
Other operating income 816 153
Research and development costs (1,371) (1,322)
General and administrative costs (3,729) (2,573)
Other costs (248) (207)
Loss from continuing operations (3,750) (2,960)
Finance income 94 23
Finance expense (55) (22)
Gain on purchase - 36
Loss before taxation (3,711) (2,923)
Income tax credit 37 61
Total Loss for the year all from continuing operations (3,674) (2,862)
Owners of the parent (3,094) (2,385)
Non-controlling interests (580) (477)
(3,674) (2,862)
Basic and diluted loss per share from continuing and discontinued operations
attributable to owners of the parent during the year:
Continuing operations 5 (13.9p) (13.2p)
From loss for the year (13.9p) (13.2p)
Consolidated Statement OF Comprehensive Income
For the year ended 31 December 2022
2022 2021 2020
£000's £000's £000's
Loss for the year (3,674) (2,862) (2,338)
Other comprehensive income/(loss):
Exchange differences on translation of foreign operations 26 (99) (3)
Change in fair value of equity investments classified as FVTOCI 8,773 6,009 (97)
Total comprehensive profit for the year 5,125 3,138 (2,438)
Attributable to:
Owners of the parent 5,732 3,624 (1,724)
Non-controlling interests (607) (486) (714)
5,125 3,138 (2,438)
Consolidated Statement of Financial Position
As at 31 December 2022
Notes 2022 2021
£000's £000's
Assets
Non-current assets
Property, plant and equipment 7 144 136
Right-of-use assets 8 420 158
Intangible assets 9 3,367 3,045
Equity investments classified as FVTOCI* 10 22,743 11,516
Financial assets classified as FVTPL** 11 693 1,462
Total non-current assets 27,367 16,317
Current assets
Inventory 76 67
Trade and other receivables 658 1,598
Cash and cash equivalents 852 2,710
Total current assets 1,586 4,375
Total assets 28,953 20,692
Liabilities
Current liabilities
Trade and other payables (2,457) (1,529)
Lease liabilities (168) (32)
Loans and borrowings (99) (59)
Total current liabilities (2,724) (1,620)
Non-current liabilities
Lease liabilities (268) (131)
Loans and borrowings (719) (432)
Total non-current liabilities (987) (563)
Total liabilities (3,711) (2,183)
Net assets 25,242 18,509
Issued capital and reserves
Attributable to the parent
Called up share capital 1,174 1,056 746
Warrants 42 42 -
Share premium account 74,175 72,792 65,594
Capital reserve account 237 237 237
Equity investment reserve 13,277 4,504 (1,505)
Foreign exchange reserve 1,421 1,368 1,368
Accumulated losses (64,486) (61,499) (59,702)
Equity attributable to the owners of the parent 25,840 18,500 6,738
Non-controlling interests (598) 9 158
Total equity 25,242 18,509 6,896
*Fair value through other comprehensive income
**Fair value through profit and loss
Consolidated Statement of Changes in Equity
As at 31 December 2022
Shareholders' equity
Share capital Share premium Capital reserve Equity investment reserve Accum-ulated losses Foreign exchange and capital reserve Total Non-controlling interests Total equity
£000's £000's £000's £000's £000's £000's £000's £000's £000's
Warrants
£000's
1 January 2021 746 - 65,594 237 (1,505) (59,702) 1,368 6,738 158 6,896
Loss for the period - - - - - (2,385) - (2,385) (477) (2,862)
Other comprehensive (loss)/income -
Foreign exchange differences - - - - - - - (9) (9)
-
Change in fair value of equity investments classified as FVTOCI - - - 6,009 - - 6,009 - 6,009
-
Total comprehensive profit/(loss) - - - 6,009 (2,385) - (3,624) (486) 3,138
-
Issue of share capital 310 - 7,635 - - - - 7,945 - 7,945
Cost of share issue - - (437) - - - - (437) - (437)
Issue of warrants - 42 - - - - - 42 - 42
Decrease in subsidiary shareholding - - - - - 447 - 447 337 784
Share-based payments - - - - - 141 - 141 - 141
31 December 2021 1,056 42 72,792 237 4,504 (61,499) 1,368 18,500 9 18,509
Loss for the period - - - - - (3,094) - (3,094) (580) (3,674)
Other comprehensive loss/income -
Foreign exchange differences - - - - - 53 53 (27) 26
-
Change in fair value of equity investments classified as FVTOCI - - - 8,773 - - 8,773 - 8,773
-
Total comprehensive profit/(loss) - - - - 8,773 (3,094) 53 5,732 (607) 5,125
Issue of share capital 118 - 1,439 - - - - 1,557 - 1,557
Cost of share issue - - (56) - - - - (56) - (56)
Share-based payments - - - - - 107 - 107 - 107
31 December 2022 1,174 42 74,175 237 13,277 (64,486) 1,421 25,840 (598) 25,242
Consolidated Statement of Cash Flows
As at 31 December 2022
Notes 2022 2021
£000's £000's
Cash flows from operating activities
Loss after income tax including discontinued operations (3,674) (2,862)
Adjustments for:
Depreciation of property, plant and equipment 7 45 54
Depreciation of right-of-use assets 8 76 31
Amortisation of intangibles 9 226 163
Estimated credit losses on trade receivables 18 2
Bad debt expense - 9
Gain on purchase of subsidiary - (36)
Gain on available for sale investments (254) -
Fair value movement during the year on convertible debt (466) (28)
Capitalisation of development costs 9 (548) (585)
Share-based payments 107 141
R&D tax credit (46) (81)
Loss on disposal of property, plant and equipment 1 -
Share of associate loss 11 -
Foreign exchange movement (71) 2
Finance income (95) (23)
Finance costs 24 10
Tax credit (37) (61)
(4,683) (3,264)
Changes in working capital
(Increase)/decrease in inventory (9) 7
Decrease/(Increase) in trade and other receivables 610 (1,148)
Increase in trade and other payables 879 864
Cash used in operations (3,203) (3,541)
Income tax received 96 78
Income tax paid - (12)
Net cash (used) in operating activities (3,107) (3,475)
Cash flows from investing activities
Acquisition of subsidiary, net cash acquired - 3
Purchase of property, plant and equipment (53) (62)
Purchase of available for sale investments (267) (2,192)
Purchase of derivative financial assets (710) (1,207)
Disposal of available for sale investments 451 -
Receipt of derivative financial assets 48 -
Interest received 1 -
Interest paid - (5)
Net cash (used in) investing activities (530) (3,463)
Cash flows from financing activities
Proceeds received on change in stake in subsidiary - 700
Lease payments (88) (38)
Repayment of loans and borrowings (89) (502)
Proceeds from loans and borrowings 415 550
Proceeds from share issue 1,558 7,746
Share issue costs (56) (437)
Net cash from financing activities 1,740 8,019
(Decrease)/Increase in cash and cash equivalents (1,897) 1,081
Cash and cash equivalents at beginning of year 2,710 1,628
Exchange differences on cash and cash equivalents 39 1
Cash and cash equivalents at end of year 852 2,710
Notes to the Financial Information for the Year Ended 31 December 2022
1. GENERAL INFORMATION
The Company is a public limited company incorporated on 12 April 2012 and
domiciled in England with registered number 08026888 and its shares are listed
on the Alternative Investment Market (AIM) of the London Stock Exchange. The
address of the registered office is C/o Azets, Burnham Yard, London End,
Beaconsfield, Buckinghamshire HP9 2JH.
2. BASIS OF PREPARATION
The preliminary results of the year ended 31 December 2022 have been extracted
from audited accounts which have not yet been delivered to Companies House.
The financial information set out in this announcement does not constitute
statutory accounts for the year ended 31 December 2022.
The report of the auditors on the statutory accounts for the year ended 31
December 2022 was qualified and did not contain a statement under Section 498
of the Companies Act 2006. Investments are stated at £21.7million in the
Parent Company Statement of Financial Position and £23.4million in the
Consolidated Statement of Financial Position. The Directors did not perform
year end valuations for some of the hard to value investments worth
c.£1million for the year ended 31 December 2022. Therefore, BDO were unable
to obtain sufficient and appropriate evidence for the valuation of such
investments at this date. The financial statements for the year ended 31
December 2022 included in this announcement were authorised for issue in
accordance with a resolution of the Board of Directors on 30 May 2023.
3. GOING CONCERN
NetScientific is in a strong position, with net assets of £25.2 million. In
addition to cash-in-bank, NetScientific holds readily realisable quoted assets
of c.£9.3 million as at 26 May 2023. Services provided by EMV Capital to the
Group's portfolio companies generate a regular Group fee income, including
from corporate finance fees, value creation fees, and profits from secondary
sales of the Group's position in certain portfolio companies. These fees have
contributed significantly to covering the operating costs of NetScientific
itself and EMV Capital. With ProAxsis and Glycotest now having access to third
party finance, they no longer draw on the Company's balance sheet.
The Board has prepared and reviewed budget cashflows and stress-tested the
assumptions and sensitivities involved in the context of the broader economic
environment. For the period to June 2024, the Group requires a minimum of
approximately £1.5 million to continue as a going concern, assuming that its
subsidiary portfolio companies continue to be fully funded by external
financing as expected. This amount can be financed through several options,
either on their own or in combination, including accelerating revenues at
Group level, partial or full exits from portfolio company stakes, soft and
non-dilutive finance, and/or a placement of NetScientific shares. Whilst a
placement of NetScientific shares remains an available option, the Board has
no current intention to pursue that in light of the Company's current share
price relative to its net assets. These options have not been executed, and
some or all may not be executed, and accordingly, this indicates that a
material uncertainty exists which may cast significant doubt on the Group's
and Company's ability to continue as a going concern and therefore that it may
be unable to realise its assets and discharge its liabilities in the ordinary
course of business. The Board will continue to tightly manage its cashflow,
closely monitor events, and maintain a flexible approach to new opportunities.
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.
4. SIGNIFICANT ACCOUNTING POLICIES
The Group financial statements have been prepared in accordance with UK
adopted international accounting standards as they apply to the financial
statements of the Group for the year ended 31 December 2022. The principal
accounting policies adopted in the preparation of the financial information
are set out below. The policies have been consistently applied to all the
years presented.
While the financial information included in this preliminary announcement has
been prepared in accordance with IFRS, this announcement does not in itself
contain sufficient information to comply with IFRS. The Group expects to
publish full financial statements by 6 June 2023.
5. LOSS PER SHARE
The basic and diluted loss per share is calculated by dividing the loss for
the financial year by the weighted average number of ordinary shares in issue
during the year. Potential ordinary shares from outstanding options at 31
December 2022 of 1,431,050 (2021: 1,064,498) are not treated as dilutive as
the entity is loss making.
2022 2021
£000's £000's
Loss attributable to equity holders of the Company
Continuing operations 3,094 2,385
Total 3,094 2,385
Number of shares
Weighted average number of ordinary shares in issue 22,266,560 18,050,724
6. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
The Group had the following subsidiaries at 31
December 2022:
Name Primary trading address Country of Proportion of Proportion of Proportion of ownership interest held by non-controlling Proportion of ownership interest held by non-controlling
incorporation ownership interest ownership interest interests Interests
or registration at 31 December 2022 at 31 December 2021 at 31 December 2022 at 31 December 2021
NetScientific UK Limited (a) UK 100% 100% - -
EMV Capital Limited (b) UK 100% 100% - -
ProAxsis Limited * (i) (c) UK 100% 100% - -
Cetromed Limited (a) UK 75% 75% 25% 25%
Frontier Biosciences Limited *
(a) UK 75% 75% 25% 25%
Frontier Oncology Limited *
(a) UK 75% 75% 25% 25%
NetScientific America, Inc. (d) USA 100% 100% - -
Glycotest, Inc. (i), (ii) (e) USA 62.5% 62.5% 37.5% 37.5%
For all undertakings listed above, the country of operation is the same as its
country of incorporation or registration.
* Held via an intermediate holding company.
All of the ownerships shown above relate to ordinary shareholdings.
(i) Options have been issued by ProAxsis Ltd and Glycotest, Inc.
which if exercised would dilute the Company's shareholding by 5% and 1%
respectively.
Registered office address:
(a) Azets, Burnham Yard, London End, Beaconsfield, Buckinghamshire, HP9
2JH
(b) 20 St Andrew Street, Holborn Circus, London, EC4A 3AG
(c) Unit 1B, Concourse Building, 3, Catalyst Inc, Titanic Quarter, 6
Queens Road, Belfast, BT3 9DT, Northern Ireland
(d) 1650 Market Street, Suite 4900, Philadelphia, Pennsylvania,
19103-7300, United States of America
(e) 613 Schiller Avenue, Merion, Philadelphia, Pennsylvania, PA 19066,
United States of America
The addresses listed above are also the registered offices of the relevant
entities.
7. PROPERTY, PLANT AND EQUIPMENT
Leasehold Improvement Furniture, fittings and equipment Plant and machinery Totals
£000's £000's £000's £000's
Cost
At 1 January 2021 100 35 170 305
Additions - 20 42 62
At 31 December 2021 100 55 212 367
Additions 5 16 32 53
Disposals - (3) (1) (4)
Foreign exchange movement - 1 - 1
At 31 December 2022 105 69 243 417
Depreciation
At 1 January 2021 42 18 117 177
Charge for the year 10 11 33 54
At 31 December 2021 52 29 150 231
Charge for the year 11 12 22 45
Disposals - (3) - (3)
At 31 December 2022 63 38 172 273
Net book value
At 31 December 2022 42 31 71 144
48 26 62 136
At 31 December 2021
(i) Leasehold improvements of £100k are funded by a
loan.
8. RIGHT-OF-USE-ASSETS
2022 2021
£000's £000's
Cost
At 1 January 253 253
Additions 338 -
At 31 December 591 253
Amortisation
At 1 January (95) (64)
Charge for the year (76) (31)
At 31 December (171) (95)
Net book value
At 31 December 420 158
There are now three long term leases with two additions in 2022. The Group
decided it would apply the modified retrospective approach to IFRS 16, and
therefore will only recognise leases on balance sheet as at 1 January 2019. In
addition, it has decided to measure right-of-use assets by reference to the
measurement of the lease liability on that date. This will ensure there is no
immediate impact to net assets 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%.
The rate applied to the new leases in 2022 is 5.0%
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 £10k (2021: £29k)
that are now all expired.
9. INTANGIBLE ASSETS
Goodwill Carry Interest Arrangements Development costs Investment Acquisition Costs Licenses and Patents Total
£000's £000's £000's £000's £000's £000's
Cost
At 1 January 2021 669 1,627 337 17 50 2700
Additions - - 585 - - 585
At 31 December 2021 669 1,627 922 17 50 3,285
Additions - - 548 - - 548
At 31 December 2022 669 1,627 1,470 17 50 3,833
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 - 163 56 - 7 226
At 31 December 2022 - 379 74 - 13 466
Net book value
At 31 December 2022 669 1,248 1,396 17 37 3,367
At 31 December 2021 669 1,411 904 17 44 3,045
Further ProAxsis development costs of £548k (2021: £585k) have been
capitalised during the year in line with the accounting policy as certain
projects 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.
The main factors leading to the recognition of this intangible are:
· the presence of certain intangible assets, such as the assembled
workforce of the acquired entity, EIS fund practice, infrastructure, thought
leadership, brand, deal flow and investor network and relationships, which do
not qualify for separate recognition;
· economies of scale which result in the Group being prepared to
pay a premium; and
· carry interest arrangements and profit share that are a material
identifiable class of asset that has been recognised separately.
10. EQUITY INVESTMENTS CLASSIFIED AS FVTOCI
Represent equity securities classified as FVTOCI
2022 2021
£000's £000's
At 1 January 11,516 2,970
Additions 555 2,192
Disposals (451)
Conversion of financial assets classified as FVTPL 2,004 -
Acquired through business combinations - 342
Change in fair value during the year 9,119 6,012
At 31 December 22,743 11,516
Name Country of incorporation % of issued share capital 2022 £2021
£000's £000's
PDS Biotechnology Corporation USA 4.4% 14,680 8,047
EpiBone, Inc. USA 1.3% 1,179 290
CytoVale, Inc. USA 1.0% 415 371
G-Tech, Inc USA 3.8% 354 317
PointGrab Israel 0.5% 76 68
FOx Biosystems NV Belgium 3.9% 495 336
Q-Bot Limited UK 17.6% 3,728 1,025
SageTech Medical Equipment Limited UK 5.5% 887 887
Sofant Technologies Limited UK 1.5% 402 -
Vortex Biotech Holdings Limited UK 30.0% 300 -
Martlet Capital Limited UK 1.0% 175 175
Ventive Limited UK 15.9% 52 -
DeepTech Recycling Limited UK 30.0% - -
At 31 December 22,743 11,516
Below we provide some additional detail on the composition of the Fair Value
estimates. When reviewing these estimates, we have taken into consideration
both third party investment rounds, and whether the company continues to
progress on their roadmap.
· NASDAQ-listed PDS Biotechnology Corporation (4.4% stake) year end
fair value was based on the listed share price (Nasdaq under the ticker PDSB)
of $13.20 per share at 31 December 2022 (2021: $8.10). At 31 December 2022
NetScientific owns 1,338,833 shares of PDS' common stock, valuing the stake at
£14,680k (2021: £8,047k). The current share price as of 19 May 2023 was
$7.41 giving a fair value of the PDS investment of £7,977k. The Company
periodically reviews its investment strategy with respect to this asset.
· CytoVale Inc., (1.0% stake) remains privately held, and fair
value has been established using the share price and company valuation from
investments by third parties during December 2019. CytoVale raised $15.0m all
at the same price per share from VC, private investor and government sources.
At the time this was the only observable valuation on which to value CytoVale.
Fair value at year end was £415k (2021: £371k). This last observable price
has been used to value the CytoVale equity investment at year end.
· EpiBone, Inc., (1.3% stake) executed a first close on a Series A
fund-raise as part of which on 1 November 2022 the convertible loan note of
£650k converted to equity. Fair value at year end was £1,179k (2021: £290k)
based on the last round price.
· G-Tech, Inc., continues to be valued at the Series A funding
round of $6 million as of May 2020. This is the last observable price which
values our 3.8% stake at £354k (2021: £316k).
· PointGrab, (0.5% stake) - Valued at the most recent investment
round as of April 2021, valuing our holding at £76k (2021: £68k).
· FOx Biosystems (3.9% stake) - On 23 November 2022 the €150k
convertible loan note plus interest converted to equity at the last investment
round share price, valuing the stake at £495k (2021: £336k) as part of a
c.€3.0m round (supported by an additional €2.5m EIC grant.
· Q-Bot Limited (17.6% stake) - After a May 2022 conversion of a
loan note of £549k into equity, NetScientific total cost is £1.5m. Following
a November 2022 investment round, our stake has a fair value of £3,728k
(2021: £1,025k), indicating a c.2.5x valuation uplift within an 18 month
period.
· SageTech Medical Equipment Limited, (5.5% stake) - Continues to
be valued at the last round price as of 24 December 2021, valuing the stake at
£887k (2021: £887k).
· Sofant Technologies Limited, (1.5% stake) - On 6 July 2022 the
convertible loan note converted to equity. The stake is valued at the last
round price, resulting in £402k (2021: £Nil), at a cost of £300k.
· Vortex Biotech Holdings Limited (30.0% stake) - On 16 August
2022, NetScientific announced the acquisition of 300,000 ordinary shares,
translating into a 30% stake in the business for a non-cash consideration.
This last round price of £1.00 was used to value the stake at £300k (2021:
£Nil).
· Ventive Limited, (15.9% stake) - Following a September 2022
rescue financing package led by EMV Capital, which also unlocked a
c.£1.5m BEIS grant, the Group received a 15.9% stake in partial settlement
of fees (and no cash investment). The stake is currently valued at £52k
(2021: £Nil), based on the 'rescue round' equity price.
· Martlet Capital Limited, (1.0% direct equity stake) - Our direct
investment in the early-stage VC platform in Cambridge is currently valued at
£175k (2022: £175k).
11. FINANCIAL ASSETS CLASSIFIED AS FVTPL
Warrants & Convertible Loans classified as FVTPL 2022 2021
£000's £000's
Balance at 1 January 1,462 78
Additions 710 1,332
Repayment (48) -
Additional accrued interest 93 24
Conversion to equity investments classified as FVTOCI (2,004) -
Change in fair value during the year 480 28
693 1,462
Balance at 31 December
Below is further detail on the various debt instruments used in financing
portfolio companies during the year. For completeness, please refer to the
above note 10, especially where convertible loans convert into equity:
· EpiBone, Inc., a $734k convertible loan note (carrying interest
at 6% p.a., and a conversion discount of 15%) was converted to equity on 1
November 2022, with accrued interest of £29k (2021: £3k). Fair value at year
end was £Nil (2021: £543k).
· G-Tech Medical, Inc., holds £88k of common form convertibles
(2021: £78k), which remain as financial assets classified as FVTPL. No
interest accrued.
· Q-Bot Limited, £300k convertible loan note carries interest at
10% p.a., a discount on conversion of 20% on the next investment round and is
repayable within two years. On 27 January 2022 a further £200k was invested
in the convertible loan note, with accrued interest during the period of £16k
(2021: £5k). On 10 May 2022 the convertible loan note of £549k converted to
equity. Fair value at year end was £Nil (2021: £312k). During 2022, a £140k
working capital loan was extended to Q-Bot, carrying interest at 10% p.a. On
30 December 2022, £48k was repaid, including interest and arrangement fee of
£9k. Fair value at year end was £101k (2021: £Nil). Warrants of £41k in
Q-Bot were also received for services.
· Vortex Biotech Holdings Limited was advanced loans of £370k
during the period. The loan carries interest at 8% p.a. Accrued interest
during the period was £15k (2021: £Nil). Fair value at year end was £385k
(2021: £Nil).
· Sofant Technologies Limited, a £300k convertible loan alongside
BBB's Future Fund with 10% pa coupon convertible loan note, with a 20%
discount on conversion was converted into equity in July 2022. Accrued
interest during the period was £14k (2021; £13k). The fair value at year end
was £Nil (2021: £324k).
· Martlet Capital Limited, £75k unsecured convertible loan note.
Fair value at year end was £80k (2021: £76k). The convertible loan note
carries interest at 5% p.a. and is repayable by the seventh anniversary from
the grant date. Accrued interest during the period is £4k (2021: £1k).
· FOx Biosystems, €150k loan note with 5% p.a. coupon was
converted to equity on 23 November 2022, with accrued interest during the
period of £7k (2021: £Nil). Fair value at year end was £Nil (2021: £128k).
· The Neumitra, Inc., and Longevity Inc., convertible loan notes do
not have a material value individually or collectively and have been fully
impaired.
1 A 2021 report by Boston Consulting Group "The Deeptech Investment Paradox"
notes "VC funds are structurally unfit (lifetime, size, incentives) to invest
in deep tech, relying on the traditional blueprints of ICT (high market risk,
low technology risk) and Pharma / biotech (high technology risk, low market
risk) and they often lack the expertise needed to understand advanced science,
engineering risks and to support ventures" p.3
2 'Fair Value' is unaudited Directors' estimated value of the directly owned
stakes, based on the BVCA valuation method.
3 This includes the subtraction of £3.9 million in respect of Vortex
Biosciences, where the company restructured its carried interest and acquired
a 30% direct interest. "Capital under advisory" is associated with carried
interest or profit share agreements, typically between 15% and 20% of the
profit on advised funds above a minimum return hurdle rate of 10 per cent.
4 The companies are listed in the order of Fair Value size of NetScientific
direct stake.
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