REG - NetScientific PLC - Business Update

NetscientificAnnouncement

13/03/2024 07:00

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RNS Number : 6035G  NetScientific PLC  13 March 2024

Strictly embargoed until: 07.00, 13 March 2024

NetScientific plc

("NetScientific" or "NSCI" or the "Company" or the "Group")

Business, Strategy and Portfolio Update

London, UK: NetScientific plc (AIM: NSCI), the deep tech and life sciences VC
investment group, is pleased to provide a business, strategy and portfolio
update for the year ended 31 December 2023, and the period to date.

Highlights of 2023 and year to date

·      The Group has a portfolio of 23 companies (including EMV Capital)
and expects a modest increase in Fair Value of the privately held assets as at
31 December 2023 (compared to 31 December 2022).

·       Across the Group's portfolio, an aggregate amount of c.£52.2
million was raised through equity and venture debt by 13 companies through to
31 December 2023.

·      Significant increase in Capital Under Advisory by £6.6 million
of Capital Under Advisory(1) (£23.5 million 2023).

·      A proprietary trade profit of £0.5 million in the period to 31
December 2023 in respect of the secondary sales of a £1.4 million position
across two portfolio companies.

·      Increase in fees generated by EMV Capital for the period to 31
December 2023, covering approximately half of the core Group's costs, whilst
providing infrastructure and services to the Group and its portfolio
companies.

·      Several portfolio companies achieving significant operational
milestones and key fundraisings.

·      Strengthened Board with the appointment of Charles Spicer as Chair
in May 2023, and key strategic hires to expand and deepen transactional and
portfolio management capabilities.

·      EMV Capital has recently received direct FCA authorisation,
enabling it to expand and deepen its corporate finance and fund management
activities.

·      Final results for the year to 31 December 2023 expected to be
announced by the end of May 2024.

(1) being the amounts associated with carried interest or profit share
agreements, typically between 10% and 20%

Strategy update

NetScientific remains focused on positioning itself as a leading deep tech
venture capital ("VC") investor, both in the UK and internationally. The Board
believes that the Company will be well placed to take advantage of the shift
in the VC industry towards deep tech opportunities across life sciences,
industrials, sustainability and other major sectors.

The Board has agreed key strategic objectives for 2024 and beyond, aiming to
build on the progress achieved last year. These include continuing to:

·      Grow the value of the NetScientific stakes (both Fair Value and
Capital Under Advisory) in portfolio companies - adding value for our
shareholders and syndicated investors through capital efficient investment in
core portfolio companies and active management (including the provision of
value creation services).

·      Progress the Group's fund management practice - this will provide
the Group with additional annual recurring revenue (in the form of management
fees) and carried interest return potential, create potential liquidity events
and scale the Group's funding capacity. The Group is actively exploring
opportunities to take on the management of two existing funds and, subject to
the agreement of terms, hopes to announce progress in respect of each in due
course.

·      Identify and create effective routes to exit for portfolio
companies - such exits should increase the Company's balance sheet strength,
allowing it to pursue its 'evergreen' investment strategy. The Group is
actively mapping out exit strategies for several portfolio companies. A
current example of this is set out in more detail below in respect of ProAxsis
Limited.

·      Build a resilient, high-performance firm - the Group is focused
on scaling and developing its team and operating platform, building it to an
institutional grade firm and allowing it to scale its investment and fund
management opportunities.

·      Achieve financial sustainability - the Group aims to move towards
core operating costs being covered through operational income (corporate
finance fees, value creation services fees, and fund management fees) and
secondary trading income (through the profitable exit of full or partial
holdings in portfolio companies) with the objective to achieve financial
independence for NetScientific.

To complement this strategy, the Board is in advanced stages of implementing a
carried interest scheme to incentivise and compensate key Group employees and
fund management teams in line with VC industry standards. This proposed scheme
is designed to help the Group to retain and attract talent as it continues to
grow and pursue exit and fund management opportunities. It is believed such a
scheme will further align management interests with those of the shareholders.
A further announcement with the details of such carried interest scheme will
be made in due course.

Portfolio highlights of 2023 and year to date

During the period, many of the Group's portfolio companies made substantial
operational and financial progress on their business plans. Key highlights
include:

·      ProAxsis Limited (81.9% direct holding and a further 8.7% advised
holding) - Strengthened its Board with the appointment of Alan Markey as Chair
and Professor Steven Myint as Non-Executive Director. The company is
intensifying the development of its Patient Point of Care product range,
leading to improved patient outcomes in respiratory disease, and exploring
strategic options to scale-up its market access.

In particular, the company has appointed EMV Capital and an external adviser
to explore options for a potential sale of the company (full or partial) to a
new strategic owner better placed to provide the funding, resourcing and
infrastructure to scale the business to its full potential. The company is
about to commence a marketing exercise and at this early stage is not in
negotiations with a potential purchaser. In the meantime, EMV Capital
continues its mandate to procure further third party funding for the company.
Further announcements will be made when appropriate.

·      Glycotest, Inc. (52 .7% direct stake and a further 5.8% advised
holding) - Secured a $1 million investment from Fosun Industrial Co., Limited,
alongside private investment of c.$800,000 syndicated by EMV Capital.
Completed enrolment in a clinical validation study for its HCC Panel. The
company is now positioned to move expeditiously through sample assay and data
analysis, with the objective of demonstrating superiority of the Glycotest HCC
Panel relative to AFP Tumour Market Test for the identification of patients
with curable early-stage liver cancer.

·      PDS Biotech Inc. (NASDAQ:PDSB) (3.5% direct holding) - Made
substantial clinical progress across its pipeline of targeted cancer
immunotherapies. Announced 75% of ICI-naïve patients alive at 36 months in
the NCI-led triple Phase 2 combination trial for advanced HPV16-positive
cancer patients. Also announced two year overall survival rate of 74% in Phase
2 trial of ICI-naïve HPV16-positive recurrent or metastatic head and neck
cancer patients.

·      Q-Bot Limited (14.3% direct holding and a further 32.4% advised
holding) - EMV Capital led a £3.5 million fundraising for expansion in the
UK, Europe, and the USA. Strengthening it Board with a proposed new Chair (in
advance stages) and Malcolm Groat as Investment Director. Achieved 10,000
property surveys and around 4,500 installations in December 2023; won
contracts in the Registered Social Housing sector; and commenced expansion
into the Netherlands, exploring Belgium as a next market.

·      Sofant Technologies Ltd (1.4% direct holding and a further 25%
advised holding) - Made significant progress on product commercialisation,
including advance orders with Inmarsat (now part of Viasat), with the European
Space Agency and a global aerospace company, targeting commercial product
launch in 2024. Previously completed a £1.2 million investment round, led by
EMV Capital.

·      Vortex Biotech Holdings Ltd (22.1% direct holding and a further
15.4% advised holding) - EMV Capital led and syndicated a £3.2 million
fundraise. Vortex expanded its lab facilities at the London Cancer Hub's
Innovation Gateway. Focused on generating studies with leading researchers
including Imperial College London and University of Cambridge to highlight
evidence of the technology. Appointed Paul Reeves as Chief Technology Officer.

·      Ventive Limited (10.9% direct holding and a further 24.9% advised
holding) - Secured c.£900,000 investment led by EMV Capital, non-dilutive
funding from the £1.5 million DESNZ grant, and a £100,000 UK Government
grant for 'net zero HVAC' systems. The company is scaling its team with
strategic senior hires, and is completing the design, test phase and factory
build for its modular heat pumps, as well as undergoing further enhancements
to its passive air ventilation product range.

·      DeepTech Recycling Technologies Limited (30 per cent. direct
holding) - Secured a first investment of £1 million in advance subscription
funding, led by EMV Capital, for commercialising its patented technology and
developing commercial opportunities focused on scalable chemical recycling
technology. The company is progressing its commercial operations with a
transition into new premises and key strategic hires.

·      Martlet Capital (1.0 per cent. direct holding and a further 5.9
per cent. advised holding) - Our strategic investment in Martlet Capital was
focused on obtaining options on investments coming from the Cambridge
high-tech cluster - one of the world's leading concentrations of deep tech
companies. Martlet continued to grow its investment portfolio, including
participation in funding rounds for Nu Quantum, Spotta, OctaiPipe and Xampla.
EMV Capital is working closely with Martlet Capital to deepen the relationship
between the two firms, expected to result in future projects and
co-investments.

Dr Ilian Iliev, Chief Executive Officer of NetScientific commented:

"We have significantly advanced our strategic goals, focusing on a sustainable
business model and enhancing the value of our portfolio holdings. We are
generating fees and executing on secondary exits. Our goal is now to leverage
our differentiated VC investment model at a critical time for the VC industry.

"With a more diversified investment approach, we are preparing for profitable
investment returns and strategic divestments that align with our growth
strategy. We are now also actively exploring new fund opportunities which fit
our criteria and expertise."

Investor Meet Company presentation

A Business, Strategy and Portfolio Update presentation will be delivered
online via Investor Meet Company on 19 March 2024 at 11.00 a.m.

The presentation is open to all existing and potential shareholders, or any
interested parties. Questions can be submitted pre-event via the Investor Meet
Company dashboard up until 18 March 2024 at 9.00 a.m, or at any time during
the live presentation.

Investors can sign up to Investor Meet Company for free to meet NetScientific
via:

https://www.investormeetcompany.com/netscientific-plc/register-investor
(https://www.investormeetcompany.com/netscientific-plc/register-investor)

 

-Ends-

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.

 

 NetScientific
 Ilian Iliev, CEO                                                            Via Belvedere Communications

 Panmure Gordon (UK) Limited (NOMAD and Broker)
 Emma Earl / Freddy Crossley / Will Goode / Mark Rogers (Corporate Finance)  +44 (0)20 7886 2500

 Rupert Dearden (Corporate Broking)

 Belvedere Communications

 John West / Llew 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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