REG - NetScientific PLC - Interim Results
28/09/2023 07:00
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RNS Number : 9099N NetScientific PLC 28 September 2023
Strictly embargoed until 07.00, 28 September 2023
NetScientific plc
("NetScientific" or "NSCI" or the "Company" or the "Group")
Interim Results for the six months ended 30 June 2023
NetScientific plc (AIM: NSCI), the deeptech and life sciences VC investment
group, is pleased to announce its interim results for the six months ended 30
June 2023.
Commenting on the results Dr. Ilian Iliev, CEO of NetScientific, said:
"During the first half of 2023 we have made significant progress and achieved
important milestones as we continue to successfully execute on our 'evergreen'
strategy, covering core operating costs through a combination of corporate
finance fees and value creation services fees via our wholly owned subsidiary,
EMV Capital. We have also demonstrated our ability to generate profitable
partial exits from our portfolio, even in the absence of a strong M&A or
IPO market. Despite challenging capital markets, third-party syndicated
investments have played a pivotal role, with EMV Capital syndicating funding
of £5.6 million to support ten of our portfolio companies.
"This essential funding for our portfolio companies has helped to facilitate
the execution of their growth strategies and preparations for forthcoming
scale-up investment rounds as well as supporting the appreciating fair value
of NetScientific's direct holdings. In such a challenging venture capital
landscape, characterised by macroeconomic volatility and industry
fluctuations, our in-house fundraising capacity distinguishes us from many of
our peers."
Operational and Financial Highlights
· Total Income: £1.15m, an increase of c.64% (H1 2022: £0.7m), of
which the majority is from the 'core' services provided by NetScientific and
EMV Capital.
· Group losses: from operations decreased slightly to £1.6m (H1
2022: £1.7m).
o Core Company and EMV Capital losses £0.4m (H1 2022: £0.7m).
o Losses at both subsidiary portfolio companies, Glycotest and ProAxsis,
have increased, reflecting further investments made by them in their growth
strategies.
· Fair Value and Net Assets: Portfolio valuation of £35.5m (2022:
£41.8m) and net assets of £18.1m (2022: £25.2m), with the decreases mainly
due to the decline of the PDS Biotechnology share price to $5.03 (at 30 June
2023) from $13.20 (at 31 December 2022). These declines were offset by a
£3.1m (11%) improvement in fair value in the non-listed portfolio, including
the following significant changes:
o Vortex Biotech Holdings up from £0.7m to £2.8m (a 300% increase of
£2.1m).
o DName-iT up from £0.1m to £1m (a 900% increase of £0.9m).
o Q-Bot up from £3.8 to £4.1m (an 8% increase of £0.3m).
· Capital Under Advisory (CUA): Increased c.11% to £26.1m (2022:
£23.5m), providing significant and growing potential future profit for the
Group from future realisations through performance fee arrangements.
· Profitable Partial Exits: A total of £117,000 profitable partial
exits of the Group's position in certain portfolio holdings, with further
profitable sales post-balance sheet leading to total proceeds of £895,000 in
the year to date. As well as providing non-dilutive funding to the Group, this
demonstrates our strategy and underpins valuations.
· Value Creation Services: Ongoing programs to accelerate several of
our portfolio companies through to value inflection points that offer strong
prospects for further fair value increases in the next 12-18 months, and the
potential for exits.
Summary and Outlook
Our strategic focus includes the advancement of our sustainable business model
and boosting the Net Asset Value and fair value of our portfolio companies.
This creates the potential for substantial investment returns from our
maturing portfolio through targeted growth and profitable exits. In
particular, our objectives include:
· Value Creation: We are actively progressing a few of our portfolio
companies through value creation stages, ensuring they achieve their full
potential.
· External Funding of Portfolio: We are facilitating and syndicating
external funding for our portfolio companies, to accelerate growth and
development. This also generates advisory, commission and performance fee
opportunities.
· Proactive Portfolio Management: We maintain a proactive approach to
portfolio management, protecting our positions while supporting management in
their business plan execution.
· Increased Fee Generation: We are actively working to enhance our
fee generation capabilities, ensuring a sustainable revenue stream to support
our growth objectives.
· Selective Group Divestments: We are strategically evaluating our
portfolio to identify opportunities for selective divestments, allowing us to
optimise our holdings and obtain investment returns.
· Funds Practice: We are exploring new fund opportunities in line
with our growth strategy.
In the first half of this year, we have made significant strides toward our
strategic objectives, positioning ourselves for further revenue and balance
sheet growth in 2024. We remain confident about the prospects of our Group,
driven by a robust investment model, and a strategic vision that positions us
at the forefront of the deeptech and life sciences VC industry.
Investor Meet Company Presentation
The Company will provide a live presentation relating to the Interim Results
via Investor Meet Company on 3 October 2023 at 11:00 a.m.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9:00 a.m. on the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet
NETSCIENTIFIC PLC via:
https://www.investormeetcompany.com/netscientific-plc/register-investor
(https://www.investormeetcompany.com/netscientific-plc/register-investor)
Investors who already follow NETSCIENTIFIC PLC on the Investor Meet Company
platform will automatically be invited.
The person responsible for arranging the release of this announcement on
behalf of the Company is Ilian Iliev, Chief Executive Officer of the Company.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE UK VERSION OF REGULATION (EU) NO 596/2014 WHICH IS PART OF UK LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
-ends-
For more information, please contact:
NetScientific
Dr. Ilian Iliev, CEO
Via Belvedere Communications
WH Ireland (NOMAD, Financial Adviser and Broker)
Chris Fielding / Darshan Patel
+44 (0)20 7220 1666
Belvedere Communications
John West / Llew
Angus
+44 (0) 203 008 6867
Email: nsci@belvederepr.com (mailto:nsci@belvederepr.com)
About NetScientific
NetScientific plc (AIM: NSCI) is a deeptech and life sciences VC investment
group with an international portfolio of innovative companies.
NetScientific identifies, invests in, and builds high growth companies in the
UK and internationally. The Company adds value through the proactive
management of its portfolio, progressing to key value inflection points, and
delivering investment returns through partial or full liquidity events.
NetScientific differentiates itself by employing a capital-efficient
investment approach, making judicial use of its balance sheet and syndicating
investments through its wholly owned VC subsidiary, EMV Capital. The group
secures a mixture of direct equity stakes and carried interest stakes in its
portfolio of companies, creating a lean structure that can support a large
portfolio.
NetScientific is headquartered in London, United Kingdom, and is admitted to
trading on AIM, a market operated by the London Stock Exchange.
www.netscientific.net (http://www.netscientific.net/)
CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
I am delighted to present an update on NetScientific's progress during the
first half of 2023. Our commitment to becoming a prominent deeptech venture
capital investor in the life sciences, sustainability, and industrials
sectors, both in the UK and internationally, continues to drive strong results
across our business and portfolio companies.
Operational Highlights
Within our own business we have made significant progress and achieved a
number of key milestones, including:
· Successfully executing our 'evergreen' sustainable strategy,
covering core operating costs through a combination of corporate finance fees,
value creation fees, and profits from partial exits of portfolio holdings.
· NetScientific has shown a reduction in losses during this period,
attributed to our capital-efficient model, while EMV Capital has remained
profitable. As a result, we have no immediate need to raise capital through
Company share placements.
· Substantial operational progress including expanding our team,
improving our 'playbooks', and continuing to enhance our fund management
practice.
In our portfolio companies:
· Syndicated investments have played a pivotal role, with EMV Capital
syndicated investors contributing £5.6m in third-party syndicated investments
to support ten portfolio companies, of which £2.6m was added to CUA.
· EMV Capital's fundraising support has secured essential funding for
our portfolio companies and facilitated the execution of their growth
strategies and preparations for forthcoming scale-up investment rounds. It has
also substantially contributed to the appreciating fair value of
NetScientific's direct holdings.
· Despite a 15% decrease in fair value, primarily attributed to the
decline in the share price of NASDAQ-listed PDS Biotechnology, we have seen
strong gains in the valuations of several other portfolio companies where we
have been proactively engaged. This validates our investment strategy of
portfolio diversification and active management.
· Value creation programs are ongoing to support and accelerate a
cohort of our portfolio companies as they progress towards key value
inflection points. This provides strong prospects for further fair value
increases in the next 12-18 months and increases the prospects for profitable
exits.
Financial Highlights
Reflecting our venture capital model, we report on both the 'core' operations
of our Group (composed of NetScientific and EMV Capital), and our 'portfolio
subsidiaries' (Glycotest and ProAxsis). We treat the latter as separately
managed portfolio companies, each now supported by external investors.
· Total income was £1.15m, an increase of c.64% (H1 2022: £0.7m)
o Income from the 'core' of NetScientific and EMV Capital increased by
c.100% to £1.0m (H1 2022: £0.5m), primarily from the near doubling of EMV
Capital revenues.
o A total of £117,000 profitable partial exits of the Group's position in
certain portfolio holdings, and further such exits post-balance sheet period
leading to total proceeds of £895,000 in the year to date. As well as
providing non-dilutive funding to the Group, this demonstrates our strategy
and underpins valuations.
· Group losses from operations decreased slightly to £1.6m (H1 2022:
£1.7m).
o Losses from operations at the 'core' decreased by c.43% to £394,000 (H1
2022: £695,000), with EMV Capital achieving a modest profit.
o Losses at both subsidiary portfolio companies, Glycotest and ProAxsis,
have increased, reflecting further investments made by them in their growth
strategies. While these losses are consolidated at Group level, the companies
are funded by third party sources and therefore do not require further funding
from the 'core'.
· The Directors' valuation of the Company's portfolio (fair value)
has decreased by 15% to £35.5m (2022: £41.8m) and net assets reduced to
£18.1m (2022: £25.2m).
o These decreases are mainly due to the decline of the PDS Biotechnology
share price to $5.03 (at 30 June 2023) from $13.20 (at 31 December 2022).
o These declines were offset by a £3.1m (11%) improvement in fair value in
the non-listed portfolio, including the following significant changes:
§ Vortex Biotech Holdings up from £0.7m to £2.8m (a 300% increase of
£2.1m)
§ DName-iT up from £0.1m to £1m (a 900% increase of £0.9m)
§ Q-Bot up from £3.8 to £4.1m (an 8% increase of £0.3m)
· CUA increased c.11% to £26.1m (2022: £23.5m), providing growing
potential future profit for the Group from future realisations.
· Working capital management remains prudent. The Group ended the
period within an existing £200,000 bank overdraft facility, with a negative
net cash balance of £93,000. The net cash position is £296,000 as of 26
September 2023. The Group has a further c.£5.2m held as readily realisable
quoted securities as at 26 September 2023.
Portfolio Review
Summary
Despite continued headwinds in the venture and capital markets, our portfolio
has seen some strong fundraising results, continued progress through value
inflection points, and fundraising support by EMV Capital. Following our
capital-efficient investment model, the portfolio consists of a combination of
direct investments and CUA, as summarised in the table below.
Portfolio Company Country Sector Stage Group Stake (%) CUA (%) Fair Value (m) CUA (m)
Jun 2023 Dec 2022 Jun 2023 Dec 2022
EMV Capital UK Venture capital Sales 100% - £3.5 £3.5 - -
Glycotest US Liver cancer diagnostics Late clinical 62.5% 3.0% £11.0 £11.0 £0.3 -
PDS Biotechnology -Nasdaq Listed US Immuno-oncology Late clinical 4.3% - £5.3 £14.7 - -
Q-Bot UK Robotics Sales 18.6% 33.9% £4.1 £3.8 £4.5 £4.4
ProAxsis UK Respiratory diagnostics Sales 100% - £3.5 £3.5 - -
Vortex Biotech Holdings Ltd UK/US Liquid biopsy oncology Sales 25.0% 13.9% £2.8 £0.7 £1.6 £0.7
EpiBone US Regenerative medicine Early clinical 1.5% 0.4% £1.1 £1.2 £0.2 £0.2
DName-iT BEL Lab technology Pre sales 36.9% 14.8% £1.0 £0.1 £0.4 £0.1
SageTech Medical Equipment UK Waste anaesthetic Sales 5.4% 25.9% £0.9 £0.9 £3.9 £3.8
Sofant Technologies UK Semiconductors satellite coms Early sales 1.7% 30.5% £0.5 £0.4 £5.3 £4.3
FOx Biosystems BEL Research equipment Sales 3.2% - £0.4 £0.6 - -
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 Investing 1.3% 7.7% £0.3 £0.3 £1.3 £1.3
PointGrab IL Smart building automation Sales 0.5% 21.0% £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 18.4% 35.3% £0.1 £0.1 £0.1 £0.1
DeepTech Recycling Limited UK Recycling Pre sales 30.0% - - - - £0.5
Oncocidia BEL Cancer therapeutics Early clinical 31.3% - - - - -
Wanda Health UK/US Digital health monitoring Sales - 90.4% - - £3.6 £3.2
Nanotech Industrial Solutions US Material science Sales - - - - £0.8 £0.8
TOTAL - - - - - £35.5 £41.8 £26.1 £23.5
Note: The 'Group stake %' amounts show direct holdings of the Group in the
issued share capital of each relevant company at 30 June 2023. These
percentages are likely to be diluted by future events, such as future dilutive
investment rounds, exercise of management options, and the conversion of
convertible securities.
The combination of direct and capital under advisory investments gives the
Group a greater influence in the portfolio companies, access to follow-on
funding through other investors, and enables greater financial and value-added
support for the portfolio companies.
The amounts under capital under advisory are associated with carried interest
or profit share agreements, typically between 10% and 20%. While it is
difficult to value or estimate the current value of these stakes, for
demonstration purposes an average 2x portfolio return on the capital under
advisory of £26.1m would result in carry returns to EMV Capital of over
£4.5m.
Selected portfolio company highlights
Glycotest, Inc. ("Glycotest") (https://www.glycotest.com/
(https://www.glycotest.com/) ) - 62.5% direct stake / 3% CUA
· Glycotest is a liver disease diagnostics company commercialising
new and unique blood tests for life threatening liver cancers and
fibrosis-cirrhosis. The Philadelphia-based company has exclusive, world-wide
rights to over 50 patent-protected serum protein biomarkers, assay technology,
and biomarker panels and algorithms that exploit novel sugar-based disease
signals. Fosun Pharma, a leading global pharmaceutical company, is a
co-investor in the business, and has a licence for the distribution of the
product in China.
· In August 2023 Glycotest completed subject enrolment and sample
collection in its HCC Panel clinical validation study.
· With one of the world's largest databanks in the liver cancer study
space, Glycotest is now positioned to complete sample assays and data analysis
when validated assays are available with the objective of establishing the
effectiveness of the HCC Panel test for the identification of patients with
curable early-stage liver cancer.
· Troubleshooting of the HCC Panel assays by an expert contract lab
was completed earlier in 2023 and a way forward to revised assays has been
identified. Delivery of effective assays for the HCC Panel is a priority for
2024.
· The Company continues to explore avenues for commercialisation,
having established important relationships with multiple key clinical opinion
leader sites through the HCC Panel clinical validation study.
· Glycotest continues to work closely with Fosun Pharma for the
successful development and realisation of returns from the business, including
through commercialisation of licensed products in China.
· In line with NetScientific's capital-efficient approach, in May
2023 EMV Capital launched a third party fundraising program to raise up to $1m
to complement funding provided by Fosun Pharma. To date $495,000 has been
raised for such fundraising program, though a secured convertible loan
agreement.
PDS Biotechnology Corporation ("PDS") (https://www.pdsbiotech.com/
(https://www.pdsbiotech.com/) ) (PDSB: NASDAQ) - 4.3% direct stake
· PDS Biotech is a clinical-stage immunotherapy company focusing on
cancer and infectious diseases. Using its Versamune® technology, it develops
therapies and vaccines that activate T-cells and enhance immune responses. Its
primary focus is on HPV-related head and neck cancers. PDS Biotech has four
Phase 2 trials with partners such as Merck, the National Cancer Institute, MD
Anderson, and Mayo Clinic, and an infectious disease vaccine program. The
company also plans to launch a Phase 3 clinical trial for one of its programs.
· NetScientific backed PDS Biotechnology in 2014 prior to its NASDAQ
listing.
· PDS has continued to make progress in 2023 in its ambitious
clinical development program, including:
o Conclusion of an exclusive global license agreement for Investigational
IL-12 Tumor-Targeted Cytokine from Merck KGaA, Darmstadt, Germany (January
2023).
o Successful meeting with FDA for triple combination of PDS0101, PDS0301 and
a commercial immune checkpoint inhibitor (February 2023) and announcement of
plan to initiate a Phase 3 study evaluating PDS0101 in combination with
KEYTRUDA® in head and neck cancer (March 2023).
o Presentation of interim data at the leading 2023 American Society of
Clinical Oncology (ASCO) annual meeting, demonstrating a 12-month overall
survival rate of 87% (June 2023).
o Addition of PDS Biotech to Russell 2000® and Russell 3000® Indexes (June
2023).
· The period has been characterised by continued weakness in the US
biotech public markets, and respectively PDS' share price has remained at
relatively low levels.
ProAxsis Ltd ("ProAxsis") (https://proaxsis.com/ (https://proaxsis.com/) ) -
100% direct stake
· ProAxsis is a commercial medtech company, with a focus on
respiratory diagnostics, a growing global health burden. ProAxsis uses its
proprietary ProteaseTag® technology to develop laboratory-based assays and
rapid point-of-care tests for the measurement of inflammatory biomarkers
associated with chronic respiratory diseases such as Chronic Obstructive
Pulmonary Disease (COPD), cystic fibrosis and bronchiectasis. The company is a
spin-out of Queens University Belfast.
· ProAxsis continues to benefit from ongoing sales of its Neatstik
product, and several potential contracts for lab services with global pharma
in the pipeline.
· Following a strategic review at the start of the year, the ProAxsis
board determined to refocus the company on its core respiratory capabilities,
cutting out non-core activities, pausing its US laboratory initiative, and
implementing various related team and cost reduction measures resulting in
c.50% decreased cost base.
· The company has recently appointed Alan Markey as its new Chair.
Alan brings 25 years' executive experience in the international pharmaceutical
and medical devices sectors, and specific experience in taking diagnostic
products to market.
· ProAxsis is now developing a highly novel, digitally-enabled
version of the company's point-of-care test (NEATstik®) for ongoing
monitoring of patients with chronic respiratory disease. To accelerate this,
it is exploring a partnership with telehealth specialist Wanda Health, another
portfolio company.
· To support this development program, the company is partnering with
clinical experts at Imperial College, London, one of the largest COPD expert
centres in the world.
· The £500,000 loan facility provided by AB Group in February 2023
remains in place.
· In line with NetScientific's capital-efficient approach, in July
2023 EMV Capital launched a third party fundraising program to raise up to
£500,000. To date c.£200,000 has been raised under such fundraising program,
though a convertible loan agreement, including £35,000 from ProAxsis
directors.
· The company also won grants of £100,000 and £30,000 from the
Regional Economic Development Agency for NI and Association of British
HealthTech Industries to develop advanced respiratory products and to develop
regulatory strategies.
· The company is now focused on implementing its commercial strategy,
through a combination of sales of existing products, and progressing a route
to launch the digitally-enabled Neatstik.
Q-Bot Ltd ("Q-Bot) (https://q-bot.co (https://q-bot.co) ) - direct stake 18.6%
/ CUA 33.9%
· Q-Bot is an award-winning robotics developer for construction
retrofit. Its AI-powered robotic tools are used to inspect, monitor, and
retrofit insulation for residential buildings. Specifically, Q-Bot is focused
on the unmet market need for underfloor insulation, helping to reduce fuel
poverty in social housing, improve energy efficiency, and align with new
regulations around decarbonisation. As a market leader, Q-Bot is now scaling
and seeking to capture a significant share of this market in the UK and
internationally.
· In July 2023, EMV Capital led a successful closing of a £3.5m
investment round to fund the next stage of growth, from a mixture of existing
and new investors.
· The company continues to make progress in its international
expansion strategy, with specific initiatives for growth into the EU and US.
· The company's revenues increased 56% in its most recent financial
year to March 2023, and are expected to continue growing.
Vortex Biotech Holdings Ltd ("Vortex") (https://vortexbiosciences.com/
(https://vortexbiosciences.com/) ) - direct stake 25.0% / CUA 13.9%
· Vortex's core technology allows for the capture and isolation of
high-quality Circulating Tumour Cells ("CTCs") from blood samples. Its mission
is to be the innovation leader in liquid biopsy CTC capture technology that
improves therapeutic decisions and saves lives. This is expected to contribute
to a shift in how cancer can be treated and monitored in the growing liquid
biopsy market. Vortex was founded upon research at UCLA, and is now dually
based in London and San Francisco.
· In June 2023 EMV Capital led a £3.2m EIS investment round into
Vortex, which has allowed further acceleration of the roadmap.
· The company is progressing its service offering for biopharma to
support the development of biomarker-driven personalised medicines.
· It has launched a CTC Centre of Excellence at The London Cancer
Hub's Innovation Gateway, on the same site as the Institute of Cancer Research
and the Royal Marsden NHS Foundation Trust.
· Vortex also announced in September 2023 the launch of a Technical
Feasibility Study to characterise a fully integrated "sample-to-result"
workflow combining Vortex's VTX-1 platform, and that of their partner AxonDx
(http://axondx.com/) to isolate, count, and characterise CTCs in cancer
patient samples.
· A recent study by the Nice University Hospital compared several CTC
liquid biopsy platforms. This peer-reviewed evaluation concluded that Vortex'
VTX-1 platform is superior across a range of parameters critical for future
commercial adoption. 1
1 Martel et al (2023) Assessment of Different Circulating Tumor Cell
Platforms for Uveal Melanoma: Potential Impact for Future Routine Clinical
Practice - PubMed (nih.gov) (https://pubmed.ncbi.nlm.nih.gov/37446253/)
DName-iT (https://dnameit.com (https://dnameit.com) ) - 36.9% direct stake /
14.8% CUA
· A University of Leuven spin-out, DName-iT has developed a platform
to avoid sample authentication errors and to correct for sample contamination
in genetic sequencing laboratory tests. DName-iT operates at the cross-roads
of major, growing markets of liquid biopsy, laboratory services, clinical
trials, and NGS. DName-iT estimates that up to 2% of specimens are
mis-identified through laboratories' workflows, leading to potentially fatal
consequences for patients.
· Following the CetroMed acquisition by NetScientific, EMV Capital's
value creation team took over the development of the business, refreshed its
business plan, and has worked alongside the founder and other experts.
· EMV Capital advised on the reorganisation of the company, and on
its recent £500,000 EIS investment round, with the participation of EMV
Capital investors and Belgium's Gamma Frisius Fund. NSCI has an effective
ownership of 46.1% through CetroMed's ownership of 61.5% in DName-iT.
University of Leuven is a co-investor in the project.
· Kevin Dean, an EMV Capital Venture Partner, joined the company as
Interim CEO, driving the company through its pilots program and towards the
next investment round.
· DName-iT also setup a collaboration partnership with ProAxsis as
manufacturing partner, helping to scale the company in a capital-efficient
way.
· There is an EU Laboratory pilot underway to validate the
technology, with regulatory planning, and a go-to-market strategy for 2024.
Sofant Technologies (https://sofant.com (https://sofant.com) ) - 1.7% direct
stake / 30.5% CUA
· An Edinburgh University spin-out, the company is developing phased
array antennas for satellite for the rapidly growing low-orbit satellite
telecommunications market. Leveraging its innovative technology, Sofant
asserts a substantial up to 70% energy efficiency advantage and significant
cost savings compared to its competitors, due to its modular design. The
company is executing a €7.3m contract with the UK Space Agency and the
European Space Agency.
· In May 2023, Sofant unveiled a substantial partnership with
Inmarsat, a global leader in satellite communications, which involves
non-dilutive funds in Non-Recurring Engineering and a substantial pre-purchase
commitment by Inmarsat (recently acquired by Viasat).
· EMV Capital provided further support by leading a follow-on EIS
investment of £2.3m, including £1.3m from EMVC investors.
Ventive (https://ventive.co.uk (https://ventive.co.uk) ) - 18.4% direct stake
/ 35.3% CUA
· Ventive specialises in passive and energy-efficient ventilation
systems for schools and a unique modular heat pump for newbuild residential
applications. Once in production, its innovative design for heat pumps, which
utilise phase change material for heat transfer, is expected to position it
well in the growing market for heat pumps. The company is focused on growth in
two markets segments of high-priority for the sustainability agenda: air
quality and sustainable heating.
· Notable developments post-investment include an accelerated
development program with Clear Blue Energy and QM Systems, a pre-purchase
agreement with a leading non-UK heat pump distributor, and increased sales in
the Natural Ventilation range.
· Following the September 2022 restructure and investment round led
by EMV Capital, the company has focused on execution of the heatpump project
and revenue growth from its passive air ventilation project.
· Ventive's passive air ventilation system has now been delivered to
over 30 schools and five leisure centres, achieving excellent air quality
results. Market demand has continued to increase with minimal marketing spend
by the company.
· The heatpump project has progressed well, with prototypes now being
tested and the company building a book for potential buyers.
· Ian Cooke, a Venture Partner at EMV Capital, joined as Chair in
August 2023, as part of the company's preparation for further investment and
growth.
DeepTech Recycling Technologies - 30% direct stake
· In December 2022, Deeptech Recycling Technologies acquired the
majority of assets from the administrator of Recycling Technologies Limited,
which company had aborted an AIM IPO that had been targeted for admission in
early 2022. Recycling Technologies had developed advanced and environmentally
sound technologies for recycling mixed plastic waste, generating valuable
naptha, lubricants, and feedstock for the plastics industry. During 2023,
Deeptech Recycling Technologies, with support from EMV Capital's value
creation team, has focused on consolidating assets and intellectual property,
further R&D, assessing market opportunities, and starting the company's
commercial roadmap.
· Commercial progress includes:
o Successful commercial discussions with a company in the plastic waste
space, with approval to start a proof-of-concept project to demonstrate the
technology.
o Discussions with various private and public funding sources for funding
support for future plants in the UK.
o Discussions with UK and EU parties for potential proof-of-concept and
technical feasibility projects to demonstrate management and recycling of
different waste streams.
Board and management
As we embark on the next phase of our development, significant changes have
been made to our Board and management team. These changes demonstrate our
commitment to strengthening our leadership and enhancing our capabilities and
corporate governance.
· Dr. Charles Spicer has joined our Board as the Non-Executive Chair,
bringing a wealth of experience from the City, complementing the Board's
skillset.
· Dr. Jonathan Robinson, who previously served as Interim
Non-Executive Chair, has transitioned into the role of Senior Independent
Director.
· Prof. Stephen Smith, after a seven-year tenure with NetScientific,
stepped down on 30 June 2023 from his position as a Non-Executive Director. We
thank him for his service and contributions to the Company.
In line with our commitment to growth and excellence, we are actively
refreshing our panel of advisers and venture partners. This initiative is
geared towards bolstering the Group's capacity to provide comprehensive
support to our portfolio companies.
We have also made planned additions to our management team. These new members
bring valuable expertise in project management, human capital management, and
other crucial infrastructure skills. Their contributions will be instrumental
in driving our organisation forward as we continue to pursue our goals.
Summary and Outlook
Our strategic focus includes the advancement of our sustainable business model
and boosting the Net Asset Value and Fair Value of our portfolio companies.
This creates the potential for substantial investment returns from our
maturing portfolio through targeted growth and profitable exits. In
particular, our objectives include:
· Value Creation: We are actively progressing a cohort of our
portfolio companies through value creation stages, ensuring they achieve their
full potential.
· External Funding of Portfolio: We are facilitating and syndicating
external funding for our portfolio companies, to accelerate growth and
development. This also generates advisory, commission and performance fee
opportunities.
· Proactive Portfolio Management: We maintain a proactive approach to
portfolio management, protecting our positions while supporting management in
their business plan execution.
· Increased Fee Generation: We are actively working to enhance our
fee generation capabilities, ensuring a sustainable revenue stream to support
our growth objectives.
· Selective Group Divestments: We are strategically evaluating our
portfolio to identify opportunities for selective divestments, allowing us to
optimise our holdings and obtain investment returns.
· Funds Practice: We are exploring new fund opportunities in line
with our growth strategy.
In the first half of this year, we have made significant strides towards our
strategic objectives, positioning ourselves for further revenue and balance
sheet growth in 2024. We remain confident about the prospects of our Group,
driven by a robust investment model, and a strategic vision that positions us
at the forefront of the deeptech and life sciences VC industry.
Dr. Ilian Iliev
Chief Executive Officer
28 September 2023
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2023
NetScientific plc
Unaudited Unaudited
Six months Six months
ended 30 June ended 30 June
2023 2022
Continuing Operations Notes £000s £000s
Total Income 1,154 656
Revenue 4 770 391
Cost of sales (53) (30)
Gross profit 717 361
Other operating income 5 384 265
Research and development costs (808) (814)
Selling, general and administrative costs (1,840) (1,427)
Other costs (67) (103)
Loss from operations (1,614) (1,718)
Finance income 22 51
Finance expense (45) (20)
Loss before taxation (1,637) (1,687)
Income Tax 17 29
Total loss for the period from continuing operations (1,620) (1,658)
Loss attributable to:
Owners of the parent 6 (1,364) (1,394)
Non-controlling interests (256) (264)
(1,620) (1,658)
Basic and diluted loss per share attributable to owners of the parent during
the period:
6
Total loss for the period from continuing operations (5.8p) (6.6p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Unaudited Unaudited
Six months Six months
ended 30 June ended 30 June
2023 2022
Notes £000s £000s
Loss for the period (1,620) (1,658)
Items that may be subsequently reclassified to profit or loss in subsequent
periods:
Exchange differences on translation of foreign operations (272) 352
Change in fair value of investments classified as fair value through other
comprehensive income
(5,698) (2,873)
Total comprehensive profit/(loss) for the period (7,590) (4,179)
Attributable to:
Owners of the parent (7,376) (3,887)
Non-controlling interests (214) (292)
(7,590) (4,179)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Unaudited Audited
30 June 31 December
2023 2022
Notes £000s £000s
Assets
Non-current assets
Property, plant and equipment 160 144
Right-of-use assets 338 420
Intangible assets 7 3,423 3,367
Equity investments classified as FVTOCI* 8 17,622 22,743
Derivative financial assets classified as FVTPL** 9 355 693
Total non-current assets 21,898 27,367
Current assets
Inventories 82 76
Trade and other receivables 10 1,002 658
Cash and cash equivalents 11 61 852
Total current assets 1,145 1,586
Total assets 23,043 28,953
Liabilities
Current liabilities
Bank overdraft 11 (154) -
Trade and other payables 12 (2,980) (2,457)
Lease liabilities (150) (168)
Loans and borrowings 13 (464) (99)
Total current liabilities (3,748) (2,724)
Non-current liabilities
Lease liabilities (207) (268)
Loans and borrowings 13 (993) (719)
Total non-current liabilities (1,200) (987)
Total liabilities (4,948) (3,711)
Net assets 18,095 25,242
Issued capital and reserves
Attributable to the parent
Called up share capital 14 1,174 1,174
Warrants 42 42
Share premium account 74,175 74,175
Capital reserve account 237 237
Equity investment reserve 7,579 13,277
Foreign exchange and capital reserve 1,107 1,421
Retained earnings (65,787) (64,486)
Equity attributable to the owners of the parent 18,527 25,840
Non-controlling interests (432) (598)
Total equity 18,095 25,242
* Fair value through other comprehensive income
** Fair value through profit and loss
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Shareholders' equity
Share capital Warrants Share premium Capital reserve Equity investment reserve Retained earnings Foreign exchange and capital reserve Total Non-controlling interests Total equity
£000s £000s £000s £000s £000s £000s £000s £000s £000s £000s
1 January 2022 1,056 42 72,792 237 4,504 (61,499 1,368 18,500 9 18,509
Loss for the period - - - - - (1,394) - (1,394) (264) (1,658)
Other comprehensive income -
Foreign exchange differences
- - - - - - 380 380 (28) 352
Change in fair value during the period
- - - - (2,873) - - (2,873) - (2,873)
Total comprehensive income - - - - (2,873) (1,394) 380 (3,887) (292) (4,179)
Issue of share capital 112 - 1,388 - - - - 1,500 - 1,500
Cost of share issue - - (56) - - - - (56) - (56)
Share-based payments - - - - - 62 - 62 - 62
30 June 2022 1,168 - 74,124 237 1,631 (62,831) 1,748 16,119 (283) 15,836
Loss for the period - - - - - (1,700) - (1,700) (316) (2,016)
Other comprehensive income -
Foreign exchange differences - - - - - - (327) (327) 1 (326)
Change in fair value during the period - - - - 11,646 - - 11,646 - 11,646
Total comprehensive income - - - - 11,646 (1,700) (327) 9,619 (315) 9,304
Issue of share capital 6 - 51 - - - - 57 - 57
Share-based payments - - - - - 45 - 45 - 45
31 December 2022 1,174 42 74,175 237 13,277 (64,486) 1,421 25,840 (598) 25,242
Loss for the period - - - - - (1,364) - (1,364) (256) (1,620)
Other comprehensive income -
Foreign exchange differences
- - - - - - (314) (314) 42 (272)
Change in fair value during the period
- - - - (5,698) - - (5,698) - (5,698)
Total comprehensive income - - - - (5,698) (1,364) (314) (7,376) (214) (7,590)
Decrease in subsidiary shareholding
- - - - - 26 - 26 380 406
Share-based payments - - - - - 37 - 37 - 37
30 June 2023 1,174 42 74,175 237 7,579 (65,787) 1,107 18,527 (432) 18,095
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Notes Unaudited Unaudited
Six months Six months
ended 30 June ended 30 June
2023 2022
£000s £000s
Cash flows from operating activities
Loss after income tax (1,620) (1,658)
Adjustments for:
Depreciation of property, plant and equipment 25 20
Depreciation of right to use assets 82 16
Amortisation of intangibles 124 105
Estimated credit losses on trade receivables 18 18
Change in fair value of financial assets classified as FVTPL (342) (179)
Capitalisation of development costs (180) (280)
Share-based payments 37 62
R&D tax credit - (21)
Foreign exchange gain/(loss) (205) 233
Share of associate loss 8 -
Finance income (22) (61)
Finance costs 38 4
Income Tax (17) (29)
(2,054) (1,770)
Changes in working capital
(Increase) in inventories (6) (4)
Decrease/(Increase) in trade and other receivables (177) 473
Increase in trade and other payables 629 169
Cash used in operations (1,608) (1,132)
Income tax received - -
Net cash used in operating activities (1,608) (1,132)
Cash flows from investing activities
Purchase of property, plant and equipment (41) (24)
Purchase of equity investments classified as FVTOCI (4) -
Purchase of derivative financial assets classified as FVTPL (43) (593)
Disposal of subsidiary stake, net of cash disposed of 123 -
Disposal of equity investments classified as FVTOCI 117 -
Net cash from/(used in) investing activities 152 (617)
Cash flows from financing activities
Lease payments (94) (19)
Repayment of borrowings (44) (35)
Proceeds of loan 659 -
Proceeds from share issue - 1,500
Share issue cost - (56)
Net cash from financing activities 521 1,390
(Decrease)/Increase in cash and cash equivalents (935) (359)
Cash and cash equivalents at beginning of the period 852 2,710
Exchange differences on cash and cash equivalents (10) 12
Bank overdraft and cash equivalents at end of the period 11 (93) 2,363
NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED 30 JUNE 2023
1. ACCOUNTING POLICIES
Basis of preparation
The interim financial information, which is unaudited, have been prepared on
the basis of the accounting policies expected to apply for the financial year
to 31 December 2023 and in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006. Policies have
been consistently applied to all periods presented apart from where new
standards have been adopted during the period, see below for changes in
accounting policies.
The financial information for the period ended 30 June 2023 does not
constitute the full statutory accounts for that period. The Annual Report and
Financial Statements for the year ended 31 December 2022 have been filed with
the Registrar of Companies.
The Independent Auditor's Report on the Report and Financial Statements for
the year ended 31 December 2022 was qualified as Directors did not perform
year end valuations for some of the hard to value investments worth c.£1
million for the year ended 31 December 2022.
Going Concern
The 2022 Annual Report audit report drew attention to the material uncertainty
relating to going concern as follows:
"We draw attention to note 2 to the financial statements, which indicates the
Directors' considerations over going concern. The going concern of the Group
and Parent Company is dependent on additional funding being raised which has
not yet been executed. As stated in note 2, these events or conditions, along
with other matters as set forth in note 2, indicate that a material
uncertainty exists that may cast significant doubt on the Group and the Parent
Company's ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate."
In the 2022 Annual Report we set out the various options underpinning the
going concern assumptions.
The Directors are confident that NetScientific remains a going concern, and it
is appropriate to prepare the financial statements on this basis. Accordingly,
the financial statements do not include any adjustments that would be
necessary if the Group and Company were unable to continue as a going concern.
Business Combinations
The Group recognises identifiable assets acquired and liabilities assumed in a
business combination, regardless of whether they have been previously
recognised in the acquiree's financial statements prior to the acquisition.
Assets acquired and liabilities assumed are generally measured at their
acquisition-date fair values. Goodwill is stated after separate recognition of
identifiable intangible assets. It is calculated as the excess of the sum of:
a) fair value of consideration transferred; b) the recognised amount of any
non-controlling interest in the acquiree; and c) acquisition-date fair value
of any existing equity interest in the acquiree, over the acquisition-date
fair values of identifiable net assets. If the fair values of identifiable net
assets exceed the sum calculated above, the excess amount (i.e. gain on a
bargain purchase) is recognised in profit or loss immediately.
Change in accounting policies
The Group has applied the same accounting policies and methods of computation
in its interim consolidated financial statements as in its 2022 annual
financial statements, except for the following amendments which apply for the
first time in 2023. However, not all are expected to impact the Group as they
are either not relevant to the Group's activities or require accounting which
is consistent with the Group's current accounting policies.
The following new standards and amendments are effective for the period
beginning 1 January 2023:
· IFRS 17 Insurance Contracts;
· Disclosure of Accounting Policies (Amendments to IAS 1 Presentation
of Financial Statements and IFRS Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8 Accounting
policies, Changes in Accounting Estimates and Errors);
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12 Income Taxes); and
· International Tax Reform - Pillar Two Model Rules (Amendment to IAS
12 Income Taxes)
IFRS 17 Insurance Contracts
IFRS 17 was issued by the IASB in 2017 and replaces IFRS 4 for annual
reporting periods beginning on or after 1 January 2023.
IFRS 17 introduces an internationally consistent approach to the accounting
for insurance contracts. Prior to IFRS 17, significant diversity has existed
worldwide relating to the accounting for and disclosure of insurance
contracts, with IFRS 4 permitting many previous accounting approaches to be
followed.
The Group carried out an assessment of its contracts and operations and
concluded that the adoption of IFRS 17 has had no effect on the interim
condensed consolidated financial statements.
Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice Statement 2)
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice
Statement 2 Making Materiality Judgements, providing guidance to help entities
meet the accounting policy disclosure requirements. The amendments aim to make
accounting policy disclosures more informative by replacing the requirement to
disclose 'significant accounting policies' with 'material accounting policy
information'. The amendments also provide guidance under what circumstance,
the accounting policy information is likely to be considered material and
therefore requiring disclosure.
These amendments had no effect on the interim condensed consolidated financial
statements of the Group as they relate to disclosures of accounting policies
in complete financial statements rather than interim financial statements. The
amendments are expected to be applicable for the accounting policy disclosures
in the annual consolidated financial statements of the Group.
Definition of Accounting Estimates (Amendments to IAS 8 Accounting policies,
Changes in Accounting Estimates and Errors)
The amendment to IAS 8, which added the definition of accounting estimates,
clarifies that the effects of a change in an input or measurement technique
are changes in accounting estimates, unless resulting from the correction of
prior period errors. These amendments clarify how entities make the
distinction between changes in accounting estimate, changes in accounting
policy and prior period errors.
These amendments had no effect on the interim condensed consolidated financial
statements of the Group.
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12 Income Taxes)
In May 2021, the IASB issued amendments to IAS 12, which clarify whether the
initial recognition exemption applies to certain transactions that result in
both an asset and a liability being recognised simultaneously (e.g. a lease in
the scope of IFRS 16). The amendments introduce an additional criterion for
the initial recognition exemption, whereby the exemption does not apply to the
initial recognition of an asset or liability which at the time of the
transaction, gives rise to equal taxable and deductible temporary differences.
These amendments had no effect on the interim condensed consolidated financial
statements of the Group.
International Tax Reform - Pillar Two Model Rules (Amendment to IAS 12 Income
Taxes)
In December 2021, the Organisation for Economic Co-operation and Development
(OECD) released a draft legislative framework for a global minimum tax that is
expected to be used by individual jurisdictions. The goal of the framework is
to reduce the shifting of profit from one jurisdiction to another in order to
reduce global tax obligations in corporate structures. In March 2022, the OECD
released detailed technical guidance on Pillar Two of the rules.
The IASB issued the final Amendments (the Amendments) International Tax Reform
- Pillar Two Model Rules, in response to stakeholder concerns, on 23 May 2023.
The Amendments introduce a temporary exception to entities from the
recognition and disclosure of information about deferred tax assets and
liabilities related to Pillar Two model rules. The Amendments also provide for
additional disclosure requirements with respect to an entity's exposure to
Pillar Two income taxes.
The amendments to IAS 12 were effective immediately, however, the amendments
have not yet been endorsed for adoption in the Group's jurisdiction, and
therefore, the Group is unable to apply them as at 30 June 2023.
Therefore, for the half year ended 30 June 2023, the Group has developed an
accounting policy, in accordance with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors to not account for deferred taxes related to
Pillar Two income taxes. The Group believes this policy results in the most
relevant and reliable information. The effect of the application of this
accounting policy is expected to be consistent with the effect of the
amendments to IAS 12 when they are adopted by the Group.
The Group does not expect any other standards issued by the IASB, but not yet
effective, to have a material impact on the group.
Use of estimates and judgements
There have been no material revisions to the nature and estimate assumptions
as reported in prior periods, including:
(a) Impairment of goodwill;
(b) The valuation of intangibles;
(c) The valuation of equity investments; and
(d) The capitalisation of development costs
2. SIGNIFICANT EVENTS AND TRANSACTIONS
Global Environment
The Group is operating in an increasingly uncertain macroeconomic environment.
The after-effects of the pandemic, significant turmoil in the tech and capital
sectors, the geopolitical concerns, most notably the conflict in Ukraine, and
the more recent economic pressures are causing additional market volatility
and uncertainty.
The carrying value of the Group's assets have been assessed in light of
current events and the long-term impacts that these may have on the
investments of the Group. Overall, we believe that the sectors the Group is
active in are in a strong position and it was not seen as necessary to impair
the carrying value of any assets further. The recoverable amount was
determined based on values in use, which utilises current budgets/reforecasts
and cash flow projections. We are closely monitoring and managing the events,
and will take further actions if required, as the situation continues to
evolve. Cash planning and management is in place for all businesses, which
have been stress tested based on a number of scenarios. Importantly as a
result of the various factors, NetScientific and several of its portfolio
companies are seeing new sustainable opportunities, offering potential for
future growth.
3. SEGMENTAL REPORTING
An operating segment is a component of the group that engages in business
activities from which it may earn revenues and incur expenses, for which
separate financial information is available and whose operating results are
evaluated and as identified by Board of Directors.
The Board of Directors assess the performance of the operating segment using
financial information which is measured and presented in a manner consistent
with that in the financial statements.
Revenue from contracts with customers by segment
30 June 2023 Delivered Goods Service Fees Total
£000s £000s £000s
EMV Capital - 699 699
ProAxsis 30 41 71
30 740 770
30 June 2022 Delivered Goods Service Fees Total
£000s £000s £000s
EMV Capital - 276 276
ProAxsis 67 48 115
67 324 391
Total Loss for the period by segment
Unaudited Unaudited
Six months Six months ended 30 June
ended 30 June 2022
2023 £000s
£000s
NetScientific (403) (541)
EMV Capital 9 (154)
ProAxsis (559) (236)
Glycotest (712) (654)
Cetromed 45 (73)
(1,620) (1,658)
The above losses reflect investment in R&D by Glycotest and ProAxsis,
which add value for the future through new product and clinical trials.
ProAxsis has seen further investment through proportional Grant funding. The
investment by the Group has been done through shareholder loans, which are
expected to be repaid in due course.
4. REVENUE
Geographic breakdown of revenue from contracts with
customers:
30 June 2023 Delivered Goods Service Fees Total
£000s £000s £000s
United Kingdom 2 740 742
Europe 3 - 3
Rest of the World 25 - 25
30 740 770
30 June 2022 Delivered Goods Service Fees Total
£000s £000s £000s
United Kingdom - 324 324
Europe 4 - 4
Rest of the World 63 - 63
67 324 391
Total Income is the sum of revenue and other
operating income.
5. OTHER OPERATING INCOME
Unaudited Unaudited
Six months Six months ended 30 June
ended 30 June 2022
2023 £000s
£000s
Fair value movement during the period on convertible debt - 179
Gain on available for sale investments 64 -
Gain on sale of subsidiary stake 276 -
R&D tax credit above the line - 21
Miscellaneous income 44 65
384 265
6. LOSS PER SHARE
The basic and diluted loss per share is calculated by dividing the loss for
the financial period by the weighted average number of ordinary shares in
issue during the period. Potential ordinary shares from outstanding options at
30 June 2023 of 1,669,540 (30 June 2022: 1,120,010; 31 December 2022:
1,431,050) are not treated as dilutive as the group is loss making.
Unaudited Unaudited
Six months Six months
ended 30 June ended 30 June
2023 2022
£000s £000s
Loss attributable to equity holders of the Company
Continuing operations (1,364) (1,394)
Total Loss attributable to equity holders of the Company (1,364) (1,394)
Number of shares
Weighted average number of ordinary shares in issue 23,488,148 21,146,591
In the prior year on 29 June 2022 the Company issued 2,238,807 of 5p ordinary
shares at 67p per share, raising gross funds of £1,500k and net funds of
£1,444k.
The total number of voting rights in the Company at 30 June 2023 is 23,488,148
5p ordinary shares (30 June 2022: 23,360,660, 31 December 2022:
23,488,148.
7. INTANGIBLE ASSETS
Goodwill Carry Interest Arrangements Development costs Investment Acquisition Costs Patents Total
£000s £000s £000s £000s £000s £000s
Cost
At 1 January 2022 669 1,627 922 17 50 3,285
Additions - - 280 - - 280
At 30 June 2022 669 1,627 1,202 17 50 3,565
Additions - - 268 - - 268
At 31 December 2022 669 1,627 1,470 17 50 3,833
Additions - - 180 - - 180
At 30 June 2023 669 1,627 1,650 17 50 4,013
Accumulated amortisation and impairment
At 1 January 2022 - 216 18 - 6 240
Amortisation charge - 81 19 - 4 105
At 30 June 2022 - 297 37 - 10 344
Amortisation charge - 82 37 - 3 122
At 31 December 2022 - 379 74 - 13 466
Amortisation charge - 81 40 - 3 124
At 30 June 2023 - 460 114 - 16 590
Net book value
At 30 June 2023 669 1,167 1,536 17 34 3,423
At 31 December 2022 669 1,248 1,396 17 37 3,367
At 30 June 2022 669 1,330 1,165 17 40 3,221
The main factors leading to the recognition of these intangibles are resulting
from the acquisition by NetScientific of EMV Capital, ProAxsis and Cetromed.
ProAxsis acquired a key patent as part of the buyout of the founders and
Queens University for £50k which will be amortised over the economic life of
the patent. A further £180k of ProAxsis development costs have been
capitalised during the period taking the total capitalised to £1,650k in line
with the accounting policy as certain projects now meet all the criteria for
development costs to be recognised as an asset as it is probable that future
economic value will flow to the Group.
8. EQUITY INVESTMENTS CLASSIFIED AS FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME (FVTOCI)
NetScientific makes direct investments into portfolio
companies through a mixture of equity and loans. The tables below outline the
Group's positions.
Represents equity securities
Unaudited Audited
Six months Year ended
ended 30 June 31 December
2023 2022
£000s £000s
Opening balance at start of period 22,743 11,516
Additions 4 555
Disposals (117) (451)
Conversion of financial assets classified as FVTPL 400 2,004
Change in fair value during the period (5,408) 9,119
Closing balance at end of period 17,622 22,743
Name Country of incorporation % of issued share capital Currency denomination Unaudited
Six months Audited
ended 30 June 2023 Year ended 31 December 2022
£000s £000s
PDS Biotechnology Corp USA 4.4% US$ 5,297 14,680
Q-Bot UK 18.6% UK£ 4,112 3,728
Vortex Biotech Holdings UK 30.0% UK 2,800 300
Epibone, Inc. USA 1.5% US$ 1,116 1,179
DName-iT Holdings UK 49.2% UK 1,372 -
SageTech Medical Equipment
UK 5.5% UK£ 887 887
Sofant Technologies UK 1.5% UK 453 402
Fox Biosystems NV BEL 4.3% EUR€ 479 495
CytoVale, Inc. USA 1.0% US$ 393 415
G-Tech Medical, Inc. USA 3.8% US$ 335 354
Martlet Capital UK 1.3% UK 192 175
PointGrab Israel 0.5% US$ 72 76
QuantalX Israel US$ 58 -
Ventive UK 18.4% UK 56 52
DeepTech Recycling UK 30.0% UK - -
17,622 22,743
Equity investments classified as fair value through other comprehensive income
are held for sale, fair valued and stand at £17,622k (2022: £22,743k). A
decrease in value of £5,121k, which relates predominately to the decrease in
fair value of PDS Biotechnology Corporation offset by increases in fair value
on Vortex Biotech Holdings, DName-iT Holdings, Q-Bot Ltd and Sofant
Technologies.
9. DERIVATIVE FINANCIAL ASSETS CLASSIFIED AS FAIR VALUE
THROUGH PROFIT AND LOSS (FVTPL)
Warrants, convertible loans and loans classified as FVTPL Unaudited
Six months Audited
ended 30 June Year ended
2023 31 December
£000s 2022
£000s
Opening balance at start of period 693 1,462
Additions 43 710
Repayment - (48)
Additional accrued interest 22 93
Conversion to Equity Investments classified as FVTOCI (400) (2,004)
Change in fair value during the period (3) 480
Closing balance at end of period 355 693
Name Country of incorporation Currency denomination 30 June 2023 2022
£000s £000s
Q-Bot Ltd UK UK£ 190 140
Vortex Biotech Holdings Ltd UK UK£ - 385
G-Tech Medical, Inc. USA US$ 83 88
Martlet Capital Ltd UK UK£ 82 80
355 693
Derivative financial assets classified as fair value through profit and loss
are £355k (2022: £693k). An decrease in fair value of £338k, which mainly
relates to the conversion of Vortex Biotech Holdings to equity investments
classified as FVTOCI for £400k.
10. TRADE AND OTHER RECEIVABLES
Current Unaudited
Six months Audited
ended 30 June Year ended
2023 31 December
£000s 2022
£000s
Trade receivables 359 218
Taxation 92 75
Other receivables 268 52
Prepayments 136 108
Accrued income 147 205
Closing balance at end of period 1,002 658
The carrying value of trade and other receivables classified at amortised cost
approximates fair value. The Group does not hold any collateral as security
against any trade and other receivables.
Estimated credit losses have been calculated as follows:
Unaudited
Six months Audited
ended 30 June Year ended
2023 31 December
£000s 2022
£000s
Gross carrying amount of trade receivables 451 276
Impairment provision (estimated credit losses) (92) (58)
Trade receivables 359 218
11. CASH AND CASH EQUIVALENTS
Unaudited
Six months Audited
ended 30 June Year ended
2023 31 December
£000s 2022
£000s
Short term deposits 1 12
Cash and cash equivalents 60 840
Bank overdraft (154) -
Closing balance at end of period (93) 852
A subsidiary has a £200k overdraft facility with HSBC UK Bank Plc that is
guaranteed by NetScientific Plc.
12. TRADE AND OTHER PAYABLES
Current Unaudited
Six months Audited
ended 30 June Year ended
2023 31 December
£000s 2022
£000s
Trade payables 938 497
Other payables 361 421
Deferred income 553 478
Accruals 1,128 1,061
Closing balance at end of period 2,980 2,457
The carrying value of trade and other payables classified as financial
liabilities are measured at amortised cost which approximates fair value.
13. LOANS AND BORROWINGS
Unaudited
Six months Audited
ended 30 June Year ended
2023 31 December
£000s 2022
£000s
Total falling due within one year (464) (99)
Total falling due more than one year (993) (719)
Closing balance at end of period (1,457) (818)
The maturity of the loans are as follows:
Amounts falling due within one year on demand (464) (99)
Amounts falling due between one and two years (99) (99)
Amounts falling due between two and five years (894) (620)
Amounts falling due over five years - -
(1,457) (818)
Loans and borrowings represent:
An original unsecured loan note by a third party to ProAxsis of £100k. £20k
is outstanding at 30 June 2023 (H1 2022: £50k). There is no interest charged
and is payable in equal instalments of £10k p.a. First instalment upon
signing of document and then equally over nine years.
ProAxsis has entered into two secured HSBC coronavirus business interruption
loan agreements "CBIL's" for £245k and then £200k. The CBIL's facility
incurs interest of 3.99% p.a. above the Bank of England base rate. The first
twelve months was interest free and the loan is repayable within six years
with principal repayments starting after thirteen months. The total
outstanding at 30 June 2023 was £327k (H1 2022: £406k).
AB Group Limited an entity associated with Melvin Lawson has advanced £365k
to ProAxsis Limited during the period of a £500k facility. The rate of
interest applicable to the loan is 10 per cent. per annum, payable on
repayment of the loan. In addition, ProAxsis has granted to AB
Group warrants over shares in ProAxsis equal to the value of £150,000 at
an exercise price determined by reference to a future third-party fundraising
of at least £500,000, such price to be discounted by 30 per cent. The
warrants have an exercise period commencing on the date of any such
third-party fundraising and ending on the five year anniversary of the date of
the Loan Agreement. The balance outstanding on the loan at 30 June 2023 is
£374k (H1 2022: £Nil). The terms of the loan are currently being
renegotiated.
Glycotest Inc., has raised a further £316k/$402k under the terms of a secured
convertible loan agreement, with third party investors, syndicated by EMV
Capital Limited (EMV Capital, the Company's wholly owned VC firm). Interest
is charged at 12 per cent. per annum. Conversion will be at a 40% discount at
the discretion of the lender. The 2022 CLA shall be subordinated to the 2023
CLA for the purposes of repayment and security. The balance outstanding on
convertible loan agreements at 30 June 2023 is £735k (H1 2022: £Nil).
14. CALLED UP SHARE CAPITAL
The total number of voting rights in the Company and issued capital at 30 June
2023 is 23,488,148 5p ordinary shares (30 June 2022: 23,360,660, 31 December
2022: 23,488,148).
In the prior year on 29 June 2022 the Company issued 2,238,807 of 5p ordinary
shares at 67p per share, raising gross funds of £1,500k and net funds of
£1,444k after deducting costs of £56k.
15. RELATED PARTY DISCLOSURES
Beckman Group and Melvin Lawson, who is interested in 16.68% (2022: 16.77%) of
the issued share capital of NetScientific, is also considered and presumed to
be acting in concert with Dr Ilian Iliev, as defined by The City Code on
Takeovers and Mergers.
AB Group Limited an entity associated with Melvin Lawson has advanced £365k
to ProAxsis limited during the period of a £500k facility. The rate of
interest applicable to the loan is 10 per cent. per annum, payable on
repayment of the loan. In addition, ProAxsis has granted to AB
Group warrants over shares in ProAxsis equal to the value of £150,000 at
an exercise price determined by reference to a future third party fundraising
of at least £500,000, such price to be discounted by 30 per cent. The
warrants have an exercise period commencing on the date of any such third
party fundraising and ending on the five year anniversary of the date of the
Loan Agreement. The balance outstanding on the loan at 30 June 2023 is £374k.
EMV Capital provides corporate finance, consulting and management services to
Vortex Biotech Holdings Limited, Vortex Liquid Biopsy Solutions Limited and
Vortex Biosciences Inc. related parties by common substantial shareholders.
During the period revenue was booked totalling £50k (H1 2022: £52k). The
balance outstanding at 30 June 2023 is £8k (31 December 2022: £9k).
EMV Capital also provided corporate finance, consulting and management
services to Wanda Health Holdings Limited, Wanda Connected Health Systems
Limited and Wanda Inc. related parties by common substantial shareholders.
During the period revenue was booked totalling £55k (H1 2022: £44k), with a
value of further work in progress to be agreed. The balance outstanding at 30
June 2023 is £77k (31 December 2022: £60k).
Except as noted above, there are no additional related party transactions that
could have a material effect on the financial position or performance of the
Group and of the Company during this financial period under review.
16. EVENTS AFTER THE REPORTING PERIOD
Options: NetScientific announced that it had granted a total of 579,703 new
options to subscribe for ordinary shares in the capital of the Company to
certain of its Directors. Ed Hooper chose to receive payment in the form
of 40,000 new Ordinary Shares, rather than cash, in respect of c.77.5 per
cent. of the annual bonus awarded to him (on a projected net of tax basis) for
the year ended 31 December 2022. The new Ordinary Shares were issued at a
price of £0.63 per share. It also reported that Dr. Charles Spicer (Chair),
purchased 16,286 ordinary shares and Ed Hooper purchased 20,000 ordinary
shares in the Company through their self-invested personal pensions.
Portfolio partial exits: Further profitable partial exits post-balance sheet
have been made of £778,000 taking the total proceeds year to date amount to
£895,000.
PDS commercial developments: PDS announced the submission to the U.S. Food
and Drug Administration (FDA) of an updated Chemistry, Manufacturing and
Controls (CMC) package and a Phase 3 multicenter registrational protocol to
the company's Investigational New Drug (IND) submission to evaluate the
combination of PDS0101 and KEYTRUDA® (pembrolizumab), Merck's anti-PD-1
therapy, for the treatment of recurrent or metastatic human papillomavirus
(HPV) 16-positive head and neck squamous cell carcinoma (HNSCC).
(#_ftnref1)
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. END IR NKOBDCBKDOCBRecent news on Netscientific
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