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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Netscientific Plc | LSE:NSCI | London | Ordinary Share | GB00BN4R5Q82 | ORD 5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.50 | -0.79% | 62.50 | 60.00 | 65.00 | 63.00 | 62.50 | 63.00 | 29,011 | 15:03:36 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Pharmaceutical Preparations | 1M | -3.09M | -0.1312 | -4.76 | 14.73M |
TIDMNSCI
RNS Number : 3104B
NetScientific PLC
30 September 2022
NetScientific plc
("NetScientific" or "NSCI" or the "Company" or the "Group")
Interim Results for the six months ended 30 June 2022
London, UK - 30 September 2022: NetScientific Plc (AIM: NSCI), the active international holding company, which invests in, develops and commercialises life sciences/healthcare, sustainability and technology companies, today announces its interim results for the six months ended 30 June 2022.
The first half of the year has been a challenging period, against a backdrop of declining markets across life sciences and technology sectors, and a worsening macro-economic environment. While there has been some inevitable slow-down on a few of the portfolio companies, others are likely to benefit from an environment of high-energy prices and weak Sterling. Overall, although delayed in certain areas, the portfolio remains robust, with plans in place for further growth, adapting to the changing environment, through value inflection points and routes to exit.
Highlights
Key operational and financial highlights include:
-- Fair Value of GBP29.2 million (2021: 31.0 million), slight decrease as a result of recent market turmoil and the PDS Biotechnology share price fall, mitigated by an increase in Fair Value in other portfolio companies [1]
-- Capital light investment model has delivered over GBP2.5 million of syndicated new investment with Capital under advisory up 11% at GBP24.6 million (2021: 22.1 million)
-- Proactive management of well-balanced portfolio of 22 companies, with further development and additional direct balance sheet investment of GBP1.3 million
-- Deeper involvement in selected companies
o Focused on delivering significant returns
o Modest balance sheet investments in portfolio companies alongside EMV Capital syndicated third party investments to secure portfolio company funding needs
o Key value inflection points identified for many companies for profitable liquidity events and exits
o Acquisition of 30% in Vortex Biotech Holdings for a non-cash consideration
o Progressed turnaround of Q-Bot
-- Raised GBP1.5 million in June 2022 PLC placing
o Strengthening the Company's balance sheet
o Limited dilution for existing shareholders
o Strong participation from the investor network of subsidiary, EMV Capital
o Facilitating the continuation of the Company's capital light investment strategy
-- Progress in "Trans-Atlantic bridges" phased programme, and international expansion
-- Loss for the period of GBP1.7 million (H1 2021: loss GBP1.4 million) reflecting further R&D investment in ProAxsis and Glycotest (in the form of shareholder loans), a small increase in headcount and considered building of the NetScientific platform (including systems and people) to drive growth and deliver added shareholder value
-- Secondary sale: Post-balance sheet, executed a secondary sale of 5.8% of the Group's Q-Bot stake, realising a GBP110k profit
Commenting on Outlook and Future Prospects, Ilian Iliev, CEO of NetScientific, said:
"We are pleased with progress in the first six months of the year, following on from a successful 2021. Our portfolio of high-growth companies is well funded, with our capital light model and network of investors securing their finance needs without the requirement to deploy significant amounts of NetScientific cash. Our portfolio fundraising transactions generate returns through increased value of direct company holdings and a carry fee on "capital under advisory". We will build on this established business model and operating template, to drive continued growth, and realise shareholder value.
" We have a well-balanced portfolio across sectors and geographies, with businesses at different stages of their development, and adaptable for a changing sectoral and macro-economic dynamics. Within several of our companies, we are working on substantial liquidity events or routes to exit. ."
John Clarkson, Executive Chairman of NetScientific PLC added :
"It is reassuring that NSCI's strategy and actions have proven resilient and appropriate, even in difficult market conditions and a challenging economic climate. Indeed, despite these factors and some consequential delays, the fundamentals remain strong and the company is well placed to take advantage of the opportunities, in the current operating environment.
"With the benefits of a well-balanced portfolio, strong proactive management and the capital light business model, we look forward positively to continued progress, generating revenue, adding value, then realising returns for shareholders"
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
For more information, please contact:
NetScientific Ilian Iliev, CEO Via Walbrook PR WH Ireland (NOMAD, Financial Adviser and Broker) Chris Fielding / Darshan Patel +44 (0)20 7220 1666 Walbrook PR +44 (0)20 7933 8780 or netscientific@walbrookpr.com Nick Rome / Joe Walker / Paul McManus 07748 325 236
About NetScientific
NetScientific Plc ("NSCI") is an active holding Company that proactively invests in a global portfolio of companies across the healthcare, life science, ESG, and deep technology sectors.
NetScientific delivers shareholder returns through a proactive and hands-on management approach to its portfolio companies; identifying, investing in, and helping to build game-changing companies. The Group targets value inflection points and the release of value through partial or full exits from trade sales, public listings, or equity sales. The Company has a strong Trans-Atlantic and growing international presence, providing attractive expansion prospects.
The Company differentiates itself by employing a capital-light investment approach, making use of its wholly owned subsidiary, EMV Capital's network of private, corporate, and institutional investors. By syndicating investment and making minimal use of its balance sheet, the Company is able to secure direct stakes, as well as carried interest stakes, in its portfolio. This ultimately creates a structure that can support a large portfolio with a limited balance sheet.
NetScientific is headquartered in London, United Kingdom, and was admitted to trading on AIM, a market operated by the London Stock Exchange, in 2013.
www.netscientific.net
BUSINESS AND OPERATING OVERVIEW
Introduction
We are pleased to report our financial results and summary of operations for the six months ended 30 June 2022. The first half of 2022 continued the progress made since the start of the Company's turnaround in the past couple of years, in what have been extremely tough market conditions.
We are focused on our next stage of growth, adding value and delivering results for shareholders. Using our now established business model, and with the benefit of additional funds, we are exploiting the potential of existing and new opportunities. Based on our detailed knowledge of the portfolio and individual businesses, we have been selectively identifying portfolio companies to build deeper ownership, influence and involvement, and drive investment returns and realisations.
Our team has been busy providing operational as well as financial support to help portfolio companies grow, offering venture capital and corporate finance advice, strategic guidance, and access to an established network of corporate and industry partners in the UK and internationally.
A Differentiated Business Model
We can now be characterised as a truly active holding company with a balanced, enhanced and expanded portfolio of companies across several sectors. As well as being a pro-active manager, generating returns through growth in the value of our direct balance sheet holdings, we differentiate ourselves by employing a capital-light investment approach, making use of our wholly owned subsidiary, EMV Capital's network of private, corporate and institutional investors, to provide venture capital investments, corporate finance services, and management services to our portfolio. By syndicating investment and making minimal use of our balance sheet, we can secure direct stakes, and/or carried interests in our portfolio. This not only earns revenues, but also can deliver profit share and carry fees as a result of capital under advisory. This ultimately creates a structure that can support a larger portfolio with a limited balance sheet, offset by ongoing fees.
Advantages of our model
Flexibility: As an active investment Company, the permanent capital funding model means that NSCI is not driven by the usual fund lifecycles on deployment and exit and can support investee companies through their growth journey. We are therefore able to take a longer and more strategic investment view, whilst still remaining live to shorter-term opportunities including in the secondary markets.
Capital efficient investment strategies for portfolio companies: Through our proactive approach, we help portfolio companies identify capital efficient investment strategies, using different corporate finance tools and making particular use of non-dilutive financing such as grants and corporate joint development agreements.
Pro-active investment approach: Our team can open up value opportunities which are not available in typical passive investment approaches, such as identifying secondaries to participate in and having early visibility on investment rounds.
Working with strategic investors and multinational corporations : Using our established network, we can broker and monetise introductions between portfolio companies and appropriate investors/multinational corporations, with a focus on both corporate VC investment and collaboration opportunities.
Access to capital: As demonstrated in its own two previous fundraisings, NSCI is able to introduce funding from its investor network, supplementing its broker's activities.
Fee-generating activities: Our tailored approach provides a range of fee sources, including corporate finance, consultancy, board monitoring, and reimbursement fees help to offset the costs of infrastructure.
Early liquidity/secondaries: We are able to broker and participate in partial liquidity events, such as through the secondary market sale of portfolio company stock to new investors into portfolio companies. This can generate additional cash returns well ahead of a full exit, with several secondary transactions being actively pursued.
Early liquidity/secondaries: We are able to arrange and lead in partial liquidity events, such as through the secondary market sale of portfolio company stock to new investors into portfolio companies. As well as providing liquidity to outgoing shareholders and incoming new investors, this can generate additional cash returns to the Group well ahead of a full exit. We have successfully executed two significant profitable secondary transactions, with several others being actively pursued.
Trans-Atlantic bridges: Our on the ground presence in the US supports the business needs of core companies, helps expend market access, and assists portfolio companies to 'land' and grow in the US. This provides a differentiator for the Group and is attractive to new companies looking to join the EMV Capital/NSCI portfolio.
Infrastructure/team: Our small, focused, and effective core team, and trusted network of venture partners and advisors, means that NSCI/EMVC has an outsize impact against a relatively modest cost base.
Routes to Exit: For a core six investee companies, we are currently actively working on routes to exit, with the potential for outsized returns.
Operational Review
Over the first half of 2022 the Company has continued its active programme to deliver on its strategy and drive shareholder value. The Company invested GBP1.26 million and raised over GBP2.5 million in total for portfolio companies.
In accordance with the strategic plan, operational actions include:
-- continued pro-active, commercial management of portfolio and individual companies;
-- judicious investments to protect and enhance NetScientific's position in several of its existing portfolio companies;
-- clear and detailed evaluation of the Group's portfolio, including business plans, timelines, milestones, associated funding needs, value inflection points, the balance of risk and reward, and the priorities and potential for each portfolio company;
-- an alignment of EMV Capital's operations to act in synergy with NetScientific's investment and portfolio objectives;
-- a wider application of the company's "capital light" approach, utilising the draw of the PLC brand, and the NetScientific balance sheet, to anchor future investments or secondaries, and achieve a multiplier effect with third party investment adding to Capital Under Advisory;
-- selective investments, deeper stakes, greater involvement, and focusing on realising enhanced returns in certain portfolio companies and target areas;
-- extending our network, platform, and access to deal flow; and
-- building a pipeline of fund-raising engagements and consultancy agreements for execution in the second half of 2022, and into 2023.
Trans-Atlantic Bridges and internationalisation
Our combined US and UK portfolio has led to the identification of a number of synergies and opportunities for operational cross-over on both sides of the Atlantic, and further international potential. We plan to consolidate our progress with specific 'on the ground' initiatives, including facilitating for select portfolio companies access to a proposed facility on the East Coast of the USA, to help our existing portfolio companies and future additions accelerate internationalisation and growth.
Both Glycotest and ProAxsis have an immediate need for a US lab, with associated commercialisation and sales/marketing facilities. Temporary space has already been secured, close to Washington DC and plans are well advanced for suitable leased premises.
Several portfolio companies have accessed investments and capital, product markets, and corporate and research relationships on either side of the Atlantic, and beyond. For instance, we have assisted Q-Bot, Sofant and Wanda in establishing corporate links in the US construction industry, telecoms and healthcare markets respectively, and have supported Vortex' continued operation of a US-UK presence.
ESG/Impact Investment
The Group continues to be well positioned in the Environment, Social and Corporate Governance ("ESG") and impact investment space, as an investor in therapeutics and diagnostics for major chronic diseases (such as PDS Biotechnology and Vortex in oncology, ProAxsis in respiratory diseases), as well as investments in sustainability companies (such as Q-Bot's carbon-mitigating retrofit insulation, or Sofant's low-energy satellite communications infrastructure).
We are focused on sustainable value creation from a strong base and continue to build out key processes that enable increased transactional, portfolio management, and investment realisation capacity. Having completed a turnround in the past couple of years, and having transformed the business, the Group is now in a strong position, with the fundamentals in place for continued progress.
Awards
We were delighted that EMV Capital has been nominated as a Finalist in the 2022 Health Investor Awards for the Private Equity Investor of the Year awards, and is a Finalist in the ESG Champion of the Year category at the Growth Investor Awards 2022. ProAxsis won the Best Established Small Business award at the Belfast Telegraph Enterprise Awards 2022.
COVID-19
Although there was a general initial negative impact on the Group, the consequences have varied across the portfolio, and the sources of revenue and individual companies have been managed accordingly. In the aftermath of the pandemic, new opportunities have been opened for both the healthcare and broader technology sectors. It was not seen as necessary to impair the carrying value of any assets.
Global Economic Environment
The macro-economic environment remains exceedingly unpredictable. The aftermath of the pandemic, capital markets volatility, geopolitical issues and concerns, most notably Russia's invasion of Ukraine, and the more recent macro-economic pressures, continue to contribute to business uncertainty.
In this climate, the first half year has at times been a challenging period, with some inevitable slow-down in a few of the portfolio companies. At the same time, some of our portfolio companies are likely to benefit from an environment of high-energy prices and weak Sterling. Overall, although delayed in certain areas, the portfolio remains robust, with plans in place for further growth adapting to the changing environment, through value inflection points and routes to exit.
Portfolio Summary
Following our capital-light investment model, the portfolio consists of a combination of direct investments and capital under advisory. This enhanced portfolio is well balanced, facilitates risk management, and provides synergistic benefits, through consolidated proactive management across the Group, as summarised below.
Portfolio Country Sector Sub-Sector Stage Group Unaudited Capital Under companies of Interest Directors' Advisory (At Development % Estimated Value Cost to Third Party) --------------- -------- ---------------- ----------- ------------ 31 Dec 30 Jun 31 Dec 30 Jun 21 22 21 22 --------------- -------- ---------------- ----------- ------------ --------- ----------- --------- --------- Subsidiaries -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- EMV Capital Venture Financial Ltd UK Capital Services Sales 100% Equity GBP3.5m GBP3.5m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- ProAxsis Respiratory Life Ltd UK diagnostics Sciences Sales 100% Equity GBP3.5m GBP3.5m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Glycotest, Liver cancer Life Late stage Inc. US diagnostics Sciences clinical 64% Equity GBP11.0m GBP11.0m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Cetromed Holding Ltd UK Life Sciences Investment Company 75% Equity - - - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Sub Total GBP18.0m GBP18.0m - -
-------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Direct/Advised -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- PDS Biotechnology Life Phase II Corporation US Immuno-oncology Sciences clinical 4.7% Equity GBP8.0m GBP4.0m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- 23.7% GBP1.0m Equity + GBP3.2m + 15.6% GBP0.3m + GBP0.1m Q-Bot Ltd UK Robotics Technology Sales Advised CLA OD GBP2.3m GBP2.8m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- SageTech Medical Waste 5.9% Equity Equipment anaesthetic Commercial + 25.14% Ltd UK capture/recycle Healthcare stage Advised GBP0.9m GBP0.9m GBP3.5m GBP3.8m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- GBP0.3m + GBP0.3m Epibone, Regenerative Life Early stage GBP0.5m + GBP0.6m GBP0.2m GBP0.2m Inc. US medicine Sciences clinical 0.8% Equity CLA CLA CLA CLA -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- CytoVale, Medical Life Late stage Inc. US biomarker Sciences clinical 1.0% Equity GBP0.4m GBP0.4m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- G - Tech Medical, Waerable Life Early stage Inc. US gut monitor Sciences clinical 3.8% Equity GBP0.4m GBP0.4m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- 1.5% Equity + GBP75k Convertible Martlet Venture loan note Capital Capital Holding + 10.3% Ltd UK - Deeptech Investment Company Indirect GBP0.3m GBP0.3m GBP1.3m GBP1.3m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Fox Biosystems Research Life * BEL Equipment Sciences Sales 5.1% Equity GBP0.3m GBP0.3m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Sofant Semiconductors Technologies Satellite 25.1% GBP0.3m GBP0.4m Ltd UK Coms Technology Pre sales Advised CLA CLA GBP3.0m GBP3.0m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- 0.5% Equity PointGrab, Smart building + 20.8% Inc. IL automation Technology Sales Advised GBP0.1m GBP0.1m GBP4.1m GBP4.1m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Dname-iT Life 61.5% * BEL Lab technology Sciences Pre sales Equity GBP0.1m GBP0.1m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- QuantalX Medical Life Late stage Neuroscience IL diagnostics Sciences clinical 0.4% Equity GBP0.1m GBP0.1m - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Oncocidia Cancer Life Early stage 41.3% * BEL therapeutics Sciences clinical Equity - - - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Longevity $250k Biotech, Neurology Life Early stage Convertible Inc. US therapeutics Sciences clinical loan note - - - - -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Sub Total GBP13.0m GBP11.2m GBP14.4m GBP15.2m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Advised -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Vortex Liquid Biosciences, biopsy Life 96.0% Inc. UK/US oncology Sciences Sales Indirect - - GBP3.9m GBP4.9m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Digital Wanda Health, health 74.7% Inc. UK/US monitoring Healthcare Sales Indirect - - GBP2.2m GBP2.9m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Insight Photonic Semiconductors Solutions, Akinetic $1.25m Inc. US laser Technology Sales Warrants - - GBP0.9m GBP0.9m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Nanotech Industrial $1.0m Solutions, Material Convertible Inc. US science Technology Sales loan note - - GBP0.7m GBP0.7m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- Sub Total - - GBP7.7m GBP9.4m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- --------- TOTAL GBP31.0m GBP29.2m GBP22.1m GBP24.6m -------- ---------------- ----------- ------------ ------------ --------- ----------- --------- ---------
On the Consolidated Statement of Financial Position, the owned portfolio is shown as Equity investments classified as FVTOCI and Financial assets classified as FVTPL.
The combination of direct and capital under advisory investments gives the Group a greater influence in the portfolio companies, access to follow-on funding, and enables greater financial and value-added support for the portfolio companies. The amounts under Capital Under Advisory are associated with carried interest or profit share agreements, typically between 10% and 20%.
While it is difficult to value or estimate the current value of these stakes, for demonstration purposes an average 2x portfolio return on the Capital Under Advisory of GBP24.6 million could result in carry returns to EMV Capital of over GBP4 million.
Subsidiaries and listed investment highlights
EMV Capital (100% owned subsidiary)
-- EMV Capital is the Venture Capital and Corporate Finance arm of NetScientific, enabling the execution of the capital light investment model of the Group (acquired in 2020).
-- Investment syndication occurs through its growing EIS investment practice, a family office network, wealth managers, institutional VCs and corporate venture capital - with the backing of a PLC balance sheet and brand.
-- EMV Capital has in place a carried interest arrangement with investors, providing additional potential investment returns and fees to the Group.
-- During the period, EMVC executed several syndicated transactions, increasing Capital Under Advisory by 11% to GBP24.6 million (2021: GBP22.1 million) following the successful completion of several fundraising transactions (SageTech, Q-Bot and Sofant), and continued funding of portfolio companies under existing investor arrangements (Vortex, Wanda).
-- The company also provides paid-for management support services to several of the portfolio companies, to support growth and fund-raising initiatives, and planning routes to exit.
-- The company also signed several additional fundraising mandates, and further incubation support and consultancy engagements - building a pipeline for the rest of 2022 and beyond.
-- EMV Capital was delighted to appoint Ed Hooper as an Executive Director (in addition to his role as General Counsel for NSCI), Ed brings a wealth of high-calibre transactional expertise, providing further critical mass as we continue our structured growth and realisation plans.
ProAxsis Ltd (100% owned subsidiary)
-- Belfast-based subsidiary, which specialises in respiratory, other diagnostics, and building a significant expertise in the measurement of inflammatory biomarkers, with a growing global client list of pharmaceutical companies, and leading academic laboratories.
-- Advances include further services to clinical trials and the commercialisation of five novel or improved products, following their successful CE marking in the first half of 2022.
-- The global licence agreement with AstraZeneca, in May 2022 was a "blue chip" validation of ProAxsis. This was further enhanced by the successfully completed Performance Evaluation study of the COVID-19 antibody test, with exceptional levels of sensitivity and specificity of 100% and 99.3% respectively.
-- This COVID-19 antibody test gives ProAxsis a competitive position in the COVID and the wider research and clinical trials markets.
-- The company established the necessary infrastructure and human resources and will continue its investment programme to exploit its full business potential.
-- ProAxsis has already taken temporary lab space close to Washington DC. Plans are well advanced for leasing a long-term suitable full US lab, with associated commercialisation and sales/marketing facilities.
-- This will enable the company to deliver consistent high-quality service for clinical trials, either side of the Atlantic and to access higher value US clinical trials. The ProAxsis team has created a strong sales pipeline on either side of the Atlantic.
-- In addition to grant finance, these developments are expected to enhance the ability of the company to access third party funding.
Glycotest (62% holding)
-- Focused on the development of early-stage liver cancer diagnostics.
-- Co-investment with Fosun Pharma as minority partner, with a licensing agreement for the Chinese market.
-- Enrolment and progress in clinical trials has progressed well even with COVID-19 delays, building up valuable samples, data, and productive sites, and is now entering the final stage. The bulk of the significant spend has already been deployed and becomes due for reimbursement by Fosun, under the existing agreement. In 2021, Fosun made a further payment on account of $1 million leaving a balance of $3 million of milestone-based funding to Glycotest.
-- Glycotest management believes the clinical trials have resulted in one of the world's largest databanks in the liver cancer study space, providing a good basis for further development.
-- The HCC Panel clinical validation study and algorithm training set have continued to be delayed by technical issues, problems with the outsourced lab, and operating arrangements. These are being progressively tackled.
-- An expert contract lab has been commissioned to carry out troubleshooting and assay optimisation to complete the training set, which will be a significant value inflection point for the company, now expected in the first half of 2023.
-- The company is exploring avenues for commercialisation and opportunities, recognising the significant value inflection points and continues to work closely with Fosun Pharma for the successful development and realisation of returns from the business.
PDS Biotechnology (NASDAQ Listed, 4.7% holding)
-- NetScientific backed PDS Biotechnology in 2014 prior to its NASDAQ listing and retains a shareholding of 4.7%.
-- The Immunotherapy biopharma company is developing novel T-cell activating cancer treatment, and infectious disease vaccine candidates.
-- After a successful fund-raise of $52m in 2021, PDS recently raised $35m non-dilutive funding from Horizon Technology Finance which extends its runway well into 2024.
-- The company has four phase 2 oncology clinical trials in progress. Clinical partnerships are with Merck, MD Anderson Cancer Center and National Cancer Institute.
-- Interim data presented in June 2022 at ASCO from the NCI-led PDS0101 Phase 2 trial showed tumor reduction in c.67% of patients (four of six subjects) who had failed prior treatment.
-- FDA fast-track status has been secured for phase 3, with multiple near-term readouts expected in the second half of 2022 and 2023.
-- The fair value of the NetScientific stake was GBP4.0 million at the end of period (2021: GBP8.0 million), broadly in line with the biotech sector.
Portfolio Strategy and other company updates
-- In line with our stated strategy, a prioritised framework is applied to the portfolio and the proactive management of the companies.
-- Following a detailed review of the portfolio of 22 companies, we have focused on several portfolio companies where we have made greater direct and syndicated investments, increasing influence, and value-added management support.
-- We are considered by many of our portfolio companies as the 'go to' investment partner, which provides us early access to investment opportunities (including secondaries).
-- Consequently, the Group has invested GBP593,000 in non-subsidiary companies and syndicated over GBP2.5 million in total for portfolio companies over the past six months, as we continue to grow and add value across the enhanced portfolio.
Several direct investments were made by NetScientific in the portfolio companies as part of the capital light investment model, and to enable the syndication of further funds by EMVC. These included:
Q-Bot (24% direct stake, 16% indirect stake)
-- London-based Q-Bot, which is a leading UK developer of robots for use in the retrofit construction industry, has successfully closed a GBP1.62m investment round to fund the next stage of its growth, primarily from existing investors.
-- The fair value of NSCI's c.24% stake (acquired for c.GBP1m in Q3 2021) has increased by 108% to GBP2.1m.
-- The additional funds allowed Q-Bot to accelerate the rollout of its unique solution of remotely applying underfloor insulation across the UK and engage with growing overseas demand.
-- Q-Bot's growth is through an expansion of its network of Accredited Installation Partners, industrialising robot manufacturing at scale, and internationalisation to the EU and US.
-- EMV Capital also supported a Board-led turnaround initiated in Q3 2021 under a consultancy project with Q-Bot.
-- Revenues doubled in its most recent financial year to March 2022, and is expected to continue growing in the UK, with international sales due to start later in 2022
-- As the UK's de facto leader in construction and retrofit robotics, Q-Bot works with both social and private landlords, as well as homeowners, having now insulated more than 3,000 properties.
-- Our VC arm EMV Capital led the investment round, with further syndicated investment planned.
-- The Group converted GBP500k of Q-Bot convertible loan notes plus interest in the round at a 25% discount.
Vortex (30% direct stake)
-- Co-located in the UK and the US Bay Area, US, Vortex's mission is to build a platform around its high-quality Circulating Tumour Cell ("CTC") capture technology - providing researchers and clinicians access to critical insights from whole cancer cells that underpin one of the main causes of metastasis, treatment resistance, and disease recurrence.
-- In May 2022 NetScientific announced the conditional acquisition of its 30% stake, which has been now completed
-- Appointment of Paul Jones as CEO, an experienced senior industry professional to lead the company's growth.
-- It has a growing international customer base for its automated VTX-1 instrument and associated cartridges, an innovative "no touch" microfluidic chip technology which captures high quality, viable CTCs from blood with very high yields.
-- These can then provide input to further downstream molecular analysis, ultimately informing patient access to therapy and monitoring.
-- The company's development is taking place in a growing market. The liquid biopsy market size was valued at $8.1 billion in 2021 and is projected to surpass $26.2 billion by 2030, growing at 14 percent over the period (Precedent Research).
We are working actively with several other promising companies, exploring how best to progress their ambitious growth paths and deliver results. At the time of writing, there are several fundraisings underway, as well as a promising pipeline of further consultancy engagements which will be announced in due course.
FINANCIAL OVERVIEW
In line with expectations, the Group made a loss of GBP1.7 million (H1 2021: GBP1.5 million) for the period, all from continuing operations, including continued substantial expensed investment in research and development at ProAxsis and Glycotest, active management and considered additional headcount and building of the NetScientific platform .
Income Statement
Revenue for the first half of 2022 was down a modest 4% to GBP391,000 (H1 2021: GBP407,000), with a promising pipeline for the second half of 2022. ProAxsis revenue at GBP115k (2021: GBP82k) is up 40% on the prior year, with kit sales and new products up 49%, and clinical research services up 30%.
Other operating income increased to GBP265,000 (H1 2021: GBP53,000), as a result of fair value movement and adjustments on derivative financial assets classified as "fair value through profit and loss" (FVTPL) of GBP179,000 (H1 2021: GBPNil), grant and other income of GBP65,000 (H1 2021: GBP7,000), and ProAxsis R&D tax above the line of GBP21,000 (H1 2021: GBP46,000).
Research and development costs of GBP814,000 (H1 2021: GBP651,000) were higher in the first half as Cetromed, Glycotest, and ProAxsis continue development and clinical trials. Further development costs on five projects of GBP280,000 (H1 2021: GBP290,000) was capitalised at ProAxsis during the period.
Selling and administrative costs of GBP1.4 million (H1 2021: GBP1.2 million) were higher, mainly due to increased headcount in the subsidiaries and at head office, and increased spending in drives towards commercialisation and eventual liquidity events.
Balance Sheet
Cash at the period end amounted to GBP2.4 million (2021: GBP2.7 million), following a fundraise of GBP1.44 million net of costs in June 2022.
Cash used in operations during the period was GBP1.132 million (H1 2021: GBP1.134 million). Cash held within the subsidiary Glycotest is not freely available for use within the wider group as it would need the consent of a minority shareholder. Intangible assets stood at GBP3.221 million (2021: GBP3.045 million). ProAxsis capitalised a further GBP280,000 of development costs during the period (2021: GBP585,000) and amortisation during the period was GBP105,000 (2021: GBP163,000). Refer to note 8 below for more information.
Equity investments held for sale and classified as fair value through other comprehensive income ("FVTOCI") stood at GBP9.435 million on 30 June 2022 (2021: GBP11.516 million). A decrease in value of GBP2.081 million, relates predominately to the PDS Biotechnology (NASDAQ: PDSB) price decline, and a trade investment measured at fair value, was down GBP4.0 million during the period. This is offset by an increase in fair value on Q-Bot of GBP1.1 million to GBP2.1 million during the period, reflecting the increased share price in the fundraise of Q2 2022.
All equity investments not quoted on an active market have had their fair values established using inputs other than quoted prices that are observable, i.e., the price from the latest third party round as publicly disclosed. Refer to note 9 below for further information.
Derivative financial instruments classified as fair value through profit and loss ("FVTPL"), were fair valued and stood at GBP1.651 million on 30 June 2022 (2021: GBP1.462 million). An increase in value of GBP189,000 was obtained, which relates predominately to a Vortex loan of GBP250,000. Refer to note 10 below for further information.
The Group ended the period with net assets of GBP15.836 million (2021: GBP18.509 million), amounting to a decrease of GBP2.673 million. The movement is shown in the consolidated statement of changes in equity and is mainly constituted by the loss in the period of GBP1.448 million and the negative movement in equity investments held for sale and derivative financial instruments of GBP2.873 million, offset by the successful fundraise during June 2022 of GBP1.444 million net of costs.
Board and Senior Management
There were no Board changes during the period, and the Board continues to work effectively providing the requisite corporate governance, positive challenge, and strategic drive. Ed Hooper, a senior City lawyer, was appointed as General Counsel and joined the Board of EMV Capital as executive director.
Summary and Outlook
The Board will closely monitor the markets and relevant industry developments. It maintains a flexible approach to new opportunities, both for investment and generating returns from investments.
NetScientific's portfolio is focused on businesses with high growth prospects. These are expected to generate shareholder returns through the increased value of direct company holdings and a carry fee on "capital under advisory". We will build on this established business model and operating template, to drive continued growth, and realise shareholder value.
The Group also continues to be well positioned in both the ESG and impact investment arenas, with long-standing investments in sustainability and healthcare.
We will continue to benefit from our capital-light investment approach, utilising EMV Capital's network of private, corporate, and institutional investors and the judicious use of NSCI's balance sheet. All the while, we are able to assist with the fund-raising needs of our portfolio companies, with a significant percentage added as Capital Under Advisory with carried interest. The Board believes that the balanced investment approach, with advised and carried interest stakes, leads to diversified investment returns with a structure that can support a large portfolio and limited balance sheet.
We are focused on progressing the various projects, including fee-generating transactions, in the second half of 2022, and beyond, building opportunities for growth and realising returns for shareholders.
John Clarkson Ilian Iliev Executive Chairman Chief Executive Officer 30 September 2022 30 September 2022
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2022
NetScientific plc
Unaudited Unaudited Six months Six months ended 30 ended 30 June June Continuing Operations Notes 2022 2021 GBP000s GBP000s ------------------------------------------- -------- ------------ ------------ Total Income 656 460 Revenue 4 391 407 Cost of sales (30) (35) ------------------------------------------- -------- ------------ ------------ Gross profit 361 372 Other operating income 265 53 Research and development costs (814) (651) Selling, general and administrative costs (1,427) (1,205) Other costs (103) (51) Loss from operations (1,718) (1,482) Finance income 51 2 Finance expense (20) (8) Loss before taxation (1,687) (1,488) Income Tax 29 40 ------------------------------------------- -------- ------------ ------------ Total loss for the period from continuing operations (1,658) (1,448) ------------------------------------------- -------- ------------ ------------ Loss attributable to: Owners of the parent 5 (1,394) (1,195) Non-controlling interests (264) (253) ------------------------------------------- -------- ------------ ------------ (1,658) (1,448) ------------------------------------------- -------- ------------ ------------ Basic and diluted loss per share attributable to owners of the parent during the period: 5 Total loss for the period from continuing operations (6.6p) (7.9p) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHSED 30 JUNE 2022 Unaudited Unaudited Six months Six months ended 30 ended 30 June June Notes 2022 2021 GBP000s GBP000s Loss for the period (1,658) (1,448) Items that may be subsequently reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations 352 (10) Change in fair value of investments classified as fair value through other comprehensive income (2,873) 9,892 Total comprehensive profit/(loss) for the period (4,179) 8,434 Attributable to: Owners of the parent (3,887) 8,689 Non-controlling interests (292) (255) ---------------------------- ---------- -------- (4,179) 8,434 --------------------------- ---------- -------- CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022
Unaudited Audited 30 June 31 December 2022 2021 Notes GBP000s GBP000s Assets Non-current assets Property, plant and equipment 6 140 136 Right-of-use assets 7 142 158 Intangible assets 8 3,221 3,045 Equity investments classified as FVTOCI* 9 9,435 11,516 Derivative financial assets classified as FVTPL** 10 1,651 1,462 Total non-current assets 14,589 16,317 Current assets Inventories 11 71 67 Trade and other receivables 12 1,159 1,598 Cash and cash equivalents 13 2,363 2,710 Total current assets 3,593 4,375 Total assets 18,182 20,692 Liabilities Current liabilities Trade and other payables 14 (1,742) (1,529) Lease liabilities 15 (33) (32) Loans and borrowings 16 (89) (59) Total current liabilities (1,864) (1,620) Non-current liabilities Lease liabilities 15 (115) (131) Loans and borrowings 16 (367) (432) Total non-current liabilities (482) (563) Total liabilities (2,346) (2,183) Net assets 15,836 18,509 Issued capital and reserves Attributable to the parent Called up share capital 17 1,168 1,056 Warrants 42 42 Share premium account 74,124 72,792 Capital reserve account 237 237 Equity investment reserve 1,631 4,504 Foreign exchange and capital reserve 1,748 1,368 Retained earnings (62,831) (64,499) Equity attributable to the owners of the parent 16,119 18,500 Non-controlling interests (283) 9 Total equity 15,836 18,509
* Fair value through other comprehensive income
** Fair value through profit and loss
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED 30 JUNE 2022 Shareholders' equity Foreign exchange Equity and Share Share Capital investment Retained capital Non-controlling Total capital Warrants premium reserve reserve earnings reserve Total interests equity GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s 1 January 2021 746 65,594 65,594 237 (1,505) (59,702) 1,368 6,738 158 6,896 Loss for the period - - - - - (1,195) - (1,195) (253) (1,448) Other comprehensive income - Foreign exchange differences - - - - - - (8) (8) (2) (10) Change in fair value during the period - - - - 9,892 - - 9,892 - 9,892 Total comprehensive income - - - - 9,892 (1,195) (8) 8,689 (255) 8,434 Issue of share capital 303 - 7,492 - - - - 7,795 - 7,795 Cost of share issue - - (436) - - - - (436) - (436) Decrease in subsidiary shareholding - - - - - 215 2 217 128 345 Share-based payments - - - - - 42 - 42 - 42 30 June 2021 1,049 - 72,650 237 8,387 (60,640) 1,362 23,045 31 23,076 Loss for the period - - - - - (1,190) - (1,190) (224) (1,414) Other comprehensive income - Foreign exchange differences - - - - - - 8 8 (7) 1 Change in fair value during the period - - - - (3,883) - - (3,883) - (3,883) Total comprehensive income - - - - (3,883) (1,190) 8 (5,065) (231) (5,296) Issue of share capital 7 - 143 - - - - 150 - 150 Cost of share issue - - (1) - - - - (1) - (1) Issue of warrants - 42 - - - - - 42 - 42 Decrease in subsidiary shareholding - - - - - 232 (2) 230 209 439 Share-based payments - - - - - 99 - 99 - 99 31 December 2021 1,056 42 72,792 237 4,504 (61,499) 1,368 18,500 9 18,509 Loss for the period - - - - - (1,394) - (1,394) (264) (1,658) Other comprehensive income - Foreign exchange differences - - - - - - 380 380 (28) 352 Change in fair value during the period - - - - (2,873) - - (2,873) - (2,873) Total comprehensive income - - - - (2,873) (1,394) 380 (3,887) (292) (4,179) Issue of share capital 112 - 1,388 - - - - 1,500 - 1,500 Cost of share issue - - (56) - - - - (56) - (56) Share-based payments - - - - - 62 - 62 - 62 30 June 2022 1,168 42 74,124 237 1,631 (62,831) 1,748 16,119 (283) 15,836 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHSED 30 JUNE 2022 Notes Unaudited Unaudited Six months Six months ended 30 ended 30 June June 2022 2021 GBP000s GBP000s Cash flows from operating activities Loss after income tax (1,658) (1,448) Adjustments for: Depreciation of property, plant and equipment 20 25 Depreciation of right to use assets 16 16 Amortisation of intangibles 105 61 Estimated credit losses on trade receivables 18 (9) Change in fair value of financial (179) - assets classified as FVTPL Capitalisation of development costs (280) (255) Share-based payments 62 42 R&D tax credit (21) - Foreign exchange gain/(loss) 233 5 Finance income (61) (2)
Finance costs 4 8 Income Tax (29) (86) (1,770) (1,643) Changes in working capital (Increase) in inventories (4) (15) Decrease/(Increase) in trade and other receivables 473 (117) Increase in trade and other payables 169 563 Cash used in operations (1,132) (1,212) Income tax received - 78 Net cash used in operating activities (1,132) (1,134) Cash flows from investing activities Purchase of property, plant and equipment (24) (41) Purchase of equity investments classified as FVTOCI - (622) Purchase of derivative financial assets classified as FVTPL (593) (100) Net cash (used in) investing activities (617) (763) Cash flows from financing activities Proceeds received on change in stake in subsidiary - 345 Lease payments (19) (19) Repayment of borrowings (35) (360) Interest paid - (3) Proceeds of loan - 550 Proceeds from share issue 1,500 7,641 Share issue cost (56) (436) Net cash from financing activities 1,390 7,718 (Decrease)/Increase in cash and cash equivalents (359) 5,821 Cash and cash equivalents at beginning of the period 2,710 1,628 Exchange differences on cash and cash equivalents 12 (9) Cash and cash equivalents at end of the period 13 2,363 7,440
NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2022
1. ACCOUNTING POLICIES
Basis of preparation
The interim financial information, which is unaudited, have been prepared on the basis of the accounting policies expected to apply for the financial year to 31 December 2022 and in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. Policies have been consistently applied to all periods presented apart from where new standards have been adopted during the period, see below for changes in accounting policies.
The financial information for the period ended 30 June 2022 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 December 2021 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Report and Financial Statements for the year ended 31 December 2021 was unqualified and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.
Going Concern
The 2021 Annual Report audit report drew attention to the material uncertainty relating to going concern as follows:
"We draw attention to note 2 to the financial statements, which indicates the Directors' considerations over going concern. The going concern of the Group and Parent Company is dependent on additional funding being raised which is not yet secured. As stated in note 2, these events or conditions, along with other matters as set forth in note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group and the Parent Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate."
The Directors have prepared and reviewed budget cashflows which were approved by the Board of Directors in the Board meeting of 1 February 2022. The review included the key budget assumptions, sensitivities, and contingency plans to cover eventualities, including the associated cash flow projections. The review has been updated and also taken into consideration the potential impact of changing market conditions and other risks. Having made substantial progress, including a GBP1.5m fund-raise in June, and as shown on the balance sheet, the Group remains in a strong position. As a result, The Directors do not believe going concern is an issue for the next 12 months from the date of this report.
The financial statements do not include any adjustments that would be necessary if the group or company was unable to continue as a going concern.
1 ACCOUNTING POLICIES (continued)
Business Combinations
The Group recognises identifiable assets acquired and liabilities assumed in a business combination, regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of: a) fair value of consideration transferred; b) the recognised amount of any non-controlling interest in the acquiree; and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.
Change in accounting policies
The Group has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2021 annual financial statements.
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for the period beginning 1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that 'settlement' includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments were originally effective for annual reporting periods beginning on or after 1 January 2022. However, in May 2020, the effective date was deferred to annual reporting periods beginning on or after 1 January 2023.
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the group.
Use of estimates and judgements
There have been no material revisions to the nature and amount of estimates of amounts reported in prior periods, including:
(a) Impairment of goodwill; (b) The valuation of intangibles; (c) The valuation of equity investments; and (d) The capitalisation of development costs
Impact of accounting standards to be applied in future periods
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to 31 December 2021, that the Group has decided not to adopt early. The Group does not believe these standards and interpretations will have a material impact on the financial statements once adopted.
2. SIGNIFICANT EVENTS AND TRANSACTIONS
COVID
The consequences of the COVID pandemic have varied across the portfolio, the negative impact has been managed, with new opportunities opening up and the individual companies have adjusted accordingly. Group companies have received minimal amounts of Government Covid-19 business support. The approach has been to respond proactively to the operating environment, particularly to minimise downside risks and concentrate on upside opportunities. Given the core focus of the Group, the Board believes that in the aftermath of the COVID pandemic there is increased potential across several of its portfolio companies.
Global Environment
The Group is operating in an increasingly uncertain macroeconomic environment. The after-effects of the pandemic, significant turmoil in the tech and capital sectors, the geopolitical concerns, most notably the conflict in Ukraine, and the more recent economic pressures are causing additional market volatility and uncertainty.
The impact to these and downturn in global environment on the Group's interim consolidated financial statements for the six months ended 30 June 2022 are summarised as follows.
(a) No impairment of group assets.
The carrying value of the Group's assets have been assessed in light of current events and the long-term impacts that these may have on the investments of the Group. Overall, we believe that the sectors the group is active in are in a strong position and it was not seen as necessary to impair the carrying value of any assets further. The recoverable amount was determined based on values in use, which utilises current budgets/reforecasts and cash flow projections. We are closely monitoring and managing the events, and will take further actions if required, as the situation continues to evolve. Cash planning and management is in place for all businesses, which have been stress tested based on a number of scenarios. Importantly as a result of the various factors, NetScientific and several of its portfolio companies are seeing new sustainable opportunities, offering potential for future growth.
3. SEGMENTAL REPORTING
An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, for which separate financial information is available and whose operating results are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Board of Directors.
The Board of Directors assess the performance of the operating segment using financial information which is measured and presented in a manner consistent with that in the financial statements.
Revenue from contracts with customers by segment
30 June 2022 Delivered Service Fees Total Goods GBP000s GBP000s GBP000s -------------- ---------- ------------- --------- EMV Capital - 276 276 ProAxsis 67 48 115 67 324 391 -------------- ---------- ------------- --------- 30 June 2021 Delivered Goods Service Fees Total GBP000s GBP000s GBP000s -------------- ---------------- ------------- --------- EMV Capital - 325 325 ProAxsis 45 37 82 45 362 407 -------------- ---------------- ------------- ---------
Total Loss for the period by segment
Unaudited Unaudited Six months Six months ended 30 June ended 30 June 2022 2021 GBP000s GBP000s --------------- --------------- --------------- NetScientific (541) (772) EMV Capital (154) 18 ProAxsis (236) (88) Glycotest (654) (606) Cetromed (73) - (1,658) (1,448) --------------- --------------- ---------------
The above losses reflect investment in R&D by Glycotest and ProAxsis, which add value for the future through new product and clinical trials. ProAxsis has seen further investment through proportional Grant funding. The investment by the Group has been done through shareholder loans, which are expected to be repaid in due course.
4. REVENUE
Revenue from contracts with customers: United Kingdom
Delivered Service Fee's Total Goods GBP000s GBP000s GBP000s -------------- ---------- -------------- --------- 30 June 2022 67 324 391 30 June 2021 45 362 407 5. LOSS PER SHARE
The basic and diluted loss per share is calculated by dividing the loss for the financial period by the weighted average number of ordinary shares in issue during the period. Potential ordinary shares from outstanding options at 30 June 2022 of 1,120,010 (30 June 2021: 620,729; 31 December 2021: 1,064,498) are not treated as dilutive as the group is loss making.
Unaudited Unaudited Six months Six months ended 30 ended 30 June June 2022 2021 GBP000s GBP000s ------------------------------------------- ------------ ------------ Loss attributable to equity holders of the Company Continuing operations (1,475) (1,195) Total Loss attributable to equity holders of the Company (1,475) (1,195) ------------ ------------ Number of shares Weighted average number of ordinary shares in issue 21,146,591 15,067,947
On 29 June 2022 the Company issued 2,238,807 of 5p ordinary shares at 67p per share, raising gross funds of GBP1,500k and net funds of GBP1,444k. On 29 June 2021 the Company issued 5,958,123 of 5p ordinary shares at 130p per share, raising gross funds of GBP7,746k and net funds of GBP7,309k. The total number of voting rights in the Company at 30 June 2022 is 23,360,660 5p ordinary shares (30 June 2021: 20,975,311, 31 December 2021: 21,121,853.
6. PROPERTY, PLANT AND EQUIPMENT Furniture, Leasehold fittings Plant Improvement and equipment and machinery Totals GBP000s GBP000s GBP000s GBP000s ----------------------- ------------- --------------- --------------- --------- Cost ----------------------- ------------- --------------- --------------- --------- At 1 January 2021 100 35 170 305 ----------------------- ------------- --------------- --------------- --------- Additions - 5 36 41 ----------------------- ------------- --------------- --------------- --------- At 30 June 2021 100 40 206 346 ----------------------- ------------- --------------- --------------- --------- Additions - 15 6 20 ----------------------- ------------- --------------- --------------- --------- At 31 December 2021 100 55 212 367 ----------------------- ------------- --------------- --------------- --------- Exchange adjustments - 1 - 1 ----------------------- ------------- --------------- --------------- --------- Additions - 3 21 24 ----------------------- ------------- --------------- --------------- --------- At 30 June 2022 100 59 233 392 ----------------------- ------------- --------------- --------------- --------- Depreciation ----------------------- ------------- --------------- --------------- --------- At 1 January 2021 42 18 117 177 ----------------------- ------------- --------------- --------------- --------- Charge for the period 6 2 17 25 ----------------------- ------------- --------------- --------------- --------- At 30 June 2021 48 20 134 202 ----------------------- ------------- --------------- --------------- --------- Charge for the period 4 9 16 29 ----------------------- ------------- --------------- --------------- --------- At 31 December 2021 52 29 150 231 ----------------------- ------------- --------------- --------------- --------- Charge for the period 6 4 11 20 ----------------------- ------------- --------------- --------------- --------- At 30 June 2022 58 33 161 252 ----------------------- ------------- --------------- --------------- --------- Net book value ----------------------- ------------- --------------- --------------- --------- At 30 June 2022 42 26 72 140 ----------------------- ------------- --------------- --------------- --------- At 31 December 2021 48 26 62 136 ----------------------- ------------- --------------- --------------- --------- At 30 June 2021 52 20 72 144 ----------------------- ------------- --------------- --------------- ---------
ProAxsis leasehold improvements of GBP100k are funded by a third-party loan.
7. RIGHT-OF-USE-ASSETS Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ------------------------------------ ------------ -------------- Cost Opening balance at start of period 253 253 Closing balance at end of period 253 253 Amortisation Opening balance at start of period (95) (64) Add: Charge for the period (16) (31) Closing balance at end of period (111) (95) ------------------------------------ ------------ -------------- Net Book Value As at end of period 142 158 ------------------------------------ ------------ --------------
There is one long term lease, the Group has decided it will apply the modified retrospective approach to IFRS 16. In addition, it has decided to measure right-of-use assets by reference to the measurement of the lease liability on that date.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as at 1 January 2019. The Group's incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The rate applied was 3.5%.
Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset.
Short term leases still expensed as operating amount to GBP9k (H1 2021: GBP20k) with a maturity of two months.
8 . INTANGIBLE ASSETS Development Investment Carry Interest costs Acquisition Goodwill Arrangements Costs Patents Total GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s -------------------------- --------- --------------- ------------ ------------- -------- -------- Cost -------------------------- --------- --------------- ------------ ------------- -------- -------- At 1 January 2021 669 1,627 337 17 50 2,700 Additions - - 585 - - 585 At 31 December 2021 669 1,627 922 17 50 2,700 -------------------------- --------- --------------- ------------ ------------- -------- -------- Additions - - 280 - - 280 At 30 June 2021 669 1,627 1,202 17 50 2,955 -------------------------- --------- --------------- ------------ ------------- -------- -------- Accumulated amortisation and impairment -------------------------- --------- --------------- ------------ ------------- -------- -------- At 1 January 2021 - 76 - - 1 77 Amortisation charge - 140 18 - 5 163 -------------------------- --------- --------------- ------------ ------------- -------- -------- At 31 December 2021 - 216 18 - 6 240 -------------------------- --------- --------------- ------------ ------------- -------- -------- Amortisation charge - 81 19 - 4 105 -------------------------- --------- --------------- ------------ ------------- -------- -------- At 30 June 2021 - 297 37 - 10 345 -------------------------- --------- --------------- ------------ ------------- -------- -------- Net book value -------------------------- --------- --------------- ------------ ------------- -------- -------- At 30 June 2022 669 1,330 1,165 17 40 3,221 -------------------------- --------- --------------- ------------ ------------- -------- -------- At 31 December 2021 669 1,411 904 17 44 3,045 -------------------------- --------- --------------- ------------ ------------- -------- --------
The main factors leading to the recognition of these intangibles are resulting from the acquisition by NetScientific of EMV Capital, ProAxsis and Cetromed.
ProAxsis acquired a key patent as part of the buyout of the founders and Queens University for GBP50k which will be amortised over the economic life of the patent. A further GBP280k of ProAxsis development costs have been capitalised during the period taking the total capitalised to GBP1,202k in line with the accounting policy as certain projects now meet all the criteria for development costs to be recognised as an asset as it is probable that future economic value will flow to the Group.
9. EQUITY INVESTMENTS CLASSIFIED AS FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVTOCI)
NetScientific makes direct investments into portfolio companies through a mixture of equity and loans. The tables below outline the Group's positions.
Represents equity securities Unaudited Audited Six months Year ended ended 30 31 December June 2021 2022 GBP000s GBP000s ------------------------------------------------------------------------- ------------- -------------- Opening balance at start of period 11,516 2,970 Additions - 2,192 Acquired through business combinations - 342 Conversion of derivative financial assets 652 - Change in fair value during the period (2,733) 6,012 Closing balance at end of period 9,435 11,516 Unaudited Six months Audited % of ended 30 Year ended issued June 2022 31 December Country share Currency GBP000s 2021 Name of incorporation capital denomination GBP000s ---------------------- ------------------- ------------- ------------- ------------- -------------- PDS Biotechnology Corp USA 4.72% US$ 4,024 8,047 Q-Bot Ltd UK 23.70% UKGBP 2,778 1,025 SageTech Medical Equipment Ltd UK 2.25% UKGBP 887 887 CytoVale, Inc. USA 1.00% US$ 412 371 Fox Biosystems NV BEL 5.06% EUREUR 400 335 G-Tech Medical, Inc. USA 3.04% US$ 351 317 Epibone, Inc. USA 0.84% US$ 322 290 Martlet Capital Ltd UK 1.51% UK 175 175 PointGrab Israel 0.49% US$ 76 68 Oncocidia BEL 41.27% EUREUR 10 1 9,435 11,516 ----------------------- --------------------------------- ------------- ------------- --------------
Equity investments classified as fair value through other comprehensive income are held for sale, fair valued and stand at GBP9,435k (2021: GBP11,516k). A decrease in value of GBP2,081k, which relates predominately to the decrease in fair value of PDS Biotechnology Corporation offset by a GBP1.1m increase in fair value on Q-Bot Ltd.
10. DERIVATIVE FINANCIAL ASSETS CLASSIFIED AS FAIR VALUE THROUGH PROFIT AND LOSS (FVTPL) Warrants, convertible loans and loans Unaudited classified as FVTPL Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ---------------------------------------------------- ------------- -------------- Opening balance at start of period 1,462 78 Additions 593 1,332 Additional accrued interest 51 24 Conversion to Equity Investments classified (652) - as FVTOCI Change in fair value during the period 197 28 Closing balance at end of period 1,651 1,462 ---------- 30 June Currency 2022 2021 Name Country of incorporation denomination GBP000s GBP000s ------------------------ ------------------------- -------------- -------------- -------- EpiBone, Inc. USA US$ 604 543 Sofant Technologies Ltd UK UKGBP 351 324 Vortex Biotech Holdings Ltd UK UKGBP 253 - Fox Biosystems NV BEL EUREUR 135 128 Q-Bot Ltd UK UKGBP 143 312 G-Tech Medical, Inc. USA US$ 87 79 Martlet Capital Ltd UK UKGBP 78 76 1,651 1,462 ----------------------------------------------------------------- -------------- --------
Derivative financial assets classified as fair value through profit and loss are GBP1,651k (2021: GBP1,462k). An increase in fair value of GBP189k, which mainly relates to the increase in fair value of Vortex Biotech Holdings.
11. INVENTORY Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ---------------------------------- ------------ -------------- Finished products 71 67 Closing balance at end of period 71 67
Inventories are held at net realisable value. ProAxsis finished products constitute ProteaseTag active neutrophil elastase immunoassay kits.
During the period the impairment charges totalled GBPNil (H1 2021: GBPNil).
12. TRADE AND OTHER RECEIVABLES Current Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ---------------------------------- ------------ -------------- Trade receivables 159 140 Taxation 138 88 Other receivables 66 815 Prepayments 97 77 Accrued income 699 478 Closing balance at end of period 1,159 1,598
The carrying value of trade and other receivables classified at amortised cost approximates fair value. The Group does not hold any collateral as security against any trade and other receivables.
Estimated credit losses have been calculated as follows:
Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s -------------------------------------------- ------------ -------------- Gross carrying amount of trade receivables 198 161 Impairment provision (estimated credit losses) (39) (21) Trade receivables 159 140 13. CASH AND CASH EQUIVALENTS Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ---------------------------------- ------------ -------------- Short term deposits 526 1,990 Cash and cash equivalents 1,837 720 Closing balance at end of period 2,363 2,710 14. TRADE AND OTHER PAYABLES Current Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ---------------------------------- ------------ -------------- Trade payables 133 219 Other payables 525 56 Corporation tax - - Deferred income 322 323 Accruals 762 931 Closing balance at end of period 1,742 1,529
The carrying value of trade and other payables classified as financial liabilities are measured at amortised cost which approximates fair value.
15. LEASE LIABILITIES
Transition Method and Practical Expedients Utilised
On adoption of IFRS 16, on 1 January 2019, the Group recognised right-of-use assets and lease liabilities in relation to leases of office space, which had previously been classified as operating leases.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate as at 1 January 2019. The incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The rate applied was 3.5%.
Lease liability Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ------------------------------------ ------------ -------------- Opening balance at start of period (163) (194) Add: Payments 19 38 Less: Interest charge during the period (4) (7) Closing balance at end of period (148) (163) Split as follows: Current Liability (33) (32) Long Term Liability (115) (131) ------------------------------------ ------------ -------------- (148) (163) ------------------------------------ ------------ --------------
The judgement that the Group was reasonably certain to extend for the full term of the lease beyond the contractual breaks in the third, fifth and seventh years of the lease have made a material difference to the carrying value of the asset/liability. The impact of this judgement is to increase the initial asset/liability amounts by GBP216k, GBP181k and GBP114k respectively.
The Group has elected to utilise the practical expedient for all rent concessions that meet the criteria. The practical expedient has been applied retrospectively, meaning it has been applied to all rent concessions that satisfy the criteria, which in the case of the Group, occurred from March 2020 to June 2020.
Accounting for the rent concessions as lease modifications would have resulted in the Group remeasuring the lease liability to reflect the revised consideration using a revised discount rate, with the effect of the change in the lease liability recorded against the right-of-use asset. By applying the practical expedient, the Group is not required to determine a revised discount rate and the effect of the change in the lease liability is reflected in profit or loss in the period in which the event or condition that triggers the rent concession occurs.
16. LOANS AND BORROWINGS Unaudited Six months Audited ended 30 Year ended June 31 December 2022 2021 GBP000s GBP000s ------------------------------------------- ------------ -------------- Total falling due within one year (89) (59) Total falling due more than one year (367) (432) Closing balance at end of period (456) (491) The maturity of the loans are as follows: Amounts falling due within one year on demand (89) (59) Amounts falling due between one and two years (67) (67) Amounts falling due between two and five years (282) (282) Amounts falling due over five years (18) (83) ------------------------------------------- ------------ -------------- (456) (491) ------------------------------------------- ------------ --------------
Loans and borrowings represent:
An original unsecured loan note by a third party to ProAxsis of GBP100k. GBP50k is outstanding at 30 June 2022 (H1 2021: GBP60k). There is no interest charged and is payable in equal instalments of GBP10k p.a.. First instalment upon signing of document and then equally over nine years.
ProAxsis has entered into two secured HSBC coronavirus business interruption loan agreements "CBIL's" for GBP245k and then GBP200k. The CBIL's facility incurs interest of 3.99% p.a. above the Bank of England base rate. The first twelve months is interest free and the loan is repayable within six years with principal repayments starting after thirteen months. The total outstanding at 30 June 2022 was GBP406k (H1 2021: GBP445k).
17. CALLED UP SHARE CAPITAL
On 29 June 2022 the Company issued 2,238,807 of 5p ordinary shares at 67p per share, raising gross funds of GBP1,500k and net funds of GBP1,444k after deducting costs of GBP56k.
In the prior year:
On 29 June 2021 the Company issued 5,958,123 of 5p ordinary shares at 130p per share, raising gross funds of GBP7,746k and net funds of GBP7,309k after deducting costs of GBP437k.
On 25 January 2021 the Company issued 101,066 of 5p ordinary shares at 49.47p per share to Chairman John Clarkson, who has taken the payment in shares, rather than cash for fees owed to Development Financial and Management Services Ltd.
On 20 December 2021 the Company issued 146,542 of 5p ordinary shares at 102.36p, based upon the average of the middle market quotation between 1 November 2021 and 5 November 2021 (inclusive) for the purchase of 75% of Cetromed Limited, a life sciences holding company with several portfolio companies spun out of the University of Leuven, Belgium.
The total number of voting rights in the Company and issued capital at 30 June 2022 is 23,360,660 5p ordinary shares (30 June 2021: 20,975,311, 31 December 2021: 21,121,853.
18. RELATED PARTY DISCLOSURES
Beckman Group and Melvin Lawson, who is interested in 16.77% (2021: 16.25%) of the issued share capital of NetScientific, is also considered and presumed to be acting in concert with Dr Ilian Iliev, as defined by the The City Code on Takeovers and Mergers.
EMV Capital provides corporate finance, consulting and management services to Vortex Biosciences Inc. a related party by common substantial shareholders. During the period revenue was booked totalling GBP52k (H1 2021: GBP18k). The balance outstanding at 30 June 2022 is GBP321k (31 December 2021: GBP330k) has been resolved post-balance sheet, as part of the Vortex restructuring.
EMV Capital also provided corporate finance, consulting and management services to Wanda Inc. a related party by common substantial shareholders. During the period revenue was booked totalling GBP44k (2020: GBP17k), with a value of further work in progress to be agreed. The balance outstanding at 30 June 2022 is GBP50k (31 December 2021: GBP68k).
Except as noted above, there are no additional related party transactions that could have a material effect on the financial position or performance of the Group and of the Company during this financial period under review.
19. EVENTS AFTER THE REPORTING PERIOD
On 16 August 2022 NetScientific announced the completion of the acquisition of a 30% stake in Vortex Biotech Holdings Limited "Vortex" and the appointment of Paul Jones as the new Vortex Chief Executive Officer. The consideration for the Acquisition is GBP300,000, satisfied by the transfer by the Group to Vortex of GBP300,000 of invoices ( "Services Invoices") to be raised to: (i) extinguish obligations of Vortex US to EMV Capital Limited for services provided under the Services Agreement; and (ii) cover fees payable by Vortex US to EMV Capital Limited in accordance with terms of certain loans made to Vortex US by associates of Deeptech Disruptive Growth Investments Limited.
On 29 September 2022, EMV Capital sold down 5.8% of the Group's direct stake in Q-Bot, realising a gross profit of GBP110,215.
[1] 'Fair Value' is unaudited Directors' estimated value of the directly owned stakes, based on the BVCA valuation method. Decrease is predominately in PDS Biotechnology (Nasdaq listed) where underlying clinical trials outlook remains positive.
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September 30, 2022 02:00 ET (06:00 GMT)
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