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 £29.2 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 £2.5 million of syndicated new investment with Capital under advisory up 11% at £24.6 million (2021: 22.1 million)

·    Proactive management of well-balanced portfolio of 22 companies, with further development and additional direct balance sheet investment of £1.3 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 £1.5 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 £1.7 million (H1 2021: loss £1.4 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 £110k 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 £1.26 million and raised over £2.5 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 companies	Country	Sector	Sub-Sector	Stage of Development	Group Interest %	Unaudited Directors' Estimated Value		Capital Under Advisory (At Cost to Third Party)
						31 Dec 21	30 Jun 22	31 Dec 21	30 Jun 22
Subsidiaries
EMV Capital Ltd	UK	Venture Capital	Financial Services	Sales	100% Equity	£3.5m	£3.5m	-	-
ProAxsis Ltd	UK	Respiratory diagnostics	Life Sciences	Sales	100% Equity	£3.5m	£3.5m	-	-
Glycotest, Inc.	US	Liver cancer diagnostics	Life Sciences	Late stage clinical	64% Equity	£11.0m	£11.0m	-	-
Cetromed Ltd	UK	Life Sciences	Investment	Holding Company	75% Equity	-	-	-	-
Sub Total						£18.0m	£18.0m	-	-
Direct/Advised
PDS Biotechnology Corporation	US	Immuno-oncology	Life Sciences	Phase II clinical	4.7% Equity	£8.0m	£4.0m	-	-
Q-Bot Ltd	UK	Robotics	Technology	Sales	23.7% Equity + 15.6% Advised	£1.0m + £0.3m CLA	£3.2m + £0.1m OD	£2.3m	£2.8m
SageTech Medical Equipment Ltd	UK	Waste anaesthetic capture/recycle	Healthcare	Commercial stage	5.9% Equity + 25.14% Advised	£0.9m	£0.9m	£3.5m	£3.8m
Epibone, Inc.	US	Regenerative medicine	Life Sciences	Early stage clinical	0.8% Equity	£0.3m + £0.5m CLA	£0.3m + £0.6m CLA	£0.2m CLA	£0.2m CLA
CytoVale, Inc.	US	Medical biomarker	Life Sciences	Late stage clinical	1.0% Equity	£0.4m	£0.4m	-	-
G - Tech Medical, Inc.	US	Waerable gut monitor	Life Sciences	Early stage clinical	3.8% Equity	£0.4m	£0.4m	-	-
Martlet Capital Ltd	UK	Venture Capital - Deeptech	Investment	Holding Company	1.5% Equity + £75k Convertible loan note + 10.3% Indirect	£0.3m	£0.3m	£1.3m	£1.3m
Fox Biosystems *	BEL	Research Equipment	Life Sciences	Sales	5.1% Equity	£0.3m	£0.3m	-	-
Sofant Technologies Ltd	UK	Semiconductors Satellite Coms	Technology	Pre sales	25.1% Advised	£0.3m CLA	£0.4m CLA	£3.0m	£3.0m
PointGrab, Inc.	IL	Smart building automation	Technology	Sales	0.5% Equity + 20.8% Advised	£0.1m	£0.1m	£4.1m	£4.1m
Dname-iT *	BEL	Lab technology	Life Sciences	Pre sales	61.5% Equity	£0.1m	£0.1m	-	-
QuantalX Neuroscience	IL	Medical diagnostics	Life Sciences	Late stage clinical	0.4% Equity	£0.1m	£0.1m	-	-
Oncocidia *	BEL	Cancer therapeutics	Life Sciences	Early stage clinical	41.3% Equity	-	-	-	-
Longevity Biotech, Inc.	US	Neurology therapeutics	Life Sciences	Early stage clinical	$250k Convertible loan note	-	-	-	-
Sub Total						£13.0m	£11.2m	£14.4m	£15.2m
Advised
Vortex Biosciences, Inc.	UK/US	Liquid biopsy oncology	Life Sciences	Sales	96.0% Indirect	-	-	£3.9m	£4.9m
Wanda Health, Inc.	UK/US	Digital health monitoring	Healthcare	Sales	74.7% Indirect	-	-	£2.2m	£2.9m
Insight Photonic Solutions, Inc.	US	Semiconductors Akinetic laser	Technology	Sales	$1.25m Warrants	-	-	£0.9m	£0.9m
Nanotech Industrial Solutions, Inc.	US	Material science	Technology	Sales	$1.0m Convertible loan note	-	-	£0.7m	£0.7m
Sub Total						-	-	£7.7m	£9.4m
TOTAL						£31.0m	£29.2m	£22.1m	£24.6m

 

 

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 £24.6 million could result in carry returns to EMV Capital of over £4 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 £24.6 million (2021: £22.1 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 £4.0 million at the end of period (2021: £8.0 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 £593,000 in non-subsidiary companies and syndicated over £2.5 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 £1.62m 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.£1m in Q3 2021) has increased by 108% to £2.1m.

·    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 £500k 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 £1.7 million (H1 2021: £1.5 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 £391,000 (H1 2021: £407,000), with a promising pipeline for the second half of 2022. ProAxsis revenue at £115k (2021: £82k) 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 £265,000 (H1 2021: £53,000), as a result of fair value movement and adjustments on derivative financial assets classified as "fair value through profit and loss" (FVTPL) of £179,000 (H1 2021: £Nil), grant and other income of £65,000 (H1 2021: £7,000), and ProAxsis R&D tax above the line of £21,000 (H1 2021: £46,000).

 

Research and development costs of £814,000 (H1 2021: £651,000) were higher in the first half as Cetromed, Glycotest, and ProAxsis continue development and clinical trials. Further development costs on five projects of £280,000 (H1 2021: £290,000) was capitalised at ProAxsis during the period.

 

Selling and administrative costs of £1.4 million (H1 2021: £1.2 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 £2.4 million (2021: £2.7 million), following a fundraise of £1.44 million net of costs in June 2022.

 

Cash used in operations during the period was £1.132 million (H1 2021: £1.134 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 £3.221 million (2021: £3.045 million). ProAxsis capitalised a further £280,000 of development costs during the period (2021: £585,000) and amortisation during the period was £105,000 (2021: £163,000). 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 £9.435 million on 30 June 2022 (2021: £11.516 million). A decrease in value of £2.081 million, relates predominately to the PDS Biotechnology (NASDAQ: PDSB) price decline, and a trade investment measured at fair value, was down £4.0 million during the period.  This is offset by an increase in fair value on Q-Bot of £1.1 million to £2.1 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 £1.651 million on 30 June 2022 (2021: £1.462 million). An increase in value of £189,000 was obtained, which relates predominately to a Vortex loan of £250,000. Refer to note 10 below for further information.

 

The Group ended the period with net assets of £15.836 million (2021: £18.509 million), amounting to a decrease of £2.673 million. The movement is shown in the consolidated statement of changes in equity and is mainly constituted by the loss in the period of £1.448 million and the negative movement in equity investments held for sale and derivative financial instruments of £2.873 million, offset by the successful fundraise during June 2022 of £1.444 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 MONTHS ENDED 30 JUNE 2022

 

 

 

 

NetScientific plc

Continuing Operations	Notes	Unaudited Six months ended 30 June 2022 £000s	Unaudited Six months ended 30 June 2021 £000s
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)