·              CHIEF EXECUTIVE OFFICER'S STATEMENT

Overview

NetScientific's transformational journey is well underway. Over the past three years, we have evolved our business from a standstill into a growing and active venture capital (VC) player. We have expanded our footprint from £8 million fair value (FV) across eight companies to a post-balance sheet date total of over an estimated £100 million in FV of direct and managed investments, now spanning a diversified portfolio of over 70 companies (combining both balance sheet investments of £16.4 million, subsidiaries and associates at directors' valuations of £19.2 million (not included in the audited financial statements), £4.0 million of post balance sheet movements and third-party stakes (for which EMV Capital has carried interest fee arrangements) with an estimated value of £62.4 million) (also not included in the audited financial statements). We intend to maintain this momentum, as we continue to transform our business over the next three years to the benefit of our investors and portfolio companies through a focus on third-party fund management alongside direct balance sheet investment.

Our goal is to become a leading VC investor in the deep tech and life sciences sectors, both in the UK and internationally. We are already making tangible progress towards leading the next wave of VC investment by discovering, nurturing, and preparing early-stage deep tech and life sciences companies with attractive IP for growth. By enabling these companies to realise their full potential and make a real-world impact, we aim to generate outsized returns for our investors. Our proactive investment approach focuses on fast-growing sectors that will shape the future of our society.

Our strategy is in line with changes in the VC landscape. The industry's focus is increasingly shifting towards our target sectors, driven by advancements in artificial intelligence, robotics, semiconductors, and breakthroughs in life sciences.  We believe that the time is right for the growth of new leaders in the VC industry, driven by a differentiated investment model. This compelling investment theme requires our unique VC approach, encompassing skillsets, engagement models, expertise, and capital deployment strategies tailored to deep tech investments. We are confident that our management team's investment and portfolio development strategy, along with our established processes and 'playbooks', will meet this demand.

Events over the past 18 months have validated our strategy. In the context of significant market volatility and realignment, having secured a new fund management mandate since the balance sheet date the fair value has reached a key milestone with assets under management now estimated at over £100 million (combining both balance sheet investments of £16.4 million, subsidiaries and associates at directors' valuations of £19.2 million (not included in the audited financial statements), £4.0 million of post balance sheet movements and third-party stakes (for which EMV Capital has carried interest fee arrangements) with an estimated value of £62.4 million) (also not included in the audited financial statements). Our investment practice has continued to attract investors to our portfolio, with £6.2 million invested by EMV Capital investors, alongside £47.7 million of third-party investor funds.

Overall Group losses for the year decreased to £2.9 million (2022: £3.7 million). The 'core' of the operations of NetScientific PLC and EMV Capital accounted for £1.1 million (2022: £1.2 million). The balance of £1.8 million is attributed to the subsidiary portfolio companies Cetromed, ProAxsis and Glycotest. Net of a £684k non-cash impairment charge for ProAxsis^[1], group losses are significantly improving on the previous year. In line with our capital efficient investment strategy, ProAxsis, Glycotest and Cetromed were funded by external investors during the year. The Group also made a cash gain on disposal of investments of £0.5 million and a one-off non-cash gain of £1.4m after completing a third party fundraise of £0.5 million in June 2023 for DName-iT Holdings Limited, due to loss of control of a subsidiary.

[1] The impairment is related to product lines that have not been commercialised (such as a COVID anti-bodies project)

The Fair Value of NetScientific's directly owned portfolio is £16.4 million, down from £22.7 million in 2022. This decline is primarily due to the decreased value of our holding in NASDAQ-listed PDS Biotech. This was partly offset by a 15% increase in the Fair Value of our directly owned privately held companies. By contrast, third party Assets Under Management have grown significantly by 42% to £38.4 million (2022: £27.1 million), on the back of increased values of portfolio companies, as well as additional new investments. 

EMV Capital's revenues have grown, offsetting the overall costs of maintaining our core infrastructure. Our Value Creation Services practice has engaged with selected portfolio companies and their management teams, providing timely support that has contributed to significant uplifts in value of several of our companies.  While full exits through M&A or IPOs remain challenging and at lower valuations, we have successfully executed profitable divestments through c.£1.4 million in profitable secondaries in two of our portfolio companies. We held our commitment that our subsidiary portfolio companies, Glycotest and ProAxsis, would be funded through third party investment, rather than drawing on our own balance sheet reserves - while at the same time protecting the value of our holdings.  Finally, as we committed to our shareholders, during 2023 we did not carry out an equity placing, for the first time in a number of years and during a particularly difficult period for the AIM market, as a result of the changes to our strategy. 

In last year's report, we indicated our intention to launch a Fund Management practice. We have made progress. Following the work started in 2023, EMV Capital recently secured a fund-management mandate for the Cambridge VC fund, Martlet Capital with £23.3 million in Assets Under Management (AUM). Martlet Capital enjoys a unique proposition, and prestigious status within Cambridge's dynamic tech ecosystem, known around the world as "Silicon Fen".  This deal not only increases our portfolio size and AUM, but also strengthens our presence in the Cambridge high-tech cluster. We will now work on leveraging the Martlet Capital brand further, exploring investor appetite for the proposed launch of two new Martlet Capital funds. 

We have also relaunched the EMV Capital Evergreen EIS Fund, expecting growth through IFAs and other sources. AUM at the time of publication of the report were c.£1.2m and are expected to grow further through our relationships with IFAs and other sources. The EIS Fund will co-invest alongside other EMV Capital deals, providing an additional source of co-investment for EIS qualifying deals.

Our model

During 2023, we have further refined our strategy, as summarised below.

Capital efficient investment strategy: We use a combination of funding sources to gain (and increase) direct and indirect stakes in our portfolio companies, including syndicated investments, selective balance sheet investments to gain deeper stakes, as well as deploying funds from our Funds practice. This provides us with capital gain opportunities when we exit portfolio companies through direct disposals and carried interest from exit realisations for our investor base. Our platform's flexibility allows us to support portfolio companies from their early stages through to successful exit.

Proactive portfolio management: We believe proactive management is key to obtaining superior returns and protecting the value of our holdings. Our approach involves taking Board positions, working closely with management and maintaining strong relationships with co-investors to coordinate strategies and objectives. We are an active, engaged investor deploying our expertise.

Value creation services: We concentrate on a select cohort of companies at a time, driving growth and investment realisations through fundraising support and value creation services. Our in-house operational team, venture partners, and panel of expert service providers offer support across functions including investment readiness, exit readiness, IP strategy, corporate collaborations, financial functions, and senior executive placements. EMVC has retained contracts with several of its portfolio companies, helping them accelerate development and execute strategy pivots.

Operational income sources: Our financial realisations and income model is to finance the operations through a combination of operational fee income and modest divestments.

Financially self-sufficient: Starting from nil in 2020, the Group now has multiple sources for ongoing income including fees in connection with corporate finance and advisory, board seats, annual management, Value Creation Services (VCS), and (most recently) recurring Fund management fees through EMV Capital. We also expect to execute profitable partial sales of portfolio holdings. The combination has enabled us to remain self-sufficient during the period, eliminating the need to access capital markets for support. This has protected shareholders from dilution in the current difficult capital markets.

Capital realisation channels / 'routes to exit': We target the realisation of venture-type/outsized investment returns through strategic partial or full exits from our directly owned positions (direct cash) and carried interest from Fund management exits. These exits are realised through M&A, IPOs, or sales to PE and other financial investors. This approach maximises value for our stakeholders through a variety of well-planned exit strategies.

Deepening direct stakes: Our proactive investment approach enables us to selectively build stakes in portfolio companies through a mixture of modest balance sheet investments, accepting fees as equity (e.g. Ventive), co-founding businesses (e.g. Deeptech Recycling), and making selective paper acquisitions (e.g. Cetromed).

Funds under management: We are expanding our Funds under management through a mixture of deal-by-deal syndication and establishing Funds (refer to Funds section). This provides us with additional investment capability in existing and new portfolio companies, additional management fees income and additional carried interest potential.

Market correction and NetScientific: Over the past two years, we have seen a major correction in VC portfolio valuations, leading to the depreciation of VC fund values. Whilst listed investments dropped c.71% to £4.3 million (2022: £14.7 million). The privately held direct portfolio value has grown significantly. Despite an environment of limited capital availability, we have been able to deploy capital continuously to support our portfolio companies. We remain confident that our emphasis on smaller, more focused investment rounds will pay off as companies progress and steadily build value, whilst the broader VC market re-aligns. Separately, whilst many funds are fully invested and driven by their fund mandates, our model enables us to look beyond the current cycle and pick the right deals for our business.

Financial and Operational Highlights:

Portfolio size: Through 2023 the Group had a portfolio of 23 companies (including EMV Capital). In the current year to date this has increased to over 70 companies following completion of the Martlet Capital transaction.

Total Assets Under Management: The estimated total portfolio fair value, measured as fair value of our direct stakes and third-party stakes for which EMV Capital has carried interest fee arrangements in the portfolio for 2023 was £74 million (see below). In the current year to date this has increased to over an estimated £100 million, marking an important milestone for our group (combining both balance sheet investments of £16.4 million, subsidiaries and associates at directors' valuations of £19.2 million (not included in the audited financial statements), £4.0 million of post balance sheet movements and third-party stakes (for which EMV Capital has carried interest fee arrangements) with an estimated value of £62.4 million) (also not included in the audited financial statements). 

Fair Value of direct stakes: the Directors' valuation of the Company's directly owned portfolio (Fair Value) has decreased by c.15% to £35.6 million (2022: £41.8 million) combining both balance sheet investments of £16.4 million, subsidiaries and associates at directors' valuations of £19.2 million (not included in the audited financial statements). The decline was driven primarily by the share price declines of a smaller holding in our NASDAQ-listed portfolio company, PDS Biotech. By contrast the FV of our privately held portfolio (where our efforts are focused) increased by 15% to £31.3 million.

Fair Value of Third-Party Stakes: The estimated fair value of our portfolio holdings under management increased by c.42% to c.£38.4 million (2022: £27.1 million) (not included in the audited financial statements). This reflects both growth in the value of portfolio companies (of c.17%), and further syndicated investments of c.£6.2 million. Since the year end, this has increased to an estimated c.£62.4 million through the addition of the Martlet fund, and further transactions. The valuation of these assets does not form part of the audited financial statements.

Portfolio fundraisings: The Group's 'capital efficient' investment model enabled NetScientific to continue to support its portfolio companies with minimal use of its balance sheet. Across the Group's portfolio, an aggregate amount of c.£53.9 million was raised through equity and debt by 13 companies in 2023. This was supported through £6.2 million of EMV Capital syndicated investments, which have added to our assets under management.

Exits and liquidity: We executed partial exits of c.£1.4 million through secondary market sales across two portfolio companies, locking in a modest profit of £0.5 million. This demonstrates our Group's ability to exit private and publicly held assets profitably, even in difficult market conditions.

Group income and sales: Total income has increased by c.111% to £3.8 million (2022: £1.8 million), primarily driven by EMV Capital sales of £1.6 million (2022: £1.2 million), achieving a profit of £0.2 million (2022: £0.1 million). This covered approximately half of the core Group's costs (NetScientific PLC and EMV Capital), whilst providing infrastructure and services to the Group and its portfolio companies. The Group also made a cash gain on disposal of investments of £0.5 million and a one-off non-cash gain of £1.4m after completing a third party fundraise of £0.5 million in June 2023 for DName-iT Holdings Limited, due to loss of control of a subsidiary.

Group losses and core operations: Group losses for the year decreased to £2.9 million (2022: £3.7 million). The 'core' of the operations of NetScientific PLC and EMV Capital accounted for £1.1 million (2022: £1.2 million). The balance of £1.8 million is attributed to the subsidiary portfolio companies Cetromed, ProAxsis and Glycotest. Net of a £684k non-cash impairment charge for ProAxsis^[2], group losses are significantly improving on the previous year. In line with our capital efficient investment strategy, ProAxsis, Glycotest and Cetromed were funded by external investors during the year. As noted above, the Group also made a cash gain on disposal of investments of £0.5 million and a one-off non-cash gain of £1.4m after completing a third party fundraise of £0.5 million in June 2023 for DName-iT Holdings Limited, due to loss of control of a subsidiary.

Cash: Cash on the balance sheet on 31 December 2023 was £0.2 million (2022: £0.9 million), with £0.8 million of cash and £2.6 million held as readily realisable quoted securities at 31 May 2024. The combination of EMV Capital's operational revenue and partial exit have meant that NetScientific has not required shareholder funding support since June 2022.

Net Assets: The Company ended the year with total assets of £22.5 million (2022: £29.0 million), and net assets of £17.1 million (2022: £25.2 million). The decrease is mostly accounted for by the declined value of our PDS Biotech holding and the current year loss of £2.9 million (2022: £3.7 million). The net asset value per share for the end of 2023 was £0.73 (2022: £1.07).

Routes to Exits: After the turnaround and consolidation of our core portfolio over the past three years, we aim to generate significant returns to NetScientific through partial or full sell-downs of our portfolio companies, with carried interest returns supplementing our direct holdings. In line with our proactive strategy, in 2023 we initiated a 'routes to exits' program. This programme works with selected companies to prepare them for M&A opportunities, drive them to value inflection points, and identify early potential acquirers. We are enhancing our in-house capabilities and working with a select group of M&A advisers to support companies in their exit strategies.

² The impairment is related to product lines that have not been commercialised (such as a COVID anti-bodies project)

EMV Capital Ltd (EMVC): EMVC, a wholly owned subsidiary and the corporate finance and venture capital arm of NetScientific, was acquired in August 2020. It is now fully integrated in the Group, with the bulk of operations conducted through EMV Capital.  EMV Capital follows an investment model that syndicates investments from its extensive network of private, institutional VC, and corporate investors, focusing on pre-Series A and Series A stages. It actively engages with portfolio companies to drive venture capital returns through Board representation and the active use of its Value Creation Services offering.

EMVC has been instrumental in implementing our 'capital efficient' investment model. It plays a vital role in the Group's strategy by generating revenues that offset the infrastructure costs of running a proactive VC operation, providing fundraising support to our portfolio companies, and offering Value Creation Services. Additionally, EMVC offers potential additional investment returns through carried interest from its assets under management in respect of third-party funds. This comprehensive approach has supported, protected, and grown the value of the Group's privately held portfolio, even as many of our peers have experienced a decline in value.

Key achievements for EMVC in 2023 include:

·     Revenue increase of 33% to £1.6 million (2022: £1.2 million) from corporate finance and value creation activities, resulting in a net profit of £210,000 (2022: £85,000).

·    Syndication of £6.2 million in additional investments, bringing Assets Under Management to £38.4 million (2022: £27.1 million) on third-party stakes for which EMV Capital has carried interest fee arrangements.

·     The unrealised gains of the third-party portfolio are £8.2 million - an increase of £4.6 million or 128% over the previous year.

·      Streamlined and grown the Value Creation Services practice with eight companies benefitting from the practice.

·    Work undertaken during 2023 enabled EMVC to receive direct FCA authorisation in early 2024, enabling it to expand and deepen its corporate finance and fund management activities.

 

EMV Capital Fund Practice

In last year's report, we indicated our plans to grow a Funds practice under EMV Capital. We believe the growth of this Fund management practice will provide many key benefits to NetScientific and its shareholders including:

·      Additional exposure to carried interest from Fund distributions.

·   Recurring management fee income from Fund management fees, contributing to the Group's infrastructure costs.

·     Diversified returns profile, increasing investment opportunities, reducing risk and enhancing potential returns.

·      Lower reliance on balance sheet for investments, use of balance sheet selectively to take advantage of opportunities without over-extending resources.

·   Growing ecosystem of co-investors and partners, to enhance investment prospects and strategic synergies.

·      Scale funding capacity to support portfolio and reduce burden of deal-by-deal funding.

·      Reaching critical mass as a VC player in our sectors of choice.

 

We have made significant progress in that regard with several initiatives bearing fruit in the current financial year to date:

·    Martlet Capital Fund mandate adding £23m of AUM: On 13 May 2024, we announced that EMV Capital was appointed as investment manager to Martlet Capital Limited, managing its c.£23.3 million portfolio of investments on a discretionary basis. In addition, EMV Capital acquired the operational venture capital business of Martlet Capital for a nominal amount (and deferred consideration connected to receipts of net carried interest from certain proposed future Martlet Capital funds). This non-dilutive transaction represents a transformational milestone for our Group, aligned with our objective to become a leading deep tech and life sciences venture capital investor in the UK and Europe.

This fund management mandate significantly increases the critical mass of our Funds practice. It provides our group with multiple benefits including additional assets under management with a carried interest arrangement, strengthened team, significant recurring annual investment management fees, access to the globally renowned Cambridge high-tech cluster, an expanded co-investor ecosystem, and additional Fund opportunities based on significant work already done by the Martlet team.

In line with our capital efficient approach, we expect that the annual management fees receivable will offset the ongoing costs associated with Martlet's business and expect to identify additional fee opportunities through selective engagement with the Martlet portfolio and other participants in the dynamic Cambridge ecosystem.

·     EIS Fund: We have also re-launched, under the fund management of EMV Capital, an Evergreen EIS Fund, which has a broad remit to invest in EIS qualifying transactions alongside our other activities. We anticipate the EIS Fund will grow progressively alongside our other practices, providing the group with the additional firepower (and fee income) to selectively co-invest alongside our portfolio. 

 

·      Other Fund initiatives: there are a number of other Fund initiatives under way, each of which could provide significant additions to our AUM and further growth opportunities.

 

Portfolio highlights

Since starting with a portfolio of eight companies in 2020, NetScientific now has an extended portfolio of c.70 companies, with a mixture of direct (on balance sheet) and third-party stakes for which we have carried interest fee arrangements (which we collectively refer to as Assets Under Management). These provide a broad range of potential returns, and opportunities to take deeper stakes and generate advisory revenues.

Measuring Assets Under Management (AUM): AUM is a commonly used measure in the VC and PE industry to denote the Fair Value of stakes owned in public and private companies, on balance sheet (i.e. owned by the company), and as part of third-party funds under management with carried interest.

In the past we have reported on the directly owned (on balance sheet) stakes as directors' fair value, whilst the indirect advised stakes were measured at cost. Going forward, in order to facilitate an easier comparison between the two, both direct (on balance sheet) and indirect (third party) stakes will be measured as directors' Fair Value and be collectively referred to as Assets Under Management. It is worth noting that investments in early-stage private companies are inherently hard to value and we have applied BVCA valuation principles in deriving fair value. The fair value of the indirect stakes does not form part of the group's audited financial statements.

By this measure, the Fair Value of NetScientific's directly owned portfolio is £16.4 million, down from £22.7 million in 2022. This decline is primarily due to the decreased value of our holding in NASDAQ-listed PDS Biotech. This was partly offset by a 15% increase in the Fair Value of our directly owned privately held companies. By contrast, third party Assets Under Management have grown significantly by 42% to £38.4 million (2022: £27.1 million), on the back of increased values of portfolio companies, as well as additional new investments. 

In 2023, whilst listed investments dropped c.71% to £4.3 million (2022: £14.7 million) our privately held portfolio experienced a further year of value growth and fundraisings, despite challenging market conditions. A total of c.£53 million was raised through equity and debt by 13 companies at various stages of investment. We selectively participated with c.£6.2 million in 10 of these investments, through both direct and syndicated means, aligning with our capital efficient model.

Several of our portfolio companies have achieved significant valuation increases. Notably:

·    Ventive experienced a fourteen-fold increase in valuation over our entry point value just 18 months ago.

·     DeepTech Recycling has made substantial progress in its commercial strategy, with post-balance sheet equity investment adding £1.8 million to its fair value.

·     Glycotest advanced further by completing its clinical sample collection and, post-balance sheet, closed a $2 million raise, including $1 million from Fosun and approximately $1 million from EMVC investors.

·     ProAxsis continued its efforts towards launching a Point of Care diagnostic for COPD and driving sales to pharma clients, funded through EMV Capital investor support.

·      PDS Biotech made significant progress in its Phase 2 trials and preparations for a Phase 3 trial.

·      Sofant signed a pre-purchase agreement with Viasat and made further strides towards product launch.

More details on the individual companies' developments are provided in the Portfolio Update section which follows this statement.

Future Strategy

Building on our strategic levers, our objectives for 2024 and onwards include the following:

·     Grow the value of our portfolio company holdings: We will do this through a combination of proactive management, helping our portfolio companies to secure funds to execute their growth plans, and protecting our stakes where appropriate. We will engage our Value Creation Services practice to drive achievement of ambitious roadmaps, overcome challenges and create value. We have also targeted growth of direct stakes in a capital efficient manner.

·   Scale funds practice: An 'at-scale' fund practice provides multiple benefits to the Group and its shareholders and is key to achieving our ambitions. Significant progress has already been made through our recent mandate for the management of the £23.3 million Martlet Capital Fund and the re-launch of the EMVC Evergreen EIS Fund (now under direct EMV Capital fund management). There are other fund initiatives underway, as well as investment to set up the right processes for the Funds practice.

·     Routes to Exits: After the turnaround and consolidation of the core portfolio in the last three years, we aim to generate significant returns to NetScientific will come through partial or full sell-downs of our portfolio companies, with carried interest returns supplementing the direct holdings. In line with our pro-active strategy, in 2023 we started a 'routes to exits' programme, working with a selection of our companies to prepare them for M&A, drive to value inflection points, and identify early potential acquirers. We are building in-house capability and working with a small group of advisors to support companies in their routes to exit.

·     Build a resilient, high-performance firm: This involves investment and alignment on several levels. The combination of a high-quality team with the right skillsets, strong processes and IT and capacity to execute, is key to the scalability of our platform, and execution of our ambitious plans and roadmap. This also involves maintaining the right incentive structures to align Management interests with the long-term target of company growth, portfolio growth - and portfolio realisations.

·     Management alignment: Management alignment is key to ensure continued proactive drive to growing investment performance and realisations. The Group is planning to implement a carried interest scheme to attract, retain and reward talent in line with industry best practice during the current financial year.

·  Achieve financial sustainability/independence: We will continue to drive the growth of operating/ongoing income and selective secondary market partial sales, so that the core platform is autonomous and does not need shareholder support. 

·    Grow Investor Relations, marketing and brand impact: We look to continue to effectively communicate our model, performance and core values to the market, with strong impact, to enable better understanding and engagement.

·    Group Structure Plans: As part of our growth strategy, we are looking to streamline our group structure to optimise costs, operations, and risk management. EMV Capital will remain the FCA regulated entity for Fund management and corporate finance, with Martlet Capital Management a wholly owned subsidiary of NetScientific UK. We are setting up a separate subsidiary below NetScientific to handle non-regulated fee-earning activities (such as value creation services and directors' fees). We are also working on streamlining the Group's branding to create a 'single firm perception in the market, whilst allowing for distinct investment strategies and Funds to operate under their own differentiated sub-brands, such as Martlet.

 

Outlook

Having successfully transformed the business since 2020, we believe the next three years will bring further positive evolution within our group, establishing us as a leader in deeptech and life sciences, and growing value for our shareholders. We aim to generate investment returns through profitable exits of select portfolio companies and targeted growth of a curated portfolio, focusing on value creation services and accelerating routes to exit. By scaling up our capital efficient investment model, we plan to move towards more evergreen investment model, offering substantial returns from a maturing portfolio. Our goals include increasing the net asset value and fair value of the business, advancing cohort companies, securing third-party investment rounds, and expanding our fund management practice.

Finally, I would like to express my gratitude to our Non-Executive Chair, Charles Spicer, and Senior Independent Director, Jonathan Robinson, for their guidance and support throughout this fast-paced and impactful year. I am also deeply appreciative of my hard-working team, whose commitment and expertise has been instrumental in our achievements.

 

 

 

Dr. Ilian Iliev

CEO, NetScientific PLC

13 June 2024

 

 

 

·              PORTFOLIO PERFORMANCE

NetScientific's portfolio consists of 22 companies across deep tech and life sciences, varying in their development stages. A significant portion of these companies are generating commercial revenues or engaging in corporate collaborations.

Our group can invest in portfolio companies both directly (from balance sheet), and/or by deploying third party funds where we have a carried interest arrangement with investors.

Therefore, the Group's Assets Under Management combine both direct (balance sheet) holdings and third-party funds with a carried interest arrangement. The combination of direct and third-party holdings provides for enhanced returns and influence in our companies in a capital efficient manner.

The combined Assets Under Management of direct and third-party holdings is £74.0 million at 31 December 2023.

The direct holdings, as measured by the Directors' Fair Value is £35.6 million, down from £41.8 million in 2022. This decline is primarily due to the decreased value of our holding in NASDAQ-listed PDS Biotech, offset by a 15% increase in the value of our direct privately held companies. By contrast, the fair value of the third-party portfolio has risen to £38.4 million, a 42% increase from the previous year (2022: £27.1 million), representing an implied gain of £8.2 million.

It is worth noting that investments in early-stage private companies are inherently hard to value and we have applied BVCA valuation principles in deriving fair value.

Table 1: Fair Value of Directly Held Portfolio Holdings

Fair Value of Direct stakes
Portfolio Company	Country	Sector	Stage	Group Stake (%)	Fair Value (m)
					2023	2022
PDS Biotechnology -Nasdaq Listed	US	Immuno-oncology	Phase II clinical	3.5%	£4.3	£14.7
Q-Bot	UK	Robotics	Sales	14.3%	£3.8	£3.8
Vortex Biotech Holdings Ltd	UK/US	Liquid biopsy oncology	Sales	22.1%	£3.5	£0.7
EpiBone	US	Regenerative medicine	Early clinical	1.3%	£1.1	£1.2
SageTech Medical Equipment	UK	Waste anaesthetic	Commercial	5.1%	£0.9	£0.9
Ventive	UK	Heat pumps and passive ventilation	Sales	10.9%	£0.9	£0.1
Sofant Technologies	UK	Semiconductors satellite coms	Early sales	1.4%	£0.5	£0.4
G - Tech Medical	US	Wearable gut monitor	Early clinical	3.8%	£0.3	£0.4
FOx Biosystems	BEL	Research equipment	Sales	3.9%	£0.4	£0.6
CytoVale	US	Medical biomarker	Late clinical	1.0%	£0.3	£0.4
Martlet Capital	UK	Venture capital	Sales	1.4%	£0.2	£0.3
PointGrab	IL	Smart building automation	Sales	0.5%	£0.1	£0.1
QuantalX Neuroscience	IL	Medical diagnostics	Late clinical	0.4%	£0.1	£0.1
Deeptech Recycling Limited	UK	Recycling	Industrial	30.0%	£0.0	£0.0
TOTAL					£16.4	£23.7

 

Table 2: Directors' Valuations of Subsidiaries & Associates

Directors' Valuations of Subsidiaries & Associates
Portfolio Company	Country	Sector	Stage	Group Stake (%)	Fair Value (m)
					2023	2022
EMV Capital	UK	Venture capital	Sales	100%	£3.5	£3.5
Glycotest	US	Liver cancer diagnostics	Late clinical	52.7%	£11.0	£11.0
ProAxsis	UK	Respiratory diagnostics	Sales	88.5%	£3.5	£3.5
DName-iT	UK/BEL	Lab technology	Presales	32.7%	£1.2	£0.1
TOTAL					£19.2	£18.1

 

Third-Party Stakes

Carried interest or profit share agreements typically range from 15% to 20% of profits earned for investors above a minimum return hurdle rate of c.10%. Third party Assets Under Management are expected to grow through further syndicated investments in existing and new portfolio companies and the expansion of our Funds practice. The Consolidated Statement of Financial Position reflects the owned portfolio as equity investments classified as fair value through other comprehensive income (FVTOCI) and financial assets classified as fair value through profit and loss (FVTPL), adhering to the British Venture Capital Association guidelines widely accepted in the VC community. The fair value of the below third-party stakes is not included within the group's audited financial statements.

Table 3: Fair Value of Third-Party Portfolio Holdings (estimates and unaudited)

Fair Value of Third-Party Portfolio Holdings
Portfolio Company	Country	Sector	Stage	AUM (%)	AUM Fair Value (m)		AUM at Cost (m)
					2023	2022	2023	2022
Glycotest	US	Liver cancer diagnostics	Late clinical	5.8%	£0.6	-	£0.6	-
Q-Bot	UK	Robotics	Sales	32.4%	£8.6	£6.5	£5.2	£4.4
ProAxsis	UK	Respiratory diagnostics	Sales	8.6%	£0.4	-	£0.4	-
Vortex Biotech Holdings Ltd	UK/US	Liquid biopsy oncology	Sales	13.9%	£2.2	£0.7	£1.9	£0.7
EpiBone	US	Regenerative medicine	Early clinical	0.3%	£0.3	£0.3	£0.2	£0.2
DName-iT	UK/BEL	Lab technology	Presales	16.0%	£0.5	£0.1	£0.5	£0.1
SageTech Medical Equipment	UK	Waste anaesthetic	Commercial	25.2%	£4.4	£4.1	£4.2	£3.8
Ventive	UK	Heat pumps and passive ventilation	Sales	24.9%	£2.2	£0.1	£0.5	£0.1
Sofant Technologies	UK	Semiconductors satellite coms	Early sales	25.0%	£8.5	£6.2	£5.6	£4.3
Martlet Capital	UK	Venture capital	Sales	8.2%	£1.5	£1.4	£1.3	£1.3
PointGrab	IL	Smart building automation	Sales	18.7%	£3.5	£3.1	£4.1	£4.1
Deeptech Recycling Limited	UK	Recycling	Industrial	-	£1.3	£0.5	£1.3	£0.5
Wanda Health	UK/US	Digital health monitoring	Sales	95.2%	£3.6	£3.2	£3.6	£3.2
Nanotech Industrial Solutions	US	Material science	Sales	-	£0.8	£0.8	£0.8	£0.8
TOTAL					£38.4	£27.1	£30.2	£23.5

 

 

Consolidated INCOME Statement

For the year ended 31 December 2023

 

Continuing Operations		Notes		2023 £000's	2022 £000's
	Total Income		3,778		1,820
	Revenue		1,445		1,004
	Cost of sales		(219)		(222)
	Gross profit		1,226		782
	Other operating income		2,333		816
	Research and development costs		(1,480)		(1,371)
	General and administrative costs		(3,960)		(3,718)
	Other costs		(758)		(248)
	Loss from continuing operations		(2,639)		(3,739)
	Share of loss of equity accounted associate		(125)		(11)
	Finance income		34		94
	Finance expense		(171)		(55)
	Loss before taxation		(2,901)		(3,711)
	Income tax credit		-		37
	Total Loss for the year all from continuing operations		(2,901)		(3,674)
	Owners of the parent		(2,643)		(3,094)
	Non-controlling interests		(258)		(580)
			(2,901)		(3,674)
	Basic and diluted loss per share from continuing and discontinued operations attributable to owners of the parent during the year:
	Continuing operations	5	(11.2p)		(13.9p)
	From loss for the year		(11.2p)		(13.9p)

 

 

 

 

 

 

Consolidated Statement OF Comprehensive Income

For the year ended 31 December 2023

 

		2023	2022
		£000's	£000's
Loss for the year		(2,901)	(3,674)
Other comprehensive income/(loss):
Exchange differences on translation of foreign operations		(22)	26
Change in fair value of equity investments classified as FVTOCI		(5,769)	8,773
Total comprehensive profit for the year		(8,692)	5,125

 

Attributable to:
Owners of the parent		(8,482)	5,732
Non-controlling interests		(210)	(607)
		(8,692)	5,125

 

 

 

Consolidated Statement of Financial Position

As at 31 December 2023

 

	Notes	2023 £000's	2022 £000's
Assets
Non-current assets
Property, plant and equipment	8	139	144
Right-of-use assets	9	255	420
Intangible assets	10	2,757	3,367
Investment in equity-accounted associate	11	1,283	-
Equity investments classified as FVTOCI*	12	16,441	22,743
Financial assets classified as FVTPL**	13	232	693
Total non-current assets		21,107	27,367
Current assets
Inventory		52	76
Trade and other receivables		934	658
Cash and cash equivalents		365	852
Total current assets		1,351	1,586
Total assets		22,458	28,953
Liabilities Current liabilities
Bank overdraft		(165)	-
Trade and other payables		(2,814)	(2,457)
Lease liabilities		(141)	(168)
Loans and borrowings		(464)	(99)
Total current liabilities		(3,584)	(2,724)
Non-current liabilities
Lease liabilities		(127)	(268)
Loans and borrowings		(1,635)	(719)
Total non-current liabilities		(1,762)	(987)
Total liabilities		(5,346)	(3,711)
Net assets		17,112	25,242

 

Issued capital and reserves Attributable to the parent
Called up share capital		1,179	1,174
Warrants		42	42
Share premium account		74,217	74,175
Capital reserve account		237	237
Equity investment reserve		7,508	13,277
Foreign exchange reserve		1,351	1,421
Accumulated losses		(66,702)	(64,486)
Equity attributable to the owners of the parent		17,832	25,840
Non-controlling interests		(720)	(598)
Total equity		17,112	25,242

*Fair value through other comprehensive income

**Fair value through profit and loss

 

 

Consolidated Statement of Changes in Equity

As at 31 December 2023

 

			Shareholders' equity
	Share capital £000's	Warrants £000's	Share premium £000's	Capital reserve £000's	Equity investment reserve £000's	Accumul-ated losses £000's	Foreign exchange and capital reserve £000's	Total £000's	Non-controlling interests £000's	Total equity £000's
1 January 2022	1,056	42	72,792	237	4,504	(61,499)	1,368	18,500	9	18,509
Loss for the period	-	-	-	-	-	(3,094)	-	(3,094)	(580)	(3,674)
Other comprehensive (loss)/income -
Foreign exchange differences	-	-	-	-	-	-	53	53	(27)	26
Change in fair value of equity investments classified as FVTOCI	-	-	-	-	8,773	-	-	8,773	-	8,773
Total comprehensive profit/(loss)	-	-	-	-	8,773	(3,094)	53	5,732	(607)	5,125
Issue of share capital	118	-	1,439	-	-	-	-	1,557	-	1,557
Cost of share issue	-	-	(56)	-	-	-	-	(56)	-	(56)
Share-based payments	-	-	-	-	-	107	-	107	-	107
31 December 2022	1,174	42	74,175	237	13,277	(64,486)	1,421	25,840	(598)	25,242
Loss for the period	-	-	-	-	-	(2,643)	-	(2,643)	(258)	(2,901)
Other comprehensive income/(loss) -
Foreign exchange differences	-	-	-	-	-	-	(70)	(70)	48	(22)
Change in fair value of equity investments classified as FVTOCI	-	-	-	-	(5,769)	-	-	(5,769)	-	(5,769)
Total comprehensive profit/(loss)	-	-	-	-	(5,769)	(2,643)	(70)	(8,482)	(210)	(8,692)
Issue of share capital	5	-	42	-	-	-	-	47	-	47
Changes in proportion of equity by non-controlling interest	-	-	-	-	-	353	-	353	88	441
Share-based payments	-	-	-	-	-	74	-	74	-	74
31 December 2023	1,179	42	74,217	237	7,508	(66,702)	1,351	17,832	(720)	17,112

 

 

 

 

 

Consolidated Statement of Cash Flows

As at 31 December 2023

 

		Notes		2023 £000's		2022 £000's
Cash flows from operating activities
Loss after income tax including discontinued operations				(2,901)		(3,674)
Adjustments for:
Depreciation of property, plant and equipment		8		49		45
Depreciation of right-of-use assets		9		165		76
Amortisation of intangibles		10		248		226
Impairment of intangibles		10		684		-
Estimated credit losses on trade receivables				-		18
Gain on available for sale investments				(476)		(254)
Gain on loss of control of subsidiary		6		(1,448)		-
Fair value movement during the year on convertible debt				(24)		(466)
Share-based payments				74		107
R&D tax credit				(29)		(46)
Loss on disposal of property, plant and equipment				-		1
Share of associate loss				125		11
Foreign exchange movement				17		(72)
Finance income				(34)		(94)
Finance costs				171		24
Tax credit				-		(37)
				(3,379)		(4,135)
Changes in working capital
(Increase)/decrease in inventory				24		(9)
Decrease/(Increase) in trade and other receivables				(315)		610
Increase in trade and other payables				529		879
Cash used in operations				(3,141)		(2,655)
Income tax received Income tax paid				- -		96 -
Net cash (used) in operating activities				(3,141)		(2,559)
Cash flows from investing activities
Disposal of available for sale investments				1,396		451
Receipt of derivative financial assets				162		48
Capitalisation of development costs		10		(322)		(548)
Purchase of property, plant and equipment				(44)		(53)
Purchase of derivative financial assets				(43)		(710)
Purchase of available for sale investments				(37)		(267)
Interest Received				-		1
Net cash (used in) investing activities				1,112		(1,078)
Cash flows from financing activities
Proceeds from loans and borrowings			1,302		415
Proceed from issue of equity instruments by subsidiary			353		-
Proceeds from share issue			21		1,558
Lease payments			(188)		(88)
Repayment of loans and borrowings			(99)		(89)
Share issue costs			-		(56)
Net cash from financing activities			1,389		1,740
(Decrease)/Increase in cash and cash equivalents			(640)		(1,897)
Cash and cash equivalents at beginning of year			852		2,710
Exchange differences on cash and cash equivalents			(12)		39
Cash and cash equivalents at end of year			200		852

 

Notes to the Financial Information for the Year Ended 31 December 2022

 

1.            GENERAL INFORMATION

 

The Company is a public limited company incorporated on 12 April 2012 and domiciled in England with registered number 08026888 and its shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange. The address of the registered office is C/o Azets, Burnham Yard, London End, Beaconsfield, Buckinghamshire HP9 2JH.

 

2.            BASIS OF PREPARATION

 

The preliminary results of the year ended 31 December 2023 have been extracted from audited accounts which have not yet been delivered to Companies House.

 

The financial information set out in this announcement does not constitute statutory accounts for the year ended 31 December 2023.

 

The report of the auditors on the statutory accounts for the year ended 31 December 2023 was qualified and did not contain a statement under Section 498 of the Companies Act 2006. Investments are stated at £11.4million in the Parent Company Statement of Financial Position and £17.7million in the Consolidated Statement of Financial Position. The Directors did not perform year end valuations for some of the hard to value investments worth c.£1million for the year ended 31 December 2023.  Therefore, BDO were unable to obtain sufficient and appropriate evidence for the valuation of such investments at this date. The financial statements for the year ended 31 December 2023 included in this announcement were authorised for issue in accordance with a resolution of the Board of Directors on 12 June 2024.

 

3.            GOING CONCERN

               

The Directors are confident that NetScientific remains a going concern, and it is appropriate to prepare the financial statements on this basis. Accordingly, the financial statements do not include any adjustments that would be necessary if the Group and Company were unable to continue as a going concern.

Net Assets at the end of 2023 were worth £17.1 million, including realisable quoted assets of £4.3 million. The quoted share price as of 31 May 2024 was $2.98 giving a fair value of the PDS investment of £2.6 million.

To support its going concern analysis, the Board has prepared and reviewed budget cashflows and stress-tested the assumptions and sensitivities involved in the context of the broader economic environment. For the period to June 2025, the Group requires (including subsidiaries) a minimum of approximately £3.6 million to continue as a going concern. NetScientific and EMV Capital require £1.6m, while the other subsidiary portfolio companies Glycotest, ProAxsis and Cetromed require £2.0 million.

This amount can be financed through several options, either on their own or in combination. The subsidiary companies plan to be funded by external financing, as they have done in 2023. This could include convertible loans, equity or debt finance.

The Board's plans for satisfying the going concern needs of NetScientific and EMV Capital are primarily based on service fees for corporate finance, value creation services, fund management and other fees. The Board plans to sell various portfolio assets in part or in full in order to meet the funding requirements. The Board can also consider the option of a placement of NetScientific shares.

While these various options are available, some or all may not be executed. Accordingly, this indicates that a material uncertainty exists which may cast significant doubt on the Group's and Company's ability to continue as a going concern and therefore that it may be unable to realise its assets and discharge its liabilities in the ordinary course of business. The Board will continue to manage its cashflows and obligations, closely monitor performance, and maintain a flexible approach to new opportunities.

 

4.            SIGNIFICANT ACCOUNTING POLICIES

 

The Group financial statements have been prepared in accordance with UK adopted international accounting standards as they apply to the financial statements of the Group for the year ended 31 December 2023. The principal accounting policies adopted in the preparation of the financial information are set out below. The policies have been consistently applied to all the years presented.

While the financial information included in this preliminary announcement has been prepared in accordance with IFRS, this announcement does not in itself contain sufficient information to comply with IFRS. The Group expects to publish full financial statements by 14 June 2024.

 

 

5.            LOSS PER SHARE

 

The basic and diluted loss per share is calculated by dividing the loss for the financial year by the weighted average number of ordinary shares in issue during the year. Potential ordinary shares from outstanding options at 31 December 2023 of 1,462,353 (2022: 1,431,050) (see note 31) are not treated as dilutive as the entity is loss making.

 

	2023 £000's	2022 £000's
Loss attributable to equity holders of the Company
Continuing operations	2,643	3,094
Total	2,643	3,094
Number of shares
Weighted average number of ordinary shares in issue	23,517,012	22,266,560

6.            BUSINESS COMBINATIONS DISPOSED DURING THE PERIOD

Loss of control in subsidiary DName-iT Holdings Limited

On 30 June 2023 the Group lost control of subsidiary DName-iT Holdings Limited as part of a £543k third party fund raise where its interest went from 61.5% to 48.5%. It had acquired its interest in DName-iT as part of the Cetromed acquisition back in December 2021. Since then it has been applying its valuable patented DNA barcoding method to develop a revolutionary platform for labelling patients' specimens that are analysed with next generation sequencing.

Details of the fair value of identifiable assets and liabilities disposed of are as follows:

		Fair Value £000's
Assets:
Other Debtors		43
Cash at Bank		83
Total assets at disposal		126
Liabilities:
Trade payables		6
Accruals		1
Loan		186
Total liabilities at disposal		193
Net liabilities at 30 June 2023		67
Fair value of residual interest		1,381
Gain on loss of control of subsidiary		1,448

 

 

7.            INVESTMENTS IN SUBSIDIARY UNDERTAKINGS

 

                The Group had the following subsidiaries at 31 December 2023:

Name	Primary trading address	Country of incorporation or registration	Proportion of ownership interest at 31 December 2023	Proportion of ownership interest at 31 December 2022	Proportion of ownership interest held by non-controlling Interests at 31 December 2023	Proportion of ownership interest held by non-controlling Interests at 31 December 2022
NetScientific UK Ltd	(a)	UK	100%	100%	-	-
EMV Capital Limited	(b)	UK	100%	100%	-	-
ProAxsis Limited * (i)	(c)	UK	100%	100%	-	-
CetroMed Limited	(a)	UK	75%	75%	25%	25%
Frontier Biosciences Limited *	(a)	UK	75%	75%	25%	25%
Frontier Oncology Limited *	(a)	UK	75%	75%	25%	25%
DName-iT Holdings Limited	(b)	UK	N/A	62%	N/A	38%
NetScientific America, Inc.	(d)	USA	100%	100%	-	-
Glycotest, Inc. (i)	(e)	USA	62.5%	62.5%	37.5%	37.5%

For all undertakings listed above, the country of operation is the same as its country of incorporation or registration.

*       Held via an intermediate holding company.

All of the ownerships shown above relate to ordinary shareholdings.

(i)      Options and convertible loan notes have been issued by ProAxsis Ltd and Glycotest, Inc. which if exercised would dilute the Company's shareholding by 22.5% and 9.8% respectively.

 

                      Registered office address:

 

(a)   Azets, Burnham Yard, London End, Beaconsfield, Buckinghamshire, HP9 2JH

(b)   20 St Andrew Street, Holborn Circus, London, EC4A 3AG

(c)   Unit 1B, Concourse Building, 3, Catalyst Inc, Titanic Quarter, 6 Queens Road, Belfast, BT3 9DT, Northern Ireland

(d)   1650 Market Street, Suite 4900, Philadelphia, Pennsylvania, 19103-7300, United States of America

(e)   613 Schiller Avenue, Merion, Philadelphia, Pennsylvania, PA 19066, United States of America

 

The addresses listed above are also the registered offices of the relevant entities.

On the 30 June 2023 there was a loss of control for subsidiary DName-iT Holdings Limited as the shareholding went below 50%, see note 12 for more information.

 

 

8.         PROPERTY, PLANT AND EQUIPMENT

 

	Leasehold Improvement £000's	Furniture, fittings and equipment £000's				Plant and machinery £000's		Totals £000's
Cost
At 1 January 2022	100	55			212			367
Additions	5	16			32			53
Disposals	-	(3)			(1)			(4)
Foreign exchange movement	-	1			-			1
At 31 December 2022	105	69			243			417
Additions	28	5			11			44
At 31 December 2023	133	74			254			461
Depreciation
At 1 January 2022	52	29			150			231
Charge for the year	11	12			22			45
Disposals	-	(3)			-			(3)
At 31 December 2022	63	38			172			273
Charge for the year	14	11			24			49
At 31 December 2023	77	49			196			322
Net book value
At 31 December 2023	56	25			58			139
At 31 December 2022	42	31			71			144

(i)            Leasehold improvements of £100k are funded by a loan (2022: £100k).

 

 

 

9.         RIGHT-OF-USE-ASSETS

				2023 £000's		2022 £000's
Cost
At 1 January				591		253
Additions				-		338
At 31 December				591		591
Amortisation
At 1 January				(171)		(95)
Charge for the year				(165)		(76)
At 31 December				(336)		(171)
Net book value
At 31 December				255		420

There are now three long term leases with two additions in 2022. The Group decided it would apply the modified retrospective approach to IFRS 16, and therefore will only recognise leases on balance sheet at 1 January 2019. In addition, it has decided to measure right-of-use assets by reference to the measurement of the lease liability on that date. This will ensure there is no immediate impact to net assets on that date.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at 1 January 2019. The Group's incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The rate applied was 3.5%.

The rate applied to the new leases in 2022 was 5.0%

Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset.

Short term leases still expensed as operating amount to £Nil (2022: £10k) that are now all expired.

 

 

10.       INTANGIBLE ASSETS

		Goodwill		Carry Interest Arrangements		Development costs			Investment Acquisition Costs		Licenses and Patents		Total
		£000's		£000's		£000's			£000's		£000's		£000's
	Cost
	At 1 January 2022	669		1,627		922			17		50		3,285
	Additions	-		-		548			-		-		548
	At 31 December 2022	669		1,627		1,470			17		50		3,833
	Additions	-		-		322			-		-		322
	At 31 December 2023	669		1,627		1,792			17		50		4,155
	Accumulated amortisation and impairment
	At 1 January 2022	-		216		18			-		6		240
	Amortisation charge	-		163		56			-		7		226
	At 31 December 2022	-		379		74			-		13		466
	Amortisation charge	-		163		79			-		6		248
	Impairment charge	-		-		684			-		-		684
	At 31 December 2023	-		542		837			-		19		1,398
	Net book value
	At 31 December 2023	669		1,085		955			17		31		2,757
	At 31 December 2022	669		1,248		1,396			17		37		3,367

Further ProAxsis development costs of £322k (2022: £548k) have been capitalised during the year in line with the accounting policy as certain projects meet all the criteria for development costs to be recognised as an asset as it is probable that future economic value will flow to the Group.

During the year ProAxsis booked an impairment charge of £684k (2022: £Nil) in relation to development costs that no longer met the criteria for recognition. Discounted future revenues and cashflows were assessed to determine impairments in a number of product lines of capitalised development costs where it has been assessed that recoverability is not possible.

 

The main factors leading to the recognition of this intangible are:

·      the presence of certain intangible assets, such as the assembled workforce of the acquired entity, EIS fund practice, infrastructure, thought leadership, brand, deal flow and investor network and relationships, which do not qualify for separate recognition;

·      economies of scale which result in the Group being prepared to pay a premium; and

·      carry interest arrangements and profit share that are a material identifiable class of asset that has been recognised separately.

 

 

11.          INVESTMENT IN ASSOCIATES

The following entities have been included in the consolidated financial statements using the equity method:

 

Name	Country of Incorporation principle place of business	Proportion of ownership interest at 31 December 2023	Proportion of ownership interest at 31 December 2022
DName-iT Holdings Limited	UK/Belgium	48.5%	61.5%
Oncocidia Limited	UK	37.9%	41.7%

 

	2023 £000's	2022 £000's
At 1 January	-	-
Additions	1,408	-
Share of Associate losses	(125)	-
At 31 December	1,283	-

 

The Group holds a 48.5% interest in DName-iT Holdings Limited which it lost control of as a subsidiary during 2023. The primary business is that of applying its valuable patented DNA barcoding method to develop a revolutionary platform for labelling patients specimens that are analysed with next generation sequencing.

 

The Group holds a 37.9% interest in Oncocidia Limited over which the Group has determined that it holds significant influence. The primary business is that of developing a target radiopharmaceutical cancer treatment with the use of iodine-131 in treating thyroid cancer to treat solid cancers (primary and metastatic) elsewhere in the body.

 

The Groups holds a 22.1% interest in Vortex Biotech Holdings Limited which the Group has determined it does not exercise control and has accounted for as Equity Investments classified as FVTOCI.

 

The Group holds a 30.0% interest in DeepTech Recycling Limited over which the Group has determined it does not exercise control and has accounted for as Equity Investments classified as FVTOCI. Post balance sheet date the holding has fallen to 21.2% after a £2.1 million third-party fundraise.

 

12.          EQUITY INVESTMENTS CLASSIFIED AS FVTOCI

Represent equity securities classified as FVTOCI
	2023 £000's	2022 £000's
At 1 January	22,743	11,516
Additions	37	555
Disposals	(920)	(451)
Conversion of financial assets classified as FVTPL	400	2,004
Change in fair value during the year	(5,819)	9,119
At 31 December	16,441	22,743

 

Name	Country of incorporation	% of issued share capital	2023 £000's	£2022 £000's
PDS Biotechnology Corporation	USA	3.5%	4,279	14,680
EpiBone, Inc.	USA	1.3%	1,107	1,179
G-Tech, Inc	USA	3.8%	334	354
CytoVale, Inc.	USA	1.0%	333	415
PointGrab	Israel	0.4%	72	76
QuantalX	Israel	0.4%	58	-
FOx Biosystems NV	Belgium	3.9%	483	495
Q-Bot Limited	UK	14.3%	3,804	3,728
Vortex Biotech Holdings Limited	UK	22.1%	3,499	300
Ventive Limited	UK	10.9%	937	52
SageTech Medical Equipment Limited	UK	5.1%	887	887
Sofant Technologies Limited	UK	1.4%	453	402
Martlet Capital Limited	UK	1.4%	192	175
DeepTech Recycling Limited	UK	30.0%	3	-
At 31 December			16,441	22,743

 

Below we provide some additional detail on the composition of the Fair Value estimates. When reviewing these estimates, we have taken into consideration both 3^rd party investment rounds, and whether the company continues to progress on their roadmap.

·      NASDAQ-listed PDS Biotechnology Corporation (3.5% stake (2022: 4.4% stake)) year-end fair value was based on the listed share price (Nasdaq under the ticker PDSB) of $4.97 per share at 31 December 2023 (2022: $13.20). During the year NetScientific sold c.7% of its stake, £1.0m for a gain on sale of £266k, the proceeds were used to fund operations. Fair value at year end was £4,279k (2022: £14,680k). The current share price as of 31 May 2024 was $2.98 giving a fair value of the PDS investment of £2,569k. The Company periodically reviews its investment strategy with respect to this asset.

 

·      CytoVale Inc., (1.0% stake) remains privately held, and fair value has been established using the share price and company valuation from investments by third parties during November 2023 as part of an $84m Series C equity round that raised fresh cash of $53m and conversion of outstanding convertible notes. Fair value at year end was £333k (2022: £415k). This last observable price has been used to value the CytoVale equity investment at year end.

 

·      EpiBone, Inc., (1.3% stake) executed a number of closes in 2023 on the Series A fund-raise and raised fresh cash of $4,946k in 2023 and has raised $12.0m in total at the same share price. Fair value at year end was £1,107k (2022: £1,179k) based on the last round price.

 

·      G-Tech, Inc., continues to be valued at the Series A funding round of $6 million as of May 2020. This is the last observable price which values our 3.8% stake at £334k (2022: £354k).

 

·      PointGrab, (0.5% stake) - Valued at the most recent investment round, valuing our holding at £72k (2022: £76k).

 

·      FOx Biosystems (3.9% stake) - Valued at the price of the last investment round in November 2022, valuing the stake at £483k (2022: £495k). Fox has recently raised further money in 2024 at the same price.

 

·      Q-Bot Limited (14.3% stake) - During the year NetScientific sold c.10% of its stake or £376k on the secondary market, for a gain on sale of £201k, the proceeds were used to fund operations. Following a September 2023 investment round totalling £3.5m, our stake has a fair value of £3,804k (2022: £3,721k). Q-Bot has recently raised money in 2024 at the same price.

 

·      Vortex Biotech Holdings Limited (22.1% stake) - Based on the price of the last investment round in November 2023 our stake is valued at £3,500k (2022: £300k).

 

·      Ventive Limited, (10.9% stake) - Following an investment round in November 2023 totalling £900k, our stake is valued at £937k (2022: £52k) a business that EMV Capital rescued in 2022 and received equity in lieu of fees.

 

·      SageTech Medical Equipment Limited, (5.1% stake) - Following a number of investment rounds in 2023 at the last price, our stake is valued at £887k (2022: £887k). SageTech has raised further money in 2024 at the same price.

 

·      Sofant Technologies Limited, (1.4% stake) - The stake is valued at the last investment round price in August 2023, resulting in fair value of the stake at £453k (2022: £402k).

 

·      Martlet Capital Limited, (1.4% direct equity stake) - Our direct investment in the early-stage VC platform in Cambridge is currently valued at £192k (2022: £175k) based on the last investment round in May 2022.

 

 

13.          FINANCIAL ASSETS CLASSIFIED AS FVTPL

Warrants & Convertible Loans classified as FVTPL	2023 £000's	2022 £000's
Balance at 1 January	693	1,462
Additions	43	710
Repayment	(162)	(48)
Additional accrued interest	34	93
Conversion to equity investments classified as FVTOCI	(400)	(2,004)
Change in fair value during the year	24	480
Balance at 31 December	232	693

 

Below is further detail on the various debt instruments used in financing portfolio companies during the year. For completeness, please refer to the above section 12, especially where convertible loans convert into equity:

·      G-Tech Medical, Inc., holds £83k of common form convertibles (2022: £88k), which remain as financial assets classified as FVTPL. No interest accrued.

 

·      Q-Bot Limited, during January 2023, a further £48k working capital loan was extended to Q-Bot, carrying interest at 10% p.a. In December 2023, the working capital loan was repaid, including interest and arrangement fee of £18k (2022: £9k). Fair value at year end was £Nil (2022: £101k). Warrants of £41k in Q-Bot are also held (2022: £41k).

 

·      Vortex Biotech Holdings Limited, loans and interest converted to equity in June 2023. Accrued interest during the period was £15k (2022: £15k). Fair value at year end was £Nil (2022: £385k).

 

·      Martlet Capital Limited, £75k unsecured convertible loan note. Fair value at year end was £84k (2022: £80k). The convertible loan note carries interest at 5% p.a. and is repayable by the seventh anniversary from the grant date. Accrued interest during the period is £4k (2022: £4k).

 

·      The Neumitra, Inc., and Longevity Inc., convertible loan notes do not have a material value individually or collectively and have been fully impaired.