TIDMNSCI
RNS Number : 0585P
NetScientific PLC
27 September 2013
NetScientific plc
('NetScientific' or the 'Group')
Interim results for the six months ended 30 June 2013
27 September 2013
NetScientific (AIM:NSCI), the healthcare medical technology
company, is pleased to announce its maiden unaudited interim
results for the six months ended 30 June 2013.
Financial Highlights
-- Pre-tax loss for the period of GBP1,040k (H1 2012: GBP840k)
-- Net cash of GBP117k (H1 2012: GBP122k)
o Net cash position strengthened by GBP28.1 million post-half
year following Placing and Admission to AIM
-- On 25(th) February 2013, the group acquired a controlling
interest in QLIDA Diagnostics Inc. which is focused on developing
smart phone enabled hand held diagnostic systems.
Operational Highlights
-- Successful Admission to AIM in September 2013
o IPO raised GBP30 million (GBP28.1 million net of cash
expenses) for the Group from institutional investors in the UK,
cornerstoned by Invesco
o Net proceeds of the Placing will be used to fund working
capital to accelerate to the market its two leading Portfolio
companies, WANDA Inc. and Vortex BioSciences Inc., whilst
developing its other core spin-out companies and pipeline
projects
-- Trading remains in line with market expectations and the
Board looks ahead with confidence and expects to achieve
significant progress with several portfolio companies in the second
half of the year
Farad Azima, Chief Executive Officer, commented:
"We are at a very exciting stage of the Group's development. We
have a strong portfolio of innovative technologies and the placing
of shares and Admission to AIM provides us with an outstanding
opportunity for growth."
For further information, please contact
NetScientific plc Tel: +44 (0) 20 3590 8877
Farad Azima, Chief Executive Officer
Peter Thoms, Chief Financial Officer
Liberum Capital (Nomad & Broker) Tel: +44 (0) 20 3100 2000
Chris Bowman / Christopher Britton / Thomas Bective
Bell Pottinger Tel: +44 (0) 20 7861 3232
Daniel de Belder
Copies of the unaudited interim results for the six months ended
30 June 2013 are available on the Group's website at
www.netscientific.net
Operational Review
Introduction
The six months ended 30 June 2013 saw the Group continue to make
progress with several portfolio companies.
During the period, the Group also deployed a significant amount
of its internal resource to preparing the Group for its IPO, which
culminated in the successful Admission of NetScientific to AIM in
September 2013. The Group raised GBP30.0 million (GBP28.1million
net of cash expenses relating to the placing) through the issue of
18,750,000 new shares at a placing price of 160p. The market
capitalisation of the Group at the placing price amounted to
GBP57.5 million.
NetScientific Overview
NetScientific is a healthcare medical technology group that
identifies, develops and commercialises research and technologies
originating from leading universities, teaching hospitals and
research institutes globally, particularly in the United Kingdom
and the United States. The Group is primarily focused on
identifying and developing research and technologies for use in
five chronic disease areas within the healthcare diagnostics
sector: (i) cardiovascular; (ii) liver; (iii) cancer; (iv)
metabolic; and (v) digital health.
The Group's core strategy is to fund and develop translational
technologies that offer transformative benefits to peoples' lives
and society through improved diagnosis, monitoring and treatment of
chronic disease. Chronic diseases account for more than 70 per
cent. of healthcare expenses in each of the United States and the
United Kingdom, according to the Centers for Disease Control and
Prevention and the UK Department of Health. Accordingly, reducing
the cost of diagnosing, monitoring and treating chronic disease has
become one of the key challenges to the global healthcare sector.
Consequently, the Directors believe the Group's five areas of focus
represent highly attractive growth markets with significant unmet
medical need for technological development, and in which the
Group's management has a significant amount of experience,
expertise and strong existing networks. The Directors also believe
that focusing on these areas will provide the Group with a
competitive advantage over private equity funds and generalised IP
commercialisation companies, enabling it to create value for
shareholders.
The Group's current portfolio contains five standalone
subsidiaries at a more advanced stage, two of which are close to
key value inflection points and are currently the primary focus of
the Group:
-- WANDA, which is developing a virtual patient engagement
system that aims to improve the effectiveness of remote monitoring
of chronic disease patients; and
-- Vortex, which is developing a blood-based cancer test that detects circulating tumour cells.
Within the Group's Portfolio there are also ten pipeline
opportunities currently undergoing evaluation and development.
Business Model
The Group aims to identify promising research projects and
technologies that have the potential to be translated from research
laboratory to clinical and commercial application.
The Group provides researchers and technologists with funding
and funding support, technical guidance and commercial expertise in
return for rights over their project IP. The Group aims to develop
each project and IP through the proof of concept stage and onward
to full commercialisation. As part of the process, the most
attractive opportunities are formed into Portfolio companies, in
which the Group typically takes a majority equity interest in
return for further funding and guidance.
The Group aims to grow the equity value of its interests in its
Portfolio companies through various key value inflection points
such as clinical trials, regulatory approvals, collaborative
funding arrangements, first revenues and follow-on growth. In turn,
these value inflection points create exit or out-licensing
opportunities for the Group through trade sales, licensing
arrangements with larger market participants or IPOs.
The Group has active collaborations with a number of US and UK
institutions and has established dialogues with several other
institutions that may lead to future pipeline projects.
Financial Review
Corporate Restructuring
In March 2013 NetScientific plc was registered as a public
company and a reorganisation undertaken to bring all the
NetScientific companies under the control of NetScientific plc. The
Azima Family Trusts subscribed for 100% of the equity in the new
plc and set off existing loan notes previously issued to fund the
NetScientific companies thereby extinguishing the debt of
GBP4,062,497. Accrued interest of GBP236,745 due to the Azima
Trusts was waived in the period to 30 June 2013 and taken to
Capital Reserves.
Comparative financial information for the period to 30 June 2012
and the year to 31 December 2012 incorporates the entities under
common control at those dates.
Comprehensive Income
The pre-tax loss for the six months ended 30 June 2013 was
GBP1,040k (six months ended 30 June 2012: GBP840k).
Administrative costs for the period amounted to GBP1,017k
including legal costs and tax advice for re-organising and
preparing the Group for the IPO (six months ended 30 June 2012
GBP787k)
The exchange difference on translation of foreign operations
relates to subsidiaries in the USA and the change in exchange rate
from 31 December 2012 $1:1.626 to 30 June 2013 $1:1.521
Statement of Financial Position and Cash Flows
At 30 June 2013, net liabilities amounted to GBP1,269k (H1 2012:
GBP3,626k) including net funds of GBP117k (H1 2012: GBP122k)
The principal elements of the GBP 294k decrease in net funds
over the six months ended 30 June 2013 (H1 2012: GBP709k) were:
-- Cash used in operations GBP599k (H1 2012: GBP717k)
-- Additional loans received of GBP334k (H1 2012: GBPNil)
Current Trading & Outlook
Trading remains in line with market expectations and the Board
looks ahead with confidence and expects to achieve significant
progress with several portfolio companies in the second half of the
year.
Unaudited Consolidated Statement of Comprehensive Income
For the 6 months ended 30 June 2013
Six months Six months 12 months
ended 30 ended 30 ended 31
June 2013 June 2012 December
2012
GBP GBP GBP
Other operating income 10,000 - 16,000
Administrative expenses (1,017,412) (787,431) (1,423,159)
------ ------ ------
Loss from operations (1,007,412) (787,431) (1,407,159)
Share of loss in joint
venture (22,051) (3,319) (13,623)
------ ------ ------
(1,029,463) (790,750) (1,420,782)
Finance expense (28,396) (49,342) (111,344)
Finance income 17,603 - -
------ ------ ------
Loss before taxation (1,040,256) (840,092) (1,532,126)
Taxation - - -
------ ------ ------
Loss for the period
/ year (1,040,256) (840,092) (1,532,126)
Other comprehensive
income
Exchange differences
on translation of foreign
operations (29,796) 12,888 87,429
------ ------ ------
Total comprehensive
expense for the period
/ year (1,070,052) (827,204) (1,444,697)
------ ------ ------
Loss for the period/year
attributable to:
Owners of the parent (895,949) (757,354) (1,423,145)
Non-controlling interest (144,307) (82,738) (108,981)
------ ------ ------
(1,040,256) (840,092) (1,532,126)
------ ------ ------
Total comprehensive
expense attributable
to:
Owners of the parent (925,745) (744,466) (1,335,716)
Non-controlling interest (144,307) (82,738) (108,981)
------ ------ ------
(1,070,052) (827,204) (1,444,697)
------ ------ ------
Loss per Ordinary Share (8)p GBP(374.93) GBP(704.53)
attributable to the
ordinary equity holders
of the parent
Unaudited Consolidated Statement of Changes in Equity
Capital Share Total
Reserve Capital attributable
Retained Foreign to equity
Earnings Exchange Share holders Non-controlling Total
Reserve Reserve premium of parent interest equity
GBP GBP GBP GBP GBP GBP GBP GBP
Balance at 1
January
2012 (2,641,250) (24,675) - 1 - (2,665,924) (133,054) (2,798,978)
Comprehensive
income
Loss for the
period (757,354) - - - - (757,354) (82,738) (840,092)
Other
comprehensive
income - 12,888 - - - 12,888 - 12,888
------ ------ ------ ------ ------ ------ ------ ------
Total
comprehensive
income (757,354) 12,888 - - - (744,466) (82,738) (827,204)
------ ------ ------ ------ ------ ------ ------ ------
Balance at 30
June 2012 (3,398,604) (11,787) - 1 - (3,410,390) (215,792) (3,626,182)
------ ------ ------ ------ ------ ------ ------ ------
Balance at 1
July 2012 (3,398,604) (11,787) - 1 - (3,410,390) (215,792) (3,626,182)
Comprehensive
income
Loss for the
period (665,791) - - - - (665,791) (26,244) (692,035)
Other
comprehensive
income - 74,541 - - - 74,541 - 74,541
------ ------ ------ ------ ------ ------ ------ ------
Total
comprehensive
income (665,791) 74,541 - - - (591,250) (26,244) (617,494)
------ ------ ------ ------ ------ ------ ------ ------
Balance at 31
December
2012 (4,064,395) 62,754 - 1 - (4,001,640) (242,036) (4,243,676)
------ ------ ------ ------ ------ ------ ------ ------
Balance at 1
January
2012 (4,064,395) 62,754 - 1 - (4,001,640) (242,036) (4,243,676)
Comprehensive
income
Loss for the
period (895,949) - - - - (895,949) (144,307) (1,040,256)
Other
comprehensive
income - (29,796) - - - (29,796) - (29,796)
Acquisition of
subsidiary - - - - - - (267,159) (267,159)
Issue of share
capital - - - 857,500 3,217,497 4,074,997 - 4,074,997
Capital
contribution - - 236,745 - - 236,745 - 236,745
------ ------ ------ ------ ------ ------ ------ ------
Total
comprehensive
income (895,949) (29,796) 236,745 857,500 3,217,497 3,385,997 (411,466) 2,974,531
------ ------ ------ ------ ------ ------ ------ ------
Balance at 30
June 2013 (4,960,344) 32,958 236,745 857,501 3,217,497 (615,643) (653,502) (1,269,145)
------ ------ ------ ------ ------ ------ ------ ------
Unaudited Combined Statements of Financial Position
As at 30 June 2013
30 June 30 June 31 December
2013 2012 2012
GBP GBP GBP
Assets
Non-current assets
Intangible assets 427,494 10,419 13,474
Property, plant and
equipment 9,746 11,568 11,747
Available for sale
investments 2 2 2
Investments in equity-accounted
joint ventures 62,099 32,740 37,350
------ ------ ------
499,341 54,729 62,573
Current assets
Trade and other receivables 170,147 191,341 221,626
Cash and cash equivalents 116,544 121,704 410,788
------ ------ ------
286,691 313,045 632,414
------ ------ ------
Total assets 786,032 367,774 694,987
------ ------ ------
Liabilities
Current liabilities
Loans and borrowings (165,646) (3,328,979) (4,138,800)
Trade and other payables (1,578,739) (664,977) (799,864)
------ ------ ------
(1,744,385) (3,993,956) (4,938,664)
Non-current liabilities
Loans and borrowings (223,363) - -
Trade and other payables (87,429) - -
------ ------ ------
(310,792) - -
------ ------ ------
Total liabilities (2,055,177) (3,993,956) (4,938,664)
------ ------ ------
Total net liabilities (1,269,145) (3,626,182) (4,243,677)
------ ------ ------
Unaudited Combined Statements of Financial Position
As at 30 June 2013
30 June 30 June 31 December
2013 2012 2012
GBP GBP GBP
Issued capital and
reserves attributable
to the parent
Called up Share Capital 857,501 1 1
Share Premium Account 3,217,497 - -
Capital Reserve Account 236,745 - -
Retained earnings reserve (4,960,344) (3,398,604) (4,064,395)
Foreign exchange reserve 32,958 (11,787) 62,754
------ ------ ------
(615,643) (3,410,390) (4,001,640)
Non-controlling interests (653,502) (215,792) (242,036)
------ ------ ------
(1,269,145) (3,626,182) (4,243,676)
------ ------ ------
Unaudited Combined Statements of Cash Flows
For the 6 months ended 30 June 2013
Six months Six months 12 months
ended 30 ended 30 ended 31
June 2013 June 2012 December
2012
Cash flows from operating GBP GBP GBP
activities
Loss before tax (1,040,256) (840,092) (1,532,126)
Adjustments for:
Depreciation 2,001 790 2,888
Amortisation 808 593 1,256
Share of loss in joint
venture 22,051 3,319 13,623
Impairment of unlisted
investments - 2 2
Finance income (17,603) - -
Finance expense 28,396 49,342 111,344
------ ------ ------
Cash flows from operations
before changes in working
capital (1,004,603) (786,046) (1,403,013)
Change in trade and
other receivables (104,147) (75,225) (105,509)
Change in trade and
other payables 509,302 143,978 278,866
------ ------ ------
Cash used in operations (599,448) (717,293) (1,229,656)
------ ------ ------
Cash flows from investing
activities
Investment in joint
venture (46,800) (3,354) (18,269)
Purchase of property,
plant and equipment - - (3,162)
Purchase of intangible
assets - (883) (3,718)
------ ------ ------
Net cash used in investing
activities (46,800) (4,237) (25,149)
Cash flows from financing
activities
Cash acquired from acquisition 2,013 - -
of subsidiary
Proceeds from loans 333,749 - 861,475
------ ------ ------
Net cash from financing
activities 335,762 - 861,475
------ ------ ------
Net decrease in cash
and cash equivalents (310,486) (721,530) (393,330)
Cash and cash equivalents
at beginning of year 410,788 830,211 830,211
Exchange gains/ (losses)
on cash and cash equivalents 16,242 13,023 (26,093)
------ ------ ------
Cash and cash equivalents
at end of period 116,544 121,704 410,788
------ ------ ------
Accounting Polices
Basis of Preparation
NetScientific plc was incorporated on 12 April 2012. On 8 March
2013 NetScientific plc acquired the entire issued share capital of
NetScientific UK Limited and NetScientific America Inc via a share
for share exchange with Cyrus Holdings Limited. The acquisitions of
the subsidiaries are deemed to be 'combinations under common
control' as ultimate control before and after the acquisition was
the same. As a result, these transactions are outside the scope of
IFRS 3 "Business combinations" and have been included under the
principles of merger accounting as set out under UK GAAP.
Accordingly, although the companies which comprise the Group did
not form a legal group for the entire period, the current period
and comparative results comprise the results of the subsidiary
companies and NetScientific plc, as if the Group has been in
existence throughout the entire period.
The interim financial statements, which are unaudited, have been
prepared on the basis of the accounting policies expected to apply
for the financial year to 31 December 2013 and in accordance with
recognition and measurement principles of International Financial
Reporting Standards (IFRSs) as endorsed by the European Union. The
accounting policies applied in the preparation of these interim
financial statements are consistent with those used in preparing
the NetScientific plc results for the year ended 31 December 2012,
for inclusion in the AIM admission document.
The IFRS that will be effective in the financial statements for
the year to 31 December 2013 are still subject to change and to the
issue of additional interpretation(s) and therefore cannot be
determined with certainty. Accordingly, the accounting policies for
that annual period that are relevant to this interim financial
information will be determined only when the IFRS financial
statements are prepared at 31December 2013.
The interim financial statements do not include all of the
information required for full annual financial statements and do
not comply with all the disclosures in IAS 34 'Interim Financial
Reporting'. Accordingly, the interim statements cannot be construed
as being in full compliance with IFRSs.
The financial information for the year ended 31 December 2012
does not constitute the full statutory accounts for that period.
The financial information for the year ended 31 December 2012 has
been derived, on the basis described above, from the financial
records of the companies under common control during the year. The
financial statement of the UK entities for the year ended 31
December 2012 will be filed with the Registrar of Companies.
Going Concern
The directors have prepared projected cash flow forecasts for
the next twelve months. On the basis of these cash flow forecasts,
and the IPO which raised GBP30m (GBP28.1m net of transaction costs)
in September 2013, the Directors believe that the NetScientific
Group will be able to continue to trade for the foreseeable future
(being a period of at least 12 months from the date of this
report)
Acquisition
During the period the Group acquired a controlling interest in
QLIDA Diagnostics Inc, through the conversion of loans into equity.
Provisional fair values have been calculated, resulting in the
recognition of goodwill and other intangibles of GBP415k.
Loss per Ordinary Share
Six months Six months 12 months
ended 30 ended 30 ended 31
June 2013 June 2012 December
2012
GBP GBP GBP
Loss attributable to
equity holders of the
company (895,949) (757,354) (1,423,145)
Weighted average number
of ordinary shares in
issue 10,899,692 2,020 2,020
The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purpose of calculating
the diluted earnings per ordinary share are identical to those used
for basic earnings per share as the parent company has no share
options in existence. On 10 May 2013, there was a 1 for 20 share
split and accordingly, this has been reflected in the weighted
average number of ordinary shares in issue in the comparative
periods.
Post balance sheet events
On the 16(th) of September, the Group listed on AIM and raised
GBP30million (GBP28.1million net of cash transaction costs) via a
placing of 18,750,000 shares at a price of 160p per share.
INDEPENDENT REVIEW REPORT TO NETSCIENTIFIC PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2013 which comprises the Consolidated
Statement of Comprehensive Income, Consolidated Statement of
Changes in Equity, Consolidated Statement of Financial Position,
Consolidated Statement of Cash Flows and the related notes 1 to
4.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2013 is not prepared, in all material respects, in accordance
with the rules of the London Stock Exchange for companies trading
securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
Southampton
United Kingdom
26 September 2013
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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