TIDMNSCI
RNS Number : 8788K
NetScientific PLC
27 April 2020
27 April 2020
NetScientific plc
("NetScientific" or the "Group")
NetScientific Full Year Preliminary Results for the year ended
31 December 2019
London, UK - 27 April 2020 - NetScientific plc (AIM: NSCI), the
transatlantic healthcare IP commercialisation Group, announces its
full year preliminary results for the year ended 31 December
2019.
Financial highlights (including post-period end highlights)
-- Loss after tax of GBP4.9 million (2018: loss GBP9.4 million)
reflects the portfolio business model
o Core portfolio companies develop and commercialise their
proprietary technologies
o All portfolio companies are currently loss making
-- Cash used in operations reduced to GBP4.1 million (2018:
GBP8.3 million) due to sale of Vortex and Wanda and lower head
office costs
-- Cash and cash equivalents at HQ and portfolio companies of
GBP3.5 million (2018: GBP2.9 million)
-- There were several Board changes during the year and
post-period, including the Chairman and CEO.
Portfolio highlights (including post-period end highlights)
ProAxsis Ltd ("ProAxsis")
-- Continued strong progress with revenue growth up 234% to GBP735k; cashflow breakeven
o ProAxsis NEATstik ELISA kit sales up by 226%
o Contract with a large researcher conducting Phase 2 clinical
trials in the last quarter of 2019
-- NEATstik(R) featured in a high-profile bronchiectasis study
published in the European Respiratory Journal in 2019
-- Short term loan and interest repaid to NetScientific plc
-- Post-period, ProAxsis has revised its plans to take into
account COVID-19 related delays and the opportunities being
pursued.
Glycotest, Inc. ("Glycotest")
-- Completed $10.0 million series A funding round with Shanghai
Fosun Pharmaceutical Co. Ltd, a leading Chinese healthcare
group
o First and second tranches of $3.0 million each received on 14
February 2019 and 21 November 2019
-- Liver diagnostic test technology access granted to Fosun to
enable Chinese regulatory filings and eventual
commercialisation
-- Completed proprietary assay analytical validation for HCC Panel at NMS Labs
-- Initiated clinical validation trial for the HCC panel with 66
cases and 202 controls enrolled at year end
-- Post-period, Glycotest has revised its plans to take into account COVID-19 related delays
PDS Biotechnology Corporation ("PDS")
-- Completed merger with Edge Therapeutics on 18 March 2019,
creating a NASDAQ listed immune-oncology biotechnology company
developing novel products treating early-and late-stage cancer
-- Collaboration with Merck in Phase 2 studies for PDS0101
-- As part of a broader $12m raise, Net Scientific subscribed
$650,000 for a further 500,000 shares of PDS common stock, total
holding of 1,042,833 PDS common stock represents approximately
7.18% of the undiluted share capital.
-- Post-period, PDS announced an expanded infectious disease
pandemic development program, including exploring novel vaccines
for COVID-19 and universal influenza, in addition to its previously
announced tuberculosis development collaboration with Farmacore
Biotechnology
-- Post-period, PDS announced COVID-19 related delays to its
Phase 2 PDS0101 clinical trial programme.
Vortex Biosciences, Inc. ("Vortex")
-- Sold on 22 March 2019 to Deeptech Disruptive Growth
Investments Ltd ("Deeptech"), a special purpose vehicle "SPV" of
EMV Capital Ltd, for total consideration of GBP113,999.
Wanda, Inc. ("Wanda")
-- Sold on 22 March 2019 to Deeptech, for total consideration of GBP37,001.
Commenting on the Group's 2019 full year results, Ian
Postlethwaite, CEO/CFO of NetScientific, said:
" The Company's strategy remains to seek to maximise shareholder
value from its core and other portfolio companies, which continue
to perform and are making progress. During 2019, the Company
carried out a review of all areas and significantly reduced the
central function costs and headcount back to the essentials,
thereby extending the Company's cash runway and using as much of
the remaining cash as possible to maximise the value of the
portfolio companies."
For more information, please contact:
NetScientific Tel: +44 (0)20 3514 1800
Ian Postlethwaite , CEO/CFO
WHIreland (NOMAD, Financial Adviser Tel: +44 (0)20 7220 1666
and Broker)
Chris Fielding / Darshan Patel
MO PR ADVISORY (Press Contact) Tel: +44 (0)78 7644 4977
Mo Noonan
About NetScientific
NetScientific PLC is a transatlantic healthcare IP
commercialisation Group focused on technologies and companies that
have the potential to treat chronic disease and significantly
improve the health and well-being of people.
For more information, please visit the website at www.NetScientific.net
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT
NetScientific PLC ("NetScientific", the "Group" or the
"Company") is a transatlantic healthcare IP commercialisation group
focused on technologies and companies that have the potential to
treat chronic disease and significantly improve the health and
well-being of people.
As announced in November 2018, the Group conducted a strategic
review to maximise value for Shareholders, which included the
potential sale of the Group or of a portfolio company. In early
2019, the Company had not received any offers for any of its
portfolio companies nor was it in receipt of any approaches
regarding a sale of the Company. The Board assessed all of its
strategic options, including a potential cancellation from trading
on AIM in order to reduce the Company's costs and to prolong the
cash runway allowing for the maximum opportunity to realise cash
from shareholdings in its investee companies. However, the general
meeting to approve the cancellation was indefinitely adjourned.
Following this decision, in line with the circular sent to
Shareholders on 15 February 2019, the Company's strategy has
remained to seek to maximise shareholder value from its portfolio
companies. During 2019, the Company carried out a review of all
areas and significantly reduced the central function costs and
headcount to the essentials, thereby extending the Company's cash
runway and using as much of the remaining cash as possible to
maximise the value of the portfolio companies.
In February and November 2019, Glycotest Inc. issued in total
11,822,605 shares to Fosun Pharmaceutical Co. Ltd ("Fosun Pharma"),
a leading healthcare group based in China as part of a $10 million
Series A financing deal , diluting the Group's interest in
Glycotest by 21.85% to 65.65%, a deemed disposal of a stake in a
subsidiary. Since receiving the funding, Glycotest has increased
expenditure on clinical trial preparations, administration and
research and development on the path to commercialisation.
In March 2019, the Company completed a GBP0.15m cash sale to
Deeptech Disruptive Growth Investments Ltd ("Deeptech"), a Special
Purpose Vehicle of EMV Capital Ltd, of its interests in Vortex and
Wanda, together with any outstanding loans and convertible loan
notes owed to the Company by Wanda or Vortex. Immediately prior to
completion, NetScientific was interested in approximately 95.0% and
70.8% of the issued shares of common stock of Vortex and Wanda,
respectively, and 100% of the Preferred Shares of Wanda. The
results of Vortex and Wanda included within the consolidated
accounts of NetScientific amounted, to a gain of GBP0.6 million and
a loss of GBP1.9 million, respectively, and the net assets of
Vortex and Wanda at the same date were GBP0.3 million and GBP0.1
million, respectively net of intercompany balances. The loss for
the year by the Vortex and Wanda discontinued operations was GBP1.3
million (2018: GBP5.4 million) reducing the operational funding
requirement of the Group substantially going forward as look to
preserve cash.
PDS has seen its fair value decline during 2018, 2019 and into
early 2020 due primarily to a weak market for smaller listed
companies and specifically to a stock overhang and a lack of new
clinical trial information to drive the value forward. At year end
PDS's share price was $2.65 per share valuing our investment at
GBP1.1 million (2018: GBP2.6 million). The Board continues to
believe that PDS has strong prospects and participated post year
end in a $12m raise to acquire a further 500,000 shares for
$650,000 taking its total holding to 1,042,000, representing
approximately 7.18% of the undiluted share capital. This provides
PDS with funding to initiate Phase 2 trials.
During the period there has been a significant reshaping of the
Board. Francois Martelet resigned as a Director on 30 April 2019.
On 14 October 2019, Dr. Ilian Iliev joined the Board as a
non-executive director. Barry Wilson retired from the Board on 13
December 2019 following seven years as Non-Executive Director and
John Clarkson joined the Board as Non-Executive Director. On the 15
January 2020, it was announced that Ian Postlethwaite had served
six months' notice to step down as CEO, CFO and Company Secretary
during April 2020. On 31 March 2020, it was announced that Sir
Richard Sykes would retire from the Board following nine years as
Chairman. John Clarkson, took over as the Chairman of the Board
with immediate effect. It is expected that Dr. Ilian Iliev,
currently a Non-Executive Director, will become a part time
Executive Director and interim CEO, and Stephen Crowe, currently
Financial Controller, will take over as interim CFO.
The Group is following the latest health authority and
government advice in light of Covid-19. T he primary focus is the
health, wellbeing and safety of all its employees and local
communities. The Group has reviewed all the major budgeted
assumptions and sensitivities and drawn up cash preservation plans
in case revenue does not continue as planned, or it faces delays in
planned payments from third parties. It has initiated further cost
saving plans across the Group and delayed expenditure where
possible, until there is more clarity on the financial impact of
the pandemic. In some cases, the crisis restrictions will delay
trials and programs, which will defer expenditure and thus extend
the cash runway. Also, there may be opportunities to take advantage
of the financial support measures and divert effort and resources
to address Covid-19 issues and generate new revenue streams,
further ensuring the Group has options and cash for at least the
next twelve months.
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT continued
Portfolio Review
ProAxsis Ltd ("ProAxsis")
ProAxsis is a medical diagnostics company, based in Northern
Ireland, developing a range of products for the capture, detection
and measurement of active protease biomarkers of disease. The
company is primarily focused on chronic respiratory diseases such
as COPD and bronchiectasis but has recently demonstrated the
adaptability of its technology for use in other clinical areas such
as oncology.
ProAxsis has made strong operational progress during 2019 and
has now reached cashflow breakeven based on higher revenue up 234%
at GBP735k versus 2018. This increase in revenue is mainly due to
the increase of ProAxsis NEATstik ELISA kit sales, up by 226%, and
a large researcher conducting Phase 2 clinical trials in the last
quarter of 2019. The outlook for the company in 2020 is positive,
with several contracts already in place with global pharmaceutical
companies.
The company's lead product, NEATstik(R), was featured in a
high-profile bronchiectasis study published in the European
Respiratory Journal in May 2019, which demonstrated encouraging
data on its ability to monitor bacterial infections in real time in
patients suffering from lung diseases.
In March 2020, ProAxsis repaid the GBP0.1 million loan to
NetScientific plus interest from 2019.
NetScientific's shareholding in ProAxsis is 56.5% (fully diluted
being 54.0%) and as at 31 December 2019, the Group had invested
GBP2.1 million (2018: GBP2.1 million).
Grant funding received to develop both the underlying technology
and new applications has exceeded GBP1.2 million (2018: GBP1.2
million).
Glycotest, Inc. ("Glycotest")
Glycotest is a US-based liver diagnostics start-up company
seeking to commercialise new and unique blood tests for life
threatening liver cancers and fibrosis-cirrhosis.
On 14 February 2019 and 21 November 2019, respectively Glycotest
received the first and second tranches of $3m each of the $10
million Series A financing from Fosun Pharmaceutical Co. Ltd
("Fosun Pharma"), a leading healthcare group based in China. As
part of the Series A raise Glycotest granted access to its liver
diagnostic test technology to Fosun during 2019 to enable the
preparation of regulatory filings and eventual commercialization in
China.
The company has continued to make good progress. During 2019,
Glycotest completed proprietary assay analytical validation at NMS
Labs for the HCC panel, and initiated clinical validation trial for
the Panel with 14 sites open to enrolling patients and with a
further six sites in the process of signing patients. As at 31
December 2019, 66 cases and 202 controls were enrolled. Glycotest
also initiated fibrosis and cholangiocarcinoma assay projects
during 2019. These development projects continue in 2020.
Glycotest also appointed a new reagent manufacturer, Rockland
Immunochemicals, in Q3 2019.
Grant funding received to develop the underlying technology,
prior to Glycotest's formation, was GBP5.9 million.
NetScientific's shareholding in Glycotest is 65.6% (2018:
87.5%), fully diluted being 51.5% (2018: 51.5%) and as at 31
December 2019, the Group had invested GBP3.9 million (2018: GBP3.9
million).
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT continued
PDS Biotechnology Corporation
PDS is a clinical stage immunotherapy company developing a next
generation of simpler, safer and more effective immunotherapies for
cancer and infectious diseases. It continued to see strong progress
with its T-cell activating technology platform, Versamune(R), which
combines three critical attributes for an effective immunotherapy:
T-cell induction, reduced tumour suppression and priming of a
potent anti-tumour response without the conventional associated
toxicities.
In November 2018, PDS entered into a merger agreement with Edge
Therapeutics, which completed on 14 March 2019, to form a
Nasdaq-Listed Clinical-Stage Cancer Immunotherapy company. The
merger created a publicly traded immune-oncology biotechnology
company (now re-named PDS Biotechnology Corporation) developing
novel products treating early-and late-stage cancer. This follows
positive phase I and 2 clinical data on its lead product candidate,
PDS0101, indicating immunotherapeutic anti-cancer activity and
favourable safety profile in early stage cervical cancer. PDS plans
to initiate multiple phase 2b and 3 clinical trials of PDS0101 in
HPV-associated cancers.
The year-end share price has been used to re-value the Group's
equity holding therein. The Company's ownership of the enlarged PDS
Biotechnology Corporation, trading on Nasdaq under the ticker PDSB,
on a fully diluted basis is 8.15%. At year end PDS's share price
was $2.65 per share valuing our investment at GBP1.1 million (2018:
GBP2.6 million). As at 22 April 2020 the share price is $0.91 per
share valuing the investment at GBP0.8m.
In May 2019, PDS announced a peer-reviewed publication
supporting the novel mechanisms of action of its proprietary
Versamune(R) platform in cancer immunotherapy. The article "Antigen
Priming with Enantiospecific Cationic Lipid Nanoparticles Induces
Potent Antitumor CTL Responses through Novel Induction of a Type I
IFN Response" was published online on 3 May 2019 in the Journal of
Immunology, and described the way PDS' Versamune(R) platform
recruits and activates killer T-cells to recognize and effectively
attack cancer cells while simultaneously making cancer cells more
susceptible to T-cell attack.
In October 2019, PDS announced that it would be collaborating
with Merck in Phase 2 studies for PDS0101 in combination with
Merck's anti-PD-1 therapy, KEYTRUDA(R) (pembrolizumab), as a first
line treatment in patients with recurrent or metastatic head and
neck cancer and high-risk human papillomavirus-16 (HPV16)
infection. The planned clinical trial is evaluating the efficacy
and safety of the combination as a first-line treatment and was
initiated in the first quarter of 2020.
The Group has invested GBP2.7 million in PDS to 31 December
2019. On the balance sheet the investment in PDS is shown as equity
investments classified as fair value through other comprehensive
income (FVTOCI).
On 12 February 2020, it was announced that PDS had issued new
shares of common stock to raise gross proceeds of approximately
US$12 million ("New Issue"). NetScientific plc subscribed $650,000,
for 500,000 shares of PDS common stock in the new issue.
NetScientific now owns approximately 7.18% of the undiluted share
capital.
On 9 April 2020 PDS appointed Dr. Ilian Iliev to its Board of
Directors.
On 16 April 2020 PDS announced an expanded infectious disease
pandemic development program, including novel vaccines for COVID-19
and universal influenza, in addition to its previously announced
tuberculosis development collaboration with Farmacore
Biotechnology. PDS also announced that initiation of its
multi-center Phase 2 VERSATILE-002 trial for PDS0101 in
advanced/metastatic head and neck cancer had been delayed due to
the severe adverse impact on clinical trial operations from the
COVID-19 pandemic.
Vortex Biosciences, Inc. ("Vortex")
Vortex Biosciences, Inc. was sold to Deeptech on 22 March 2019
for total consideration of GBP112,999, being GBP1 for the shares
and GBP112,998 for the transfer of the debt.
NetScientific shareholding in Vortex was 95.0%, fully diluted
being 66.1% and as of 31 December 2019, the Group had invested
GBP21.4 million (2018: GBP21.4 million).
Wanda, Inc. ("Wanda")
Wanda, Inc. was sold to Deeptech on 22 March 2019 for total
consideration of GBP37,001, being GBP1 for the shares and GBP37,000
for the preferred stock and debt.
NetScientific's shareholding in Wanda was 70.8%, fully diluted
being 61.8% and as at 31 December 2019, the Group had invested
GBP11.6 million (2018: GBP11.6 million).
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT continued
Early stage Investments Portfolio
During the year, the Group reviewed its five early stage
investments (the 'Early Stage Portfolio'). Limited investment has
been made to date, mostly in the form of convertible loans. The
five assets are in the following companies CytoVale, Inc., Epibone,
Inc., Longevity Biotech, Inc., G-Tech, Inc., and Nemitra, Inc. Only
two of the five early stage investments, CytoVale and Epibone
currently have any material value. Of note from the Early Stage
Portfolio:
Cytovale, a clinical stage company using cell mechanics and
machine learning to revolutionise diagnostics starting with sepsis,
announced a preferred Series B funding round in 2019 valuing the
company at $50m, decreasing slightly the value of the NetScientific
investment to GBP0.4m.
Epibone, a ground-breaking research company that transforms
skeletal repair by remodelling stem cells into a personalized bone
graft ready for implantation, announced a Series A funding round in
January 2020 raising $8 million. NetScientific's convertible loan
note and accrued interest valued at GBP0.3m at year end converted
into preferred shares valued at GBP0.3m on the closing of the
financing. and values the Company post investment at $35 million.
NetScientific is in active dialogue regarding developments.
On the balance sheet (as explained in note 3) the investment in
Cytovale is shown within equity investments classified as FVTOCI
whilst the other early stage investment portfolios are all shown
within financial assets classified as FVTPL as warrants and
convertible loan notes at a fair value of GBP0.3m which now relates
to a single convertible loan note investment in Epibone.
Finance
For the year, the Group made a loss of GBP4.9 million (2018:
GBP9.4 million), split between continuing and discontinued
operations as follows:
- Continuing operations GBP3.6 million (2018:
GBP4.0 million)
- Discontinued operations GBP1.3 million (2018:
GBP5.4 million)
The loss reflects the business model where the core portfolio
companies are mainly subsidiaries. These companies are
commercialising or still developing their technologies and are all
currently loss making.
Cash
Cash on the balance sheet as at 31 December 2019 was GBP3.5
million (2018: GBP2.9 million). Cash used in operations in 2019,
was GBP4.1 million (2018: GBP8.3 million). Group companies are not
expected to require any further funding hereafter in 2020. ProAxsis
required a short loan in January 2020 which has now been repaid.
GBP1.2m is held in the Company, giving it and the Group enough cash
to operate until the end of 2021. The cash held within subsidiary
Glycotest, Inc., of GBP2.2m (2018: GBP0.1m) is not freely available
for use within the wider group as it would need the consent of a
40% minority shareholder.
In February 2020, NetScientific plc subscribed for $650,000 of
PDS common stock in its new issue. Upon completion of the new
issue, NetScientific owns approximately 7.18% of the undiluted
share capital of PDS. NetScientific had cash to fund this
investment, however, on 7 April 2020 for prudent financial
management, the Group entered into an 18-month secured GBP700,000
line of credit with the Beckman Group. The facility, which incurs
interest of 10.0% pa on drawn amounts and 3.0% pa on undrawn
amounts and had an arrangement fee of 1%, can be extended by mutual
agreement for an additional six months and is secured on the whole
of NetScientific's interest in PDS.
Going concern
The Directors have prepared and reviewed budget cashflows which
were approved by the Board of Directors in the Board meeting of 5
December 2019, and further reviewed at the Board meeting on 18
March 2020 for the impact of Covid-19 and subsequently approved on
25 March 2020. The budgeted cash flows included a number of
implemented cash saving initiatives, including:
a) significantly reducing the Company's central cost base by
reductions in headcount, closing the office at 6 Bevis Marks London
at the end of March 2019 and reviewing all expenditure
commitments;
b) selling Vortex and Wanda for net proceeds of GBP0.15 million
on 22 March 2019 and consequently reducing the operational cost
base and funding requirement of the Group;
c) allocating the remaining cash to manage the remaining
portfolio companies which the board believes provide the most
realistic prospects of delivering shareholder returns within the
anticipated lifespan of the Company; and
d) making a planned partial drawdown of the GBP700k line of credit towards the end of 2020.
The Group has reviewed the major budgeted assumptions and
sensitivities in light of Covid-19 and drawn up cash preservation
plans in case revenue does not continue as planned, or it faces
delays in planned payments from third parties. It has initiated
further cost saving plans across the Group and delayed expenditure
where possible, until there is more clarity on the financial impact
of the pandemic. In some cases, the crisis restrictions will delay
trials and programs, which will defer expenditure and thus extend
the cash runway. Also, there may be opportunities to take advantage
of the financial support measures and divert resources to support
the Covid-19 effort and generate new revenue streams, further
ensuring the Group has options and cash for at least the next
twelve months.
The Going concern status of the group is dependent on meeting
its forecast including generating revenues, receiving planned
payments from third parties and achieving planned cost savings. In
the event the Group is unable to meet its forecasts it will need to
raise further finance. These events or conditions indicate that a
material uncertainty exists that may cast significant doubt on the
Group and the company's ability to continue as a going concern.
The financial statements do not include any adjustments that
would be necessary if the group or company was unable to continue
as a going concern.
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT continued
Board changes
There were four Board changes during the year (2018: 1).
Francois Martelet resigned as a Director on 30 April 2019. On 14
October 2019 Dr. Ilian Iliev joined the Board as a non-executive
director. Barry Wilson retired from the Board on 13 December 2019
following seven years as Non-Executive Director, and John Clarkson
joined the Board as Non-Executive Director. On 15 January 2020 it
was announced that Ian Postlethwaite had served six months' notice
to step down as CEO, CFO and Company Secretary. On 31 March 2020 it
was announced that Sir Richard Sykes would retire from the Board
following nine years as Chairman. John Clarkson, took over as the
Chairman of the Board with immediate effect. It is expected that
Dr. Ilian Iliev, currently a Non-Executive Director, will become a
part time Executive Director and interim CEO. Finally, it is
anticipated that Stephen Crowe, currently Financial Controller,
will take over as interim CFO during April 2020.
Summary and Outlook
The Board believes that the portfolio companies continue to hold
great potential which the Group will look to unlock. The Company's
strategy remains to maximise shareholder value from the portfolio
companies by:
a) reducing the Company's central functions and costs
significantly such that as much of the remaining cash as possible
can be allocated to the portfolio companies and their active
management; and
b) assessing the funding requirements of each portfolio company
against its prospects of generating a shareholder return.
John Clarkson Ian Postlethwaite
Non-Executive Director and Chairman Chief Executive Officer/Chief Financial
Officer
24 April 2020 24 April 2020
Consolidated Income Statement
For the year ended 31 December 2019
2019 2018
Continuing Operations Notes GBP000's GBP000's
Revenue 735 245
Cost of sales (117) (78)
------------------------------------- ------ ---------- ----------
Gross profit 618 167
Other operating income 76 101
Research and development costs (1,979) (524)
General and administrative costs (2,079) (2,821)
Other costs (269) (1,029)
Loss from operations (3,633) (4,106)
Finance income 21 47
Finance expense (22) (12)
Loss before taxation (3,634) (4,071)
Income tax credit 88 73
------------------------------------- ------ ---------- ----------
Loss for the year from continuing
operations (3,546) (3,998)
Discontinued Operations
------------------------------------- ------ ---------- ----------
Loss for the year from discontinued
operations (1,326) (5,405)
------------------------------------- ------ ---------- ----------
Total loss for the year (4,872) (9,403)
------------------------------------- ------ ---------- ----------
Owners of the parent (4,491) (8,328)
Non-controlling interests (381) (1,075)
------------------------------------- ------ ---------- ----------
(4,872) (9,403)
Basic and diluted loss per share
from continuing and discontinued
operations attributable to owners
of the parent during the year: 5
Continuing operations (4.3p) (4.8p)
Discontinued operations (1.4p) (6.2p)
From loss for the year (5.7p) (11.0p)
------------------------------------- ------ ---------- ----------
Consolidated Statement OF Comprehensive Income
For the year ended 31 December 2019
Notes 2019 2018
GBP000's GBP000's
-------------------------------------------- ------- ---------- -----------
Loss for the year (4,872) (9,403)
Other comprehensive income:
Exchange differences on translation
of foreign operations (56) 94
Change in fair value of equity investments
classified as FVTOCI (1,340) (3,863)
Total comprehensive loss for the year (6,268) (13,172)
----------------------------------------------------- ---------- -----------
Attributable to:
Owners of the parent (5,891) (11,810)
Non-controlling interests (377) (1,362)
---------------------------- ---------- -----------
(6,268) (13,172)
--------------------------- ---------- -----------
Consolidated Statement of Financial Position
As at 31 December 2019
Notes 2019 2018
GBP000's GBP000's
-------------------------------------------- ------ ---------- ----------
Assets
Non-current assets
Property, plant and equipment 128 169
Right-of-use assets 6 221 -
Equity investments classified as
FVTOCI* 8 1,468 2,768
Financial assets classified as FVTPL** 9 262 297
Total non-current assets 2,079 3,234
-------------------------------------------- ------ ---------- ----------
Current assets
Inventory 30 37
Trade and other receivables 603 445
Cash and cash equivalents 3,453 2,911
-------------------------------------------- ------ ---------- ----------
4,086 3,393
Assets in disposal groups classified
as held for sale - 569
-------------------------------------------- ------ ---------- ----------
Total current assets 4,086 3,962
-------------------------------------------- ------ ---------- ----------
Total assets 6,165 7,196
-------------------------------------------- ------ ---------- ----------
Liabilities
Current liabilities
Trade and other payables (623) (668)
Lease liabilities 6 (30) -
Loans and borrowings (163) (140)
-------------------------------------------- ------ ---------- ----------
(816) (808)
Liabilities directly associated
with assets in disposal groups classified
as held for sale - (158)
-------------------------------------------- ------ ---------- ----------
Total current liabilities (816) (966)
-------------------------------------------- ------ ---------- ----------
Non-current liabilities
Lease liabilities 6 (194) -
Loans and borrowings (50) (60)
Total non-current liabilities (244) (60)
-------------------------------------------- ------ ---------- ----------
Total liabilities (1,060) (1,026)
-------------------------------------------- ------ ---------- ----------
Net assets 5,105 6,170
-------------------------------------------- ------ ---------- ----------
Issued capital and reserves
Attributable to the parent
Called up share capital 3,928 3,928
Share premium account 58,006 58,006
Capital reserve account 237 237
Equity investment reserve (1,408) (68)
Foreign exchange reserve 1,384 1,444
Retained earnings (56,681) (51,442)
-------------------------------------------- ------ ---------- ----------
Equity attributable to the owners
of the parent 5,466 12,105
Non-controlling interests (361) (5,935)
-------------------------------------------- ------ ---------- ----------
Total equity 5,105 6,170
-------------------------------------------- ------ ---------- ----------
*Fair value through other comprehensive income
**Fair value through profit and loss
Consolidated Statement of Changes in Equity
As at 31 December 2019
Shareholders' equity
Foreign
exchange
Equity and
Share Share Capital investment Retained capital Non-controlling Total
capital premium reserve reserve earnings reserve Total interests equity
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
1 January
2018 3,452 53,839 237 - (43,220) 1,063 15,371 (4,573) 10,798
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Change on
initial
application
of IFRS 9
Financial
Instruments
(see note
1) - - - 3,795 - - 3,795 - 3,795
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Balance at
1 January
2018 (as
restated) 3,452 53,839 237 3,795 (43,220) 1,063 19,166 (4,573) 14,593
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Loss for the
period - - - - (8,328) - (8,328) (1,075) (9,403)
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Other
comprehensive
income -
Foreign
exchange
differences - - - - - 381 381 (287) 94
Change in
fair value
during the
year - - - (3,863) - - (3,863) - (3,863)
Total
comprehensive
income - - - (3,863) (8,328) 381 (11,810) (1,362)) (13,172)
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Share capital
issued 476 4,524 - - - - 5,000 - 5,000
Change in
fair value
of equity
investments
classified
as FVTOCI - (357) - - - - (357) - (357)
Share-based
payments - - - - 106 - 106 - 106
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
31 December
2018 3,928 58,006 237 (68) (51,442) 1,444 12,105 (5,935) 6,170
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Loss for the
period - - - - (4,491) - (4,491) (381) (4,872)
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Other
comprehensive
income -
Foreign
exchange
differences - - - - - (60) (60) 4 (56)
Change in
fair value
of equity
investments
classified
as FVTOCI - - - (1,340) - - (1,340) - (1,340)
Total
comprehensive
income - - - (1,340) (4,491) (60) (5,891) (377) (6,268)
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Decrease in
subsidiary
shareholding - - - - 2,668 - 2,668 1,677 4,345
Disposal of
subsidiaries - - - - (3,469) (3,469) 4,274 805
Share-based
payments - - - - 53 - 53 - 53
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
31 December
2019 3,928 58,006 237 (1,408) (56,681) 1,384 5,466 (361) 5,105
--------------- --------- --------- --------- ----------- --------- --------- ------------ ---------------- ---------
Consolidated Statement of Cash Flows
As at 31 December 2019
Notes 2019 2018
GBP000's GBP000's
--------------------------------------- ------- ---------- ----------
Cash flows from operating activities
Loss after income tax including
discontinued operations (4,872) (9,403)
Adjustments for:
Depreciation of property, plant
and equipment 42 262
Depreciation of right-of-use assets 32 -
Estimated credit losses on trade 56 -
receivables
Impairment of property, plant &
equipment and inventories - 977
Loss on disposal of property, plant 4 -
and equipment
Loss on disposal of subsidiaries 703 -
Fair value movement during the year
on convertible debt - 230
Release of loan provision - (40)
Share-based payments 53 132
Foreign exchange gains 23 (65)
Finance income (21) (47)
Finance costs 22 12
Tax credit (88) (73)
(4,046) (8,015)
Changes in working capital
Decrease/(increase) in inventory 7 (296)
(Increase)/decrease in trade and
other receivables (130) (136)
Increase/(decrease) in trade and
other payables (26) 24
------------------------------------------------ ---------- ----------
Cash used in operations (4,195) (8,423)
------------------------------------------------ ---------- ----------
Income tax received 72 142
------------------------------------------------ ---------- ----------
Net cash used in operating activities (4,123) (8,281)
------------------------------------------------ ---------- ----------
Cash flows from investing activities
Disposal of discontinued operations, 34 -
net of cash disposed of
Purchase of property, plant and
equipment (6) (112)
Proceeds from sale of property,
plant and equipment - 1
Interest received 7 23
Net cash from/(used in) investing
activities 35 (88)
------------------------------------------------ ---------- ----------
Cash flows from financing activities
Proceeds received on change in stake 4,345 -
in subsidiary
Lease payments 6 (38) -
Repayment from borrowings - (10)
Proceeds from loans - 39
Proceeds from share issue - 5,000
Share issue cost - (357)
---------------------------------------- -------- --------
Net cash from financing activities 4,307 4,672
---------------------------------------- -------- --------
Increase/(decrease) in cash and
cash equivalents 219 (3,697)
Cash and cash equivalents at beginning
of year 3,316 6,868
Cash in disposal groups classified
as held for sale - (405)
Exchange differences on cash and
cash equivalents (82) 145
---------------------------------------- -------- --------
Cash and cash equivalents at end
of year 3,453 2,911
---------------------------------------- -------- --------
Notes to the Financial Information for the Year Ended 31
December 2018
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
Anglo House, Bell Lane Office Village, Bell Lane, Amersham,
Buckinghamshire HP6 6FA.
2. BASIS OF PREPARATION
The preliminary results of the year ended 31 December 2019 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
2019.
The report of the auditors on the statutory accounts for the
year ended 31 December 2019 did not contain a statement under
Section 498 of the Companies Act 2006 but drew attention to a
material uncertainty in respect of going concern and included the
following wording in that respect;
Material uncertainty related to going concern
As set out in note 3, the group is loss generating and is
reliant upon fundraising and cost savings in order to obtain the
resources necessary to continue. The Going concern status of the
group is dependent on meeting its forecast including generating
revenues, receiving planned payments from third parties and
achieving planned cost savings. In the event the group is unable to
meet its forecasts it will need to raise further finance. These
events or conditions indicate that a material uncertainty exists
that may cast significant doubt on the group and the company's
ability to continue as a going concern.
These events or conditions, along with other matters as set out
in Note 3, indicate that a material uncertainty exists which may
cast significant doubt over the Group's ability to continue as a
going concern. Our opinion is not modified in respect of this
matter.
The financial statements for the year ended 31 December 2019
included in this announcement were authorised for issue in
accordance with a resolution of the Board of Directors on 24 April
2020.
3. GOING CONCERN
The Directors have prepared and reviewed budget cashflows which
were approved by the Board of Directors in the Board meeting of 5
December 2019, and further reviewed at the Board meeting on 18
March 2020 for the impact of Covid-19 and subsequently approved on
25 March 2020. The budgeted cash flows included a number of
implemented cash saving initiatives, including:
a) significantly reducing the Company's central cost base by
reductions in headcount, closing the office at 6 Bevis Marks London
at the end of March 2019 and reviewing all expenditure
commitments;
b) selling Vortex and Wanda for net proceeds of GBP0.15 million
on 22 March 2019 and consequently reducing the operational cost
base and funding requirement of the Group;
c) allocating the remaining cash to manage the remaining
portfolio companies which the board believes provide the most
realistic prospects of delivering shareholder returns within the
anticipated lifespan of the Company; and
d) making a planned partial drawdown of the GBP700k line of credit towards the end of 2020.
The Group has reviewed the major budgeted assumptions and
sensitivities in light of Covid-19 and drawn up cash preservation
plans in case revenue does not continue as planned, or it faces
delays in planned payments from third parties. It has initiated
further cost saving plans across the Group and delayed expenditure
where possible, until there is more clarity on the financial impact
of the pandemic. In some cases, the crisis restrictions will delay
trials and programs, which will defer expenditure and thus extend
the cash runway. Also, there may be opportunities to take advantage
of the financial support measures and divert resources to support
the Covid-19 effort and generate new revenue streams, further
ensuring the Group has options and cash for at least the next
twelve months.
The Going concern status of the group is dependent on meeting
its forecast including generating revenues, receiving planned
payments from third parties and achieving planned cost savings. In
the event the Group is unable to meet its forecasts it will need to
raise further finance. These events or conditions indicate that a
material uncertainty exists that may cast significant doubt on the
Group and the company's ability to continue as a going concern.
The financial statements do not include any adjustments that
would be necessary if the group or company was unable to continue
as a going concern.
4. SIGNIFICANT ACCOUNTING POLICIES
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union as they apply to the financial statements of the
Group for the year ended 31 December 2019. 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 that comply with IFRS by 1 May 2020.
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 2019 of 3,475,984 (2018:
2,782,651) are not treated as dilutive as the entity is loss
making.
2019 2018
GBP000's GBP000's
------------------------------------- ----------- -----------
Loss attributable to equity holders
of the Company
Continuing operations 3,409 3,648
Discontinued operations 1,082 4,680
----------- -----------
Total 4,491 8,328
----------- -----------
Number of shares
Weighted average number of ordinary
shares in issue 78,561,866 75,796,048
6. IFRS 16 LEASES
Effective 1 January 2019, IFRS 16 has replaced IAS 17 Leases and
IFRIC 4 Determining whether an Arrangement Contains a Lease.
IFRS 16 provides a single lessee accounting model, requiring the
recognition of assets and liabilities for all leases, together with
options to exclude leases where the lease term is 12 months or
less, or where the underlying asset is of low value. The Group does
not have significant leasing activities acting as a lessor.
Transition Method and Practical Expedients Utilised
On adoption of IFRS 16, the Group recognised right-of-use assets
and lease liabilities in relation to leases of office space, which
had previously been classified as operating leases.
The judgement that the Group was reasonably certain to extend
for the full term of the lease beyond the contractual breaks in the
third, fifth and seventh years of the lease have made a material
difference to the carrying value of the asset/liability. The impact
of this judgement is to increase the initial asset/liability
amounts by GBP216k, GBP181k and GBP114k respectively.
The lease liabilities were measured at the present value of the
remaining lease payments, discounted using the incremental
borrowing rate as at 1 January 2019. The incremental borrowing rate
is the rate at which a similar borrowing could be obtained from an
independent creditor under comparable terms and conditions. The
rate applied was 3.5%.
Transition to IFRS 16
The table below shows the impact due to the transition to IFRS
16 and the initial effect on the balance sheet as at 1 January
2019.
2019 2018
GBP000's GBP000's
----------------------------------- ---------- ----------
Right-of-use asset
Addition 1 January 2019 253 -
Less:
Amortisation during the period (32) -
---------- ----------
Balance at 31 December 2019 221 -
---------- ----------
Lease Liability
Initial recognition 1 January 2019 (253) -
Add:
Payments 38 -
Less:
Interest charge during the period (9) -
Balance at end of period (224) -
---------- ----------
Split as follows:
Current Liability (30) -
Long Term Liability (194) -
(224) -
---------- ----------
Instead of recognising an operating expense for its operating
lease payments, the Group will instead recognise interest on its
lease liabilities and amortisation on its right-of-use assets. This
will increase the reported total loss for the year by the amount of
its current operating lease cost, which for the year ended 31
December 2018 was GBP54k for continuing operations. Due to the
short terms of the Group's leases, approximately there will only be
a nominal charge to interest of approximately GBP9k with the rest
of the charge being recognised as depreciation of GBP32k. There are
several short-term leases where the lease commitment is under six
months in length where the Group will continue to spread the lease
payments on a straight-line basis over the lease term.
7. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
The Group had the following subsidiaries at 31 December
2019:
Proportion Proportion
of ownership of ownership
Proportion Proportion interest interest
of of held by held by
ownership ownership non-controlling non-controlling
Primary Country of interest interest interests Interests
trading incorporation at 31 December at 31 December at 31 December at 31 December
Name address or registration 2019 2018 2019 2018
------------------ --------- ----------------- --------------- --------------- ---------------- ----------------
NetScientific
UK Limited (a) UK 100% 100% - -
ProAxsis Ltd *
(i) (b) UK 56.5% 56.5% 43.5% 43.5%
NetScientific
America, Inc. (c) USA 100% 100% - -
Vortex
BioSciences,
Inc. ** (i) (d) USA - 95% - 5%
Wanda, Inc. **
(i) (e) USA - 70.8% - 29.2%
Glycotest, Inc.
(i), (ii) (f) USA 65.6% 87.5% 34.4% 12.5%
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.
** Sold to Deeptech in March 2019, a SPV of EMV Capita Ltd for total consideration of GBP150k.
All of the ownerships shown above relate to ordinary
shareholdings.
(i) Options have been issued by ProAxsis Ltd and Glycotest, Inc.
which if exercised would dilute the Company's shareholding by 3%
and 14% respectively.
(ii) Following issue of further shares during the year the
Group's interest was reduced to 77.5% on 14 February 2019 and then
to 65.6% on the 21 November 2019.
(a) Anglo House, Bell Lane Office Village, Bell Lane, Amersham, Buckinghamshire, HP6 6FA
(b) Unit 1B, Concourse Building, 3, Catalyst Inc, Titanic
Quarter, 6 Queens Road, Belfast, BT3 9DT, Northern Ireland
(c) 1650 Market Street, Suite 4900, Philadelphia, Pennsylvania,
19103-7300, United States of America
(d) 5627 Stoneridge Drive, Suite 312, Pleasanton, CA 94588, United States of America
(e) 350 Sansome Street, Unit 800, San Francisco, CA 94104, United States of America
(f) 77 Water Street, Suite 817, New York, NY 10005, United States of America
The addresses listed above are also the registered offices of
the relevant entities.
8. EQUITY INVESTMENTS CLASSIFIED AS FVTOCI
Represent equity securities classified
as FVTOCI
2019 2018
GBP000's GBP000's
---------------------------------------- ---------- ----------
At 1 January 2,768 2,863
Remeasurement to fair value on initial
application of IFRS 9 - 3,744
Change in fair value during the year (1,300) (3,839)
At 31 December 1,468 2,768
---------------------------------------- ---------- ----------
% of issued
Name Country of incorporation share capital Currency denomination GBP000's
------------------------------ ------------------------- -------------- --------------------- --------
PDS Biotechnology Corporation USA 10.28% US$ 1,089
CytoVale, Inc. USA 1.00% US$ 379
1,468
-------------------------------------------------------- -------------- --------------------- --------
The Company's ownership of the enlarged PDS Biotechnology
Corporation, now trading on Nasdaq under the ticker PDSB, on a
fully diluted basis is 8.15% (2018: 9.12%), which at the year-end
listing price of $2.65 values NetScientific's holding in PDS at
GBP1,097k (2018: GBP2,380k). It is the Company's intention to hold
the shares and to make a decision on its position in due course.
The Group's interest in PDS Biotechnology is non-controlling.
The fair value for the prior year end was derived from the
listed entity Edge Therapeutics, Inc. and using its share price as
a proxy to value PDS. On the 18 March 2019 PDS announced the
closing of its merger with Edge Therapeutics, Inc. following the
approval of Edge stockholders on 14 March 2019.
CytoVale Inc. remains not quoted on an active market at year end
and fair value has been established initially using inputs from
other than quoted prices that are observable; i.e. the price of
recent investments by third parties during December 2019. CytoVale
raised $15.0m all at the same valuation per share, the fundraise
was restricted to a small group of sophisticated investors. At the
time this was the only observable valuation on which to value
CytoVale.
9. FINANCIAL ASSETS CLASSIFIED AS FVTPL
Warrants & Convertible Loans classified Restated
as FVTPL 2019 2018
GBP000's GBP000's
---------------------------------------------- ----------- ----------
Balance at 1 January 297 460
Change in fair value on initial application
of IFRS 9 - 51
Change in fair value during the year (35) (214)
---------------------------------------------- ----------- ----------
Balance at 31 December 262 297
---------------------------------------------- ----------- ----------
The warrant has been valued using the Black-Scholes Model and a
level 3 fair value hierarchy, given the unobservable data for
volatility and its fair value. These warrants may be exercised at
any time prior to May 2021.
The Epibone convertible loan note is the only financial asset to
have a material value individually or collectively the rest have
been fully impaired.
Convertible loans FVTPL of GBP253k in the prior year have been
moved out of trade and other receivables to financial assets
classified as FVTPL. The amount was not material at 1 January 2018
and there is no impact on net assets.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR MZGZDLVZGGZG
(END) Dow Jones Newswires
April 27, 2020 02:00 ET (06:00 GMT)
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