Netscientific Regulatory News (NSCI)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

15 February 2019

NetScientific plc

("NetScientific" or the "Company")

Conclusion of Strategic Review and proposed cancellation of trading on AIM

1. Background

On 26 November 2018, the Company announced that it had decided to conduct a review (the "Strategic Review") of the various strategic options open to it (the "Strategic Options"), including a sale of the Company to be conducted within the formal sale process framework under the Takeover Code (the "FSP") or a sale of certain of its portfolio companies, to maximise value for Shareholders.

On 20 December 2018, the Company provided an update on the progress of the Strategic Review and FSP (the "Update Announcement"), informing the market that the Company had not received any binding or non-binding offers for any of its portfolio companies nor was it in receipt of any approaches or in discussions with any potential offeror regarding a sale of the Company, and that, accordingly, the Board was continuing to assess all of its Strategic Options, which included the possibility of seeking a delisting of the Company's Ordinary Shares from admission to AIM in order to reduce further the Company's costs.

On the same date, the Company also announced that it expected to have (i) available cash resources of approximately £3 million as at 31 December 2018, (ii) central costs of approximately £2 million per annum and (iii) investments of up to approximately £5 million in its Portfolio Companies in each of 2019 and 2020, should they fail to raise external financing.

On 15 January 2019, the Company announced that the status of the Strategic Review remained as set out in the Update Announcement and that the Board was not aware of any parties who might make an approach or initiate discussions regarding the sale of the Company, and that it had therefore decided to close the FSP.

As at 31 December 2018, the available cash resources of the Company were approximately £3.3 million.

2. Conclusion of Strategic Review

The Company announces today that the Board has now concluded its Strategic Review, including a review of the benefits and drawbacks to the Company and its Shareholders in retaining its quotation on AIM and the Board has concluded it is in the best interest of the Company and its Shareholders as a whole to adopt a revised strategy. That revised strategy is to seek to maximise shareholder value from the Company's portfolio companies (the "Portfolio Companies") based upon the remaining cash resources of the Company 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 on the basis detailed below and the Company can continue to operate for as long as is reasonably possible whilst it seeks to generate Shareholder value from the Portfolio Companies (the "Revised Strategy");

b) assessing the funding requirements of each Portfolio Company against its prospects of generating a Shareholder return within the anticipated lifespan of the Company; and

c) subsequently allocating the Company's remaining cash to managing the Company's stakes in those Portfolio Companies which the Board believes provide the most realistic prospects of delivering Shareholder returns within the anticipated lifespan of the Company.

In line with the Revised Strategy, the Board has concluded that it is in the best interests of the Company and its Shareholders as a whole to cancel the admission of the Ordinary Shares to trading on AIM, re-register the Company as a private limited company and amend the Company's Current Articles to reflect the Company's new status as a private limited company (the "Proposals").

In reaching this conclusion, the Directors have considered the following key factors:

(a) the failure to generate any interest in a sale of the Company or elicit any binding or non-binding offers for any of its Portfolio Companies;

(b) the Company's limited cash resources compared to its expected aggregate expenditure as referred to above and the need to reduce costs significantly in line with the Revised Strategy;

(c) the reluctance of the market to provide funds of sufficient quantum to the Company on terms which the Directors believe would give the Company a realistic prospect of delivering greater value to its Shareholders than the Directors believe may be achieved by adopting the Revised Strategy;

(d) the Board's view that there is a limited investor appetite for investing in listed IP commercialisation companies, such as the Company;

(e) the considerable cost, management time, and the legal and regulatory burden associated with maintaining the Company's admission to trading on AIM which are, in the Directors' opinion, disproportionate to the benefits that its AIM quotation now provides to the Company; and

(f) the Directors' belief that a wind-down of the Company now would be unlikely to generate material value for Shareholders.

The Directors believe, having discussed in principle the Revised Strategy with the Company's major Shareholders, that the Revised Strategy has the most realistic potential to deliver value for the Shareholders. The Directors have therefore concluded that it is in the best interest of the Company and Shareholders as a whole to seek the proposed Cancellation at the earliest opportunity.

The Company is therefore distributing to Shareholders today a circular containing a resolution (the "Resolution") to approve implementation of the Proposals.

3. Off-market trading facility

The Directors are aware that certain Shareholders may be unable or unwilling to hold Ordinary Shares in the event that the Cancellation is approved and becomes effective. Such Shareholders should consider selling their interests in the market prior to the Cancellation becoming effective.

However, the Company intends to make arrangements for an off-market trading facility to facilitate Shareholders to trade in the Ordinary Shares, which will be put in place from the date of the Cancellation for at least one year. The details of this trading facility will be announced prior to the date of the Cancellation.

4. Current Trading

The Company released its interim results for the six months ended 30 June 2018 on 28 September 2018.

Since that date there are the following updates on the Company and its Portfolio Companies:

(a) Central costs have continued to be incurred at a similar rate;

(b) Vortex Biosciences ("Vortex") entered into a global manufacturing partnership agreement with STRATEC Consumables GmbH to produce a customised chip, a crucial component of Vortex's automated liquid biopsy platform, VTX-1. Vortex also presented a study that demonstrates the feasibility of combining its technology with impedance spectroscopy to improve the analysis of circulating tumour cells ("CTCs"). The researchers believe the results provide feasibility for label-free, reliable, fully-integrated cell enumeration, whilst keeping the cells collected intact for downstream transcriptomic, genomic or proteomic analysis;

(c) Glycotest, Inc. ("Glycotest") agreed to a $10m Series A financing round with Shanghai Fosun Pharmaceutical Co., Ltd., a leading healthcare group based in China. The transaction has been approved by the Chinese ODI (outbound direct investment) committee and the first tranche of investment has been received;

(d) ProAxsis Ltd ("ProAxsis") had two products selected for inclusion in the BRIDGE study, a major upcoming clinical trial funded by the European Respiratory Society ("ERS"), following receiving a CE Mark for its ProteaseTag® Active Proteinase-3 Immunoassay;

(e) Wanda, Inc. ("Wanda") launched its new digital health application, Wanda CareLink™. This application allows the Wanda Patient Management solution to be used on a wide variety of internet-enabled devices including iOS and Android devices. This enhances the ability for patients and doctors alike to improve clinical and financial outcomes. Wanda has signed a pilot contract with ACO Florida, and 50 patients have been enrolled thus far. Wanda also has several pilot contracts pending with key home health agencies; and

(f) PDS BioTechnology ("PDS") announced that the respective boards of directors of PDS and Edge Therapeutics, Inc. approved a definitive merger agreement, which is expected to close in the first quarter of 2019.

5. Revised Strategy

The Revised Strategy is to seek to maximise shareholder value from the Portfolio Companies based upon the remaining cash resources of the Company by:

(a) reducing the Company's central functions and costs significantly such that as much of the remaining cash as possible can be so allocated to the Portfolio Companies and the Company can continue to operate for as long as is reasonably possible whilst it seeks to generate shareholder value from the Portfolio Companies on the basis detailed below. This includes implementing each of the Proposals. In addition, it is the intention to restructure the Board, as more fully explained below;

(b) assessing the funding requirements of each Portfolio Company against its prospects of generating a Shareholder return within the anticipated lifespan of the Company. At this stage, Glycotest, ProAxsis and PDS do not require further funding from the Company. However, Wanda and Vortex do require further funding and, currently, have not secured such funding from third parties; and

(c) subsequently allocating the Company's remaining cash to managing the Company's stakes in those Portfolio Companies which the Board believes provide the most realistic prospects of delivering Shareholder returns within the anticipated lifespan of the Company. At this stage, those Portfolio Companies would be Glycotest, ProAxsis and PDS.

Notice has been served to terminate the lease of the Company's headquarters at 6 Bevis Marks London EC3A 7BA.

6. Changes to the Board of Directors

In the event that the Resolution is approved, the Board has agreed that, upon Cancellation:

(a) Francois Martelet will resign as a Director;

(b) the employment contract of Francois Martelet will be terminated in accordance with its terms;

(c) Ian Postlethwaite will remain Chief Finance Officer of the Company for a transitional period until 1 June 2019, at which point his employment will be terminated in accordance with its terms and he will resign as a director;

(d) Barry Wilson will resign as a Non-Executive Director; and

(e) Sir Richard Sykes and Professor Stephen Smith will continue as Non-Executive Directors on terms to be agreed. 

From 1 June 2019, the Company intends to engage a consultant who will be responsible for managing the Company's interests in the Portfolio Companies under the supervision of the Non - Executive Directors.

7. Circular and letter to Shareholders

A circular to shareholders containing details of the Proposals, including a notice of general meeting, together with a letter seeking Shareholder consent for the company to communicate with its shareholders electronically once the de-listing has occurred, has today been posted to shareholders, with a copy of each placed on the Company's website, www.NetScientific.net. Unless otherwise defined, terms used in this announcement shall have the same meanings as those defined in the circular.

The General Meeting will be held at Ashurst LLP, Broadwalk House, 5 Appold Street, London, EC2A 2AG commencing at 11 a.m. on 4 March 2019. If the Resolution is passed, the Cancellation is expected to become effective at 7 a.m. on 18 March 2019.

For more information, please contact:

About NetScientific

NetScientific is a transatlantic healthcare technology group with an investment strategy focused on sourcing, funding and commercialising technologies that significantly improve the health and well-being of people with chronic diseases.

For more information, please visit the website at http://www.NetScientific.net

Important notices

This announcement has been prepared by, and is the sole responsibility of the Directors of NetScientific. WH Ireland Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for NetScientific and no one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than NetScientific for providing the protections afforded to clients of WH Ireland Limited., or for providing advice in relation to the matters referred to in this announcement.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Cautionary note regarding forward-looking statements

This announcement may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations, financial performance, business strategy or plans for future operations the Company. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", or other words of similar meaning. These statements are based on assumptions and assessments made by the Company in light of their experience and their perception of historical trends, current conditions, future developments and other factors they believe appropriate.

By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement.

The Company does not assume any obligation to, and does not intend to, update or correct the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law. There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or disposals.

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 http://www.rns.com.

END