Last checked at 19 Mar 2014 07:00
NetScientific plc
('NetScientific' or the 'Group')
Preliminary results for the 12 months ended 31 December 2013
19 March 2014
NetScientific (AIM:NSCI), the biomedical and healthcare technology investment group, has published its results for the year ended 31 December 2013.
Highlights
§ £30.0 million (net of costs £28.6) raised via IPO on AIM market of the London Stock Exchange in September 2013
§ Post money valuation of £57.4 million
§ Use of proceeds to fund commercialisation of two key subsidiaries, further spin outs and an exciting pipeline of further opportunities
§ Strengthened operational management team in key subsidiaries
§ Investment in novel respiratory diagnostics company, ProAxsis Ltd, a newly formed spin-out from Queen's University Belfast
§ Post-tax loss for the period of £4.3 million (2012: £1.5 million) which includes reorganization, AIM listing costs and share based payments totalling £1.8 million
§ Available cash resources of £25.5 million (2012: £0.4 million)
Farad Azima, Chief Executive Officer, commented:
"Since September, NetScientific has strengthened its operational management, adding six new senior executives across the Group - bringing additional expertise in business development and product engineering
The Group has accelerated the development of its existing subsidiaries, added an advanced diagnostics company and made significant progress with FDA - with major new initiatives underway for 2014."
For further information, please contact
NetScientific plc Farad Azima, Chief Executive Officer Peter Thoms, Chief Financial Officer
| Tel: +44 (0) 20 3590 8877 |
Liberum (Nomad & Broker) Chris Bowman / Christopher Britton / Thomas Bective
| Tel: +44 (0) 20 3100 2000 |
Bell Pottinger Daniel de Belder
| Tel: +44 (0) 20 7861 3232 |
CHAIRMAN'S REPORT
Introduction
In the twelve months ended 31 December 2013, NetScientific Plc ('the Group') successfully completed an IPO on the AIM market of the London Stock Exchange and continued to develop its strong portfolio of innovative technology companies.
During the period, the Group deployed a significant amount of its internal resource to preparing for its IPO, which culminated in the Admission of NetScientific plc to AIM in September 2013. The Group raised £30.0 million (£28.6 million net of expenses) 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 post fundraising was £57.4 million.
The Group's current portfolio contains six 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. It is planned the net proceeds of the Placing will be used to fund working capital to accelerate to the market these two leading portfolio companies, WANDA, Inc. and Vortex BioSciences, Inc., whilst developing its other core subsidiary companies and pipeline projects. Within the Group's portfolio there are now eleven pipeline opportunities currently undergoing evaluation and development.
Financial Results
The loss after tax for the year ended 31 December 2013 was £4.3 million (31 December 2012: £1.5 million)
Net funds held by the Group at 31 December 2013 amounted to £25.0 million and comprised cash and cash equivalents and short-term deposits of £25.5 million less long term loans of £0.5 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.
Outlook
After a successful 2013 and the progress in the first few months of 2014, the Board looks ahead with confidence and expects to achieve significant progress with its portfolio companies in 2014.
On behalf of the Board I would like to thank our staff. They have worked tirelessly to organise the Group for the AIM listing and continue the commercialisation of the Group's portfolio. With this on-going commitment I am convinced we will achieve continued success in the coming year.
Sir Richard Sykes
Chairman
18 March 2014
CHIEF EXECUTIVE'S REPORT
Introduction
Since our IPO in September 2013, the Group has made good progress in line with its operational and financial objectives, with cash balances in excess of budget. The Group's key subsidiaries have been the subject of intense development, with particular focus on Wanda and Vortex.
Wanda, Inc.
NetScientific's telemedicine device company is developing a major platform in Big Data Healthcare Analytics, to improve the effectiveness of remote monitoring systems deployed in chronic disease management. Wanda's achievements in the first six months since our IPO include:
· Appointed both a President and a CTO with strong backgrounds and experience in Fortune 500 companies.
· Established operational headquarters in Silicon Valley and initiated the recruitment of a world-class team of engineers.
· Ongoing clinical trials sponsored by the National Institute of Health (NIH) in seven California tier-1 hospitals, to complete later in 2014. Results continue to confirm statistically significant improvements in patient outcome and in reductions in re-hospitalisations, compared to conventional RMS without Wanda.
· Completed pre-submission filing with FDA, with the expectation that FDA Class 1 & 2 will be achieved approximately one year from final submission.
· Commenced active discussions for corporate partnership opportunities with a number of entities in Europe and the United States.
Vortex BioSciences, Inc.
NetScientific's cancer diagnostics company is developing blood test cancer diagnostics by detecting, quantifying and harvesting Circulating Tumor Cells. These live CTCs offer important possibilities in advanced therapeutics and personalised medicine. The same post-IPO period has seen the following developments at Vortex:
· Clinical research and validation of Vortex systems have been expanded to breast, lung, pancreas and colon cancers - enabled by accelerated development of new techniques and instrumentation.
· Important clinical collaboration has started with the Stanford Cancer Centre to exploit the technology's ability to capture live cancer cells from blood samples for improved diagnosis and prognosis. This will potentially transform the selection of treatments for patients and the development of new classes of anticancer therapeutics.
· Expanded clinical collaborations with physicians at UCLA through our dedicated new research facility. Particular focus will be on the analysis and identification of lung and pancreatic tumor cells.
· IP portfolio strengthened, with brand new Patent filings and Disclosures.
Other Key Subsidiaries
· Glycotest, Inc. has initiated collaboration with the Baruch Blumberg Institute (formerly the Institute of Hepatitis & Virus Research), a leading liver cancer research centre. This collaboration will focus on development of liver cancer diagnostic panels and clinical analytics for liver disease.
· QLIDA Diagnostics, Inc. has accelerated work on its commercial prototype for smartphone-enabled cardiovascular disease diagnostics and has expanded the team, with the appointment of VP Engineering.
· Glucosense Diagnostics Limited completed an initial twelve patient clinical study of its non-invasive blood glucose sensor, with encouraging results. A different clinical model will now be implemented to extend and validate these.
Other Progress and Outlook
Since September, NetScientific has strengthened its operational management, adding six new senior executives across the Group - bringing additional expertise in business development and product engineering.
Last month the Group announced an investment in the award-winning ProAxsis Ltd in partnership with Queen's University Belfast. ProAxsis will bring to the market novel point-of-care medical diagnostics devices to monitor patients with Cystic Fibrosis and other chronic respiratory conditions, such as Chronic Obstructive Pulmonary Disease (COPD).
In summary, the Group has accelerated the development of its existing subsidiaries, added an advanced diagnostics company and made significant progress with FDA - with major new initiatives underway for 2014.
Farad Azima
Chief Executive Officer
18 March 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 £ | 2012 £ | ||
Other operating income |
177,667 |
16,000 | |
Research and development expenditure Share based payment Reorganisation and AIM listing costs Other administrative expenses
|
762,624 717,234 1,123,508 1,900,242 |
622,134 - - 801,025
| |
Total administrative expenses |
(4,503,608) |
(1,423,159) | |
Loss from operations |
(4,325,941) |
(1,407,159) | |
Share of loss of joint ventures |
(27,832) |
(13,623) | |
(4,353,773) |
(1,420,782) | ||
Finance income |
37,566 |
- | |
Finance expense |
(35,210) |
(111,344) | |
Loss before taxation |
(4,351,417) |
(1,532,126) | |
Taxation |
14,153 |
- | |
Loss for the year |
(4,337,264) |
(1,532,126) | |
Other comprehensive income Exchange difference on translation of foreign operations |
87,377 |
87,429 | |
Total comprehensive expense for the year |
(4,249,887) |
(1,444,697) |
Loss attributable to: | |||
Owners of the parent | (4,112,565) | (1,423,145) | |
Non-controlling interests | (224,699) |
(108,981) | |
|
(4,337,264) |
(1,532,126) |
Total comprehensive expenses attributable to: | |||
Owners of the parent | (4,025,188) | (1,335,716) | |
Non-controlling interests | (224,699) |
(108,981) | |
(4,249,887) |
(1,444,697) | ||
Loss per Ordinary Share attributable to the ordinary equity holders of the parent: | (0.21) |
(704.53) |
All other comprehensive income will be reclassified to retained earnings on the ultimate sale of any relevant subsidiary company.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 £
| 2012 £ | ||
ASSETS | |||
NON-CURRENT ASSETS | |||
Intangible assets | 638,492 | 13,474 | |
Property, plant and equipment | 67,101 | 11,748 | |
Investment in joint ventures | 69,872 | 37,350 | |
Available for sale investments | 2 | 2 | |
775,467 | 62,574 | ||
CURRENT ASSETS | |||
Trade and other receivables | 325,651 | 221,626 | |
Cash and cash equivalents | 25,546,951 | 410,788 | |
25,872,602 | 632,414 | ||
TOTAL ASSETS | 26,648,069 | 694,988 | |
LIABILITIES CURRENT LIABILITIES | |||
Trade and other payables | (1,113,490) | (799,864) | |
Loans and borrowings | (3,250) | (4,138,800) | |
(1,116,740) |
(4,938,664) | ||
NON CURRENT LIABILITIES | |||
Trade and other payables | (49,723) | - | |
Loans and borrowings | (475,109) | - | |
Provision for deferred tax | (106,965) | - | |
TOTAL LIABILITIES | (1,748,537) | (4,938,664) | |
TOTAL NET ASSETS/(LIABILITIES) |
24,899,532 |
(4,243,676) | |
ISSUED CAPITAL AND RESERVES ATTRIBUTABLE TO THE PARENT | |||
Called up share capital | 1,795,101 | 1 | |
Share premium account | 30,844,552 | - | |
Capital reserve account | 236,745 | - | |
Foreign exchange reserve | 150,131 | 62,754 | |
Retained earnings | (7,459,726) | (4,064,395) | |
Equity attributable to the parent |
25,566,803 |
(4,001,640) | |
Non-controlling interests |
(667,271) |
(242,036) | |
TOTAL EQUITY |
24,899,532 |
(4,243,676) |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Retained Earnings Reserve
£
| Foreign Exchange Reserve
£ | Capital Reserve
£ | Share Capital
£ | Share Premium
£ | Total Attributable to Equity holders of parent £ | Non- Controlling Interest
£ | Total Equity
£ | |
Balance at 1 January 2012 | (2,641,250) | (24,675) | - | 1 | - | (2,665,925) | (133,054) | (2,798,978) |
Comprehensive Income | ||||||||
Loss for the period | (1,423,145) | - | - | - | - | (1,423,145) | (108,982) | (1,532,127) |
Other comprehensive income | - | 87,429 | - | - | - | 87,429 | - | 87,429 |
Total comprehensive income |
(1,423,145) |
87,429 |
- |
- |
- |
(1,335,716) |
(108,982) |
(1,444,698) |
Balance at 31 December 2012 |
(4,064,395) |
62,754 |
- |
1 |
- |
(4,001,640) |
(242,036) |
(4,243,676) |
Balance at 1 January 2013 | (4,064,395) | 62,754 | - | 1 | - | (4,001,640) | (242,036) | (4,243,676) |
Comprehensive Income | ||||||||
Loss for the year | (4,112,565) | - | - | - | - | (4,112,565) | (224,699) | (4,337,264) |
Other comprehensive income | - | 87,377 | - | - | - | 87,377 | - | 87,377 |
Acquisition of subsidiary | - | - | - | - | - | - | (203,357) | (203,357) |
Increase in subsidiary shareholding |
- |
- |
- |
- |
- |
- |
(6,772) |
(6,772) |
Dilution in subsidiary shareholdings |
- |
- |
- |
- |
- |
- |
9,593 |
9,593 |
Issue of share capital Transaction costs in respect of share issues | -
- | -
- | -
- | 1,795,100
- | 32,279,998
(1,435,446) | 34,075,098
(1,435,446) | -
- | 34,075,098
(1,435,446)
|
Waiver of loan interest on share issue |
- |
- |
236,745 |
- |
- |
236,745 |
- |
236,745 |
Share based payments | 717,234 | - | - | - | - | 717,234 | - | 717,234 |
Total comprehensive income |
(3,395,331) |
87,377 |
236,745 |
1,795,100 |
30,844,552 |
29,568,443 |
(425,235) |
29,143,208 |
Balance at 31 December 2013 |
(7,459,726) |
150,131 |
236,745 |
1,795,101 |
30,844,552 |
25,566,803 |
(667,271) |
24,899,532 |
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 £
| 2012 £ | ||
Cash flows from operating activities | |||
Loss before tax | (4,351,417) | (1,532,126) | |
Adjustments for: | |||
Depreciation | 5,508 | 2,888 | |
Amortisation | 1,616 | 1,256 | |
Share of loss of joint ventures Impairment of unlisted investments | 27,832 - | 13,623 2 | |
Share based payment expense | 717,234 | - | |
Finance Income | (37,566) | - | |
Finance costs | 35,210 | 111,344 | |
(3,601,583) |
(1,403,013) | ||
Change in trade and other receivables | (245,100) | (105,509) | |
Change in trade and other payables | 167,977 | 278,866 | |
Cash used in operations |
(3,678,706) |
(1,229,656) | |
Cash flows from investing activities | |||
Investment in joint venture | (60,354) | (18,269) | |
Purchase of intangible assets | - | (3,718) | |
Purchase of property, plant and equipment | (60,861) | (3,162) | |
Interest received | 37,566 | - | |
Increase shareholding in subsidiary undertaking | (6,772) | - | |
Net cash used in investing activities |
(90,421) |
(25,149) | |
Cash flows from financing activities | |||
Proceeds from loan | 428,457 | 861,475 | |
Proceeds from share issue Share issue cost | 29,912,750 (1,435,446) | - - | |
Cash acquired on acquisition of subsidiary | 1,973 | - | |
Net cash from financing activities |
28,907,734 |
861,475 | |
Increase/(decrease) in cash and cash equivalents | 25,138,607 | (393,330) | |
Cash and cash equivalents at beginning of year | 410,788 | 830,211 | |
Exchange losses on cash and cash equivalents | (2,444) | (26,093) | |
Cash and cash equivalents at end of year |
25,546,951 |
410,788 |
Notes
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 financial information of the Group set out above does not constitute "statutory accounts" for the purposes of Section 435 of the Companies Act 2006. The Group's first audited financial statements for the year ended 31 December 2013 were approved by the Board of directors on 18 March 2014 and will be delivered to the Registrar of Companies for England and Wales in due course.
The report of the auditor on those financial statements was unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRSs') as adopted by the European Union, this announcement does not itself contain sufficient information to comply with those IFRSs.