Emv Capital (LSE:EMVC) — Results and Company Update

0:02 Good afternoon, ladies and gentlemen, and welcome to the NET Scientific results investor presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard and we'll notify you by email when they are ready

0:34 for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And if you would give that your kind attention, we would be most grateful. And I'd now like to hand over to John Clarkson, Chairman and Ilihan Ilihan CEO from NetScientific. Good afternoon to you both. Good afternoon. Thank you for that introduction, Mark. And thank you to everybody for attending today. Apologies for being a couple of minutes late in getting started. We have been ready to go, but had a little sound issue. So for bandwidth purposes, I'll keep my camera off for a little while and then come back in when I'm not speaking as much. So the objective today is really to introduce the NET Scientific half year results to the June 30, but also as you'll see on the agenda there, to provide a broader introduction to Net Scientific.

1:32 I want to explain a little bit more of the background. I'm conscious that some of you will know quite a lot about Net Scientific, others may not know as much. I'll try and strike the middle ground and apologies if I'm repeating what you already know or vice versa, not covering all the ground, which we could do in the Q and A later. From here, I'd like to then go through the strategy and portfolio and give you the general business update. And then in particular, I hand you over to Ilian to talk about the half year results, the KPIs, and most importantly, the highlights and the way forward. And then we'll just have a brief summary before handing you over for the Q and A session. So on then to Net Scientific.

2:18 Today Net Scientific is an active holding company. And I stress the active holding company because in the past it's not been as strong in the approach. We invest in, develop and commercialize with the specific objective to realize returns for our shareholders. And we have targeted the high growth sectors: life sciences and healthcare, sustainability and technology. So that's the core of our portfolio. And the other advantage we bring to bear is our transatlantic relationships. We see those as very strong and very powerful, but they also will lead into the global opportunities where we can believe we will deliver enhanced shareholder value.

3:08 A little bit of the background to Net Scientific. We call ourselves the new team here. Ilion and myself joined NET Scientific at the back end of twenty nineteen and initially started with a review of NET Scientific strategy. At that point, the company was in dire straits and we reviewed the strategy. And the good news from that strategy is that whilst there were challenges and problems, the underlying science and the strength of the portfolio companies were still there. So we had good underlying assets and something to build on. And as such, we've been driving forward. We have a tight board providing effective corporate governance myself, John Clarkson, as Executive Chairman a broad based background ranging from partner in charge of a developing services consultancy division, which included strategy and performance improvement.

4:08 I've been CEO and involved in startups both sides of the Atlantic. Had a spell with Laura Ashley as Vice Chairman based out of Boston, responsible for restructuring and turnaround. And my background's from a finance and accounting perspective. Very well complemented by Ilian Ilief, our CEO, who brings tremendous entrepreneurial venture capital and strengths ranging from the top level of investment right down through strategy negotiations to hands on management and delivery. Both actively involved in the core business and the portfolio, developing that core portfolio, and also combines particular knowledge and expertise in IP commercialisation.

5:00 We are fortunate to have on the board Professor Stephen Smith as a non executive director. Not only does Steve provide that independence with the REMCOMM and NOMCOMM committees, but he brings to bear excellent science. And as a scientist, he has a great skill of translating complex subjects into not only understandable science, but in particular to the commercial world. So he combines that science with commercial world and moreover on a global basis. So has spent time in the locations identified Australia, Singapore. So a very broad base and a great strength of the company.

5:41 Clive Sparrow joined us as not NED to chair the audit committee and provide that healthy and strong financial challenge, making sure that we keep on track, Clyde bringing to bear that financial expertise, not only in the application, but in chairing audit committees elsewhere and time spent with Treasury the public sector, change management programmes and professional firms. And then we are complemented by Stephen Crow, a very experienced CFO. We do not claim to cover everything in expert detail, but what we do as necessary is to call on expert advisors and consultants, so we have the full knowledge and expertise in the appropriate level of detail.

6:32 So on from the team in terms of what we've been doing. And for the past twelve months, we've been very much focused on the strategy implementation. The strategy implementation is all about, let's get a grip of the businesses, let's focus on execution and the controls, but in particular, not just doing it on a one off basis, but making sure it's a scalable process. We're building that platform for growth. And we're doing that with the very much proactive and commercial management of the portfolio companies. We have extended the portfolio and now we believe we've got an excellent balance in that group. But we don't treat it as a blanket approach, we tailor our approach to each specific company circumstances.

7:23 We fully evaluated each company, we keep up to date a detailed data sheet of the company, We roll that forward into a dashboard and with three year projections. So we're mapping out over time using three years as a benchmark, not as an absolute, but that three year horizon, we identify where the value inflection points are coming, where the potential is for liquidity and exit events, and in particular, what is the cost? What are the resources necessary and what are the risks in achieving that? So we can then focus carefully on those with the best potential. And we do that through the capital light investment approach. And basically what that means in practical terms, we take a modest amount from the Net Scientific balance sheet. Unlike our predecessor which exhausted their balance sheet, we have got a sensible fighting fund and war chest. We're able to deploy that in a structured fashion, but alongside that modest investment to syndicate through EMVC, through EIS, family office and corporate investments to fund the company through that life cycle.

8:39 In so doing, it's actually providing additional revenue for NetScientific through fees, and it's also now well positioned for growth. And whilst we have had some impact of COVID, as most companies have, It's not been too dramatic. We've managed it, we believe, pretty well. And now coming out of the worst of the pandemic, we do see real opportunities and as a result, multiple options for significant returns. I'm looking forward then to exits and liquidity events. Our focus remains on building and realizing shareholder value. With that in mind, we look next and say, okay, where is it coming from? So we have an excellent portfolio, 17 companies based in The US and The UK primarily, but also with a successful Israeli company.

9:33 And we are looking to build on those strengths and synergies. I'm not going to talk about each one now because it would take too long, but in the course of the presentation, and in particular in the next half of the presentation, Ilian will take you through specific case studies about each of those companies and exemplify what we're doing. So we have that robust balanced portfolio. The focus is very much on the future and the growth. And as such, with that balance we can mitigate the risk. So the portfolio delivers exactly what we want it to do. Where does that take us now? And what have we been doing? Well, we have now got the necessary support and we're very, very grateful for all of you in the room and outside the shareholders who have supported us with the funding earlier this year. We successfully raised more than we anticipated, and we now are able to accelerate our growth strategy.

10:36 And that acceleration is not just for speed alone, it's because we have a clear plan of what we want to do and how we want to do it for the success of the overall company and the individuals. And when we look at it, break down our portfolio into three categories. There are these subsidiaries, we are very much hands on driving the projects and looking all the time at the commercialization, the drive for sales, the drive towards profitability, making sure we have the operational capability and that we do deliver. With a direct investment, we choose carefully and of those when the company needs support, we are there to provide it, but we're not doing it without careful judgment.

11:27 And we progress each opportunity on its merit. And that combination of the direct investments with the capital under advisory is really the heart of our capital light investment INVESTMENT approach. Through EMV CAPITAL we are able to build that capital under advisory where we take a profit share from the company's unsuccessful exit. And here we have planned further growth and we have a strong deal pipeline, not only for that growth, but also to generate fees and returns. And so if like that's the outward facing side of it internally, we now have a good platform infrastructure. We have invested and will continue to invest in the team and the systems and the regulatory to ensure we can scale up successfully.

12:21 And two key elements of that are the transatlantic bridges, which Ilian will explain more, but also the international expansion. So we are already exploiting that potential and expanding our footprint. And we do believe we've got these differentiated capabilities, a unique combination coming together to enhance the performance of the company. In terms of enhanced performance, the progress that we have made, we have real momentum now. The momentum is focused on delivery. We spent the last year or so not just on the turnaround, but the good news of turnaround is now largely complete.

13:07 There's always the odds and ends to tidy up, but to all intents and purposes, the turnaround is done and we have the consolidated base and we're driving forward with structured growth from that stronger platform. And perhaps today the most important message is how we are selecting our priorities. There's PDS, which for many people is the visible one tenth above the water of the iceberg. So the tip of the iceberg with the excellent performance of PDS. But underneath that we are targeting not only with Glycotest and Proaxis, but also another half dozen companies where in the portfolio we see them as really strong prospects for success.

13:54 Here we're taking a deeper ownership stake. We want to be able to have a commanding position in the ownership. We are targeting the investment to realize those returns, so focused on delivery. And that delivery is looking many ways from the other end of the telescope. Many startup companies, as you'll know, focus on the research and the product development. We are focusing on saying how do we get the best exits and the best returns for our shareholders and ensuring that we do get involved to deliver that. So through that portfolio, we've got the balanced risk, but we're very much focused on the potential and realization. We believe the half year results show strong progress. So we're very pleased with those results. But in that sense, is the continuation of the theme and we expect that to continue going forward. But I'll hand over now to Ilian to take you through the numbers and the specific examples. Thank you.

14:56 Thank you very much, John. And of course, ultimately performance needs to be translated in numbers. And ultimately, the most important number is the price per share. And here in a sense, there is two stories. So what there's one story of a remarkable recovery over the last eighteen months whereby at the beginning of last year, around February, we reached an all time low of 12.5 p. I think at the time, the market cap was roughly £2,500,000, which of course was absolutely disastrous. And at that point, the turnaround that John was referring to as a strategy was accepted and adopted by the previous board. And we've been able to make significant progress to an average price of 65 p in the first half of this year and end of period of $11.08, and it's been bouncing around the $1.20 mark ever since.

15:54 But this is one side of the story. And for those that have participated in the business in the early stages as shareholders, you have already had a significant return. The other side, of course, is those that have joined us earlier this year at the $1.30 p who are very much looking forward to the further return possible. And here, what I'll flag is that, I mean, we believe that the market continues to significantly undervalue Net Scientific and we'll go through the numbers why we believe that's the case. But suffice it to mention that external reference points includes a target price of $1.80 by WHI and close to 200 by another analyst. So turning to the performance underneath that.

16:42 Well, the loss for the period has increased slightly to 1,400,000, but actually what's underneath that loss is vastly different. In the first half of last year, it was mostly momentum. We were spending because we used to spend that way and why shouldn't we spend in that way going forward. Of course, all of that changed once we rolled up our sleeves and did a bottom up review. So we have done so much more with the money that we have spent ever since. This has been not only continued r and d by glyco test and ProAxis as the holding companies, but also continued investment in infrastructure. In the case of ProAxis, it has been scaling up production capacity and sales capacity. And in the context of EMV CAPITAL, investing in regulatory as well as deal delivery and transactional capability, which we expect will translate in further fees and sales in the months and years to come.

17:36 Now turning to the main numbers. Well, the key aspect here is around fair value. And the way we measure fair value is we use the PVCA guidelines. That is to say, if it's a listed company such as PDS, we take that number. But where it's the privately held companies, are taking externally validated numbers whenever there was an external round. And naturally in a growing company, that means that fair value trails behind where actual economic value, if you will, is. And when I go through the businesses, I'll give you some indication of that. Even so, fair value has increased by 50% from the end of the year until the June 30, going from 21,000,000 to 31,900,000.

18:23 Most of that has been due to the increase in the PDS value and our share of that. But as I mentioned, there is a lot more happening underneath

18:34 that. So we expect that fair value will continue to grow at a brisk pace, driven through the other developments in the rest of our portfolio and new additions to the portfolio. But importantly, as John mentioned, we now have the capital under advisory as a complementary measure of value in the future. And of course, what this signifies is potential future profits. If we're successful in exiting the businesses profitably, we make money not only from the balance sheet direct investment we've made, but also from the investors money that we manage where we have a 15 to 20% carry. But it's also important to mention that the capital under advisory gives us greater influence in the businesses that we work with. It's one thing to have 5%, it's another thing to have 25% combined.

19:24 People listen to you, you have more influence on the board, but you also have more friends to come in when the company needs more money. So we expect to have continued growth for the capital under advisory in the coming months and years. This is underpinned by a specific pipeline of deals and transactions that we're working on. And you've seen some of them announced since the end of the period. But also what we did when we started the turnaround period is we did a bottom up review of all the portfolio companies, irrespective of what percentage we own of them. And as a result, we know more or less with some level of precision where the value inflection points are for these businesses, how much they need to get to each of those value inflection points over the next three years, how much funding is needed for these businesses, the strength of management, level of influence and which are the points at which we can build influence in the company. So as a result, we have a very well defined pipeline going forward, not six months, not one year, but going forward three years. And this in turn makes it easy for us to invest in infrastructure and prepare for that activity.

20:35 And capital under advisory is up 25% for that first half and we expect it, we're fairly confident that this will continue to grow through the end of the year. Now, if we look a little bit under the hood, and thank you for some of the early questions that were sent in particular around ProAxis, PDS and glyco test. And I hope some of this will answer those questions, but we can take more Q and A, of course, after the presentation. Starting with ProAxis,

21:02 and it is now 100% subsidiary, but when we started the turnaround, we owned 65% of the problem and we're responsible for 100% of it. When we looked at the business, we saw, look, actually, is a very promising business in the respiratory diagnostic space. They have a single product focused on COPD. But as it happens with the advent of COVID, respiratory diagnostics, I would hazard a guess, will be important for many years to come as the healthcare system realigns itself to deal both with COVID and long COVID and everything else associated with it. So what we did last year is two things. First of all, we acquired Full Control. We acquired the outstanding interest of the remaining founders that were not active in the business. We did that at a very good valuation. At the moment, ProAxis is sitting on our books at 3,000,000, reflecting the valuation at which we did the acquisition.

21:55 But we believe the company is worth much more. What we have done is we have through grant support by Innovate UK and others, have started

22:04 commercializing five additional products, which are due for launch in Q1, starting from Q1 next year. So we're going from one product focused around COPD to multiple others that are based on in licensing further in house development. And this will transform the business into a multi diagnostics company, which we own a 100% of. We also invested in building up production capacity so that we can handle more. Now, the traditional sales part for the need stick, which involves us selling to pharma companies in their clinical trials has slowed down unfortunately. We've had a significant slowdown in sales that were budgeted for this year. This was mostly due to COVID whereby clinical trials have simply been postponed. Now from our perspective, this is sales postponed, not sales lost, and we expect we'll make up the gap next year. But it's quite important that we are gearing up for a significant growth, and we're now building infrastructure and sales capacity.

23:03 Last but not least was the lean licensing agreement that we signed with AstraZeneca earlier this year and for the global license for the antibody test developed by AstraZeneca. Now we are in the process of the validation of this test within ProAxis. It's a technical thing that we need to do before we are able to sell this externally. And once we have completed, once we've finished that, we'll be able to announce our commercial plans for this part of the business. We are very optimistic. We feel that it's a significant opportunity, but we are in the process of doing it. Turning to PDS. Now this is the visible one. And of course, the performance for us has been nothing short but remarkable.

23:51 But also for us, it's we don't want to see this as a lottery ticket that we found lying at the bottom of the drawer. We see PDS as a demonstration of what our strategy is capable of. Once upon a time, PDS was a university spinout nobody had heard of. NetScientific was the first backer of PDS after their spinout. And it was NetScientific scientific due diligence process, which was very good. We might disagree with the previous management's commercial approach, but the scientific due diligence was always very strong. And they identified a very strong and promising company. Last year, February, when they came to us for money, when they were doing their first placements on NASDAQ, they got onto NASDAQ by reversing into a cash shell. We undertook further analysis, we looked at the business, we realized if we don't participate, we're going to lose our shirt on this one because one way or another, if you're NASDAQ, you will get funded, question is what price?

24:46 So we were able to mobilize some other investors to come alongside us as well as funding from PDS. And as a result, we were able to anchor that very critical February fundraise for PDS. At that point, the price per share was somewhere in the $1.85 if memory serves me correctly. There was further investment that came in last year. With that money, they were able to launch the phase two trials. At that point, again, we looked at it. Is it going well? Does it make sense to participate? It did.

25:17 The company continued to grow. They launched the phase two trials earlier this year, they had very positive results announced at one of the major US oncology conferences that led to a significant jump in the price per share. There was the launch of the COVID-nineteen vaccine project in Brazil and the company again came to markets in June, where again we took a look, okay, maybe we should cash in now. We've made the conclusion that the company remains strong. It's very promising. We believe that it has the potential to go to 1,000,000,000 plus. However, you never know in this space, the strong prospects, is biotech, it is a very risky space. But we decided to continue to support the business. We were able to put in 500,000, in fact, we wanted to put in 2,000,000, but it was a heavily oversubscribed round.

26:07 And since then, the company has continued to grow. Now, we are sitting on a 10x plus return on the initial investment we did in February. But the way we see this is we have to look at the full life cycle of this investment and where we sit. So we're not shy of taking a profit. Of course, we're looking at some point, would it be good to sell down some?

26:28 But we continue to be excited about this business and we're supporting it. Looking at glyco test, this is a company that's developing a liver cancer and related diagnostics. We own 64 of the business, they're based in The US. We have a co investor, Foshun Pharma, one of China's largest corporates and largest pharmaceutical companies. And we've had, as part of the turnaround, found ways to preserve cash in the context of COVID. The company has continued its strong progress. They have in particular accelerated the clinical trials with more sites delivering viable samples and data. We have had a slowdown on the HCC panel clinical validation study where the algorithm training was delayed by a mixture of technical issues that we are busy resolving.

27:19 But also in the context of COVID, there is simply lack of capacity with laboratories.

27:26 I mean, the chain is challenging many sectors, but that's also the case for labs. When I talk about the transatlantic measures we're doing, I'll get back to this issue, the importance of having your own independent lab capacity. At any rate, we're working through these issues and we remain positive on the prospects of the company. Now you've heard about these companies before, you would have seen our report in the previous EMC presentation. But now I want to turn to some of the other businesses that you know a little bit less about. And I see a question, what investment excites you the most? And I'll answer, they're all exciting and they're all great. But within the broader portfolio, we have identified a subset of roughly half a dozen companies, a cohort that we believe we have a mixture of both the promise of these companies. We believe each and every one of them is potentially

28:16 a 100,000,000 plus exit and some of them are multi 100,000,000 exit. But also these are companies where we have influence, we believe we can work with management and we have a way of building up our capability and our stake in those businesses so that we can get the investment returns that we're targeting. And starting with Sage Tech Medical, when I go through this, I'll give you a little bit maybe too much detail on what we do. But what I want to demonstrate to you is the toolkit that we have, the Swiss Army knife, if you will, whereby we're able to use different tools and different playbooks in engaging with these businesses. We're not a one trick pony, we have different ways of working with our portfolio companies. What's universal is we're looking for an exit and a return for ourselves and for the investors.

29:01 So starting with Sage Tech Medical, this is a Devon based highly innovative company. You heard us right, there is innovation happening in Devon. Now what the company does is they have developed an aesthetic capture, gas capture and recycling medical equipment.

29:19 This is actually very important not only for keeping patients alive during operations, but also it's a very important piece of infrastructure within ICU units and operating theatres. What COVID showed in a very painful way is the importance of having flexible infrastructure at hospitals. But equally, the NHS is under a lot of pressure as are all sectors to decrease the greenhouse gas emissions. And SageTech's product addresses both of those aspects.

29:52 Not many know that anaesthetic gases have a really, really high greenhouse gas impact, anywhere between eight and forty times the impact of CO2 emissions. So you don't use so much of it, but the impact is quite high. Anyhow, we were monitoring this business. Last year, we had roughly 1% of the company, but we identified a position where we could increase our stake by helping the company sort out some internal problems, but also help them develop a new strategic framework. And now the company has turned the page, they're launching canister capture in hospitals, they have successful NHS pilots and broadly, there's a strong commercialization push. We've gone from one percent of the business to 24% combination of managed and direct. Another example, PointGrab, it's a company that when I was at EMV CAPITAL, we call it an investment alongside ABB Ventures, Philips Lighting and also participation by Mitsubishi and Flextronics now called Flex.

30:50 And in this business, we again have been developing for a while, but their product is in the smart office space where they're using artificial intelligence sensors to identify and help facility managers optimize how people use those spaces. Now you would have thought that demand for their product would have gone down in the context of COVID. In fact, the opposite happened. Despite empty offices, facility managers recognized that they need to make their offices smarter and need to help avoid overcrowding. As a result, the company doubled revenues last year in the context of COVID and are on track of doing the same this year with 18,000 sensors installed internationally with blue chip clients. In this company too, we identified the right point where we can

31:33 help redefine the business strategy, but also lead an investment round and build up an equity stake, further equity stake in this business. We're now sitting on 23% mixture of managed and direct. Now look, all of these things have been announced in RNSs by Net Scientific. But we want to help you kind of connect the pieces here because if you look at it as a standalone, wow, Net Scientific invested £70,000, okay, so what? But in fact, what we're doing is we're using our balance sheet in a very clever way. In one case, we put an underwrite we didn't have to use because we were able to solve a problem otherwise. But in every one of these cases, we make sure that we improve our position, we make transaction fees and improve our equity position. In that vein, turning to SOFANT, this is an Edinburgh University spin out based in Edinburgh, and they have developed a platform for antennas for satellite communications and five gs. When we first met the company and made a small investment, it was science fiction, five gs from the sky, what is this stuff? People couldn't quite relate to it, they didn't quite believe it will happen. Of course, is now mainstream.

32:41 Not only is it mainstream, but satcoms in the sky, one web on masks platform is potentially going to merge with five gs infrastructure when you're looking at automation and industry and urban infrastructure and so on. And SOFANT has a significant play in this. We've been working with the company as they've been maturing their technology. They're in a really advanced stage now. Strong support by the European Space Agency, but also strong collaborations with the emerging cohort of corporates that are playing in this space. In addition to the multimillion investments we've syndicated in 2018 and 'nineteen, earlier this year, we also syndicated a £900,000 convertible loan with British business bank support, once again, Net Scientific on the right.

33:29 The last one I'll mention here is Vortex Biosciences. And this is a potentially transformative business in the liquid biopsy and in general oncology space. Now, another effect of the COVID crisis has been to demonstrate the disastrous and unsustainable way in which we deal with cancer, not only in The UK, but internationally. As a result, there is a significant investor interest in this space, broadly the digitization of cancer care, but also specifically around liquid biopsy and the digitization this enables. Some of you may have seen the acquisition by Illumina of Grell for 6,500,000,000 US, which ironically was a spinout of Illumina. But also closer to us, there is an angle PLC with a market cap of $290,000,000 doing something somewhat similar to Vortex.

34:21 Now Vortex is a spinout from UCLA and when we turned our attention to it, the company had taken significant level of investment from NetScientific. The technology was very strong, but the commercial focus simply wasn't there. Through the turnaround that we implemented, we've been able to make multiple placements with a mixture of universities, pharma companies, biotech companies, but also to publish as it's important in this space, multiple publications showing how the technology can be utilised in the liquid biopsy space. Now, importantly, what we have also done in line with our transatlantic thesis is we have established a presence in Cambridge. We have hired a new CEO based in The UK close to Cambridge, but also being able to service The US market.

35:10 And as a result, we've been able to do many more placements in The UK and Europe, and also to optimize the platform for commercial, for scale up in commercial development. The company is now positioned for growth and we expect significant developments with this business in the coming months and years as the company grows in this space. So I hope now you've seen four, I mentioned six. So there's two other companies that we are in advanced discussions for similar developments. We'll be making announcements in due course. But what I hope this demonstrates to you is as a platform and as a strategic method is that we are combining several tools. We're able to do more with less, the capital light approach combining our balance sheet with the syndicated investment approach. But also we have multiple ways of supporting these businesses all the way from board level involvement, all the way through to running the businesses if we have to and making placements of senior executives in these companies as they continue to grow. There are two other elements of our strategy I want to talk to you about today.

36:14 Now, so far, our portfolio has been our universe, but of course, our universe is not the universe. There's a lot of technology developments happening there and we are living through the golden age of venture capital for all sorts of reasons that I'd love to talk about, but we don't have time to do so now. So as we do so, we're now lining up to expand our portfolio by making further investments. Now in The UK, if you're active in investing and if you're in the BVCA's website or membership book, you will get deal flow. Inevitably, companies will find you. But our approach to deal flow is different. We want to know the businesses we invest in. We're not really that concerned with investing on top of hype. We want to understand what we are doing and as a result, we want to get to know businesses we're going to back over some period. Some of the companies we back, we've been monitoring for years from seed stage investment.

37:11 As a result, we have a very structured approach to deal flow. We have multiple partnerships, formal and informal, with corporates, with family offices, with other investors and investment platforms and that is how we get our deal flow. And as we look into formalize, we have one good example in recent that we announced in September, which is our investment in MARTLET Capital. Now the Cambridge high-tech cluster is one of Europe's and I would say globally, a leading source of really high quality technology companies. However, it's a bit of a closed shop. There are several players that get to see the deals first and they're able to invest in those companies before they make the broader market. So by the time you see them, the valuation has gone through the roof. So what we have done here is, I mean, it's a deal that my team had been working on since November in partnership with Saranac Partners, which is a major wealth manager based in London. But basically, we've done a two part deal whereby we have provided a million pounds into a 12,000,000 investment into Martlet Capital.

38:19 And Martlet Capital is one of the well recognized seed stage investors in The UK that until recently was owned by Marshall Group, which is a major group there. And as a result, chairman is telling me to hurry up, I will take a jump. But as a result, we have now a significant stake in market capital itself, but also we have a stake in the follow on investment vehicle, Marcuity, which gives us the ability to co invest and follow on in all the deals coming out of market capital. And this gives us the sort of proprietary deal flow that we like that I explained to you. So you'll be seeing more from this in the coming months. The final bit about our strategy that I want to mention as a platform is the transatlantic bridges initiative.

39:05 And this is where we started off, we said, okay, half of our portfolio is in The US, the other half is in The UK plus one in Israel, What can they do together? So we mapped out lots of things that companies could do to help each other, but also where we could help them with our respective networks. We're now looking to codify and solidify this framework through several measures. Most importantly, we're looking to establish a cost effective shared laboratory facility in the East Coast in The US. This intended eventually to be a breakeven operation, perhaps profitable, But we already have three anchor companies that will take facilities in the East Coast, glyco test to help them scale up their LDT test, ProAxess to provide them a local base to scale up The US sales operation, Americans like to buy from Americans, and Vortex to give them an East Coast base complementing the West Coast base. But there are several other companies that will seek to position there.

40:03 On The UK and EU side, I talked about Vortex and the Cambridge operations, but also we want to use the infrastructure we have here to help our US companies establish growth here in The UK and as well as Europe. We're also looking at growth in Asia through partnerships, but a lot of the focus has been on The US. So I've been speaking for a while, but just as a summary of our way forward before I hand over to John. Look, in a way, this is a very boring business. We're looking to combine strong good science in our businesses with good common sense commercial management, looking at where the cash is, looking at where sales are going to come from, focusing our management on delivery and milestones. But also ultimately, how do we get returns to investors? We have sometimes a streetwise approach to investment looking for the good deals, but ultimately we want to provide returns to our shareholders.

40:59 I hand over to John for some concluding remarks. We've explained now, I think, how we are going forward with that selective development of the portfolio, which gives us real new growth potential. And from that, it's the multiple opportunities. This isn't a one or two shot business. This is a balanced business with multiple opportunities to generate, to grow further and to realize those returns. And hopefully it's come across as well that we as management are continued to deliver. In simple terms, we think we've had a good half year, but that's history. We are focusing on the successful completion of 2021 and most importantly, reinforcing that exciting growth strategy.

41:49 So thank you for listening and my apologies over sound quality. Over to Q and A. John, thank you very much indeed and to Ilium for updating investors this afternoon. Ladies and gentlemen, please could I ask you to continue to submit your questions using the Q and A tab that's situated on the right hand corner of your screen. I Just while the company take a few moments to review those questions submitted already, I'd like to remind you that a copy of this presentation along with the recording and the published Q and A will be accessed via your Investor Meet company dashboard and we'll notify you by email when that's ready for your review. I'd also like to remind you that your feedback is important to the company and immediately after this presentation has ended we'll redirect you for the opportunity to provide your feedback in order the company can better understand your expectations. Ily and John obviously investors had ability to pre submit questions ahead of today's event. We did receive quite a few and they tended to theme against two or three different categories. So perhaps the first question, I know you have touched on this within the presentation, but in case you can add any further light is, can you please provide an update as to the progress and timelines at glyco test? Perhaps if there's anything further you wanted to add in that regard.

42:59 I think maybe just to add to what Ilian said that COVID has had its impact in the two ways. One, with the sites, but we have been largely able to overcome that and progress, but also in the lab processing. The original strategy was to outsource the lab capabilities and because of the pressure on labs in the COVID world, to get space in our third party lab has been more difficult than we anticipated. So we've suffered delays in terms of priority access to that lab. Hence, one of the reasons going forward, we want to be able to control our own destiny. So when we are selling the glyco test, that's the early diagnosis of liver cancer, we need to make sure we can deliver the results quickly to those clients.

43:51 And hence, one of the other reasons why we'll be pushing ahead with our own lab. So from a timescale point of view, we have made an adjustment now to the test in the light of the results. We are now rerunning and it's the process of the timescale to rerun those tests. And in parallel with this, we are coordinating very closely with Fosun, who are our co shareholders in glycotest to look forward towards commercialization. That's very kind, John. We received a number of questions relating to PROAXIS, and I guess the one that covers it the most is, please, can you provide an update on the PROAXIS stroke AZ antibody test? Yep, maybe I'll sort of follow on and pick up what Ilian said. I think the first one was about the regulatory manager and in some ways it flows into the AZ test because in part the appointment reflects news to date, and what we've described today, but we are anticipating further growth, further grants and further new products.

44:58 And so from that point of view, we are strengthening the team to be able to deliver. And part of that includes the AZ antibody test. Going back a year, then, proaxis were not in a great shape. It was delivering a sensible product, it did got a good team, but lacked the necessary equipment. So a lot of manual activities, a lot of single tests where we've invested in equipment. So a multiplex which can carry out multi tests together, improve the lab systems, improve the protocols. So when we bid for the AstraZeneca test, we had hit hard from them with here is our due diligence program. So we took a deep intake of breath and thought, if we can come through the AstraZeneca due diligence, it will put us in good shape. And it took many months of them going through, working through each level and finally appointing us, that's praxis, to deliver their antibody test.

46:00 It isn't a completed test that AstraZeneca handed over. They handed over the protocols, but we have had to do two things. One is to complete that work and the second is then to validate it. And that validation process is a repetitive process on a daily basis to ensure that we get consistent results day after day. That has progressed well. We've been able to identify both those people who've had COVID and certain of the vaccines, But it's still not complete and we still need to do greater refinement in terms of the measurement of that test. That was always planned and always anticipated. But in parallel with that, we're looking at the market and commercialization. Initially we saw it as the opportunity to enhance our clinical trials work to put us in a more competitive space as we go forward, and we still see that. The question is how far and if we do enter the consumer market, which is pretty competitive space.

47:02 So we are reviewing that process and as yet we've got to take final decision. John, that's very kind. Just touching on to the the two final areas, I guess. The first one relating to PDS biotechnology. What is your exit strategy? So I think, as you can imagine, there's only so much that that we can say in a in a in a public forum. But the way I would explain it is that, you know, we are sitting on a healthy return with PDS right now. But equally, we need to look at each opportunity on its own merits at any point of time. And when we we actually commissioned a third party strategy review in the summer to look at PDS as an opportunity.

47:54 And the conclusion of the consultants was that there is always risks. It is biotech, you know, but the company has a credible path that may well see the company's value exceed 1,000,000,000 and perhaps beyond. From our perspective, you know, we have, as you can imagine, a logical tree of of of options, but it's never best to take a profit. And at the same time, we believe that we can have a further return from PDS. And I'm sorry that I can't say more than that. That's great. Thank you very much, Ilian. And I guess the final pre submitted question, and thank you to all the investors that took time to submit questions, I hope we've covered some of the areas that you guys were looking at. Can you please provide a timeline for Sage Tech Medical?

48:48 John? Yeah, I'm very happy to provide a certain amount of information here. Basically, there's been excellent progress this year with Sage Tech. So by refining the technology, business breaks down into a series of elements. The first one is naturally the research, development and the IP, which has produced a successful anesthetic capture machine. This is a relatively small rig, which fits onto an existing anesthetic machine and has proven to capture this anesthetic. And there's now orders for the supply of those where the testing has gone well in three trial sites. So the capture is looking extremely encouraging, which as Ilian said, has a huge impact on the waste anesthetic gases. So that's one line of profitability.

49:45 The second one then becomes the extraction that waste gas and taking it from the canisters it contained in, which are reusable canisters and can be changed as the theater continues to operate. So it's an efficient piece of kit. And then a larger machine which extracts and separates the three main anesthetic gases. So that's up and running. And the last, and again, provides a free, if you like, raw material, a waste management services for the hospital. And then the next element being the ability to sell the recycled, if you like, green anesthetic after purification, which in the first instance is likely to be in the vet market.

50:33 So the system is proven, progress is going well. There are various discussions underway. The trial sites are going well. The last, I can't actually tell you the names, although I know that I'm afraid I can't tell you the names of those. There will be a shareholder update, I think later this month, but it is going well and the focus is now moved from that what was essentially a research and product development company to one which is now pushing very hard for commercialisation and growth. That's great John, well thank you very much for that and that as I say takes care of those pre submitted questions. If you would be so kind, John Ilian, on the right hand side and just open up that Q and A tab, you'll see that investors have submitted a number of questions through today's event.

51:23 And perhaps I could just hand back to you to where appropriate to read out the question and give a response, that would be great. Okay. So the first question is what investment excites you the most? What I suggest, John, is maybe if each each one of us takes one or two. As I said, each and every one of these investments is exciting in its own way. That's why we've made those investments. But I think for myself, I would highlight Vortex as a really potentially important company that fits within the transformation that we are seeing in the cancer care space, both on the research side and on the clinical side.

52:10 And the companies such as Vortex and others in that market have the potential of through a mixture of digitization, improvement of tools, and getting to market the latest scientific breakthroughs have the potential within a generation or less than a generation simply to transform how we look after and how we help people recover from the range of ailments that the cancer space represents. At the same time, it's a company that we've been able to stabilize and bring over to The UK and to create a local success story on the back of a joint US and UK IP. John? Yeah, I think it's a very unfair question really. It's like that classic one, which one is your favorite child, isn't it? Whichever one you choose, you're about to upset the other people. But with that caveat in mind, the first one is obviously PDS for me because it was Zillion said, it's the first one that we challenged and said, we must invest and it can deliver.

53:16 So for us, it was a litmus test of our process. And whilst we don't want to place undue emphasis on it, it is the one right now that's clearly got the unicorn potential. Looking at the next slide, think there's a degree of excitement because we want to deliver returns for shareholders. But there's also something about the space we're in. And I think proaxis through the challenges of COVID, the research work of the product that's coming through there, only has great commercial potential, but also I think the practicalities. And I think from a breadth of company that can really deliver on many fronts, then Paraxis, given that we now own 100% of it, is really the next one. And I think over the coming months, we're really going to see some excellent progress and results there.

54:10 So I'll keep to those and I'll say all the rest of them, whenever we're looking at them, continue to excite us. What we have done though, by consciously identifying that half dozen of the next tier, I think you can see that we are not putting the same priority. That may be because the companies are already well advanced, but we have chosen that cohort of companies as the targets for us that can deliver a successful multimillion exits for the company, but also that can deliver NetScientific with the necessary significant returns. Okay. Next question is, what is your strategy around exiting your holdings?

54:57 Do you have a set of metrics and how we will recycle return capital? So it's three questions in one. In terms of our strategy, look, ultimately, what this business is about is about providing a return to Net Scientific and then to its shareholders. So each and every holding that we have, including the subsidiaries, we are looking at them with the prospect of an exit or a liquidity event in the future. Having said that, we also don't want to be forced or rushed into an exit at the wrong time. And this is why during the turnaround period, we took our time and we took quite some time to analyze all of the businesses irrespective of our stake in them to understand the likely value inflection roadmap for these businesses over the next three years, but also to understand what additional investment in these businesses over and above what management says they need would do for these companies.

56:00 As a result, it's not a scientific level of knowledge, but we have a good commercial knowledge for each of our portfolio companies about what the value inflection roadmap looks like and therefore when are the likely optimized exit points, should we say, compared to do we invest more at this point or do we help the company go to an exit? Now there's a further tweak to that, that we're not binary in this sense. We could have trade sales, also you could have IPOs as a way of achieving some level of liquidity in these businesses. You could also have carve outs as a way of developing liquidity. So we're very pragmatic in terms of how we look to get investment returns.

56:53 John, do you want to add more? I think it's also reflect the agelessness in so far as where we're at today. When we exit and look forward to exits, there's a little bit of time away from realizing significant gains potentially, although there's always potential surprises. We want to strike a balance of reinvestment in the business. And yes, we do look forward to the time when we can deliver special dividends to shareholders. The next question is how do you source new opportunities? And maybe this question was asked before the section on MARTLET. But again, just to reiterate, we have a structured approach to deal flow.

57:42 We look for trusted sources of deal flow and we look to get to know the transactions before we make a move. And even when we make a move, we have a multistage approach to getting involved in a business. In terms of specifics, look, it's corporates, it's other investors, it's structured investments such as what we just shared with you with Maltz Capital, but it's a structured approach to obtaining proprietary or highly trusted sources of deal flow. The next question, what is the current cash level? Well, from the half year report, you know what it was at the end of the first half. What I'll say without giving you a specific number is that NetScientific's cash level has not been so healthy for several years.

58:35 We are in a very strong position from I mean, clearly, the going concern question is more than answered, but we're in a strong position to continue to make investments. And will know what the cash at the end of the year is at the time of the publication of the annual report. In terms of total capital currently invested, and I just checked with my CFO, So as of at the end of thirtieth of June, total capital invested is 34,600,000 net of write offs that have been done over time. Ilyan, John, I think you've actually addressed every single question that's come through. So once again, you to everybody that has sent any questions in. If any more do come in, we will make those available to the company for their review.

59:28 John, Ilian, I know investor feedback is important and we'll shortly redirect investors to give them the opportunity to let you know their thoughts and expectations. But before doing so, perhaps I could hand back to John just for a few closing comments perhaps just to wrap things up. For the last question and answer to, as I ended previously, it's not where we've come from. We've done what we believe is that first step. And I take Ilian's lines, we are at the end of the beginning, and now we start the more exciting journey. And therefore we do expect to be making further investments before the year end. And we expect to continue that trend, but utilizing the CAPITAL LITE model. Our model is not cash heavy, and therefore we have that profile.

1:00:23 And the fundamental for us is that we will be continuing to address that gap between the underlying asset value, the future potential, and for us today, the shares still look way below their realistic price. So it's an encouragement to say we believe there's an opportunity for those people who wish to invest. But I'm going to thank all shareholders so far for the support. Thank you for today, Mark. Thank you. That's great. John, Ilian, thank you so much for updating investors this afternoon. Could I please ask investors not to close this session as we'll now redirect you for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company.

1:01:09 On behalf of the management team of NET Scientific PLC, we'd like to thank you for attending today's presentation. Apologies for the break in the audio. That now concludes today's session, and good afternoon to you all.