annual report - netscientific · wanda, inc. netscientific’s telemedicine device company is...

ANNUAL REPORT 2013

This page is intentionally blank

1

Index

Overview Page

✾ Chairman’s Statement 2

Strategic Report

✾ Chief Executive’s Report 4

✾ Strategic Report 6

✾ Financial Review 9

Corporate Governance

✾ Board of Directors 12

✾ Report of the Directors 15

✾ Corporate Governance Report 19

✾ Directors’ Remuneration Report 21

Financial Statements

✾ Report of the Independent Auditors 24

✾ Consolidated Statement of Comprehensive Income 25

✾ Consolidated Statement of Financial Position 26

✾ Consolidated Statement of Changes in Equity 27

✾ Consolidated Statement of Cash Flows 28

✾ Notes to the Consolidated Financial Statements 29

✾ Parent Company Financial Position 50

✾ Notes to the Parent Company Financial Statements 51

NETSCIENTIFIC PLCANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013

Chairman’s Statement

Introduction

In the twelve months ended 31 December 2013, NetScientific Plc (‘the Group’) successfully completed an IPO on the AIM marketof 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 inthe 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 placingprice 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 valueinflection points and are currently the primary focus of the Group. It is planned that the net proceeds of the Placing will be usedto 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 noweleven 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 andshort-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 technologiesoriginating from leading universities, teaching hospitals and research institutes globally, particularly in the United Kingdom andthe United States. The Group is primarily focused on identifying and developing research and technologies for use in five chronicdisease areas within the healthcare diagnostics sector: (i) cardiovascular; (ii) liver; (iii) cancer; (iv) metabolic; and (v) digitalhealth.

The Group’s core strategy is to fund and develop translational technologies that offer transformative benefits to peoples’ lives andsociety through improved diagnosis, monitoring and treatment of chronic disease. Chronic diseases account for more than 70per cent of healthcare expenses in each of the United States and the United Kingdom, according to the Centers for DiseaseControl and Prevention and the UK Department of Health. Accordingly, reducing the cost of diagnosing, monitoring and treatingchronic disease has become one of the key challenges to the global healthcare sector. Consequently, the Directors believe theGroup’s five areas of focus represent highly attractive growth markets with significant unmet medical need for technologicaldevelopment, and in which the Group’s management has a significant amount of experience, expertise and strong existingnetworks. The Directors also believe that focusing on these areas will provide the Group with a competitive advantage overprivate 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 toachieve significant progress with its portfolio companies in 2014.

2

Chairman’s Statement

StaffOn behalf of the Board I would like to thank our staff. They have worked tirelessly to organise the Group for the AIM listing andcontinue the commercialisation of the Group’s portfolio. With this on-going commitment I am convinced we will achieve continuedsuccess in the coming year.

Sir Richard SykesChairman18 March 2014

3

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, withcash balances in excess of budget. The Group’s key subsidiaries have been the subject of intense development, with particularfocus on Wanda and Vortex.

Wanda, Inc.

NetScientific’s telemedicine device company is developing a major platform in Big Data Healthcare Analytics, to improve theeffectiveness of remote monitoring systems deployed in chronic disease management. Wanda’s achievements in the first sixmonths 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 inreductions 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 approximatelyone year from final submission.

• Commenced active discussions for corporate partnership opportunities with a number of entities in Europe and theUnited States.

Vortex BioSciences, Inc.

NetScientific’s cancer diagnostics company is developing blood test cancer diagnostics by detecting, quantifying and harvestingCirculating Tumor Cells. These live CTCs offer important possibilities in advanced therapeutics and personalised medicine. Thesame 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 capturelive cancer cells from blood samples for improved diagnosis and prognosis. This will potentially transform the selectionof 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. Particularfocus will be on the analysis and identification of lung and pancreatic tumour 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 & VirusResearch), a leading liver cancer research centre. This collaboration will focus on development of liver cancerdiagnostic panels and clinical analytics for liver disease.

• QLIDA Diagnostics, Inc. has accelerated work on its commercial prototype for smartphone-enabled cardiovasculardisease 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 glucosesensor, with encouraging results. A different clinical model will now be implemented to extend and validate these.

4

Chief Executive’s Report

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 otherchronic 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 companyand made significant progress with FDA - with major new initiatives underway for 2014.

Farad AzimaChief Executive Officer18 March 2014

5

Strategic Report

6

Investments made at an early stage

Risk

To date the Group has invested inearly-stage research andtechnologies that are generallyregarded as higher risk than otherforms of investment. In particularearly stage companies may not beable to secure later rounds offunding, or achieve the required rateof growth to make significant returnsfor investors.

Possible Consequence

The Group is committed to managingthe risk inherent within its investmentmodel, as well as minimising it, tothe extent possible. First andforemost, the Group principallyinvests in the “applied” phase ofresearch projects, meaning that suchprojects have generally receivedsignificant prior investment fromuniversities, foundations andgovernments and have reached astage where there are well-definedgoals and processes to achieving IPand patent generation, proof ofconcept, market testing andregulatory approvals, all of whichsignificantly de-risk a project whenachieved. The Group is also able tospread risk by adopting a portfolioinvestment approach in its chosenfield of transformative biomedicaltechnology. In addition the Groupplans to continue an investmentstrategy where potential newinvestments have been de-risked byprior investment or due diligence.

How the Board guards against risk

Business ModelThe Group aims to identify promising research projects andtechnologies that have the potential to be translated fromresearch laboratory to clinical and commercial application.

The Group provides researchers and technologists withfunding and funding support, technical guidance andcommercial expertise in return for rights over their project IP.The Group aims to develop each project and IP through theproof of concept stage and onward to full commercialisation.As part of the process, the most attractive opportunities areformed into portfolio companies, in which the Group typicallytakes a majority equity interest in return for further fundingand guidance.

The Group aims to grow the equity value of its interests in itsportfolio companies through various key value inflectionpoints such as clinical trials, regulatory approvals,collaborative funding arrangements, first revenues and follow-on growth. In turn, these value inflection points create exit orout-licensing opportunities for the Group through trade sales,licensing arrangements with larger market participants orIPOs.

The Group has active collaborations with a number of US,UK and European institutions and has established dialogueswith several other institutions that may lead to future pipelineprojects.

Key Performance Indicators (‘KPIs’)The Board considers that the most important KPIs are non-financial and relate to the progress of the developmentprograms in the subsidiaries which are identified in thebusiness model and discussed in the Chairman’s and ChiefExecutive’s Reports.

The most important financial KPIs are the cash position andthe operating loss of the Group. At 31 December 2013 cashand deposits balances amounted to £25.5 million and wasfavourable to budget. The operating loss of £4.3 million wasin line with the budgeted loss for the year.

Risks and uncertaintiesThe Directors review the principal risks faced by the Companyas part of the internal controls process.

Strategic Report

7

Clinical development and regulatory risk

Risk

Potential clinical trials and regulatoryapprovals of the Group’ssubsidiaries’ products may not beginon time, may not be completed onschedule, or at all, or may not besufficient for registration of theproducts or result in products thatcan receive necessary clearances orapprovals. Numerous unforeseenevents during, or as a result of,clinical testing could delay or preventcommercialisation of such products.


The Group seeks to reduce this riskby closely monitoring the progress ofrecruitment of its clinical trials,drawing on the experience of itsExecutive Directors, seeking advicefrom regulatory advisors, andholding consultations withappropriate regulatory bodies.


Intellectual property risk The commercial success of the Groupdepends on its ability to obtainpatent protection for its owndiscoveries and for technology it haslicensed from universities andresearch institutes. The intellectualproperty (“IP”) licensed to the Groupis protected by patent, trademark,copyright, as well as confidentialityprocedures. These laws, proceduresand restrictions provide only limitedprotection and any such intellectualproperty rights may be challenged,invalidated, circumvented, infringedor misappropriated. In particular,patents might not contain claims thatare sufficiently broad to preventothers from utilising the covered IP.Third parties may independentlydevelop similar or superior IP thatdoes not infringe any protectionafforded to the IP licensed to theGroup. There can be no assurancethat unauthorised use, disclosure orreverse engineering of the IP licensedto the Group will not take place.

The Group seeks to reduce this riskby employing an experienced legal,patent and licensing team along withexternal patent attorneys to reviewthe patent protection availablebefore licensing in technology andby managing a policy of extensivelypatenting all new discoveriesgenerated in the subsidiaries. Inaddition the Group is prepared todefend itself vigorously againstinfringement of intellectual property,should it be required.

Strategic Report

8

Business ReviewThe business review has been covered in the Chief Executive's Report on pages 4 and 5 and in the Financial Review on pages9 to 11.

Farad AzimaChief Executive Officer18 March 2014

Competition risk

Risk

There is intense competition amonghealthcare, diagnostic andbiotechnology companies. TheGroup is aware of competitors inboth the United States and abroadwho have developed or aredeveloping diagnostic products thataddress the same chronic diseasesthat the Group’s spin-outs aretargeting.

These companies’ diagnosticproducts or services could be moreeffective and/or cost-effective thanthe diagnostic products offered bythe Group’s spin-outs.

Also, although the market forsoftware products that provideadvanced remote monitoringtechnology is still developing, theGroup faces increasing competitionfrom other companies in thehealthcare information technologymarket. There is no assurance thatother intellectual property may notbe developed in other institutionswhich could render the Group’sproducts non-competitive orobsolete.


The Group seeks to minimize theserisks by having the Group’s Directorsand senior management team focusa significant amount of their time onthose spin-outs, which the Directorsbelieve are capable of achieving thegreatest value for the Group withtheir current products. In addition riskis spread through strategic portfoliodiversification within the targetedchronic disease areas.


Dependence on key executives andpersonnel

A significant part of the Group’svalue and the key to its futuretechnology creation also lies with thescientists and engineers who partnerwith the Group. Retention of keyexecutives and personnel, and themaintenance of such a qualifiedworkforce, is a high priority for theGroup. However, it is not possible toguarantee retention of the services ofkey personnel and a failure to attractor retain key executives could havean adverse effect on the group’sbusiness.

The Group seeks to reduce this riskby a balanced compensationpackage consisting of salary,benefits, performance relatedbonuses and equity incentiveschemes. The equity incentiveschemes are implemented at aGroup level for NetScientific staffand in specific schemes forsubsidiary employees.

Financial Review

The Financial Review should be read in conjunction with the consolidated financial statements of the Company and its subsidiaries(together the ‘Group’) and the notes thereto on pages 29 to 49. The consolidated financial statements are presented under InternationalFinancial Reporting Standards as adopted by the European Union. The financial statements of the Company continue to be preparedin accordance with UK Generally Accepted Accounting Practice and are set out on pages 50 to 56.

Corporate Restructuring

In March 2013, NetScientific plc was registered as a public company and a reorganisation undertaken to bring all the NetScientificcompanies under the control of NetScientific plc. The Azima Family Trusts subscribed for 100% of the equity in the new plc and setoff existing loan notes previously issued to fund the NetScientific companies, thereby extinguishing the debt of £4,062,497. Accruedinterest of £236,745 due to the Azima Trusts was waived in the year ended 31 December 2013 and taken to Capital Reserves.

Comparative financial information for the year to 31 December 2012 incorporates the entities under common control at those dates.

Fundraising

In September 2013, the Company raised £30.0 million (£28.6 million net of expenses) through successful admission to AIM frominstitutional investors in the UK.

Research and Development

Research and development expenditure £763k (31 December 2012: £622k). Of the research and development costs incurred in theyear, 55% of the costs were spent on the five key subsidiaries and the balance, which includes projects in receipt of grant income,was expended on pipeline projects.

Statement of Comprehensive Income

The loss from operations for the year ended 31 December 2013 was £4,326k (31 December 2012: £1,407k)

Administrative costs for the year amounted to £4,504k (31 December 2012: £1,423k) and the costs were represented by the following:

Research and development expenditure £763k (31 December 2012: £622k)Other administrative expenses £1,900k (31 December 2012: £801k)Legal costs, tax advice and advisory costs for the reorganisation, preparation for listing and listing costs not chargeable to sharepremium account £1,124k (31 December 2012 £Nil)Share based payment expense £717k (31 December 2012 £Nil)

The loss after tax for the year was £4,337k (31 December 2012: £1,532k) and the loss per share was 21p (31 December 2012:£704.53).

9

Financial Review

The exchange difference on translation of foreign operations relates to subsidiaries in the USA and the change in exchange rate from31 December 2012 £1:1.626 to 31 December 2013 £1:1.649

Statement of Financial Position and Cash Flows

At 31 December 2013, net assets amounted to £24,900k (31 December 2012 net liabilities: £4,244k), including net funds, of£25,069k (31 December 2012: net borrowings £3,728k).

The principal elements of the £25,139k increase in cash and cash equivalents over the year ended 31 December 2013 (31 December2012: decrease £393k) were:

• Net cash flow from operating activities £3,602k (2012: £1,403k)• Movement in working capital £78k (2012 (£173k))• Cash used in investing activities £90k (2012: £25k)• Funding from loans £428k (2012: £861k)• Issue of shares on AIM listing (net of cash expenses) £28,465k (2012: £NIL)

Treasury policy and financial risk management

Credit riskThe Group follows a risk-averse policy of treasury management. Sterling and US dollar deposits are held with one or more approvedUK and US-based financial institutions. The Group’s primary treasury objective is to minimise exposure to potential capital losseswhilst at the same time securing prevailing market rates.

Interest rate riskThe Group’s cash held in current bank accounts is subject to the risk of fluctuating base rates. A substantial element of the Group’sfinancial assets is placed on interest earning deposits. The interest rate profile of financial assets is illustrated in note 20 to the financialstatements.

Currency riskDuring the year under review, the Group was exposed to US dollar exposure as a substantial element of its research and developmentexpenditure is denominated in this currency. The Group covered a proportion of its forward exposure for 2014 by converting US$12million from sterling in December 2013.

Capital structure and funding

The Group is funded by equity capital, reflecting the early stage nature of its development programmes. The Group considers itscapital to be its total equity, which at 31 December 2013 amounted to £25.6 million (31 December 2012: Deficit of £4.0 million).The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to providereturns to equity holders of the Company and benefits to other stakeholders and to maintain an optimal capital structure to reduce thecost of capital. The Group manages this objective through tight control of its cash resources.

10

Financial Review

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 as shown below:

Short-term deposits

Cash and cash equivalents

Loans and Borrowings

Net Funds

Of the total share capital and share premium of £32,640k, £4,062k was from the conversion of the Azima Family Trust loan notesto equity and a further cash subscription of £13k, and the balance of £28,565k was raised on the AIM Listing.

Peter ThomsChief Financial Officer18 March 2014

11

2013 2012

£k £k

17,027 -

8,520 411

(478) (4,139)

25,069 (3,728)

Board Of Directors

Sir Richard Sykes, Non-executive Director and ChairmanSir Richard Sykes is Non-executive Director and Chairman of the Company. Sir Richard spent thirty years working in the biotechnology and pharmaceutical industries, including at Glaxo plc (subsequently Glaxo Wellcome plc), where he served as Chairman and CEO from 1995 to 2000, and then GlaxoSmithKline plc, where he served as Chairman until 2002. Sir Richard was also the senior independent Non-executive Director and Deputy Chairman of Eurasian Natural Resources Corporation from 2007 to 2011, Chairman of NHS London from December 2000 to 2010, Rector of Imperial College from 2000 to 2008 and a Non-executive Director of Rio Tinto plc from 1997 to 2007. He holds a BSc in Microbiology from the University of London, a PhD in Microbial Biochemistry from Bristol University and a DSc from the University of London.

In 1994, Sir Richard received a knighthood for services to the pharmaceutical industry. In 2004, he was awarded Honorary Citizenshipof Singapore for his contribution to the development of the country’s biomedical sciences industry.

Sir Richard is a Fellow of the Royal Society and Academy of Medical Sciences, Imperial College London, Imperial College School ofMedicine and King’s College London and an Honorary Fellow of the Royal Academy of Engineering, Royal Society of Chemistry,Royal Pharmaceutical Society, Royal College of Pathologists, Royal College of Physicians, the University of Wales and the Universityof Central Lancashire.

Farad Azima, Executive Director and Chief Executive OfficerFarad Azima is founder, Executive Director and CEO of the Company. NetScientific represents the culmination of a thirty-five year career as a successful industrialist, technology entrepreneur and philanthropist. Most notably, Farad was the founder of the sound technology business, NXT plc (formerly Verity Group plc), which he built into a FTSE 250 company before stepping down as CEO in 2001. In 1997, Farad co-founded Eastern Counties Radio with the Daily Mail newspapers and Verity Group plc, of which Farad was then CEO. He also founded hi-tech businesses Mission Electronics Limited in 1977 and Cyrus Electronics Limited (now Cyrus Audio Limited) in 1983.

Farad has a passion for new technologies and has strong connections with academics and academicinstitutions. He is the inventor of numerous new technologies in diverse areas of engineering, which arethe subject of international patents registered in his name. From 2001 to 2005, Farad served on the Industrial Key Advisers of ChurchillCollege, Cambridge. He has remained an active alumnus of the University of Leeds, where he received his postgraduate degree inDevelopment Economics.

12

Board Of Directors

13

Dr. Michael Boyce-Jacino, Executive Director Dr. Michael Boyce-Jacino is an Executive Director of the Company. He is also currently CEO ofQLIDA, a subsidiary company. In the early part of his career, Michael completed a National Institute ofHealth (“NIH”) post-doctoral fellowship in 1993, after which he joined Molecular Tool, Inc., a geneticsdiagnostics start-up. After becoming President of Molecular Tool, Inc. in 1994, Michael spearheaded amerger with Genescreen, Inc. and subsequent acquisition of Molecular Tool, Inc. by Orchid BioSciences,Inc. (“Orchid”) in 1998. Michael acted as General Manager and Chief Scientific Officer of Orchid forfour years, and had a key role in the commercialisation of diagnostics technologies, the acquisition ofCellMark Laboratories, Inc., and Orchid’s successful $170 million initial public offering (“IPO”). Afterselling Orchid’s instrument business to Beckman Coulter, Inc. in 2002, Michael joined Beckman Coulter,Inc. as Vice President, Genomics, creating the global GenomeLab branding initiative for Beckman. Michaelsubsequently joined Princeton University spin-out, BioNanomatrix, Inc. (now BioNano Genomics, Inc.), as founding CEO, and wasinvolved in raising more than $20 million for that company before founding and seed financing QLIDA, one of our subsidiarycompanies.

He holds a PhD in Microbiology and Human Molecular Genetics from the University of Minnesota and a BS from the University ofWisconsin, Madison.

David Gough, Executive DirectorDavid Gough is an Executive Director of the Company. David has spent forty years working in the pharmaceutical, healthcare and biomedical sectors, including in a number of senior sales, marketing and business development roles, followed by a research career, notably with Johnson & Johnson. Previously, David was Head of Healthcare and Biotechnology in the Technology division of PA Consulting Group. Leaving PA Consulting Group to join PowderJect Pharmaceuticals plc ahead of its IPO, David subsequently founded Vectura Limited (now Vectura Group plc). Since leaving Vectura Limited, David has been both an investor and an early-stage entrepreneur. He has worked for or advised several venture capital companies, including Avlar BioVentures Limited, Merlin Ventures Limited (with whom he co-founded Vectura Group plc) and Quester Capital Management Limited. He has extensive experience working with companies spun out from universities in both the United Kingdom and the United States.

David has a BSc in Physiology and Biochemistry, an MBA with finance options, the Diploma in Marketing and the InvestmentManagement Certificate.

Peter Thoms, Executive Director and Chief Financial OfficerPeter Thoms is Executive Director and Chief Financial Officer (“CFO”) of the Company. He was formerly CFO of NXT plc (formerly Verity Group plc), having served on its board since 1992. A Chartered Accountant, he worked for the Gillette Group for fifteen years, first as Vice-President & Director of Finance of Gillette Canada Inc., and then as Controller of Gillette Northern Europe.

Peter moved from the Gillette Group to the position of Group Finance Director of Amstrad plc. Peter joinedNXT plc (formerly Verity Group plc) in 1992 as Finance Director and Company Secretary.

14

Board Of Directors

Nicholas Heckford, Executive Director, Commercial and LegalNicholas Heckford is Executive Director, Commercial and Legal at the Company. Nicholas is an accountant with extensive experience in commercial management.

After graduating from Bristol University in 1970 with a degree in Economics, Politics and French, andworking as an accountant with KPMG in London, Nicholas worked as a Financial Controller and FinancialDirector in the electrical and electronics industries. He then moved into broader commercial roles in avariety of businesses, including various start-ups. Before joining the Company, Nicholas was Director ofLicensing Operations for an international technology licensing company, where he negotiated andmanaged licences for brands such as Samsung, Siemens, Philips, NEC and Bosch.

Barry W Wilson, Non-executive DirectorBarry W Wilson is Non-executive Director of the Company. He is an international executive with over 45 years of experience working in the healthcare industry. Previously, Barry served as President International of Medtronic, Inc., President International of the Lederle Division of American Cyanmid Company, prior to its merger with Wyeth, Inc. (now Pfizer, Inc.), and President Europe of Bristol-Myers Squibb Company. Additionally he had nine international assignments with Pfizer, Inc. Barry serves on the Board of Directors of Welch Allyn, Inc. and Anecova SA. He is currently a member of the Thematic Advisory Board of Lombard Odier Private Bank. Barry also advises several venture capital organisations and start¬ups. Barry previously was a Director of Malinckrodt, Inc., Bausch & Lomb, Inc. (both NYSE companies), Rezidor Hotel Group AB (Swedish Stock Exchange) and Healthcare Advisor to DLJ Credit-Suisse Alternative Investments.

Barry holds a BA (Hons), MA from Cambridge University, England and an MBA from The Wharton School, University of Pennsylvania.

Lady Barbara Judge, CBE, Non-executive DirectorLady Barbara Judge is Non-executive Director of the Company. Lady Barbara is a lawyer with extensive international experience working in both the private and public sectors. Previously, she was a partner in a major US law firm and, in 1980, was appointed a Commissioner of the US Securities and Exchange Commission. Lady Barbara is Chairman of the UK Pension Protection Fund, an arms length Government body, and the Energy Institute of University College London. Previously, she was Chairman of the UK Atomic Energy Authority. In June 2010, she was awarded Commander of the British Empire in the Queen’s Birthday Honours for services to the nuclear and financial services industries.

Report Of The Directors

The Directors present their report with the audited financial statements of NetScientific plc (“NetScientific”) and its subsidiaries (“theGroup”) for the year ended 31 December 2013.

CHANGE OF NAMEThe company passed a special resolution on 4 March 2013; the Company changed its name from Greybridge IT Limited to NetScientificLimited as part of a reorganisation of the Group's corporate structure.

It passed a further resolution on 11 March 2013; the Company re-registered as a public limited company and changed its name toNetScientific plc.

RESEARCH AND DEVELOPMENTThe Group incurred research and development expenditure of £762,624 in the year (2012 £622,134). Commentary on the majoractivities is given in the Financial Review.

DIVIDENDThe Directors do not propose the payment of a dividend.

FUTURE DEVELOPMENTSA review of anticipated future developments is included in the Chief Executive’s Report.

POST BALANCE SHEET EVENTSSince the 31 December 2013 the company has acquired a majority stake in ProAxsis Ltd a newly formed company involved in thedevelopment of a range of novel medical diagnostic tests to enable routine monitoring of patients with Cystic Fibrosis and otherchronic respiratory conditions such as Chronic Obstructive Pulmonary Disease. The company invested £100,000 for a 57% equityholding in ProAxsis Ltd.

DIRECTORSThe Directors shown below have held office during the whole of the period from 1 January 2013 to the date of this report.

N C HeckfordP Y Thoms

Other changes in Directors holding office are as follows:

Sir R Sykes appointed 7 March 2013F Azima appointed 7 March 2013 Dr M T Boyce-Jacino appointed 7 March 2013 D A Gough appointed 7 March 2013 B W Wilson appointed 7 March 2013 Lady B Judge appointed 9 May 2013

15


16

No. of shares as at 31-12-13

No of shares as at31.12.12

Basis of Directors’ shareholdings and other interest

Additionally Farad Azima and members of his family are beneficiaries of trusts who hold 100% of the issued share capital in thefollowing shareholders in NetScientific Plc

Between 31 December 2013 and the date of this report there has been no change in the interests of Directors in shares or shareoptions as disclosed in this report.

Sir Richard Sykes, Farad Azima, David Gough, Nicholas Heckford and Lady Barbara Judge shares are held by nominees.

DIRECTORS’ REMUNERATION AND SHARE OPTIONS

Details of the Directors’ remuneration and share options are given in the Directors’ Remuneration Report on pages 21 to 23.

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

Qualifying indemnity insurance cover has been arranged in respect of the personal liabilities which may be incurred by Directorsand officers of the Group during the course of their service with the Group. This insurance has been in place from 6 March 2013 andup to the date of this report.

FINANCIAL INSTRUMENTS

The Group’s use of financial instruments is discussed in the Financial Review on pages 9 to 11 and in note 20 to the financial statements.

Sir Richard Sykes 62,500 -

Farad Azima 156,250 -

Dr. Michael Boyce-Jacino 1,563 -

David Gough 6,250 -

Peter Thoms 1,563 -

Nicholas Heckford 3,125 -

Barry W Wilson 15,525 -

Lady Barbara Judge 3,125 -

Cyrus Holdings Limited 11,795,000 -

Quantadyne Limited 3,430,000 -

Zahra Holdings Limited 1,927,020 -


CHARITABLE AND POLITICAL DONATIONS

During the year ended 31 December 2013 the Group made no charitable donations (2012 £Nil) and no political donations (2012£Nil).

DISABLED EMPLOYEES

The Group gives every consideration to applications for employment from disabled persons where the requirements of the job maybe adequately covered by a handicapped or disabled person. Should any employee become disabled every practical effort is madeto provide continued employment.

SUBSTANTIAL HOLDINGS

As at 17 March 2014 the Directors were aware of the following interest of 3 per cent or more in the issued ordinary share capital ofthe Company (other than Directors interests already disclosed) and have not been notified, pursuant to the provisions of the CompaniesAct 2006, of any further such interests.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law andregulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have electedto prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the EuropeanUnion and the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UnitedKingdom Accounting Standards and Applicable Law). Under company law the Directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state of affairs of the company and the group and of the profit orloss of the group for that period. The Directors are also required to prepare financial statements in accordance with the rules of theLondon Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements,the Directors are required to:

• select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any

material departure disclosed and explained in the financial statements; and; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will

continue in business.

17

No. of sharesName

Per cent. ofvoting rights

Invesco Asset Management Limited 14,000,000 39.0%

Zahra Holdings Limited 11,795,000 32.9%

Quantadyne Limited 3,430,000 9.6%

Cyrus Holdings Limited 1,927,020 5.4%

Artemis Investment Management LLP 1,078,125 3.0%


The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's and thegroup's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group andenable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguardingthe assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and otherirregularities.

Website publicationThe Directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financialstatements are published on the Group’s website in accordance with AIM rules for companies and legislation in the United Kingdomgoverning the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. Themaintenance and integrity of the Group’s website is the responsibility of the Directors. The Directors’ responsibility also extends to theon-going integrity of the financial statements contained therein.

Going concernThe Directors have prepared and reviewed financial forecasts. After due consideration of these forecasts and current cash resources,the Directors consider that the Company and Group have adequate financial resources to continue in operational existence for theforeseeable future (being at least twelve months from the date of this report), and for this reason the financial statements have beenprepared on a going concern basis.

AuditorsAll the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information neededby the Company’s Auditors for the purpose of their audit and to establish that the Auditors are aware of that information. The Directorsare not aware of any relevant audit information of which the auditors are unaware.

The Auditors, BDO LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

BY ORDER OF THE BOARD:

Ernest SchneiderCompany Secretary18 March 2014

18

Number of meetings held whilst a Board MemberDirector Number of

meetings attended

Sir Richard Sykes 8 8

Farad Azima 8 8

Dr. Michael Boyce-Jacino 8 8

David Gough 8 7

Peter Thoms 8 8

Nicholas Heckford 8 8

Barry Wilson 8 8

Lady Barbara Judge 5 1

Corporate Governance Report

The Board is accountable to the Company’s shareholders for good corporate governance and it is the objective of the Board toattain a high standard of corporate governance. The Company does not seek to comply with the Code and it is not giving anystatement of compliance. However, the Company has regard to the Code when determining its corporate governance processeswhich are set out below.

Board of DirectorsOn 31 December 2013 the posts of Chairman and CEO are held by different Directors and the Board of Directors (the “Board”) isbalanced by an appropriate Non-executive element with three out of the eight Directors being Non-executive Directors.

The Board meets regularly throughout the year (normally quarterly on a formal basis) and arrangements are made to enableinformation in a form and of a quality to be supplied to Directors on a timely basis to enable them to discharge their duties.Additionally, special meetings take place or other arrangements are made when Board decisions are required in advance ofregular meetings. Certain matters are reserved for consideration by the Board (with other matters delegated to Board committees).The Board is responsible for leading and controlling the Company and in particular, setting the Company’s strategy, its investmentpolicy and approving its budget and major items of expenditure, acquisitions and disposals.

The Board of Directors has a procedure through which the Directors are able to take independent advice in the furtherance oftheir responsibilities. The Directors have access to the advice and services of the Company Secretary.

During the year ended 31 December 2013, the board met 8 times, with each member attending as follows.

As appropriate, the Board has delegated certain responsibilities to Board committees.

Audit CommitteeThe Audit Committee which was formed on the 9 May 2013 is chaired by Barry W Wilson, and its other members are Sir RichardSykes and Lady Barbara Judge. The Audit Committee has responsibility for considering all matters relating to financial controls,reporting and external audits, the scope and results of the audits, the independence and objectivity of the auditors and keepingunder review the effectiveness of the Group’s internal controls and risk management.

The committee monitors the scope, results and cost-effectiveness of the audit. It has unrestricted access to the Group’s auditors. Incertain circumstances it is permitted by the Board for the auditors to supply non-audit services (in the provision of tax advice, ornon-specific projects where they can add value). The committee has approved and monitored the application of this policy inorder to safeguard auditor objectivity and independence.

During the year ended 31 December 2013 the Audit Committee met once and all members attended.

Remuneration CommitteeThe Remuneration Committee which was formed on the 7 March 2013 is chaired by Sir Richard Sykes and its other members areFarad Azima and Barry W Wilson. The Directors consider that the composition of this committee is appropriate given theCompany’s size and circumstances.

19

Corporate Governance Report

The committee meets at least twice a year. The Remuneration Committee has responsibility for making recommendations to theBoard on the Company’s policy for remuneration of senior executives, for reviewing the performance of Executive Directors andsenior management and for determining, within agreed terms of reference, specific remuneration packages for each of theExecutive Directors and members of senior management, including pension rights, any compensation payments and theimplementation of executive incentive schemes. The committee administers the Company’s share option scheme and approvesgrants under the scheme. The committee is responsible for all senior appointments that are made within the Group. Non-executiveDirectors’ fees will be determined by the full Board. Farad Azima, in his capacity as a member of the remuneration committee,does not have a vote in determining or approving his executive pay. During the year ended 31 December 2013, the committeemet four times and Sir Richard Sykes, Barry W Wilson and Farad Azima attended all meetings

Nomination CommitteeThe Nomination Committee which was formed on the 9 May 2013 is chaired by Lady Barbara Judge, and its other members areBarry W Wilson and Farad Azima. The committee has responsibility for considering the size, structure and composition of theBoard, and the retirement and appointment of Directors, and will make appropriate recommendations to the Board about thesematters. During the year ended 31 December 2013, the committee did not meet prior to or following the listing of the Companyon AIM in September 2013.

Investor relationsThe Directors seek to build a mutual understanding of objectives between the company and its shareholders by meeting withmajor institutional investors after the Company’s preliminary announcement of its year-end results and its interim results. Thecompany also maintains investor relations pages on its website (www.netscientific.net) to increase the amount of informationavailable to investors.

There is an opportunity at the Annual General Meeting for individual shareholders to question the Chairman, and the Chairs ofthe Audit, Remuneration and Nomination Committees.

Internal controlThe Directors are responsible for establishing and maintaining the Group’s system of internal control and reviewing its effectiveness.

The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives andcan only provide reasonable but not absolute assurance against material misstatement or loss.

The main features of the internal control system are as follows:

• a control environment exists through close management of the business by the Executive Directors. The Group has a definedorganisation structure with delineated approval limits. Controls are implemented and monitored by personnel with thenecessary qualifications and experience

• a list of matters reserved for Board approval• regular management reporting and analysis of variances• standard financial controls operate to ensure that the assets of the Group are safeguarded and that proper accounting

records are maintained.


Ernest SchneiderCompany Secretary18 March 2014

20

Directors’ Remuneration Report

This report is non-mandatory for AIM-quoted companies and has been produced on a voluntary basis. It includes and complieswith the principal disclosure obligations of the AIM Rules and with the principal disclosure requirements of Schedule 5 of theLarge and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008.

Remuneration CommitteeThe Company’s remuneration policy is the responsibility of the Remuneration Committee (the “Committee”) which was establishedin March 2013. The terms of reference of the Committee are summarised in the Corporate Governance Report on pages 19 and20. The members of the Committee are Sir Richard Sykes, Barry W Wilson and Farad Azima.

The Committee, which is required to meet at least twice in the year, met four times during the year ended 31 December 2013.The Chief Executive, Farad Azima, was not present when his own remuneration was discussed.

Remuneration policyThe objective of the remuneration policy is to provide packages for executives that are designed to attract, retain and motivatepeople of high quality and experience.

The remuneration for the Chief Executive and Executive Directors consists of an annual salary, an annual performance-relatedbonus and private health cover. In addition the Executive Directors have received grants from the Company’s share option scheme.

The Committee believes that the base salary and benefits for the Executive Directors should represent a fair return for employmentbut that the maximum total potential remuneration may only be achieved in circumstances where the Executive has met challengingpersonal objectives that contribute to the Group’s overall performance.

The basic salaries of the Chief Executive and the Executive Directors are reviewed annually and take effect from 1 October eachyear. The basic salary is determined by reference to relevant market data and the individual’s experience, responsibilities andperformance.

Chairman and Non-executive Directors’ remuneration. The Chairman Sir Richard Sykes receives a fixed fee of £36,000 per annum. Barry W Wilson and Lady Barbara Judge receivea fixed fee of £24,000 per year. The fixed fee covers preparation for and attendance at meetings of the full Board and committeesthereof. The Chairman and the Executive Directors are responsible for setting the level of Non-executive remuneration. The Non-executive Directors are also reimbursed for all reasonable expenses incurred in attending meetings. The Non-executive Directorswere granted options in the Company’s share option scheme on the Company’s admission to AIM.

Equity based incentive schemesThe committee believes that equity based incentive schemes increase the focus of employees in improving the Group’s performance,whilst at the same time providing a strong incentive for retaining and attracting individuals of high calibre.

21


The NetScientific Share Option Scheme (the “Scheme”) was established on 9 May 2013 and is administered by the RemunerationCommittee. The Committee decides to whom of the employees to grant options, the number, the exercise dates and theperformance conditions. Options are normally granted within 42 days of the preliminary announcement of the Company’s interimor final results. Options may also be granted at other times to new eligible employees or in other circumstances determined bythe Remuneration Committee to be exceptional. The option price is the greater of the average of the closing or middle marketprice over the 5 dealing days before the date the option is granted or the amount specified by the Remuneration Committee tobe the option price. No options can be exercised unless the participant has been in employment with the Company for threeyears since the date of grant other than the options granted to Directors at the time of the admission to AIM, the vesting timingfor which is detailed in the paragraph below. The Scheme limit is 8.5% of the number of Ordinary Shares in issue prior to sucha grant.

Directors’ interests in share optionsThe interests of Directors in The NetScientific Share Option Scheme over Ordinary Shares during the year were as follows.

The options were granted on 16 September 2013, the date of the Company’s Admission to AIM. The options price was 160p,the Placing Price. The vesting terms for the Directors were one third of the option became exercisable on the date of Admission,the next third on the first anniversary of the date of Admission and the final third on the second anniversary of the date ofAdmission. In the case of the Chairman and Non-executive Directors any Ordinary Shares issued as a result of the exercise oftheir options must be held for three years from the date of vesting of the relevant options.

Audited informationThe following section (Directors’ remuneration) contains the disclosures required by Schedule 5 to the Large and Medium sizedCompanies and Groups (Accounts and Reports) Regulations 2008 and forms part of the financial statements for the year ended31 December 2013 and has been audited by the Company‘s auditor, BDO LLP.

22

Options as at31 December 2013

Option Price

Sir Richard Sykes 359,020 160p

Farad Azima 359,020 160p

Dr Michael Boyce-Jacino 359,020 160p

David Gough 359,020 160p

Peter Thoms 359,020 160p

Nicholas Heckford 359,020 160p

Barry W Wilson 179,510 160p

Lady Barbara Judge 179,510 160p



Sir Richard SykesChairman of Remuneration Committee18 March 2014

23

Executive Directors

Farad Azima 100 2 102

Dr Michael Boyce-Jacino (i) 100 1 19 120

David Gough 67 - - 67

Nicholas Heckford 67 - - 67

Peter Thoms 100 1 - 101

Non-executive Directors

Lady Barbara Judge 12 - - 12

Sir Richard Sykes 18 - - 18

Barry Wilson 12 - - 12

–––––– –––––– –––––– ––––––

Total 476 4 19 499

–––––– –––––– –––––– ––––––

There were no Directors’ remuneration arising during the accounting period ended 31 December 2012.

(i) Dr Michael Boyce-Jacino was the highest paid Director

In addition to the amounts shown above, the share-based payment charge for the period was:

Directors’ remunerationThe aggregate remuneration received by Directors who served during the year ended 31 December 2013 is set out below. Theremuneration for the Executive Directors is for the eight months from 1 May until 31 December and the Non-executive Directorsfor the six months from 1 July.

NoteYear ended 31 December 2013£000’s

Salary/Fee

Benefits Bonus Total

Executive Directors

Farad Azima 102 -

Dr Michael Boyce-Jacino 102 -

David Gough 102 -

Nicholas Heckford 102 -

Peter Thoms 102 -

Non-Executive Directors

Lady Barbara Judge 52 -

Sir Richard Sykes 103 -

Barry Wilson 52 -

–––––– ––––––

Total 717 -

–––––– ––––––

Year ended 31December 2013£000’s

Year ended 31December 2012£000’s

Report Of The Independent Auditors

24

We have audited the financial statements of NetScientific plcfor the year ended 31 December 2013 which comprises theConsolidated Statement of Comprehensive Income, theConsolidated Statement of Financial Position, theConsolidated Statement of Changes in Equity, theConsolidated Statement of Cash Flows, the Parent CompanyBalance Sheet and the related notes. The financial reportingframework that has been applied in the preparation of thegroup’s financial statements is applicable law andInternational Financial Reporting Standards (IFRSs) asadopted by the European Union. The financial reportingframework that has also been applied in the preparation ofthe parent company financial statements is applicable lawand United Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice) in accordance withthe provisions of the Companies Act 2006.

This report is made solely to the company's members, as abody, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertakenso that we might state to the company's members thosematters we are required to state to them in an auditor’s reportand for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility to anyoneother than the company and the company's members as abody, for our audit work, for this report, or for the opinionswe have formed.

Respective responsibilities of Directors and Auditors As explained more fully in the statement of Directors'responsibilities, the Directors are responsible for thepreparation of the financial statements and for being satisfiedthat they give a true and fair view. Our responsibility is toaudit and express an opinion on the financial statements inaccordance with applicable law and International Standardson Auditing (UK and Ireland). Those standards require us tocomply with the Auditing Practices Board's (APB’s) EthicalStandards for Auditors.

Scope of the audit of the financial statements A description of the scope of an audit of financial statementsis provided on the FRC’s website atwww.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion:

• the financial statements give a true and fair view of thestate of the group's and the parent company's affairs asat 31 December 2013 and of the group's loss for the yearthen ended;

• the groups financial statements have been properlyprepared in accordance with IFRSs as adopted by theEuropean Union;

• the parent company’s financial statements have beenproperly prepared in accordance with United KingdomGenerally Accepted Accounting Practice; and

• the financial statements have been prepared inaccordance with the requirements of the Companies Act2006.

Opinion on other matter prescribed by the Companies Act2006 In our opinion the information given in the Report of theDirectors and the Strategic Report for the financial year forwhich the financial statements are prepared is consistent withthe financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matterswhere the Companies Act 2006 requires us to report to youif, in our opinion:

• adequate accounting records have not been kept by theparent company, or returns adequate for our audit havenot been received from branches not visited by us; or

• the parent company financial statements are not inagreement with the accounting records and returns; or

• certain disclosures of Directors' remuneration specified bylaw are not made; or

• we have not received all the information and explanationswe require for our audit.

Paul Anthony (Senior Statutory Auditor) for and on behalf of BDO LLP, statutory auditor SouthamptonUnited Kingdom

18 March 2014

BDO LLP is a limited liability partnership registered in England andWales (with registered number OC305127)

Consolidated Statement Of Comprehensive Income

25

Other operating income 177,667 16,000

Research and development expenditure 762,624 622,134Share based payment 717,234 -Reorganisation and AIM listing costs 1,123,508 -Other administrative expenses 1,900,242 801,025

Total administrative expenses (4,503,608) (1,423,159)–––––––––– ––––––––––

Loss from operations 7 (4,325,941) (1,407,159)

Share of loss of joint ventures 12 (27,832) (13,623)–––––––––– ––––––––––

(4,353,773) (1,420,782)

Finance income 5 37,566 -

Finance expense 6 (35,210) (111,344)–––––––––– ––––––––––

Loss before taxation (4,351,417) (1,532,126)

Taxation 8 14,153 -–––––––––– ––––––––––

Loss for the year (4,337,264) (1,532,126)–––––––––– ––––––––––

Other comprehensive incomeExchange 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: 9 (0.21) (704.53)

–––––––––– ––––––––––

All other comprehensive income will be reclassified to retained earnings on the ultimate sale of any relevant subsidiary company.

Note 2013£

2012£

Consolidated Statement Of Financial Position

26

ASSETSNON-CURRENT ASSETSIntangible assets 10 638,492 13,474Property, plant and equipment 11 67,101 11,748Investment in joint ventures 12 69,872 37,350Available for sale investments 12 2 2

–––––––––– ––––––––––

775,467 62,574–––––––––– ––––––––––

CURRENT ASSETSTrade and other receivables 13 325,651 221,626Cash and cash equivalents 25,546,951 410,788

–––––––––– ––––––––––

25,872,602 632,414–––––––––– ––––––––––

TOTAL ASSETS 26,648,069 694,988–––––––––– ––––––––––

LIABILITIESCURRENT LIABILITIESTrade and other payables 14 (1,113,490) (799,864)Loans and borrowings 15 (3,250) (4,138,800)

–––––––––– ––––––––––

(1,116,740) (4,938,664)–––––––––– ––––––––––

NON CURRENT LIABILITIESTrade and other payables 14 (49,723) -Loans and borrowings 15 (475,109) -Provision for deferred tax 16 (106,965) -

–––––––––– –––––––––

TOTAL LIABILITIES (1,748,537) (4,938,664)–––––––––– ––––––––––

TOTAL NET ASSETS/(LIABILITIES) 24,899,532 (4,243,676)–––––––––– ––––––––––

ISSUED CAPITAL AND RESERVESATTRIBUTABLE TO THE PARENTCalled up share capital 17 1,795,101 1Share premium account 18 30,844,552 -Capital reserve account 18 236,745 -Foreign exchange reserve 18 150,131 62,754Retained earnings 18 (7,459,726) (4,064,395)

–––––––––– ––––––––––

Equity attributable to the parent 25,566,803 (4,001,640)

Non-controlling interests 19 (667,271) (242,036)–––––––––– ––––––––––

TOTAL EQUITY 24,899,532 (4,243,676)–––––––––– ––––––––––

The financial statements on pages 25 to 49 were approved and authorised for issue by the Board of Directors on 18 March 2014and were signed on its behalf by:

Peter ThomsChief Financial Officer

Note 2013£

2012£

Consolidated Statement Of Changes In Equity

27

£ £ £ £ £ £ £ £

Balance at 1 January 2012 (2,641,250) (24,675) - 1 - (2,665,924) (133,054) (2,798,978)

Comprehensive incomeLoss 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 incomeLoss for the period (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 - - - 1,795,100 32,279,998 34,075,098 - 34,075,098

Transaction costs in respect of share issues - - - - (1,435,446) (1,435,446) - (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–––––– –––––– –––––– –––––– –––––– –––––– –––––– ––––––

Total equity

Non-controllinginterest

Totalattributableto equityholders ofparent

Sharepremium

Share Capital

CapitalReserve

ForeignExchangeReserve

RetainedEarningsReserve

Consolidated Statement Of Cash Flows

28

Cash flows from operating activitiesLoss before tax (4,351,417) (1,532,126)Adjustments for:Depreciation 5,508 2,888Amortisation 1,616 1,256Share of loss of joint ventures 27,832 13,623Impairment of unlisted investments - 2Share 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 activitiesInvestment 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 activitiesProceeds from loan 428,457 861,475Proceeds from share issue 29,912,750 -Share issue cost (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 410,788 830,211Exchange losses on cash and cash equivalents (2,444) (26,093)

–––––––––––– ––––––––––––Cash and cash equivalents at end of year 25,546,951 410,788

–––––––––––– ––––––––––––

2013£

2012£

Notes To The Combined Financial Information

1 ACCOUNTING POLICIES

Basis of preparation

NetScientific plc was incorporated on 12 April 2012. On 8 March 2013 NetScientific plc acquired the entire issued share capitalof NetScientific UK Limited and NetScientific America, Inc. via a share for share exchange with Cyrus Holdings Limited. Theacquisitions of the subsidiaries are deemed to be ‘combinations under common control’ as ultimate control before and after theacquisition was the same. As a result, these transactions are outside the scope of IFRS 3 “Business combinations” and havebeen 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 currentperiod and comparative results comprise the results of the subsidiary companies and NetScientific plc, as if the Group has beenin existence throughout the entire period.

The Group financial information has been prepared in accordance with International Financial Reporting Standards as adoptedby the European Union that are effective for accounting periods beginning on or after 1 January 2013. The principal accountingpolicies adopted in the preparation of the financial information are set out below. The policies have been consistently appliedto all the years presented, unless otherwise stated.

First time adoptionThe NetScientific Group is preparing its financial information in accordance with EU adopted IFRSs for the first time and hasconsequently applied IFRS 1. The NetScientific Group was not previously reported under UK GAAP as it was not in existencetherefore no reconciliation to UK GAAP figures has been reported as no material first time adoption exemptions taken.

New standards, interpretations and amendments not yet effectiveIASB and IFRIC have issued the following relevant standards and interpretations with an effective date after the date of thesefinancial statements:

29

Standard or interpretation

Title Effective from

IFRS 2 Amendments for Annual Improvements to IFRSs 2010-2012 Cycle 1 July 2014(definition of vesting condition)

IFRS 3 Amendments for Annual Improvements to IFRSs 2010-2012 Cycle 1 July 2014(contingent consideration)

IFRS 3 Amendments for Annual Improvements to IFRSs 2011-2013 Cycle 1 July 2014(scope exception for joint ventures)

IFRS 9 Deferral of mandatory effective date of IFRS 9 and 1 January 2015amendments to transition disclosures

IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, Applies when IFRS IFRS 7 and IAS 39) issues, implementing additional disclosures 9 is applied(and consequential amendments) resulting from the introduction of the hedge accounting chapter in IFRS 9

IFRS 10 Consolidated Financial Statements 1 January 2014IFRS 11 Joint Arrangements 1 January 2014IFRS 12 Disclosure of Interests in Other Entities 1 January 2014IFRS 13 Amendments for Annual Improvements to IFRSs 2010-2012 Basis conclusion

Cycle (short-term receivables and payables) only

Notes To The Consolidated Financial Statements

30

1 ACCOUNTING POLICIES continued

The Directors do not anticipate that the adoption of the remaining standards and interpretations will have a material impact on theGroup’s financial statements in the period of initial application.

The effective dates stated here are those given in the original IASB/IFRIC standards and interpretations. As the Group prepares itsfinancial statements in accordance with IFRS as adopted by the European Union, the application of new standards and interpretationswill be subject to their having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this willresult in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts theGroup’s discretion to early adopt standards.

The Group financial information is presented in sterling.

Basis of consolidationThe consolidated financial statements incorporate the financial statements of the company and its subsidiaries made up to the reportingdate. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity soas to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the statement offinancial position, the acquiree’s identifiable assets and liabilities are initially recognised at their fair values at acquisition date. Theresults of acquired entities are included in the consolidated statement of comprehensive income from the date at which control isobtained and are deconsolidated from the date control ceases.

Standard or interpretation

Title Effective from

IFRS 13 Amendments for Annual Improvements to IFRSs 2011-2013 Cycle 1 July 2014(scope of portfolio exception in paragraph 52)

IFRS 14 IFRS 14 Regulatory Deferral Accounts issued 1 January 2016IAS 1 Amendments for Annual Improvements 2009-2011 Cycle 1 July 2013

(comparative information)IAS 16 Amendments for Annual Improvements to IFRSs 2010-2012 Cycle 1 July 2014

(proportionate restatement of accumulated depreciation under the revaluation method)

IAS 24 Amendments for Annual Improvements to IFRSs 2010-2012 Cycle 1 July 2014(entities providing key management personnel services)

IAS 27 Amendments for Investment Entities 1 January 2014IAS 36 Amendments for Recoverable Amount Disclosures for Non-Financial Assets 1 January 2014IAS 38 Amendments for Annual Improvements to IFRSs 2010-2012 Cycle 1 July 2014

(proportionate restatement of accumulated depreciation under the revaluation method)

IAS 40 Amendments for Annual Improvements to IFRSs 2011-2013 Cycle (interrelationship between IFRS 3 and IAS 40) 1 July 2014



Joint venturesJointly controlled entities are included in the financial statements using the equity method, with the accounts reflecting the Group'sinvestment in the joint venture less its share of its losses.

The Group has a contractual liability to provide $500,000 of funding to the joint venture to enable it to meet its obligations asthey fall due and therefore the Group will recognise its share of the losses of the joint venture up to $500,000.

GrantsGrants for research and development activities are recognised as income over the periods in which the relevant research anddevelopment costs are to be incurred and expensed to the income statement. Grants for future research and development costsare recorded as deferred income. Grant income is included in other operating income.

Grants where the Group purchase, construct or otherwise acquire capital expenditure are recognised as deferred revenue in theconsolidated statements of financial position and credited to the profit and loss on a systematic and rational basis over the usefullives of the related assets.

GoodwillPurchased goodwill (representing the excess of fair value of the consideration given over the fair value of the separable netassets acquired) arising on consolidation in respect of acquisitions is capitalised. The carrying amount is subject to an impairmentreview by the Directors at the end of each accounting period in accordance with International Accounting Standard 36,Impairment of Assets.

Intangible assetsAcquired patents and licenses are included at cost and amortised to administrative expenses on a straight-line basis over theiruseful economic life of 10 years.

The carrying values of intangible assets are reviewed for impairment if events or changes in circumstances indicate that thecarrying value may not be recoverable.

Acquired in process research and development (IPRD) is an indefinite-lived asset, subject to impairment testing until the completionor abandonment of the related project. No further costs will be capitalised in respect of this IPRD unless it meets the criteria forresearch and development capitalisation as set out below. As per IFRS 3, once the incremental research and development iscompleted, the carrying value of the acquired IPRD is reclassified as a finite-lived asset and amortised over its useful life.

Property, plant and equipmentProperty, plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairments losses.Depreciation is provided at the following annual rates in order to write off the cost of each asset, less its estimated residual value,over its estimated useful life.

Property, plant and equipment - between 20% and 50% per annum on a straight line basis or 33.33% on a reducing balancebasis.

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicatethat the carrying value may not be recoverable.

Financial instrumentsFinancial assets and financial liabilities are recognised in the Group's combined statement of financial position when the Groupbecomes a party to the contractual provisions of the instrument.

31



Financial assetsLoans and receivablesThese assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and aresubsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of thecounterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under theterms receivable; the amount of such a provision being the difference between the net carrying amount and the present value ofthe future expected cash flows associated with the impaired receivable.

The Group's loans and receivables comprise trade and other receivables, other financial assets and cash and cash equivalentsin the consolidated statement of financial position. Cash and cash equivalents includes cash in hand and deposits held at callwith banks.

Available-for-saleNon-derivative financial assets not included in the above categories are classified as available-for-sale and comprise principallythe investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair valuewith changes in fair value, other than those arising due to exchange rate fluctuations and interest calculated using the effectiveinterest rate, recognised in other comprehensive income and accumulated in the available-for-sale reserve.

Where there is a significant or prolonged decline in the fair value of an available for sale financial asset (which constitutesobjective evidence of impairment), the full amount of the impairment, including any amount previously recognised in othercomprehensive income, is recognised in profit or loss.

Purchases and sales of available for sale financial assets are recognised on settlement date with any change in fair value betweentrade date and settlement date being recognised in the available-for-sale reserve.

On sale, the cumulative gain or loss recognised in other comprehensive income is reclassified from the available-for-sale reserveto profit or loss.

Financial liabilitiesThe Group classifies its financial liabilities as financial liabilities held at amortised cost. Trade payables are initially recognisedat fair value and subsequently carried at amortised cost using the effective interest rate method.

TaxationIncome tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws thathave been enacted or substantively enacted at the reporting date. Research and development tax credits are included as anincome tax credit under current assets.

Deferred tax balances are recognised in respect of all temporary differences that have originated but not reversed by the reportingdate except for differences arising on:

• investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable thatthe difference could not reverse in the foreseeable future; and

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transactionaffects neither accounting nor taxable profit.

32



The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reportingdate and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Recognition of deferred tax assets is restricted to those instances where it is probable that a taxable profit will be availableagainst which the temporary difference can be utilised. Deferred tax balances are not discounted.

Research and developmentAll on-going research expenditure is currently expensed in the period in which it is incurred. Due to the uncertainties inherentin the development of the Group's products, the criteria for development costs to be recognised as an asset, as set out in IAS 38"Intangible Assets", are not met until it is probable that future economic benefit will flow to the Group. The Group currently hasno such qualifying expenditure.

Foreign currenciesTransactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetaryassets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rateruling at that date.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when thetransactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of thoseoperations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening netassets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income andaccumulated in the foreign exchange reserve.

Non-controlling interestsThe total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controllinginterest in proportion to their relative ownership interests.

Share based paymentFor all grants of share options, the fair value as at the date of the grant is calculated using an appropriate option pricing model,taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense isadjusted to reflect the actual number of share options that are likely to vest, except for options with market based conditionswhere the likelihood of vesting is factored into the fair value attributed to those options. The expense is recognised over thevesting period of the option. The credit for any charge is taken to equity.

2. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

The Directors make judgements and estimates concerning the future. Estimates and judgements are continually evaluated andare based on historical experience and other factors, such as expectations of future events, and are believed to be reasonableunder the circumstances. Actual results could differ from these estimates.

The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in thefinancial statements are discussed below.

Calculation and impairment of goodwillThe amount of goodwill initially recognised is dependent on the allocation of the purchase price to the fair value of the purchaseprice to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of theassets and liabilities is based to a considerable extent on the use of professional advisors in conjunction with management’sjudgement. Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortised whereasindefinite lived intangible assets including goodwill are not amortised and could result in differing amortisation charges basedon the allocation to indefinite lived and finite lived intangible assets. Due to the early stage nature of the acquired entity,determining whether goodwill is impaired has been based on the progress of the core research programme since acquisitionand based on the progress made management are of the opinion that no impairment is required.

33


2. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS continued

Indefinite lived intangible assets Acquired in process research and development (IPRD) is an indefinite-lived asset. The value of such acquired assets is based toa considerable extent on the use of professional advisers in conjunction with management judgement and is the subject ofimpairment reviews until the completion or abandonment of the related project. Management takes into consideration therequirements of IFRS 3, once the incremental research and development is completed, the carrying value of the acquired IPRDwill be required to be reclassified as a finite-lived asset and amortised over its useful life.

Share based paymentThe critical accounting estimates, assumptions and judgements underpinning the valuation of the option are disclosed in Note26.

3. SEGMENTAL REPORTING

IFRS 8 “operating segments” defines operating segments as those activities of an entity about which separate financial informationis available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocationof resources. The Chief Operating Decision Maker has been identified as the Board of Directors. The Directors are of the opinionthat under IFRS 8 the Group has only one operating segment, being the development of intellectual property. The Board ofDirectors assess the performance of the operating segment using financial information which is measured and presented in amanner consistent with that in the financial statements.

4. EMPLOYEES AND DIRECTORS

Wages and salaries

Social security costs

Share based payment expense

For the purposes of presentation in the Consolidated Statement of Comprehensive Income, remuneration costs of £117,926(2012 £Nil) are included in research and development expenditure, costs of £19,000 (2012 £Nil) were included inreorganisation and aim listing costs and £1,451,004 (2012 £94,387) are included in other administrative expenses.

The average monthly number of employees during the year including Executive Directors was as follows:

Administrative

Management

The Directors represent the key management personnel and details of their remuneration are given in the Directors’ RemunerationReport.

In respect of Directors’ remuneration, the disclosures required by Schedule 5 to Large and Medium-sized Companies and Groups(Accounts and Reports) Regulations 2008 are included in the detailed disclosures in the audited section of the RemunerationReport on page 23, which are ascribed as forming part of these financial statements.

34

2013 2012£ £

795,810 90,294

74,886 4,093

717,234 -

1,587,930 94,387

2013 2012£ £

1 1

12 4

13 5


5. FINANCE INCOME

Bank interest receivable

6. FINANCE EXPENSE

Interest payable on loans

7. LOSS FROM OPERATIONS

The loss before income tax is stated after charging:

Depreciation – owned assets

Patents and licences amortisation

Fees payable to the company’s auditor for the audit of the company’s financial statements Audit of the company’s subsidiaries pursuant to legislation

Fees payable to the company’s auditors for other services:Corporate finance servicesTax compliance servicesTax advisory servicesAudit related servicesOther non-audit related services

In addition to the above fees charged by the auditors further corporate finance fees of £39,181 were charged to the sharepremium account for the year.

8. TAXATION

Analysis of tax credit

Adjustment in respect of prior period

Factors affecting the tax expenseThe tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:

Loss before taxation

35

2013 2012£ £

37,566 -

2013 2012£ £

35,210 111,344

2013 2012£ £

(14,153) -

2013 2012£ £

(4,351,417) (1,532,126)

2013 2012£ £

5,508 2,888

1,616 1,256

25,000 -

15,000 -

101,167 -24,023 -2,500 -

15,000 -3,050 -


8. TAXATION continued

Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 23.25% (2012 – 24.5%)

Effects of:Expenses not deductible for tax purposesDepreciation in excess/(deficit) of capital allowances Utilisation of brought forward trading lossesUnutilised tax losses arising in the period(Over)/under provision in respect of previous yearsResearch and development adjustment

Current tax credit

Tax effects relating to effects of other comprehensive income

Exchange differences on translation of foreign operations

There are tax losses available to carry forward against future trading profits of approximately £3,214,203 (31 December 2012- £1,755,175). A deferred tax asset in respect of these losses of approximately £674,983 (31 December 2012 - £403,690)has not been recognised in the accounts, as the full utilisation of these losses in the foreseeable future is uncertain.

9. LOSS PER ORDINARY SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted averagenumber of ordinary shares outstanding during the period.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of alldilutive potential ordinary shares.

Loss attributable to equity holders of the companyWeighted average number of ordinary shares in issue

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculatingthe diluted earnings per ordinary share are identical to those used for basic earnings per share as whilst parent company hasshare options in existence they are not dilutive as their exercise would have the effect of reducing the loss per ordinary share.

36

2013 2012£ £

(1,011,704) (375,371)

482,369 3,211825 (483)(72) -

430,345 372,643(14,153) -98,237 -

(14,153) -

12 monthsended 31December 2013

12 monthsended 31December2012

£ £

(4,112,565) (1,423,145)19,558,458 2,020

Gross Tax Net£ £ £

87,377 - 87,377

87,377 - 87,377


10. INTANGIBLE ASSETS

37

In Process Research andDevelopment

Goodwill Patents and licences

Total

£ £ £ £COSTAt 1 January 2012 - - 11,512 11,512Additions - - 3,718 3,718At 31 December 2012 - - 15,230 15,230Additions 359,220 267,414 - 626,634At 31 December 2013 359,220 267,414 15,230 641,864

AMORTISATIONAt 1 January 2012 - - 500 500Amortisation - - 1,256 1,256At 31 December 2012 - - 1,756 1,756Amortisation - - 1,616 1,616At 31 December 2013 - - 3,372 3,372

NET BOOK VALUEAt 31 December 2013 359,220 267,414 11,858 638,492

At 31 December 2012 - - 13,474 13,474

At 1 January 2012 - - 11,012 11,012

During the period the Group acquired a controlling interest in QLIDA Diagnostics, Inc., through the conversion of loans into equity.Provisional fair values have been calculated, resulting in the recognition of goodwill and in process research and development (“IPRD”).

Further details in respect of the acquisition are included in Note 12


38

11. PROPERTY, PLANT AND EQUIPMENT Plant and machinery

£

COSTAt 1 January 2012 13,652Additions 3,162At 31 December 2012 16,814Additions 60,861At 31 December 2013 77,675

DEPRECIATIONAt 1 January 2012 2,178Charge for the year 2,888At 31 December 2012 5,066Charge for the year 5,508At 31 December 2013 10,574

NET BOOK VALUEAt 31 December 2013 67,101

At 31 December 2012 11,748

At 1 January 2012 6,474

12. INVESTMENTS Interestin jointVenture

Available for saleinvestments

Total

£ £ £

COSTAt 1 January 2012 199,251 4 199,255Additions 18,269 - 18,269Write down of investments - (2) (2)At 31 December 2012 217,520 2 217,522Additions 60,354 - 60,354At 31 December 2013 277,874 2 277,876

SHARE OF RETAINED PROFITSAt 1 January 2012 (166,547) - (166,547)Retained loss for the year (13,623) - (13,623)At 31 December 2012 (180,170) - (180,170)Retained loss for the year (27,832) - (27,832)At 31 December 2013 (208,002) - (208,002)

TOTALAt 31 December 2013 69,872 2 69,874

At 31 December 2012 37,350 2 37,352

At 1 January 2012 32,704 4 37,708


39

12. INVESTMENTS continued

Interest in joint ventureThe Group has a 50% interest in a jointly controlled entity, Butterfly BioSciences LLC, which has been included in the consolidatedaccounts using the equity method. The Group has agreed to invest up to $500,000 into the joint venture to help fund its researchadventures and therefore is recognising its share of the losses up to $500,000.

Set out below is the summarised financial information for Butterfly Biosciences LLC which is accounted for using the equity method.

Summarised Statement of Financial Position

CURRENTCurrent liabilities Net liabilities

Summarised statement of comprehensive income

Administrative expensesLoss before taxTaxationLoss for the yearOther comprehensive incomeTotal comprehensive income

Reconciliation of summarised financial information

Opening net assets 1 JanuaryLoss for the periodOther comprehensive incomeClosing net assetsInterest in joint venture @ 50%GoodwillCarrying value of share of losses

2013£

As at 31 December2012£

(416,004) (360,340)(416,004) (360,340)

2013£


(55,664) (27,246)(55,664) (27,246)

- -(55,664) (27,246)

- -(55,664) (27,246)

2013£


(360,340) (333,094)(55,664) (27,246)

- -(416,004) (360,340)(208,002) (180,170)

- -(208,002) (180,170)


Subsidiary undertakingThe following were subsidiary undertakings and all have been included in the combined financial information from their dateof incorporation or in the case of QLIDA Diagnostics, Inc. its date of acquisition.

NetScientific UK Limited UK 100% 100%Glucosense Diagnostics Limited * UK 100% 100%Watermass Limited * UK 100% 100%Nearfield Communications Limited * UK 100% 100%RoboScientific Limited * UK 80% 100%

NetScientific America, Inc. USA 100% 100%Advanced Cardiotech, Inc. USA 87.5% 87.5%Advanced BioSensors, Inc.* USA 87.5% 87.5%CardioScientific, Inc. * USA 100% 100%Glycotest, Inc. USA 87.5% 87.5%

Vortex BioSciences, Inc. USA 95% 94%Wanda, Inc. USA 57% 57%QLIDA Diagnostics, Inc. USA 51% -MOFTek, Inc. USA 100% 100%MOF Technologies Limited * UK 51% 60%

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

Options

Some of the entities above have issued options which if exercised would dilute the Group's shareholding. The following optionswere in existence at year end:

• Options have been granted by Vortex BioSciences, Inc., which if exercised would dilute the company’s shareholding by 19%.• Options have been granted by Glycotest, Inc., which if exercised would dilute the company’s shareholding by 14%.

Acquisition of subsidiary

QLIDA Diagnostics, Inc. was incorporated in November 2010 and engaged in the development of portable handheld diagnosticstests for life threatening conditions. As such its research complimented the group’s activities. The group held unsecured convertiblepromissory notes through a subsidiary NetScientific America, Inc. On the 25 February 2013 the conversion rights were exercisedresulting in the Group owning 47% of the equity of the company which, in tandem with enhanced voting rights agreed withexisting shareholders, gave the group control of QLIDA Diagnostics, Inc.


40

Country ofIncorporationor registration

Proportion ofownership interestunder common controlAt 31 December 2013

Proportion ofownership interestunder common controlAt 31 December 2012

BookValue£

Adjustment

£

FairValue£


41


Intangible assets - 267,414 267,414Cash and cash equivalents 1,973 - 1,973Trade and other payables (277,869) - (277,869)Deferred tax liability - (106,965) (106,965)Provision for warrants (53,912) - (53,912)NetScientific America, Inc. Loan (25,666) - (25,666)Other loans (185,580) - (185,580)

Total net liabilities (541,054) 160,449 (380,605)

Share of net liabilities acquired by Group at fair value 177,248

Total consideration through conversion of loans into equity 181,972

Goodwill 359,220

Non-controlling interest arising on acquisition 203,357

Goodwill arising on acquisitionGoodwill arose on the acquisition of QLIDA Diagnostics, Inc. because of the consideration paid effectively included amounts inrelation to the benefit of expected synergies, revenue growth and future market development.

None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.

Impact of acquisition on the results of the groupIncluded in the loss for the year is £99,845 attributable from the additional business combination with QLIDA Diagnostics, Inc.No revenue is included in the year in relation to the business combination.

Had the business combination been effected at 1 January 2013, the loss from continuing operations would have been£4,352,596.

The Directors consider their pro-forma numbers to represent an approximate measure of the performance of the combined groupon an annualised basis and to provide a reference point for comparison in the future periods.

13. TRADE AND OTHER RECEIVABLES

Current:Other receivables 86,478 164,822Prepayments and accrued income 220,268 56,804

306,746 221,626

Non current: Prepayments and accrued income 18,905 -

Aggregate amounts 325,651 221,626

2013£

2012£

14. TRADE AND OTHER PAYABLES

Current:Trade creditors 645,646 780,517Social security and other taxes 1,003 10,250Other creditors 466,841 9,097

1,113,490 799,864

Non current: Other creditors 49,723 -

Aggregate amounts 1,163,213 799,864


42

2013£

2012£


43

2013£

2012£

15. LOANS AND BORROWINGS

Total falling due within one year 3,250 4,138,800

Total falling due after more than one year 475,109 -

Total 478,359 4,138,800

The maturity of the loans are as follows:

Amounts falling due within one year on demand 3,250 4,138,800

Amounts falling due between one and two years - -

Amounts falling due between two and five years 201,095 -

Amounts falling due in more than five years 274,014 -

Financial liabilities and Borrowings represent:

Convertible loan notes of £200,000 plus accrued interest to 31 December 2013 of £1,096 issued to a UK subsidiary company.Interest is payable on any outstanding loan notes thirty six months after execution of the convertible loan note instrument at arate of 10% per annum. but is only payable subject to certain conditions being met and the company agreeing to the redemptionof the loan. All outstanding convertible loan notes not redeemed shall convert into fully paid senior shares at a conversion pricebased on the value of future fundraising or fair value at the date of conversion. The date of conversion is determined by eventsset out in the convertible loan note instrument, but in any event will be no later than thirty six months after conversion of theconvertible loan note instrument.

Borrowings falling due after more than five years represent the sterling equivalent of loans totalling $400,000, plus accruedinterest, which has been obtained by a US subsidiary in accordance with a Seed Capital Funding Agreement effective September2013 (replacing previous agreements). Interest of 8% arises on the loans and the maturity date for these loans is 31 March2019. The agreement includes the option for the loans to be converted into equity interests in the US subsidiary, providingcertain criteria are met. Concurrently with the execution of the agreement the US subsidiary was required to issue a warrant infavour of the lender, although the company has the option to repurchase the warrants at any time prior to their exercise and thelender can require settlement of the warrants in cash after 5 years.

In the opinion of the Directors, materially these constitute debt instruments and therefore no element has been reallocated asequity.

2013£

2012£

16. PROVISION FOR DEFERRED TAX

Deferred Tax (106,965) -

16. PROVISION FOR DEFERRED TAX continued

Balance as at 1 January 2012 -Provision on acquired intangibles 106,965

Balance as at 31 December 2013 106,965

The provision represents the deferred tax on the capitalisation of the In Process Research and Development (IPRD) arising on theacquisition of QLIDA Diagnostics, Inc. (see note 12)

17. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number: Class:1 Ordinary £1 - 135,902,020 Ordinary 5p 1,795,101 -

1,795,101 1

On 8 March 2013 the company issued 500,100 £1 Ordinary shares at par and 357,500 £1 Ordinary shares for £10 pershare. The shares were issued in exchange for a combination of cash outlay and setting off against debts owed by the companyas referred to more fully in note 23.

On 10 May 2013 the whole of the issued £1 Ordinary shares were sub-divided to 5p Ordinary shares.

On 16 September 2013 the company was listed on AIM issuing 18,750,000 5p Ordinary shares at a price of £1.60 per share.

On 16 September 2013 options were granted over 2,513,140 5p Ordinary shares. As at 31 December 2013 there has beenno movement on share options and the un-issued, options are equivalent to 7% of the issued share capital. Details of the shareoptions and terms can be found in note 26. The group has no legal or constructive obligation to repurchase or settle the optionsin cash.

18. CAPITAL AND RESERVES

Share CapitalShare capital represents the nominal value of shares issued.

Share Premium AccountShare premium represents amounts subscribed for share capital in excess of nominal value less the related costs of shares issued.

Capital Reserve AccountCapital reserve represents the waiver of loan interest by Quantadyne Limited and Zahra Holding Limited companies on conversionof the loans provided to the group into ordinary shares.

Foreign exchange reserveThe foreign exchange reserve is used to record exchange differences arising from the translation of the financial statements offoreign subsidiaries of the group.

2013£

NominalValue

2012£


44

DeferredTax £

Floatingborrowings

£

Total

£

Fixedborrowings

£

Weightedaverageinterest

Weighted averagetime for

which rate isfixed years


45

2013£

2012£

18. CAPITAL AND RESERVES continued

Retained earningsRetained earnings are in deficit and represent cumulative net gains and losses recognised in the consolidated statement ofcomprehensive income adjusted for cumulative share-based payments

19. NON-CONTROLLING INTERESTS

Balance at beginning of year (242,036) (133,054)Share of loss for the year (224,699) (108,982)Non-controlling interest arising on the acquisition of QLIDA Diagnostics, Inc. (203,357) -Increase in subsidiary shareholdings (6,772) -Dilution in subsidiary shareholdings 9,593 -

(667,271) (242,036)

20. FINANCIAL INSTRUMENTS

Currency riskDuring the year under review, the Group was exposed to US dollar exposure as a significant element of its research anddevelopment expenditure is denominated in this currency. The Group holds an element of its cash in US dollars to reduce itsexposure to movements in exchange rates.

The currency and interest rate exposure of the group’s borrowings is shown below.

As at 31 December 2012Sterling 499,999 - 499,999 0.0% 1Sterling 3,424,998 3,424,998 - 3.8%

3,924,997 3,424,998 499,999 3.3%

As at 31 December 2013Sterling 3,250 - 3,250 0.0% 1Sterling 201,095 - 201,095 10.0%US Dollar 274,014 - 274,014 8.0%

478,359 - 478,359 8.8%

Interest rate and currency of cash balances

Floating rate financial assets of £25,546,951 (2012 £410,788) comprises sterling and dollar cash deposits with the bankscurrent accounts. There are no fixed rate financial assets. Interest receivable at 0.4% for the year ended 31 December 2013was £37,566 (2012 £nil).


46

Dollar£

Sterling£

Total£

20 FINANCIAL INSTRUMENTS continued

Currency exposureThe group's currency exposure, ie those exposures arising from transactions, the net currency gains and losses from which willbe recognised in the profit and loss account, is shown below.

Function of currency of group operations Net foreign currency monetary assets/(liabilities)

As at 31 December 2013

Sterling - (24,909) (24,909)Dollar - - -

- (24,909) (24,909)

The exposures comprise the monetary assets and liabilities of the group that are not denominated in the operating or 'functional'currency of the operating unit involved.

Undrawn bank facilitiesThe Group does not have in place any undrawn committed bank borrowing facilities available to it.

Credit riskThe Group follows a risk-averse policy of treasury management. Sterling and US dollar cash balances are held with reputablefinancial institutions to minimise credit risk. The Group's primary treasury objective is to minimise exposure to potential capitallosses whilst at the same time securing prevailing market rates.

Interest rate riskThe Group's cash held at bank is subject to the risk of fluctuating base rates.

Capital risk managementManagement regard the capital structure of the company to consist of all elements of invested capital and non-controllinginterests.

Liquidity RiskThe Group's policy is to maintain adequate cash resources to meet liabilities as they fall due. Cash balances are placed ondeposit for varying periods with reputable banking institutions to ensure there is limited risk of capital loss. The Group does notmaintain an overdraft facility.

21a. CONTINGENT LIABILITIES

There are no contingent liabilities in current and prior period.

21b. CONTINGENT ASSETS

The company has undertaken activities in the field of research and development and the Directors have every expectation of asuccessful claim for receipt of tax credits in relation to costs incurred. However an application has not yet been submitted to HMRevenue & Customs and therefore the amount of tax credits expected to be received in relation to activities to 31 December2013 has not been quantified.


47

2013£

2012£

22. CAPITAL COMMITMENTS

Contracted but not provided for in the financial statements 106,005 -

23. RELATED PARTY DISCLOSURES

F Azima is a Director and shareholder of a UK registered company, Quantadyne Limited. Included in debtors at 31 December2013 is a loan to Quantadyne Limited of £Nil (31/12/2012 - £13,684). The combined statement of comprehensive incomefor the year includes expenditure amounting to £32,000 (31/12/2012 -£10,000), in respect of management fees charged byQuantadyne Limited. No amount remains outstanding at year end (31/12/2012 - £Nil).

Thoms International Limited is a company controlled by the P Thoms family. The combined statement of comprehensive incomefor the year includes expenditure amounting to £11,977 (31/12/2012 - £36,000), in respect of international consultancyservices.

Additionally, under a letter of agreement dated 9 May 2013 between the Company and Thoms International Limited, theCompany paid an additional fee of £100,000 on the successful AIM listing, in respect of international consulting servicesprovided by Thoms International Limited as a consultant to NetScientific UK Limited from March 2011 to 2013. No amountswere outstanding at the year end.

N Heckford is a Director of NetScientific Plc. The combined statement of comprehensive income for the year includes expenditurefor consultancy services amounting to £7,833 (31/12/2012 - £23,500). No amounts were outstanding at the year end(31/12/2012 - £Nil).

D Gough is a Director of NetScientific Plc. The combined statement of comprehensive income for the year includes expenditurefor consultancy services amounting to £12,000 (31/12/2012 - £36,000). No amounts were outstanding at the year end(31/12/2012 - £Nil).

Dr M Boyce–Jacino is a Director of NetScientific Plc. The combined statement of comprehensive income for the year includesexpenditure for consultancy services amounting to £5,083 (31/12/2012 - £15,793). No amounts were outstanding at the yearend (31/12/2012 - £Nil).

H Azima is a close relative of F Azima a Director of NetScientific Plc. The combined statement of comprehensive income for theyear includes expenditure for consultancy services in the USA amounting to £9,149 (31/12/2012 - £9,476). No amounts wereoutstanding at the year end (31/12/2012 - £Nil).

Loans and borrowings include:

Loan of £Nil (31/12/2012 - £499,999), from the former parent undertaking, Cyrus Holdings Limited. No interest was chargedon this loan.

Loans from Mehdi Trust to the group of £Nil ( 31/12/2012 - £1,549,998). F Azima is a beneficiary of this trust. Interest onloans to NetScientfic America, Inc. were charged at 1% above US 3 month Libor rate with a minimum interest of 4%. Intereston loans to NetScientific Limited were charged at 2% above the Bank of England base rate. Interest charged in the year totalled£9,786 (31/12/2012 - £53,886). Cumulative interest creditors included is £Nil (31/12/2012 - £154,571).

Loans from Zahra Holdings Limited of £Nil (31/12/2012 - £1,875,000). F Azima is a beneficiary of this trust. Interest on loansto NetScientific America, Inc. were charged at 1% above US 3 month Libor rate with a minimum interest of 4%. Interest onloans to NetScientific UK Limited were charged at 2% above the Bank of England base rate with a minimum interest of 4%.Interest charged in the year totalled £12,771 (31/12/2012 - £59,231). Cumulative interest creditors included is £Nil(31/12/2012 - £59,231).


23. RELATED PARTY DISCLOSURES continued

In March and May 2013, the Group completed a reorganisation of its corporate structure, which consisted of the following steps

NetScientific America, Inc, a wholly-owned subsidiary of Cyrus Holdings Limited, and the Company entered into an agreementunder which NetScientific America, Inc. agreed to sell all of its interest in each of Wanda, Inc., Vortex BioSciences, Inc., Glycotest,Inc., QLIDA Diagnostics, Inc. and MOFTek, Inc. (collectively, the "US Subsidiaries") to the Company, including all of its equityholdings in each US Subsidiary and debt owed by each US Subsidiary to NetScientific America, Inc. in consideration for theCompany agreeing to assume debt owed by NetScientific America, Inc. to each of the British Virgin Island companies,Quantadyne Limited and Zahra Holdings Limited, and the assignment of all documents, agreements and instruments associatedwith such interest and debt;

NetScientific UK Limited entered into deeds of assignment with the Company and each of Cyrus Holdings Limited, QuantadyneLimited and Zahra Holdings Limited under which NetScientific UK Limited assigned to the Company (and the Company assumed)the obligations of NetScientific UK Limited in respect of sums loaned by each of Cyrus Holdings Limited, Quantadyne Limitedand Zahra Holdings Limited to NetScientific UK Limited;

Quantadyne Limited, Zahra Holdings Limited and the Company entered into a deed of waiver under which Quantadyne Limitedand Zahra Holdings Limited agreed to unconditionally and irrevocably waive any and all of their respective rights to the interestaccrued but unpaid in respect of debts owed by the Company to each of Quantadyne Limited and Zahra Holdings Limited (asa result of the debt assignments described above);

Cyrus Holdings Limited and the Company entered into an agreement under which Cyrus Holdings Limited subscribed for 100Ordinary Shares, the consideration for which Cyrus Holdings Limited transferred its entire shareholding in NetScientific America;

Cyrus Holdings Limited and the Company entered into an agreement under which Cyrus Holdings Limited subscribed for (i) oneOrdinary Share at par, the consideration for which Cyrus Holdings Limited transferred its entire shareholding of NetScientificUK Limited to the Company; (ii) 12,500 Ordinary Shares for cash at par; and (iii) 37,500 Ordinary Shares at par and 46,250Ordinary Shares at £10 per share, the consideration for which Cyrus Holdings Limited agreed to set off against debt owed bythe Company to Cyrus Holdings Limited (as a result of the debt assignments described above), resulting in the extinguishment ofsuch debt;

Quantadyne Limited and the Company entered into an agreement under which Quantadyne Limited subscribed for 100,000Ordinary Shares at par and 71,500 Ordinary Shares at £10 per share, the consideration for which Quantadyne Limited agreedto set off against debt owed by the Company to Quantadyne Limited (as a result of the debt assignments described above),resulting in the extinguishment of such debt;

Zahra Holdings Limited and the Company entered into an agreement under which Zahra Holdings Limited subscribed for350,000 Ordinary Shares at par and 239,750 Ordinary Shares at £10 per share, the consideration for which Zahra HoldingsLimited agreed to set off against debt owed by the Company to Zahra Holdings Limited (as a result of the debt assignmentsdescribed above), resulting in the extinguishment of such debt.

24. EVENTS AFTER THE REPORTING PERIOD

Since the 31 December 2013, the company has acquired a majority stake in ProAxsis Ltd a newly formed company involved inthe development of a range of novel medical diagnostic tests to enable routine monitoring of patients with Cystic Fibrosis andother chronic respiratory conditions such as Chronic Obstructive Pulmonary Disease. The company invested £100,000 for a57% equity holding in ProAxsis Ltd.

48

Forfeited during the period

Exercised during

the period

Granted during the period

Outstanding at 1st January 2013

Grant date Outstanding at 31st December

2013

Expirydate

Weighted averageexercise price


49

25. ULTIMATE CONTROLLING PARTY

The Directors believe there to be no ultimate controlling party.

26. SHARE-BASED PAYMENTS

Details of the share options outstanding during the year are as follows

16-09-13 - 2,513,140 - - 2,513,140 16-09-23 160.00p

The Group operates a share option scheme for certain Directors and employees of the Group. Options are exercisable at aprice defined by the individual option agreement. The vesting period varies according to the individual employment contract. Ifthe options remain unexercised during the specified period from the date of grant, the options expire. Options are generallyforfeited if the employee leaves the Group before the options vest; however this is at the discretion of the board.

As at 31st December 2013 a total of 2,513,140 subscription rights had been issued to Directors and employees and remainedoutstanding. Members of the Executive Board hold share options as disclosed in the Directors and remuneration reports.

The weighted average fair value of the share options during the year is 59.64p. Options were priced using the Black Scholesmodel. Where relevant the expected life used in the model has been adjusted based on management's best estimate for theeffect of non-transferability, exercise restrictions and behavioural considerations. Most of the options were granted on Admissionto trading on AIM. The Directors were therefore unable to base their expected volatility rate on the historical performance ofthe Company’s share price. The expected volatility was based on the average volatility of similar companies at a comparablestage in their development.

The fair values are determined by using the Black-Scholes option pricing model and the assumptions used at the fair valuemeasurement date are shown in the table below:

Weighted Average share price at grant £1.60Weighted average exercise price £1.60Expected dividend yield -Expected volatility 40%Expected life 5 yearsWeighted average risk free interest rate 1.66%Fair value at grant date 59.64p

Parent Company Financial Position

50

Note 2013£

2012£FIXED ASSETS

Tangible assets 5 1,658 -Investments 6 501 -

2,159 -

Debtors amounts falling due after more than one year 7 1,207,511 -1,207,511 -

CURRENT ASSETSDebtors amounts falling due within one year 7 9,388,153 1Cash at bank 18,291,771 -

27,679,924 1

CREDITORSAmounts falling due within one year 8 (159,095) -Net Current Assets 27,520,829 1

Total assets less current liabilities 28,730,499 1

CAPITAL AND RESERVESCalled up share capital 9 1,795,101 1Share premium account 9 30,844,552 -Capital redemption account 10 236,745 -Profit and loss account 10 (4,145,899) -Shareholders’ Funds 11 28,730,499 1

The financial statements on pages 50 to 56 were approved and authorised for issue by the Board of Directors on 18 March 2014and signed on its behalf by:

Peter ThomsChief Financial Officer

Notes To The Parent Company Financial Statements

1. BASIS OF PREPARATION

NetScientific plc’s financial statements have been prepared under the historical cost convention and in accordance with UKGenerally Accepted Accounting Practice (‘UK GAAP’).

As permitted by FRS1 ‘Cash Flow Statements’, no cash flow statement for the Company has been included on the grounds thatthe Group includes the Company in its own published consolidated financial statements. The Company has taken advantage ofthe exemptions in FRS8 ‘Related Party Disclosures’ not to disclose related party transactions with wholly-owned subsidiaries.

2. ACCOUNTING POLICIES

The following accounting policies have been applied consistently in dealing with items which are considered material to theCompany’s financial statements.

RevenueTurnover represents management fees charged to subsidiary undertakings, excluding Value Added Tax.

Investment in Subsidiary UndertakingsInvestments in subsidiary undertakings where the Company has control are stated at cost less any provisions for impairment.Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so asto obtain benefits from its activities.

Tangible Fixed AssetsDepreciation is provided at the following annual rates in order to write off each asset over its estimated useful life:

Fixtures, fitting and equipment - 33.3% reducing balance

Share based paymentFor all grants of share options, the fair value as at the date of the grant is calculated using an appropriate option pricingmodel, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expenseis adjusted to reflect the actual number of share options that are likely to vest, except for options with market based conditionswhere the likelihood of vesting is factored into the fair value attributed to those options. The expense is recognised over thevesting period of the option. The credit for any charge is taken to equity

TaxationThe charge for taxation is based on the loss for the period and takes into account taxation deferred.

Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted or substantivelyenacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date,except that the recognition of deferred tax assets is limited to the extent that the company anticipates making sufficient profits inthe future to absorb the reversal of the underlying timing differences.

Deferred tax balances are not discounted.

3. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY

As permitted by Section 408 of the Companies Act 2006, the Company’s profit and loss account has not been included in thesefinancial statements. The loss dealt with in the financial statements of the Parent Company for the year ended 31 December2013 was £4,863,133 (2012 - £Nil).

51

2013£

2012£

4. DIRECTORS REMUNERATION

Directors’ remuneration 498,387 -498,387 -

Information regarding the highest paid Director is as follows:

Emoluments 120,000 -120,000 -


52

£5. TANGIBLE FIXED ASSETS

COSTAt 1 January 2013 -Additions 1,774At 31 December 2013 1,774

DEPRECIATIONAt 1 January 2013 -Charge for the year 116At 31 December 2013 116

NET BOOK VALUEAt 31 December 2013 1,658

At 31 December 2012 -

£6. INVESTMENTS

COSTAt 1 January 2013 -Additions 501At 31 December 2013 501

NET BOOK VALUEAt 31 December 2013 501

At 31 December2012 -



At 31 December 2013, the Company has an investment in the following subsidiary undertakings:

Held directly by NetScientific Plc

NetScientific UK Limited UK 100% IP Commerialisation

Advanced Cardiotech, Inc. USA 87.5% Healthcare diagnostics research

and product developmentGlycotest, Inc. USA 87.5% Healthcare diagnostics research

and product developmentNetScientific America, Inc. USA 100% Holding company

Vortex BioSciences, Inc. USA 95% Healthcare diagnostics research

and product developmentWanda, Inc. USA 57% Healthcare diagnostics research

and product developmentQLIDA Diagnostics, Inc. USA 51% Healthcare diagnostics research

and product developmentMOFTek, Inc. USA 100% Holding company

Held via subsidiary companies

Watermass Limited UK 100% CleanTech research

and product development

Nearfield Communications Limited UK 100% Security research


Roboscientific Limited UK 80% Healthcare diagnostics research


Advanced BioSensors, Inc. USA 87.5% Healthcare diagnostics research


Cardio-Scientific, Inc. USA 100% Healthcare diagnostics research

and product developmentMOF Technologies Limited UK 51% CleanTech research

and product developmentGlucosense Diagnostics Limited UK 100% Healthcare diagnostics research


53

Country ofincorporation or registration

Proportion of ownership interestunder common control at 31 December 2013

Nature of business

Name

2013£

2012£


54


The following dormant companies are also held via subsidiaries

EcoScience Limited UK 100% DormantDexmead Systems Limited UK 100% DormantNetScientific Technologies, Inc. USA 100% DormantNetScientific Solutions Limited Hong Kong 51% Dormant

For all undertakings listed above, the country of operation is the same as its country of incorporation or registration.

OptionsSome of the entities above have issued options which if exercised would dilute the Company’s shareholding. The followingoptions were in existence at the year end:

• Options have been granted by Vortex BioSciences, Inc., which if exercised would dilute the company’s shareholding by 19%.• Options have been granted by Glycotest, Inc., which if exercised would dilute the company’s shareholding by 14%.

7. DEBTORS

Amounts falling due within one year:Amounts owed by group undertaking 9,253,178 1Other taxes and social security 103,514 -Prepayments and accrued income 31,461 -

9,388,153 1

Amounts falling due after more than one year:Other debtors 1,207,511 -

Aggregate amounts 10,595,664 1

2013£

2012£

2013£

2012£


55

8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Trade creditors 35,069 -Amounts due to group undertaking 401 -Accruals and deferred income 123,625 -

159,095 -

9. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number: Class: Nominal Value1 Ordinary £1 - 135,902,020 Ordinary 5p 1,795,101 -

1,795,101 1

On 8 March 2013 the company issued 500,100 £1 Ordinary shares at par and 357,500 £1 Ordinary shares for £10 pershare.

On 10 May 2013 the whole of the issued £1 Ordinary shares were sub-divided to 5p Ordinary shares.

On 16 September 2013 the company was listed on AIM issuing 18,750,000 5p Ordinary shares at a price of £1.60 per share.

On 16 September 2013 options were granted over 2,513,140 5p Ordinary shares. As at 31 December 2013 there has beenno movement on share options and the un-issued, options are equivalent to 7% of the issued share capital. Details of the shareoptions and terms can be found in Note 26 the Group accounts.

The group has no legal or constructive obligation to repurchase or settle the options in cash.

Fully paid ordinary shares

Balance at 1 January 2013 1 1 -Shares issued during the year 35,902,019 1,795,100 32,279,998Share issue cost - - (1,435,446)

Balance at 31 December 2013 35,902,020 1,795,101 30,844,552

ShareCapital

Number of Shares

Share Premium


56

10. RESERVES SharePremium

£

RetainedEarnings£

CapitalRedemption

£

Total

£

At 1 January 2013 - - - -Loss for the year (4,863,133) - - (4,863,133)Shares issued during the year - 32,279,998 - 32,279,998Share issue costs - (1,435,446) - (1,435,446)Waiver of loan interest - - 236,745 236,745Share based payments 717,234 - - 717,234

At 31 December 2013 (4,145,899) 30,844,552 236,745 26,935,398

11. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS 2013£

2012£

Loss for the financial year (4,863,133) -Shares issued during the year 34,075,098 1Share issue costs (1,435,446) -Capital contribution 236,745 -Share based payments 717,234 -Net addition to shareholders’ funds 28,730,498 1Opening shareholders’ funds 1 -

Closing shareholders’ funds 28,730,499 1

12. RELATED PARTY TRANSACTIONS Amount due (to) / fromas at

31 December2013 £

Amount dueas at

31 December2012£

RoboScientific Limited 30,053 -Vortex BioSciences, Inc. 341,564 -Glycotest, Inc. 133,347 -Qlida Diagnostics, Inc. 1,384 -Wanda, Inc. 1,832,681 -NetScientific Solutions Ltd (401) -

The following management fees were charged by NetScientific Plc to fellow non wholly owned subsidiary undertakings.

2013 £

2012 £

Vortex BioSciences, Inc. 91,159 -Glycotest, Inc. 69,433 -Wanda, Inc. 128,995 -

Other related parties have been disclosed in note 23 to the consolidated financial statements.

Company Information

DIRECTORS: Sir R SykesF AzimaDr M T Boyce-JacinoD A GoughP Y ThomsN C HeckfordB W WilsonLady B Judge

SECRETARY: E Schneider

REGISTERED OFFICE: Anglo House, Bell Lane Office Village Bell LaneAmershamBuckinghamshireHP6 6FA

REGISTERED NUMBER: 08026888 (England and Wales)

AUDITORS: BDO LLPArcadia HouseMaritime WalkOcean VillageSouthamptonHampshireSO14 3TL

LAWYERS: Simmons & Simmons LLPCityPointOne Ropemaker StreetLondonEC2Y 9SS

Morgan Lewis & Bockius LLP1701 Market StreetPhiladelphiaPennsylvaniaUSA19103-2921

PATENT AND TRADE MARK ATTORNEYS: Marks & Clerk LLP62-68 Hills RoadCambridgeCB2 1LA

57

NetScientific PlcSt. John’s Innovation Centre, Cambridge CB4 0WS

Tel: 020 3290 8877 • [email protected]

annual report - netscientific · wanda, inc. netscientific’s telemedicine device company is...

Documents