Nanoco Regulatory News (NANO)

20 June 2023

NANOCO GROUP PLC

("Nanoco", the "Company" or the "Group")

Posting of Circular in relation to

Proposed Capital Reduction Facilitating Future Returns to Shareholders

Notice of General Meeting

Nanoco Group plc (LSE: NANO), a world leader in the development and manufacture of cadmium-free quantum dots and other specific nanomaterials emanating from its technology platform, announces that it will today post a Circular setting out details of a Proposed Capital Reduction to create distributable reserves in order to facilitate future returns to Shareholders. The Circular will also contain the Notice of General Meeting to be held on 7 July 2023.

Highlights of the Circular:

· The Company is proposing to undertake a Capital Reduction in order to facilitate the return of capital to Shareholders. The Company is currently restricted from returning capital to its Shareholders as it does not have distributable reserves.

· The Board intends to initiate a return of between £33 million and £40 million (or approximately 10 pence to 12 pence per share) using the second tranche of the proceeds of the Samsung litigation ($75 million) which is expected to be received during February 2024. No final decision has yet been taken as to the method of any such return of capital.

· Nanoco intends to retain approximately £20 million of cash (following the return to shareholders) to invest in R&D and commercial activities, a proactive IP licensing programme, payment of debt obligations, and to provide working capital through to the self-financing position that is expected to be achieved during 2025.

· The Board is confident that the near term opportunities for commercial production of sensing materials, together with the current interest in the Group's display materials following the successful IP litigation and the growing display market for CFQD® cadmium free quantum dots, fully merit the allocation of funds noted above.

Christopher Richards, Non-Executive Chairman of Nanoco, said:

"The Proposals in relation to a Capital Reduction and the proposed return to Shareholders are consistent with our stated intention to balance the investment needs of Nanoco's growing organic business whilst delivering a material return of capital to Shareholders following the Samsung litigation.

"The Board considers the Resolutions to cancel the Company's share premium account and capital redemption reserve to be in the best interests of the Company and its Shareholders as a whole and the Board unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting."

- Ends -

A copy of the Circular will be published on the Company's website later today at www.nanocotechnologies.com.

This summary should be read in conjunction with the full text of the Circular. Capitalised terms used but not defined in this announcement will have the same meaning given to them in the Circular.

The person responsible for arranging for the release of this announcement on behalf of Nanoco is Liam Gray, Chief Financial Officer.

MAR

The information contained within this announcement is considered by the Company to contain inside information for the purposes of UK MAR. Upon the publication of this announcement via a Regulatory Information Service, this inside information will be considered to be in the public domain.

FORWARD LOOKING STATEMENTS

This announcement (including information incorporated by reference in this announcement) and other information published by Nanoco may contain statements about Nanoco that are or may be deemed to be forward looking statements. Such statements are prospective in nature. All statements other than historical statements of facts may be forward looking statements. Without limitation, statements containing the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or "considers" or other similar words may be forward looking statements.

Forward looking statements inherently contain risks and uncertainties as they relate to events or circumstances in the future. Important factors such as business or economic cycles, the terms and conditions of Nanoco's financing arrangements, tax rates, or increased competition may cause Nanoco's actual financial results, performance or achievements to differ materially from any forward looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. Nanoco disclaims any obligation to update any forward looking or other statements contained herein, except as required by applicable law.

EXTRACTS FROM THE CIRCULAR

Expected Timetable of Principal Events

Publication of this document 20 June 2023

Latest time and date for receipt of Forms of Proxy for theGeneral Meeting 9:00 a.m. on 5 July 2023

General Meeting 9:00 a.m. on 7 July 2023

Expected date of initial directions hearing of the Court 10 July 2023

Expected date of Court Hearing to confirm the Capital Reduction 18 July 2023

Expected effective date for the Capital Reduction 19 July 2023

Background to, and reasons for, the Capital Reduction

Review of addressable markets reaffirms the commercial opportunity

As announced on 3 February 2023, and following the successful conclusion of the IP litigation, the Company made the following statement: "In deciding the allocation of the net proceeds, the Board will balance any investment needs of Nanoco's growing organic business with a firm intention to deliver a material return of capital to shareholders."

The Board has recently completed a review of the addressable sensing and display markets for the Group's unique and IP protected nano-materials. The review assessed multiple compelling opportunities for the use of funds within the commercial business, including a licensing programme for the Group's now validated IP.

The Board recognizes that the adoption of nano-material technology has taken longer than expected for both Nanoco and its competitors and has been challenging. However, the Board is encouraged by customers' feedback that Nanoco's materials are superior to others in the market. This position is strongly reinforced by the recent licensing of Nanoco's technology by Samsung. Other nano-material companies have failed to generate a net positive lifetime return on capital, sometimes resulting in the distressed sale of their assets. By contrast, following the litigation settlement, Nanoco has generated a net positive cash return compared to the total amount of equity capital raised in its history.

IP licensing programme opportunity

In addition, the validation of Nanoco's IP provides an opportunity to build a licensing programme to leverage further value. The Group has identified a number of potentially infringing third parties and has created a team to pursue them, where economically viable, and early stage activity is already underway.

The Board notes that the customary model for third party IP licensing companies often requires the surrender of full or partial ownership rights of IP, as well as control of any licensing activity or litigation in return for an approximate 50% share of any net proceeds. If such a model had been in place for the recent IP litigation involving Samsung, the Board estimates the Group's net cash receipt would have been less than $60 million on a pre-tax basis, compared to the approximately $90 million actually received and to be received. This economic analysis makes clear the potential additional value that can be retained by a self-funded licensing programme whilst retaining ownership and control of the IP assets within the Group.

Use of litigation proceeds for investment

Given the substantial achievements of Nanoco to date, the Board intends to continue investing in R&D and commercial activities, through to the self-financing position that is expected to be delivered during 2025. The Board therefore intends to retain approximately £20 million of cash (following the return of capital set out below) to invest as follows:

· Funding the Group's commercial business activities until they become self-financing (expected in 2025) along with a number of promising investments in R&D and capital equipment, whilst accelerating the development of new generation sensing materials, and delivering valuable device capability.

· Self-financing the IP licensing programme as set out above.

· Paying off the Group's current debt facilities (approximately £5.0 million) to become debt-free and self-funded.

· The Group will also maintain a modest cash buffer for working capital and to mitigate the risk of unforeseen events.

The Board is confident that the near term opportunities for commercial production of sensing materials, together with the current interest in the Group's display materials following the IP litigation and the growing display market for CFQD® cadmium free quantum dots, fully merit the allocation of funds noted above.

Use of litigation proceeds for return of capital

The second tranche of litigation proceeds is expected to be received during February 2024. Taking into account the proposed investments noted above, the Board is proposing to return between 65% and 75% of the second tranche of net proceeds to Shareholders, subject to no material change in circumstances ahead of that time and after allowing for Korean withholding tax and the payment of the Group's current debt obligations. Using the current $USD / £GBP exchange rate of approximately $1.25 / £1.00, this will equate to a return of capital of between £33 million and £40 million (or approximately 10 pence to 12 pence per share (including vested options)). The return of capital is expected to commence shortly after the receipt of the second tranche of litigation proceeds.

If the Group's prospects improve further or the self-financing point arises earlier than 2025, the Board will consider further returns of capital in line with developing an appropriate dividend policy for a profitable and cash generative business.

The Board is currently examining the most tax efficient method of making the return of capital and options include, but are not limited to, dividends, tender offer, or a share buyback programme.

The Capital Reduction proposal

The Company is currently restricted from returning cash to its Shareholders as it does not have distributable reserves so cannot currently either pay a dividend or buy-back shares. The Board is therefore proposing to undertake a Capital Reduction in order to facilitate the return of cash to Shareholders.

Under the Act, a company may, with the sanction of a special resolution passed by its shareholders and confirmation of the Court, reduce or cancel its share capital, share premium account, capital redemption reserve and other reserves. It may then apply the sums resulting from such reduction to its distributable reserves. These sums may then be treated as distributable for the purposes of making future returns to Shareholders.

The Company currently has:

• the Share Premium Account standing to the credit of £121,145,010.91; and

• the Capital Redemption Reserve standing to the credit of £4,402,245.79.

The Act requires that if a company issues shares at a premium to the nominal value of those shares for cash or otherwise, a sum equal to the aggregate amount of or value of the premiums must be transferred to the company's share premium account. A share premium account can only be used in very limited circumstances. The Company intends to reduce the Share Premium Account in full.

The Company currently has a Capital Redemption Reserve which arose as a result of the off-market purchase of deferred shares on 4 May 2004 and their subsequent cancellation. The Company plans to reduce the Capital Redemption Reserve in full.

The Share Premium Account and the Capital Redemption Reserve are statutory reserves in respect of which the Court has the power to sanction their reduction or cancellation.

The Capital Reduction, if approved by the Court and when it becomes effective, will have the effect of creating distributable reserves and provide the Company, subject to the financial performance of the Company and the Act, with the ability to make distributions of profits by way of share buy-back or dividend in cash. The Capital Reduction would create additional distributable reserves to the value of £125,547,256.70.

In the event that any of the return of capital to Shareholders is by means of a buy-back of Ordinary Shares, the Company will either cancel those shares or transfer them to the Company's Employee Benefit Trust to meet its obligations in respect of outstanding vested and not yet vested Deferred Bonus Plan Options and vested and likely to vest Long Term Incentive Plan Options.

The Capital Reduction

In addition to the approval by Shareholders of the Resolutions, the Capital Reduction requires the approval of the Court. Accordingly, following the General Meeting, an application will be made to the Court in order to confirm and approve the Capital Reduction.

In providing its approval of the Capital Reduction, the Court may require measures to be put in place for the protection of creditors (including contingent creditors) of the Company whose debts remain outstanding on the relevant date, except in the case of creditors who have consented to the Capital Reduction. Such creditor protection measures may include seeking the consent of the Company's creditors to the Capital Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company or an undertaking to treat as undistributable for the time being certain sums representing the realisation of "hidden value" in the balance sheet as at the Effective Date. It is currently expected that no such measures will be required in view of the fact that the Company's cash balances exceed its total creditors.

It is anticipated that the initial directions hearing in relation to the Capital Reduction will take place on 10 July 2023, with the final Court Hearing taking place on 18 July 2023 and the Capital Reduction becoming effective on the following day, following the necessary registration of the Court Order at Companies House.

There will be no change in the number of Ordinary Shares in issue (or their nominal value) following the implementation of the Capital Reduction and no new share certificates will be issued as a result of the Capital Reduction. The Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The distributable reserves arising on the Capital Reduction will, subject to the discharge of any undertakings required by the Court as explained above, support the Company's ability to pay dividends or buy-back shares should circumstances in the future make it desirable to do so. Shareholders should note that if, for any reason, the Court declines to approve the Capital Reduction, the Capital Reduction will not take place. The Board reserves the right to abandon or to discontinue (in whole or in part) the application to the Court in the event that the Board considers that the terms on which the Capital Reduction would be (or would be likely to be) confirmed by the Court would not be in the best interests of the Company and/or its Shareholders as a whole. The Board has undertaken a thorough and extensive review of the Company's liabilities (including contingent liabilities) and considers that the Company will be able to satisfy the Court that there is no real likelihood that any creditor of the Company would be prejudiced by the Capital Reduction.

General Meeting and Resolutions

The Notice of General Meeting is set out in the Circular.

The General Meeting will take place at The Conference Centre, The Heath Business and Technical Park, Runcorn, WA7 4QX at 9:00 a.m. on 7 July 2023. At the General Meeting, the Resolutions set out in Part III of the Circular will be proposed to Shareholders.

The Resolutions will be passed if 75% or more of the votes cast (in person or by proxy) at the General Meeting are in favour of the Resolutions.

The Resolutions, which are special resolutions, are summarised below:

• Resolution 1 - this is a resolution to approve, subject to confirmation of the Court, the cancellation of the Share Premium Account.

• Resolution 2 - this is a resolution to approve, subject to confirmation of the Court, the cancellation of the Capital Redemption Reserve.

Questions

Any questions should be submitted in advance of the Meeting by emailing such questions to the Company Secretary at LGray@nanocotechnologies.com. Please include in your email: the shareholder's full name, number of shares held and telephone contact details.

For further information, please contact:

Nanoco Group PLC: +44 (0) 1928 761 404

Brian Tenner, CEO

Liam Gray, CFO & Company Secretary

Peel Hunt (Joint Corporate Broker): +44 (0) 20 7418 8900

Paul Gillam

James Smith

Turner Pope Investments (Joint Corporate Broker):

Andrew Thacker +44 (0) 20 3657 0050

James Pope

MHP Communications: +44 (0) 20 3128 8990

Reg Hoare

Matthew Taylor

Christian Harte

nanoco@mhpgroup.com

Notes for editors:

About Nanoco Group plc

Nanoco (LSE: NANO) harnesses the power of nano-materials. Nano-materials are materials with dimensions typically in the range 1 - 100 nm. Nano-materials have a range of useful properties, including optical and electronic. Quantum dots are a subclass of nano-material that have size-dependent optical and electronic properties. The Group produces quantum dots and other nano-materials. Within the sphere of quantum dots, the Group exploits different characteristics of the quantum dots to target different performance criteria that are attractive to specific markets or end-user applications such as the Display, Sensor and Electronics markets. An interesting property of quantum dots is their absorption spectrum. Nanoco's HEATWAVE™ quantum dots can be tuned to absorb light at different wavelengths across the near-infrared spectrum, rendering them useful for applications including image sensors. Another interesting property of quantum dots is photoluminescence: the emission of longer wavelength light upon excitation by light of a shorter wavelength. The colour of light emitted depends on the particle size. Nanoco's CFQD® quantum dots are free of cadmium and other toxic heavy metals, and can be tuned to emit light at different wavelengths across the visible and infrared spectrum, rendering them useful for a wide range of applications including displays, lighting and biological imaging.

Nanoco was founded in 2001 and is headquartered in Runcorn, UK, with a US subsidiary, Nanoco Inc., in Concord, MA. Nanoco continues to build out a world-class, patent-protected IP portfolio generated both by its own innovation engine, as well as through acquisition.

Nanoco is listed on the Main Market of the London Stock Exchange and trades under the ticker symbol NANO. For further information please visit: www.nanocotechnologies.com.