2024 Annual Report and Results

• Fulfilled first ever commercial production orders for two different first generation materials for use in infra-red sensing applications.

• Commenced two-year Joint Development Agreement ("JDA") with ST Microelectronics to optimise the performance of a second generation sensing material. Post year end, this programme has been cancelled by the customer. However, Nanoco will continue to invest resources in this material.

• Commenced two-year JDA with Asian chemical customer to optimise another different second generation sensing material.

• Completed major investment and fit out of new device and analytical testing facility at our Runcorn base in Cheshire, UK.

• All operations accredited to ISO 14001 Environmental Management Systems, a key customer requirement.

• Post year end, we have brought in an experienced CEO, and during the year, appointed two new independent Non-Executives with significant experience in consumer electronics markets.

• Second and final tranche of litigation proceeds (net £58.8 million) received from Samsung after settling last year on a no-fault basis for the alleged infringement of the group's IP, including a net foreign exchange gain of £1.8 million compared to spot rates on the date of receipt.

• Completed tender offer at a 25.1% premium to the closing mid-market price per ordinary share on the day before the tender was announced to return £30.0 million to shareholders following receipt of the second tranche of the litigation proceeds.

• Commenced broker managed market buy-back to return a further £3.0 million to shareholders, completed post year end.

Revenue

£7.9m

+40%

Adjusted EBITDA1

£1.2m

+175%

1 See page 31 for reconciliation.

Billings2

£61.0m

-3%

2 See page 30 for reconciliation.

Cash

£20.3m

+147%

Our core competencies

• We custom design bespoke nanomaterials to exploit emission, absorption and other properties

• Our materials can be used in a wide variety of commercial applications

• Continuous expansion of our portfolio of materials

• Scale up capability
  to move from laboratory to industrial scale

• ISO-certified,low cost in-house production facilities in Runcorn, UK

World-class talent

• At 31 July 2024,
  47 employees, of whom
  10 are inventors

• 13 staff with PhDs

• 4 nationalities of staff: British, German, Indian and Italian

Respected globally

• International partnerships with global players from US to Europe to Asia

• R&D, scale up and twin production facilities all located in Runcorn, UK

• Customers operate in multi-billion dollar markets with a wide range of applications for our materials

Large and defensible IP portfolio QD materials market valued at

1 Source - Infinity Business Insights Global Quantum Dot Market, Forecast to 2030.

002 Nanoco Group plc  -  Annual Report and Accounts 2024

Significant manufacturing scale

500m+

devices per annum can be enabled through our production capacity

SWIR imaging

$2.9bn

addressable market by c.20301

• Consumer electronics
• Automotive applications
• Internet of Things

In the visible region, the emissive properties of QDs have revolutionised the display industry. The efficiency and nature of quantum dots leads to ultra-pure colour emission. This leads to enhanced display and lighting applications.

Quantum dots can both emit and absorb very pure light, the latter of which can be exploited for sensors. Traditionally, very expensive InGaAs sensors have been used. QDs can be combined with cheap silicon CMOS image sensors to extend the spectral range of silicon. In the NIR, applications include facial recognition and night vision.

Beyond the NIR, by selecting the correct size of quantum dots, the spectral range of CMOS image sensors can be extended into the SWIR at a much lower cost than InGaAs detectors. Potential applications in this region are wide ranging, with the ability to see through water vapour and fog enabling LiDAR, while skin penetration in the SWIR is being explored for security applications such as anti-spoofing, as well as the development

of novel optical diagnostic techniques.

Sensing

Yole Intelligence forecasts growth in SWIR imaging from $322 million in 2022 to $2.9 billion in 2028. This is expected to be driven by emerging markets in consumer electronics and automotive.

The CMOS imaging sensor market is forecast to increase from revenues of $21.3 billion in 2022 to $28.8 billion in 2028.

Display

Infinity business insights estimates the quantum dot display market was valued at $3.2 billion in 2022 and is projected to reach $13.1 billion by 2030, at a CAGR of 19.9%.

$13.1bn

Quantum dot display market forecast for 2030

Summary

• Fulfilled first ever commercial production orders for two different first generation materials for use in infra-red sensing applications.

• Commenced two-year Joint Development Agreements ("JDA") with the Asian chemical customer to optimise the performance of second generation sensing materials.

• Completed fit out of new device and analytical testing facility at our Runcorn base in Cheshire, UK.

• Second and final tranche of litigation proceeds (net £58.8 million) received from Samsung, including a net foreign exchange gain of £1.8 million compared to spot rates on the date of translation.

• Completed £30.0 million tender offer. Started £3 million buy-back.

Post year end

• Completed £3 million broker managed buy-back.

• Post-year-endrestructure underway following contract termination by European customer.

• Outlined new strategy to minimise costs, divest the group's operating business and return surplus cash to shareholders.

• Appointed Dmitry Shashkov as Chief Executive Officer to lead new strategy and deliver value from operating business.

Overview

This has been another important year for Nanoco. We delivered our first ever commercial production orders while commencing significant new development projects with two global electronics players. The receipt of the second tranche of the Samsung litigation proceeds has allowed us to make a significant return of capital to shareholders while retaining sufficient cash to secure the group's medium-term future.

Our European customer's decision after the year end to focus on other larger short-term opportunities was clearly disappointing. This decision came after our technology had been proven and there remain meaningful, albeit smaller, commercial opportunities for Nanoco to pursue directly in the short to medium term. We have announced a reduction in our staffing levels and plans to progressively reduce the size and cost of the Board to match our new activity levels.

Our focus now is on the prudent use of those retained funds to drive forward our efforts to commercialise our technology across a wider range of customers and potential applications in our chosen markets of sensing and display. The expansion of our Runcorn facility to create our new device fab is one such investment that will rapidly accelerate new product development and enhance customer outreach. We are also significantly increasing our future-focused business development spend.

Commercial strategy

The Board has a clear vision for Nanoco's trading business. Underpinned by our IP, we aspire to be the "go-to" manufacturer of quantum dots for a variety of applications and markets. By focusing on our core competencies, we play to our key strengths while ensuring that we understand enough about the full device stacks to be a credible and trusted supply chain partner to some

of the world's largest companies. Our sensing materials can provide significant improvements over existing technologies at a competitive price point while our display materials offer performance and clear environmental benefits over highly toxic, cadmium-based quantum dots. We will continue to add to our IP assets

• the value of which was amply proven in the litigation with Samsung - and to defend it vigorously.

Group strategy to realise value

This commercial strategy goes hand in hand with the Board's strategy for the group to deliver value for shareholders, which was outlined to shareholders on 3 October 2024.

The Board is strongly of the view that there are significant organic commercial applications for Nanoco's technology across a range of markets that will generate value for the business

over time.

We are increasing our pipeline of commercial engagements to a broader range of potential customers."

Group strategy to realise value (continued)

Pursuing these commercial and licence opportunities will require investment and the maintenance of critical technology and commercial capabilities. The Board is confident that the group can succeed in pursuing these commercial objectives with the appropriate investment of money and time. The Board believes that it is now prudent to consider if this growth and investment would be best led in a different ownership setting than allowed for as the sole business of a listed group. The Board has concluded that it is in the group's best interests to appoint advisers to review the options for the group's business and assets, including the potential for a sale of the trading business (including IP).

With this in mind, post period end, we took steps to rationalise the group's cost base. This includes reducing headcount, reducing the cost and size of the Board during FY25 and reducing non-critical operating costs across the group.

Once complete, these measures will reduce the group's annualised cash cost base by £2.6 million (or 34%) on a like-for-like basis compared to the Q4 FY24 run rate, with an associated, one-off, cash restructuring cost of just over £0.1 million.

The Board is determined to deliver shareholder value as rapidly as possible. In light of the plans set out above, the Board believes that it is now appropriate to make plans to return surplus cash to shareholders during the course of FY25.

The timing and size of further returns of surplus cash will be contingent on the completion of the right-sizing noted above, working capital needs and progress on the execution of a potential sale process.

Sustainability and ESG strategy

The Board is committed to the promotion and achievement of environmental, social and governance objectives within the context of a small, listed group. During the year, we achieved the important milestone of ISO 14001 Environmental Management Systems accreditation,

a key criterion from our customers. We are now pursuing accreditation to ISO 45001 Occupational Health and Safety Management Systems. We have also appointed an ESG steering committee represented at Board level by Liam Gray, our CFO.

Governance

We remain committed to the highest standards of corporate governance and we comply with all of the provisions of the UK Corporate Governance Code as outlined on page 57.

Return of capital

We have now completed the promised £33.0 million return of capital to shareholders. This represents just under half of the total equity raised by the Company since its founding in 2001. This has resulted in the cancellation of just over 128 million shares (40% of the equity in issue prior to the return of capital). A further 13.8 million shares are held in the Employee Benefit Trust to meet future obligations arising from the group's employee share plans, mitigating any future dilution.

As outlined above, the Board is determined to deliver shareholder value as rapidly as possible. The timing and size of further returns of surplus cash will be contingent on the completion of the right-sizing noted above, working capital needs, progress on the execution of a potential sale process and the availability of distributable reserves.

Our people

Nanoco benefits from an exceptional group of staff, who have come to Runcorn from many countries to build our exceptional technology capability. Our staff are focused on delivering the focused tasks we set for them. We are repaying that commitment by further investments in learning and development opportunities.

This was recognised when Nanoco was featured in the prestigious Sunday Times Best Places to Work 2024 award in the Small Organisations category.

Board and Annual General Meeting

We have further strengthened the Board with the addition in the second half of the year of two new Independent Non-Executive Directors, Dieter May and Dr Jalal Bagherli. Dieter and Jalal add significant experience in the group's key target markets of industrial and consumer electronics markets.

In July 2024, CEO Brian Tenner advised the Board of his intention to leave the group to pursue new opportunities.

Our industrial capacity positions us well to benefit from any widespread adoption of quantum dots in commercial applications whilst our validated IP creates a strong barrier to entry to the industry."

Brian led the group through a period of significant change that delivered a multi disciplinary team based in Runcorn, a successful outcome to the Samsung litigation and financial stability.

As outlined above, Dmitry Shashkov took up the post of CEO post period end.

And finally, after nine years with Nanoco, I will not be putting myself forward for re-election at the upcoming AGM. Dr Jalal Bagherli has agreed to take over the role of Chairperson from the next AGM.

Requisitioned General Meeting

Ahead of the Annual General Meeting to be held in January 2025, the Company has received a requisition from The Milkwood Fund to appoint two of their representatives to the Nanoco Board of Directors. This general meeting is to be held at 11.30 am on 13 December 2024, and further details are included on the Nanoco website. The Nanoco Board do not believe this is in the interest of all shareholders, and firmly believe shareholders should vote against both resolutions. It is a point of deep frustration that we find ourselves once again having to defend shareholders' cash against an activist acting in their own interests.

Dividends

No dividend is proposed for the year (2023: none).

Outlook

The Board is highly confident in the inherent value and commercial potential of our technology, IP and trading business. A balance needs to be struck, in the interests of all of its shareholders, between supporting this growth and prudence with regard to risk, to preserve cash and to take a highly disciplined approach to investment.

We have concluded that it is in the group's best interests to appoint CDX Advisors to review the options for the group's trading business, IP and other assets, including the potential for a sale of these assets.

While this process will be undertaken at pace, the group's considerable financial resources mean that the trading business will continue to be supported to grow and not compromise its potential.

Dr Christopher Richards

Chairman

21 November 2024

At Nanoco, we are prototyping

QD-based short wavelength infra-red ("SWIR") sensors using tools capable of handling 200 mm wafers. It is currently feasible to fabricate SWIR sensors on ROIC CMOS wafers within one month for prototyping purposes.

QD-based image sensors offer several advantageous and unique features. One key benefit is the customisable wavelength response, achieved by selecting specific quantum dot sizes and material systems. These sensors also support monolithic integration,

as the direct processing onto the CMOS wafer surface eliminates the need for hybridisation, reducing both cost and complexity. Additionally, the pixel dimensions and density are scalable, with the primary limitations being set by the resolution of the underlying CMOS process, allowing for flexible adaptation to various imaging needs.

The device facility is equipped with a range of advanced tools for thin film deposition and device fabrication.

The facility includes thin film deposition systems capable of handling substrates up to 200 mm, allowing for versatile material deposition across various substrate sizes. Among the key tools

is an Atomic Layer Deposition ("ALD") system, which provides atomic-level control for thin film coating, essential for achieving precise, conformal layers in advanced devices. The facility houses both thermal and e-beam evaporators, supporting material deposition for multiple applications, ensuring flexibility in the fabrication process. A specialised glove box, equipped with a spin coater, is designed for quantum dot ("QD") ink formulation, enabling contamination-free processing on substrates up to 200 mm in size. This setup is crucial for handling sensitive materials in a controlled environment. Electrical characterisation

is performed using a manual probe system for IV testing, which is integrated with an LED and heater, enabling detailed IV characterisation of devices under varying thermal and lighting conditions, also accommodating substrates up

to 200 mm. To ensure the quality and uniformity of thin films, the facility is equipped with an advanced ellipsometer, which provides accurate thickness measurements and optical characterisations. This comprehensive setup supports

the development and optimisation of cutting-edge devices, ensuring high quality output across various stages of fabrication.