TIDMNANO
RNS Number : 8577O
Nanoco Group PLC
03 February 2023
FOR IMMEDIATE RELEASE 3 February 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (596/2014/EU) AS THE
SAME HAS BEEN RETAINED IN UK LAW AS AMED BY THE MARKET ABUSE
(AMMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR").
Nanoco Group PLC
( " Nanoco", the " Group", or the " Company")
Definitive Agreements Signed with Samsung for $150m Litigation
Settlement
A transformative outcome for Nanoco
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 the
final agreements (collectively, the "Settlement") have been signed
to settle the litigation with Samsung on a no fault basis for the
alleged infringement of the Group's IP.
The Group has separately published a trading update this morning
for its half year ended 31 January 2023.
Litigation settlement overview
-- Litigation concluded with $150m cash settlement to be paid in
two equal tranches (by 5 March 2023 and by 3 February 2024)
-- Nanoco retain over $90m net proceeds after litigation costs
-- Settlement structured as a sale of non-core patents and a
global, perpetual, fully paid up licence agreement
-- Settlement ends all global litigation with Samsung; Nanoco's
IP fully validated by the legal process
-- Nanoco retains full freedom to operate in all markets,
territories, products and material types
Chris Richards, Chairman of Nanoco Group plc, said:
"This has been a long and hard battle for Nanoco. The outcome is
remarkable, given the relative scale of Nanoco and Samsung. The
settlement value is almost three times our own low case damages
model; settling now avoids the risks associated with further
litigation and the adverse impact from the time value of money in
an appeals process that would have extended for years. Even more
importantly, it validates Nanoco's core IP, which we will continue
to defend vigorously.
"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."
Brian Tenner, Chief Executive Officer of Nanoco Group plc,
said:
"Today marks the start of a new chapter for Nanoco. We have
successfully validated our core IP against one of the world's
biggest electronics companies, who were advised by one of the most
expensive law firms in the world. Others operating in our space
should take note.
"We therefore remain vigilant to other potential infringement
activity, as well as opportunities to pro-actively deliver new
licence agreements. The confirmation of the validity of our IP is
already encouraging more commercial interest in Nanoco as a
supplier of leading edge nano-materials.
"We have also generated a transformational amount of value for
our stakeholders, whilst providing the funding for investment in
the business. We have done this while transforming Nanoco and
positioning ourselves for significant organic growth in the near
term. Most importantly, we have a foundation on which to focus on
the organic business as we continue to build on the significant
positive momentum achieved in the last few years."
Settlement agreements
The Settlement is structured as two agreements:
-- IP Licence agreement: This global, perpetual, fully paid up
licence agreement encapsulates any past or future royalties that
would have been paid / come due to be paid.
-- IP Sale agreement: This encapsulates the divestment of a
number of non-core patents from Nanoco to Samsung, with Nanoco
receiving a fully paid up, perpetual and global licence on the
divested patents. Neither of the two patents due to be presented at
trial were included in the sale.
For clarity, Nanoco retains complete freedom to operate in all
of its markets, territories, products and material types.
Nanoco will receive gross proceeds of $150 million (GBP125
million [1] ), $65m for the IP Licence agreement and $85m for the
IP Sale agreement, payable in two equal tranches by 5 March 2023
and by 3 February 2024. Nanoco expect to retain over 60% (over
$90m) of this sum, after deducting legal and litigation funding
costs. Legal and litigation funding costs have first claim on the
proceeds. There will be a tax liability but this is anticipated to
be modest.
The Settlement ends all global litigation between the Parties
(including Germany and China) , and Samsung will receive a fully
paid up, perpetual, global licence that runs until the expiration
of Nanoco's current individual patents.
Expected accounting impact of the settlement
The notes below set out a summary of the expected accounting
treatment of the two agreements in the Group's Financial
Statements, subject to confirmation during the statutory audit of
the Group's FY23 Annual Report and Accounts.
The sale of IP will be accounted for as a profit on disposal of
intangible assets in accordance with the requirements of IAS 38
Intangible Assets. This is expected to generate a net profit on
disposal of approximately GBP70.0m based on the proceeds noted
above less the current net book value of the patents at the point
of sale. This profit on disposal will be recognised in the FY23
Financial Statements.
The income from the IP Licence agreement will be accounted for
in accordance with the requirements of IFRS15 Revenue from
Contracts with Customers. It is expected that the revenue from the
IP contract will be recognised over the average estimated remaining
life of the existing entire IP portfolio after the sale of IP noted
above, even though the cash will be received in the two tranches
noted earlier (a revenue recognition period of approximately nine
years). The patents that would have been presented if the trial had
gone ahead had remaining lives of two and a half years and five
years respectively.
The cash and receivable due for the IP licence will give rise to
a significant deferred income balance of approximately GBP54.0m in
the Group's Financial Statements that will be recognised as revenue
in line with the nine year period noted above. Revenue from the IP
licence in H2 of FY23 is expected to be approximately GBP3.0m and
then GBP6.0m each year thereafter until the deferred income has
been recognised in full.
The costs of the litigation (approximately GBP47.0m) will be
expensed in full in FY23 as a standalone cost reflecting the fact
that the litigation itself has now ceased. There will also be a one
off interest charge of approximately GBP4.7m linked to the Group's
loan notes that were executed in July 2021, based on a successful
conclusion to the Samsung litigation.
The Group's accumulated tax losses will be available to offset
any tax impacts from the above subject to final tax computations,
normal UK rules restricting the utilisation of losses in any one
year, and any overseas withholding tax. Depending on forecasts of
the possible utilisation of tax losses in future financial years, a
deferred tax asset may be recognised in the Group's Financial
Statements. It is expected that net cash tax payable in respect of
FY23 will be modest. The final tax position will also depend on any
losses in the organic business in the year (excluding the Samsung
agreements) as well as any beneficial impact of both the UK's
R&D tax credit and Patent Box regimes.
The Group expects to have net negative distributable reserves in
a number of subsidiary companies and in the parent company itself
after the impact of the transactions noted above. The Group will
therefore review options for its future capital structure prior to
the receipt of the second tranche of proceeds around February 2024
in order to facilitate a possible return of funds to
shareholders.
For further information, please contact:
Nanoco Group PLC :
Brian Tenner, CEO +44 (0)1928 761 404
Liam Gray, CFO & Company Secretary
Peel Hunt (Joint Corporate Broker):
Paul Gillam +44 (0) 20 7418 8900
James Smith
Turner Pope Investments (Joint Corporate Broker):
Andrew Thacker +44 (0) 20 3657 0050
James Pope
MHP : +44 (0) 203 128 8570
Reg Hoare
Pete Lambie
nanoco@mhpgroup.com
- Ends -
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.
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(TM) 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(R)
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.
visit: www.nanocotechnologies.com .
Litigation Funder - GLS Capital LLC
The litigation against Samsung was funded by GLS Capital LLC of
Chicago and the GLS team was led Adam Gill.
GLS Capital is a commercial litigation finance firm with more
than $500 million under management. Founded by litigation finance
industry veterans, GLS focuses on investments in complex commercial
litigation and arbitration, patent infringement litigation, and
life sciences litigation. GLS prides itself on decision-making
speed and the pace of its investment process. Armed with a broad
investment mandate and fully discretionary capital, all investment
decisions are made internally by the GLS investment committee,
which provides certainty and transparency for counterparties
throughout the investment lifecycle. More information about GLS
Capital can be found at www.glscap.com .
Strategic Adviser
Epicentre Law, PC
Ron Epstein has been an adviser to Nanoco on strategic IP issues
for a number of years. He supported Nanoco throughout the
litigation against Samsung as the Strategic Adviser to the Board
and as a member of the Litigation Sub-Committee.
With more than 30 years of experience in developing, optimizing,
and transacting Intellectual Property (IP) asset portfolios, Ron is
recognized as a global leader in helping patent owners maximize the
value of their IP. As a market-maker, Ron has been instrumental in
defining the category of patent brokers in the emerging patent
marketplace, delivering over $1 billion of value from the sale or
licensing of patents in over 150 transactions. As a thought leader,
Ron has contributed to the public discourse, consulted with
companies and law firms on complex IP transactions, and has helped
to develop many who are now leaders in their own right in the IP
monetization industry. More information about Epicentre Law can be
found at http://www.epicenterip.com/.
Litigation Advisers
Caldwell Cassady Curry - Trial Counsel ('CCC')
The trial team at CCC was led by Bradley Caldwell, a trial
lawyer who focuses on patent infringement and complex commercial
litigation.
Caldwell Cassady & Curry is a U.S.-based law firm
specializing in high-stakes patent infringement lawsuits and
complex business disputes. Caldwell Cassady & Curry's track
record includes cases involving a diverse array of leading
technologies. The firm has won billions of dollars in verdicts and
settlements against some of the largest companies in the world.
More information about CCC can be found at
https://caldwellcc.com/.
Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo ("Mintz") - Lead
Legal Advisers
Michael Newman at Mintz led the litigation team in prosecuting
the US suit as well as co-ordinating actions in overseas
jurisdictions. Mr Newman was also personally instrumental in all
five of Nanoco's patents and all 47 claims being validated by the
Patent Trial and Appeal Board.
Mintz Levin has a proven track-record of successfully
representing patent owners of all sizes and across all industries
in disputes before the Patent Trial and Appeal Board, the
International Trade Commission, and the federal district courts.
Mintz also advises clients on a wide range of other strategic
patent matters, including licensing, portfolio management and
valuation, and patent prosecution. More information about Mintz can
be found at https://www.mintz.com/.
Ward, Smith & Hill PLLC - Local Counsel
Our local counsel team in Texas was led by Johnny Ward.
Ward, Smith & Hill is a trial law firm with a long history
of representing clients throughout the Lone Star State. Our office
in Longview supports the firm's emphasis on cases tried in every
division of the U.S. District Court for the Eastern District of
Texas and in state courts throughout the East Texas region. Ward,
Smith & Hill is well-known among law firms throughout the U.S.
based on our work together in high-stakes trials involving
intellectual property claims, oil and gas disputes, business
litigation matters, breach of contract, and serious personal
injuries. Our attorneys have tried more than 350 cases with
impressive results. Our team is made up of seasoned, ethical
attorneys who provide clients with proven courtroom track records,
including AV-rated lawyers, two former federal judges, and two
attorneys Certified by the Texas Board of Legal Specialization.
More information about Ward, Smith & Hill can be found at
https://wsfirm.com/.
MHP - Litigation and Financial PR advisers
Reg Hoare
Pete Lambie
Christian Harte
[1] Using FX rate of $1.20 / GBP1.00 throughout this document,
the estimated average FX rate during H1 FY23 - actual rates in
financial statements will vary depending on which financial
statement any figures appear in and movements in FX rates.
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END
MSCFIFIDFRIVIIV
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