For release on RNS: 07.00, 13 May 2024

NetScientific plc

("NetScientific" or the "Company")

Investment management mandate with Martlet Capital

and acquisition of its operational business

NetScientific plc (AIM: NSCI), the deep tech and life sciences VC investment group, is pleased to announce that the Company's wholly owned venture capital and corporate finance firm, EMV Capital Limited (EMV Capital), has been appointed as investment manager to Martlet Capital Limited (Martlet Capital) to manage on a discretionary basis its c.£23.3 million portfolio of investments (Martlet Portfolio). In addition, EMV Capital has acquired the operational venture capital business of Martlet Capital (Martlet Business), excluding the Martlet Portfolio, (Transaction).

Background to and rationale for the Transaction

Founded by Robert Marshall, Martlet Capital is a seed stage investor based in Cambridge, providing patient capital to deep tech and life sciences early-stage companies, primarily in the Cambridge tech cluster. The Martlet Portfolio comprises 53 investments with a fair value of c.£23.3 million as at 31 March 2024.

NetScientific and EMV Capital invested in the initial fundraising rounds of Martlet Capital in September and December 2021, and have a current direct stake of 1.38 per cent. (1.49 per cent. voting rights) with an additional 8.2 per cent. (8.88 per cent. voting rights) in capital under advisory (such percentages assuming the conversion of convertible loan notes held by NetScientific and those of capital under advisory).

Having worked closely with Martlet Capital since incorporation, EMV Capital recently identified the opportunity to take on the investment management role for Martlet Capital, using its active management strategy to accelerate and maximise returns for the shareholders of Martlet Capital following exits from the Martlet Portfolio. The existing Martlet Business transfers to a new company within the NetScientific group, Martlet Capital Management Limited (MCM), and the Martlet Portfolio remains under the ownership of Martlet Capital.

The Transaction provides to NetScientific and its group:

·      an additional c.£23.3 million of funds under management, an increase of c.89 per cent. upon the £26.1   million of capital under advisory announced by the Company for the period to 30 June 2023;

·       recurring investment management fees for a minimum period of four years; and

·       carried interest over the Martlet Portfolio.

In addition, the respected Martlet brand provides EMV Capital with further exposure to the deep network of Martlet Capital within the globally renowned Cambridge high-tech cluster, known for its track record of generating high-value technology businesses in the deep tech and life sciences space. EMV Capital intends to work closely with MCM in order to leverage the Martlet brand by means of exploring investor appetite for the proposed launch of the following two proposed new Martlet funds (New Funds), each to be managed by EMV Capital if and when launched:

·     Martlet Capital Fund II (or similar) (MC2): a fund to build on the existing investment policy of Martlet       Capital (noting it is not anticipated that Martlet Capital itself will make material new investments); and

·     Martlet Growth Fund (or similar) (MGF): a fund intended to take up follow-on investment opportunities   emerging from the Martlet Portfolio and others investments, which is anticipated to be established         following the launch of MC2.

Further announcements regarding the New Funds will be made if and when appropriate.

Investment management agreement (IMA)

EMV Capital has entered into an IMA with Martlet Capital in respect of its appointment as discretionary investment manager of the Martlet Portfolio. The IMA is for a minimum term of four years, subject to customary termination provisions for cause.

Under the IMA, EMV Capital is due to receive from Martlet Capital annual management fees, which will be mid-high six figures per annum over the term of the IMA, and carried interest fees based on the increase in fair value of each company within the Marlet Portfolio between the existing fair value and the values received upon each exit.

EMV Capital has also committed to provide Martlet Capital shareholders with preferential investment terms should they wish to invest in MC2 and/or MGF, certain co-investment rights relating to the Martlet Portfolio, and opportunities to participate in other investments advised upon by EMV Capital (including the portfolio companies of NetScientific).

Business transfer agreement

Pursuant to a business transfer agreement (BTA), MCM has acquired as a going concern the Martlet Business, including (inter alia) the existing team managing the Martlet Portfolio, the goodwill, business information, IT systems, business intellectual property, and the Martlet director services company, Martlet Capital Directors Limited.

For the year ended 30 September 2022, the Martlet Business generated no revenues (given the nature of the business) and a loss of approximately £0.97 million. The gross asset value of the assets the subject of the transaction is £0.002 million.

During the term of the IMA and should the New Funds in due course be launched, EMV Capital expects the annual management fees receivable thereunder to offset the ongoing costs associated with the Martlet Business, with anticipated costs savings also identified in connection with a number of synergies arising from the similar operating requirements of EMV Capital and the Martlet Business.

The consideration payable by MCM to Martlet Capital for the Martlet Business comprises an initial cash payment of £2.00 and deferred cash consideration as summarised below:

·     10 per cent. of any net carried interest received by the NetScientific group in respect of investments       made by a public institutional investor in the New Funds within two years of completion of the BTA;

·     20 per cent. of any net carried interest received by the NetScientific group in respect of investments     made by MC2 within two years of completion of the BTA; and

·     20 per cent. of any net carried interest received by the NetScientific group in respect of investments       made by MGF into companies within the Martlet Portfolio.

Dr Ilian Iliev, CEO of NetScientific and MD of EMV Capital, commented:

"This non-dilutive transaction represents an important milestone for the NetScientific group, aligned with our objectives to become a leading deep tech and life sciences venture capital investor in the UK and Europe. Robert and his team have created a respected brand within the world-class Cambridge high-tech investment cluster. This is a logical next step in the deepening relationship between our organisations following our initial investment in 2021.

"This important fund management mandate and acquisition of the Martlet business significantly increases the fee income and critical mass of our funds practice. We also gain 'work in progress' for the potential launch of two further funds under the Martlet brand and a supportive Martlet investor base.

"I thank Robert Marshall and the broader Martlet team for their collaborative approach in executing this carefully balanced transaction. We look forward to working together to deliver returns for Martlet Capital shareholders and EMV Capital and to further leverage and grow the Martlet brand."

The person responsible for arranging the release of this announcement on behalf of the Company is Edward Hooper, General Counsel and Executive Director of the Company.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE UK VERSION OF REGULATION (EU) NO 596/2014 WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

-Ends-

For more information, please contact:

About NetScientific

NetScientific plc (AIM: NSCI) is a deep tech and life sciences VC investment group with an international portfolio of innovative companies.

NetScientific identifies, invests in, and builds high growth companies in the UK and internationally. The company adds value through the proactive management of its portfolio, progressing to key value inflection points, and delivering investment returns through partial or full liquidity events.

NetScientific differentiates itself by employing a capital-efficient investment approach, making judicial use of its balance sheet and syndicating investments through its wholly owned VC subsidiary, EMV Capital. The group secures a mixture of direct equity stakes and carried interest stakes in its portfolio of companies, creating a lean structure that can support a large portfolio.

NetScientific is headquartered in London, United Kingdom, and is admitted to trading on AIM, a market operated by the London Stock Exchange.

www.netscientific.net

About Martlet Capital

Martlet Capital is an early-stage investor based in Cambridge, providing patient capital to deep tech and life sciences B2B startups with high growth potential.

Martlet Capital (and its predecessor entity) has invested in more than 65 start-ups since its launch in 2011. In 2021, Martlet successfully raised additional capital to scale its investment activity.

The team is comprised of experienced investors and entrepreneurs. In addition to capital, Martlet offers support, experience and a network of contacts.

They have achieved several exits from their portfolio, from trade sales to global technology companies and IPOs. Notable exits include Abcam, Cambridge CMOS Sensors, Arachnys, Audio Analytic.

https://martletcap.com/