Nanoco Group (LSE:NANO) — Unaudited Preliminary Results for the year ended 31 July 2023

0:01 Good morning, and welcome to the NANOCO Group PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be dismissed at any time via the Q and A tab situated in the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. Have the company review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Brian Tennant, CEO. Good morning to you, sir.

0:31 Thanks, Alessandro, and welcome everybody to this, follow on presentation. We'll be using the same slide deck, that we used in our preliminary results, original presentation last week, but we will go through it at greater pace to allow us to answer, questions on this call. The original recording of the preliminary results is available on our website if, anyone wants to listen to that more fully. Today, joining me on the call, I have, doctor Nigel Pickett, our CTO and cofounder of NANOCO, and I'm also joined by Liam Gray, our CFO and company secretary. And I'll start with the the highlights of the year just passed on slide four here.

1:18 We achieved all development milestones for all of our customers on every single project and technical project that we undertook during f y twenty three. The biggest output from that is that two sensing materials are now in final validation with, our European customer. Excuse me. During the year, we also settled the, litigation with Samsung, and we netted $90,000,000 for NANOCO. And that $90,000,000 allows a number of things. Firstly, it allows us to make a return of capital in the first quarter of calendar year twenty four, so before the end of March, '24. That, net funding also, creates a secure financial underpin for our commercial business, which, puts us on a much stronger, fitting than we have been for the last, well, twenty years, actually, and allows us to plan for the future and make some, investments, in the business.

2:20 Lastly, but by no means, least, we've also made initial contact with other potential, infringers of our IP. There'll be more on that later. So in summary, we've done a lot in f y twenty three, but there is still a lot to do. Now I go over two pages. I'll say a little bit about the sensing market and the opportunities there. Again, I'll do this faster to save us time. The key slide on here or the the key message on here is in the top right that the current, market for cameras and imagers, you can see roughly at $200,000,000 there in 2022, It's expected to grow to $3,500,000,000 by 2028.

3:05 And the single biggest driver in there actually is growth in cameras, and that is through the forecast adoption of SWIR technology. SWIR is shortwave infrared technology in 2026, in mobile phones. And you can see that, that camera figure of $2,900,000,000 in 2028, 70% of that comes from, consumer mobile devices. It is worth emphasizing though that that is a forecast and it does need, the mobile phone companies to adopt, SWIR technology, in 2026. Though again, our view and certainly of independent market forecasters is that mobile phones will adopt SWIR technology and that, quantum dots are the best placed technology, for that breakthrough adoption.

3:55 Go over the page. What is it that QDs, quantum dots bring to, the sensing market? Well, they increase the efficiency of current silicon sensors to 60%. They also expand significantly the wavelength, a long way out into shortwave infrared that silicon actually can see. Today, silicon effectively becomes blind around a thousand nanometers, whereas out of, fourteen, fifteen hundred, nanometers, quantum dots can allow silicon to see, and those wavelengths are, are much better for for high safety.

4:28 Quantum dots can also be tuned to gaps, if you like, in background, radiation from sunlight. And it's by targeting those gaps, you can get a much clearer signal and picture in your imager or in your camera. Shortwave infrared also needs less laser power, which is a great, selling point for mobile devices. And last and again, but no means least, quantum dots on silicon sensors are priced for consumer applications. If you consider that the alternative in gas technology can cost, you know, $10,000 for one sensor, you realize very, very quickly that that is not going to end up in a consumer device or a household device. And whereas QD, silicon sensors can be up to a thousand times, cheaper, than that.

5:19 And then finally, in terms of what NANOCO differentiates or or brings to the party in terms of QD solutions, We already have multiple validated materials. We also already have multiple tunable, wavelengths of material, and we also have a wide range of proof of concept materials. Our platform technology, I. Those quantum dots that can be tuned for different wavelengths, different applications, different environments, is protected by our now validated IP. And very importantly, for large players in electronics, supply chains, NANOCO already has high volume capacity, in place, in the facility, just over my shoulder.

6:06 And lastly, our quality control systems already operate to the exacting, standards of consumer electronics. Go to the page to slide number eight. Just a quick, explanation of how NANOCO accesses our markets and our customer ecosystem. And today, we have, two very large anchor customers, and we are looking to add to that during the coming year. The European customer has more than 200,000 customers of their own and clearly has the potential to, make high volume demand on the NANOCO. And by high volume demand, what I mean is hundreds of millions of of sensor units. Again, just to to explain, low volume for us would be, something measured in millions of units. So whether that was a headset, an industrial control system, those sorts of things.

7:00 Mid volume would be tens of millions of units, so smartwatches, and those are typically sold in tens of millions of units. And high volume, which is hundreds of millions of units, which again typically is mobile phone handsets. So the European customer has the potential get to high volume, but we've said now for some time and a number of times that we expect the first order first commercial order to be for low volumes, I e, measured in millions of units, not tens or hundreds of millions of units.

7:34 Our Asian customer is almost the same size as the European customer. They've got more than 50,000 customers. And, again, their the potential from them is for mid, volume type orders. However, we also know that our Asian customer is, active with the other major player in QD CMOS sensors, referred to here as QD Player two. And that company themselves, again, have more than 200,000, customers and has the, potential for for high volume demand. So, the summary here is the two major players in QDC sensors. NANOCO already is effectively directly or indirectly active, with with with with both.

8:22 And as I said earlier, we already have significant installed production capacity so that we can, very quickly move to high volume demand, when it arises. Then go over the page, just a little bit of a reminder on background for the display market and quantum dots in display. If you look at the top right chart there, the gray part of that graph is, flat panel TVs today that do not make use of quantum dots. So, basically, not relevant for for NANOCO. What is relevant is the blue wedge and the slightly pinky wedge. The the pink wedge is Samsung QD TVs and the blue wedge is, QD TVs made by other companies of whom there are around 10 or so.

9:12 You can see on that blue, band if you look at the twenty twenty three point that it's a very, very small volume today. And the truth is the majority of that volume is actually cadmium based TVs. However, what is interesting is that it is expected to grow significantly over time so that by 2030, the total of all QD TVs is expected to be around a third of the, the market. Importantly, today, if you look at the images on the bottom right, specifically the smart watches, the, mobile device, and the headset, there's a lot of interest growing in micro LEDs, I e small screens and applying quantum dots to those. Micro LEDs for large screen TVs are still unbelievably expensive. Samsung have launched, something like a 100 inch TV that is, a $150,000, so you can't expect many of those, to be sold.

10:09 But the,

10:11 yeah, growing interest for micro LED technology and quantum dots in in those smaller devices. We've explained before some of the benefits quantum dots, whether it's the color, whether it's the, clarity of the colors, the range of colors, the fact that it can exist within the existing supply chain, certainly for film, technology. Also, everyone will be familiar with, our quantum dots are are cadmium free. And, actually, the same materials, with, tweaking can be applied either to film or micro LED devices. And critically, our, IP is already validated for mass production. That's the result of the PTAB decision around our technology during the Samsung litigation and then the settlement and license agreement that Samsung took out. I'll now hand you over to Nigel who'll quickly take you through, technology updates and our technology road map. Nigel.

11:09 Thank you, Brian. Just explaining how we work, the technology cycle, with materials. And this is just a slide showing you how we go from initially, you could call it a kind of development stage. This is where we identify a new material. Why would you need a new material? Because it it works better in the device. It makes device quicker. There's either some kind of environmental kind of impact. It it it's better for the environment, or it's kinda cheaper to produce or a combination of those kind of aspects. Once we've identified that, we then make the material and do some kind of proof of concept that it actually works. After that step,

12:00 we move to what we call the optimization phase, and this is where we optimize the properties. So if it's for a a display, we we optimize the optical properties. If it's for a a sensor, we optimize the electronic properties and its absorptive properties. And for both of those, we optimize the synthesis process. Once we've done that, we then go into a what we we call the scale up phase, and this is where we why we scale, say, from one gram to 10 grams and then 10 grams to a 100 and then kilos without losing any of these kind of optimization properties that we've managed to to to achieve. Once you've done that, you then go into what we call a validation stage, and this is where the same material for each customer might be slightly different because each customer has certain different requirements to get the material, the quantum dots, into their existing or new devices without changing their existing process very much and also without

13:00 changing what we've done on making materials better. You then go to kind of a product stage. This is whereby, you know, the the whole process is locked down. So even if you one of your scientists come to you and say we've made some improvements, you can't put it into that round of the cycle. As I said, the process is completely locked down, and you work with your customer to get some kind of validation and then they're actually deciding to take up the that technology. This process can take from about four years up to about eight years depending on, you know, the customer and what you're trying to make. If you go over to the next slide, this shows the actual materials that we're working on. You can see we've worked on material quantum dots of lead sulfide and where we are.

13:49 You can see a timeline. We completely validated those materials, a number of different wavelengths. Each wavelength is an actual different material. It has different properties. As you say, you don't wait until the end of the whole cycle for one material to start the cycle of the next material. So you can see we've been working on a tool called indium arsenide.

14:10 Why would you want to make that? As we say, it's works better, has a much better spectral range, and it also doesn't actually contain lead. And then we're also working on material again called indium antimonide, again, because it's got even better properties, and we've started working on that one as well. Nice thing about the indium arsenide and antimonide, these are what's known as three five materials.

14:37 And it it actually the only way to really make large quantities of the material is using some variation of our seeding process. So we think we believe we've got very good protection for making these materials on a large scale. If we go over to the next slide.

14:55 Again, this is what I was saying about materials and why we were making different materials because they have better properties. You can see you get more green ticks as you go down the table. So things like the indium antimonide, indium arsenide. The the wavelength range is much broader, and, also, they have what's known as better electron mobility. This means they can cycle the light into electricity, into a signal much quicker, you and can start using them for things like dynamic purposes, videos, etcetera, and things like that. And, again, you can see on the far right, we've actually established

15:33 a synthesis method for all of these processes. If you go over to the next slide. So this just shows you where we are again with these materials in this development cycle. You can see there's a number of red arrows where I think you've seen something similar in a presentation previously. You can see some of these materials now dropping down the table, kind of cascading down the table as they go from all the way from just a concept through the development and finally down to production. If we go into the next slide. And then just a a brief mention about where we are with the display DOCSIS CFQDs. We we're working very hard on these. And as Brian said, we believe there's gonna be take up more take up of the cadmium free quantum dots.

16:26 Over to the left is conventional kind of television, which Samsung you you kind of use, and then it's moved to what what's a slightly different format whereby you have a blue OLED, and this is like the Samsung TVs, as you say, with dot SIM, and then it's moving to what's known as micro LEDs. There becomes more competition, you could say, as you go over to to the right, but we we believe, and and we're having a lot of interest in using our dots in the micro LEDs as as Brian said in in small devices, things like smartwatches or even mobile phones. So we're we're kind of excited to see this technology being used. And, again, we are continuing to pursue others that we believe may be using our intellectual property.

17:17 I think those are my slides, so I'll hand back over to Brian. Thanks. Thanks very much, Nigel. If we now turn to slide 17, just a little bit of a refresher on what we're doing and some of the parameters and what is needed, for the effective monetization of of the group's IP. And fundamentally, we actually need two ingredients to be able to generate that big green circle of value. The two ingredients that you need to have if you're going to generate value is one is a commanding IP portfolio, I e a portfolio that

18:02 people should be scared of, basically, because it is dominant. It is very clear. It's been validated, etcetera, etcetera. However, you also need a valuable addressable market. You know, bluntly, you're you can have the best IP in the world. If no one's actually selling any products, using that IP, then you can't actually claim, significant losses because there's no value to address. So those are the two things you need. If you've got both of those or you can create both of those, then you can generate value from your from your IP. So turning to the first of those fundamentals, a commanding patent portfolio. This is the position for NANOCO today. During the Samsung litigation process, the, US patent office, the patent trial and appeal board validated all five patents that we had brought into that litigation.

18:55 Each of those patents and each of the claims survived multiple different challenges. And given that, you know, there were 47 claims in total and each one was challenged, in as many as eight or nine or 10 different ways, you can see there was a huge challenge brought against all those claims and they survived them all. In terms of the patents that we've then kept inside NANOCO, as we've previously announced, we have kept four of the five validated patents. What's more importantly is the four that, patents that we kept actually, mean that we retained 46 of the 47 claims. So we sold one patent or or or one one of the the 47 claims, and that was a patent that we weren't actually, using in the business. So validated patents and they're retained in NANOCO with the the relevant claims.

19:45 It's also worth noting that when we were evaluating the litigation against Samsung, we had a longer list of patents that were relevant to the case and we think may well have been infringed as well. However, as I've explained a number of times before, given that in a trial of five days, in The United States, you cannot possibly get through 47 claims for patents, never mind 10 or 12 patents. And, actually, as a matter of record for the final trial or or the planned trial, we were only going to be taking two patents into that trial. So there are other patents, that were relevant to the litigation, but that we were not deployed in the litigation, and those are still in our portfolio.

20:32 When the annual report is published in a couple of weeks, you'll see there's a graph in there that then shows them and their their expect or their remaining lives. Then in terms of remaining patent lives, because, again, if your patents are gonna expire in, you know, the next week, and you haven't already started litigating, you may have issues. You can look backwards six years, once once that patent expires, but, of course, that will then take you back into the question of a valuable addressable market. So in terms of patent lives, just so folk are aware, the four trial patents that we kept in the NANOCO, their lives, at at the long stop date go out to 2028. So that's another, five years or so. The other relevant patents that we did not use in the trial but were actually relevant to the same technology actually go out to 2033.

21:25 And then we've got the the rest of our portfolio, many of which go out further than that. And last and again, but no means least, and the the fact that Samsung actually felt the need to settle, with NANOCO is a clear sign to the market that, they had concerns, about, our portfolio. And the fact or or the size of the settlement, the $150,000,000, is also a clear sign to the market that, this is a commanding, patent portfolio. So that's the first fundamental, where we think we're in very good shape. The second fundamental that you need though is a valuable addressable market. If you look at that red dot, I've repeated here on this on this slide, the, graph, that I showed you earlier just about demand in, display markets.

22:15 That red dot's sitting over 2023. And the truth is today, the impacted market is of, relatively or very low value. So it's it's shallow, because the majority of those TVs, that contain quantum dots today are actually still got cadmium in them. Now the fact that it's going to grow over time and if you look out to 2028, 2030, the fact that we've got patent lives that are going out to 2028 or 2033 means that we're not too concerned about the fact that the market, today is small. It will become more attractive. So the opportunity for NANOCO to leverage its, IP will grow over time.

23:02 If we go over the page, the fact that the market's going to grow over time has not held us back from actually examining, potential infringers today. That chart on the right hand side was put together by, the NANOCO team using both our internal expertise and also our, retained advisers. As we've said before, we do not think anyone can make cadmium free quantum dots at a commercial scale without infringing our IP. And we've already carried out a number of, analyses of different devices and there is more ongoing, and I'll talk about that in a second. But what we've put on this chart is, on the x axis, you have the probability of companies, breaching our IP, either today or in the near future because of their publicly stated aims with respect to cadmium free QDs.

23:58 And also on the, y axis, you then have the value to pursue today. I should point out that, Samsung and one of its customers are on here. So, from our point of view, they're already dealt within the license that we have in place. And I should also point out that there are a number of quantum dot companies on here. Again, as I've explained before, there is no point suing or litigating against the quantum dot company, certainly not if you're trying to get money because they are often small,

24:31 poorly funded, and often or or or or always, use a or or create a very small part of the value chain. So if you think of seeing somebody makes quantum dots in a TV or someone who makes a TV, there's a lot more value in the TV than there is in the quantum dots. So that gave us a a, a pointer on who we thought was infringing and who would be worth looking at in in the short to medium term. If you go over the page then on slide 21, ignoring, Samsung and its customer from the previous slide, what we have here is there are 16 companies, worth looking at. They're referred to here on the left hand column as suspects. We've actually torn down eight, devices sold by those companies.

25:17 Many of them will have many different devices, so we we've just taken one from each, you know, so whether it's a 42, 55, or 65 inch TV. You can see in the third column there, three quarters of all those devices that we tore down actually contain toxic cadmium, which from a NANOCO perspective means, that they are likely not to be for infringing our IP. It's not impossible, but today, it's likely, that that they're not. One of the TVs, despite what it says on the box about containing, quantum dot technology or quantum technology, quantum dot color, etcetera, actually doesn't contain any quantum dots. So of the eight, there was one, device available in, commercial retail stores today that actually contains cadmium free quantum dots. Now I should emphasize that does not guarantee or prove infringement, but it is a very strong clue, particularly given our belief that you can't make copy and free quantum dots at scale without infringing our IP.

26:25 And then the last column on there, you can see that there are eight more companies devices to tear down and we'll be, addressing those as we move through, this, current financial year. If now I go over the page then, so summarizing where we are on, monetizing our IP. I think it's pretty clear that we do have a commanding IP portfolio. So the first fundamental without which you can't get to the, the market is very firmly in place. The valuable addressable market, as I've shown, it will grow over time whether it's in display or in those small, devices, using micro LEDs. Having done the teardowns, having looked at that heat map, we have now already started in, engaging with potential infringers. So we haven't just left the analysis or the heat map sitting on shelf or in in filing cabinets. We're now engaging with potential infringers.

27:26 Given that our aspiration is to be a production company, that initial engagement is, I would call it, commercial in nature that we're looking for either supply agreements or development agreements. And if those aren't available, then we'll move on to a basis. Because, again, investors will understand that if someone buys your product, it comes with a built in license. You don't, typically sell products and, get a license fee on top of that. And I should emphasize this engagement could be a relatively lengthy process, and that's why we're saying, expectations for some kind of outcome by the end of calendar year '24. So, fifteen months from today seems to be a reasonable target.

28:12 Also, if, commercial discussion and licensing options fail, then we obviously have the the fallback, and retain our advisers to to pursue litigation. And lastly, because then they retain proceeds from the $90,000,000, we do have the option to self fund, litigation. If we thought it was going to be extremely expensive again, then, we could for a lower return have a much lower risk by, put that funding with a third party. But today, we do have that option and the activities that we're doing today, we are self funding. So that's it where we are in monetizing our IP, and all I hand over to Liam who'll quickly take you through, financial position.

28:59 Thank you, Brian. This first slide shows our financial highlights for the year end of 07/31/2023. So revenue is up a 128% on the prior year, moving from 2,500,000 to 5,600,000, and this increase was primarily driven by the IP license, which contributed 3,000,000 to revenue. This increase in revenue had direct impact on our adjusted EBITDA, which is reduced to 9,400,000 compared to 2,300,000 in the prior year. Our cash cost base has increased on the prior year and sits just above 6,000,000. We have invested in our capabilities in h two of f y twenty three and increased our footprint to our offices and labs at Rumcorn, increased our headcount, and brought in new equipment. Like most companies, there are some general inflationary increases. Our year end cash was 8,200,000, and that includes a net 4,500,000 from the first tranche of proceeds from litigation after paying all litigation related costs.

29:50 Excluding this, our net cash outflow for the year was 3,100,000. And finally, our year end cash, in addition to the cash due to be received in February 24, means our cash runway is no longer a concern, and our commercial prospects are fully underpinned by the litigation proceeds. Moving on to the next slide. This is a summary income statement, and I'll just run through this quickly, so we've got more time for q and a. So the revenue growth flow has flowed through its gross profit, which is up 3,300,000 on the prior year. As mentioned before, our costs have increased slightly on the prior year, gets us down to an EBITDA of 9,400,000 compared to 2,300,000 in the prior year. And moving down the table, there are a number of significant adjustment items in the year, and we'll look at these on the next slide. Financing costs amount to 5,400,000, and these include contingent interest on the lower notes, which is paid during the financial year.

30:38 On tax, we have utilized some of our accumulated losses to reduce the tax in the year, and we've also recognized the fair tax assets in the period. We do have unusualized losses to carry forward against future profits as well. So compared to a loss after tax in the prior year of 4,700,000, we have generated profits of 11,100,000 in f y twenty three. As I mentioned, I'll quickly cover the adjusting items, incurred in the period, which gets us down from our adjusted EBITDA of 9,400,000 to our operating profit of 15,000,000. So we have the sale of the IP, which netted 68,700,000, and then the litigation related costs of 49,300,000 offset that in the financial year. They were recognized in full during the period. The general meeting cost 500,000, in broker, advisor, and legal fees. And then we also have a foreign exchange loss this year of 1,700,000 rated to the USD balances on the balance sheet, translates at year end of the relevant exchange rate.

31:34 It's important to note that on this, we have recently announced that we have hedged the second tranche, so there'll no no more future risk of volatility around the cash receipts in February 24. And then we have our share based payments value, which in line with the prior year, and depreciation and amortization are lower than prior year due to the low impairment charge IP. So I'll just skip the move to cash slide, and get on to the final summary the financial summary. So looking at the f y twenty four, we expect our services and material revenue to be in line with f y twenty three. However, our license and income would double to 6,000,000, reflecting the full year's recognition of the IP license agreement. Our cash cost base is around 6,000,000, following the investment in additional space and headcount to improve our capabilities. And this investment will allow us to provide a more tailored customer solution and accelerate our own product development.

32:22 And on cash, we start to see with 8,200,000. Our net monthly cash burn is forecast to be around 9,300,000, and we'll also have a program of capital expenditure in the year, which we're historically not done to try and preserve cash. And, again, as mentioned, we have a firm intention to return 33 to £40,000,000 of the proceeds from tranche two, which will be in q one upon the year 2024. And with that, I'll pass you back to Brian to summarize. Thanks, Liam. So the this last slide, slide number 30, just in terms of outlook for for the year ahead. As we announced in our prelims, we are, negotiating two longer and deeper collaborations with our, two key customers, and we would expect to conclude those negotiations, the next month or or so.

33:12 We're also currently negotiating the production contract, terms for that first production order that we're expecting before the end of this financial year. And that then leads on to that expectation of a low volume production order, before the end of December, 2023. And using our, retained proceeds, both current and those, after February, '24, the the second tranche payment. We're currently expanding our footprint in, Runcorn to give us both a device capability to 200 millimeter wafer size, which will allow us to actually demonstrate fully functioning sensor devices to our customers rather than simply demonstrating here some, nano materials and what they can do.

34:10 We're also, as we announced in the summer, comfortably through a NED recruitment process. We will be hosting a number of candidates here at our Run Corn site over the next few weeks. And, again, we hope to announce a new, non executive director, by the end of this calendar year. That new NED, we've targeted deep knowledge in commercialization of new technology and consumer electronics, whether that's in business development, supply chain, or or operations. And the the candidates that we're hosting in Runcorn, have got incredibly, impressive, CVs given their very strong backgrounds in consumer electronics and semiconductor industries.

34:56 And lastly, as Liam referred to, we will be making a return of capital, to, shareholders during the first quarter of calendar year twenty twenty four. So in terms of outlook, and I said at the start, we've a lot has been achieved and there's still lots to do, but you can see that the these outlook and these impending events are a, a big part of that. Lots to do. Thanks very much. I'll hand you over to Alessandro briefly just before we, take questions. Perfect. Brian, Nigel, Liam, thank you very much for presentation. Ladies and gentlemen, please do continue to submit your questions by using the q and a tab which is situated on the top right hand corner of your screen. But just while the company take a few moments to review this question submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

35:48 As you can see, we received a number of questions both presubmitted and throughout today's live presentation. Liam, if I could just ask you to read out those questions and give you them out to the team where appropriate, that'd be great, and I'll pick up from you at the end. Yeah. Sure. Brian's gonna read through. Okey dokey. Thanks very much. I'm right. Question number one, there were other projects, medical horticulture, etcetera. How is that doing? I think are aware that for a number of years, we've emphasized that with our constrained cash position, we've had to focus our efforts on a much narrower range of opportunities. And it's fair to say that for the last four years, sensing has taken the vast majority of our our resources with only modest investments in display activities, particularly while we were pursuing the the litigation with Samsung.

36:41 I think Folk will be aware also that it's important for any business, particularly those who are effectively in start up mode, who don't yet have commercial production orders to actually focus on a small number of opportunities to maximize the chances of success and also to carefully manage, your restricted funding. And part of the dot only strategy that we implemented a few years ago has been to focus on our core strengths and those markets where the opportunities are large enough and short term enough, just to to be worth pursuing with time, energy, and money. But specifically on the on the markets that were mentioned in the question and a few others, in medical, we announced a year ago that our medical team had actually been stood down following the successful completion of a grant funded project that was looking at using quantum dots as a testing kit for pathogens including COVID nineteen.

37:36 We also noted that at the same time last year, that taking medical applications forward would require a a specialist partner. We retain our IP. We retain, some capability in that space, but it's not something that we are actively, pursuing. It would be reactive if, someone came to us. Horticulture, the applications here are very similar to those used in display. I they're using the emissive, properties of quantum dots. We did carry out a number of different small scale projects with different customers. And, unfortunately, those customers decided not to pursue them for further. But, again, like medical, we retain the IP. We retain the materials, and we can react to inbound inquiries, but we're not focusing our our resources on either of those at the moment.

38:28 Similar answer if you think of lighting. Again, very similar materials to those used in display, but, again, it's something we're not actively pursuing. Last specific one to cover, solar applications. Again, investors, I'm sure, will be aware that with the advent of cut price, competition from China, that effectively destroyed, western companies' efforts on solar. I mean, you consider that China has got 80% of the the the market. You can see why that is so important. So our materials and our efforts in solar were similarly impacted, by, the presence of of Chinese manufacturers in the market. But, again, we're still on the IP trade secrets and material recipes that we can, deploy should a meaningful opportunity, present itself.

39:21 So we will so I guess the question would be, do we expect to start funding those areas again, with retained processes or proceeds? I think the truth is in the short term, the answer is no. We will not, be putting significant funding or much funding at all into either of those four areas. And that's not because they're, wholly unattractive. It's because there is, much more attractive opportunities in sensing and, display. So that's where we are on those projects, and that's why we're focusing our efforts on sensing and display. And question number two, I'll hand that over to to Liam. Yes. The question is, we expect our order book to rise to deliver similar services and material revenue to that seen in f y twenty three. License income will reflect the full year of the litigation settlement.

40:13 Can you please clarify exactly how much said license income will be if it is equal to a full year of the litigation settlement numbers, please? Okay. So, as we've discussed in our prelims and as in the presentation, our services material sales in f y twenty three were 2,500,000 2,500,000, and we expect a similar sum in f y twenty three sorry, in f y twenty four. So in our prelims in regards to license revenue, it discloses 3,100,000 for f y twenty three. Of that, no 100,000 released from historic receipts from Huahong. The balance of 3,000,000 was from the light Samsung license and covered the second six months of f y twenty three. So the Huawei license expires in a few months. The expectation for licensing company f y twenty four for the Samsung settlement is 6,000,000. So the 2.5 plus the six will give a total expected revenue around 8,500,000.

41:03 And with that, I'll pass you back to Brian for the next question. Okey doke. Next question was about, an email address for this meeting, which I think we've already dealt with. So moving on question four. When are we expecting to see new orders following extended trials with potential customers? As I said earlier, we we do expect our first commercial production order before the end of December twenty twenty three, and we do expect that to be a low volume application. Again, low volume means measured in millions of sensor units per year. Our expectation is that with the technology, established in the end user ecosystem, we believe, and our customers believe that more applications and more end customers will adopt the technology over the following years, and that will obviously have a positive impact on our revenue.

41:56 However, we can't be sure when those end users will actually adopt either NIR or, SWIR technology. However, because our customers are major electronic supply chain customers, we've got a very strong route to market through their customers. And, again, they have not got into this application or technology to be selling millions of units a year. Their industrial scale production sizes are the hundreds of millions of of units. So, again, as I said earlier, market forecasts are expecting SWIR technology to be adopted in mobile phones in 2026, and that would meet our definition of a high volume application. And as as I've just said, that would also meet the, the aspirations of our, current two key customers who'd got into this, sector, to be selling hundreds of millions of sensors, not not not millions of sensors.

42:56 And again, as we said previously, if we were around 100,000,000 sensor units per year, that could generate potentially, £20,000,000 of cash revenue a year, obviously, subject to price negotiations given volumes, material costs, other costs at the time, two to three years from now. And at that level of revenue, we would be significantly cash generative. Moving on to, question five. That's one for Liam. So the question is when will we receive a dividend payment resulting from the Samsung award and approximately how much is it likely to be? So as we communicated, Samsung are due to pay the second tranche of settlement proceeds in February 2024.

43:42 We intend commencing the return to shareholders shortly thereafter, so aiming for February and March twenty twenty four. In regards to what form this may take, this may be a dividend, a capital return, a share buyback, or a tender offer. The board is currently evaluating all the options and the plan method will be announced in early twenty four. And on the amount, just to reiterate, the board intends to return between 10p and 12p per share with the equivalent of £33,000,000 to £40,000,000. And I'll pass it back to Brian for next question. Does the company have an interest in solar panels? And if not, please, could you explain why not? Just refer you back to the comment you made earlier about, solar, and the fact that, you know, the macroeconomic environment for for solar.

44:28 Again, you know, the Internet's littered with references to German solar companies, Western European, Western companies basically being, annihilated by the influx of, low cost Chinese, solar panels. So that's why we're not currently actively pursuing solar today. If a Chinese company turned up and the price point was acceptable, or any other, company turned up and the price point was acceptable, we do have IP and experience in making those materials so we could go into that, but it's not something we're actively pursuing today. Next question. Are the two materials that have moved from development to optimization stage, those of the Asian customer? That is not true.

45:14 One of those materials is for the European customer and one is for the Asian customer. Next question. Could we expect to see more materials move from development to optimization during f y twenty four? Yes. It's possible, though, note the, the timeline that Nigel set out, earlier, when he was going through the typical development cycle for materials. Some of those individual stages can last one to two years. Further to that, with with the European customer already having two materials at final validation stage and one new material in optimization, also with the Asian customer having a material in optimization, I think the the real expected changes in this coming year is for the two materials in validation to move, into production, as we said, expecting an order before the end of this calendar year.

46:09 So optimization does tend to last longer than a year and require significant investment both by a customer and NANOCO. New customers in sensing in f y twenty four are more likely to start with small scale proofs of concept at the development stage. However, display could be faster. Moving on to the next question. The proposed return of capital suggests the company does not see any rapid growth in the volume of quantum dots required over the next few years. Is this interpretation correct? And this interpretation is not correct. The return of capital does not, imply no rapid growth in the volume of quantum dots, over the next few years, and let me explain why.

46:56 We've said that we expect the first production order to be for low volume, for millions of units. Our installed production capacity today in the facility literally just just, you know, three meters behind me can already make enough material for over 100,000,000 devices on a single shift. Partly depends on the size of the sensor, but if those were smaller sensors, you know, going into a watch or something like that, then you would be multiplying that 100,000,000 devices. Putting in full staff for a full single shift would be relatively inexpensive. We also today, and going forward have, favorable working capital terms with our key customers and our suppliers. So the simple message is a significant increase in sensing demand would not require significant investment in CapEx or OpEx or working capital.

47:49 In display, the position is similar, although here, the installed volume capacity is lower being around 1,000,065 inch TVs or actually around 30,000,000 smartphones or over 200,000,000 smartwatches. Again, staffing, working capital, capital, expenditure in display would be very similar to, what I just described for sensing. I e, there is not a huge need, for investment in those areas if a significant demand came online. So, just to emphasize, the return of capital reflects the residual funds after we considered the business need for funds and that, those assumptions about the need for funds includes the assumption that, we're at mobile phone, type levels of demand in 2026, I e, 100, million plus, sensor units and the us making the materials for those.

48:45 Next question. Can you please talk about the benefits that QDs could bring to small sized micro LED screens over other technologies and why QDs may be beneficial here, but perhaps not in larger screen sizes. Okay. In terms of the advantages of micro LEDs, you get a very high level of brightness. They are very energy efficient because you're not, using a backlight. If you think of an entire TV as being lit up with a backlight and and all different all of the colors are being activated. And then on an LCD TV, you actually filter out the colors you don't need. So there's a lot of energy being wasted there. The color gamut is superb. The durability of micro LEDs is really high. There's no, expectations of screen burn or pixel, degradation, which you do get in, other TVs.

49:38 You've also got increased eye comfort, which is actually incredibly important if you think that, these could be used in screens that are going in a headset that's only an inch or two, from from from your eye. And, also, these, micro LEDs can be incredibly thin, so, pushing beyond the the one millimeter, barrier. In terms of what the issue is with larger screen size, there's a problem today. Certainly, we see a problem today, and most people researching QDs for use in larger screen sizes see this is that small screens typically use less energy. Often, they're a closer range. If as I say, if you think of a headset, a smartwatch, or a a mobile phone, you know, it's much closer to you.

50:24 It isn't using as much energy. So in a large TV where there's a lot more, energy passing through the QDs, that causes a significantly higher level of stress for the QDs. And we, believe that a significant amount of development work is needed to create stable cadmium free TV, cute quantum dots for a large screen, I. E, a TV application. So, basically, today, quantum dots cadmium free quantum dots are applicable to micro LEDs, but a lot of development work before they could be used in TVs. Next question. Would any selection of your materials for use in mobile phones be more likely to use your second generation materials rather than first generation materials?

51:13 Second generation of materials that we're working on, as Nigel was explaining earlier, will have new, and additional properties. They will, almost certainly be faster than the first generation of materials, which, again, for sensors are very important. But importantly, they'll also be more thermally stable. A mobile phone application that needs higher speed, in the application would prefer generation two materials, but that would be the application, not the, not the environment or the device. Whereas automotive applications actually require, higher thermal stability. So automotive applications are unlikely to use the, first generation of materials. They're much more interested in that second generation of materials.

52:03 So we're not aware of any performance restrictions for generation one materials to be used in mobile phones. Although today, some OEMs are trying to use, avoid the use of lead in devices even if that, is within prescribed safe, limits. And our generation two material is lead free. Next question. Can you say a little more what a deeper collaboration with one or both of your main sensing customers might look like? Would it be working on an expanded number of materials with greater collaboration there? So what we mean by deeper with both parties, means basically applying more resources and funds. That increases the speed of development and it also increases the chance of success.

52:50 It would normally be appropriate to go into that sort of relationship after, you've done your proof of concept, because there's a simple message in development stage or proof of concept stage that if you're going to fail, you want to fail fast and cheap. And I think a good example of that is, as we've said with the Asian customer, in the last two years, we have completed almost six, back to back or in series projects. So you you clear hurdle one, then you commission another short term project to clear hurdle two, etcetera, etcetera. Once you get to your proof of concept, that's when it's then worth, a lower risk to apply more resources, more money, more more time. A deeper collaboration also involves sharing more information in a two way flow, and that then increases the speed of feedback loops, which again can reduce the time to market, and that's always a a competitive advantage.

53:46 The specific question about, an expanded range of materials with a customer, it doesn't necessarily mean that. But what it can mean is that if if you think that, you know, you you've got a recipe to, you know, to to make a quantum, dot, you can tweak that many, many different ways. So while ultimately the material basis is staying the same, the the full bill of material may change as you, you know, add a little bit more salt, a little less salt, or whatever it happens to be, using a a cooking, metaphor. And, the more tweaking, the more experimentation, the more reactions you can run, the greater your chance of success and the timeline to find, if you like, the the secret sauce, so to speak.

54:34 Next question. Excuse me. With the license to Samsung that has been agreed over NANOCO's patents, would this cover some of the sensing relevant patents and would Samsung there have therefore have the ability to make sensing products that rest on some of NANOCO's patents? So, again, just to clarify, as we said before, the Samsung license does cover our core seeding methodology, and our generation two sensing products, but not generation one, are made using that IP. However, there is a very significant body of additional, business know how, recipes, trade secrets that are needed to be even able to consider making sensing materials.

55:21 Furthermore, future sensing IP that is independent of our existing IP portfolio is not covered by the Samsung, license. That brings us to the end of the pre submitted questions. I'm now going to start looking at the questions that are on the screen here. And I think I'm starting with the most recent one. You talked several times about infringers, plural, but the chart shows only one infringer. Which one is correct? I think you're referring to two different charts. The first chart is the heat map. All 19 companies on there could be infringing our IP. The second chart where we've done teardowns on eight out of those 19, companies' devices, and one of those has got cadmium free quantum dots.

56:13 I did mention that, we're engaging with a number of potential infringers. One of those potential infringers doesn't yet have a product on the market, but has said that they want to have a product on the market. So and so both of the charts are correct at this point in time. As we do more tear downs, we may find more cadmium free devices on the market. But, again, as I was saying earlier, the critical thing is that over time, the quantum dot share of the display market is expected to grow. And when it grows, there will be more devices coming on to the market. And with, restrictions on cadmium increasing, we expect a greater proportion of new devices to be cadmium free quantum dots. So that, again, will grow over time. At the moment, it is correct to say that we have identified, outside of Samsung, one device with cadmium free quantum dots and, another, group of companies who want to move into the cadmium free quantum dot space.

57:18 Next one, bearing in mind final validation of two sensing materials and final production with the customer's forecast to be received by July 2023. How confident are you that a commercial order will still be received by calendar year end and what underpins that confidence? And, ultimately, final validation is is outside of NANOCO's control. That is something that the customer needs to do. They have got parts of the process that, their own process that they need to modify, they need to change, they need to validate. In terms of our confidence and why we're confident we're gonna get an order before the end of the calendar year, the fact that as we've announced that we are going through, that we're currently negotiating the terms of, supply for a commercial production order, that's where the the the confidence, comes from.

58:07 Next question. Thank you to everyone on NANOCO on great work getting to this point. Question. Your patents on when they expire are confusing to a layperson. Could you give more detail on when patents for the seeding process expire, please, and how long this process is protected? So there are multiple, patents, covering the ceding process. Of the four that we're going to, that we retain from the litigation, one of them lasts until 2028, so another five years. One of them expires, I think, in 2025, and then the other two are in between those dates. But as I mentioned, we also have some, patents that were relevant to seeding, could have been used in the litigation. We chose not to because we had too many and some of their lives going to 2033.

58:57 Again, apologies we haven't got it in this slide deck, but there is a chart you'll see in the annual report and accounts that actually sets out for our 370 odd patents how many years of life each one of them has got left. And it also color differentiates the four that were in the litigation and these other ones that I'm mentioning. And so simple answer is 2028 for those in the trial, 2033, for some that we held back from the trial, the rest of the portfolio, a lot of it actually goes out longer than that. And once our QD materials make it into consumer products, whether you'll be doing teardowns of well known products to check if they contain our dots and then inform the market of that, it'd be really helpful for the share price.

59:43 And that's assuming that our customer our customer doesn't tell us who the end customer is or if that end customer, refuses to be named. Then in that case, yes, we will be scanning the market for, devices that claim to have adopted SWEAR quantum dot technology, and we'll go and look at them and see whether or not they're containing our materials. And if that's how we learn it, which is a legitimate thing to do in the market, then, yes, we would be able to to tell the market that that's what we have found. And next one, excuse me if you've answered this in the past, but the settlement with Samsung, while significant for NANO, is a rounding error for Samsung. Why do you think Samsung insists as part of the settlement offer in splitting the payment up over such a long period of time, and why did NANOCO, agree to it? And so I'll repeat what I what I've said about that in the past. We, for whatever reason, I do not know why Samsung wanted to split it, in two.

1:00:47 However, from an NANOCO point of view, we did not need that cash immediately. So given that it was something they wanted, and we were able to give that, in exchange for some things that we wanted, whether, you know, their confidential terms inside that license agreement or whether it relates to the final value that they actually paid, etcetera. But there was no harm done to NANOCO, by, taking first part of the payment in February last year and the second, or March last year and the second, payment in February, '24. What form will the cash return take? We're evaluating that at the moment. We've looked across all of the different options.

1:01:36 So that will include special dividend, a share buyback, a b share b share c share scheme, a tender offer. What we're trying to do is make sure that as many shareholders as possible, if not all, have a choice on whether or not that, return takes the form of capital or a dividend. And and we'll be saying more about that in January when we hope to be able to say, what our intention is once the the money actually arrives. And thank you for the presentation. Are you able to provide an estimate of the total maximum annual sales value for NANOCO's current production facilities? And there are a lot of variables in this.

1:02:22 If you think of a 300 millimeter wafer, if you've got a 10 by 10 sensor, you might get five or 600 sensors out of that. If you've got a two and a half by two and a half sensor, then you'll get, maybe four and a half, 5,000 or more sensors out of that. But in simple terms, what we said in previous years is that on the sensing side, working twenty four seven, we believe that our sensing facility could generate annual sales of around a £100,000,000 and that our display facility could generate, annual sales of around £30,000,000. And that those are the kind of numbers why I was saying earlier, we do not need to invest capital today to expand our, production facilities.

1:03:11 Though if we had to, it would be, relatively inexpensive, to do so. But, clearly, to get to those level of sales, we would need to be in the multiple hundreds of millions. So on more than one, smartphone, one smartphone might get us to $2,025,000,000 pounds of revenue. For TVs, whether that was a million TVs or, you know, $2,030,000,000, phones or, you know, maybe a 100,000,000 plus, smartwatches. And with the global uncertainty for security of supply, please clarify now that NANOCO's strategy of resourcing and supply confidence for base materials necessarily underpin future order book. And we and our customers throughout electronic supply chain have multiple supply routes. So whether that's two or three or, in some cases, four different potential suppliers they're very, very specialist suppliers or very specialist material, where actually NANOCO, and maybe one other, customer might be the only, customers in the world for those materials.

1:04:21 We insist on a minimum of two sources of supply, and, all of our sources of supply today are effectively coming from what I would describe as stable western, far eastern democracies. So, yeah. Security supply is a big deal for us and for our customers, and we spend a lot of time and effort on that, and that's, led by Liam and his team. And next question, have you considered a tender offer for shares as possibility for returning capital? Yes. We have. That's one of the options that we've been, looking at. And, yeah, we'll come to a final decision on that in in January.

1:05:10 As I mentioned, we want as many shareholders as possible, if not all shareholders, to have a a choice in terms of the form of the return, but we'll we'll confirm the actual technical route that we're planning. Clearly, if someone would rather have income, we don't want to force capital on them. If someone would rather have capital, we don't want to force income on them. One last question, and this is, just effectively allows me to recap. What are you spending the money on that you're not returning to to shareholders? Why are you keeping back £20,000,000 or more? I think over the summer, and since then, we we've set out a number of broad areas, that we're going to be spending that that money on.

1:06:01 Pretty simply, roughly £5,000,000 is going to be used to pay off the group's, debt or or loan notes to three different parties, including the University of Manchester. We're also going to use the retained funds to, fund the the the commercial business through to our expected cash breakeven point in, calendar year 2025. Certainly, the current market conditions in our view internal to NANOCO and through our advisers is that, NANOCO, is unlikely to be able to go back to the market for, additional funding. So you can understand why we're being cautious to make sure that we've got enough money, retained to see us through to cash breakeven. In terms of investments in in our business, I've already mentioned we are currently self funding IP monetization.

1:06:53 And if it gets incredibly expensive, you know, through litigation, that we can look at litigation financing again. But, again, that will, you know, you're you're playing off risk and reward there. But, again, the 60% of our proceeds that we retained is much higher than most IP licensing companies will offer you if they were doing the service for you. We're also making some investments to self finance and some r and d activities on additional material sets. We're also investing to enhance our robustness as a potential supplier, to some of the world's largest electronics companies. Again, I think people should not underestimate how much of an issue it is for our customers and major players in electronic supply chains to know that you have multiple sources of raw materials, that you have that you are a robust supplier and can operate to the quality requirements of, consumer electronics, which are incredibly, demanding.

1:07:59 And lastly, on the investments in the commercial business, we are putting some capital into create a device capability. So we're we're extend extending our footprint in Rumcorn here by around 50% to create a a a a device facility and also a dedicated analytical lab. Both of those will support business development and also reduce the time to market, with new materials. As I mentioned earlier, our working capital needs are very modest for the business going forward, and we've got favorable working capital terms with our suppliers and our customers. And then the last, use of funds, you like, given what I said about our ability or lack of that ability to go back to the market for more funding, is that, we are keeping a modest buffer, for risk such as if there's a delay or a slower ramp up to high volume production, you know, if it went back a year from, 2026 to, 2027.

1:09:00 But equally, I should say, if the business progresses faster, cash breakeven happens faster, then we will obviously have the option to return further sums to shareholders at some point in the future. And that's it on the questions. Perfect. Thanks very much for that, and thank you for being so generous with your time. I think you managed to address every question from investors. And, of course, the company will review all the questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which is important to the company, Brian, could I just ask you for a few closing comments? Okay. Thanks very much, Alessandro. So just to to recap, we feel like in the last three, four years from since we started the Samsung litigation, we've we've come an awful long way, you know, with multiple, materials and final validation. The expectation of a actual first ever commercial production order, before the end of this year. And you've heard the basis for that confidence that we're actually negotiating the terms of that delivery.

1:10:05 And and so expecting that first low volume production order before the end of this this calendar year. We're able to start investing, a little bit of money, back into the business. I think Liam said during the prelims, expect us to spend around 1,500,000 on capital, this financial year. So it's not a huge amount of money, but it will make a huge difference in terms of our capability, our ability to, demonstrate functioning devices, to new, potential customers and also the speed of our feedback loops. We're strengthening our board with that new, deeply experienced non exec, again, aiming to announce that before the end of this calendar year. And as we said, that major return of capital, in the first quarter of next year, and you'll hear more about that in January.

1:10:57 So just, you know, final comment. Yes. We've achieved a lot in the last few years, but there is still a lot to do as we move, NANOCO forward to target that cash breakeven point and then to grow the business further to the sorts of, revenue, that this facility and our staff are capable of generating. Thanks very much. Perfect. And thank you once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, but but I'm sure we'll be greatly valued by the company. On behalf of the management team of NANOCO GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.