Nanoco Group plc (GXG.DU) Earnings Call Transcript & Summary

Good morning, and welcome to the Nanoco Group plc Interim Results Investor Presentation. [Operator Instructions]. Before we begin, I'd like to split the following poll. And I'd now like to hand over to Brian Tenner, CEO; Liam Gray, Finance Director. Good morning to you both.

Good morning. Thanks very much for that introduction. Welcome to the second presentation of our interim results. Today, we really want to focus on questions that have been pre-submitted in advance. So we will wrap up quite quickly through the presentation that you can see on your screens. If you want the longer version of that presentation, you will shortly be able to see the presentation on our website, the recording of yesterday's presentation, I should say, where we spend a little bit more time on the content of the slide deck. My name is Brian Tenner, I'm the CEO of Nanoco. And with me, I've got Liam Gray, our CFO. If you do have questions that arise while I'm talking or while I'm answering other questions, please do submit them via the interface. Again, you can see on your screens in front of you. So just moving on then very quickly to the highlights of the year on Slide 3 in our presentation. We said in November last year, the 2022 calendar year was going to be a big year for Nanoco and that is exactly how things are shaping up. And our confidence is growing significantly in a number of different fronts. And that confidence and growth in confidence is driven because we continue to deliver our technical milestones and material deliveries for a number of key customers, but also good progress has continued on the litigation front. So our confidence is say it is growing, and we are getting closer to a number of value inflection points. So turning to the specific highlights of the first half of this financial year. We have agreed for a number of additional work packages with our major European customer. That's where our products are closest to the point of production. We've also expanded the range of infrared sensing materials that we make and about some of them are through the stages of development, whether it's going from development to optimization, optimization to scale up, et cetera. We're also preparing our Runcorn production facility for scale and production. We've already announced that. And as I've already mentioned, litigation is progressing well, and the first significant value inflection point will be in May 2022. So it's only 4 or 5 weeks. So -- and that's when we will know if the validity of our patents is being confirmed by the U.S. patent office, by the Patent Trial and Appeal Board. In terms of financial highlights, our revenue and other operating income increased 21% year-on-year. Our cost base has been relatively stable at around GBP 400,000 per month, and we will see that reducing in the second half of this financial year. So actually, starting from this month, in April, and it will reduce further than in the first half of financial year 2023. So at the back end of this year, around December, January time. Our cash at the half year was GBP 1.8 million. That was on a like-for-like basis actually artificially low because our tax credit remain slightly late compared to last year. And that's evidenced by the fact that our cash has risen to GBP 2.6 million by the end of February. You would normally expect us to see us generating in terms of cash in the month of February. Take all that together with that growing confidence in some of the short-term deliverables, we've extended our organic cash runway to the first half of calendar year 2023, i.e. into the effectively the second half of financial year 2023. We just go over the page, and again, a reminder here, and I don't mind going into a little bit more detail on these. There are 3 key sources of value in the business today that we are focused on. The first of them is our organic business in sensing. And there, our confidence, as I mentioned earlier, is actually growing in the prospects there. We still expect production order visibility in the second half of this calendar year, so before December '22. But just [indiscernible], that's production order visibility. So we may receive an order without actually being in production. Again, our customers published road maps actually imply or suggest or require an actual production during 2023. But we expect some visibility, the advance just over in the second half of this calendar year. If you look at the gray bubble on the bottom of the chart in the middle, that's the second source of value that we're focusing on at the minute, which is around litigation. And as we said before, the numbers involved there are significant enough to refer to the opportunity as transformative for the company's prospects and also for shareholder value. The 2 big milestones that we will see in the next 9 months, the IPR decision, I've already said, that's in the next 5 weeks. And our expectation is that even, if there are appeals on those IPR decisions, that the court case will restart and will be rescheduled for the second half of this year. So we're saying around October, November time. That's not guarantee, but given the nature of the stay that was granted in Texas, the fact that the judge said he didn't actually want to grant a stay, but was only granting it because both parties agreed to it and because Samsung agreed that they would agree to be bind by any reasonable validity grant raised in the IPR process. That's why we are confident that the trial will be rescheduled for the second half of this year. So winning an IPR and winning a trial, 2 very significant value inflection points for the litigation process. And then linked to litigation is coming full circle back to the organic business, but here for the display side of the organic business. If we're successful, potentially just with IPRs, we don't even have to wait for the trial. That will be a strategic or tactical decision that we'll look at. But being successful, having our IP validated will give us some leverage and potential to start pushing more aggressively with other potential customers around the world and also other companies, who may need to take a license of our IP. In terms of actual organic activity on display, we are still engaging with a number of small-scale development projects with a number of customers, but they are slightly further back in their development cycle than where we are with the major European customer on the sensing side. But those are the 3 key areas of value with I've to say at the moment, a very, very clear focus on the sensing part of the business and also on the litigation opportunity. If we go over the page, this is one of those pages you can hear more narrative when you go to our website, where that presentation will be available shortly from yesterday. But this is just reminding people about what's the problem that's in the market for silicon sensors, how is that problem sold by quantum dots and what's Nanoco's differentiation in all that. I think the one thing I want to draw out is the last time we spoke, I think we had 4 different use cases or market applications for short wave infrared sensing. We've added 4 more here. You can see them on the bottom, whether it's agriculture, driver monitoring, surveillance and security. And just to highlight one of those, a number of you may be interested in it that in the next few years, compulsory monitoring of the driver inside of a car or a truck is going to be part of a European regulation. So you can expect to see compulsory installation of sensors inside the car. And that's when you bring in all those benefits that we believe a quantum dot enabled silicon sensor can bring to that operating environment. If we go over the page then, just to highlight 2 things. I said that we expanded and have developed our portfolio of materials. The 2 changes on here to look at. The red circle with an S in the middle of it, that used to be a gray circle with an O, and then we're just flagging up the fact, as we said in the recent [ RNS ], our work package with a European customer has now moved beyond optimization. There's still some optimization going on, but we're not actually scaling up the process. And again, just so one can understand, you will not scale up a recipe or a process until you're happy with it. So even then you might then tweak it slightly while you're doing scale up, you will only move to scale up once you're actually happy with the process. So the fact that we're passing through the optimization tells you that we've delivered the customer parameters, and we're not looking at how do we make that product at a larger scale. The other change on this chart is the other dotted line box against customer for. It's a brand new material and a brand new wave length. We haven't made it before. We're [ now ] developing that material for our customer. And again, just as a reminder because there's been some speculation on how quickly things move through this process, particularly around the Asian customer. The cycle from development to production, so if you like going from a blue dot with a D in it, to a green dot with a P in it, it's typically 3 to 4 years, it's not 12 to 18 months. The nature of these markets, the requirement for absolute consistency of product recalls, et cetera, et cetera, it is a long drawn out process. So those Ds on there that you can see in that chart, our goal would be to get them towards a yellow B or a green P, but over a 3-year -- 3- to 4-year time line from when they first appear as a development project, but we still have the overall unchanged goal. In 2023, we want to have 1 material in actual commercial production for a customer and have a second validated. So if you like, for this chart to have 1 product that's going past the green P, which is ready for production in that actual production and a second one, either it B [ or P ] being ready for production. Then turn the page again, just very quickly. If you want to hear the longer version of this around display opportunities, listen to that presentation, it's going to be on the website. The 1 thing I really want to draw out on here is if you look at the bottom right, what you can see is quantum dots are now being included in more devices. Go back a couple of years and they're really just in TVs, maybe the occasional computer monitor. Now they're actually going into tablets, mobile phones, public signage, new advertising hoardings, the kind of things you see all over various undergrounds, at the bus stops and basically in any public place. And what that all means is if you got more devices using quantum dots, that means there's more demand for more quantum dots, that means it's a more attractive market, whether that's being served by Samsung, who we are dealing with via the litigation, or through other display companies, and we are still dealing with, as I mentioned, some small-scale inquiries and -- for other companies, who are looking at other devices, who may ultimately want Nanoco to manufacture quantum dots for them because we still retain that production capability. Just going over the page again, then I wouldn't say anything around these 2 things. We've still got some activity, but it is very, very small scale going on in our life sciences, also in our lighting and also [ horticulture ] lighting. So again, if you want to hear more about that listen to the presentation, that's going to be on the website. If we then move on, sort of now moved away from the organic business and now looking at the litigation side of things. The litigation picture is complex. It is relatively long. So there are a number of reminders on this slide. It's fundamentally unchanged from the last time that we spoke. But these key points are still valid, which is why we've got them here as a reminder. So there are 5 patterns in this case that we're litigating against Samsung. Within those patents, there are 47 individual claims. In order to win a trial and actually to entitle some damages, at least 1 claim needs to survive IPR and be find to have been infringed in the court process. Clearly, we'd like to win all 47 in the IPRs. But as I said before, we cannot take 47 claims to a 1-week trial. We will have 12 hours to present our case. If we try to litigate on 47 claims in court, it's just not possible in terms of time. But clearly, if we win 47 claims and IPRs, then we can take the clearest, the easiest to explain, the clearest infringement case. So we can pick and choose our best [ boots ], if you like, that we then take into the trial. I already mentioned that the PTAB will decide on validity in the next 4 or 5 weeks. If you read the transcript of the hearing, we believe that went well. It's a subjective judgment. It's as much based on who got more questions, and who've got more difficult questions, both sides had challenges to deal with. But on balance, we think we have had a better oral hearing than Samsung did. And we look forward to hearing the actual results in 4 or 5 weeks. Assuming then that the PTAB actually uphold some of the claims, there is a hearing in Texas in June to decide whether or not to continue to delay the trial. We will be pushing for that delay to be lifted and for the trial to be rescheduled in the second half of the year. Just to remind people, this lawsuit is about the United States only. It's about historical sales only. So if we have a trial in October '22, it will be on sales of TVs in October '22. And the jury will also be asked to answer the question of was this done deliberately or was it willful. The reason that's relevant is that if it was done deliberately or willfully, then you can expect the damages to be multiplied. Legally, it can be up to 3x. But again, the history and practice of the Texas courts is normally to inflict damages by around 1.5x. That actual multiplier is decided by the judge after the jury [ hopefully ] finding of the willfulness. In terms of what the damages should be, we think they are technology is fundamentally enabling for these TVs and therefore, that they are damages model, if you like, should reflect a value or a share of the value of the entire TV. There are other models. And some people might argue that -- they might say, well, this is just 1 component of the TV and it wasn't the most important component. Therefore, you should only look at the value of the component and damages models be calculated according. Again, we've explained before, if any successful award is granted to us, we will retain around 50% of the modest award, rising quite quickly towards 80% of a more significant award. So as the award gets bigger in absolute terms, our percentage share grows as well as the absolute number, obviously growing. Again, just a reminder, income from either from a damages case or from a settlement, both will be treated as income for tax purposes in the U.K., and we would therefore be subject to U.K. Corporation Tax. Again, we do have GBP 36 million of losses, accumulated losses in the U.K. that could offset some of those gains. So again, just to reiterate, this lawsuit in the United States on its own is absolutely potentially transformative, not just for Nanoco's future prospects in the organic business, but also for shareholder value. Going over the page again very quickly. The only change on this chart in terms of time line is the oral hearing has now been and gone. And as I say, all reading of the transcript suggest it went really well for Nanoco, and we look forward to the decision from PTAB in 4 to 5 weeks. But it is fair to say, we don't know what the outcome of that decision will be. Once PTAB have made their decision, the both sides are entitled to appeal. Unless Samsung win all 47 claims, we do expect them to appeal, they may even appeal even if we win all 47, you never know. Again, that appeal process can take between 12 and 18 months. There is a fast track appeal process in the PTAB, but it doesn't actually apply to IPRs. It applies when people apply for their initial patent filing. So that fast track process that can be a couple of months long does not apply to this situation. So you should expect, if there are appeals, they'll last 12 to 18 months. But as I've already said, because we were so close to being ready for trial, because the judge didn't -- in Texas did not want to grant the stay and we did it because both sides agreed to, we expect that once we've got the IPR decision, even if it's appealed, the judge will go ahead, treat that as a final decision and reschedule the trial for Texas, which, as I said, we expect in the second half of the year. Once the jury come up with a verdict of effectively guilty or not guilty of infringing, the jury come up with the damages number, the baseline number for the historical TV sales, and they decide if it was willful, subsequently, the judge will issue a formal written opinion. That could be in 1 month, it could take 6 months. It depends on how busy the judge is and how much information needs to go into that opinion. But the judge's opinion will confirm the formal decision. He then, if there is willfulness sign, will apply a damages multiplier. And he will also make a decision on whether or not to grant future royalty i.e., if you can calculate a per TV basis of the damages, he may mandate that, that is also identified for future sales after the court case, but he doesn't have to. If that was not the case, then we may end up having to have a second piece of litigation. Clearly, then once a judge publishes his opinion, both sides can appeal that decision, and unlike the IPRs, where it's a relatively tightly controlled time frame for payables of 12 to 18 months, the judicial appeal process could take 2 years or longer, in some cases, have been up for a payable sent back to Texas. They've gone to appeal again and then sent back again up and down. So that can be a very long-winded process. And it's a sort of process that we would look strategically or tactically at other options to see if we can apply pressure to the other side, assuming we're successful in the trial to actually have them not to draw it out to make it drawn the process doing lots of appeals, a more painful option than actually just agreeing to the settlement. And then the final reminder is currently all that activity, as I said before, is underwritten by a third-party funder. Let's go over 1 more page and my last comment on the litigation before I hand it over to Liam. We've just drawn this amount for the world to show you the different litigation value opportunities across the world. If you look at the figures in red, you can see the North American market, which on this chart includes Canada, which is why it's different from the previous 33% in the United States. Roughly, our estimate is 35% of Samsung's QD TVs sales around the world are in North America. We estimate -- and this is based on independently published market research, but it's not based on Samsung's numbers, we don't know what those are. The Western European markets is around 27% Samsung sales. You can see China and Taiwan around 10% and now Korea and Japan, another 10%. The charts, the bar charts underneath are just showing you how many patents in total we have in those territories, either granted patents or pending patents. I should say, the reason we picked these 4 territories is that 5 patents we've got in the United States, effectively, we have the same or similar patents granted in those other 3 regions, i.e., Western Europe, China, Taiwan and also Korea, Japan. Now again, we've talked about Western Europe on here. There is no such thing as a European patent. There is no such thing as a global patent. Each patent is individually filed in the territory. It's only because there are language translations. Each patent office, each national patent office may actually allow the filing of different claims, more claims, less claims, et cetera. We've highlighted those because fundamentally, we believe that the 5 patents in North America are effectively represented in those other 3 territories. And those have territories have obviously got high growth rates as well. China, in particular, is growing. And it's also relevant. Again, people may have seen the press that Samsung is now talking about selling second-generation QD-OLED TVs to other large OEMs, supply TVs, all of which just adds to the number of infringing models. But it also gives us potentially some other leverage that if we are successful in the IPR, we can start pointing out to some of these other customers of Samsung around the world. You're actually -- our IPRs -- our IP, our patents are valid. We believe we're going to be successful in trial, were successful in trial, so we're coming for next. So it will add some pressure into the process. So successful litigation, whether it's after IPRs or waiting until the court case is out of the way as well. We don't have to, but we can, it unlocks more than just a damages awarded in the U.S.A. And the one in particular I want to highlight is, in the U.S., it is very difficult to get an injunction unless you're a direct competitor against the person you're suing. We don't make TVs. If we were a TV manufacturer, then we would have a better chance of getting an injunction in the United States. But even in that situation, the preference in the U.S. is monetary compensation. That statement is not true, fundamentally not true in some other territories around the world. And if you take some of the Western European territories, there are countries in Western Europe where I wouldn't say that an injunction is almost guaranteed, but it is much, much more likely to be granted. And clearly, an injunction against someone selling TVs, it's going to have a significant impact on that person's tactical strategic thinking and considering whether or not they would agree to settle them rather than risk that injunction continuing, et cetera. And again, injunctions can be granted pending appeals. Sometimes, if it's more borderline, people might wait till after the appeal for the injunction to be granted. But it's all part of the mix of by what could be done. So [indiscernible] Nanoco, if we're successful at IPRs through trial, to look at starting to litigate in other territories around the world, either because there's a large economic market or because their process is quick or because it's cheap or because there are chances of injunctions. So that's it for me on the presentation. I'll just hand over to Liam to do a quick run through on the financials.

Thank you, Brian, and good morning, everyone. I will begin with our financial highlights slide for the period ended January 2022. To start with our top line, our revenue for the operating income is 21% ahead of the prior year at GBP 1.3 million compared to GBP 1.1 million. This is flowed through to our bottom line with additional cost savings contributing to our adjusted operating loss, reducing by 27%. Looking at our costs. Our headcount is largely stable. As an operational business, we do have some organic staff attrition. And when this happens, we'll also replace staff as and when needed. This ensures we can continue to support our customers and supporting both the sensing and display sectors. So we continue to focus on reducing our headcount -- sorry, continue to focus on reduction of costs. We recently announced the closure of the ground floor facility of Manchester. This follows on from the previously announced closing of the first floor in Manchester, which we fully exited in March of this year. In spite of some additional costs as a result of moving all our operations to Runcorn, we're anticipating seeing some of the financial benefits of these moves in the current financial year. On our cash, our [indiscernible] continues to be a key management focus and currently extends to H1 of calendar year '23. Once the gross cash costs, so before the benefit of revenue or R&D tax claim are around GBP 0.4 million, which I've mentioned previously, we reduced [indiscernible] the Manchester premises both exited for. And our business model means there is strong cash conversion on any new commercial wins for services, which better extends our cash runway. Moving on to our next slide. Here, we have our summary of income statement. So as mentioned previously, our revenue and other operating income has increased by 21%. This is due to both an increase in our commercial revenues of GBP 0.1 million and additional grant income of GBP 0.1 million as the same period in the prior year. This, coupled with a smaller reductions in our R&D investment costs, has resulted in an adjusted LBITDA, which was reduced GBP 1.5 million in the prior year to GBP 1.1 million in the current year. Our share-based payment charge is slightly higher in the current period due to bonuses to staff in the prior year being deferred in terms of options and therefore we incur a charge to our share-based payment plan. There's been a reduction in depreciation and amortization charge in the period of GBP 0.3 million, which reflects the lower IP, amortization and impairment charge in the prior period. Depreciation is expected to [indiscernible] in the future periods as a result of the closure of the Manchester premises. And whilst our R&D tax claim appears to be nil, this is due to the finance cost of the loan notes we issued in July '21, offsetting the R&D tax claim, which means overall, there has been a reduction in our loss after tax from GBP 2.3 million to GBP 2.1 million. Moving on to the next slide. This slide reconciles the movement in net loss between the current period and the same period in the prior year. On the chart, the movements are positive for the company as they show a decrease in the net loss. Starting with the prior period of net loss of GBP 2.3 million, additional revenue and other operating income has very few additional costs. And we also have our cost savings of GBP 0.2 million, reducing our lost down to GBP 1.7 million. We then have a few other bits and pieces in there. Our share-based payments as mentioned previously and some of the costs taken our loss back to GBP 2.1 million. Just to reiterate, our current gross monthly cash costs remain stable at GBP 0.4 million before the impact of revenue and actually in the benefit of R&D tax [indiscernible]. So if you move on to our next slide, usual movements in cash, start with the closing position in FY '21 of GBP 3.8 million, adjusted LBITDA of GBP 1.1 million reduces this to GBP 2.7 million. We then have some adverse working capital for the income movements, which totaled GBP 0.5 million. The operating lease cash outflow of GBP 0.3 million, which are now shown outside of LBITDA due to IFRS 16, takes to our reported cash balance of GBP 1.8 million at the end of '22. As Brian mentioned briefly, it also creates a like-for-like comparison. We then have back the R&D tax credit, GBP 0.7 million, which we received in February this year. And we also have significant customer payments, which we received late GBP 0.3 million. So like-for-like, our cash balance is GBP 2.8 million, which shows a net underlying cash outflow for the period of GBP 1 million. This compares to a GBP 2.3 million underlying cash consumption from the prior period. And then just moving on to our financial summary slide. The guidance, our current commercial pipeline opportunities underpin the revenue being at least in line with FY '21. Our gross cash cost remains stable at GBP 0.4 million per month. And we'll see the benefits of the closure of the Manchester properties from Q3 in the current financial year. Business is stable with commercial prospects and a steady headcount. On capabilities, it's largely in line with our previous years. It's a team of highly flexible, continues to work on both services and products for our customers in both sensing and display. In spite the number of redundancy rounds in the past few years, we continue to retain our core capabilities, and we anticipate all operations being transferred to Runcorn by June '22. And finally, on our cash, consolidation in Runcorn will further reduce our cost base with average net monthly cash burn of GBP 0.2 million in the period. And with our current order book and commercial opportunities, our run extends to H1 of calendar year '23. Any new commercial opportunities will further extends this, obviously depending on their scale and composition and quantum. As always, we do retain contingency plans to protect the business and able to see the lawsuit through the provision. And with that, I'll push it back to Brian to summarize.

Okay. Thanks, Liam. So final comments from me before we start going through the questions that have been pre-submitted and the questions that are coming in online while we're talking. So just to reemphasize, we said 2022 is going to be a big year for Nanoco. It's going to be an important year for value generation. On the litigation, you've got those 2 big value inflection points, winning the IPRs in May and then into winning the trial in October, November. I've highlighted there are still on tables. For those 2 events, if you like, [indiscernible] will tell us whether or not we're in a winning position or we're in a losing position. So those 2 key value inflection points coming up this year, and we're very confident on the direction of trial on both of those. In terms of organic revenue, still, as we've said before, we expect to see visibility on potential production revenue for sensing materials in the second half of this year. So H1 calendar year '22 for visibility and then expect actual production next year 2023 and that's supported by our road maps that are being published by our key European customer. And again, just to emphasize, the management team are focused on generating value from both of those sources right now rather than just favoring 1 exclusively at the cost of the other. In terms of our cash runway because that has been a perennial issue for the business. Our cost base, we expect it to reduce by around 20% over the next 12 months on an annualized basis, dropping from around GBP 5 million from around GBP 4 million, which are lowering breakeven point, i.e., the point the amount of revenue that we need to actually base self-sustaining from a financing or cash point of view. Because of the achievements we've already delivered an extra business with customers, we've extended our organic cash runway to the first half of calendar year 2023. Remember what we mean by organic cash runway is the organic business of R&D, scale up and production as opposed to the situation if we had to improve contingency plans and becoming [indiscernible]. And any new business that we win can extend our cash runway further. So in terms of the opportunity for Nanoco net shareholders, consolidation in Runcorn is going to reduce our cost base, and it will actually improve our -- the organic platform for the business by co-locating all of our activities in 1 place, meaning transfers between different stages of development are easier and better integrated working. And Samsung litigation is successful say, even if it's just at the stage of IPR, even before a trial, will potentially promote new licensing opportunities. And fundamentally, success in our organic business will deliver our medium-term goal of the company being self-financing. So a final comment is our confidence is growing and continues to grow, and we expect to deliver significant organic and litigation value inflection points during 2022. So that's it all in the presentation. We've left just about half an hour to start running through questions that have been pre-submitted and coming in online. I'll read them out and then just speed things up and move straight into an answer. So here we go.

So the first question was, what's the situation of expected production orders for sensors for the European customer? We've already answered this. We expect visibility of production orders in the second half of 2022. So before December 2022, I want be specific, we don't know what size those orders will be because it will very much depend on the application. And just to give an example, say, for example, first application was in automotive. Well, if it was on a 200 miles per hour supercar, the company might sell 50 of those a year. So demand for our sensors wouldn't be very high. Whereas if it was for a Ford Fiesta that sells 5 million units a year, then demand would be very high. And sitting here where we are in supply chain, we do not know who the first end customer will be. We know who our customer is, but we don't know who the first end customer will be, and we don't know the application. I would like to say from a Nanoco point of view, even if it was a small scale application with modest demand in the first year or so, that would be a huge substantial achievement for the company because it will be our first ever commercial product in our 19-year history. And once we've got into a commercial market, you would expect then the ecosystem to grow, to expand the use cases and the size of each application to grow as well. So that's where we are on expected production orders. We expect visibility in the second half of this year. Similar question, when can we expect commercial contracts to be signed and manufacturing to commence? So it's very much the same question. Second half of this calendar year we expect visibility, and we then expect actual production in 2023. But again, I should caution, ultimately, all of this is dependent on end users actually agreeing to adopt the technology in their end applications. Next question is about property, has moving out of 1 Manchester floor gone to plan? Also, is there an option to move out of Manchester altogether and relocate to Runcorn? I think this question presupposes some of the things that we've recently just announced. So the exit from the first floor in Manchester is complete. And we have announced the intention to exit the remaining ground floor in Manchester and relocate all of our operations and all our activities to Runcorn. We expect to be fully operational in Runcorn in the third quarter of this calendar year, so sometime between June and September. And we expect the final exit from the ground floor in Manchester to be complete just by early 2023. Our reasons for moving are that we actually had more space than we needed. We used to have 140 people and effectively 4 facilities or 4 pieces of property, and we now have less than 40 people. So we just didn't need the excess space. In addition, by exiting Manchester on a net basis, we expect to save around GBP 700,000 a year once complete. And it is the case that Manchester was a more expensive facility than Runcorn. But probably the most important thing about this move is we absolutely did not want to give up our production capability. So if we were going to exit one site, it was always going to be Manchester because you can relocate R&D and scale it to Runcorn. You could not have relocated production from Runcorn to Manchester. The next question, question 4. The last time you talked, you said you were the most optimistic unit ever been for the company, what you're positioned now? The simple answer is actually more optimistic than it was in November last time, last year. I mean I didn't want to have that just a reminder that the company is being taken to the [indiscernible] twice back in 2015, when we were really close to what we thought was going to be production with Samsung and [indiscernible] and then in 2019, when we were ready for production with the U.S. customer. So we know we've had [indiscernible] before. But all that aside, our confidence today is bigger than I think it was at either of those times because you have a customer published road map, and we have got expectations for what's going to happen, et cetera. So I'm more optimistic today than I was in November '21, while still acknowledging that we're not over the finishing line and certain things still have to follow into place. And the next question, do you retain enough staff to carry out R&D, scale up and production? Why are you recruiting now? As Liam said, we retain all 3 of our capabilities today. So we've got our R&D capability, our scale up capability and our production capability. It is worth noting as an advanced materials business, our business is not particularly labor-intensive, particularly on the production side. R&D is more labor-intensive, but production is not. Output can be significantly increased just by increasing how many -- the size of the recipe. Imagine, if you got a big mixing bill, you can choose to have 1, 2, 5x, 10x. So we have the equipment and the facility in place that can produce very significant levels of revenue depending on the actual demand from the customers. And in terms of why are we recruiting now, and the answer is a very boring one. It's just dealing with normal staff turnover. So one member of staff decided that they commute to Runcorn is too far from given where they are in Manchester. So we need to replace that person and a number of members staff who decided they want to spend a bit of time with their family. So yes, it's just normal staff turnover. It's not indicative of something happening on an impending basis. Next question. There's a few here about the litigation. So how do the oral hearing go for the IPRs? I already said, we think it went very well. I say good size, but has some challenging questions but on balance. If you can take the weight of the questions as is indicative of where the PTAB are leaning, we think we did better than the other side on the IPR. So we're looking forward to the actual results of the IPRs in May. Next question, again, litigation related. Have Samsung admitted infringement? So their only defense is that patents are not valid? I have to say an emphatic no to that. That is absolutely not correct. Challenging validity is definitely not admitting infringement. It's just a first line of attack. So basically, a defendant will first argue that the patents are invalid. If they lose that, they will then say, well, it doesn't matter, they're valid because we weren't infringing them anyway. And if they lose that, they'll then say, well, the fact that they're valid and we're infringing that doesn't really matter because the damages were really, really low. So you can see it doesn't matter who you're up against, they will go through all those 3 lines of events. And you can have a view on which of those that got better chances on. Some people might say maybe Samsung were betting more on IPR. Some people might say they're betting more on infringement, but they will go through all 3. So it is not the case that they have admitted infringement by going after validity in IPRs as their first line of attack. And just to remind that we have to be successful in all 3 to win. We have to prove validity, we have to prove infringement, and then we have to prove a reasonable damages model. So the next question, have Samsung said they would agree to be bind by PTAB and hence given up the right to appeal the findings of PTAB? This is actually 2 slightly different questions. So the first question, have they agreed to be bind by PTAB? Yes, they agreed to that as part of getting the trial delayed in Texas that -- and I'll read you the formal words, they will not challenge any grant raised or they reasonably could have been raised in the IPR process. Now you can see from that language is if there's a grant that could not have been reasonably raised, then it is still for them to be able to challenge validity. But we effectively believe that they almost conceded that whatever the PTAB decide, they are going to be agreed to bind by, even though there are some other technical things that they might have tactically to deal. However, they are still allowed to appeal PTAB. So what they basically said is they've agreed to be bound by a final decision of PTAB that comes after appeal processes. So they do have the right to appeal whatever it comes out in the next 4 to 5 weeks. Next question, when do the payments expire? And how does that impact any potential damages models? The last of the core [ QD patents ], so there are 4 core [ QD patents ]. The last of them expires in early 2028. Those core patents have about 46 claims attached to them, almost 47. The [indiscernible], it has 1 claim and that patent expires in 2035. So it's an extra 7 years. And in really simple language, the longer the patent, the more potential future damages, assuming that more actual TVs or displays or films are sold. This is particularly relevant in a high-growth market. So you can imagine some markets are growing so quickly that, a hypothetical example, you can imagine that in the fourth year of product sales, the sales in that year could actually be higher than the first 3 years combined. So the life of the patents is relevant to the amount of damages again, particularly, in the high-growth market. Question in how many countries around the world does Nanoco have the same or similar patents registered? I think I covered that in the presentation. But in terms of individual countries, we got the U.K., Germany, France, Netherlands, Japan, Korea, China. There are more. And as I mentioned, there isn't a global patent system. These are separate and distinct filings, not just because of the language, but because individual patent officers may agree to certain claims than another country does, et cetera, et cetera. So if you wanted to litigate even after a successful outcome in the U.S., you would have to go through litigation again, unless you'd come to a global negotiated settlement with Samsung. So we estimate that our combined patent coverage in terms of TV sales for Samsung is actually bigger outside the USA than the USA itself. So whether you're doubling it or tripling it for the whole world, it's that order of magnitude. Next question is in litigation. We've got a couple more on these. If Nanoco win at IPR and in Texas, will Samsung have to stop selling TVs in the U.S.? Unfortunately, no. This is absolutely not correct. The previous U.S. Supreme Court, and I think we actually cite the court case in the formal interim document, you can look it up there, and actually settle that patent infringement cases should be settled by economic compensation, not by an injunction. If we were a direct competitor, I think I mentioned if we make TVs, we have more chance in the U.S. of getting an injunction, but even then, it would be hard because of the Supreme Court view that says, no, you just get financial compensation. However, again, I think I mentioned, in a number of European or other global territories around the world, who take a different take on these matters, it is possible to seek an injunction. And they're more often granted. Again, they're not guaranteed and they could be before or after appeals, et cetera. But there are other territories where there's a much stronger chance of getting an injunction. And I should emphasize, this all stands even though when we sued Samsung, we did apply for an injunction. It's almost standard. You just included, you say, we want economic relief and injunctive relief, et cetera, et cetera. Even if your chances are getting it are quite little. So it wasn't a mistake to ask for it, but it's just acknowledging the reality that they're rarely granted. So if we are successful in Texas and in the IPRs, we will look at next territories, next steps to potentially start litigating against Samsung. Next question, will the company agree to a settlement offer from Samsung? So again, the answer to this is straightforward. The Board has been absolutely consistent throughout the litigation that our goal is to deliver fair value to our shareholders for IP assets for the cost of developing these assets for many years of work that have been done. And fair value basically means a fair value for the life of the patents for the whole world. So as long as there's fair value being achieved, it would be easier and faster through a settlement. But if we have to go down the legal process and the appeals, et cetera, then that's what we will do. And clearly, there's a trade-off of a negotiation. But again, you have to start at what's the fair value of this lawsuit and then have your conversations about potential settlements. And there's next question, can you remind us the different damages models on the dollar amounts that they might translate into? I think, again, I covered this. There's the high value when you talk about the total value of the TV. There's a mid-value where it's an alternative, but similar approach where you value the individual contributing components or on the low end, where you really just break the TV dine into your 400 constituent parts and you just focus on the individual components [indiscernible]. Again, I just have to reiterate, we have never given a dollar value for this, other than to say we think it's potentially transformative for shareholder value in the business. And you only need to look at the numbers of TVs, the values of the TVs, the values of the markets and even ascribing relatively low royalty rates to those, you get to in the numeral terms very significant sums of money. Yes, there's more of that. Yes. So just quickly, there's a couple more pre-submitted, and then we'll get to the ones that are live. So this -- so changing away from litigation, some of the last question about how can you change the timing of your different results announcements? And in answer to this, again, a bit like the recruitment thing is very boring. So in the real world, we have customer visits, customer and supplier deliverables, tender exercises, Board schedules move around, et cetera, people go on holidays, different parts of the country have different holidays, people get sick, all those things. And we're very much focused on delivering value. And while obviously, results stays, et cetera, it's important to get them out, et cetera, to get those updates out there. I think we tend to prioritize the value-adding activities, the sorts of things that I've just mentioned. So to be clear, our results dates really are driven just by the administrative tasks and the logistics of actually producing them and publishing them. Again, I should just emphasize, if the company today is in possession of any inside information, it's not a matter of hours to publish that. You can't hold on to it because you want to link it to the notes, dates or whatever. So as I say, I know it can be frustrating. I know some companies basically religiously go with the same date every year or every time for their results. But with Nanoco being a small company versus having less resources, there's a much harder commitments for us to make. So we do have to let things a little, but as I say, I wouldn't read much into the timing of those results. And next question was how long does the latest work package last with European customer? Again, it's in the [ RNS ]. It says all the income is going to be earned in the third quarter of this financial year or so between the months of February and April, so in the month we're in now. And there's another question sort of linked to that, I find it difficult to work out the size of your new work package for the European customer. Can you explain more? And then this is just very simple general reminders, but companies and with Nanoco, because we're small and our numbers are small, so the really small numbers kicks in, but companies typically tend to work to a 5% to 10% rule of thumb as a quantitative measure of when you need to update markets or make an announcement about a work package. So for us, 5% to 10% movement in revenue. In absolute terms, it's small, but using that rule of thumb, some people may think, well, a 10% increase, that's big enough to be talking about. But just to be clear, there is no such actual rule that it is a rule of thumb. The other thing is if you're trying to work out the size of a work package, you look for the qualifiers. If we say we're going to beat expectations, then you might be thinking around the 5% to 10%. If it's going to be much higher than that, then you might be talking about significantly outperform or 25% higher or almost double, et cetera. But we do try to make sure that each RNS has got enough information, if you read it carefully to answer all those sorts of questions. Turning now to the questions that have come in on line. So the first question and I'll paraphrase, but it says there have been -- you previously mentioned about minimum quantities of material in the contract with the European customer. Can you give us some idea of the quantities and those that apply to your other customers? Simple answer is that's commercially sensitive. And obviously, I wouldn't give out details of the actual financial implications of those contracts. I will say the minimum quantity is quite small. So it wouldn't automatically get Nanoco to a breakeven position. It would be a relatively low level of revenue, but it's one of those hits in the same way that there is a minimum purchase requirement for the customer. We also are guaranteed a minimum share of customer demand in some of our contracts. So those are sorts of protections that we put in place to make sure that we don't do all the work and then find that another bigger company, it gets 90% of the demand and we get 5% or 10%. We have much stronger protections than that. The next question was you clearly preparing Nanoco for production? When do you expect the first commercial contract being officially announced? Is it 1 to 2 months from now, in the next 6 months or longer? Can you tell us already any number of possible revenue annually? Again, I think I've covered this, so we expect visibility before the end of the year. So that's visibility in the next 6, 7 months. We'll be ready for production in the third quarter of this year, but that does not mean there will be production because we will be ready. We'll finish the Manchester moves. And again, the size really depends on that first application and the size of the application, the car example is a good one. If it was sensors for a super car, it will be a low level demand for us. If it was demand for sensors in a ubiquitous family type car, then it would be a much bigger demand. In consumer and electronics terms, if it was demand to go on a major handset for a major telephone company, one of the big boys around the world, that would immediately be a full shift of operations coming out of Runcorn. And one full shift at Runcorn can give around GBP 15 million to GBP 20 million of revenue. Conversely, if it was a much more niche application, if it was a wearable, if it was something in pair of glasses or a headset or one of these other devices that's coming out, the demand would be much lower. And then actually on a device like that low levels of demand, again, we wouldn't -- it would not automatically take us to a breakeven point, but I think the critical thing for us would be, as I said earlier, it will be the very first time we've ever been on an actual commercial product. Next question, you mentioned you can also sue for IP in other markets. Will it be the same financing model as Samsung lawsuit, i.e., third-party financing and a cooperation with Mintz as a partner law firm? The simple answer is it really depends. So we are evaluating the cost of litigation in other territories. The United States is by far the most expensive. It is possible that the company's either organic business or financial circumstances might be that we could self-fund litigation in the European territory, where it's at a much lower cost. Equally, we could get third-party financing. We could try to extend the work with the existing funding partner. We could look for a new third party. And we could go to shareholders and say, actually, we need a few million quid to sue the European territory, and it means that any upside is all kept for shareholders. So there are different options available. Cooperation with Mintz in the same question. Mintz have done a staggeringly good job and they are thoroughly professional and the guys we work with are really, really good. So we would like that to continue, whether it's directly through Mintz or them coordinating with associated law firms, et cetera, but we look to keep that in place. Next question was, could you give a bit more insight on the move to Runcorn? Will all staff be retained and able to make the move? Operational benefits offering the company would encourage you to make the leap? As I said, we had 4 facilities that could cope with 150, 160 staff. So we basically have too much space. On top of that, we absolutely wanted to keep production, which meant we had to keep Runcorn. Manchester scale-up in R&D activities were more affordable. Will all staff be retained? That's what we've set out to achieve. But the simple practicalities are that there are individuals who say, well, a 2 or 3 hour commute to work each today is actually just too long, 6 hours in the car, it's just too long. But we have put in place a number of staff benefits, whether it's petrol allowances, et cetera, for a period of time, actually giving some members of staff loans on learning to drive, et cetera, to facilitate the move because we absolutely did not need to reduce our headcount as a result of this move. And as I mentioned earlier, that's one of the reasons why we're actually recruiting some staff. In terms of operational benefits, having everyone in 1 place on 1 site, transferring between optimization, development scale up, et cetera. It's just much easier. On the Runcorn side, frankly, it's set up for large-scale production, large-scale deliveries. It's an old ICI R&D environment. Manchester is, I would say, it's less production friendly. It's more very light touch -- very light R&D. So that covers that. And the next question, a lot of historic R&D work on infrared sensor development focused on cadmium selenide and calcium -- cadmium sulfide. And so what gives the company confidence that its customers published roadmaps intend to launch commercial production in '23 will use Nanoco materials, instead not based on cadmium? We knew what's in the customers' materials that they're running through pilot lines, including auto wafers and building prototype sensors. They're absolutely not based on cad selenide or cad sulfide, probably to make it was wrong, but I think that's what it's saying because I'm not a chemist. And yes, so there's absolutely no reason to assume that they're not going to use our materials because they are focused on what type of material because we work really closely with our customers' R&D teams. We know what materials they are using. In theory, we have a black lab, a secret lab somewhere, working on a completely different material, but we've seen no evidence of that. So that would -- I wouldn't lose any sleep whatsoever over that question or issue. The only real alternative to quantum dots on CMOS is InGaAs, and InGaAs is unbelievably expensive. I've said 100x more expensive. It can be at 1000x more expensive. Next question, do the lower damages awards as reported by [ Edison ] apply to the current litigation territory U.S. only or to worldwide? I know -- so Edison worked out their number themselves. They obviously do talk to us. We talk to them about, well, if its 10 million TVs, and if a TV is $1,500 more expensive, et cetera. They came up with their own royalty rate to apply to that. So that's their estimate of loss of revenue based, I guess, on a low interpretation of damages models or a medium possibly. Yes, it is U.S. only and yes, it is history only. So again, if you're using that as a baseline number, you have to apply those multipliers for the future and the rest of the world. Next question, with the PTAB, has there been any dialogue for you to answer further questions after the oral hearing? No. It doesn't work that way. You're right, Andrew. It is radio silence, oral hearing is complete. We now wait for the outcome from PTAB. I should warn folk, the detail will publish. We may get 30 minutes notice before everyone else before you guys. So it's not one of the easier where the Prime Minister gets to report 3 weeks in advance and we get to think about it. So when they publish, you guys will know very shortly. Thereafter, if not, actually, it's the same time. I noticed there was a slight delay with the trade receivables. Is it anything to worry about? I think Liam mentioned it. Our very big customer, you all know, they run really huge, enormous inflexible ERP systems. And if there's a spelling mistake in a purchase order, it can mean that you have to go back to the start of the payment process. So absolutely nothing to worry about. That money did come in, in February. And we are talking to our larger customers, just reminding them that we're a small company and actually that kind of interruption to cash flow isn't helpful. They are engaging very strongly and positively with us to try and make sure that doesn't happen again. A question, what would you class as a modest payment to a larger payment? Again, this is digging into the what size we think the numbers are. We're not going to answer that question, other than to say, even at the low end of things, we think a modest outcome in the United States only, on historical damages, will be transformative for shareholder value. However, you measure that, whether it's in terms of our market cap today or whatever. Clearly, there could be a -- we can lose and get nothing. Clearly, you could because the jury is deciding this, they're not technical experts that could take a lower number. But our view is on our assessment of damages at the low end, it's still transformative for shareholder value. There's a question. I know Nanoco came close to display sales with the Taiwanese customer. Are you able to say what happened there? And is that opportunity still live? I'm not certainly the specific one is, this may be about when I just joined the company, gaming monitors, where we thought we might have maybe a few months away, that opportunity effectively went away. We still talk to those customers, but I think we still have this hurdle that sounds to not only take them off monopoly on CFQD market, but there's such a big base that they're actually making it difficult for us to get in with other companies even though we still got some small inquiries. So I wouldn't call out any hope for a short-term movement on that time of these customers. Next one, you mentioned last time, the current stock price doesn't reflect the value of the company. Share price has risen enormously since March. How you see the value of the company now? Does the share price [indiscernible] company's value and you still seeing Nanoco's undervalued? And well on 2 grounds, if you go back to when the organic business was ready for production with the U.S. customer. And again, we thought that was going to be around the handset, but the company was valued around 50p, 55p a share. We haven't sued Samsung. So you can always take that as the market saying, that's what you were worth when we thought you were about to go into production. So from an organic point of view, that sort of number or bigger to me would seem sensible given where we are with the European customer, then step the lawsuits on top of that. So -- and if you decide the lawsuit as a [indiscernible], if it isn't worth anything, you won't add anything to that. If you decide, you think it's actually worth the same value as the company today, then you add today's [Indiscernible] whatever. But yes, so I think the Board still believes there's a lot more value to be generated for shareholders and for the company. Next question, there's only 2 left. Apologies we've over run 3 minutes, but does the company intend to distribute any part of the future litigation of the award as a special dividend? Again, hopefully, you won't be surprised. Obviously, the Board won't tie themselves to any particular strategy, but it will really depend on the size of that, on business need. If we have got an enormous opportunity that costs a lot of money, but we think it's a better use of funds in distributing, we will. Equally, if we decide this award is so big that some of it can go back to shareholders, whether it's a dividend, share buybacks, some other form of distribution, et cetera, et cetera, then again, that is a consideration, but it really will depend of the business need at the time. But if I remind you that we're already with our Runcorn facility have the capability of doing over GBP 100 million of revenue, the need for a state of the -- brand new state-of-the-art factory. And at this point in time, we look low, but if we're really successful and really fast in a rollout of products with our sensing customers and even some display orders came in, then we might actually need to look at an expansion of potentially a capital investment, but it will really come back down to the size of any award. Last question, if Samsung have been infringed, then [indiscernible] will have lost out as well. Would they have any means to recompense? [indiscernible] aren't to connected our IP, so that they have a recompense there. Clearly, [indiscernible] an enormous company. They already have multiple commercial relationships with Samsung. I'd be speculating if I say I don't know if they've already negotiated you a better price on product A because they lost out on product B, et cetera. But [indiscernible] aren't part of this lawsuit, they're not joined to this lawsuit. I don't believe they were deposed or by either side in respect to the lawsuit. So they've certainly lost out, but they've got and have had other ways of making money, obviously, still supplying Samsung with various materials, et cetera. But other than that, I can't really speculate on what they would want to do, et cetera. So that brings it to the end of the questions that were submitted online.

You've been very generous to take your time and you actually managed to address all those questions from investors. And of course, the company will review questions submitted today and will publish the response on the Investors company platform. But just before redirect investors to provide you with their feedback, which I know is particularly important to you both, Brian, can I just ask you for a few closing comments.

Okay. Thank you. I'm -- so just to reiterate what I said a couple of times, 2022 is going to be a big year for the company from an organic business perspective because we believe we're going to get that visibility on production orders. But also you've got those 2 big set pace events on the litigation. One locked in for the IPR decision in May and then our expectation that the trial and the verdict will happen in the second half of the year. And as I said, our confidence in both of those, because we continue to deliver, because we and our advisers, the litigation are making good progress, we expect all of those things to create further positive momentum for us, the organic business and for the litigation over the next 8 to 12 months. And we look forward to updating you on those events later in the year on individual announcement basis. And also obviously, we will get our full year results, which will be announced sometime around September, October.

Brian, Liam, thank you very much for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments complete, and I'm sure will 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.