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

Good morning, and welcome to the Nanoco Group plc investor presentation. [Operator Instructions] Due to the number of attendees, the company will not be addressing live questions in today's meeting. However, we'll review all questions submitted today and publish responses where it is appropriate to do so, alongside the pre-submitted questions. Before we begin, I would like to submit the following poll. I would now like to hand you over to CEO, Brian Tenner. Good morning, sir.

Thanks very much. Hello, everyone. My name is Brian Tenner. Welcome to those listening live this morning, or who are listening afterwards on the website recording, which will be made available shortly. I'm joined today by Liam Gray, our CFO, and together, we will be presenting our interim results for the 6 months ended 31st of January 2023. We'll be kicking things off on Slide #3. So if you could advance to that, please -- with the highlights from the period and also the significant opportunities that we see for Nanoco going forward. Firstly, today we have final validation process underway for a number of commercial production materials, and we expect production orders by the end of this calendar year, so by December 2023. Secondly, we're still operating in markets where there's significant forecast growth in both Sensing and Display. Thirdly, the litigation process that we've now completed -- validated the group's core IP, and that core IP remains under the ownership of Nanoco. And last, but by no means least, the litigation proceeds underpin the commercial business, which is really important today, particularly in a market environment that is very much risk off for small-cap companies. So those are the highlights of the period and shortly after the period end. So if we now turn to Slide #4, where I have a reminder of the value opportunities that we see for Nanoco. Looking at the green bubble on the left, the last few years our main focus has been on our Sensing business. We already are delivering service and product revenue from our Sensing business, and we expect to see multiple material validations in this financial year. So before the end of July 23. That then is a precondition [ too ], and will lead on to actual commercial production orders, which, as I've already said, we expect to see by the end of this calendar year, so by December 2023. So overall in Sensing, we feel we've delivered some strong progress in the period. If we look at the pinkish bubble on the right-hand side, in Display, we're seeing new interest in our materials, and we have the potential to deliver service income, product income. And also, we still have further potential for licensing income. We're seeing increased engagement with a number of Display companies. And in one case, we actually have materials on test with a major TV brand. We also have the opportunity going forward to leverage our now validated core IP, into potential new licenses, as the market penetration of QD devices grows and expands. And underpinning both of those market sectors, Sensing and Display, we still own our core underpinning IP, which is relevant to materials in both of those markets. So now I turn over the pages -- couple of pages to Slide 6. Just a quick reminder of the Sensing markets -- the problem that Nanoco's quantum dots actually sold for the Sensing markets and what's our differentiator here when it comes to the Sensing markets. So just a quick reminder of the problem. So today, there are many billions actually of silicon sensors out there in the market. But actually, silicon sensors have very poor efficiency when it comes to infrared. Either they don't absorb much of the data that's falling on them or actually once you go into longer wavelengths, and there are good reasons to go to longer wavelengths, unenhanced silicon sensors are actually blind. They can't see anything. The longer wavelength infrared will just pass through the sensor undetected. Current sensors, because they're operating at shorter wavelengths closer to natural sunlight, also experience problems with interference from natural light. It's natural sunlight. Particularly at the higher end of wavelengths there is a significant amount of infrared in sunlight. Current sensors are also impacted by atmospheric conditions. I think I gave an example in a previous presentation where I have an electric car and the sensors on that actually deactivated because they couldn't see through. It was very light fog. So that's, again, another problem with silicon sensors today. Because of some of those problems, typically, the lasers that are then paired up with a silicon sensor have to be higher power. And in a static device, whether it's in a building or on a large device like a car, that might not be a big deal, but in a mobile device where battery power is a key attribute and the duration of that battery is a key attribute of the device, then obviously, again, that represents a challenge for those devices. And lastly, a point that needs to be made is that the effective alternative to a silicon-based sensor that's available today as an InGaAs sensor. Those are incredibly expensive. Those can be up to $10,000 for 1 sensor, whereas a CMOS sensor could be in single-digit, $5, $10, or possibly more expensive ones, maybe even up to $100. But you can see that the quantum of difference in cost is enormous. And when you then take into account certain devices just couldn't afford the cost of an InGaAs sensor, then you'll see particularly for consumer electronics markets that a much cheaper alternative is a must if those sensors are going to be deployed. So the question then is, why would you use nanomaterials for quantum dots? Well, quantum dots allow the sensor to see further into the infrared. So instead of just being limited to around 900 nanometers, you can go to 1100, 1350, 1500, 1800, even to 2000 nanometers. That's important for a number of different reasons. As you go further out, you actually overcome issues like interference from satellite. You also can deal with atmospheric conditions because longer wavelength like, literally, not just passes through atmospheric conditions, but can actually go through solid objects as well. If you've got the ability to see through these things, you can actually use a lower-powered laser operating at those longer wavelengths, and again, that lower powered laser [ has ] a direct benefit for the battery needs or the battery life of a mobile device. And lastly, as I've already alluded to, particularly when it comes to consumer electronics, it's hard to imagine a telephone that would -- that's expensive enough to be able to afford an InGaAs sensor at $10,000 or any other consumer electronic device. So, because CMOS sensor enhanced with quantum dots can be over 100x cheaper than the InGaAs alternative, that's a pretty compelling reason to be using quantum dots in a CMOS sensor these days. In terms of what does Nanoco bring to the party then in our differentiation, we've already proven and fully functioning devices over the last few years, including working with previous customers, that the data capture efficiency instead of being 6%, 7% efficient, that can be -- go up towards 60% efficient, so 10x more data being captured. And if you think of sensors or environments where the abundance of data is really important, then that did -- capture efficiency is huge, or a huge positive impact on the performance of the sensor. And again, many listeners will be aware that a number of years ago, we constructed a full production facility capable of supporting hundreds of millions of devices. That was paid for as part of our contracts with the U.S. customer and then our collaboration with them was halted because of a redesign of their device. That factory, if you like, was -- any financial obligation was written off, and that factory is now fully owned by Nanoco and it's wholly unencumbered. Nanoco today offers a wide range of materials. So it's not just one material set, and that's important, again, because you get different performances at the different material sets where you can tune our material to multiple different wavelengths, again, because different applications require different wavelengths of light. And that's why we refer to our technology as a platform technology because we can be flexed into these different areas. And last, but certainly by no means least, our IP, as I mentioned in the summary of our [ tune ] in markets, actually underpins that platform technology, whether it's into those 2 main markets or -- in the past we've addressed other markets like lighting, horticulture, solar, et cetera. I won't go through all the examples below. But again, you will see that there are a number of different areas, different applications for quantum dot enhanced sensors, whether that's in quality control and the ability to the sensor to see -- for example, here, it's a bruised apple which should be rejected from going into the supply chain. It [ glowed ] to be able to see through opaque containers to look at fill levels, et cetera. And there are a number of examples done in there. But basically, the main message is that there's a significant range of potential applications, and those are high-valued applications for whether it's near infrared or short-wave infrared sensors. If we go over the page to Slide #7, there's a short summary here or just an overview of the CMOS image sensor market. The independent market research company, [ ULA ] estimate that, that market today for sensors -- not just for the quantum dots, but for the sensors is around $21 billion today, and that will grow to surpass $30 billion by 2030. That group's [ incentive ] numbers is expected to be driven by a combination of mobile, industrial and automotive applications. But again, as I've mentioned, there's a whole range of other market applications all contributing to that growth. The technology changes that are forecast also support the drive for new materials because you need to be able to increase the speed and sensitivity of those sensors. So even if you're swapping in 1 sensor out for another, the new sensor you wanted to be able to respond faster to see further, to have higher sensitivity, to pick up more data, et cetera. And that's where our quantum dots come in because those quantum dots, basically, turbocharger significantly enhanced the capability of that naked CMOS sensor. I already mentioned a couple of times, cost is a key driver, particularly in the high-volume applications because they tend to be cheaper applications. So whether that's devices in the home, devices in a smart building, devices in logistics and industrial control systems. And again, the largest part of consumer electronics is obviously mobile devices where it's estimated there's around $1.5 billion of those sold every year. So the summary there is, within the overall group in the CMOS image sensor market is that drive for sensors to achieve higher performance standards, and that's where our Nanoco materials can play a key role. We then go over the page now looking at Slide #8. Just a reminder, back in 2008, when we first got into nanomaterials for sensing applications, we effectively had 1 customer, 1 product, 1 application. The chart below that on the bottom left, choose that position as of the end of January 2023. We're currently active with around 5 customers across a multiple range of different materials at different wavelengths. And again, you can see where I mentioned earlier that we're expecting to have 2 materials validated before the end of this financial year. That's the 2 orange dots, you can see we're the #1 sitting inside them where we've made progress in this period. And again, you can see we made progress in other materials as -- in the last period, as highlighted by those boxes with the dotted outlines. Just a reminder, these are relatively long development cycles. So something that's back at development should have a 4 to 5-year road ahead of it before it's ready for commercial applications of production. And the best example of that is that the material that we started to work on in early 2018, that's one of the materials that we're aiming to get into commercial production by the end of this calendar year. But if you look out at 2018 to the end of 2023, that's that 5-year development cycle as an example -- a real-life example that I was just talking about. But again, just to summarize, our key goal for our sensing business, which is where we see our nearest term opportunities, is by the end of this calendar year to have 2 fully validated materials and to actually have production orders for at least one of those materials. If we now go over the page, we're now moving to Slide #10, and give a little bit of background information on the QD display markets. And what you see on this chart is a forecast. It's a combination of forecast from TDR, which again is another independent market forecast with some adjustments for company estimates based on slight more up-to-date information. Key thing to look at this chart is that the significant growth in the flat panel TV market is actually coming from QD enabled TVs. Their share of the market is forecast to rise from around 6% in 2022 to around 34% in -- by 2030. Key thing to look at is that the sort of purplish wedge in the middle, i.e., QD-TVs that don't come from Samsung. That today is relatively small. I think we've explained in the past that Samsung for a number of years, had market shares between 90% and 100% to the QD-TV market -- certainly of the cadmium-free QD-TV market where Nanoco has focused our efforts. You can see that that purple wedge, if you like, of non-Samsung QD-TVs is expected to grow significantly over time. And if you like, that's where the opportunity lies for Nanoco, whether it's in the direct supply of material to go into those TVs or potentially to leverage our validated IP into potential licensing deals with participants in that market. It's worth noting that today, some of that -- and known Samsung QD-TV market is based on cadmium and that is not a market in which Nanoco has participated or is active. And again, there's an expectation that over time that those cadmium QD-TVs will actually be phased out and be replaced with cadmium free TVs. So as I say, over time, you can see that expanding purple wedge of QD-TVs are coming from someone other than Samsung, and that's the opportunity for Nanoco whether through our production capability at Runcorn or our validated IP to access value in that expanding purple wedge. If now go over the page, a little bit more background information on QD display markets. So here, I'm talking about other devices compared to TVs. On the previous page, we noted that they're around 250 million, 300 million QD-TVs over time. If you look here, the unit numbers are higher. However, the individual screen sizes of these devices are lower. So in particular, where it says tablet, phablet, those -- effectively, that's looking at -- primarily at smartphones. So you can see that the individual sizes are lower. A typical 65-inch TV has the same area as around 70 or 80 average-sized mobile phones. But the key message is that the more types of devices are going to be adopting QD technology in their display inside each of that growing number of devices. Those devices themselves are going to experience significant growth within each type of device. And the main message is that, while these are smaller devices in high numbers, they will be equivalent to around a 30% addition to the total area of QD-TVs, and basically bringing it to under real basics. The bigger the display area, the more QDs that -- you need for that, and therefore, the bigger the opportunity for people who are involved in the production or licensing of cadmium free quantum dots for use in display devices. So that was some background information on QD display markets. And now just turning to Slide #12 and looking at the specific opportunities for Nanoco in our cadmium free quantum dots. Already mentioned that we're expecting significant growth forecast -- or there are significant growth forecast for QD-TVs with a compound annual growth rate through to 2030 of around 38%. The fact that we had our IP validated by the litigation process, that does create a significant technical and financial barrier to new entrants to enter the market. I think I've already mentioned, we already have our cadmium free quantum dots on test with a major TV brand. We have had that in the past, but the last time would have been 4 or 5 years ago. So that's a nice step forward for us again. In retaining our Runcorn production facility, we have enough capacity to deal with any new entrant coming into the QD-TV market and actually most of the non-Samsung participants in the cad-free TV market today. We could service those out of the Runcorn facility, which has the production capacity service for few million TVs. And if you consider that -- the entire cadmium free TV market today, excluding Samsung, there's only around 1 million to 2 million TVs. You can see why we're saying we could actually support either a new entrant or one of those participants. It's also the case that if we exceeded our capacity at Runcorn and there are 2 other options. One is that it would be a relatively low cost to scale our own production capacity if required and also outsourced production is always an option for us as we've had agreements in the past and still have some license agreements in place for outsourced production. Last couple of points. RoHS, while the legislation to adopt that in Europe is still outstanding, the Europeans have accepted a new performance standard, which means cadmium-based TVs will not be legal once that legislation is passed in Europe. However, it's worth noting, an RoHS is a thing -- restriction of hazardous substances -- It's a thing around the whole world. It's not just a European thing. There's RoHS in the United States in the different states. Each one has their own legislation and also in companies as diverse as China, et cetera. It's worth noting, though, that a number of larger companies rather than waiting for RoHS to catch up and be legislated or enacted in various companies -- countries, sorry -- a number of countries or companies are actually pushing their ESG agendas forward by actually embracing cadmium free solutions before they're obliged through regulation. And the last point to make on here is, we're currently exploring a distribution agreement for our materials for quantum dots with a potential partner in Chinese -- in China to be able to access that important market. Then [ we ] go over the page. I want to talk a little bit about the 2 IP transactions that the -- contracts that the group signed shortly after the period end. As we were aware, we agreed to stay in the litigation before the period end and the 2 final contracts were signed after the period end. What I said out here on Page 14 is the financial impact of those 2 transactions. So starting at the top, the total amount receivable under those 2 contracts is $150 million growth. The expected share from Nanoco is $90 million on a pre-tax basis. The litigation funder and advisor costs totaled around $16 million. Now I need say, or it's obvious that, when you look at litigation finance after you've won, it looks expensive, when you look at that 40% of the total proceeds that went to the funder and the advisor. So as I say, after you have won, it looks expensive. However, if you go back to before you started back for us in February 2020 when the company had a couple of million pounds available to it in the bank, that was for running its organic business, et cetera. When you're in that situation, can't even access the legal system to seek redress for your IP infringement, et cetera, then that's why you look to litigation finance, which is clearly accepted to be an expensive resource. But that's the approach that the company took and the reasons for it. Just to remind, we actually run an independent tender exercise for nonrecourse, meaning, if you lose, you get nothing financing. So that rules out the vast majority of ordinary financing. Most people expect their money back, litigation financers do not. And we received 4 independent offers of litigation finance from large litigation financing houses, both here in the U.K. and in the United States. At the end of that independent tender process, we evaluated those 4 offers and we selected GLS Capital based in Chicago on the basis of, A, there are superior commercial terms, and B, also the expertise and experience of their team, because you do want a litigation funder, he understands litigation, he understands the other side, understands tactics, et cetera. It's not just about who can provide the cheapest money. The last point I'd make here on that funder versus Nanoco share is that we're actually in retaining 60% of the gross award. That's higher than we previously anticipated, where we've made a number of public statements saying we would expect to retain around half of the -- or at least half of the -- a potential outcome that was towards the lower end of possible outcomes. Looking then at actual cash usage. Tranche 1 was received in March 2023, that was $75 million. The funder and advisers, their $60 million has been paid out. Again, people have asked the question, why have they been paid out first. Well, if you're putting up 100% risk capital, you can understand why one of the negotiated terms in their contracts was, they are the first to get paid, which does mean that if we had an outcome, say, of $30 million, they would get paid first, $30 million would have resulted in 0 money for Nanoco. That leaves then $15 million on a pre-tax basis for the organic business. Obviously, Nanoco then has to service our tax and our organic business debt. Looking at tranche 2, the next $75 million, that's due by February 2024, that is wholly unencumbered. All $75 million of that, again, on a pre-tax basis will be for Nanoco. And at that time in February 2024, the Board will decide the best use of those funds at that time. And we'll balance business needs with the already public commitment to make a material return of capital to shareholders, whether by share buyback or in the form of dividends. I think as well, we've also publicly disclosed because of the nature of our balance sheet and our accumulated losses and reserve positions in our subsidiaries, but also in the parent company. At some point in the coming months, we will need to get a high court approved scheme to do a capital reduction, eliminate some of our share premium so that actually when those proceeds are received, that we are in a position to then make that return of capital to shareholders. That's an administrative process. It's relatively quickly -- it's relatively short process, and it will require a shareholder vote to approve that reduction in share capital or share premium in order to allow a return of capital to shareholders. If I then go over the page, a slightly drier topic, but it is important to talk about the accounting for those 2 IP transactions. So as previously announced, the 2 transactions were structured as a sale of IP and an IP license. It's fair to actually look at the 2 contracts together, but it is worth noting that the different performance obligations, if you like, in those 2 contracts have to be accounted for in a different way. I'll deal first with the sale of IP. As we previously announced, we retained full freedom to operate in all products, all markets and all geographies, and that's as a result of 2 things. The 2 things being that we retain the ownership of all patents linked to our current commercial activity and the commercial activity foreseeable in the short term. We also have a license back on those patents that we actually sold, and this is an industry standard thing. And indeed, many of the terms and conditions of these agreements, sale agreement, licenses, et cetera, are just industry standard. So we actually still have access and can operate the patents that we've disposed off. The patents that we sold, there is 118 out of a total of around 500 patents. Again, we've explained that those are noncore payments, nonmaterial patents that had a book value of $0.4 million. And as I said, we do not believe that the sale of those patents in any way impacts our freedom to operate. The disposal, because it occurs at a point in time, will be recognized in financial year '23 as a profit on disposal of intangible assets, and there is an extensive non-adjusting post-balance sheet event disclosure note. At the end of the detailed interim statements that sets out the numbers and figures around the accounting that I'm describing in words here today. For then turn to the IP license. The IP license has been granted over our remaining IP portfolio. And that's, say, the portfolio that still includes all of our core patents, including the 2 patents that we were going to court on. The income there, rather than being recognized at the point of time is expected to be recognized over the next 9 years or so. And that's reflecting the fact that there is an ongoing access for Samsung to that IP portfolio. And that just then reflects the requirements of IFRS 15, the accounting standard that deals with revenue recognition because this is the ongoing obligation to give Samsung access to that portfolio. I should emphasize that does not include brand-new technology. It's the portfolio for the remainder of its average remaining life. Together, those 2 agreements are what led to the global settlement overall litigation between Nanoco and Samsung. It also leads to the end of the appeals that have been lodged against our IP, PTAB. And again, so that's part of the reinforcing of our core IP, being validated by PTAB. The last note, just to point out here, from an accounting point of view, and these are estimates because there's quite a complex interaction between the Patent Box regime in the U.K., which delivers an attractive 10% tax rate. Also, the U.K. R&D tax credit regime and our position in that may change slightly. We're still participants in it. We still benefit from it. But we have to assess going forward whether or not we want to surrender our losses for cash because if you do that, you actually get a lower proportion of your losses. And we also have accumulated U.K. losses at the end of January 2023 amounting to GBP 43 million. So in round sums the final cash tax impact of the transaction is estimated to be around GBP 5 million of cash tax payable over the next 2 years. Just turning over the page then to Slide #16. What I want to set out here is, this is a [ Herlit ] board, if you like. Look at litigation risk and how we assessed a number of possible scenarios. There are more than this, but we set out 4 possible scenarios here that were considered by the Board. Because in assessing whether or not to settle a litigation without going to trial, that invariably involves a degree of compromise on your most favorable outcome because you're removing other risks from the equation. If I just run through these quickly, then 1 scenario was to actually lose, go to trial and the jury decide, no, we actually believe Samsung story and we don't think there is an infringement. We haven't put any percentages around these. People will have their own views. Some people think that the chance of losing was relatively low. Other people may have thought it was actually a much more meaningful number. But there is a genuine chance of losing if you're in front of a jury. Also, if you lose on a jury actually finding factually there is no infringement, it's fair to say that you have virtually new chance of winning on appeal. It's possible that you could win on appeal, but you would need to start showing that the jury had reached an irrational verdict, and that's something that only happens very rarely. So if you lose, you've got a very low chance of winning on appeal. Another scenario, which is from a net return to Nanoco shareholders point of view, just as bad as losing actually, is if you win, but you win on the Samsung damages model, so here, the jury decide there has been infringement. Samsung have infringed your IP, but actually, the jury are convinced as Samsung's damages arguments and model. So again, there, with the jury finding a fact and the jury deciding around you what the damages are, yes, you could appeal against the low damages. You obviously want to appeal the verdict as you won, but appealing against the damages. And again, you may have relatively low chances of success there. If you then look at the bottom right-hand corner on here, winning on our own low damages model -- as again, as we explained multiple times over the last 3 years, 1 damages model would look at the component in the TV, 1 damages model at the extreme other end would look at the total TV for value with a whole range of different ways of looking at damages in between. But it's fair to say that if you win on your own low damages model, you actually have -- you can't pay because you want -- you can't pay your own damages model because it wasn't your own damages model. So those are 3 of the outcomes. If you then look at the fourth outcome -- possible outcome, or fourth scenario, yes, you could win, and you could win on your high damages model. Now we've made it clear, and I think we said in our annual report a number of times that our view was that, if you won on the high damages model, the other side would be absolutely guarantee to appeal. You only need to look at the history of major awards and appeals and see how long they last. They can be 4-plus years because you could have retrials -- you can have damages, retrials, retrials or retrials, et cetera. You've also obviously got a risk of losing on appeal, in which case the win becomes a loss. You've also got the risk, if there is a damages retrial that you actually are back to then rearguing the damages models, which could take you back to winning on the other side damages model, your low damages model or your high damages model again. Clearly, the longer that goes on, you then incur a further very expensive litigation costs. And ultimately, you then get into the question of how is that going to be funded. And because it's not an open checkbook from any litigation finance provider, there is a budget. It will eventually run out, then you have to decide what to do thereafter. And again, you may time yourself back in the hands of further litigation finance or even more expensive litigation finance. So obviously, the Board took extensive advice from different advisers throughout this process. But in the summary, looking at those different scenarios is -- there are actually 3 scenarios there. Given the fact that litigation finance and advisers get paid first, 3 of those scenarios would actually lead to an outcome of nil for Nanoco with no obvious way forward or strong low risk way forward in dealing with that. The last scenario, the fourth scenario, irrespective what you view of those percentage chances is clearly, it does have further risks associated with it. So in summary, any assessment of litigation risk going into a jury trial, you're going to make adjustments for risk. If you decide to settle, you're going to compromise on some of the things that you're trying to achieve. And that's why we ended up deciding that in the best interest of the company, that gross settlement of $150 million, netting $90 million for the organic business was the right thing to do. Ultimately, we [ sued ] one of the biggest -- best resource companies in the world. We netted more money or money that's greater in value than the company was when we actually started this litigation or just before we started this litigation. If I then move over to the page and looking at future licensing opportunities. The US PTAB validated our core patents. So that's a strength for us. We retained those core process and composition of matter patents. And those 2 things together without a growing wedge of -- if you remember, the growing purple wage of QD-TVs that are coming from someone other than Samsung, that creates an opportunity for Nanoco for proactive licensing approaches as that market is growing. We've already established an internal IP licensing team that is identifying opportunities, and we've retained our IP strategy expert to advisers going forward. We're also in discussions with a couple of different companies about looking at options for external licensing support to support those efforts to leverage value from that IP portfolio that we still have today. The last point on this slide is just to make a point clear that the proceeds from the IPC on the license, therefore [ allow ] going forward to choose whether or not to -- if we have to litigate the game, whether to use litigation finance or whether to self-fund that. So the summary here is that, with that asset still owned by the business, there is the potential in the medium term to create IP income to supplement the commercial business, which is the main focus of our managed containment business activity. I'll hand you over to Liam now.

Thank you, Brian, and good morning, everyone. If we move on to the financial highlights slide. Starting with our trading results. Revenue was up 45% on the same period in the prior year. This increase has been driven by an increase in the sale of materials by approximately 60% as part of the validation process, which all in all has increased revenue up to $1.6 million in the 6-month period. Our cost base remains stable. However, it's worth pointing out that some of the financial benefits from the closure of the Manchester facility in November 22, been partially offset by inflationary cost increases. And in addition, we continue to invest in our premises and staff, where we have recently seen a 30% increase in headcount, which reflects the increased workload across the business. Cash to period ended GBP 6 million, fallen from GBP 6.8 million as reported at 31 July '22. This is a net cash [ spend ] just over north of GBP 1 million payment, and that includes the receipt of the R&D tax claim related to the prior financial period. And still relating to cash transfer on the proceeds from the sale of the IP and license agreement [ were ] received post period end in March '23. We move on to the income statement slide, I just follow a few bits out. As I mentioned before, revenues of 45% and the increase in material sales has increased the cost of sales number from 0.1% to 0.3%. As mentioned, the cost base remains fairly static, but we have seen some inflationary cost increases in both labor and operating costs, which means our adjusted EBITDA is in line with prior year. And as Brian mentioned on our tax regime -- our tax position, we'll weather our tax advisers at year-end to identify the most efficient use of our brought-forward tax losses and our position in the patent box regime, given the profits which will result in the sale of IP and the license agreements. We then move on to the next slide. In interest of time, we intend to get to Q&A. I'll just skip the next couple of slides, we should bridge on movements in that, loss and movement in cash. And this gets us to our financial summary. So for guidance, as we have previously mentioned, our full year revenue will be around 20% ahead of FY '22. This is before the impact of the Samsung license agreement, which will contribute an additional GBP 3 million of license fee revenue. Our cost base remains at GBP 0.4 million per month, but the savings from the closure of the Manchester site being partially offset by inflation pressures and increase in headcount. On capabilities, we are managed to retain our core capabilities through 3 very challenging years. Our recent increase in headcount will have a positive impact on our capacity to provide additional services and supply card materials as and when required. And we do continue to invest in both our Runcorn facilities. And finally, just on treasury. We finished the pay with GBP 6 million of cash, reflecting a net cash consumption of just over north a GBP 1 million per month. The cash proceeds from the sale of IP and license agreement, meaning the cash flow [indiscernible] are no longer a concern for the business. And finally, we are looking at restructuring our balance sheet to enable a potential retain of capital in the future. And with that, I'll pass you back to Brian to summarize.

So just running quickly through Slide 25. And as Liam said, we've got over 30 pre-submitted questions we want to get to. So the [ folk ] can digest this at their leisure. But in terms of the opportunity, we're still active in some very high-growth global markets, whether linked to Display or Sensing. Our validated IP creates barriers to entry and create value leverage for us in display markets. And we have a wide range of novel high-performing materials to exploit -- expected rather, rapid growth in Sensing markets. We refer to our technology as a platform and the business that we now think is sitting on a platform in terms of we're in now the most robust financial and commercial position in our 20-year history. Our core IP underpins both display and sensing opportunities. And as I mentioned earlier, the proceeds of the litigation process means that the company has strengthened a fully funded risk of the market. Lastly, in terms of value going forward, the litigation delivered the transformational value for Nanoco with our IP being validated by the process. We do have 2 materials on final preproduction validation, and management focus, as we said before, remains on our commercial business because that's the best way to deliver a sustainable long-term increase or shareholder value in the long term. So that's it in terms of going through the presentation. I'll just quickly now turn to the pre-submitted questions. We do have, as I say, more than 30 of them. We've been through them in advanced course of that. And a number of them were duplicates. So where it's the same question on the same thing, we won't go through those. I'll read them out and respond appropriately.

Question 1, can you explain to investors in what way the company is being transformed by the Samsung settlement? So when we started the litigation, the company was worth around GBP 60 million and 3 months later, actually, it was worth less than GBP 30 million. At that time, the company was dependent on near annual fund raises of around GBP 3 million, just to avoid growing concerns [ SKU ], and the risk of becoming an IP show, with our IP of questionable value having never been tested in litigation or having generated commercial production income. Contrast that with following the litigation process, our core IP has been tested and validated by the US PTAB. We're now a fully funded business that can fund itself through to commercial production and should be seen as -- and should not be seen as a funding risk in a relatively hostile risk of market environment. Furthermore, we now have the opportunity to deliver further value from that validated IP portfolio. And obviously, during these 3 years, while the litigation has been ongoing, we've made significant strides forward in our Sensing business and other parts of our commercial business with significant reductions in our cost base, et cetera. So primarily, you've heard the reasons that the litigation has transformed the business, but we've also made other transformational changes to the business during those 3 years. Question 2, with the company share price so low following the less than anticipated amount received in settlement from Samsung, why of our senior Board members not shown confidence in the company and purchase shares with their own money? So collectively and individually, the Board actually have good personal holdings in Nanoco shares and a number of significant additional holdings in options. It's also worth noting that all executive bonuses for the last 4 years, if they've been paid at all have, been paid in deferred shares and not cash. It's also worth noting that the whole board voluntarily reduced their salaries for a very extended period during COVID and actually remain then on reduced salaries for a very long period of time, even after all other staff -- all other companies in the country were returning to full pay. So we believe that the Board has demonstrated significant commitment to Nanoco already. In order to ensure an orderly market and ensure no complaints of insider knowledge by any parties arose when Nanoco shares not suspended prior to the first RNS issued by the company on 6 January '23, confirming discussions regarding the settlement were agreed with Samsung. Sorry, that question slightly convoluted, I was just reading it word for word. A simple answer to that is the company at no reasonable basis to expect a disorderly market in response to the short announcement on Friday, the 6th of January. That announcement simply said that a settlement term should have been agreed, and we have 30 days to agree the detailed terms of a binding agreement, which included the negotiation of a number of high-value items. Question number 4, why was the settlement figure agreement with Samsung so much lower than estimated as a minimum by the market? So I said out in the presentation some of the risks and issues that the Board took into account in evaluating the settlement offer. In any litigation, obviously, the minimum outcome -- and so, that question saying the minimum outcome was a few hundred million. Obviously, in any litigation, as I've explained, the minimum might come in, of course 0 because you lost, with Samsung having their own competing in very low damages model and the company also having a low case damages model. As I said earlier, in 3 out of the 4 illustrative possible scenarios, the company would have netted a 0 after costs. We understand that the Edison estimate was based wholly on public information. It made no alliances for possible discounts required in a compromised settlement item and no line for risk mitigation, time, value, money, et cetera. And all of those factors could influence the final result. And all of those factors were explicitly set out in the group's previous public communications. So we consider that the market was fully informed of the risks and the issues. The next question, it was a duplicate. So we won't repeat that. Next one, do you have a date to work for the production of your dots in the sensor industry? As I said in the presentation, we set out that we expect final validation of 2 materials before the end of July 23 and anticipated commercial production orders for 1 or more of those materials by the end of December 2023. Question 7, 8 and 9 were all duplicates of other questions. Then question 10. It's hard to believe that you've managed to take this company from being in such a strong position with almost certain prospects -- interesting use of almost certain prospects against Samsung to being such a worthless company with utterly unknown prospects, can you explain how this [ capitulation ] was for the benefit of anyone other than the company directors? If you really believe the commercialization was as imminent as you said, and a settlement worth $90 million was not necessary to protect the future of the company? There's a couple of points or quite a few points in there. Response to that is, we set out in the presentation how the Board assessed the risks and rewards in evaluating the offer from Samsung. It's certainly not the case that we had, and I quote almost certain prospects. I think that's a significant exaggeration in our case against Samsung. I won't repeat all of the issues here, but as I've already said, with 3 out of 4 possible outcomes resulting in a net 0 for Nanoco, that would also undermine the commercial application of our IP. Add to that a high wind would inevitably signal and start an extended appeals process with no guarantee of the outcome, needing more finance to do that, whether it's other forms of debt or equity, no guaranteed access to that financing and with no guaranteed outcomes. And of course, as I mentioned, the Board took extensive advice and was advised by some of the best law firms in the world and the best IP experts in the world in reaching its considered conclusion in respect of the settlement offer. Next question, will you be commencing litigation against Hansol in Korea? And if so, will you be seeking a preliminary injunction which is available as a relief in South Korea? So the answer to that, one is, as a standard -- industry standard practice, Samsung through their license agreement have the right to have made materials under that license agreement. To emphasize, it is a license agreement that grants its right. It's not the IP that they bought. So the simple answer is that Hansol are only supplying the materials to Samsung, then we do not have the option to sue them. However, if they are supplying materials or want to supply materials elsewhere, someone other than Samsung, then they or their customer would indeed require a license. And if they didn't take out a license, then they would face the threat of potential litigation. In the latest annual report, the Chairman -- this next question. Yes. In the latest annual report, the Chairman described it as "highly likely" that the Samsung trial would run for 7 years, i.e., go to trial. Given the statistical likelihood of settling, the strength of the case against Samsung and the fact that you accepted an offer below the market's expectation, this was arguably a misleading statement. Do you agree? Fundamentally, we do not agree. When we published the last annual report, it was our recently held belief that we would go to trial. And that, if I quote from the annual report myself, "it is important to emphasize that Samsung is likely to appeal any verdict that favors Nanoco" and "as a result, we do not expect conclusion of the U.S. litigation until the appeals process is exhausted, which could take some years". Such an assessment can only be made with respect to the specific circumstances in the case at the relevant point in time. The company did not otherwise publish or disclose any opinion on the strength of the case damages against Samsung, and frankly, the best source of information for the market to make its assessment of the prospects in the case and the various damages cases was through the published court record of the party submissions and the various orders made by the court over the years from 2020 through to January 2023. And question 13, given the depressed share price, the cash Nanoco will soon have on the balance sheet, a share buyback now will be in the best interest of shareholders. Will you propose shareholders' resolutions to do a capital reduction and allow a greater buyback of shares? So we've already explained, we do need to carry out a high court approved capital reduction by eliminating or reducing the share premium account to allow us to create distributable reserves in the PLC. So that is our intention. That capital reduction will require a shareholder vote to allow it to happen. There are some other creditor protection actions that need to be taken, but we don't see those as in any way significant, given the financial resources that will be available to the company when the second tranche of proceeds are received. So the reserves that are created by that reduction, assuming it's approved by shareholders, will then be available to be utilized for any return of capital and whether that's in the form of a share buyback or in the dividend. And the Board will consider the most appropriate mechanism for any capital distribution at that time. And next question. Can Samsung withhold payment of the second tranche of settlement moneys due in 2024 if certain preconditions are not met? If yes, can you elaborate on these preconditions? The simple answer is no. We're confident of meeting any of the remaining performance on the obligations under [ either ] contracts as they are mainly of an administrative nature. And what I mean by that is we have to submit invoices on time. We have to certify our tax data, et cetera. The only real performance obligation in either of those agreements actually relates to the obligation to keep confidential the contents of those agreements. Clearly, as a public company, we have to balance that with our obligations to disclose the material elements of those agreements. And that's what we've done in the disclosures that we have made of the individual sums of money and some of the other facts that we have disclosed in accordance with accounting regulations and disclosure obligations as a publicly listed company in the U.K. So the simple answer is yes, in theory, they could withhold if we breach any of those conditions, but I've described the conditions, and there's no reason to assume we're going to breach any of those. So from all practical purposes, I do not anticipate Samsung having any basis to withhold that second payment. Next question, the litigation settlement update RNS states that Nanoco retains complete freedom to operate. Can you provide further clarification in wider context specifically due the terms of the license agreement and/or the IP sale allow Samsung or other commercial partners or associates to operate as a direct competitor to Nanoco for the supply of CFQD materials based on Nanoco IP to third parties, or B, in any way restrict Nanoco's ability to license CFQD manufacture to parties other than Samsung or their commercial partners or associates? I am glad that the answer to that question is much shorter than the question itself. So Part A, simple answer is no. As explained previously, Samsung have the right hub materials made for inclusion in Samsung products. That's industry standard practice for those licenses. Otherwise, if you think about it, the license would actually be worthless to the licensee if the licensee can use it, but they've got their way to get material. But to be clear, that does not give anyone else the right to make material for sale to any other parties besides Samsung. I've already given the example of Hansol supplying Samsung. They're allowed to do that. They can't supply anyone else. Part B, is there any restriction on Nanoco's ability to license CFQD manufacturer to anyone other than Samsung? Absolutely not. The license to Samsung is nonexclusive. So Nanoco can license to anyone that we want. Next question. Please explain why the Samsung settlement did not go to shareholder vote? Please explain and properly address [ defend ] comments about corrupt behaviors, especially what is the true settlement on what noncore patents were used as part of the settlement details [ exclamation mark ]? So answer that question. The settlement doesn't actually fall within any of the class test for anything requiring shareholder approval. And so that was appropriately a matter for the Board to decide. And the company has already issued a short response to the recent shareholder letter in which we emphatically reject all of the speculative matters that have been raised. We have at all times adhered to all required standards and regulations regarding the -- regarding company behavior. The reference to "true settlement" is not something that we actually recognize in any share perform as we have published the material details of both contracts. So there simply is no hidden "true settlement". And on the payments that we've disposed of as investors will already be aware, every year, we carry out a review of our IP portfolio to assess our payments. And for those that are of limited commercial value in the foreseeable future, and that's part of our annual review process. We're transparent about that every year. People will be aware that we reduced the number of patents from 3 or 4 years ago, around 700 to 500 at the start of this year. That review identifies what we would call must-keep patents or call it core patents. It also assesses things that are either currently in commercial use, or potentially we can see in the short term they will be of commercial use. And also, there's a final category of patents where we, Nanoco, from our perspective, think that commercial application is either uncertain or a long way away. And as I say, that's from the Nanoco's perspective. Other people may have a different perspective on those patents. The vast majority of patents that were disposed off, fell into that third category, i.e., not currently in commercial use in Nanoco, and we don't see any short to medium-term commercial application in our business for those patents. There was 1 patent with the associated other country patents that would have been in the second category of potential commercial use, but that patent again was not actually in use in our business. So as I mentioned earlier, the 2 patents that were the real core of our IP that we're going into the trial, we've retained full ownership of those. Hence, that's why we got to the conclusion that the disposal that we made only involved noncore patents. We also got a license back on those patents, so we still have full access to them as a licensee and not as an owner. And the main difference there is, when you're the owner, you can sell something and sublicense it. When you're a licensee, you can't, but you can operate them. The question -- next question. This company used to have a really -- have a really opportunity was sitting there for long-term sustainable growth instead of a pump and dump enterprise. Where did that company go? As we said in these interim results -- previous result statements, we believe the long-term growth prospects for Nanoco have never been better with 2 products undergoing final validation and commercial orders expected by the end of 2023 with a validated IP portfolio from which we think we can generate further value over time, and all in a business on a robust financial fitting. So we've always said we would focus on -- I think people will be aware of my metaphor of the cake and the cherry. The cherry was always the Samsung litigation, the real cake. The long term sustainable focus for the business was around that commercial business, and that's where we think the long-term value is to be generated, let's just say, supported by the proceeds from that -- from the litigation. Question -- next question, [ Chris ] in the interim results. It stays orders anticipated by the end of 2023. Is this calendar year, financial year, et cetera? For the production orders, it's calendar year. It's material validation financial year. Question 19, Nanoco's RNS on 9th of January, refers to the range of expectations as previously guided. Please could you clarify where this guidance was to be filed? There was a range of damages models, which we highlighted in any number of company presentations, probably 5 or 6 different times. These damages model were the subject of the company submissions to the cohort -- interim court orders, all of which were in the public court record and referenced by the company. Due to the significant range of the potential jury outcomes of trial, we did not issue an opinion on jury verdict prospects, except to refer -- describe it as qualitatively to the potential for a transformative outcome. I've also explained above why we consider the final outcome achieved with the settlement. They got rid of litigation risks of the jury trial and meets that transformative target. Next question, I'll answer this myself, even though its about me. I am hoping Mr. Tenner's inflated salary, approximately double the U.K. average for a company of Nanoco's size, be justified, given the disappointed end to the litigation and continuing delays to organic growth. I'll just make the obvious points my salary set by the remuneration committee. I know it's benchmarked against other companies -- other listed companies on the main market, all a similar size and situation. Just to remind shareholders that when I was promoted to [ PEO ] -- actually deferred to CEO, I actually deferred my pay rise for 2 years. And the leadership team -- as I've already mentioned that Nanoco took extended pay cuts to preserve company resources, and that included the payment of any bonuses and deferred shares rather than in cash. Next question was a duplicate. #22 was the company ignoring the potential impact of German and Chinese injunctions on Samsung. Whole purpose of litigation in these countries was to counter the risk of long appeals. This appears to be -- being conveniently forgotten about after the settlement. Commencing litigation on -- in other territories was deliberate and intended to put pressure on Samsung. We succeeded in that objective. In order to enforce an injunction, it's a matter of law, but if you want to enforce an injunction ahead of any final appeal resolution or ahead of any infringement decision because you get the validity -- sorry, ahead of any validity decision because you get the infringement decision first, you actually be required to put forward a bond for the other side for lost profits that goes through to the end of the litigation process. There -- that would have been extremely challenging. That goes as far as say we could not have afforded to do that. If we wait until the end of the German litigation process, then to enforce the injunction if we had been successful and if we had it succeeded through appeals, obviously all at risk, then that actually time frame would have taken you into the 4-plus years that we were talking about in the United States anyway. So I'd say the objective ensuing in those 2 countries was to bring pressure to bear and re-regard the settlement offer that was accepted as evidence that, that strategy was successful. And yes, just to remind shareholders, winning in one jurisdiction, for example, in the U.S. at PTAB or in the U.S. in court is absolutely no guarantee win in another jurisdiction. The 2 are wholly unconnected. As I've explained before, partly because patents are actually written in different languages where individual words have different meetings and can be interpreted in different ways. And it is -- may well have been possible that new arguments could have been put forward for invalidity or for non-infringement in other territories, et cetera. People do not have to replay the same script. You're basically starting from scratch all over again. Next question. What are you going to attract stable and reputable institutional investment to set a solid foundation for a share price like over the next bit because it's defamatory actually? So what are we going to do to attract stable and reputable institutional investment? As a Board, we're very grateful to support our retail investors that they've shown over the past few years. They've always been a part of the equity fund raises that we've done over the last 3 or 4 years. As part of these interim announcements, turning specifically to the question, we are engaging with an encouraging growing number of U.K. institutional investors and also investors in the United States. And that follows a number of years where the potential binary outcome of both -- of the litigation process, combined with what was deemed to be a longer time frame to commercial production. That means institutional investors who are not attracted to the story. So institutions do now appear to be becoming more interested in the Nanoco story, and we are talking to them. Next question is, what were the reasons for the commercial order which was intended for H1 '23, was anticipated to be H2 '23, and now the end of '23 is a long-term investor? I've heard the announcements too often in recent years, and it worries me. What can you tell us about it? Simple answer is, as I explained earlier, is 5-year development cycles. And for these materials, they are very long. There are a lot of steps in the supply chain. As we previously disclosed about the U.S. customer, their decision there to end that collaboration had nothing to do with us or our materials. It was bid other parts of the supply chain. Specifically, coming back to today, the European electronics customer, they have a series of validation steps that our materials must go through before they can be formally introduced to the supply chain. And as I am sure you can appreciate, given the potential end-use applications, those are highly technical and require significant investment in multiple types of testing. The customer is continuing to invest in the material and its testing, and we believe the product once adopted by the market, will have a large number of significant applications. But ultimately, it's the customer's assessment of the readiness of the whole supply chain, including their external demand that will drive those commercial orders. We cannot force that to happen. But on the best information that we have right now, we set out we're expecting -- when we're expecting those commercial orders. Next question, in the RNS, you mentioned 2 products really for commercialization. Are the 2 products intended for use in different products? And can we assume that there will then be too low-volume orders? Can you also define what you mean by the end of the year, October, November, December? So the company is actively preparing for production orders at the end of the calendar year. So what I mean by that is by December, it could be a little earlier, but our best intelligence at this point in time is by December. Again, obviously, dependent on final customer adoption and technology. With respect to the number of products, the first commercial application could use 1 product, they could use both products and final visibility of that will actually come with the actual production orders. Next question -- we're at 26. So a few more to go, and I appreciate wherever they are, but we'll try to get through these. From the figures of the interim results, it can be seen that Nanoco will -- sorry, reports -- that should say, will report a profit of GBP 18 million in the FY '23 statement and the net cash flow FY '23 is GBP 4.5 million. This will likely attract investors or make Nanoco interesting as a takeover target due to Samsung's future payment in 2024, and Nanoco's cash position in IP. What does the Board intend to do to protect Nanoco from a hostile takeover below a fair value? And what do you define as fair value based on the outcome of the Samsung settlement on future organic business? So the simple answer to that, by continuing to deliver on our commercial projects -- prospects by delivering new license income. That's how we believe that the current undervaluing of the business will reverse over time. We just need to keep delivering on the commercial business as we've been doing for the last few years. Because ultimately, in the event, if the takeover offer was ever received, any decision about that and price would be for shareholders to make -- so what management are focused on is our commercial prospects that we believe will lead to a group in shareholder value, and that will be the best defense against a [ lubol ] takeover offer. But ultimately, as I say, that would be for shareholders to evaluate if and when such an offer arose. Next question, Nanoco is in a strong cash position. By February '24 is the Board considering acquiring other QD companies that are in a worse cash position to strengthen the Nanoco's portfolio? So again, simply, it's nice to have the firepower of the anticipated cash that's coming in, and we're always open to value creation opportunities. If one came up, we'd assess it as and when it arose. However, I would say that acquiring a loss-making business, where there was no obvious route to profitability, well that, I think we're just risk losing our current hard one and very low cash annual outflow and would bring a lot more risk into the business than possible rewards. So as I say, would need to be evaluated if and when such an opportunity arose. Next question, you mentioned the RNS, the Board intends to make a material return of capital. Would it be possible -- what would a possible amount of the special dividend based on the knowledge you have today? So we've made the public statement that we've got a firm intention to deliver a material return of capital to shareholders. We will have to balance that with the needs of the commercial business. We will give -- the Board will give further consideration in the second half of this financial year, whether or not we feel in a position to issue quantitative guidance to be more specific on what that word material means in that disclosure. But that's a conversation that still needs to be held by the Board. Next question was a duplicate. Next question, Nanoco recently looked for staff on its own website. There have been no vacancies for a few days. Have you currently reached the level of staff you need for commercialization, or have you stopped recruiting because commercialization has been postponed to the end of the year? So we've seen increased activity levels across the business, both in Display and in Sensing. We've been actively recruiting a number of what I would describe as frontline revenue-generating positions, including R&D scientists, production chemists and direct support staff, so analyst engineers, et cetera, frontline operations. And there are also 1 or 2 back-office support roles in there. It's fair to say that now with that headcount increased from 33 to 44, which now is complete, we have added the 10 people we have targeted to add. We're now fully staffed for a first commercial production order, if it's at the lower end of volumes. We can scale very quickly if the first use case is a higher volume use case. We've already explained we have the facility and equipment in place to do that. It would just be a question of adding extra staff. But I think you can see -- given our location in the Northwest, we're surrounded by a large cluster of companies operating in high-tech materials and the chemicals industry. So we'd be confident if we did need to staff relatively quickly for a much larger commercial production order, then we would be able to do that quickly. So that's why we've stopped recruiting. It's because we've added the 10 people that we targeted, and we're ready for first commercial production order. Next question was a duplicate. And then finally, last question. In the statement by the Chairman on 3rd of February, he said settlement value is almost 3x their own low case damages model, also market aware that the low case model was only -- this question says $50 million? And do you think this would have had an impact on market expectation if it was no? Just -- I think I said it earlier; the damages models were made public in a court document in the middle of 2022 in a motion submitted by Samsung to dismiss all 3 of our damages models. I think I know a number of folks are aware that we were planning on only taking 2 those damages models into core, again, through core published documents. We never -- Nanoco never publicly commented quantitatively on the quantum of damages outside of the references to that low case damages model that would evaluate just the component in a TV versus the high case damages model that we look at the total value of the TV and our use of words referring to the potential for a transformative outcome, which already defined what we meant by that and why we think the income that has been delivered makes that definition. That's the totality of all the questions were submitted in advance. We'll stop there because we're significantly over time, and we have a couple of more meetings that we need to get to. So thank you for listening.

That's great. Brian and Liam. Thank you very much indeed for addressing those questions this morning. And as I mentioned, the company will review all questions submitted today and publish responses [ if ] appropriate to do so on the Investor company platform. Before redirecting investors to provide you with their feedback, which is particularly important to you and the company, Brian, can I please ask you for a few closing comments.

Okay. Thanks very much. So I guess I just want to leave people with some of the comments I made when we run through the summary slide. We do have a significant opportunity in front of Nanoco given the Display and Sensing markets that we're operating in and where we are now with our materials and proximity to commercial production. The proceeds from the Samsung litigation obviously provide us with a very strong platform and transform certainly the financial position of the company. Also with having had our IP validated through that litigation process that gives us the opportunity to potentially leverage further IP license income as markets grow. And as I've already said, our management team is focused on that commercial business to make it a long-term sustainable growth in shareholder value. Thank you very much.

[Operator Instructions] On behalf of the management team of Nanoco Group plc, we would like to thank you for attending today's presentation. Good morning to you all.