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

Good afternoon, and welcome to the Nanoco Group plc update and response to EGM requisition. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of your questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to let the following poll. And I'd now like to hand over to Chairman, Dr. Christopher Richards. Good afternoon, sir.

Good afternoon and good afternoon, everybody, and welcome again to this Nanoco webcast. My name is Chris Richards. As has been mentioned, today's meeting is to go through matters set out in the circular and Notice of General Meeting, which was issued last week. We're going to go through a presentation, but we've also received a large number of questions from shareholders. And we'll attempt to answer as many as we can in the spirit of openness and transparency. So if we move to the speakers today, I'll start with myself, if I may, because this is the first time I've had the privilege of speaking with Nanoco shareholders personally on one of these webcasts. I have a background in operational management in technology-driven companies, both large and small, including 10 years at the CEO level. And over the last 12 years, I've been chair of a variety of both listed and unlisted companies, including several early-stage technology companies. Brian?

You've also got Brian Tenner, here, CEO of Nanoco. As most of you know, I joined Nanoco in August 2018 in the combined role of Chief Operating Officer and Chief Financial Officer, reflecting my extensive experience with turnarounds, operations and commercial finance. I've also got 15 years' experience serving on U.K. public boards. And in my time at Nanoco, I have developed the dot-only strategy, developed the current commercial relationships and delivered a halving of our monthly cash burn in the last 4 years.

Thanks, Brian. Nigel?

I'm Dr. Nigel Pickett, CTO of Nanoco and one of the cofounders of Nanoco. I've worked in this area of cluster chemistry and nanoparticles, which obviously includes quantum dots for over 30 years now. I have over 100 academic papers and obviously many patents as well. And I've worked on -- with Nanoco for Nanoco majority of my work and nicely enjoyed every minute of it for the last 20 years. Currently, I head up the R&D team and try to find the best R&D people out there, which is extremely difficult because they are few and far between and also obviously work on monetizing the IP and our intellectual property.

Thank you, Nigel. So moving on directly. We are recommending that shareholders vote against the resolutions that are being put forward, and we have engaged with a number of institutional shareholders. And it is clear that professional investors support the current board and intend to vote against the resolutions. And just as 2 examples from Harwood, they endorse that we have a clear strategy to build value for all shareholders. And their view is that the proposed new directors are not of the experience or caliber that they would expect to see on the Board of a U.K. plc. And Pinnacle, similarly, the statement there, its current prospects of Nanoco give us more enthusiasm than we have had at any point in the last 3 years, and that very much endorses the view of the Board -- of the current Board. Changing the team, they say would potentially derail the operational progress that has been building momentum even during the recent Samsung lawsuit. So we would like you to know that professional investors intend to vote against the resolutions. And I have to say from a personal point of view, that this whole exercise is a completely unnecessary distraction from the successful management of your company, and we would like to see this come to a successful conclusion on August 14. In terms of the agenda for today, the team would like to go through about a few points from the core business to explain why we believe that the business is at such an exciting inflection point. The delivering shareholder value does need an experienced and qualified board. The requisitionists are unfairly attempting to gain control of your company and your cash. It's a backdoor takeover attempt. We are firmly of the belief that we're in exodus of key talent, if they succeed, and that will undermine our IP. And throughout, the requisitionists have presented a false narrative to mislead shareholders. So in our view, there's a lot to lose here. The requisitionists resolutions are simply not in the best interests of shareholders. Now we'll go through the presentation, and then there will be a fairly lengthy Q&A session at the end. So Brian, over to you.

Thanks, Chris. So I'll remember to click over on my slide. So as Chris said in the agenda and the introduction, a lot has been done, we've still got a lot to do, but we are at an exciting inflection point for Nanoco. Just to recap, where the company has come from in the last 4 years or so. Back in 2018, we had one sensing product/customer/application combination. Our display business was effectively dormant. We had a lack of sector focus, and our cash cost base was around GBP 9.2 million. And that's why you can see in the heading there that the company, for a number of years, going concern was either a partial qualification or an emphasis of matter in all the opinions, et cetera. And fast forward to today, where we're expecting our first commercial production orders by the end of this calendar year, so by December 2023. We're also in continuing discussions on deeper collaborations and longer collaborations with 2 key customers and looking to add to that. Our organic commercial business is fully underpinned by the litigation proceeds, and our core IP has been validated by the Samsung litigation. And we've also started targeting new potential infringers. During those 4 years, we obviously filed suit against Samsung. We delivered GBP 90 million of net proceeds from the Samsung lawsuit, and we cut our cash cost base down to just over GBP 5.2 million a year. So a lot achieved new commercial momentum now being delivered. If I move on to then say a little bit about the markets. Most investors will have heard some of this before. The top left chart show the forecast growth, and all these forecasts are coming from independent market forecasts, Yole. Top left shows expected growth in use of sensors and cameras and or consumer device use of images, the one beside it is consumer device for cameras and sensors. And you can see very significant growth forecast between 2022 and 2028 on the sensing markets. On the top right chart, you can see a chart that we shared before about the QD TV market. Again, forecasts here coming from independent forecasts combination of Omdia, TDR and our own estimates based on known information for us. The key point in there is that there's going to be a significant expansion in the number of QD TVs in the display market, and the majority of those TVs are expected to move to cadmium-free solutions, which builds on Nanoco's core strength. Again, I won't go through the multitude of potential applications there are for sensing. You can see those in the examples on the bottom left. But the key thing is, as already mentioned, by the end of this calendar year, we expect our first commercial production orders. And then the independent forecasts say that mobile devices, mobile phones, will start using SWIR technology in 2026, and that's when our volume -- demand would increase significantly for Nanoco. I'm just going to hand you over briefly to Nigel, who is going to talk a little bit about technology and IP.

Thank you, Brian. Yes. So this slide kind of sets out what we plan to do going forward. You heard Brian talk about we moved to a dot only strategy about 4 years ago. And I think prior to that, we were doing a bit too much, but in the last 4 years, we really have found our feet, and it's all about making quantum dots, that's what we could and that's what we do. So the top line shows where we are with the current material, like [ sulfide ], and what we're working on here is the design of the core inorganic material scale up because there's no point in having the best if you can't scale those up and then the surface chemistry, which is extremely important because you pass that on to next kind of the upper supply chain and they had to have something they can work with. And you can see where we are with those materials and where a product we believe product launch would be quite early in [ 2023 ]. But obviously, we can't rely on just one material, we want to move to better materials that work a lot more efficiently and have a wider wavelength range. This means that can work in near IR and SWIR, which are extremely important areas going forward in the sensor market. So moving to materials such as indium arsenide and indium antimonide. The nice thing about these is the only way you can make these materials on a commercial scale is to use a version of our seeding process. So it really does play into Nanoco's [indiscernible] kind of thing. So if we move to the next slide, this is one is a little bit about monetizing the IP for the display materials, which obviously, we've done quite successfully with Samsung. Each case is different, no -- each company and how they use the dots, where they use the dots are different. So it's a little bit -- you have to start a new case, you could say. So we spoke about Samsung, which has set a precedent -- all of our IP has been validated and the patent [indiscernible]. As I say, can anyone else make our materials or the 3, 5 materials, such as indium phosphide using different methodologies. Again, going through this process and have a lot of experts look into our chemistry, we believe it will be extremely difficult, if not impossible, to make this material on a commercial scale without using our seeding process. You see on the right-hand side, this is a little bit of a heat map of the companies we currently looked at, who we believe may be infringing our technology and have the means to pay. So there's -- you can see down on the bottom left, there's lots of companies, but they may not have any kind of money to pay for any licenses. The more important ones, I would say, are up on the top right-hand corner, and we're now going through a process where we're looking at our patents against their patents, analysis of the products out there in the market. And from those 2 activities, starting to put what's known as claims constructions together against these various companies, and then that's obviously followed by some kind of engagement with these companies. And again, the nice thing is we don't have to seek kind of third-party funding. We have funding internally to do this. Thank you Brian.

Okay. Cheers, Nigel. Just moving on then. We've published twice now, I believe, both in the circular to call the GM for the capital reduction and also in the circular for the GM for the requisitionists proposals about what we plan on doing with your cash with shareholders' cash. And our view is the plans we've laid out are putting it to very good use. So on the left-hand side, you can see that we've already committed to be returning between GBP 33 million and GBP 40 million to shareholders in early 2024. And that process should start soon after we receive the second tranche of proceeds from Samsung. Investors will have seen today our RNS that the High Court has indeed approved the capital reduction. And now we're just waiting on the final formalities from company's host as they actually have to register the documents that have been sent to them. In terms of how we will return that capital to shareholders? It could be a special dividend. It could be a tender offer. It could be a share buyback. We will consult with shareholders on preferred methods of return, and we'll seek to do that in the most efficient value supportive wear. And then on the right-hand side, again, as people are aware, we have said that we do plan on retaining around GBP 20 million in the business. And we've set out a clear investment strategy for what we plan on doing with that money. We're going to use it to fund the organic business. We're going to continue to pursue world-leading R&D and particularly because in the last 3 or 4 years where things have been very lean, and we've had to not pursue some interesting avenues. We will, in a disciplined way, be able to continue to support leading-edge R&D. We already have production capacity for commercial contracts, and our intention is to reinforce that by upgrading some equipment and some processes, again, in areas where we've had to be very careful with cash in the last 3 or 4 years. And as Nigel said, we're now able to self-finance IP licensing and litigation program, meaning that a bigger share of any future proceeds will stay with Nanoco. We'll also be able to make the company debt-free by repaying all of our outstanding debts once we get that second tranche of proceeds from Samsung. And that's critical at a time when we're still consuming cash to be able to be debt-free and have our own cash and cash buffer in the business to support us going forward. And I guess, a key question that we think is pretty obvious from some of the publications that Mr. Hamoodi and the requisitionists have put out that it really is very unclear what they plan on doing with shareholders' cash with your cash. Let me just move over the page and in terms of the significant value opportunities that we see in front of us. As I said, there's a lot that has been done, there's still a lot to do. And final validation is underway to commercial production materials, and we are expecting an order by the end of 2023. You've already seen significant forecast growth in our core markets for both sensing and display. We do have active and ongoing discussions aimed at deeper and longer-term collaborations with 2 key customers and looking to add to that. The litigation proceeds do underpin our commercial business and put us on a firm financial footing, where we can plan for the future. The litigation, as Nigel said, validated our core IP. And lastly, we've made that firm commitment to return between GBP 33 million and GBP 40 million or between 65% and 75% of tranche 2 of net litigation proceeds to shareholders in the first quarter of 2024. I'll now hand over to Chris to talk a little bit about the Board, both the current Board and the nominee Board.

Thank you, Brian. If we move on to the next slide, please. The running a company like Nanoco as the executives do, does require an experienced and professional Board to provide support and oversight of the executives. And I believe the Nanoco has an exceptionally experienced and effective Board. Brian and Nigel, you've met. I would like to single out that Brian has exceptional experience as a public company director with both financial and legal background as well as strong operational experience. And what I've observed with Brian, a remarkable transformation of Nanoco under his leadership. Nigel, I always referred to as a rocket scientist. He's a remarkable statistic in many ways, who's achieved great things. Liam Gray is the CFO and Company Secretary. He's a chartered accountant with KPMG. He has been successful in a series of financial roles of increasing seniority. He joined us 2 years ago -- sorry, 4 years ago as Financial Controller and was appointed 2 years ago as CFO. On the nonexecutives, I've already introduced myself. Alison Fielding is a remarkable individual. She has 20 years of executive and nonexecutive experience, particularly as COO of the IP group. Ali probably has more experience of early-stage technology companies than anyone else in the U.K. She's also, as it happens, is a chemist by background, has PhD in chemistry, and she follows the technology very, very closely. And she's a very strong and effective Chairman of the Remuneration Committee. Similarly, Chris Batterham is a chartered accountant, originally with Arthur Andersen and then was the Finance Director and CFO of various technology companies, so has real hands-on operational experience from about 20 years of nonexecutive experience in technology companies. And Chris is, of course, the Chair of the Audit Committee. And I can assure you that as a Board, we have in-depth and robust discussions as a Board of independent-minded professionals. Let's look then at the individuals proposed to replace this Board by the requisitionists. And I think the single most important point is that none of these individuals have any U.K. plc experience. And frankly, that matters for good governance of the company. Moreover, so far as we can make out, none have experience of running a company at Board level, and that is also an important characteristic. That portrayed is having more experience on the electronics materials sector than the current Board, but frankly, none have direct experience at QDs except Greg Moeller. And to be clear, he worked in QD Vision for 3 years, but left 7 years before the launch of their first product. Certainly, the company later failed, and the IP from QD Vision was bought by Samsung for $65 million. I do want to single out Greg Moeller because he's proposed as the new CEO, and he was recently sanctioned by U.S. Court for repeated misconduct despite 2 court orders. And that leaves in my mind, a real question for shareholders with the Board as a whole. Is this really the Board, which you, as shareholders, want to run Nanoco. Brian?

Thanks, Chris. We've used this phrase that the requisitionists are trying unfairly to gain control of your cash. Why are we saying that? Well, we genuinely think this is a backdoor takeover attempt. The requisitionists represent 5% -- just over 5% of shareholders. But what their resolutions will do? Will give complete control of Nanoco, complete control of your cash without paying any control premium because none has been offered. And as I said, they represent just over 5% of shareholders at the moment. Reviewing the various incoherent and inconsistent documents, that have been published by the requisitionists, what we see is an incoherent plan. Typical of a business school to basically spend 90 days having a look at stuff and then deciding what to do. It doesn't really fill you with confidence. In terms of -- sorry, hang on Nigel. Good point, and I should have moved on a slide. In terms of bid premium, as I've already mentioned, none has been offered. And on the return of capital, well, once again, we see inconsistent messages and no clear intention for use of funds. Sometimes talking about buying stuff, sometimes not, intimating they think our return on capital is too small, whereas this, say, between GBP 33 million and GBP 40 million and 65% to 75% of the net second tranche, we think is a firm and positive commitment to shareholders. We've highlighted a risk, and we are aware that we've been accused now of trying to hold people hostage and fear mongering, but it's a simple fact that Nigel, Dr. Pickett is not a commodity. He's not an asset that anyone owns. Nigel is a very capable individual who can make his own decisions and decide what he wants to do. So we've seen a speculation about whether or not Nigel actually is important to Nanoco and would his departure actually matter. But it's the Board's absolute conviction that Nigel leaving the company would destroy value in Nanoco, very serious value in Nanoco. Nigel is recognized as one of the world's few, and I quote "authors of $150 million patent." There aren't many of those out there. Nigel, as he explained, he leads our existing R&D, our IP licensing and is heavily involved in our commercial activity. All those future R&D developments that will add to our pipeline and secure the long-term future of the business would be put at risk with Nigel's departure. And it's also incredibly naive to assume that no value would be lost with his exit. And this probably explains why Mr. Hamoodi tried to recruit Nigel to his cause, but he actually failed in that. And now he instead is proposing a resolution to remove Nigel from a post in the company that he co-founded. You can see from these charts that Dr. Pickett or Nigel is critical to the group's IP portfolio and its monetization. So of the 47 claims that were validated by the U.S. Patent Office, we kept 46. Yes, 1 has been sold. Nigel is a named inventor in all 46 of those retained claim patents. If you then look at the totality of our patents, where we have around 377 patents, Nigel, again, is a named inventor on 250 or over 60% of those patents. And just to put it into perspective, again, shareholders won't be aware of this. Nigel worked flat out for 18 months to deliver the successful outcome for those IPRs with the patent office that validated those 46 out of 47 claims. And it was also cross-examined all those daily for 6 months in the multiple lead ups to the various supportive trials that were going to be held in Texas. And anyone who thinks that, that work, that effort and the person who did that can be lost from the business without doing serious long-term harm to Nanoco, as I say, is naive. Other people might use different language. So moving on from the importance of Nigel to the group. We've said this a number of times, that the requisitionists are pedaling basically a false narrative that is designed to mislead and indeed those mislead Nanoco's shareholders. We repeat some examples of that on here. And again, some of these examples are really clear indications of how inconsistent Mr. Hamoodi, in particular, has been with regard to his engagement with Nanoco for the last 2 years and also some of the things he said. We have said quite firmly that the convertible loan notes issued in 2021 represented the best terms available at the time of their issue. And you can read a lot more details about these in the circular and in previous publications. And I just use Mr. Hamoodi's own words himself. "I congratulate you on the financing you obtained from your key shareholders earlier this year. From a shareholder’s perspective, I think the transaction was much more attractive than what Baupost could have offered." So that probably puts the [ sale ] on the loan notes and our perspective on that. The requisitionists' assertions regarding remuneration and director independence are simply not true, again, set out in the circular. And we've got a number of misleading questions and assumptions that we'll be answering when we get into the Q&A session on those. We'd like to point out no director, executive or nonexecutive is entitled to a settlement bonus. Another one here, again, we have no idea where some of these speculations come from, but Nigel Pickett has never resigned from Nanoco. And again, we cover that in one of the questions later. The Board is absolutely confident that all statements made in relation to the Samsung litigation represented the potential value of a successful jury trial outcome. And also reflected the risks inherent in any litigation process. This next point, guiding publicly towards the value of our prospective settlement would have destroyed value. The Board had a challenge to manage in the last few years of finding that balance between having confidential legally-controlled litigation and discussions with Samsung and their advisors, while also honoring our obligations as a public company to make sure shareholders were suitably informed. And as I said, we believe that we achieved that with the statements that we've made on the Samsung litigation. We also emphasized at no point were individual shareholders granted inappropriate access to information. The outcome of the Samsung litigation was in the best interest of all stakeholders. And on this final point, the group has retained its most valuable IP. I'll now hand you back to Chris for a short summary before we then move on to the Q&A.

Thank you. Brian. So in summary, there's a lot to lose here. Nanoco has a clear strategy for commercialization in a strong market. We've got structural tailwinds, had a demonstrably strong IP portfolio. As Nigel said, he struggles to see how anyone will be able to produce quantum dots for display with our -- without using our technology at commercial scale. Board changes should be in the interest of all shareholders and not give undue influence to one small vocal group. The resolutions represent a change of control of Nanoco with no takeover premium being paid. The resolutions will place Nanoco's cash and return to shareholders at risk. The requisitionists have not presented a coherent plan or strategy for the businesses, and the Board nominees have never served on any U.K. public company. So we strongly recommend that you vote against because we believe that their proposals will be damaging to Nanoco's future prospects and shareholder value. Now during -- that comes to the end of the presentation. And we will now go on monitoring questions that are coming up on the board during the course of the presentation here. And I can assure you that we will answer as many of those questions as we can in the next few minutes. So I shall pass now to Brian to go through the first of these questions.

Apologies if -- the speed with which we answer these questions and the combination of that with my accent. This will -- this is being recorded and you can listen to it afterwards if anything is going quickly. But there is a huge amount of questions that have been submitted. And we have tried to group them where there are repeats. We only answer one, et cetera, and equally, where there are long -- very long statements with lots of embedded assumptions, et cetera, and then we tend not -- we will be reading those out. We'll just be actually pulling out the key question. I should point out, we can't provide any commercially confidential information as disclosure of such information may compromise the interest of the company. And similarly, we can't respond with information that's subject to legal professional privilege. A number of questions that we've received are repeats and continuations raised in the requisitionists various publications. Again, these have already been addressed in our letter to Mr. Hamoodi's lawyers and also in the 2 circulars issued for the capital reduction and for the requisition General Meeting. And I would like to make one final comment before we start. We do feel that the 2 sides in this debate are playing by very different sets of rules. Nanoco in all of our publications are required to independently verify by our lawyers, by reference to third-party evidence every single statement of fact made it or where it's a board opinion clearly highlight that these things are our opinion. Whereas the requisitionists seem able to publish whatever they want without any verification, even if the truth that contradicts their position is readily available in public documents. These documents include including audited annual reports and accounts that they've either not reviewed or have just chosen to ignore. So shareholders should bear this in mind when reading communications from either side. And indeed, the letters that were published this morning, the errors and the misleading statements have obviously continued in them because we read with interest that someone who was made redundant from the company a number of years ago is actually still today leading one of our R&D teams. So turning to the specific questions. Where it deals with remuneration, partly because I'm personally named in some of these questions. It's Chris, who is -- who attends our Remuneration Committee. He's going to answer those questions. So Chris, if you can deal with question number one.

Yes, I'm also going to take a couple of questions in one, if I may. The first one is, I read the remuneration report from the year of Michael Edelman's departure and can find no reference to any plan for a $1 million settlement bonus. How can this not have been made public? And why was Michael Edelman paid $1 million success bonus for the Samsung litigation? Well, this is simply not true. And here's another example of requisitionists being misleading. Dr. Edelman was paid $35,000 per annum on a retainer during the Samsung litigation because of his extensive knowledge of the history. And all of his salary details are fully disclosed in the group's annual report and the S430B statement. So all this information is in the public. And the other one is related to, what is or was the threshold for Brian Tenner's settlement bonus from the Samsung litigation? And again, let me be absolutely clear that none of the Executive Directors are entitled to a settlement bonus. Options and bonuses are fixed by the Remuneration Committee. And there is nothing related to the settlement. There is no basis whatever for assertions and insinuation that any director acted out of self-interest in settling the Samsung litigation. But again, all of this is a matter of public record in our reporting. Brian?

Okay. And next question, why was Ron Epstein of Epicenter Law paid $5 million? And how could you give independent advice if you only got paid when a Samsung settlement was achieved? Well, unfortunately, this is another statement that is not true. And yet another example of misleading narratives being put out by the requisitionists. Mr. Epstein received a fraction of that amount. And I should point out that he worked for free for almost 4 years. So unlike other litigation counselor being paid discounted phase, Mr. Epstein worked for free for almost 4 years in return for a fraction of that. It's also the case that almost all advisers in any IP litigation have an incentive related to the outcome of the litigation, and it often increases if the outcome gets larger. So if anything, that incentive would get bigger if we had achieved a higher outcome. But again, as I mentioned, Mr. Hamoodi's words earlier about the loan notes, I'd like to quote you what he said about Ron Epstein of Epicenter. He said, "He may be the sharpest professional I have come across in the IP space." So once again, Mr. Hamoodi has shown himself to be inconsistent in questioning Ron Epstein's value and helping generate that $150 million settlement and $90 million net for Nanoco. And again, that question is answered in more detail in the circular. And next question. As a long-term investor, I was surprised and dismayed to hear that Nigel has resigned twice. Why is he resigned -- why did he resign and what meet them stay? Well, again, I think we've already said, this is just not true. And in fact, the opposite is true. In 2020, before we signed our first development agreement with the European customer, when the company had very, very limited cash resources and was downsizing to conserve cash to protect the lawsuit, Nigel voluntarily accepted that the company needed to serve notice on him to reduce any financial liability linked to his notice period, which at that time was 12 months. At the end of that 12-month notice period, with development work Nigel firmly established with the European customer, the company, again with Nigel's agreement, rescinded his notice and modified his employment contract, so this notice period was shortened to 6 months, matching those of the other exec directors. So far from having resigned Nigel has shown clear leadership in accepting his notice being served and agreeing to the contract amendment to shorten his notice. This is the exact opposite of acting in his own interest. Next question. I was shocked to hear that the company had previously turned on a higher offer from Samsung before accepting the lower settlement money. How do you justify this? This is also not true. At no time was the company ever offered more money than was finally agreed in the settlement. And frankly, this question is almost nonsensical. Next question. The commercialization schedule has shifted comparing their original time line and changes to those of Apple and Vision Pro, one might assume that Nanoco is involved with STMicro on this project. What do you say about this assumption, justified or nonsense? So AR and VR headsets are indeed one potential application for QD-enhanced CMOS sensors. We know that our European customers engage with many different customers of their own with a very wide range of potential applications and devices. However, we can't comment on the specific example that's been raised in this question. We are confident of getting commercial orders, but those commercial orders do depend on passing final validation with our customer. One of the end users who are testing the products, validating our customers' product. And then finally, one of the end users who are currently testing the product deciding to adopt the technology. And the customer feedback that we have had supports our confidence as does the fact that we understand that a number of potential end users are testing this technology. Next question, how do you rate the probability that Nanoco will receive its first commercial order this year? I think I've already answered that and saying what the basis for our confidence is. Next question. You mentioned that there were ongoing discussions about licensing agreements with other companies. What is the status quo here? And can we expect such an agreement in calendar year 2023? So in order to deliver a successful licensing program, you effectively need 2 key things. One is a commanding or dominant IP portfolio. And clearly, we've already demonstrated that by the outcome of the recent litigation and the decision by PTAB to validate the all 47 of the claims that were subject to IPR. The second thing you need is a deep and impacted market. No, that's where outside of Samsung, the market today for QD TVs is relatively small, and it will take time to grow as we showed on one of those charts earlier. But again, based on what Nigel presented to you, you've seen that we've already identified potential targets for licensing our litigation. It is true that the licensing route will be much cheaper than litigation, but it still takes time. So our view is a more realistic time frame to secure a new license is towards the end of next calendar year, so towards the end of calendar year 2024. So this could be faster or slower depending on the stance of any of those companies that we engage with. It goes without saying that Samsung was by and away, the biggest target. Next question. Why does the board need to keep GBP 20 million of the settlement amount if commercial orders are expected by December, yet states in the circular that breakeven won't be met until calendar year 2025? I won't go through, again, the uses of funds and what we're investing the money in. But just to differentiate, we have said on a number of occasions that we expect initial commercial orders to be for low-volume applications and hence, the initial revenue would be a low in value, a few million dollars potentially. As those volumes grew and other devices and end users adopt the technology, then we move to a cash flow breakeven point, which we expect in 2025. The year before, we expect mass market mobile or premium mobile phones to adopt SWIR technology. I mentioned that we'd received some additional questions this morning. I know we said we want questions in advance, but we didn't want to take -- miss this opportunity to rebut some of the insinuations and assertions made in these questions. And so again, they're quite long questions, so we're just pulling out what the actual questions were. So first one, why did the Board fail to seek shareholder approval for a major transactions? Well, simple answer is the settlement did not require shareholder approval. Second question, why did the Board not disclose on January 6, the financial terms in the settlement term sheet? We've answered this question repeatedly before. The process we're involved in was still subject to a judicial process, and we are in ongoing confidential negotiations that would be jeopardized by disclosure of any of the confidential terms. Next question. Why did the Board not disclose the 3 damages amount? And again, we've repeatedly said that we would not and could not give a running commentary on the lawsuit. All court papers were part of the public record. And we had no obligation under MAR, the market abuse regulations, to announce any of those court papers. Next question. Why did the Board let LOAM or Lombard Odier Asset Management join Nanoco's litigation subcommittee managing the Samsung litigation with full access to inside information? So this question is about Henry Turcan, who was a nominated Director to the Board of Nanoco, nominated by Lombard Odier. Henry was appointed to the Board following shareholder approval, and all directors are entitled to attend any subcommittee meeting. When Henry stepped down from the Board on 12th of September 2022, he lost any right to attend any Nanoco subcommittee, and he no longer had access to inside information. Should also emphasize that all inside information that arose during his time on the board was fully disclosed in accordance with our disclosure obligations under MAR. During this time of Henry's tenure on the board, there was no settlement in prospect. Next question. The loan from Lombard Odier and Richard Griffiths announced in July is a related party transaction requiring shareholder approval. The rationale for this unsecured loan was set out in detail in the circular. And no it was not a related party transaction requiring shareholder approval. So the premise of the question is not true. We've also quoted Mr. Hamoodi saying himself that the terms of the deal were better than what could have been offered by another party. The next question is about Edison. And why did the Board allow Nanoco to publish highly inflated bogus damages estimates repeatedly misleading shareholders and boosting share prices? As explained previously, all analysts have given access to the same public information as anyone else. Edison did not have access to inside information. And while Edison provides paid for research services, Edison's opinions, as it clearly says on their own website, are their own and are not endorsed by the company. The next 2 questions we're going to take together. One is, why did the Board settle our license for measly $65 million? And next question, how do you justify a measly $65 million for a worldwide license settlement? So let's be clear, the settlement agreement was $150 million. The net value after cost was $90 million. It was not a loss as has been alleged. And by any measure, it was a very significant settlement. I do want to deal with these last 2 questions in a little bit more detail. So I'll read an extract from the circular that addresses these insinuations. In assessing whether or not to agree to the proposed IP sale and license agreements linked transactions representing the settlement, the Board took extensive advice and carefully considered the balance of potential risks and rewards that could be expected if the litigation had continued. Against the possible benefits of continuing the litigation, the board weighed the possible downside risks. These included the risk of losing a trial, winning a trial with an award based either on Samsung's damages model or in Nanoco's own low case damages model, sometimes referred to in public court papers as the die approach, both of which were considerably lower than the settlement value grade. Winning with Nanoco's high-case damages model would inevitably have led to an appeals process likely the last number of years with the risk of losing on appeal, a retrial or a retrial of damages only, possibly resulting in a lower damages award. The Board also considered the incremental funding costs of an extended litigation process as well as the potentially dilutive sources of that funding and the potentially significant impact of the time value of money. Any settlement process invariably involves an element of compromise to remove risks, having weighed up the risks and rewards of continuing the litigation, the Board concluded it is in the best interest of all stakeholders to accept the proposed commercial agreements. Having dealt with those questions from this morning, we'll now return to the submitted questions. Why was there a need for 2 RNS releases in January? It was expected that there would be little market response to the first RNS, given that it had no financial information in it. When the market reacted, as it did, the Board concluded that a cooling announcement needed to be made on the Monday, which is why the second announcement was made. The next question. Did Lombard and Griffiths get access to inside information? I partially already answered this. But as we said, the Board is confident that at no point were individual shareholders given access to inside information during the settlement process. We are aware of speculation about phone calls, the night and day before the stay in the trial was announced. Purpose of the call was to negotiate reduced fees as we did with our legal advisers and others with returns linked to the outcome of the lawsuit. At no point were details of the settlement discussed. These discussions resulted in Nanoco retaining over $11 million more of the litigation proceeds that would otherwise have been the case. Next question. What's the guidance or not on the value of the outcome of the lawsuit? It's clear no one can negotiate with a third-party via public announcements, telling Samsung, how likely we thought settlement was or what we thought the damages might be, would fundamentally undermine those very negotiations. That much seems obvious. At all times, the company simply referred to the potential for a transformational outcome and confidence in our case and its merits, but never wants to the certainty of any outcome, always emphasizing at all times the up and downside risks. Next question. If a commercial order came in tomorrow, how long would it take for you to ship dots to the European customer? If the order was a large one needing an extra shift, would you have enough raw materials and staff? And we currently ship materials to customers every month. The lead time on our product is less than 1 month. If an order was to say for a much higher volume application, we estimate that putting on an extra shift of labor could take between 4 and 6 months to source and train staff appropriately. However, I should point out that order lead times and notice periods for such a large increase in volume are covered in our commercial agreements to allow for this eventuality. You previously said customers are required to give advance notice. Tell us exactly what the customer has told you about orders in terms of the size of the order, which materials required? I think this question has been covered above. We said we expect initial orders to be for low volumes. And yes, we would obviously get a purchase order in advance of having to manufacture depending on the size of the order. Next question. How much of a revenue base does the current cost base of around GBP 5 million support? So firstly, our current recurring fixed cost base supports up to around [ GBP 20 million ] of revenue from product sales and R&D services. If we had to expand this, the first 2 major expansions, we'll be adding extra shifts. If we went to a 24/7 capacity, we would more than quadruple our capacity by reference of that GBP 20 million of revenue. Certainly, the bits that are linked to production rather than R&D. If there was a risk of exhausting 24/7 capacity, we would need additional floor space or a new facility. But as I mentioned, I would expect enough notice to such an event to allow the necessary investments in new capacities to be made. I should point out as well that the question talks about a GBP 5 million current cost base following inflationary increases and the addition of additional staff in the last 4 or 5 months to prepare for commercial production and higher activity levels in the business. Our current fixed recurring cost base in FY '24 is more likely to be around GBP 6 million. And I should say that, that excludes any nonrecurring costs incurred in responding to the actions by the requisitionists, and those are substantial. Next question. Can you give us an idea of gross margins to expect if you had GBP 20 million, GBP 50 million, GBP 70 million of revenue, presumably, they wouldn't be too different given that production isn't labor-intensive. Is that correct? Industry typically targets -- our industry typically targets anywhere between 40% and 60% gross margins. That's on a fully absorbed production cost basis, the variability depending on your strength of your IP or the uniqueness of your product, et cetera. And it's fair to say higher volumes would bring lower prices. But again, the volume should compensate for those lower prices. So we would aim to maintain [indiscernible] gross margin somewhere between that 40% and 60%. Given where we are in terms of actual product launches, we can't be more specific at this time. Next question in the circular, no mention of CFQD being on test with a major TV maker. Has there been disappointing news on that front? No, there has not been disappointing news on this front. The supply chain processes are long and involved and customers invariably take time to make a major decision to adopt new technology and change their supply chains. And what is positive is that a major TV brand laterally approach Nanoco to discuss our materials, and we're still in discussions with them. Next question. Do you believe that the market expected any settlement could include a sale of IP? The truth is the market appears to have had multiple different expectations regarding the possible outcome of the litigation. Those include going all the way through [indiscernible] forced damages award possibly after appeal court and Supreme Court. There was speculation that there could be a settlement with a license or a settlement with IP or even as many will be aware, there was speculation that the litigation could end in the acquisition of Nanoco itself and the entire IP portfolio. So details of the IP disposal are set out in some detail in the circular. Next question is in 2 parts. Could you justify the requirement for questions to be submitted in advance? And I've noted the comments made by Mr. Hamoodi that there are serious questions over their independence. It means the Board independent -- current Board independence. I view the network of related parties on the transforming Nanoco website, which seems compelling. Could you please explain why this [ view ] is wrong? So on questions in advance, we ask for questions to be submitted in advance to be allowed -- to allow them to be considered properly and answered accordingly. And this approach also allows all shareholders a fair chance to submit questions to be considered rather than just those who are fastest at typing. Today's presentation also focused on matters already raised in the circular. And given that, that was issued last week, that give investors plenty of time to consider what their questions might be and to submit those questions. The second part of the question on Board independence. The circular clearly sets out why the alleged connections between the directors and certain shareholders are totally spurious. And if directors were actually connected to every investment fund that has ever invested in any company of which they've been a director, except for first-time directors, it's likely there would be new independent directors working in any listed company in London. Next question. Chris, this one is for you about options.

Indeed. So the -- the question is the Board of Nanoco issued option awards for the Executive Directors in October 2022. The following price target must be reached, which is no below 55 P -- 25% from 55P, 60% from 62p and 100% from 70p. Will there be a change here? All this agreement remains as it is, even in the event of a capital reduction. Firstly, shareholders overwhelmingly approved the published option scheme rules, which cover a change of the capital structure of the group. The RNS announcing the 2022 options make clear that based on total shareholder return, not just the share price. And furthermore, the scheme rules specify that any change would be by reference to the degree to which performance conditions have been achieved. So these are stretching targets. And I think shareholders should be encouraged that executives only invest their options at share prices substantially higher than the current share price. I'll take the next 1 as well, if I may. Will the Board be willing to protect our cash by taking voluntary pay cuts? Till their salaries and until such time a sustainable organic profit is secured, the company can maintain the salaries without that dipping its hands into our cash. This does seem a slightly strange question, I would like to point out that all the Board, and Brian has already made reference to Nigel, took cuts in remuneration when the company was particularly short of cash. So I think the directors have already indicated their commitment in that regard. The group operates a remuneration policy in full compliance with the U.K. corporate governance code. And as set out in some detail in the circular, the group's annual report on accounts for a number of years, the Group Remuneration Policy and Directors Remuneration Report have been approved by shareholders with 96% or more of votes in favor in each of the last 4 years and 99% in favor of the remuneration policy 2 years ago. Board remuneration has been conservative for a number of years. Independent benchmarking shows executives are paid either at median, lower quartile or lower decile rates and not above that, and the NEDs are similarly conservatively paid.

Back to me. Next question. Why does the Board think that chat on web forms and legal documents behind the paywall is an acceptable way to communicate information for shareholders rather than using RNS. So the Board explicitly communicated in many formal communications, such as interim and final results, had a wide range of potential damage methodologies and models exist in IP litigation cases, including the one involving Nanoco. We consistently refer to a range of possible outcomes, assuming that a trial was successful from a low case using the smallest separable component of a TV to high case using the value of the whole TV. The Board does not participate in any web forums or use them to disseminate views, information or for that matter, misinformation. Next question. How do you propose to proactively engage with private investors in explaining the Samsung settlement? I believe the piece of the circular that I read out in some detail earlier, also our interim results regarding how the Board evaluated the risks and opportunities in the Samsung litigation and the decision to accept that settlement in some detail. Just to emphasize, we evaluate the risk of losing, winning on low damages models and then all of the different risks, appeal risks, funding risks and the time value of money. And clearly, in any litigation, as you swap information back and forward between the sites, the status of the litigation ebbs and flows. But I would just emphasize, as we said in our published full year results in October 2022, and I quote, "the risks to Nanoco, therefore, remain substantial." Next question. Surely, some experienced new directors -- this one is for Chris.

Yes. New directors with the skills and experience, the ones proposed by Mr. Hamoodi get out a lot of value to Nanoco and also improve governance. I think we've dealt with this pretty comprehensively in our presentation. We have a number of concerns with regards to the proposed directors. And I have specifically singled out Mr. Moeller in that regard. We simply don't believe that these profiles fit with the running of a U.K. listed company. None of the proposed directors have any experience whatsoever on serving on the Board of a U.K. listed company. And we're completely at a loss as to how they can claim to meet the governance requirements of the U.K. corporate governance code. So while we've been online, a number of questions have come in with Brian, which -- and a lot of them, I think we've covered or attempted to cover in some of the questions that were submitted prior to the meeting. But there's a couple of ones here I think which we should have aimed to address now. And the others, we'll review and respond as best we can over the coming days where we believe we haven't addressed them. The first one is, who will be physically present at EGM? I'm physically present, will be Brian, Nigel, myself and Liam and also Alison Fielding. Chris Batterham will be joining remotely, but physically present will be all of those. And we hope as many shareholders can make it will also come to the AGM, which will be here in London. The next one. How do I vote my shares when I hold shares through Hargreaves Lansdown or other nominees?

The circular has got a page of instructions and actually ones of those instructions specifically refers to Hargreaves Lansdown. It's also possible that shareholders received the letter recently from the requisitionists where they copied verbatim, the voting instructions. So best place to look is at the circular.

But in essence, we instruct your nominee to vote on your behalf.

If you tell electronically, you can log in and there will be instructions as I say, on that website and in the circular, how to vote your shares.

The last one I'll pick out is can anyone comment on the dissolution of the company owned by Tariq Hamoodi Golden Bridge Advisory. And I have an idea. I think that's a question which should be addressed to Tariq Hamoodi. But Brian?

Yes. So the company was dissolved. Golden Bridge Advisory Limited was dissolved on the 11th of July 2023, according to records at company's host. I understand letters that are currently being circulated are in the name of Golden Bridge Advisory, although it doesn't say Golden Bridge advisery Limited. So as Chris said, that's a question for the requisitionists why it seems that this company has been dissolved having previously issued communications, et cetera.

So I think we've used an awful lot of everybody's time. We've gone over an hour, and we have done our level best to answer questions from the shareholders, both submitted in advance and as I say, those which have been submitted online, we'll have a look at, and where we don't believe we've answered them, we will answer them over the coming days. And we've specifically addressed the questions from Mr. Hamoodi in his letter this morning. As Brian has said, at all times, our statements have been verified by our lawyers, and we are very careful to ensure that everything we say is not only transparent and clear, but is also demonstrably true. We would expect Mr. Hamoodi to hold himself in the future to similar standards. Nanoco is at a really exciting time in its development. It's actually at an inflection point. We expect our very first production order before the end of this year. Your Board is very positive and excited about the future of the company. This is a company with a bright future under the current very strong executive management. The requisitionists continue to present a false narrative. They have a sensible plan. We don't believe their Board nominations are suitable. They're trying to take over your company by the backdoor. For that reason, we recommend all shareholders to vote against the resolutions.

Perfect. Chris, Brian, Nigel, thank you very much for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order management team to better understand your views and expectations. So it's going to take a few moments to complete, so I am sure will be greatly valued by the company. On behalf of the management team of the Nanoco Group plc, I would like to thank you for attending today's presentation. Good afternoon to you all.